TORONTO, May 9, 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 ended March 31, 2014.
KEY HIGHLIGHTS
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Same-property occupancy of 97.8% as at March 31, 2014, compared to 98.2%
on a sequential basis as at December 31, 2013 and 98.4% on a
year-over-year basis as at March 31, 2013.
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Overall portfolio occupancy of 97.9% as at March 31, 2014, compared to
98.2% on sequential basis as at December 31, 2013 and 97.4% on a
year-over-year basis as at March 31, 2013.
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FFO - As Reported per unit of $0.10 for the current quarter, compared to
$0.30 for the same period last year; FFO - Core per unit of $0.22 for
the current quarter, compared to $0.24 for the same prior period.
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AFFO - As Reported per unit of $0.19 for the current quarter, compared
to $0.23 for the same period last year; AFFO - Core per unit of $0.20
per unit for the current quarter, compared to $0.23 for the same prior
period.
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AFFO - Core payout ratio of 95% for the three months ended March 31,
2014.
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In April 2014, FAM REIT entered into an agreement to invest $16.0
million in the development of the MTS Data Centre in Winnipeg which
will be financed through a $21.4 million equity issue, consisting of a
bought-deal equity offering and a $6.4 million concurrent private
placement.
Shant Poladian, Chief Executive Officer of FAM REIT, commented, "Our
results for the first quarter of 2014 reflect the same challenges we
experienced in the fourth quarter of 2013, namely office space turnover
at Saskatchewan Place and adverse weather conditions in Manitoba.
Notwithstanding the impact of these short-term issues on our first
quarter results, our financial performance remains healthy with a 95%
AFFO-Core payout ratio, an interest coverage ratio of 2.7x, and a 52.6%
indebtedness ratio which is well within our target operating range.
Post-closing of our MTS Data Centre investment and the equity financing
announced in April, our pro-forma leverage ratio will decline to
approximately 48% and our liquidity will be approximately $23.7 million
consisting of cash and unused revolver capacity. Our focus is on the
long-term, with the strength of our financial position and liquidity
affording us the opportunity to execute transactions such as the MTS
Data Centre. We continue to be innovative in our approach to create
value for our long-term unitholders on a risk-adjusted and
leverage-neutral basis. "
Financial Highlights and Key Performance Indicators
($000s unless otherwise
noted and except per unit amounts)
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Three months ended
March 31, 2014
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Three months ended
December 31, 2013
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Three months ended
March 31, 2013
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Revenue from investment properties
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$
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8,207
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|
$
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8,228
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$
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6,081
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Net operating income(1)
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4,765
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4,823
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3,886
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Same-property net operating income
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3,205
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3,332
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3,490
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Net income and comprehensive income
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(354)
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1,827
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6,998
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|
|
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Funds from operations - As Reported(1)
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1,189
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3,141
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2,489
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Funds from operations - Core(1)
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2,598
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2,703
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1,978
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FFO per unit (basic and diluted) - As Reported(1)
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$
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0.10
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$
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0.27
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$
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0.30
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FFO per unit (basic and diluted) - Core(1)
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$
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0.22
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$
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0.23
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$
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0.24
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Adjusted funds from operations - As Reported(1)
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2,268
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2,186
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1,910
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Adjusted funds from operations - Core(1)
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2,386
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2,126
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1,910
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AFFO per unit (basic and diluted) - As Reported(1)
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$
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0.19
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$
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0.19
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$
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0.23
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AFFO per unit (basic and diluted) - Core(1)
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$
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0.20
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$
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0.18
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$
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0.23
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Distributions per unit - basic and diluted(2)
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$
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0.19
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$
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0.19
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$
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0.19
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AFFO - Core pay-out ratio(3)
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95%
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106%
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82%
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Cash distributions per unit - basic and diluted(2)
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$
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0.13
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$
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0.13
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$
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0.19
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AFFO - Core pay-out ratio, net of DRIP(3)
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65%
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72%
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82%
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Net operating income by asset class
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Industrial
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$
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1,448
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$
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1,448
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$
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1,449
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Office
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3,039
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2,999
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2,040
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Retail
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278
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376
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397
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$
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4,765
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$
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4,823
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$
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3,886
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Net operating income by geographic location
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Manitoba
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$
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1,697
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$
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1,706
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$
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2,100
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Ontario
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2,314
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2,210
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811
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Saskatchewan
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128
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291
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348
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Alberta
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497
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484
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493
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Northwest Territories
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129
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|
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132
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|
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134
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$
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4,765
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$
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4,823
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$
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3,886
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Interest coverage ratio (times)(4)
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2.7x
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2.9x
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2.8x
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Leverage ratio (times) - period end(5)
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8.6x
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8.0x
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8.1x
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Debt service coverage ratio (times)(6)
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1.6x
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1.8x
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1.8x
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Indebtedness ratio (%) - period end(7)
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52.6%
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52.2%
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51.6%
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Weighted average mortgage interest rate - period end
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4.7%
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4.7%
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5.1%
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Same-property occupancy - period end
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97.8%
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98.2%
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98.4%
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Occupancy - period end
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Industrial
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100.0%
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100.0%
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100.0%
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Office
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96.0%
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96.5%
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96.5%
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Retail
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100.0%
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100.0%
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90.4%
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97.9%
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98.2%
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97.4%
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Leased square footage (sq. ft.) - period end
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1,790,104
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1,795,277
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1,616,126
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Rentable square footage (sq. ft.) - period end
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1,829,096
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1,828,574
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1,659,633
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FINANCIAL
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Funds From Operations ("FFO") - FFO - As Reported for the three months ended March 31, 2014 was $0.10
per unit. After adjusting for a $0.11 per unit non-cash fair value loss
on the interest rate swaps and $0.01 per unit for Special Committee
related expenses, FFO - Core was $0.22 per unit, relatively consistent
with $0.23 for the three months ended December 31, 2013. The decrease
in FFO - Core of $0.02 per unit on a year-over-year basis was primarily
due to the decline in same-property net operating income resulting from
the office space turnover at Saskatchewan Place and the negative impact
of adverse weather conditions on operating costs.
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Adjusted Funds From Operations ("AFFO") - AFFO - As Reported and AFFO - Core was $0.19 per unit and $0.20 per
unit, respectively, for the three months ended March 31, 2014. The
year-over-year decrease in AFFO - As Reported and AFFO - Core was due
to a decline in same property net operating income.
OPERATIONAL
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Net Operating Income ("NOI") - The REIT achieved NOI of $4.8 million for the three months ended
March 31, 2014 and $3.9 million for the three months ended March 31,
2013. The acquisitions of 4211 Yonge, The Promontory, and 1700 Ellice
generated $1.6 million of incremental NOI during the current quarter,
partially offset by the loss of NOI attributable to properties that
were sold in 2013, including the 220 Portage and Humboldt Mall, which
contributed $0.4 million in NOI during the three months ended March 31,
2013.
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Operating cost recoveries - The operating cost recovery for the three months ended March 31, 2014
was negatively impacted by adverse weather conditions in Manitoba and
resulted in higher snow removal and utility costs, which were not fully
recoverable from certain tenants under their respective lease
arrangements.
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Occupancy - Occupancy on a same-property basis was 97.8% as at March 31, 2014, which
was below the occupancy rate of 98.2% as at December 31, 2013 and 98.4%
as at March 31, 2013 due to office space turnover at Saskatchewan
Place. Overall portfolio occupancy was 97.9%, compared to 98.2% on a
sequential basis as at December 31, 2013 and 97.4% on a year-over-year
basis as at March 31, 2013. The sequential decrease in occupancy was
due to office space turnover at Saskatchewan Place in downtown Regina.
As noted in our year end 2013 press release, we expected modest
additional turnover in Regina during 2014 as we work to optimize the
long-term leasing profile and tenant mix through new leasing,
relocations, early renewal and tenant expansion.
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Leasing Profile - Month-to-month and lease maturities were 112,000 sf during the three
months ended March 31, 2014. The REIT has completed lease renewals of
90,000 sf and in long-term lease renewal negotiations for 17,000 sf of
tenancies.
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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
On a pro-forma basis, the MTS Data Centre is expected to have a
significant positive impact on FAM REIT's financial performance upon
rent commencement in mid-2015. As outlined in the press release dated
April 22, 2014, FAM REIT's $9.5 million equity investment is projected
to generate, on a pro-forma basis, $2.9 million of NOI, $2.0 million of
AFFO, and $1.2 million of free cash flow after deducting mortgage
principal repayments in the first full year following rent commencement
in mid-2015.
FAM REIT's $6.5 million mezzanine loan at a 13.3% interest rate to its
joint venture partner partner's share of incremental project equity
provides an appropriate risk-adjusted return on our capital, de-risks
the project's equity capital requirements, and allows the REIT to
increase its ownership to 80% in the project in the event the loan is
not repaid. In the event that at least 50% of the mezzanine loan is not
repaid, the put-call feature provides the opportunity for the REIT to
increase its ownership to 100%.
On February 20, 2014, FAM REIT announced that it has formed a Special
Committee comprised of its Independent Trustees, Chaired by Gary
Samuel, FAM REIT's Lead Independent Trustee in response to Huntingdon's
initiation of a Strategic Review as announced on February 19, 2014.
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. Please refer to the disclosures contained in FAM REIT's final
prospectus dated May 5, 2014 for additional information.
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
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(1)
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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.
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(2)
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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.
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(3)
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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.
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(4)
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The interest coverage ratio is calculated as EBITDA for the period
divided by interest expensed during the period.
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(5)
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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.
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(6)
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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.
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(7)
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The indebtedness ratio is calculated as total debt divided by total
assets at period end.
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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
