HALIFAX, Aug. 4 /CNW/ - Killam Properties Inc. (TSX:KMP/KMP:DB) today announced its financial results for the second quarter ended June 30, 2010.
Highlights of Killam's Second Quarter
- Increased same store net operating income ("NOI") by 5.3% during the
- Achieved same store rental revenue growth of 3.0% during the second
- Improved on already high occupancy rates, ending the second quarter
with total apartment occupancy at 97.1%, compared to 96.6% at June 30,
- Generated funds from operations ("FFO") of $0.19 per share, compared to
$0.20 per share during the second quarter of 2009, notwithstanding a
31% increase in the weighted average number of shares outstanding.
- Total debt as a percentage of the gross book value of assets of 63.9%
at June 30, 2010, a decrease of 130 basis points from 65.2% at
December 31, 2009.
- Completed $98.9 million in acquisitions, principally in Ontario.
- Entered the Ontario apartment market with the purchase of 137 units in
London and 225 units in Cambridge.
- Continued to grow the apartment portfolio in Atlantic Canada with the
purchase of 134 units in Halifax and 50 units in Moncton.
Financial Highlights (in thousands, except per share information)
June 30, June 30,
For the three months ended, 2010 2009 % Change
Rental Revenue $27,837 $25,854 7.7%
Net Operating Income $17,838 $16,108 10.7%
Net Income Before Tax and Depreciation $9,035 $6,313 43.1%
Net Income (Loss) $1,381 ($356) n/a
Funds from Operations $8,596 $6,833 25.8%
Funds from Operations per Share $0.19 $0.20 (5.0%)
Shares Outstanding (weighted average) 44,772 34,088 31.3%
June 30, June 30,
For the six months ended, 2010 2009 % Change
Rental Revenue $53,851 $50,871 5.9%
Net Operating Income $33,175 $29,792 11.4%
Net Income Before Tax and Depreciation $14,880 $10,235 45.4%
Net Income (Loss) $812 ($2,268) n/a
Funds from Operations $14,945 $11,518 29.8%
Funds from Operations per Share $0.36 $0.34 5.9%
Shares Outstanding (weighted average) 41,859 34,067 22.9%
June 30, Dec 31,
Balance Sheet as at, 2010 2009 % Change
Total Assets $839,559 $739,373 13.6%
Total Liabilities $624,710 $562,171 11.1%
Total Shareholders' Equity $214,849 $177,202 21.2%
Debt as a % of Gross Book Value 63.9% 65.2% (2.0%)
FFO of $0.19 Per Share in the Second Quarter
FFO per share for the second quarter of 2010 was $0.19 per share, compared to $0.20 per share for the second quarter of 2009. Killam's FFO increase of 25.8% in the quarter was more than offset by a 31.3% increase in the weighted average number of shares outstanding following equity raises completed in July 2009 and March 2010. The $75.3 million raised during this time, primarily for acquisitions and debt reduction, was not fully deployed at the beginning of the second quarter, contributing to the $0.01 reduction in FFO per share.
The FFO increase in the quarter was primarily attributable to the same store portfolio NOI growth of 5.3% and the impact of new acquisitions completed during the second quarter.
Management considers FFO per share to be a key measure of operating performance and believes that many of its analysts and shareholders also find this measure of value. The Company provides the components of FFO and a reconciliation between FFO and net income in its Management's Discussion and Analysis. FFO is a generally accepted measure of operating performance for real estate companies; however, it is a non-GAAP measurement and readers are cautioned that Killam's calculation of FFO may be different than that used by other companies. Killam calculates FFO as net income plus depreciation and amortization, stock compensation and non-cash debenture interest, less gains on debt retirement and future income tax recovery.
Consolidated Same Store NOI Growth of 5.3%
Killam achieved same store NOI growth of 5.3% during the second quarter of 2010, with NOI growth realized in both the apartment and the manufactured home community ("MHC") portfolios, which increased 4.8% and 6.8%, respectively.
Killam's apartment portfolio realized a 3.2% increase in rental revenue in the quarter. Higher rents, which increased an average of 2.5% from June 2009 to June 2010, were the most significant contributor to revenue growth. Improved occupancy in the quarter also contributed positively to revenue.
The same store apartment portfolio's operating costs were relatively stable in the quarter, at $7.7 million, compared to $7.6 million in the second quarter of 2009. Increased general operating costs and property taxes, both of which increased by approximately 4%, were offset by a decrease in utility costs. Although the cost of heating oil and natural gas increased from the second quarter of 2009, consumption rates were down due to improved operating efficiencies and warmer spring temperatures. Also contributing to a positive variance for utilities was $0.2 million in hedge settlement costs incurred in the second quarter of 2009 that Killam did not incur during the second quarter of 2010.
Rental revenue for the MHC portfolio increased by 2.4% from the second quarter of 2009 due primarily to increased rents, with an average annual increase of 4.1%. MHC property expenses decreased 4.6% from the same quarter in 2009 as lower waste water treatment costs in Ontario (following higher than normal costs in 2009) more than offset a 5.2% increase in water costs.
Consolidated same store NOI increased by 7.9% for the six months ended June 30, 2010, including an 8.3% increase for the apartment portfolio and a 6.6% increase for the MHC portfolio.
Following the strong same store NOI growth realized during the first half of the year, and the continued low vacancy, Management has adjusted its same store NOI growth target for 2010 from 3% to 4% to a target of 4% to 6%.
Low Vacancy Rates Continued During the Second Quarter
Killam has continued to maintain low vacancy in its properties. Consolidated vacancy was 2.0% at June 30, 2010, compared to 2.1% at June 30, 2009.
As at the end of the second quarter, the apartment portfolio had a vacancy rate of 2.9% with an average monthly rent of $796 and the MHC portfolio had a vacancy rate of 1.0% and an average monthly rent of $227. The apartment vacancy improved by 50 basis points from the vacancy of 3.4% at June 30, 2009, attributable to improvements in Fredericton, Moncton and Halifax. Included in the vacancy statistics below are Killam's three new Ontario properties. Historically, after Killam acquires a property, there is increased tenant turnover as the building converts to Killam's management and operating platform. Leasing activity has been strong at the newly acquired properties and the vacancy rate is expected to normalize by year-end.
Not included in the MHC vacancy numbers are 163 MHC sites that had not been previously rented, including some expanded sites, and 376 transient sites in Killam's seasonal resort portfolio. These units are excluded from vacancy statistics in the table below.
Units Vacancy Rent
---------- ---------- ----------
Nova Scotia 4,384 3.1% $818
New Brunswick 3,360 2.7% $726
Newfoundland 732 2.2% $637
Prince Edward Island 686 0.9% $809
Ontario 362 7.2% $1,504
Total Apartment Portfolio 9,524 2.9% $796
Total MHC Portfolio 8,751 1.0% $227
New Home Sales in 2010
Killam completed 9 home sales and earned 3 home sale placement fees during the second quarter, compared to 3 home sales and 4 home sale placement fees in the second quarter of 2009. Home sales in Nova Scotia were strongest in the quarter with 8 sales, followed by Ontario and Saskatchewan, each with two sales. During the first half of 2010, Killam has completed a total of 23 home sales and home sale placements, compared to 12 during the first half of 2009. Management expects to meet its total home sales target of 40 to 60 homes in 2010.
Debt to Gross Book Value of Assets at 63.9%
At the end of the second quarter the Company's debt as a percentage of the gross book value of assets was 63.9% compared to 67.9% as at June 30, 2009 and 65.2% as at December 31, 2009. The debt levels have increased from 61.5% at March 31, 2010 following Killam's acquisition activity. Management maintains its target debt ratio of between 65% and 70%. Killam's annualized interest coverage ratio was 2.0 at the end of the quarter, compared to 1.8 as at June 30, 2009 and 1.8 as at December 31, 2009.
$98.9 Million in Acquisitions in Q2
Killam completed $98.9 million of acquisitions during the second quarter with the purchase of six recently-constructed apartment buildings in Ontario and Atlantic Canada. In London, Ontario, Killam acquired the 137-unit Richmond Hill apartments for $33.0 million. As well, two buildings, with a total of 225 units, were purchased in Cambridge, Ontario, 100 and 200 Eagle Street, for $46.7 million. Killam also continued to expand its Atlantic Canadian apartment portfolio with the purchase of two 67-unit properties in Halifax, 459 and 505 Parkland Drive, for $12.3 million and Belmar Plaza, a 50-unit building in Moncton, New Brunswick, for $6.9 million. Year-to-date, Killam has completed $100.7 million in acquisitions with a weighted average cap rate of 5.9%, reflecting the age and quality of the properties.
"We are pleased to report rental increases, continued strong occupancy, and same store property and FFO growth during the second quarter", noted Philip Fraser, Killam's President and CEO. "Our portfolio of quality apartments and MHC sites has achieved outstanding growth over the last two years."
"The second quarter was an active acquisition quarter. We believe that we have made a strong entry into the Ontario apartment market and we are realizing the positive impact as the new properties contribute to FFO growth. We look forward to continuing to grow the Company through acquisitions and the development of new properties in the future."
Killam's June 30, 2010 Financial Statements and Notes and Management's Discussion and Analysis can be found at www.killamproperties.com.
Second Quarter Conference Call
Management will host a conference call to discuss Killam's second quarter results on Thursday, August 5, 2010 at 11:00 AM Atlantic time (10:00 AM Eastern). The dial-in numbers for the conference call are 647-427-7450 (in Toronto) or 888-231-8191 (toll free, within North America).
A live audio webcast of the conference call will be accessible on the Company's website at www.killamproperties.com and at www.newswire.ca.
A replay will be available by dialing 416-849-0833 (Toronto) or 800-642-1687 (toll-free) and using the passcode 87527015 until August 12, 2010, or on the Company's website for 90 days after the conference call.
Killam Properties Inc, based in Halifax, Nova Scotia, is one of Canada's largest residential landlords, owning and operating multi-family apartments and manufactured home communities.
Note: The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein. Certain statements in this report may constitute forward-looking statements relating to our operations and the environment in which we operate, which are based on our expectations, estimates, forecast and projections, which we believe are reasonable as of the current date. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of Killam to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For more exhaustive information on these risks and uncertainties, you should refer to our most recently filed annual information form which is available at www.sedar.com. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made and should not be relied upon as of any other date. Other than as required by law, Killam does not undertake to update any of such forward-looking statements.
SOURCE Killam Properties Inc.
For further information: For further information: Dale Noseworthy, CA, CFA, Director, Investor and External Relations, Killam Properties Inc., Phone: (902) 442-0388, email@example.com