Plaza Retail REIT Announces Solid Results for the Three Months Ended March 31, 2016

-  NOI growth from developments/redevelopments/acquisitions drives AFFO growth of 4.6%

FREDERICTON, May 11, 2016 /CNW Telbec/ - Plaza Retail REIT (TSX: PLZ.UN) ("Plaza" or the "REIT") today announced solid financial results for the three months ended March 31, 2016.

Michael Zakuta, President and CEO said, "We are pleased with our financial results for the three months ended March 31, 2016.  FFO excluding non-recurring items and AFFO are up over the prior year and reflect the impact of the continued growth in our business from development and redevelopment activity. Our goal is always to achieve cash flow per unit growth and pass that growth onto unitholders.  We achieve this goal by being opportunistic and by developing and redeveloping high quality retail projects leased to national retailers and financing those projects for as long a term as possible. Our financial results confirm the success of our business strategy."

All period information in this press release is for the three months ended March 31, 2016 (except as otherwise noted) and all comparisons relate to the corresponding period in the prior year. "Same-asset" refers to properties the REIT has owned and operated during all of 2016 and the entire year ended December 31, 2015, and excludes partial year results from certain assets due to timing of acquisitions, redevelopments and dispositions.

Three Months Ended March 31, 2016 Financial Highlights

  • Funds from operations ("FFO") were $7.5 million, consistent with the same period in the prior year. Excluding non-recurring items, FFO increased 4.5%. Adjusted funds from operations ("AFFO") were $7.7 million, up 4.6% from $7.4 million in 2015. FFO per unit was consistent at $0.080 year over year and AFFO per unit was $0.082, up 3.8%, from $0.079 in 2015;
  • FFO and AFFO payout ratios were 83.2% and 80.8%, respectively, compared to 78.4% and 79.5% in 2015;
  • Property rental revenues were $24.5 million, up 2.4% from $23.9 million for the three months ended March 31, 2015. Same-asset rental revenues were consistent year over year at $21.9 million compared to $22.0 million for the three months ended March 31, 2015;
  • Net property operating income ("NOI") was $15.3 million, up 2.9% from $14.9 million in the prior year and same-asset net property operating income was consistent year over year at $13.9 million;
  • Profit and total comprehensive income for the period ended March 31, 2016 was $4.5 million compared to $16.3 million at March 31, 2015, mainly due to year over year non-cash fair value adjustments;
  • New long-term financing was obtained in the amount of $6.3 million (at Plaza's consolidated share) with a weighted average term of 8.3 years and a weighted average interest rate of 3.51%;
  • The interest coverage ratio improved from 2.04x at March 31, 2015 to 2.07x at March 31, 2016. The debt coverage ratio at March 31, 2016 was 1.51x compared to 1.55x at March 31, 2015;
  • Plaza's financial leverage remained relatively consistent ending the quarter with a debt to gross asset ratio of 53.6% (including convertible debentures) and 47.7% (excluding convertible debentures), compared to 53.9% and 47.7%, respectively, at the end of the first quarter in 2015;
  • Plaza paid total cash distributions to REIT unitholders and Class B exchangeable LP unitholders of $6.2 million; and
  • On March 31, 2016, Plaza closed a bought deal public offering of 5.0 million units at an issue price of $4.60 per unit for gross proceeds of $23.0 million.

Three Months Ended March 31, 2016 Operating Highlights

  • Plaza's leasing activity included 212 thousand square feet of renewals/new leasing at existing properties at an average rate of $13.73 per square foot;
  • Plaza completed 12 thousand square feet of new leasing deals on developments and redevelopments at market rates and 46 thousand square feet of new and renewal leasing deals at market rates at non-consolidated investments;
  • Same-asset committed occupancy and total committed occupancy remained high at 96.5% and 95.9%, respectively, at March 31, 2016, compared to 96.6% and 96.3%, respectively, at March 31, 2015; and
  • Plaza acquired an additional 5.5% interest in the Village Shopping Centre in St. John's, NL for $2.7 million. The REIT now owns 50.0% of this property.

 

Financial Results Summary for the Three Months Ended March 31st

(CAD$000s, except percentage and per unit amounts)

2016

2015

Change

Property rental revenue

$24,466

$23,902

+ 2.4%

Property operating expenses

$9,162

$9,024

+ 1.5%

Property net operating income

$15,304

$14,878

+ 2.9%





Same-asset rental revenue

$21,914

$22,034

- 0.5%

Same-asset operating expenses

$7,999

$8,149

- 1.8%

Same-asset net operating income

$13,915

$13,885

+ 0.2%





FFO

$7,491

$7,489

-

FFO per unit

$0.080

$0.080

-

FFO payout Ratio

83.2%

78.4%

+ 6.1%





AFFO

$7,722

$7,385

+ 4.6%

AFFO per unit

$0.082

$0.079

+ 3.8%

AFFO payout ratio

80.8%

79.5%

+ 1.6%





Profit and total comprehensive income

$4,460

$16,250

-72.6%





Total distributions to unitholders

$6,234

$5,870

+ 6.2%





Debt to gross assets (including converts)

53.6%

53.9%

- 30 bps

Debt to gross assets (excluding converts)

47.7%

47.7%

-

Refer to "Non-IFRS Financial Measures" below for further explanations.

 

Three Months Ended March 31, 2016 Financial Results
Property NOI was $15.3 million, up 2.9% from $14.9 million in the prior year and same-asset NOI was consistent year over year at $13.9 million.  Total property NOI increased mainly due to significant growth from developments and redevelopments, Plaza's core business, notwithstanding a decrease in NOI of $124 thousand due to properties sold.  Same-asset NOI was impacted by a decrease in non-recoverable snow removal costs due to a milder winter this year, offset by a slight decrease in occupancy.

FFO was consistent for the three months ended March 31, 2016 compared to March 31, 2015 at $7.5 million.  AFFO was $7.7 million, up 4.6% from $7.4 million in 2015.  FFO per unit was consistent at $0.080 year over year and AFFO per unit was $0.082, up 3.8% from $0.079 in 2015.  FFO and AFFO were impacted by growth in NOI, mainly due to net growth from developments/redevelopments/acquisitions and AFFO was impacted by a decrease in maintenance capital expenditures.  Plaza incurred $148 thousand of one-time early mortgage discharge fees on properties sold during the quarter, which are included in FFO.  As well, the prior year numbers include insurance proceeds of $213 thousand.  Excluding these, FFO was $7.6 million, up 4.5% from $7.3 million in 2015 and FFO per unit was $0.081, up from $0.077 in 2015.

Profit and total comprehensive income declined to $4.5 million for the three months ended March 31, 2016, from $16.3 million in the prior year.  The variance is mainly due to year over year non-cash fair value adjustments.

Fair Value of Investment Properties
At the end of the quarter, investment properties were valued using an overall weighted average capitalization rate of 7.04%, consistent with December 31, 2015 and a drop of 2 basis points from March 31, 2015.  There was a fair value decrease of $2.0 million recognized in the first quarter of 2016 primarily as a result of occupancy and NOI at particular properties, partly offset by an increase in fair value on acquisitions.  Fair value adjustments are determined based on the movement of various parameters, including changes in stabilized NOI and capitalization rates.

 

New Leases / Renewals


Strip Plazas

Enclosed Malls

Single-User Retail

Single-User QSR(1)

2016 – Q1





Leasing renewals (sq. ft.)

101,011

53,297

14,000

1,657

Weighted average rent ($/sq. ft.)

$13.13

$15.03

$7.86

$42.85






Expiries that renewed (sq. ft.)

101,011

53,297

14,000

1,657

Weighted average rent ($/sq. ft.)

$10.85

$15.25

$7.86

$42.72






New leasing (sq. ft.)

31,929

7,783

2,146

-

Weighted average rent ($/sq. ft.)

$14.50

$11.00

$24.31

-






Expiries not renewed (sq. ft.)

41,136

5,522

-

1,982

Weighted average rent ($/sq. ft.)

$15.28

$12.13

-

$22.00






2016 – Remainder of Year





Expiries (sq. ft.)

253,062

21,143

2,989

18,537

Weighted average rent ($/sq. ft.)

$11.67

$16.21

$16.44

$23.83

(1) QSR refers to quick service restaurant.

 

Distributions
Distributions paid to REIT unitholders and Class B unitholders of the REIT's subsidiary limited partnership were $6.2 million for the three months ended March 31, 2016, representing an AFFO payout ratio of 80.8%, compared to distributions in the amount of $5.9 million paid in the prior year, representing an AFFO payout ratio of 79.5%.

Liquidity and Capital Structure
To fund ongoing operating activities, the REIT has a $30.0 million 365-day revolving operating facility with a Canadian chartered bank.  It bears interest at prime plus 1.0% or BAs plus 2.25%.  The operating facility was paid down with the proceeds from the bought deal equity offering.  At March 31, 2016 there was $29.5 million available on this facility (net of letters of credit issued). 

To fund development activities the REIT has two 365-day revolving development facilities with Canadian chartered banks available upon pledging of specific assets.  One is a $20 million facility that bears interest at prime plus 1.00% or BAs plus 2.75%, and the other is a $15 million facility that bears interest at prime plus 1.00% or BAs plus 2.25%.  At March 31, 2016 there was $18.7 million available on these development facilities. The REIT also has two variable rate secured construction loans, one for $2.2 million and the other for $907 thousand on two of its Ontario development projects.  The loans bear interest at a rate of prime plus 1.25% or BAs plus 2.50% and prime plus 1.00% or BAs plus 2.50%, respectively, and mature in August 2017 and December 2017, respectively.  At March 31, 2016, $1.6 million and $0.5 million, respectively, were drawn on these loans. 

During 2016 Plaza obtained new long-term financing in the amount of $6.3 million (at Plaza's consolidated share) with a weighted average term of 8.3 years and a weighted average interest rate of 3.51%.  The REIT ended the quarter with total mortgages payable (excluding development, construction and operating lines mentioned above) of $449.2 million with a weighted average interest rate on fixed rate mortgages of 4.58% and a weighted average maturity of 6.3 years.  

In February 2016, Series VI mortgage bonds matured and were repaid.

On April 29, 2016, Plaza redeemed the $9.2 million outstanding 8% Series B convertible debentures with the proceeds from the bought deal public offering.

Debt to gross book assets, excluding convertible debentures, at March 31, 2016 was 47.7% and including convertible debentures was 53.6%.

Further Information
A more detailed analysis of the REIT's financial results for the three months ended March 31, 2016 is included in the REIT's Management's Discussion and Analysis and Condensed Interim Consolidated Financial Statements, which have been filed on SEDAR and can be viewed at www.sedar.com or on the REIT's website at www.plaza.ca.  

Conference Call
Michael Zakuta, President and CEO, and Floriana Cipollone, CFO, will host a conference call for the investment community on Thursday, May 12, 2016 at 2:00 p.m. ET (3:00 p.m. AT). The call-in numbers for participants are 647-427-7450 or 888-231-8191.  

A replay of the call will be available until Thursday, May 19, 2016. To access the replay, dial 416-849-0833 or 855-859-2056 (Passcode: 88242232). The audio replay will also be available for download on the REIT's website for 90 days following the conference call.

About Plaza
Plaza is an open-ended real estate investment trust and is a leading retail property owner and developer, particularly in Eastern Canada.  Plaza's current portfolio includes interests in 300 properties totaling approximately 7.1 million square feet across Canada and additional lands held for development. Plaza's properties include a mix of strip plazas, stand-alone small box retail outlets and enclosed shopping centres, anchored by approximately 91% national tenants.  For more information, please visit www.plaza.ca.  

Non-IFRS Financial Measures
This press release contains certain non-IFRS financial measures including FFO and AFFO. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. However, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Please refer to the REIT's Management's Discussion and Analysis for the quarter ended March 31, 2016 for a reconciliation of FFO and AFFO to standardized IFRS measures.

Forward-looking Information
This news release contains forward looking statements relating to our operations and the environment in which we operate, which are based on our expectations, estimates, forecasts and projections.  These statements are not future guarantees of future performance and involve risks and uncertainties that are difficult to control or predict.  Therefore, actual outcomes and results may differ materially from those expressed in these forward looking statements.  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.  We undertake no obligation to publicly update any such statement, to reflect new information or the occurrence of future events or circumstances, except for forward-looking information disclosed in prior disclosures which, in light of intervening events, requires further explanation to avoid being misleading.

The TSX does not accept responsibility for the adequacy or accuracy of this release.

 

SOURCE Plaza Retail REIT

For further information: Floriana Cipollone, Chief Financial Officer, Plaza Retail REIT, Tel: 416.848.4583; Kim Sharpe, Director of Business Development, Plaza Retail REIT, Tel: 506.357.7901

RELATED LINKS
http://www.plaza.ca

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