TRANSGLOBE APARTMENT REIT ANNOUNCES FIRST QUARTER 2011 RESULTS

MISSISSAUGA, ON, May 17 /CNW/ - TransGlobe Apartment Real Estate Investment Trust (TSX: TGA.UN) (the "REIT") announced today results for the three months ended March 31, 2011 and the period since the completion of its Initial Public Offering ("IPO") on May 14, 2010 to March 31, 2011. The REIT had no operations prior to the completion of its IPO. Certain numbers in the REIT's IPO forecast have been pro-rated to correspond with the reporting periods below. In addition, the three month period ended March 31, 2011 is the first period that the REIT has reported under International Financial Reporting Standards ("IFRS"). Please refer to the REIT's Management Discussion and Analysis and the condensed consolidated interim financial statements for the three months ended March 31, 2011 for a comprehensive description of the changes arising from the transition.

Q1 2011 HIGHLIGHTS:

  • Occupancies remain strong at 96.1% at March 31, 2011.
  • Average Monthly Rents for the portfolio solid at $888 per suite.
  • Portfolio of apartment suites increased by 44% through acquisition of 3,651 suites for approximately $315 million.
  • 78% of upcoming 2011 debt maturities have been refinanced to date at lower rates than maturing debt, with balance expected to be completed by end of May.
  • Operating results impacted by higher than forecast utility costs and energy consumption.

Operating Results

Property revenues for the three months ended March 31, 2011 of $28.9 million were higher than forecast primarily due to the inclusion of acquisitions not included in the forecast. Revenue reported for the properties acquired at the time of the IPO ("Initial Portfolio") was in line with forecast. For the period May 14, 2010 to March 31, 2011 property revenues were $84.3 million, up from the pro-rated forecast of $79.5 million due to the contribution from acquisitions not included in the forecast. Occupancy for the Initial Portfolio of 96.4% in the first quarter of 2011 was in line with the 96.2% forecast. Average monthly rents for the Initial Portfolio of $898 per suite were slightly lower than the previous quarter due to mandated rent reductions for in-place tenants related to a reduction in realty taxes at 16 properties.

Net Operating Income ("NOI") for the three months ended March 31, 2011 and the period from May 14, 2010 to March 31, 2011 was $14.6 million and $46.2 million, respectively, both higher than forecast due to the contribution from acquisitions not included in the forecast. NOI for the Initial Portfolio was negatively impacted by higher utility costs and energy consumption than originally forecast due to the much colder winter than anticipated in the REIT's markets. Management continues to implement a number of energy savings initiatives in an effort to achieve efficiencies in the REIT's utility costs.

Funds from Operations ("FFO") for the three months ended March 31, 2011 of $8.3 million were higher than the forecast of $7.2 million primarily due to the increased contribution from acquisitions completed in the quarter partially offset by increased operating costs on the Initial Portfolio as described above. FFO for the period from May 14, 2010 to March 31, 2011 of $27.2 million was lower than the forecast of $27.4 million. FFO and FFO per unit have been negatively impacted by the transition to IFRS which resulted in non-cash accounting adjustments of $0.5 million and $1.8 million in the three months ended March 31, 2011 and the period from May 14, 2010 to March 31, 2011 respectively. Excluding the impact of these adjustments FFO per unit for the quarter of $0.22 was in line with forecast. Since inception, FFO per unit was $0.84 compared to the forecast of $0.85 per unit.

Adjusted Funds from Operations ("AFFO") for the three months ended March 31, 2011 were $6.4 million, higher than the forecast of $5.3 million. For the period May 14, 2010 to March 31, 2011 AFFO was $21.4 million, ahead of the forecast of $20.7 million. On a per unit basis, AFFO for the quarter was $0.17 compared to forecast of $0.18 and since inception was $0.66 compared to the forecast of $0.69

"Our property portfolio continued to grow in the first quarter of 2011 as we acquired a total of 3,651 suites in strong markets for total consideration of approximately $315 million," commented Kelly Hanczyk, Chief Executive Officer. "These accretive purchases will make a solid contribution to our results going forward, and we expect to further aggressively expand our portfolio in the coming quarters both geographically and in markets where we already operate."

Strong Financial Position

The REIT maintained a strong balance sheet and liquidity position as at March 31, 2011 with a conservative debt to Gross Book Value ratio of 59.3% and a solid interest coverage ratio of 2.50 times. The weighted average interest rate on its mortgage portfolio was 3.91% with a weighted average term to maturity of 2.86 years. The REIT has negotiated the refinancing of a substantial amount of its mortgage debt maturing in 2011. To date $74.4 million of the $95.6 million maturing debt has been refinanced. The maturing debt that has been renewed to date has an average interest rate of 3.72% and average term to maturity of 5.7 years. Management expects the remaining $21.2 million maturing debt will be refinanced by the end of May 2011 for a 10 year term which would result in the weighted average term to maturity of the mortgage portfolio increasing from  2.86 years at March 31, 2011 to 3.75 years.

Portfolio Growth

On January 28, 2011 the REIT indirectly acquired a portfolio of 48 apartment buildings and one townhouse complex totaling approximately 3,100 suites for total consideration of approximately $277 million. The acquisition was funded by cash, the issuance of approximately 1.7 million Class B limited partnership units ("Class B LP Units") of limited partnerships the managing general partner of which is a subsidiary of the REIT and the assumption of approximately $168.9 million in mortgage debt.

On March 1, 2011, the REIT indirectly acquired five residential properties owned and operated by a third party in Moncton, Dieppe and Shediac, New Brunswick. The properties are comprised of 20 buildings, totaling 543 suites. The aggregate purchase price of approximately $38.4 million was satisfied by a combination of cash and the assumption of $19.5 million in mortgage debt with a weighted average interest rate of 4.06% and a weighted average term to maturity of 3.82 years.

"With continuing strong fundamentals in the Canadian apartment business, our focused and proven property management strategies, and our access to a large pipeline of potential future acquisitions, we believe we have the opportunity to generate significant growth and deliver enhanced value to our unitholders over the long term," Mr. Hanczyk concluded.

Financial Performance

       
      As at March 31, 2011
           
Operational Information          
Number of properties         92
Total suites         11,948
Occupancy %         96.1%
Weighted average in-place rent         $888
           
(In thousands of dollars, except per unit amounts) For the three
months ended
March 31, 2011
  As at / for the period
from May 14, 2010 to
March 31, 2011
           
Summary of Financial Information          
Gross Book Value (1)         $1,101,056
Indebtedness (2)         $652,440
Indebtedness to Gross Book Value (3)         59.26%
Weighted average mortgage interest rate (4)         3.91%
Weighted average term to maturity         2.86 years
Interest coverage (5)     2.17 x   2.24 x
Indebtedness coverage ratio (6)     1.47 x   1.60 x
Revenue     $28,887   $84,304
NOI     $14,569   $46,233
Net (loss)/income and comprehensive (loss) income     ($786)   $27,456
FFO     $8,325   $27,190
FFO per unit - basic     $0.22   $0.84
FFO per unit - diluted     $0.22   $0.83
AFFO     $6,375   $21,423
AFFO per unit - basic     $0.17   $0.66
AFFO per unit - diluted     $0.16   $0.65
Distributions per unit (annualized) - basic     $0.75   $0.75
FFO payout ratio (7)     95.71%   80.41%
AFFO payout ratio (7)     124.99%   103.55%
           
Units outstanding at period-end for FFO and AFFO per unit:          
  Weighted average (000s) - basic (8)   38,628   32,410
  Add: Unexercised options exercisable for Units 27   11
    Convertible Debentures   981
  Weighted average (000s) - diluted (8)   38,655   33,402
           
Notes:          
(1) "Gross Book Value" is defined in the DOT and excludes impact of any fair value adjustment of investment properties.
(2) "Indebtedness" is defined in the DOT and excludes mark-to-market premium of $13,954, unamortized financing costs of $816 and contingent liabilities.
(3) Defined as Indebtedness divided by Gross Book Value.
(4) Market weighted average mortgage interest rate = 2.92%.
(5) Defined as net income plus finance costs, less interest income and gain on early extinguishment of mortgages payable and adjusted for non cash items divided by interest expense, net of amortization of mortgage premium, distributions to class B LP Units and instalment notes receipts.
(6) Contractual payments on mortgages and the Convertible Debentures and gives effect to the payments provided by TransGlobe under the Instalment Notes.
(7) Based on FFO and AFFO and prorated distributions for the 48 day period ended June 30, 2010 and monthly distributions for the nine months ended March 31, 2011.
(8) For purposes of calculating FFO and AFFO per unit, Class B LP Units are included as Units outstanding on both a basic and diluted basis.

 

Investor Conference Call

A conference call (and live audio webcast) hosted by the REIT's management team will be held Wednesday, May 18, 2011 at 2:00 p.m. (ET). The call-in numbers for participants are local/international (416) 849-2698 or North American Toll-Free at (866) 400-2270. Please connect with the conference call at least five minutes before the start time. An audio replay of the call will be available after the live call by dialing (416) 915-1035 or (866) 245-6755 and entering access code 339074#. A recording of the call will also be available on the REIT's website at www.tgareit.com.

About TransGlobe Apartment Real Estate Investment Trust

TransGlobe Apartment Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust owning a growing portfolio of high quality apartment and town house properties well-located in urban centres in Alberta, Ontario, Québec, New Brunswick and Nova Scotia.

For the complete financial statements and Management's Discussion and Analysis for the period, please visit www.sedar.com or the REIT's web site at www.tgareit.com.

Non-IFRS Financial Measures

NOI,  FFO and AFFO do not have standardized meanings prescribed by IFRS and should not be construed as alternatives to net income/loss, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Such measures as computed by the REIT may differ from similar measures as reported by other trusts or companies in similar or different industries.

Management considers NOI to be an important measure of the REIT's operating performance and uses this measure to assess the REIT's property operating performance on an unlevered basis.  FFO is a measure of operating performance based on the funds generated from the business of the REIT before reinvestment or provision for other capital needs. Management considers FFO to be an important measure of the REIT's operating performance and AFFO to be an important performance measure to determine the sustainability of future distributions paid to holders of trust REIT units after provision for maintenance capital expenditures. AFFO should not be interpreted as an indicator of cash generated from operating activities as it does not consider changes in working capital.

Reconciliations of NOI, FFO and AFFO to the most directly comparable measures calculated in accordance with IFRS are provided in the REIT's Management Discussion and Analysis for the three months ended March 31, 2011, available on SEDAR at www.sedar.com.

Forward-looking Statements

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding the REIT's financial position, financial performance and cashflows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT.  Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

Forward-looking statements necessarily involve known and unknown risks and uncertainties, that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which, are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in the REIT's materials filed with Canadian securities regulatory authorities from time to time.  The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements as there can be no assurance that actual results will be consistent with such forward-looking statements.

Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; TGIM and its affiliates will continue their involvement with the REIT; and the risks identified or referenced above, collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release.  Except as specifically required by applicable Canadian law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

SOURCE TransGlobe Apartment Real Estate Investment Trust

For further information:

Leslie Veiner
Chief Financial Officer
(905) 293-9400 ext. 1985
lveiner@tgareit.com


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