Inovalis Real Estate Investment Trust reports strong financial results for the fourth quarter and the year ended December 31, 2013.

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TORONTO, March 21, 2014 /CNW/ - Inovalis Real Estate Investment Trust (the "REIT") (TSX: INO.UN) today reported its financial results for the fourth quarter and the year ended December 31, 2013. Inovalis REIT's management team will be holding a conference call on Monday March 24, 2014 at 10:00 am EST to discuss the results. The dial-in numbers for the conference call are: in Toronto 1-416-764-8688; outside Toronto (toll free, within North America) 1-888-390-0546.

HIGHLIGHTS

  • Financial results ahead of forecast with Funds from Operations (FFO) for the fourth quarter of $2.6 million (or $0.20 per unit on a fully diluted basis), higher than the forecasted $2.1 million (or $0.18 per unit) and for the partial year ended December 31, 2013 of $7.1 million (or $0.56 per unit on a fully diluted basis), higher than the forecasted $6.0 million (or $0.51 per unit)

  • Adjusted Funds From Operations (AFFO) for the fourth quarter of $3.1 million (or $0.24 per unit on a fully diluted basis), higher than the forecasted $2.6 million (or $0.22 per unit) and for the partial year ended December 31, 2013 of $8.4 million (or $0.67 per unit on a fully diluted basis), higher than the forecasted $7.4 million (or $0.62 per unit)

  • The AFFO payout ratio stands at 84.7% for the quarter ended December 31, 2013 and at 89.1% for the partial year ended December 31, 2013

  • Active acquisition pipeline with the recent announcement of the acquisition of a 217,400 square feet property located in Duisburg (Germany) on a 50-50 co-ownership arrangement basis with a global institutional investor

"I am very pleased to announce our first year end results with FFO and AFFO figures higher than our initial forecasts. Looking ahead, we will focus on running our business efficiently, identifying growth opportunities in order to create long-term value for our Unitholders. We continue to believe that the French and German real estate office markets, due to their maturity, depth and the recovery phase they have entered in, are and will continue to be sought-after investment markets. After a four years of suffering time, with a new rising era, we now foresee for the next five years numerous opportunities to upgrade properties and be rewarded with higher rents and significant capital gains. We are convinced that owning properties on a joint-venture basis with institutional partners, as it will be the case for our next acquisition in Duisburg (Germany), is a value-enhancement tool for our company with a better diversification of our risk profile" said Stéphane Amine, Chairman of the Board of Inovalis REIT.

OPERATING AND FINANCIAL SUMMARY

    3-month period ended 
December 31, 2013
  Period from February 8, 2013
to December 31, 2013
 
               
(in thousands of CAD$ unless otherwise expressed and except for per
Unit amounts)
  Actual Financial
forecast(1)
  Actual Financial forecast
pro-rated(1)
 
               
Operational information              
Number of properties   4          
Gross leasable area   529,267 sq.ft          
Occupancy rate (end of period) (2)   96.0%        
Weighted average lease term    7.5 years        
Average capitalization rate (3)   7.6%          
               
Operating results              
Rental income   4,630 4,101   12,523 11,595  
Net rental income   4,394 4,001   12,125 11,312  
Profit for the period   3,955 1,863   17,381 11,822  
Funds from Operations (FFO) (4) (5)   2,555 2,099   7,054 5,991  
Adjusted Funds from Operations (AFFO) (4) (5)   3,073 2,582   8,446 7,392  
FFO per Unit (diluted) (4) (5) (6)   0.20 0.18   0.56 0.51  
AFFO per Unit (diluted) (4) (5) (6)   0.24 0.22   0.67 0.62  
               
Distributions              
Declared distributions on Units and Exchangeable Securities   2,602     7,523    
Declared distribution per Unit (diluted) (6)   0.21     0.60    
AFFO cash payout ratio (4)   84.7%     89.1%    
               
Financing              
Level of debt (debt-to-book value) (7)   44.2%          
Level of debt (debt-to-book value, net of cash) (7)   42.8%          
Weighted average interest rate (8)   1.44%          
Weighted average term to maturity of principal repayments of finance leases   4.25 years          
Interest coverage ratio (9)   4.0 x          
(1)   Financial forecast refers to the financial forecast for the three-month period ended December 31, 2013 included in our prospectus dated March 28, 2013. The financial forecast for the period from April 16, 2013 to December 31, 2013 has been pro-rated to reflect our ownership of the properties starting on April 16, 2013
(2)    Does not take into account the impact of the Vendor Leases. Taking them into account, occupancy rate is 100.0%
(3)    Calculated on annualized rental income (based on rental income for the quarter ended December 31, 2013)
(4)    FFO and AFFO are key measures of performance used by real estate companies. However, they are not defined under IFRS, do not have standard meanings and may not be comparable with other industries or issuers
(5)     FFO is net income adjusted for acquisition costs, negative goodwill, valuation gain from investment properties, net change in fair value of financial instruments and change in fair value of exchangeable securities. AFFO is FFO adjusted with amortization of fair value on assumed debt, non cash part of asset management fees paid in exchangeable securities and capex net of cash subsidy
(6)      Based on the weighted average number of Units during the period, i.e. 12,619,505 for the 3-month period ending December 31, 2013, and 12,579,625 for the period from February 8, 2013 to December 31, 2013
(7)    Debt-to-book value is defined as total debt divided by total assets. Debt-to-book value, net of cash, is defined as total debt divided by total assets, each of which excludes $6.1 million of cash at December 31, 2013
(8)    Calculated as the weighted average interest rate paid on all the finance leases
(9)     Calculated as net rental income plus interest, less general and administrative expenses, divided by interest expense on the financial leases

LOOKING AHEAD

Acquisition of a property in Duisburg (Germany)
The REIT recently announced the acquisition of an office property located in Duisburg (Germany) on a 50-50 co-ownership arrangement basis with a strategic, global institutional investor that has a long-standing relationship with Inovalis SA. The property, located in Duisburg, Germany, is an eight-storey office building developed in 2008 totalling 217,400 square feet of office space and is fully let to Mitsubishi Hitachi Power Systems Europe GmbH under a lease expiring on December 31, 2020.

Refinancing of the French properties
The REIT's share of the above-mentioned acquisition in Germany will be funded through a combination of existing cash on hand, proceeds from re-financing and up-financing of the REIT's French properties with European banks and a first mortgage on the property. Upon the completion of the Property acquisition (expected in May 2014), the average LTV on the REIT will remain below 55%.

Development of partnerships
The REIT intends to develop partnerships with institutional investors for the ownership, on a joint-venture basis, of investment properties as a risk-diversification enhancement tool.

DISCLAIMER

Information appearing in this news release is a select summary of results. The financial statements and management's discussion and analysis for the REIT are available at www.inovalisreit.com and on SEDAR at www.sedar.com.

ABOUT INOVALIS REAL ESTATE INVESTMENT TRUST

Inovalis Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been created for the purpose of acquiring and owning office properties primarily located in France and Germany but also opportunistically in other European countries where assets meet the REIT's investment criteria. The REIT currently owns an interest in four office properties in France and Germany, comprising 529,267 square feet (49,170 square metres) of gross leasable area.

 

SOURCE Inovalis Real Estate Investment Trust

For further information:

David Giraud, Chief Executive Officer 
Inovalis Real Estate Investment Trust
Tel: +33 1 5643 3323
david.giraud@inovalis.com 

Antoine Tronquoy, Chief Financial Officer   
Inovalis Real Estate Investment Trust
Tel: (416) 845-1483     
antoine.tronquoy@inovalis.com