TORONTO, March 7, 2014 /CNW/ - FAM Real Estate Investment Trust ("FAM
REIT", or the "REIT") (TSX: F.UN) (TSX: F.WT) announced today its
financial results for the three months and twelve months ended December
31, 2013.
KEY HIGHLIGHTS
-
Same-property occupancy of 98.2% as at December 31, 2013, compared to
95.2% for the initial public offering ("IPO") forecast; Overall
portfolio occupancy of 98.2% as at December 31, 3013, compared to 93.6%
for the IPO forecast
-
Same-property net operating income of $13.9 million for the year ended
December 31, 2013, compared to $13.0 million for the IPO forecast
-
FFO - As Reported per unit of $1.13 and FFO - Core per unit of $0.96 for
the year ended December 31, 2013, compared to $0.96 per unit for the
IPO forecast
-
AFFO - As Reported per unit of $0.70 and AFFO - Core per unit of $0.79
per unit for the year ended December 31, 2013, compared to $0.80 per
unit for the IPO forecast
-
AFFO - Core per unit of $0.89 excluding $0.10 per unit of leasing costs
to lease-up 21,400 sf of previously vacant space
-
AFFO - Core payout ratio of 95% for the year ended December 31, 2013, or
84% excluding $0.10 per unit of year-to-date leasing costs on the above
noted lease up of vacant space, which increased occupancy in the fourth
quarter of 2013
-
Reduced leverage as indebtedness ratio decreased to 52.2% as at December
31, 2013, from 53.8% as at December 31, 2012
-
Subsequent to year end, FAM REIT increased its secured revolving credit
facility limit from $14 million to $17 million, and extended the
maturity date by one year to November 30, 2015
Shant Poladian, Chief Executive Officer of FAM REIT, commented, "We are
a performance driven organization, and this is evident in our results.
In achieving these operational results, I would like to personally
thank all members of our team who have worked diligently to maximize
tenant retention, lease vacant space and are proactively engaged with
our tenants to optimize their long-term space requirements. While our
results could have been higher on a per unit basis had we operated with
higher financial leverage, we are strategically focused on deleveraging
as an important risk management tool in order to navigate within the
current environment of capital market volatility and potentially rising
long-term interest rates. This is an example of how our short and
medium term decision making is calibrated with our long-term strategic
objectives."
Financial Highlights and Key Performance Indicators
($000s unless otherwise
noted and except per unit amounts)
|
|
Three months
ended
December 31,
2013
|
|
Forecast - Three
months ended
December 31,
2013(1)
|
|
Twelve months
ended
December 31,
2013
|
|
Forecast -
Twelve months
ended December
31, 2013(1)
|
|
Revenue from investment properties
|
|
$
|
8,228
|
|
$
|
5,793
|
|
$
|
28,478
|
|
$
|
23,525
|
|
Net operating income(2)
|
|
|
4,823
|
|
|
3,491
|
|
|
17,559
|
|
|
14,305
|
|
Same-property net operating income
|
|
|
3,332
|
|
|
3,178
|
|
|
13,868
|
|
|
12,985
|
|
Net income and comprehensive income
|
|
|
1,827
|
|
|
1,437
|
|
|
14,215
|
|
|
6,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations - As Reported(2)
|
|
|
3,141
|
|
|
1,935
|
|
|
10,927
|
|
|
8,046
|
|
Funds from operations - Core(2)
|
|
|
2,703
|
|
|
1,935
|
|
|
9,281
|
|
|
8,046
|
|
FFO per unit (basic and diluted) - As Reported(2)
|
|
$
|
0.27
|
|
$
|
0.23
|
|
$
|
1.13
|
|
$
|
0.96
|
|
FFO per unit (basic and diluted) - Core(2)
|
|
$
|
0.23
|
|
$
|
0.23
|
|
$
|
0.96
|
|
$
|
0.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted funds from operations - As Reported(2)
|
|
|
2,186
|
|
|
1,571
|
|
|
6,746
|
|
|
6,665
|
|
Adjusted funds from operations - Core(2)
|
|
|
2,126
|
|
|
1,571
|
|
|
7,611
|
|
|
6,665
|
|
AFFO per unit (basic and diluted) - As Reported(2)
|
|
$
|
0.19
|
|
$
|
0.19
|
|
$
|
0.70
|
|
$
|
0.80
|
|
AFFO per unit (basic and diluted) - Core(2)
|
|
$
|
0.18
|
|
$
|
0.19
|
|
$
|
0.79
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions per unit - basic and diluted(3)
|
|
$
|
0.19
|
|
$
|
0.19
|
|
$
|
0.75
|
|
$
|
0.75
|
|
AFFO - Core pay-out ratio(4)
|
|
|
106%
|
|
|
100%
|
|
|
95%
|
|
|
94%
|
|
Cash distributions per unit - basic and diluted(3)
|
|
$
|
0.13
|
|
$
|
0.19
|
|
$
|
0.64
|
|
$
|
0.75
|
|
AFFO - Core pay-out ratio, net of DRIP(4)
|
|
|
72%
|
|
|
100%
|
|
|
81%
|
|
|
94%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income by asset class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
$
|
1,448
|
|
$
|
1,409
|
|
$
|
5,789
|
|
$
|
5,589
|
|
|
Office
|
|
|
2,999
|
|
|
1,709
|
|
|
10,153
|
|
|
7,224
|
|
|
Retail
|
|
|
376
|
|
|
373
|
|
|
1,617
|
|
|
1,492
|
|
|
|
|
$
|
4,823
|
|
$
|
3,491
|
|
$
|
17,559
|
|
$
|
14,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net operating income by geographic location
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manitoba
|
|
$
|
1,706
|
|
$
|
1,810
|
|
$
|
7,523
|
|
$
|
7,469
|
|
|
Ontario
|
|
|
2,210
|
|
|
804
|
|
|
6,158
|
|
|
3,215
|
|
|
Saskatchewan
|
|
|
291
|
|
|
266
|
|
|
1,404
|
|
|
1,237
|
|
|
Alberta
|
|
|
484
|
|
|
481
|
|
|
1,950
|
|
|
1,864
|
|
|
Northwest Territories
|
|
|
132
|
|
|
130
|
|
|
524
|
|
|
520
|
|
|
|
$
|
4,823
|
|
$
|
3,491
|
|
$
|
17,559
|
|
$
|
14,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest coverage ratio (times)(5)
|
|
|
2.9x
|
|
|
2.6x
|
|
|
2.7x
|
|
|
2.7x
|
|
Leverage ratio (times) - period end(6)
|
|
|
8.0x
|
|
|
NF
|
|
|
8.4x
|
|
|
NF
|
|
Debt service coverage ratio (times)(7)
|
|
|
1.8x
|
|
|
NF
|
|
|
1.7x
|
|
|
NF
|
|
Indebtedness ratio (%) - period end(8)
|
|
|
52.2%
|
|
|
NF
|
|
|
|
|
|
|
|
Weighted average mortgage interest rate - period end
|
|
|
4.7%
|
|
|
NF
|
|
|
|
|
|
|
|
Same-property occupancy - period end
|
|
|
98.2%
|
|
|
95.2%
|
|
|
|
|
|
|
|
Occupancy - period end
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Industrial
|
|
|
100.0%
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
Office
|
|
|
96.5%
|
|
|
89.6%
|
|
|
|
|
|
|
|
|
Retail
|
|
|
100.0%
|
|
|
82.9%
|
|
|
|
|
|
|
|
|
|
|
98.2%
|
|
|
93.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
Leased square footage (sq. ft.) - period end
|
|
|
1,795,277
|
|
|
1,553,431
|
|
|
|
|
|
|
|
Rentable square footage (sq. ft.) - period end
|
|
|
1,828,574
|
|
|
1,659,633
|
|
|
|
|
|
|
FINANCIAL
-
Funds From Operations ("FFO") - As Reported for the three months ended
December 31, 2013 was $0.27 per unit. After adjusting for a $0.03 per
unit fair value gain on interest rate swaps and $0.01 per unit
reimbursement of aborted transaction costs, FFO - Core was $0.23 per
unit, consistent with the IPO forecast of $0.23 per unit.
-
FFO - As Reported for the twelve months ended December 31, 2013 was
$1.13. After adjusting for $0.18 per unit fair value gain on interest
rate swaps, $0.08 per unit gain from mark-to-market adjustments on
mortgages that were refinanced or repaid, $0.06 per unit of defeasance
costs related to the discharge of the 220 Portage mortgage (in
conjunction with the sale of this property), and $0.03 per unit of
aborted transaction costs, FFO - Core per unit was $0.96 and consistent
with the IPO forecast of $0.96 per unit.
-
Adjusted Funds From Operations ("AFFO") - As Reported and AFFO - Core
was $0.19 and $0.18 for the three months ended December 31, 2013,
respectively, compared to the IPO forecast of $0.19 per unit. AFFO -
Core for the fourth quarter would have been $0.21 per unit excluding
$0.03 per unit of leasing costs associated with the lease-up of 21,400
sf of vacant space which increased occupancy during the fourth quarter
of 2013. As previously disclosed in our earnings release for the third
quarter of 2013, the lease-up of this vacant space is projected to
generate approximately $0.5 million of gross annual rental revenue for
a weighted average lease term of 10.7 years.
-
AFFO - As Reported per unit was $0.70 for the twelve months ended
December 31, 2013. After adjusting for $0.06 per unit of defeasance
costs related to the discharge of the 220 Portage mortgage and $0.03
per unit of aborted transaction costs, AFFO - Core per unit was $0.79
and in line with the IPO forecast of $0.80. Excluding the $0.10 per
unit of leasing costs associated with the lease up of 21,400 sf of
vacant space, AFFO - Core for the year would have been $0.89 per unit.
OPERATIONAL
-
Net Operating Income ("NOI"). The REIT achieved NOI of $4.8 million for the three months and $17.6
million for the twelve months ended December 31, 2013 compared to the
IPO forecast of $3.5 million and $14.3 million for the same periods.
NOI was ahead of IPO forecast due to higher than forecasted tenant
retention, lease-up of vacant space, and the acquisitions of 4211 Yonge
and The Promontory office buildings in the Greater Toronto Area. These
were slightly offset by the sale of 220 Portage and office space
turnover in Regina.
-
Operating cost recoveries. Operating cost recoveries as a percentage of property operating costs
were 88% for the three months and 90% for the twelve months ended
December 31, 2013. The operating cost recovery in the three months
ended December 31, 2013 was negatively impacted by adverse weather
conditions across most of Canada and resulted in higher snow removal
and utility costs of $0.2 million, which were not fully recoverable
from certain tenants under their respective lease arrangements.
-
Occupancy. Occupancy on a same-property basis was 98.2% as at December 31, 2013,
which was well ahead of the forecasted occupancy rate of 95.2% driven
by higher than forecasted tenant retention and lease-up of vacant
space. The sequential improvement was due to the acquisition of 1700
Ellice, which was 100.0% occupied, the disposition of Humboldt Mall,
which had an occupancy rate of 81.6%, and the lease up of vacant space
in Toronto and Winnipeg, partly offset by office space turnover in
Regina. Overall portfolio occupancy was 98.2%, up from 97.1% as at
September 30, 2013 and well ahead of the 93.6% forecasted year end
occupancy.
-
Leasing Profile. Lease maturities were 107,000 sf during the three months ended December
31, 2013. Of the total 107,000 sf, we completed lease renewals of
15,000 sf during the quarter, and are in long-term lease renewal
negotiations for 75,000 sf of tenancies. Lease maturities were 284,000
sf for the twelve months ended December 31, 2013. Of the total 284,000
sf, we completed lease renewals of 188,000 sf, and are in long-term
lease renewal negotiations for 75,000 sf of tenancies.
-
Debt Strategy. In February 2014, the REIT increased its revolving credit facility
limit from $14.0 million to $17.0 million, and extended the expiry date
to November 30, 2015.
OUTLOOK
FAM REIT is well positioned in the current environment. There are no
mortgage debt maturities during 2014, our secured revolving credit
facility limit was recently increased from $14 million to $17 million,
and the DRIP participation rate currently stands at 32%, generating
$2.9 million of annual cash retention, which can be used to prudently
reinvest the retained cash flow and/or to fund additional deleveraging.
Based on our current outlook for leasing activity, we expect FAM REIT's
occupancy to remain above 96% throughout 2014 with tenant retention in
the range of approximately 90%, assuming no acquisitions, dispositions
or redevelopment initiatives.
On February 19, 2014, Huntingdon Capital Corp announced that it has
commenced a strategic review process to enhance shareholder value.
Huntingdon has assured FAM REIT of its continued sponsorship of FAM
REIT and commitment to the management of FAM REIT during its review.
In response, FAM REIT announced on February 20, 2014, that it has formed
a Special Committee comprised of its Independent Trustees, Chaired by
Gary Samuel, FAM REIT's Lead Independent Trustee. The Special
Committee's mandate is to evaluate the impact of the strategic review,
and if advisable, to respond to such review. While Huntingdon
undertakes its strategic review, FAM REIT expects to continue to carry
on normal operations with Huntingdon acting as its manager.
Other information
Information appearing in this press release is a select summary of
results. The consolidated financial statements and management's
discussion and analysis for the REIT are available at www.sedar.com and our website at www.famreit.com.
|
Footnotes
|
|
NF
|
|
Not forecasted
|
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(1)
|
|
For information purposes only, select forecast financial information for
the three months ended December 31, 2013 has been included in this
press release, based on the financial forecast in the IPO documents.
|
|
(2)
|
|
Net operating income, FFO - As Reported, FFO - Core, AFFO - As Reported,
AFFO - Core, and earnings before interest, taxes, depreciation and
amortization ("EBITDA") are not measures defined under International
Financial Reporting Standards ("IFRS"). Management believes that these
are useful supplemental measures, but may not be comparable to other
REITs. Please refer to the REIT's MD&A for a description of these
measures.
|
|
(3)
|
|
The weighted average number of units outstanding used in the per unit
calculations includes the weighted average of all REIT units and Class
B LP units.
|
|
(4)
|
|
The AFFO - Core pay-out ratio is calculated as total distributions
divided by AFFO - Core for the period. The AFFO - Core pay-out ratio,
net of DRIP reflects the actual amount of cash paid or payable after
taking into account unitholders who have elected to take their
distributions in the form of trust units instead of cash.
|
|
(5)
|
|
The interest coverage ratio is calculated as EBITDA for the period
divided by interest expensed during the period.
|
|
(6)
|
|
The leverage ratio is calculated as the average debt outstanding divided
by annualized EBITDA. Debt consists of mortgages payable, vendor
take-back loan, and the revolving credit facility at face value,
excluding deferred transaction costs.
|
|
(7)
|
|
The debt service coverage ratio is calculated as EBITDA divided by the
debt service requirements for the period. Debt service requirements
reflects principal repayments and interest expensed during the period.
Payments related to defeasance, prepayment penalties, or payments upon
discharge of a mortgage are excluded from the calculation.
|
|
(8)
|
|
The indebtedness ratio is calculated as total debt divided by total
assets at period end.
|
About FAM Real Estate Investment Trust
The REIT is a diversified commercial real estate investment trust
focused on owning and acquiring strategically well-located office,
industrial and retail real estate located primarily across Canada's
large population centres.
Forward looking information
This press release contains forward-looking information within the
meaning of applicable securities legislation, which reflects the REIT's
current expectations regarding future events. Forward-looking
information is based on a number of assumptions and is subject to a
number of risks and uncertainties, many of which are beyond the REIT's
control, that could cause actual results and events to differ
materially from those that are disclosed in or implied by such
forward-looking information. These risks and uncertainties include, but
are not limited to, general and local economic and business conditions;
the financial condition of tenants; our ability to refinance maturing
debt; leasing risks, including those associated with the ability to
lease vacant space; and interest rate fluctuations. Our objectives and
forward-looking statements are based on certain assumptions, including
that the general economy remains stable, interest rates remain stable,
conditions within real estate market remain consistent, competition for
acquisitions remains consistent with the current climate and that the
capital markets continue to provide ready access to equity and/or debt.
All forward-looking information in this press release speaks as of the
date of this press release. The REIT does not undertake to update any
such forward-looking information whether as a result of new
information, future events or otherwise. Additional information about
these assumptions and risks and uncertainties is contained in the
REIT's filings with securities regulators, including its latest annual
information form and MD&A.
SOURCE FAM Real Estate Investment Trust
