MONTRÉAL, Nov. 13, 2019 /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") ended September 30, 2019.
"2019 has been an outstanding year for PROREIT so far, and I am pleased with our continued growth and our sound financial position," said Jim Beckerleg, President and CEO, PROREIT.
"In the third quarter of 2019, we generated a solid increase in net operating income, and same property net operating income and occupancy rates remained strong, reflecting the strength of our business fundamentals. The third quarter also marked the successful completion of our acquisition of seven high-quality assets on an accretive basis, and of our largest equity raise to-date. In line with our growth strategy, the timing and full deployment of the proceeds from our equity raise will have an accretive impact on our AFFO and payout ratio within the next few months," added Mr. Beckerleg.
"With our increased scale and a growing profile, we have access to properties within larger urban centres, with about one-third of our GLA now located in the attractive Montreal and Ottawa regions. During the quarter, we have also increased our exposure to the industrial and commercial mixed-used sectors, which account for more than 64% of our GLA," added Mr. Beckerleg
"Our asset and property management functions are now well integrated, resulting in operational synergies that will improve results over time to the benefit of unitholders. With TSX graduation and management internalization now behind us, our key operational metrics can reflect our strong momentum as we remain focused on pursuing our vision to build a high-quality, diversified mid-cap Canadian REIT," concluded Mr. Beckerleg.
TABLE 1- FINANCIAL HIGHLIGHTS
(CAD $ thousands except unit, per unit amounts and
Net operating income (NOI) (1)
Debt to Gross Book Value (1)
Interest Coverage Ratio (1)
Debt Service Coverage Ratio (1)
Weighted average interest rate on mortgage debt
Net cash flows provided from operating activities
Funds from Operations (FFO) (1)(3)
Basic FFO per unit (1)(2)
Diluted FFO per unit (1)(2)
Adjusted Funds from Operations (AFFO) (1)
Basic AFFO per unit (1)(2)
Diluted AFFO per unit (1)(2)
AFFO Payout Ratio – Basic (1)
AFFO Payout Ratio – Diluted (1)
Non‑IFRS measure. See "Non‑IFRS and Operational Key Performance Indicators".
Total basic units consist of Units (as defined herein) and Class B LP Units (as defined herein). Total diluted units also include deferred trust units and restricted trust units issued under the REIT's long‑term incentive plan.
Includes one-time transaction costs relating to management internalization and graduation to the TSX (as defined herein) of $nil and $3,076 respectively for the three and nine months ended September 30, 2019.
PROREIT owned 91 investment properties at September 30, 2019, compared to 76 properties at the same time last year. Total assets amounted to $628.6 million at September 30, 2019, representing an increase of $196.4 million, or 45.5%, compared to $432.2 million at September 30, 2018. The increase is mainly due to the acquisition of 15 investment properties in the twelve-month period ended September 30, 2019.
During the quarter, PROREIT acquired seven properties for $97.8 million, representing a total of 696,000 square feet of gross leasable area ("GLA"). The properties include a boutique office tower in the central business district in Ottawa and a Class-A mixed-used industrial property located in Kanata, Ontario, in addition to a five-property light industrial portfolio in Halifax, Nova Scotia.
PROREIT closed, on August 16, 2019, its previously announced public offering of trust units of the REIT ("Units"), on a bought-deal basis, at a price of $7.00 per Unit, resulting in 8,222,500 Units being issued for total gross proceeds of $57.6 million, including 1,072,500 Units issued pursuant to the full exercise of the over-allotment option.
For the third quarter ended September 30, 2019:
For the nine-month period ended September 30, 2019:
TABLE 2- RECONCILIATION OF NET OPERATING INCOME TO NET COMPREHENSIVE INCOME
(CAD $ thousands)
Property operating expenses
Net operating income (NOI) (1)
General and administrative expenses
Long‑term incentive plan expense
Depreciation of property and equipment
Amortization of intangible assets
Interest and financing costs
Distributions ‑ Class B LP Units
Fair value adjustment ‑ Class B LP Units
Fair value adjustment ‑ investment properties
Debt settlement costs
Net comprehensive income
(1) See "Non‑IFRS and Operational Key Performance Indicators".
For the three months ended September 30, 2019, net comprehensive income amounted to $6.9 million, compared to $9.8 million for the same period last year. The $2.9 million decrease mainly relates to the $3.5 million difference in non-cash fair value gain on investment properties for the third quarter of 2019 compared to the same period last year, partially offset by the impact of property acquisitions completed in the twelve-month period ended September 30, 2019.
For the nine months ended September 30, 2019, net comprehensive income amounted to $13.7 million, an increase of $1.4 million compared to $12.3 million for the same period last year, mainly as a result of the impact of property acquisitions completed in the twelve-month period ended September 30, 2019, combined with a $5.2 million increase in the non-cash fair value gain on investment properties, partially offset by one-time transaction costs of $3.1 million relating to the internalization of PROREIT's asset management function and the graduation to the Toronto Stock Exchange ("TSX").
TABLE 3- TOTAL PORTFOLIO BASE RENT
BY ASSET CLASS
September 30, 2019
September 30, 2018
Commercial Mixed Use
September 30, 2019
September 30, 2018
Acquisitions made during the last twelve-month period contributed to the diversification of PROREIT's asset portfolio. PROREIT's industrial exposure rose to 28.2% while commercial mixed-used and office exposure increased to 17.9% and 16.2% respectively at the end of the third quarter of 2019. The acquisitions also increased exposure to the Ontario market to 29.4% at the end of the three-month period ended September 30, 2019.
TABLE 4- OPERATIONAL HIGHLIGHTS
Number of properties
Gross leasable area (square feet)
Occupancy rate (1)
Weighted average lease term to maturity (years)
(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, 2019 was approximately 30,327 square feet of GLA (79,989 square feet of GLA at September 30, 2018).
GLA increased 44.6% to 4,396,004 square feet at September 30, 2019, compared to 3,041,030 square feet at September 30, 2018. The increase of 1,354,974 square feet in GLA is a result of the acquisition of 15 investment properties in the twelve-month period ended September 30, 2019.
Occupancy rate remained firm at 98.2% as at September 30, 2019, compared to 98.1% a year earlier. The solid, high profile 10 largest tenants in PROREIT's portfolio accounted for approximately 34.9% of annualized in-place and committed base rent at September 30, 2019 and comprise approximately 7.5 years of remaining lease term, while credit quality tenants represent 45.5% of in-place annualized base rent.
Weighted average lease term to maturity stood at 5.6 years for the three months ended September 30, 2019, compared to 6.5 years for the same period in 2018. Over 91% of PROREIT's leases maturing in 2019 have been renewed as of September 30, 2019.
Distributions to unitholders totaling $0.0525 per Unit were declared monthly during the three months ended September 30, 2019, representing distributions of $0.63 per Unit on an annual basis. Equivalent distributions are paid on the Class B limited partnership units ("Class B LP Units") of PRO REIT Limited Partnership, a subsidiary of the REIT.
On October 22, 2019, PROREIT announced a cash distribution of $0.0525 per Unit for the month of October 2019. The distribution is payable on November 15, 2019 to unitholders of record as at October 31, 2019.
STRATEGY AND OUTLOOK
Given the current economic fundamentals in Canada, management expects the low-interest rate and high liquidity context to prevail. The real estate market outlook should also remain favourable, with demand for properties remaining solid and rental rates firming up.
Management continues to seek opportunities to strategically grow, diversify and improve its asset portfolio both in high-demand asset classes as well as in provinces with a sound and resilient economy, while achieving additional economies of scale.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its third quarter 2019 results on November 14, 2019, at 11:00 a.m. EDT. There will be a question period reserved for financial analysts. To access the conference call, please dial 888-390-0605 or 416-764-8609 or 514-225-7341. A recording of the call will be available from November 14 to February 14, 2020 by dialing 888‑390‑0541 or 416-764-8677, access code for participants 545796#. The conference call will also be accessible via live webcast on PROREIT's website at 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 same property net operating income (or same property NOI), adjusted funds from operations or AFFO, AFFO payout ratio, net operating income or NOI, debt to gross book value, gross book value, interest coverage ratio, debt service coverage ratio, and funds from operations or FFO. 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 months ended September 30, 2019, available under PROREIT's profile on SEDAR at www.sedar.com.
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 impact of the recently completed acquisitions on the REIT's future financial performance, the impact of recent transactions on the REIT's AFFO per unit and AFFO payout ratio, the ability of the REIT to executive its growth strategy, the performance of the real estate markets and the payment and level of future distributions. PROREIT's objectives and forward-looking statements are based on certain assumptions, including management's perceptions of historical trends, current conditions and expected future developments.
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, which is available on SEDAR at www.sedar.com.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
PROREIT (www.proreit.com) is an unincorporated open-ended real estate investment trust owning a diversified portfolio of 91 commercial properties across Canada representing over 4.4 million square feet of GLA. 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.
Non-IFRS measure. See "Non-IFRS and Operational Key Performance Indicators".
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