Edgefront Real Estate Investment Trust announces strong Q3 2015 results and technical restatement of audited 2014 financial statements, continued accretive growth, and distributions for November and December

CALGARY, Nov. 19, 2015 /CNW/ - Edgefront Real Estate Investment Trust (the "REIT") (TSXV: ED.UN) announced today its results for the three and nine months ended September 30, 2015, the completion of accretive acquisitions, November and December distributions and the technical restatement of the audited 2014 financial statements with respect to accounting for REIT units issued as partial purchase price consideration in January 2014. Management is of the view that such revisions have no economic consequences to the REIT or its unitholders. There is no impact on total unitholders' equity.

Highlights

  • The REIT acquired 3 industrial properties for $38 million, representing a blended 7.6% capitalization rate, adding approximately 233,500 square feet of gross leasable area; issuing 7,523,617 units valued at $1.90 per unit as purchase consideration.
  • Subsequent to quarter end, announced two additional properties under contract for $12.1 million, at a blended 7.9% capitalization rate;  $5.3 million of the purchase prices to be satisfied in units valued at $1.90 being issued to the vendors.
  • The REIT continues to derive rental revenues from stable tenants under long-term leases with a weighted average 10.2 year remaining lease term.
  • AFFO payout Ratio of 79.1% for the three months and 78.4% for the nine months ended September 30, 2015.
  • Conservative debt to total assets ratio of 50.1%.

 

Summary of Results
Included in the table that follows and elsewhere in this news release are non-IFRS measures that should not be construed as an alternative to net income / loss, cash from operating activities or other measures of financial performance calculated in accordance with IFRS, and may not be comparable to similar measures as reported by other issuers. Readers are encouraged to refer to the REIT's MD&A for further discussion of the non-IFRS measures presented.



Three months ended

 September 30,


Nine months ended

 September 30,



2015


2014


2015


2014

Financial Highlights


$


$


$


$

Funds from operations (FFO)


1,574,607


1,204,193


4,091,582


2,681,648

Adjusted funds from operations (AFFO)


1,808,064


1,426,812


4,785,503


3,220,283

Distributions declared (1)


1,429,433


1,145,868


3,750,684


2,611,714

Weighted average units outstanding – basic and diluted (2)


34,690,473


27,297,317


30,904,435


21,503,969

Distributions per unit (1) (2)


0.041


0.042


0.121


0.121

FFO per unit (2)










Basic


0.045


0.044


0.132


0.125


Diluted


0.045


0.044


0.132


0.125

AFFO per unit (2)










Basic


0.052


0.052


0.155


0.150


Diluted


0.052


0.052


0.155


0.150

AFFO payout ratio (1)


79.1%


80.3%


78.4%


81.1%

Debt to total assets ratio


50.1%


48.5%


50.1%


48.5%



(1)

Includes distributions payable to holders of Class B LP Units which are accounted for as interest expense in the consolidated financial statements.

(2)

Weighted average number of units includes the Class B LP Units.

 



Three months ended September 30,


Nine months ended September 30,



2015

2014


2015

2014

Financial Results


$

$


$

$

Rental revenue


2,987,548

2,571,558


8,399,754

5,871,124

Net rental income


2,570,519

2,099,324


6,974,863

4,824,487

Net income


1,930,614

2,566,808


4,006,638

7,917,652(1)

Net income excluding fair value adjustments


1,412,237

1,189,797


3,823,261

2,640,587



(1)

Net income for the nine months ended September 30, 2014 has been restated – see below

 

"We continue to grow the REIT through accretive acquisitions of quality properties", stated Kelly Hanczyk, CEO. "We look forward to seeing the full positive impact of these acquisitions, combined with contractual rent increases, on our financial results in future quarters. We continue to pursue acquisition opportunities where properties are tenanted by creditworthy tenants, and expect we will be closing on the two previously announced additional acquisitions prior to the year's end. We are extremely pleased with the growth of our portfolio and its steady, safe and predictable performance."

Revenues and Results from Operations In Line with Expectations, Growth Driven by Acquisitions

Rental revenue increased to $2,987,548 in the quarter as compared to $2,571,558 in the same quarter of 2014. Net rental income grew to $2,570,519 in the quarter as compared to $2,099,324 in same quarter of 2014. Net rental income increased $369,268, or 16.8% as compared to Q2 2015. 

The REIT generated FFO and AFFO of $1,574,607 and $1,808,064 respectively, in the quarter ended September 30, 2015, with FFO and AFFO per unit of $0.045 and $0.052, respectively. FFO and AFFO per unit increased 4.8% and 1.8%, respectively, as compared to Q2 2015.

Distributions of $0.041 per unit were declared for the quarter. The AFFO payout ratio for the quarter was 79.1%.

Properties acquired on July 17, 2015 and August 4, 2015 were acquired through the issuance of units and with cash on hand. Mortgages were placed on these two acquisition properties to fund the August 25, 2015 acquisition of a $22,000,000 property in Calgary, Alberta. The full positive impact of leveraged returns on these acquisitions will be seen in the fourth quarter.  

Balance Sheet and Liquidity

The REIT's debt to total assets ratio was 50.1% at September 30, 2015. The REIT intends to maintain a debt to total assets ratio of less than 55%.

November and December 2015 Distributions

The REIT will make a cash distribution in the amount of $0.01333 per unit, representing $0.16 on an annualized basis, payable December 15, 2015 to unitholders of record as of November 30, 2015.

The REIT will also make a cash distribution in the amount of $0.01333 per unit, representing $0.16 on an annualized basis, payable January 15, 2016 to unitholders of record as of December 31, 2015.

The REIT's current distribution per unit continues to be $0.01333 per month. The REIT's distribution reinvestment program ("DRIP") entitles eligible unitholders to elect to receive all, or a portion of the cash distributions of the REIT reinvested in units of the REIT. Eligible unitholders who so elect will receive a bonus distribution of units equal to 4% of each distribution that was reinvested by them under the DRIP.

Technical Restatement of Audited 2014 Consolidated Financial Statements

In the quarter ended September 30, 2015, the REIT acquired 3 industrial properties. REIT units were issued as partial purchase price consideration. Following an analysis of the required accounting for these transactions, it was determined that the fair value of the REIT units issued should be measured in accordance with IAS 39, at the trading price of the REIT units at the date of issue. In light of this determination, it was also concluded that the REIT units issued as partial consideration for the acquisition of the RTL Westcan Properties (the "Acquisition") during the quarter ended March 31, 2014, which had previously been accounted for in accordance with IFRS 2 in the audited 2014 annual financial statements, should also have been recorded at fair value measured in accordance with IAS 39. As such, the audited 2014 annual financial statements were restated, and the MD&A for the year ended December 31, 2014 has been revised accordingly, so that the financial presentation is now consistent and comparable with the presentation adopted for Q3 2015.

The impact of the 2014 restatement was to reduce the carrying amount of the REIT units issued as partial purchase consideration from $37,240,000 to $32,300,000, with an offsetting increase in fair value adjustment of investment properties. The restatement has no impact on total unitholders' equity, cash from operating or financing activities or cash used in investing activities. Further, this change does not impact FFO or AFFO of the REIT.

About the REIT

Edgefront REIT is a growth oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership and management of industrial properties located in primary and secondary markets in North America. The REIT currently owns a portfolio of 17 properties comprising approximately 952,000 square feet of rentable area. The REIT has approximately 33,143,708 units issued and outstanding. Additionally, there are 3,830,985 Class B LP units of subsidiary limited partnerships of the REIT issued and outstanding.

FORWARD LOOKING STATEMENTS

Certain statements contained in this new release constitute forward-looking statements which reflect the REIT's current expectations and projections about future results. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors 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 by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect.

While the REIT anticipates that subsequent events and developments may cause its views to change, the REIT specifically disclaims any obligation to update these forward-looking statements except as required by applicable law. These forward-looking statements should not be relied upon as representing the REIT's views as of any date subsequent to the date of this news release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the REIT.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Edgefront Real Estate Investment Trust

For further information: Please contact Kelly C. Hanczyk, President and CEO at (403) 817-9497 or Rob Chiasson, CFO at (403) 817-9496.

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Edgefront Real Estate Investment Trust

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