MONTREAL, Nov. 10, 2021 /CNW Telbec/ - PRO Real Estate Investment Trust ("PROREIT" or the "REIT") (TSX: PRV.UN) today reported its financial and operating results for the three-month period (or "third quarter" or "Q3") ended September 30, 2021.
Third Quarter 2021 Highlights
- Property revenue of $19.6 million, a 13.2% increase from Q3 2020
- Same property net operating income1 of $10.0 million, a 5.6% increase from Q3 2020, or 3.4% increase excluding COVID-19 related impacts
- Net operating income1 of $12.1 million, a 16.4% increase from Q3 2020
- Net income and comprehensive income of $4.1 million, compared to a net loss and comprehensive loss of $0.7 million in Q3 2020
- AFFO1 of $6.6 million, a 11.8% increase from Q3 2020
- Occupancy rate remains high at 98.5%
- Completion of previously announced accretive acquisitions of 16 industrial properties for $163.2 million subsequent to quarter-end, industrial exposure now representing 63% of base rent
- Closing of previously announced $69.0 million bought deal equity offering and $14.3 million concurrent private placement subsequent to quarter-end
- Credit facility to be expanded on improved terms to $60 million, up $15 million
"We delivered another strong performance in the third quarter of 2021, with historical transaction levels on the acquisition and capital raise front. With $297 million of industrial market acquisitions since the beginning of the year, we are actively executing on our specific growth strategies, increasing our industrial segment exposure and strengthening our presence in attractive mid-sized Canadian cities with strong economies," said James W. Beckerleg, President and Chief Executive Officer of PROREIT.
"We are also pleased with our robust internal growth, as evidenced by the increase in same property net operating income across asset classes during the third quarter and since the beginning of the year, with the strongest performance in the industrial segment. With our recent acquisitions and a shorter average lease term in our industrial portfolio generally, we believe this positive trend will continue to improve over the coming quarters, further improving our cash flows and performance ratios.
"We remain fully committed to maintaining a solid financial and liquidity position, while steadily decreasing our leverage. Excluding a $5.2 million deposit made on recent acquisitions closed subsequent to quarter-end, our debt to gross book value ratio1 stood at 57.9% at the end of third quarter, compared to 58.7% a year ago. These strong results also translate in a payout ratio trending down.
_______________________ |
|
1 |
Non-IFRS measure. See "Non-IFRS and Operational Key Performance Indicators". |
"In a rebounding economy, we are well-positioned to pursue our growth and capitalize on the significant potential embedded in our portfolio. With real estate markets tightening in cities such as Ottawa, Winnipeg and Halifax where we have a strong presence, our business outlook is positive and we look forward to creating more value for our unitholders," Mr. Beckerleg concluded.
RESULTS
Table 1 - Financial Highlights
(CAD $ thousands except unit, per unit amounts and unless otherwise stated) |
3 Months |
3 Months |
9 Months |
9 Months |
||||
|
||||||||
Property revenue |
$ |
19,588 |
$ |
17,302 |
$ |
54,742 |
$ |
52,221 |
Net operating income (NOI) (1) |
$ |
12,100 |
$ |
10,399 |
$ |
32,924 |
$ |
30,527 |
Net income (loss) and comprehensive income (loss) |
$ |
4,068 |
$ |
(709) |
$ |
16,803 |
$ |
14,659 |
Total assets |
$ |
769,085 |
$ |
634,079 |
$ |
769,085 |
$ |
634,079 |
Debt to Gross Book Value (1) |
58.19% |
58.72% |
58.19% |
58.72% |
||||
Interest Coverage Ratio (1) |
2.7x |
2.8x |
2.7x |
2.7x |
||||
Debt Service Coverage Ratio (1) |
1.6x |
1.6x |
1.6x |
1.6x |
||||
Weighted average interest rate on mortgage debt |
3.50% |
3.73% |
3.50% |
3.73% |
||||
Net cash flows provided from operating activities |
$ |
833 |
$ |
8,936 |
$ |
9,034 |
$ |
13,137 |
Funds from Operations (FFO) (1) |
$ |
6,349 |
$ |
5,527 |
$ |
15,009 |
$ |
16,119 |
Basic FFO per unit (1)(2) |
$ |
0.1315 |
$ |
0.1381 |
$ |
0.3323 |
$ |
0.4031 |
Diluted FFO per unit (2)(2) |
$ |
0.1284 |
$ |
0.1349 |
$ |
0.3244 |
$ |
0.3943 |
Adjusted Funds from Operations (AFFO) (1) |
$ |
6,556 |
$ |
5,863 |
$ |
17,719 |
$ |
17,070 |
Basic AFFO per unit (1)(2) |
$ |
0.1358 |
$ |
0.1465 |
$ |
0.3923 |
0.4269 |
|
Diluted AFFO per unit (1)(2) |
$ |
0.1325 |
$ |
0.1431 |
$ |
0.3829 |
$ |
0.4176 |
AFFO Payout Ratio – Basic (1) |
82.8% |
76.8% |
86.0% |
89.6% |
||||
AFFO Payout Ratio – Diluted (1) |
84.9% |
78.6% |
88.1% |
91.6% |
||||
(1) |
Non–IFRS measure. See "Non–IFRS and Operational Key Performance Indicators". |
(2) |
Total basic units consist of trust units of the REIT and Class B LP Units (as defined herein). Total diluted units also includes deferred trust units and restricted trust units issued under the REIT's long–term incentive plan. |
PROREIT owned 104 investment properties as at September 30, 2021, compared to 92 properties at the same time last year. Total assets amounted to $769.1 million as of September 30, 2021, representing an increase of $135.0 million, or 21.3%, compared to $634.1 million on September 30, 2020. During the twelve-month period ended September 30, 2021, PROREIT acquired 18 investment properties and sold six non-strategic investment properties at or above their related carrying values.
For the third quarter ended September 30, 2021:
- Property revenue amounted to $19.6 million, an increase of $2.3 million, or 13.2%, compared to the same prior year period. The increase relates to the favourable impact of the net property acquisitions in the twelve-month period ended September 30, 2021.
- Same property net operating income1 increased across all segments to reach $10.0 million, an increase of $0.5 million, or 5.6%, compared to the same prior year period. Excluding COVID-related expenses of $0.2 million recorded in the third quarter of 2020, same property net operating income increased by 3.4% in Q3 2021 compared to the same prior year period. The growth reflects increased occupancy, contracted rent steps, and higher net renewal rents in the portfolio.
- Net operating income1 reached $12.1 million, a $1.7 million or 16.4% increase, compared to the same prior year period. The change is mainly attributable to the net increase in the number of properties in the twelve-month period ended September 30, 2021.
- Net income and comprehensive income amounted to $4.1 million, compared to a loss of $0.7 million for the same prior year period. The increase mainly relates to the impact of non-cash fair value adjustments in investment properties as well as the favourable variance in net operating income in the third quarter of 2021 compared to the same prior year period.
- AFFO1 totaled $6.6 million, a $0.7 million or 11.8% increase, compared to the same period last year. The increase reflects the favourable impact of the net property acquisitions in the twelve-month period ended September 30, 2021, partially offset by an increase in maintenance capital expenditures, stabilized leasing costs and general and administrative expenses.
- Net cash flows provided from operating activities was $0.8 million, compared to $8.9 million for the same prior period. The change is mainly attributable to timing between cash receipts from rent collections and settlement of payables in addition to a $5.2 million deposit paid with respect to recent acquisitions closed subsequent to quarter-end.
- AFFO payout ratio1 stood at 82.8% compared to 76.8% for the same prior year period. The increase in the payout ratio as well as the reduction in the corresponding AFFO per unit1 amounts is mainly due to a non-recurring expense reduction for one property in prior period of 2020.
For the nine-month period ended September 30, 2021:
- Property revenue was $54.7 million. The increase of $2.5 million or 4.8%, compared to the same period last year is primarily due to incremental revenues from the net property acquisitions completed in the twelve-month period ended September 30, 2021.
- Same property net operating income1 increased across all segments to reach $29.1 million, an increase of $1.0 million or 3,4%, compared to the same period last year. Excluding COVID-19 related expenses of $0.3 million recorded in the nine-month period of 2020, the increases was 2.2%. The growth reflects increased occupancy, contracted rent steps and higher net renewal rents in the portfolio.
- Net operating income1 was $32.9 million, an increase of $2.4 million or 7.8%, compared to the same period last year. This increase results primarily from the favourable impact of the net property acquisitions in the twelve-month period ended September 30, 2021.
- Net income and comprehensive income amounted to $16.8 million, an increase of $2.1 million or 14.6%, compared to the same prior year period. The difference relates to the net property acquisitions as well as non-cash fair value adjustments in investment properties and non-cash long-term incentive plan expense for the first nine months of 2021, partially offset by the impact of the non-cash fair value of Class B LP Units compared to the same prior year period.
- AFFO1 totaled $17.7 million, an increase of $0.6 million or 3.8%, compared to the same prior year period. The increase reflects the favourable impact of the net property acquisitions in the twelve-month period ended September 30, 2021, partially offset by the increase in maintenance capital expenditures, stabilized leasing costs and general and administrative expenses.
- Net cash flows provided from operating activities was $9.0 million, compared to $13.1 million for the same prior period. The change is mainly attributable to timing between cash receipts from rent collections and settlement of payables in addition to a $5.2 million deposit paid with respect to recent acquisitions.
- AFFO payout ratio1 stood at 86.0% compared to 89.6% for the same period last year. The decrease in the payout ratio was primarily driven by the revision of PROREIT's monthly distributions to $0.0375 per unit from $0.0525 commencing April 2020.
_______________________ |
|
1 |
Non-IFRS measure. See "Non-IFRS and Operational Key Performance Indicators". |
Solid Balance Sheet and Liquidity Position
PROREIT is committed to steadily improving its balance sheet and liquidity position. As at September 30, 2021, PROREIT had in excess of $20 million of operating liquidity through cash on hand and undrawn operating facilities. At the end of the quarter, PROREIT's debt to gross book value ratio1 was 58.19%. Excluding the impact of a $5.2 million deposit made on recent acquisitions closed subsequent to quarter-end, debt to gross book value ratio amounted to 57.9%.
Subsequent to quarter-end, PROREIT received confirmation from its lender that its revolving credit facility will be increased to $60.0 million on improved terms, an increase of $15.0 million, adding to PROREIT's operating liquidity availability while reducing its contracted borrowing costs going forward.
On October 6, 2021, subsequent to quarter-end, PROREIT completed its previously announced public offering of trust units on a bought deal basis for total gross proceeds of $69 million, including 1,314,000 units issued pursuant to the full exercise of the over–allotment option. Concurrently, PROREIT completed a non–brokered private placement with Collingwood Investments Incorporated, a member of the Bragg Group of Companies, from Nova Scotia, for total gross proceeds of $14.3 million. PROREIT used the net proceeds from the offering and the private placement to partially fund the acquisitions closed subsequent to quarter-end, to repay certain indebtedness which may be subsequently redrawn, and the balance if any to fund future acquisitions and for general business and working capital purposes.
_______________________ |
|
1 |
Non-IFRS measure. See "Non-IFRS and Operational Key Performance Indicators". |
Portfolio Transactions
On September 29, 2021, PROREIT sold three non–strategic properties located in New Brunswick for gross proceed of $8.1 million, marginally above their related carrying value. The proceeds were used to repay the property mortgages and for general trust purposes.
On November 9, 2021, subsequent to quarter-end, PROREIT announced the completion of its acquisition of a 100% interest in 15 industrial properties located in Atlantic Canada and one industrial property in Winnipeg, Manitoba, for an aggregate purchase price of $163.2 million (excluding closing costs). The purchase price was substantially financed by the proceeds of $105.6 million of new three–year and seven–year first mortgages at an average rate of 2.97% and the assumption of an $8.4 million first mortgage with an effective interest rate of 2.75%. The balance of the purchase price was satisfied with cash on hand from the offering and the private placement.
Impact of the Transactions on PROREIT's Overall Portfolio
PROREIT's portfolio is now comprised of 120 income producing commercial properties representing approximately 6.6 million square feet of gross leasable area ("GLA") with a weighted average lease term of 4.5 years. The recent addition of industrial properties has improved portfolio balance by increasing exposure to the industrial segment to 78% by GLA and 63% by base rent, while increasing the footprint in the Maritime provinces to 51% by GLA and 47% by base rent.
Portfolio Overview
Province |
% By Base |
% By GLA |
Asset Class |
% By Base |
% By GLA |
Maritime Provinces |
47% |
51% |
Industrial |
63% |
78% |
Ontario |
27% |
24% |
Retail |
26% |
15% |
Western Canada |
16% |
14% |
Office |
11% |
7% |
Quebec |
10% |
12% |
|||
Total |
100% |
100% |
Total |
100% |
100% |
Table 2 - Operational Highlights
September 30 |
September 30 |
||||
|
|||||
Number of properties |
104 |
92 |
|||
Gross leasable area (square feet) (GLA) |
5,407,664 |
4,571,311 |
|||
Occupancy rate (1) |
98.5% |
98.1% |
|||
(1) |
Occupancy rate includes lease contracts for future occupancy of currently vacant space. Management believes the inclusion of this committed space provides a more balanced reporting. The committed space at September 30, 2021 was approximately 110,653 square feet of GLA (43,203 square feet of GLA at September 30, 2020). The occupancy at September 30, 2021 excludes an 82,000 square foot building under redevelopment. |
GLA increased 18.3% to 5,407,664 square feet at September 30, 2021, compared to 4,571,311 square feet at September 30, 2020. The increase of 836,353 square feet is mainly attributable to the net increase in investment properties in the twelve-month period ended September 30, 2021.
Leasing momentum continued in the third quarter of 2021. Occupancy rate increased to 98.5% as of September 30, 2021, compared to 98.1% a year earlier, with substantially all rent collected in Q3 2021. PROREIT has renewed approximately 92% of total square feet maturing in 2021 at positive spreads averaging 10.2%, as well as approximately one third of 2022 renewals which will also be at positive spreads, again especially in the industrial sector.
PROREIT's tenant mix is well diversified by industry sector. As of September 30, 2021, approximately 77% of portfolio base rent is from national and government tenants, and 66.5% of base rent in the retail segment is from tenants providing necessary services to the public, including groceries, pharmacies, financial institutions, government offices and medical offices. The ten largest tenants in PROREIT's portfolio accounted for approximately 34.9% of annual base rent at September 30, 2021 and have an average remaining lease term of 5.6 years.
Distributions
Distributions to unitholders of $0.0375 per trust unit of the REIT were declared monthly during the three months ended September 30, 2021, representing distributions of $0.45 per unit on an annual basis. Equivalent distributions are paid on the Class B limited partnership units of PROREIT Limited Partnership ("Class B LP Units"), a subsidiary of the REIT.
Renewal of Normal Course Issuer Bid
On September 21, 2021, PROREIT announced that the Toronto Stock Exchange accepted its notice to renew its normal course issuer bid ("NCIB") for a one-year period. The NCIB commenced on September 24, 2021 and will terminate on the earlier of: (i) September 23, 2022, and (ii) the date on which the maximum number of units that can be acquired pursuant to the NCIB are purchased. PROREIT may purchase up to 1,404,238 trust units under the NCIB, representing 3.0% of the REIT's 46,807,962 issued and outstanding trust units as at September 17, 2021.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its third quarter 2021 results on November 11, 2021, at 10:30 a.m. Eastern. There will be a question period reserved for financial analysts. To access the conference call, please dial 888-664-6383 or 416-764-8650 or 514-225-6995 (conference: 81238978). A recording of the call will be available until November 18, 2021 by dialing 888-390-0541 or 416-764-8677 Access code: 238978 #
The conference call will also be accessible via live webcast on PROREIT's website at www.proreit.com or at https://produceredition.webcasts.com/starthere.jsp?ei=1504529&tp_key=20c1180403
About PROREIT
PROREIT (TSX:PRV.UN) is an unincorporated open-ended real estate investment trust owning a diversified portfolio of diversified commercial properties across Canada. Established in March 2013, PROREIT is mainly focused on strong primary and secondary markets in Québec, Atlantic Canada and Ontario, with selective exposure in Western Canada. For more information, go to: www.proreit.com
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). In this press release, as a complement to results provided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including net operating income ("NOI"), adjusted funds from operations ("AFFO"), debt to gross book value, interest coverage ratio, debt service coverage ratio, funds from operations ("FFO"), AFFO payout ratio and same property net operating income ("same property NOI"). These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. PROREIT has presented such non-IFRS measures as management of the REIT believes they are relevant measures of PROREIT's underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance with IFRS as indicators of PROREIT's performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the "Non-IFRS and Operational Key Performance Indicators" section in PROREIT's management's discussion and analysis for the three month period ended September 30, 2021, available under PROREIT's profile on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond PROREIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.
Forward-looking statements contained in this press release include, without limitation, statements pertaining to the execution by PROREIT of its growth strategy, the future economic activity, economic conditions, the future performance of PROREIT and the increase of its credit facility and the terms thereof. PROREIT's objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favourable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with the REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT's operations, including its financing capacity and asset value, will remain consistent with PROREIT's current expectations; (v) the performance of PROREIT's investments in Canada will proceed on a basis consistent with PROREIT's current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt. Without limitation, there can be no assurance that any discussions or agreements PROREIT may have concerning future acquisitions will result in definitive agreements or property acquisitions, and, if they do, what the terms or timing of any such acquisitions would be.
The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.
Additional information about these assumptions and risks and uncertainties is contained under "Risk Factors" in PROREIT's latest annual information form and "Risk and Uncertainties" in PROREIT's management's discussion and analysis for the three month period ended September 30, 2021, which are available under PROREIT's profile on SEDAR at www.sedar.com.
SOURCE PROREIT
Investor Relations: PRO Real Estate Investment Trust, James W. Beckerleg, President and Chief Executive Officer, 514-933-9552; PRO Real Estate Investment Trust, Gordon G. Lawlor, CPA, CA, Executive Vice President, Chief Financial Officer and Secretary, 514-933-9552
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