Artis releases third quarter results; Q3-11 FFO per unit increases 29% over Q3-10 and 7% over Q2-11

WINNIPEG, Nov. 8, 2011 /CNW/ - Today Artis Real Estate Investment Trust ("Artis" or "the REIT") issued its financial results and achievements for the three and nine month periods ended September 30, 2011.  All amounts are in thousands of Canadian dollars, unless otherwise noted.

2011 THIRD QUARTER HIGHLIGHTS

  • Acquired a total of 4 commercial properties in Q3-11 for CAD$175.4 million and sold one commercial property for proceeds of CAD$1,366 (net of costs and related debt). Portfolio increased to 162 income-producing properties comprising approximately 16.7 million square feet of leasable area at September 30, 2011.
  • Increased Q3-11 revenues by 69.8% to $78.4 million compared to Q3-10; increased year-over-year revenue by 74.2% to $207.6 million.
  • Increased Q3-11 Property NOI by 64.1% to $49.1 million compared to Q3-10; increased year-over-year Property NOI by 66.7% to $130.7 million.
  • Increased Q3-11 Same Property NOI by 1.9% compared to Q3-10; increased year-over-year Same Property NOI by 1.4%.
  • Increased Q3-11 FFO by 85.3% to $26.9 million compared to Q3-10; increased year-over-year FFO by 80.0% to $71.3 million.
  • Increased Q3-11 FFO per unit to $0.31, representing an 29.2% increase compared to Q3-10 and a 6.9% increase compared to Q2-11.  Increased year-over-year FFO per unit by 15.8% to $0.88.
  • Reported interest coverage ratio of 2.21 for the quarter ended September 30, 2011.
  • Reported mortgage debt to gross book value ("GBV") of 51.9% at September 30, 2011, compared to 52.6% at December 31, 2010.
  • Reported portfolio occupancy of 95.7% (96.3% including committed space) at September 30, 2011, up 10 basis points compared to occupancy at June 30, 2011.

SELECTED FINANCIAL INFORMATION

     
000's, except per unit amounts Three month period ended
September 30,
Nine month period ended
September 30,
  2011 2010 2011 2010
Revenue $    78,427 $    46,184 $    207,572 $  119,151
Property NOI       $    49,111       $    29,928           $    130,652       $    78,372
FFO (1)       $    26,910       $    14,521       $      71,280       $    39,604
FFO per unit (diluted) (1)       $        0.31               $        0.24       $          0.88       $        0.76
Distributions       $        0.27       $       0.27        $          0.81       $        0.81
FFO payout ratio 87.1%       112.5%               92.0%             106.6%

(1)     After adjustment for convertible debentures financing costs, current tax expense and loss on equity securities.

       
000's September 30,
2011
  December 31,
2010
Total Assets $        3,020,077   $        2,211,596
GBV $        3,020,398   $        2,211,829
Mortgages, loans and bank indebtedness $        1,568,204   $        1,164,092
Debt to GBV 51.9%   52.6%

Portfolio Acquisition and Disposition Activity

During the three month period ended September 30, 2011, Artis acquired four properties, as follows:

Property   Location   Asset
Class
  Leasable Area
(in square feet)
  Acquisition Date
Plymouth Corporate Campus   Minneapolis, MN   Industrial   83,617   July 6, 2011
Stampede Station   Calgary, AB   Office   162,502   July 26, 2011
MTS Place   Winnipeg, MB   Office   274,712   August 31, 2011
7499 East Paradise Lane   Phoenix, AZ   Industrial   98,555   September 15, 2011

Artis acquired these commercial properties in Canada and the United States (the "U.S.") for aggregate purchase prices of $145.8 million and US$27.2 million, which represents a weighted-average going-in capitalization rate of 6.9%.  The purchase prices were settled with cash on hand and from the proceeds of new or assumed fixed rate mortgage financing aggregating CAD$108.5 million.  The weighted-average interest rate on the mortgages is equivalent to an annual rate of 4.51% and the weighted-average term to maturity is 4.8 years.

During the three month period ended September 30, 2011, Artis sold a property that was part of the Minneapolis Industrial Portfolio. The property was sold for aggregate gross proceeds of US$6.9 million. Proceeds net of costs and related debt were $1,366 and the gain recorded on the sale was $481.

Liquidity and Capital Resources

At September 30, 2011, Artis had $58.5 million of cash and cash equivalents on hand, $1.0 million in equity investments and $22.1 million available on the revolving term credit facility.

At September 30, 2011, the ratio of mortgages, loans and bank indebtedness to GBV was 51.9%, compared to 52.6% at December 31, 2010.  The ratio is well within the 70% limit set out in the REIT's Amended and Restated Declaration of Trust.  Including the convertible debentures, the ratio is 59.4% at September 30, 2011, compared to 59.6% at December 31, 2010.

Portfolio Operational and Leasing Results

Portfolio occupancy at September 30, 2011 increased 10 basis points to 95.7% (96.3% including commitments on vacant space) from 95.6% at June 30, 2011.

At September 30, 2011, Artis had two properties in redevelopment, comprising 46,283 square feet of leasable area. Lease commitments are in place for 44.3% of the leasable area.

Excluding GAAP adjustments for straight-line rent and amortization of tenant inducements, Same Property NOI results for Q3-11 increased 1.9%, or $425 over Q3-10 results (YTD increased 1.4%, or $924).

Considering all properties owned at September 30, 2011, 7.6% of the portfolio's leasable area is set to expire in 2011 and 7.5% in 2012.  As of today's date, 96.1% of the 2011 and 31.6% of the 2012 leasing programs have been completed.  Tenant retention thus far is 78.8% and a weighted-average rental increase of 8.0% was achieved on Q3-11 renewal activities (YTD - 5.9%).

Artis' management reviews the current market rents across its portfolio on an on-going basis.  Management estimates that the weighted-average in-place rents for leases expiring in 2011 are slightly below market and for 2012 are approximately at market. Across the portfolio, in-place rents at expiry are estimated to be 3.0% below today's market.

Tenant Profile

Considering all properties owned at September 30, 2011, Artis' portfolio includes 1,774 tenant leases with a weighted-average term to maturity of 5.6 years.  Approximately 64.2% of the REIT's GLA is occupied by national or government tenants.  The top twenty non-government tenants account for 23.7% of the portfolio's gross revenues at September 30, 2011, with a weighted-average lease term to maturity of 8.1 years.  The largest single tenant in the portfolio accounts for 2.8% of gross revenues.

Upcoming Webcast and Conference Call

Interested parties are invited to participate in a conference call with management on Wednesday, November 9, 2011 at 2:00 p.m. CST (3:00 p.m. EST). In order to participate, please dial 1-416-695-6616 or 1-800-952-6845. 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.com/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 November 9, 2011, a replay of the conference call will be available by dialing 1-905-694-9451 or 1-800-408-3053 and entering passcode #3604787.  The replay will be available until November 23, 2011. The webcast will be archived 24 hours after the end of the conference call and will be accessible for 90 days.

*********

Artis is a diversified Canadian real estate investment trust investing in office, industrial and retail properties. Since 2004, Artis has executed an aggressive but disciplined growth strategy, building a portfolio of commercial properties in Canada and the United States, with a major focus on Western Canada. Artis' commercial property comprises nearly 16.7 million square feet of leasable area in 162 properties. Leasable area by asset class is approximately 22.1% retail, 35.7% office and 42.2% industrial. The portfolio is located 9.6% in British Columbia, 30.0% in Alberta, 5.6% in Saskatchewan, 20.7% in Manitoba, 11.9% in Ontario and 22.7% in the U.S.

Non-GAAP Performance Measures

Property NOI and FFO are non GAAP measures commonly used by Canadian income trusts as an indicator of financial performance. Management uses Property NOI and FFO to analyze operating performance.  Property NOI and FFO may not be comparable to similar measures presented by other issuers. 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.

 

SOURCE Artis Real Estate Investment Trust

For further information:

Mr. Armin Martens, President and Chief Executive Officer, Mr. Jim Green, Chief Financial Officer or Ms. Kirsty Stevens, Chief Administrative Officer of the REIT at (204) 947 1250


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