Agellan Commercial Real Estate Investment Trust Releases Third Quarter 2015 Results

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TORONTO, Oct. 26, 2015 /CNW/ - AGELLAN COMMERCIAL REAL ESTATE INVESTMENT TRUST (the "REIT") (TSX:ACR.UN) is pleased to report its financial results for the three and nine month periods ended September 30, 2015.





FINANCIAL AND OPERATIONAL HIGHLIGHTS


September 30, 2015

December 31, 2014

(all dollar amounts in 000's, except per Unit amounts)








Summary of Operational Information




Number of Properties


32

27

Gross Leasable Area ("GLA") (in 000's)


4,710

4,349

Occupancy % (at period end)


93.8%

92.6%

Average lease term to maturity (years)


3.5

3.9





Summary of Financial Information




Gross Book Value(1)


$661,200

$597,461

Debt (face value)


$345,313

$316,546

Debt to Gross Book Value(1)


52%

53%

Interest Coverage(1)


3.4x

3.3x

Weighted average interest rate


4.0%

3.9%






For the three month period ended


September 30, 2015

September 30, 2014

Variance





Total Property and Property Related Revenue

$21,792

$18,152

$3,640

Net Operating Income ("NOI")(1)

$12,565

$10,591

$1,974

Funds From Operations ("FFO")(1)

$7,573

$6,631

$942

Adjusted Funds From Operations ("AFFO")(1)

$6,146

$5,033

$1,113





Basic and Diluted FFO per Unit

$0.32

$0.28

$0.04

Basic and Diluted AFFO per Unit

$0.26

$0.21

$0.05

Distributions per Unit

$0.194

$0.194

$0.00





Payout Ratio(1)

74%



Units Outstanding at Period-end:

23,449,410



Weighted Average Units Outstanding

23,561,989



 (1) This is a non-IFRS measure. Please see "Non-IFRS supplemental measures" below.

 

Summary of Significant Events:

  • For the three month period ended September 30, 2015, the REIT achieved FFO per Unit of $0.321 and AFFO per Unit of $0.261.  For the three month period ended September 30, 2014, the REIT reported FFO and AFFO per Unit of $0.283 and $0.215, respectively.  The increases in FFO and AFFO represent growth of 13.4% and 21.4%, respectively.
  • For the nine month period ended September 30, 2015, the REIT achieved FFO per Unit of $0.913 and AFFO per Unit of $0.711.  For the nine month period ended September 30, 2014, the REIT reported FFO and AFFO per Unit of $0.868 and $0.648, respectively. The increases in FFO and AFFO represent growth of 5.2% and 9.7%, respectively.
  • During the nine month period ended September 30, 2015, the REIT continued to experience NOI, FFO and AFFO growth primarily as a result of improved operating fundamentals, such as increased leasing activity and rental rate growth arising from the REIT's U.S. assets.
  • In addition, the REIT benefited from the strength in the U.S. economy displayed through the increased value in the United States Dollar ("USD" or "US$") compared to the CAD. The average value of the USD in relation to the CAD increased 20.2% and 15.2% during the respective three and nine month periods ended September 30, 2015 compared to the average values for the three and nine month periods ended September 30, 2014, which increased the net income the REIT generated in USD during these periods.
  • The REIT's Payout Ratio for the nine month period ended September 30, 2015 decreased to 82% from 90% for the nine month period ended September 30, 2014.
  • The REIT has also reduced its debt to gross book value ratio to 52% as at September 30, 2015 compared to 54% as at September 30, 2014.
  • As at October 1, 2015 occupancy of the REIT's Same Store U.S. assets was 95.4%, which is an increase of approximately 4.5% from October 1, 2014.  This increased occupancy contributed to year over year Same Store NOI growth from the REIT's U.S. assets, exclusive of the currency impact, of approximately 8.0% and 4.7% for the three and nine month periods ended September 30, 2015.
  • During the quarter the REIT also reduced vacancy in its Canadian assets, including obtaining two lease commitments for approximately 30,000 sqft of space, previously occupied by the vendor lease tenant at the REIT's Parkway Place complex.  Occupancy commenced on August 1, 2015 in respect of approximately 2,000 sqft for a term of 5 years, with the balance to become occupied on July 1, 2016 for a term of 10 years.  The new leases were completed at net rental rates approximately 4.1% higher than the expiring vendor tenant lease.
  • On July 8, 2015 the REIT completed the acquisition of 1800 Sandy Plains Industrial Parkway, a multi-tenant property. The property consists of 3 buildings containing approximately 167,000 sqft of gross leasable area, and is currently 98% occupied by 18 tenants. The aggregate purchase price of approximately US$11.0 million before closing costs represents a going-in capitalization rate of approximately 8.13%. The REIT satisfied the purchase price for the property with certain of the net proceeds that it previously received in connection with the disposition of 8271 Anderson Court on April 21, 2015. In addition, a mortgage that was previously secured by 8271 Anderson Court is now secured by 1800 Sandy Plains Industrial Parkway.
  • On August 10, 2015, the TSX accepted the REIT's notice of intention to make a normal course issuer bid for a portion of its issued and outstanding Units.  Pursuant to the notice, the REIT may purchase for cancellation up to a maximum of 1,000,000 Units, or approximately 5% of its public float, over the 12-month period commencing August 13, 2015 and ending on August 12, 2016.  The REIT believes that the re-purchase of its outstanding Units may, from time to time, be an appropriate use of available resources and in the best interest of the REIT and its Unitholders.  The REIT also believes that the ongoing purchase by the REIT of certain of its Units will afford additional liquidity for the issued and outstanding Units, and benefit the remaining Unitholders by increasing their proportionate equity and voting interest in the REIT. The REIT has funded and intends to continue to fund the purchase of Units under the normal course issuer bid out of its available cash and/or undrawn credit facilities.  As at September 30, 2015 the REIT has repurchased and cancelled 173,800 Units.
  • Subsequent to the quarter end, on October 6, 2015 the REIT obtained Toronto City Council's support for the proposed rezoning of certain land at the REIT's Consumers Road complex required in order to develop the land as a dealership.  The matter is expected to go to a formal vote during the fourth quarter of 2015.  The REIT is currently working with its lenders to obtain financing for the construction of the project and expects to begin construction prior to the end of the year.
    "We continue to see occupancy gains throughout the REIT's portfolio, and have achieved significant AFFO growth on the back of the U.S. commercial real estate market," said Frank Camenzuli, Chief Executive Officer of the REIT. "We continue to be strong believers in the U.S. commercial real estate market and intend to invest in specific areas where we can maximize the growth potential of the assets."  

The REIT will hold a conference call to discuss the REIT's financial performance for the period ended September 30, 2015 on Tuesday, October 27, 2015 at 2:00 p.m. EST. To access the call, please dial 1-416-340-2217 or 1-866-696-5910 and enter the participant pass code: 9576065. For operator assistance during the call, please press *0.

A replay of the conference call will be available from 5:00 p.m. EST on October 27, 2015 until midnight EST, November 10, 2015. To access the replay, call 1-905-694-9451 or 1-800-408-3053 and enter participant pass code: 3290267.

Other information:

Information appearing in this news release is a select summary of results. The REIT's consolidated financial statements along with management's discussion and analysis for the three and nine month periods ended September 30, 2015 ("MD&A") are available electronically on the REIT's website at www.agellanreit.com and under the REIT's issuer profile at www.sedar.com.

The REIT 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 industrial, office and retail properties in select major urban markets in the United States and Canada.

The REIT's current portfolio comprises approximately 4.7 million square feet of gross leasable area in 32 properties. The properties are primarily located in major urban markets in the United States and Canada.

Non-IFRS supplemental measures:

Certain terms used in this news release are not recognized under International Financial Reporting Standards ("IFRS") and therefore these terms should not be construed as alternatives to IFRS measures, such as net income or cash flow from operating activities, nor are these terms necessarily comparable to similar measures presented by other reporting issuers. These terms are used by management to measure, compare and explain the operating results and financial performance of the REIT. Management believes that these terms are relevant measures in comparing the REIT's performance to industry data and the REIT's ability to earn and distribute cash to holders of the REIT's units. These non-IFRS measures, including FFO, AFFO, Payout Ratio, Gross Book Value, NOI, and related per Unit amounts are defined and FFO and AFFO are reconciled to net income in the REIT's MD&A, which should be read in conjunction with this news release.

Forward-looking information:

This press release contains forward-looking information within the meaning of applicable securities legislation.  Forward-looking information can be identified by words or expressions including, but not limited to, "plans", "expects", "scheduled", "estimates", "intends", "anticipates", "predicts", "projects", "believes", or variations of such words and phrases or statements to the effect that certain actions, events or results "may", "will", "could", "would", "should", "might", "occur", "be achieved" or "continue" or similar expressions. Forward-looking information is necessarily based on a number of estimates and assumptions that are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are beyond the REIT's control, which could cause actual results 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: the REIT's future growth potential; results of operations; future prospects for additional investment opportunities in Canada and the U.S., including access to debt and equity capital at acceptable costs and the ability to obtain necessary approvals and to minimize any unexpected costs or liabilities, environmental or otherwise, relating to any acquisitions or dispositions; demographic and industry trends remaining unchanged, including occupancy levels, lease renewals, rental increases and retailer competition; future levels of the REIT's indebtedness remaining at acceptable levels, including its credit rating; tax laws as currently in effect remaining unchanged, including applicable SIFT rules; and current economic conditions remaining unchanged, including interest rates and applicable foreign exchange rates. Readers, therefore, should not place undue reliance on any such forward-looking statements. All forward-looking information in this press release speaks only 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, except as required by applicable securities laws. All forward-looking statements in this press release are qualified by these cautionary statements. 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 Agellan Commercial Real Estate Investment Trust

For further information: Frank Camenzuli, Chief Executive Officer, (416) 593-6800, ext. 226, fcamenzuli@agellancapital.com

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Agellan Commercial Real Estate Investment Trust

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