Artis releases second quarter 2009 results; reports solid same-property NOI growth



    WINNIPEG, Aug. 12 /CNW/ - Today Artis Real Estate Investment Trust
("Artis" or "the REIT") issued its financial results and achievements for the
three and six month period ended June 30, 2009.

    
    FINANCIAL AND OPERATIONAL HIGHLIGHTS

    -   Q2-09 revenue increased 3.4% ($1.2 million) over Q2-08 to reach
        $35.5 million; year-to-date, revenue increased 7.7% ($5.1 million) to
        $71.9 million.

    -   Q2-09 property net operating income ("Property NOI") increased 2.2%
        ($521,000) over Q2-08 to reach $24.3 million; year-to-date, Property
        NOI increased 5.5% ($2.5 million) to reach $49.0 million.

    -   Year-to-date, funds from operations ("FFO") was $27.4 million, an
        increase from $26.6 million for the same period of 2008. Year-to-
        date, FFO per unit was $0.83 per unit an increase from $0.82 for the
        same period of 2008.

    -   Q2-09 same Property NOI, excluding non-cash revenue adjustments,
        increased 6.3% ($1.1 million) over Q2-08; year-to-date, same Property
        NOI increased 6.7% ($2.4 million).

    -   At June 30, 2009, debt to gross book value ("GBV") was 51.2%, a
        decrease from 51.6% at December 31, 2008.

    -   Q2-09 interest coverage ratio was 2.27, a slight increase from 2.26
        in Q2-08.

    -   At June 30, 2009, portfolio occupancy was 96.2% (96.8% including
        committed space), up from 95.8% at Q1-09.

    SELECTED FINANCIAL INFORMATION

    -------------------------------------------------------------------------
    $000's, except        Three month period ended   Six month period ended
    per unit amounts              June 30,                  June 30,
    -------------------------------------------------------------------------
                              2009         2008         2009         2008
    -------------------------------------------------------------------------
    Revenue               $    35,486  $    34,324  $    71,947  $    66,813
    NOI                        24,288       23,767       48,975       46,430
    DI                         12,899       13,740       26,797       27,043
    FFO                        13,147       13,519       27,392       26,571

    DI per unit (basic)          0.39         0.42         0.81         0.83
    FFO per unit (basic)         0.40         0.41         0.83         0.82
    Distributions                0.27         0.27         0.54         0.53
    FFO payout ratio            67.5%        65.9%        65.1%        64.6%


    -------------------------------------------------------------------------
                                                      June 30,   December 31,
    $000's                                              2009         2008
    -------------------------------------------------------------------------
    Total assets                                    $ 1,153,498  $ 1,243,693
    GBV                                               1,307,378    1,374,377
    Mortgages, loans and bank indebtedness              669,936      708,869
    Debt to GBV                                           51.2%        51.6%
    -------------------------------------------------------------------------
    

    "Artis' is pleased to report solid Q2-09 results in the face of a
challenging economic climate - year-to-date, we have decreased the debt to GBV
ratio for the REIT, while increasing our cash on hand," said Armin Martens,
President and Chief Executive Officer of Artis REIT. "Thus far in 2009, Artis
has generated significant gains, as well as cash proceeds, from the selective
disposition of properties, with more expected to be realized in Q3 and Q4.
Although this has reduced DI and FFO somewhat, we are pleased to note that
both continuing operations and same store properties continue to show revenue
and Property NOI growth. Subsequent to June 30, 2009, we have made further
strides in strengthening our balance sheet, with the issuance of $46.0 million
of convertible debentures in July and the private placement of units also
completed in July."

    Operational Improvements and Internal Growth

    Portfolio occupancy was 96.2% at June 30, 2009, an increase from 95.8% at
March 31, 2009. Occupancy including commitments was 96.8%, unchanged from
96.8% at March 31, 2009. Occupancy by asset class and by province increased
across the portfolio, with the exception of B.C., which remained stable.
    Excluding GAAP adjustments for straight-line rent and above- and
below-market rent adjustments, Q2-09 same Property NOI results increased 6.3%
over Q2-08. The same Property NOI growth was driven primarily by increases in
base rental rates achieved on lease turnovers.
    In Q2-09 Artis leased or renewed over 203,408 square feet of leasable
area and the weighted average rental rates achieved on lease turnovers in the
period were approximately 8.1% higher than the rates in place at expiry
(year-to-date, 10.4%). At June 30, 2009, the weighted average in-place rent
per square foot across the portfolio was $13.59, compared to $12.50 at June
30, 2008. To date, approximately 66% of the 2009 and 17% of the 2010 lease
expiries have been renewed or new lease commitments secured.

    Disposition Activity

    On April 1, 2009, the sale of the two properties known as Airways
Business Plaza and Glenmore Commerce Court was completed. Both properties were
Class "B" suburban office properties in Calgary, Alberta. The properties were
sold for $24.9 million, representing a capitalization rate of 6.3%. Artis
recorded a gain on sale of $6.3 million and realized cash proceeds on the sale
of approximately $12.1 million. On May 15, 2009, the sale of the property
known as McKnight Village Mall, a neighbourhood unenclosed retail centre in
Calgary, Alberta, was completed. This property was sold for $23.2 million,
which represented a capitalization rate of 8.4%. Artis recorded a gain on sale
of approximately $2.2 million and realized cash proceeds on the sale of
approximately $9.0 million on the transaction.
    Subsequent to June 30, 2009, Artis completed two further dispositions. On
July 15, 2009, the sale of the property known as Albert Street Mall, a retail
centre in Regina, Saskatchewan, was completed and on July 27, 2009, the sale
of the property known as Bridges Centre, a two-storey office building in
Calgary, Alberta, was completed. The properties were sold for $10.4 million
which represented a weighted-average capitalization rate of 7.6%. Artis
expects to record a gain on sale of approximately $402,000 in the third
quarter of 2009 on these transactions and receive cash proceeds of
approximately $3.7 million. Artis has also entered into an unconditional
agreement to sell a Calgary industrial property for a total of $6.0 million,
which represents a capitalization rate of 8.2%; the sale is expected to close
on November 1, 2009.

    Termination of Interplex II and Interplex III Agreements

    On May 11, 2009, Artis reached a settlement with the vendor of the
Interplex II and Interplex III projects, and agreed to terminate both
agreements. The 543,781 Class B units were converted into REIT units on May
11, 2009, and the interest of AXLP in the Interplex II project was transferred
to the vendor. The 177,566 Class B units of AXLP that were issued for a 50%
interest in the Interplex III lands were returned to AXLP for cancellation,
and the 50% interest in the land was transferred to the vendor.

    Liquidity and Capital Resources

    At June 30, 2009, Artis had $14.8 million of cash and cash equivalents on
hand or held in trust. In addition to cash resources, the REIT also has $27.5
million undrawn and available on its Line of Credit. The undrawn balance can
be utilized to fund future acquisitions; alternately, up to $10 million of the
undrawn facility may be utilized for general corporate purposes, up to $10
million may be utilized to provide mezzanine financing and up to $7.5 million
may be utilized to purchase units under the REIT's normal course issuer bid.
    Subsequent to June 30, 2009, Artis realized aggregate gross proceeds of
$46.0 million from the successful convertible debenture offering concluded in
July, 2009, and additional $5 million from the proceeds of the July 31, 2009,
non-brokered private placement of units. Subsequent to June 30, 2009, $38.0
million has been used to retire or pay down existing long-term debt.
    At June 30, 2009, the debt-to-GBV ratio (exclusive of convertible
debentures) was 51.2%, a decrease from 51.6% at December 31, 2008. The ratio
is well within the 70% limit set out in the REIT's Amended and Restated
Declaration of Trust.

    Update on Refinancing Activities

    Artis has limited exposure to short-term re-financing risk, with
approximately 4.1% of its mortgage debt maturing in the balance of 2009, 12.8%
maturing in 2010 and 5.5% maturing in 2011. Approximately $3.7 million of the
2009 mortgage maturities relates to property under an unconditional sales
agreement and the remaining 2009 debt maturities either have refinancing
commitments in place from the lender or have been repaid since June 30, 2009.
As well, $20.0 million of the 2010 mortgage maturities have been repaid since
June 30, 2009 and $3.8 million relates to a property sold since June 30, 2009.
Management is currently in discussion with various lenders with respect to the
remaining refinancings.

    Series E Convertible Debenture Offering and Private Placement of Units

    On July 9, 2009, Artis closed a $40.0 million public offering of 5-year
convertible unsecured subordinated debentures (the "Series E Debentures"). On
July 15, 2009, an additional $6.0 million of the Series E Debentures were
issued pursuant to the exercise of the underwriters' overallotment option. The
Series E Debentures pay interest at a rate of 7.5% per annum and are listed on
the Toronto Stock Exchange as AX.DB.E.
    On July 31, 2009, Artis issued 555,555 units at a price of $9 per unit
for aggregate gross proceeds of $5.0 million pursuant to a non-brokered
private placement agreement.

    Portfolio Leasing and Tenant Profile

    Artis' lease expiry profile at June 30, 2009 is summarized as follows:

    
                                                          Calgary
     Expiry   British                                      Office
      Year   Columbia Saskatchewan  Manitoba   Alberta      Only      Total
    -------------------------------------------------------------------------
      2009       0.4%       0.4%       1.7%       3.3%       1.2%       5.8%
      2010       0.4%       1.4%       6.8%       7.3%       2.0%      15.9%
      2011       0.2%       0.8%       5.4%       9.3%       5.2%      15.7%
      2012       1.3%       0.4%       2.5%       4.2%       2.3%       8.4%
      2013       0.3%       1.9%       4.3%       8.0%       5.1%      14.5%
      2014       0.5%       0.9%       4.7%       3.3%       1.3%       9.4%
      2015 &
       Later     1.8%       2.1%       4.2%      17.6%       7.2%      25.7%
      M-T-M      0.0%       0.0%       0.3%       0.1%       0.1%       0.4%
      Vacancies  0.9%       0.0%       0.7%       2.6%       1.7%       4.2%
    -------------------------------------------------------------------------
    Total GLA 362,195    493,999  1,929,404  3,506,578  1,636,676  6,292,176
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Artis' management reviews the current market rents across its portfolio
on an on-going basis. Management estimates that the weighted average market
rent rates at June 30, 2009 for all remaining 2009 lease expiries are
approximately 18.6% higher than the rates in place at lease expiry.
    At June 30, 2009, 54.1% of the REIT's GLA is occupied by national
tenants, 8.7% by government tenants and the remainder by regional and local
tenants. Artis' top twenty (non-government) tenants in the portfolio account
for 32.0% of the REIT's gross revenues and the weighted average term to
maturity on those leases is 8.1 years. The top tenants by asset class, and
their share of the REIT's gross revenues is summarized as follows:

    
          Office                      Retail              Industrial
    -------------------------------------------------------------------------
    AMEC Americas Ltd.      6.0%   Sobeys         2.2%  Bell Canada     1.8%

    Provincial Government   4.8%   Shoppers       1.5%  Q9 Networks     1.4%
    Departments (various)          Drug Mart

    Federal Government      3.8%   Cineplex Odeon 1.1%  BW Technologies 1.0%
    Departments (various)                               (Honeywell)
    

    Further details on the top tenants in the REIT's portfolio can be found
in the Management's Discussion and Analysis for the three and six month
periods ending June 30, 2009, or the Supplemental Package for June 30, 2009.

    Upcoming Webcast and Conference Call:

    Interested parties are invited to participate in a conference call with
management on Thursday, August 13, 2009 at 1:00 p.m. EDT. In order to
participate, please dial 1-416-340-8018 or 1-866-223-7781. You will be
required to identify yourself and the organization on whose behalf you are
participating.
    Alternatively, you may access the simultaneous webcast by following the
link from our website at http://www.artisreit.ca/areit_investor.php. Prior to
the webcast, you may follow the link to confirm you have the right software
and system requirements.
    If you cannot participate on August 13, 2009, a replay of the conference
call will be available by dialing 1-416-695-5800 or 1-800-408-3053 and
entering passcode No. 2038533. The replay will be available until August 27,
2009. The webcast will be archived 24 hours after the end of the conference
call and will be accessible for 90 days.

    Artis is a growth oriented real estate investment trust focused
exclusively on commercial properties located in primary and growing secondary
markets in western Canada. The REIT's goal is to provide unitholders the
opportunity to invest in high quality western Canadian office, retail and
industrial properties, as well as to provide monthly cash distributions that
are stable, tax efficient, and growing over time.
    Artis' commercial property comprises approximately 6.3 million square
feet of leasable area in 83 properties. Leasable area is approximately 31% in
Manitoba, 7% in Saskatchewan, 56% in Alberta, and 6% in B.C.; by asset class
the portfolio is 31% retail, 41% office and 28% industrial.
    The REIT's Distribution Reinvestment Plan ("DRIP") allows unitholders to
have their monthly cash distributions used to purchase trust units without
incurring commission or brokerage fees, and receive bonus units equal to 4% of
their monthly cash distributions. More information can be obtained at
www.artisreit.com.

    Non-GAAP Performance Measures

    DI, Property NOI and FFO are non GAAP measures commonly used by Canadian
income trusts as an indicator of financial performance. Management uses DI,
Property NOI and FFO to analyze operating performance. DI, Property NOI and
FFO may not be comparable to similar measures presented by other issuers. DI,
Property NOI and FFO are not intended to represent operating profits for the
period or from a property nor should any such measure be viewed as an
alternative to net income, cash flow from operating activities or other
measures of financial performance calculated in accordance with GAAP.

    Cautionary Statements

    The comments and highlights herein should be read in conjunction with the
consolidated financial statements and management's discussion and analysis for
the same period. These documents are available on the SEDAR website at
www.sedar.com. They are also posted on the Artis web site at
www.artisreit.com.
    This press release contains forward looking statements. For this purpose,
any statements contained herein that are not statements of historical fact may
be deemed to be forward looking statements. Without limiting the foregoing,
the words "expects", "anticipates", "intends", "estimates", "projects", and
similar expressions are intended to identify forward looking statements. Artis
is subject to significant risks and uncertainties which may cause the actual
results, performance or achievements of the REIT to be materially different
from any future results, performance or achievements expressed or implied in
these forward looking statements. Artis cannot assure investors that actual
results will be consistent with any forward looking statements and Artis
assumes no obligation to update or revise such forward looking statements to
reflect actual events or new circumstances. All forward looking statements
contained in this press release are qualified by this cautionary statement.

    
    The Toronto Stock Exchange has not reviewed and does not accept
    responsibility for the adequacy or accuracy of this release.
    





For further information:

For further information: Mr. Armin Martens, President and Chief
Executive Officer, Mr. Jim Green, Chief Financial Officer or Ms. Kirsty
Stevens, Senior Vice President of the REIT at (204) 947-1250


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