FAM REIT Announces Q3 2013 Results

TORONTO, Nov. 7, 2013 /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 and nine months ended September 30, 2013.

KEY HIGHLIGHTS

  • Same-property occupancy of 97.2% as at September 30, 2013, compared to 89.6% for the IPO forecast; Overall portfolio occupancy of 97.1% as at September 30, 3013
  • Same-property net operating income growth of 2.5% on a sequential quarter basis and 2.8% growth over the first quarter of 2013
  • FFO - As Reported per unit of $0.23 and FFO - Core per unit of $0.24, compared to $0.23 for the IPO forecast
  • AFFO - As Reported and AFFO - Core per unit of $0.20 per unit excluding $0.05 per unit ($0.5 million) of leasing costs to lease-up 21,400 sf of previously vacant space. Additional leasing costs of $0.4 million will be incurred during the fourth quarter of 2013 for this vacant space. This investment will generate $0.5 million of incremental cash flow annually for 10.7 years beginning in the fourth quarter of 2013
  • AFFO - Core payout ratio of 92% for the nine months ended September 30, 2013, or 85% excluding the above noted lease up of vacant space which will contribute to AFFO beginning in the fourth quarter of 2013
  • Closed the acquisition of The Promontory, a Class A Greater Toronto Area office complex, for $39.0 million on August 15, 2013
  • Reduced leverage as indebtedness ratio decreased to 53.5% from 56.6% as at June 30 2013 with the $27.0 million equity issuance which closed on August 2, 2013

Shant Poladian, Chief Executive Officer of FAM REIT, commented, "Our operational and financial performance in the third quarter further builds our track record of solid execution. Tenant demand for our portfolio remains healthy through high occupancy and lease-up of vacant space. Equally as important is our focus on building a strong balance sheet and liquidity to navigate a more challenging capital market environment for REITs as long-term interest rates rise from generationally low levels. We have $12.3 million of liquidity in the form of cash and unused lines, only $0.8 million of mortgages maturing before November 2015, our 2015-2017 mortgage maturities represent a very conservative 44% loan to value, and our overall credits metrics are sound. In addition, DRIP participation has now reached approximately 30%, allowing us to prudently reinvest the retained cash flow and/or to further reduce leverage."

Financial Highlights and Key Performance Indicators  

($000s unless otherwise noted and except per unit amounts) Three months
ended
September 30,
2013
Forecast - Three
months ended
September 30,
2013(1)
Three months
ended June 30,
2013
Revenue from investment properties   $                7,568 $            5,770 $            6,601
Net operating income   4,720 3,468                  4,130
Same-property net operating income   3,669 3,180 3,578
Net income and comprehensive income   1,228 1,420                  4,162
           
Funds from operations - As Reported   2,418 1,899                  2,879
Funds from operations - Core   2,519 1,899                  2,081
FFO per unit (basic and diluted) - As Reported(2)   $                 0.23 $              0.23 $              0.34
FFO per unit (basic and diluted) - Core(2)   $                 0.24 $              0.23 $              0.25
           
Adjusted funds from operations - As Reported   1,529 1,432                  1,121
Adjusted funds from operations - Core   1,529 1,432                  2,046
AFFO per unit (basic and diluted) - As Reported(2) $                 0.15 $              0.17 $              0.13
AFFO per unit (basic and diluted) - Core(2)   $                 0.15 $              0.17 $              0.24
           
Distributions per unit   $                 0.19 $              0.19 $              0.19
Core AFFO pay-out ratio   127% 112% 76%
Cash distributions per unit - net of DRIP   $                 0.15 $              0.19 $              0.19
Core AFFO pay-out ratio, net of DRIP   100% 112% 76%
           
Net operating income by asset class        
  Industrial   $               1,445 $            1,379 $            1,447
  Office   2,858 1,716 2,256
  Retail   417 373 427
      $               4,720 $            3,468 $            4,130
           
Net operating income by geographic location        
  Manitoba   $              1,851 $            1,759 $            1,866
  Ontario   1,876 804 1,261
  Saskatchewan   380 323 385
  Alberta   491 452 482
  Northwest Territories   122 130 136
      $              4,720 $            3,468 $            4,130
           
Interest coverage ratio (times)   2.8x 2.6x 2.4x
Leverage ratio (times) - period end   8.4x NF 9.3x
Debt service coverage ratio (times)   1.7x NF 1.5x
Indebtedness ratio (%) - period end   53.5% NF 56.6%
Weighted average mortgage interest rate - period end   4.7% NF 4.8%
Same-property occupancy - period end   97.2% 89.6% 97.3%
Occupancy - period end        
  Industrial   100.0% 98.5% 100.0%
  Office   96.0% 82.7% 96.5%
  Retail   90.9% 82.3% 90.4%
      97.1% 90.0% 96.9%
             
Leased square footage (sq. ft.) - period end   1,849,875 1,493,785 1,690,701
Rentable square footage (sq. ft.) - period end   1,905,036 1,659,633 1,745,292
NF = Not forecasted        
(1) For information purposes only, select forecast financial information for the three months ended September 30, 2013 has been included in this press release, based on the financial forecast in the initial public offering documents.
(2) The basic 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.
 

FINANCIAL

  • Funds From Operations ("FFO") - As Reported for the three months ended September 30, 2013 was $0.23 per unit. After adjusting for a $0.01 per unit fair value loss on interest rate swaps, FFO - Core was $0.24 per unit, ahead of the IPO forecast of $0.23 per unit. If the acquisition of the Promontory and related financing had occurred at the beginning of the third quarter, FFO - Core would have been $0.25 per unit.
  • Adjusted Funds From Operations ("AFFO") - As Reported and AFFO - Core for the three months ended September 30, 2013 was $0.15 per unit, compared to the IPO forecast of $0.17 per unit. AFFO - Core for the third quarter would have been $0.20 per unit excluding $0.05 per unit of leasing costs associated with the lease-up of 21,400 sf of vacant space which is slated to take occupancy in the fourth quarter of 2013. Additional leasing costs of $0.4 million will be incurred during the fourth quarter of 2013 for this vacant space.

OPERATIONAL

  • Net Operating Income ("NOI"). During the three months ended September 30, 2013, the REIT achieved NOI of $4.7 million, which was 34.3% ahead of the forecasted NOI of $3.5 million. This growth was driven by the acquisitions of 4211 Yonge and The Promontory, higher than expected tenant retention, lease-up of vacant space, slightly offset by the sale of 220 Portage.
  • Same property NOI growth. Same-property NOI growth was 2.5% on a sequential basis and  2.8%  compared to the first quarter of 2013 due to higher occupancy and lower non-recoverable expenses.
  • Occupancy. Occupancy on a same-property basis was 97.2% as at September 30, 2013, ahead of the forecasted occupancy rate of 89.6% driven by higher than forecasted tenant retention and lease-up of vacant space. Overall portfolio occupancy was 97.1%, which included the acquisitions of 4211 Yonge and The Promontory, and the disposition of 220 Portage.
  • Leasing Profile. 171,000 sf of leased area expired during the three months ended September 30, 2013. Of the total 171,000 sf of expiries, we completed lease renewals totaling 37,000 sf during the quarter, and 133,000 sf of tenancies are being overheld as these lease renewals are currently underway.
  • Debt Strategy. FAM REIT deleveraged its financial position with the $27.0 million August 2013 equity raise. In connection with The Promontory acquisition, the REIT obtained a $23.0 million mortgage for a ten year term at an interest rate of 4.60%. For the next 12 months, FAM REIT has a strong and flexible financial position with only $0.8 million of mortgage maturities prior to November 2015.

OUTLOOK

Our existing portfolio continues to perform well, and our recent acquisitions have integrated smoothly into our operations. Based on our current leasing outlook we expect to maintain same property occupancy at 97% for the remainder of 2013.

The Promontory acquisition, together with the FAM REIT's previously completed property transactions (the acquisition of 4211 Yonge and the disposition of 220 Portage) are expected to generate approximately $2.1 million of pro-forma annualized AFFO.

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.

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

For further information:

Shant Poladian, Chief Executive Officer
FAM Real Estate Investment Trust
Telephone: (647) 256-5002
Email: spoladian@famreit.com

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FAM Real Estate Investment Trust

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