Regal Lifestyle Communities Inc. Announces Results for the Quarter Ended March 31, 2013

TORONTO, May 14, 2013 /CNW/ - Regal Lifestyle Communities Inc. ("Regal") (TSX:RLC) announced today results for the first quarter ended March 31, 2013.

Q1 2013 Highlights:

• Revenue 0.5% above forecast and 0.4% higher than the previous quarter, on an adjusted equivalent days basis;
• Continued strong growth in Brampton property, Regal's largest retirement home;
• Net operating income was in line with the previous quarter, as adjusted.  Operating margins improved by 20 basis points.  Margins have  not yet reached forecast levels due primarily to timing and seasonal issues;
• Corporate expenses higher than prior period (adjusted) and forecast, also mainly due to timing;
• Internal development opportunities are on target; and
• Accretive acquisitions continue to be primary focus for growth.

"We are pleased to report another quarter of steady growth" said Mr. Nyilassy, President and CEO.  "We are already working on a number of enhancements to our existing portfolio" he added "which will add value and bottom line improvement when completed later this year."

For the balance of 2013, Regal expects its stabilized properties to continue to operate at current high occupancy levels and operating margins to be in line with forecast.  Furthermore, the only  property in Regal's portfolio that is in the initial lease up phase, Greenway Retirement Village in Brampton, is expected to continue out performing forecast, having recently reached 81% occupancy, ahead of the forecast of 77%.

The conversion of 17 long term care beds to assisted living suites at Valley Stream Manor is now complete. Leasing of the new assisted living suites has begun, however during this lease up period there will be a short term negative impact to revenues until stabilized occupancy is achieved.

There are several additional operational activities that will impact 2013:

• The conversion of 48 independent living suites to 43 assisted living suites at Greenway Retirement Village has leased up well and is close to 70% occupied;
• The seven suite expansion in Renaissance Retirement Residence is underway and will be available for lease in June of 2013; and
• The eight to ten additional suites in Plymouth Cordage Retirement Community will be available for lease in June of 2013.  These new suites replace the 14 additional respite suites that were originally planned to be completed in Q4 of 2012.

Financial Highlights

(in $000's, except for unit amounts and as otherwise indicated)	Actuals for the three months ended March 31, 2013	Financial forecast for the three months ended March 31, 2013	Actuals for the three months ended December 31, 2012 ^(1)	Actuals for the 167-day period from October 16, 2012 to March 31, 2013	Financial forecast for the 167-day period from October 16, 2012 to March 31, 2013^(2)
Operating Revenue	$    13,663	$   13,598	$   11,424	$    25,087	$    24,729
Net Operating Income	$      5,327	$     5,573	$     4,440	$      9,767	$    10,028
AFFO ^(3)	$      2,893	$     3,166	$     2,667	$      5,560	$      5,723
AFFO per share - basic^(3)	$      0.153	$     0.184	$     0.148	$      0.301	$      0.336
AFFO per share - dilutive ^(3)	$      0.153	$     0.183	$     0.147	$      0.301	$      0.335
Dividends - declared	$      3,312	$     3,049	$     2,728	$      6,040	$     5,521
Dividends per share - basic	$      0.175	$     0.177	$     0.151	$      0.326	$     0.324
Dividends per share - dilutive	$      0.175	$     0.177	$     0.150	$      0.326	$     0.323
Distributions paid as a % of AFFO	114.5%	96.3%	102.3%	108.6%	96.5%

 

(1)	Reflects 77 days of operations from the date of Regal's initial public offering.
(2)	Financial forecast - refers to the financial forecast for the six-month period ended March 31, 2013 included in Regal's prospectus dated October 5, 2012; pro-rated to reflect Regal's ownership of the Initial Communities commencing on October 16, 2012.
(3)	AFFO, AFFO per share basic and diluted are measures used by Management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-IFRS Measures" in this press release.

Operating revenue of $13,663 exceeded forecast by 0.5% for the quarter ended March 31, 2013.  Operating revenue was also $2,239 higher than the previous quarter due mainly to the longer operating period in the first quarter of 2013.  Adjusting to an equivalent number of days results in a net improvement of 0.4%.

Net operating income for the quarter of $5,327 was $246 or 4.4% below forecast due mainly to seasonally higher operating expenses, the ramp up in operations for Brampton's new assisted living wing which opened at the end of last year and the revisions to the new suite plans at Plymouth Cordage.  Compared to the previous quarter, and after adjusting for an equivalent period, net operating income was in line.

AFFO for the first quarter was lower than forecast by $273 or 8.6%, with actual AFFO of $2,893 compared to a forecast of $3,166 due mainly to the lower net operating income as noted above, as well as higher corporate expenses offset by lower interest expense.  On a per share basis, AFFO was $0.153 compared to a forecast of $0.184. Dividends declared during the period were $3,312 compared to the forecast of $3,049. The increase of $263 was due to the issuance of approximately 2.2 million shares for the over allotment and the earn-out on Valley Stream Manor and Barrhaven Manor in the fourth quarter of 2012 and a further 0.2 million shares in the first quarter of 2013. The pay-out ratio as a percentage of AFFO was 114.5% compared to a forecast of 96.3% for the quarter for the reasons described above. The payout ratio for the period from initial public offering until March 31, 2013 is 108.6% compared to the forecast of 96.5%.

Total mortgage debt is $197,007 compared to $207,605 at IPO. The reduction relates to the repayment of a $10 million term loan on Greenway Retirement Village using a portion of the over allotment proceeds. The repayment of this debt also reduced Regal's weighted average interest rate from the forecast of 4.03% to 3.93% (3.64% after interest rate subsidy).

Operating Performance

(in $000's except for otherwise indicated)	Actuals for the three months ended March 31, 2013		Financial forecast for the three months ended March 31, 2013		Actuals for the three months ended December 31, 2012^(1)		Actuals for the 167-day period from October 16, 2012 to March 31, 2013		Financial forecast for the 167-day period from October 16, 2012 to March 31, 2013^(2)
Weighted average occupancy %		90.7%		91.9%		90.7%		90.7%		91.0%
Operating revenue	$	13,663	$	13,598	$	11,424	$	25,087	$	24,729
Operating expenses	$	8,336	$	8,025	$	6,984	$	15,320	$	14,701
Net operating income (NOI)^(3)	$	5,327	$	5,573	$	4,440	$	9,767	$	10,028
G&A expenses	$	1,075	$	820	$	608	$	1,683	$	1,493
G&A expenses as a % of revenue		7.9%		6.0%		5.3%		6.7%		6.0%
Net loss	$	(711)	$	134	$	(3,926)	$	(4,637)	$	114

 

(1)	Reflects 77 days of operations from the date of Regal's initial public offering.
(2)	Financial forecast - refers to the financial forecast for the six-month period ended  March 31, 2013 included in Regal's prospectus dated October 5, 2012; pro-rated to reflect Regal's ownership of the Initial Communities commencing on October 16, 2012.
(3)	NOI is a measure used by Management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-IFRS Measures" in this press release.

While weighted average occupancy for the portfolio was 90.7% compared to forecast of 91.9%, this was more than offset by higher average revenue.  As a result, revenue was $13,663 compared to a forecast of $13,598, an increase of $65 or 0.5%.

For the three months ended March 31, 2013 net operating income was lower than forecast with operating margins slightly lower than plan by 2.0%.  This was due to operating expenses of $8,336 being higher than forecast of $8,025. The increase of $311 or 3.9% was due to higher spending in repairs and maintenance and higher utility costs which are primarily due to the seasonality and timing of expenses as well as the ramp up in assisted living in Brampton.  Management expects overall margins to be substantially in line with forecast for the year ended December 31, 2013.

General and administrative expenses of $1,075 were $255 higher than forecast due primarily to the timing of expenditures on public company costs and professional fees.  Management also expects annual general and administrative expenses to be substantially in line with forecast. Net loss was higher than the forecast by $845 primarily due to factors noted above as well as  higher than forecasted non-cash expenses including depreciation and fair value changes offset by interest expense of $1,684, compared to a forecast of $1,904. This reduction primarily relates to the repayment of the $10 million loan on Greenway Retirement Village utilizing a portion of the over allotment proceeds.

Financial Position

At March 31, 2013 cash on hand was $1.3 million and the unused borrowing capacity on Regal's revolving credit facility and revolving loan was $20.0 million.

Debt to gross book value is at the bottom of the target range of 55% to 60%. The debt service coverage ratio for the quarter ended March 31, 2013 was 1.4 times. Regal's weighted average interest rate is 3.64% after interest subsidy. Regal's debt strategy is to obtain secured mortgage financing on a primarily fixed rate, property-by-property basis with staggered maturity dates once a property reaches a stabilized lease-up level. Regal's objectives are to: (i) achieve and maintain staggered debt maturities to lessen exposure to interest rate fluctuations and re-financing risk in any particular period; and (ii) fix the interest rates and extend loan terms as long as possible when borrowing conditions are favourable.

Mr. Nyilassy said, "Our strong liquidity and lower than target leverage puts us in a strong position to execute on acquisitions as opportunities crystallize."  He added, "We continue to actively pursue a variety of opportunities in both Regal's existing market as well as new markets in Canada."

Investor Conference Call

Simon Nyilassy, President and Chief Executive Officer and Harold Atterton, Chief Financial Officer, will host a conference call tomorrow, May 15, 2013 at 9:00am ET.  The telephone numbers for the conference call are:  Local [phone] or Toll Free 1-866-696-5910.  The participant passcode is #5005855.

The conference call can be replayed (Instant Replay) until June 15, 2013 by dialing:  Local [phone] or Toll Free 1-800-408-3053.  The passcode for the Instant Replay is #9297066.  The call will also be archived on the Regal website at www.regallc.com.

About Regal Lifestyle Communities Inc.

Regal Lifestyle Communities Inc. is a corporation incorporated under the laws of the Province of Ontario. With the completion of its recent initial public offering and related transactions, the Company acquired a portfolio consisting of income-producing retirement communities offering primarily independent serviced living and assisted living programs. The Company's portfolio is comprised of ten "current generation" retirement communities with an average age of approximately five years, consisting of over 1,400 suites, primarily located in the Province of Ontario and including a property located in each of the Provinces of Saskatchewan and Newfoundland and Labrador.

Forward-Looking Information

This press release contains forward-looking information that reflects the current expectations, estimates and projections of management about the future results, performance, achievements, prospects or opportunities for Regal and the seniors housing industry. The words such as "may", "would", "could", "will", "anticipate", "believe", "plan", "expect", "intend", "estimate", "aim", "endeavour", "project", "continue" and similar expressions have been used to identify these forward-looking statements. Forward-looking statements are based upon a number of assumptions and are subject to a number of known and unknown risks and uncertainties, many of which are beyond management's control, and that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements.

While we anticipate that subsequent events and developments may cause our views to change, we do not intend to update this forward-looking information, except as required by applicable securities laws. This forward-looking information represents our views as of the date of this press release and such information should not be relied upon as representing management's views as of any date subsequent to the date of this document. Management has attempted to identify important factors that could cause actual results, performance or achievements to vary from current expectations or estimates, expressed or implied, by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These factors are not intended to represent a complete list of the factors that could affect us. See "Risks and Uncertainties" in the MD&A, "Risk Factors" in the prospectus and risk factors highlighted in materials filed with the securities regulatory authorities of Canada from time to time, including but not limited to Regal's most recent annual information form.

Non-IFRS Measures

FFO, AFFO, NOI, and Debt Service Coverage Ratio are not measures defined by International Financial Reporting Standards ("IFRS"). They are presented because Management believes these non-IFRS measures are relevant and meaningful measures of Regal's performance. FFO, AFFO, NOI and Debt Service Coverage Ratio as computed may differ from similar computations as reported by other issuers and may not be comparable to those reported by such issuers. Regal's Management Discussion and Analysis of Results of Operations and Financial Condition for the three months ended March 31, 2013 ("Q1 2013 MD&A") contains a reconciliation of net loss to FFO and a reconciliation of cash flows from operating activities to AFFO for the three months ended March 31, 2013. Detailed descriptions of the terms are contained Regal's Q1 2013 MD&A, available at www.sedar.com.

 

SOURCE: Regal Lifestyle Communities Inc.

Regal Lifestyle Communities Inc.
Harold Atterton
Chief Financial Officer
[phone], extension 203
[email protected]