Pure Industrial Real Estate Trust Announces Release of Q2 -2015 Financial Results

VANCOUVER, Aug. 13, 2015 /CNW/ - Pure Industrial Real Estate Trust ("PIRET" or the "Trust") (TSX: AAR.UN) is pleased to announce the release of its financial results for the three and six months ended June 30, 2015.

Q2-2015 Financial Results

The Q2-2015 financial results, consisting of PIRET's unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2015, and Management's Discussion and Analysis ("MD&A") dated August 13, 2015, are available on SEDAR (www.sedar.com) and PIRET's website (www.piret.ca).

Highlights
(All metrics have been normalized for IFRIC 21 and assumes all property taxes have been pro-rated and accrued based on the number of days of ownership within the reporting year.)

  • As at June 30, 2015, PIRET's portfolio consists of 173 income producing properties representing gross leasable area ("GLA") of approximately 17.4 million square feet ("sf") under management, an increase from 171 properties and 15.6 million sf of GLA at December 31, 2014. In addition, PIRET's portfolio consists of one property under development which will comprise 422,433 sf of GLA when completed and one property under expansion which will comprise an additional 59,600 sf of GLA upon completion.

  • Investment properties increased to $1.95 billion as at June 30, 2015 from $1.74 billion at December 31, 2014 due to the acquisition of a portfolio of three properties comprising 1.3 million sf of GLA, the acquisition of a property under development as noted above and the increase in the fair market value of the properties since December 31, 2014. Investment properties increased by $49.2 million from March 31, 2015 due primarily to a US$28 million increase in the appraised value of the U.S. FedEx portfolio and progress on the Vaughan development, as described below.

  • PIRET purchased and cancelled 949,300 Class A Units (each, a "Unit") under its NCIB program at an average cost of $4.46 per Unit for a total cost of $4,234,262.

  • Loan to Gross Book Value as at June 30, 2015 was 49.6%, representing a 2.3% increase from a ratio of 48.5% at December 31, 2014 due primarily to the new financing for the North Carolina acquisition, as described below, and the construction financing for the Vaughan development. Loan to Gross Book Value decreased by 30 basis points from March 31, 2015 due primarily to the increase in the appraised value of the U.S. FedEx portfolio as described above.

  • Revenue for the six months ended June 30 increased 26.6% from $66.9 million in 2014 to $84.7 million in 2015. For the three months ended June 30, PIRET's revenues increased 24.7% from $34.0 million in 2014 to $42.4 million in 2015.

  • The adjusted earnings from property operations ("NOI"), after accounting for the IFRIC 21 fair value adjustment, increased by 25.0% from $47.6 million for the six months ended June 30, 2014 to $59.5 million for the same period in 2015. For the three months ended June 30, PIRET's adjusted NOI increased 24.4% from $24.2 million in 2014 to $30.1 million in 2015. Same property NOI ("SPNOI"), from 155 properties, increased 0.6% over the previous year's quarter, led by a 4.3% increase in rents and the Containerworld expansion, offset by a 3.0% decrease in occupancy at those properties since Q2-2014 from 96.5% to 93.5%. When including additional property management fee revenue from tenants and co-owners, SPNOI increased by 1.0% over that period.

  • On a go-forward basis, the geographic concentration of PIRET's portfolio by NOI is as follows: British Columbia 17%; Alberta 24%; Ontario 33%; U.S. 19%; and others 7%.

  • General and administrative ("G&A") expenses were significantly higher for the quarter due to a one-time charge of $1.4 million related to the transition to a single CEO and the development of the Trust's new compensation plan. The one-time charge impacted the Trust's results in the quarter and year to date.

  • Funds from operations ("FFO") increased from $29.1 million for the six months ended June 30, 2014 to $36.3 million for the same period in 2015. On a per unit basis, FFO for the six months ended June 30, 2015 was consistent at $0.19 compared to the same period in 2014. The payout ratio for the six months ended June 30, 2015 increased slightly to 82.5% from 81.3% in 2014.

  • FFO increased from $14.7 million for the three months ended June 30, 2014 to $17.5 million for the same period in 2015. On a per unit basis, FFO for the three months ended June 30, 2015 was consistent at $0.09 compared to the same period in 2014 and the payout ratio increased to 85.4% from 82.4% for the same period in 2014. The Trust's FFO per unit of $0.19 for the six months ended June 30, 2015 and $0.09 for the quarter includes the dilutive effects of the one-time G&A costs incurred in the quarter as described above.

  • Adjusted funds from operations ("AFFO") increased from $24.3 million for the six months ended June 30, 2014 to $32.7 million for the same period in 2015. On a per unit basis, AFFO increased slightly to $0.17 or 6.6% for the six months ended June 30, 2015 compared to $0.16 for 2014. The AFFO payout ratio for the six months ended June 30 decreased from 97.4% in 2014 to 91.4% in 2015.

  • AFFO increased from $12.0 million for the three months ended June 30, 2014 to $15.9 million for the same period in 2015. On a per unit basis, AFFO for the three months ended June 30, 2015 increased by 7.8% to $0.08 compared to the same period in 2014 and the payout ratio decreased from 101.1% in 2014 to 94.0% in 2015. Similar to FFO, the Trust's AFFO per unit of $0.17 for the six months ended June 30, 2015 and $0.08 for the quarter includes the dilutive effects of the one-time G&A costs incurred in the quarter as described above.

  • After adjusting for the $1.4 million one-time charge related to the G&A expenses, FFO and AFFO for the three months ended June 30, 2015 would have been $0.10 and $0.09 per unit, respectively.

  • The occupancy of the portfolio was 94.0% as at June 30, 2015, with a weighted average lease term of 6.7 years. The Trust's committed occupancy is currently at 94.6%. The occupancy of the portfolio was 96.0% as at March 31, 2015. The decrease in occupancy compared with the previous quarter was due primarily to recent large vacancies in Calgary and Toronto.

  • PIRET achieved an average increase on rental rates of 13.3% on new leases and renewals of leases expiring in Q2-2015. PIRET renewed 53.9% of leases expiring in Q2-2015.

Vaughan Development, North Carolina Acquisition, and Barrington Expansion

In February 2015, the Trust acquired 60 acres of development land in Vaughan, Ontario for $44,353,575 for the construction of a state-of-the-art distribution and sorting facility that will serve the Greater Toronto Area ("GTA").  The building, when completed, will comprise approximately 422,433 sf in respect of which the tenant has entered into a binding fifteen year lease with 2 five year renewal options.  Development is progressing on schedule.  The structure is complete and installation of the roofing membrane and wall panels is well in progress.  The property will deliver approximately $8.0 million in annual NOI upon completion in Q2-2016.

In February 2015, the Trust also acquired a 51% controlling interest in a portfolio of three income producing investment properties located in North Carolina for a total price of $71,170,200 (US$57,000,000).  The portfolio consists of three bulk distribution and warehouse facilities, comprising approximately 1.33 million sf of GLA and is 100% leased to three credit-rated tenants.  PIRET provides certain asset management, administrative and related services for the North Carolina portfolio for a fee equal to 37.5 basis points of the gross book value of the portfolio for its services.

In June 2015, the Trust entered into a binding agreement with its largest tenant to expand an existing property in Barrington, New Jersey.  The tenant currently occupies a 197,649 sf sorting and distribution facility and the expansion will comprise a total of 59,600 sf.  The tenant is expected to commence occupancy of the expansion premises on April 15, 2016 for a term of ten years and has agreed to extend its existing lease by approximately four years making it co-terminus with the expansion premises.  The total project cost is estimated to be US$9.1 million and will be funded with PIRET's existing working capital.  The expansion is progressing on schedule.  The installation of the roofing membrane and siding are well in progress.  The expansion is expected to increase the property's annual net rent by approximately US$900,000

Dispositions

During the six months ended June 30, 2015, PIRET sold its interest in four investment properties located in Burlington, Mississauga, and Vaughan, Ontario for gross proceeds of $11.1 million less standard closing costs and adjustments of $0.8 million resulting in net proceeds of $10.3 million and a net gain on sale of $1.1 million.  The sale properties generated approximately $70,000 in NOI in Q1-2015.

Selected Financial Information





For the six months

ended June 30

For the three months

ended June 30








($000s, except per unit basis)

2015

2014

2013

2015

2014

2013








Revenue

$ 84,687

$ 66,944

$ 45,000

$ 42,375

$ 33,972

$ 25,775

Net operating income (1)

$ 59,488

$ 47,641

$ 33,475

$ 30,076

$ 24,241

$ 19,215








Distributions declared per Unit

$ 0.16

$ 0.16

$ 0.16

$ 0.11

$ 0.08

$ 0.08

FFO(2) per unit (fully diluted)

$ 0.19

$ 0.19

$ 0.19

$ 0.09

$ 0.09

$ 0.10


Payout Ratio(3)

82.5%

81.3%

80.2%

85.4%

82.4%

78.5%

AFFO(2) per unit (fully diluted)

$ 0.17

$ 0.16

$ 0.17

$ 0.08

$ 0.08

$ 0.09


Payout ratio(3)

91.4%

97.4%

89.4%

94.0%

101.1%

87.1%

G&A as a Percent of Revenue

5.0%

3.6%

3.6%

6.3%

3.9%

3.7%

(1) 

Net operating income has been normalized for IFRIC 21 and assumes all property taxes have been

pro-rated and accrued based on number of days of ownership within the reporting year. 

(2)

FFO and AFFO are widely accepted supplemental measures of financial performance for real estate

entities.  These measures are not defined under IFRS, however.  For a description of these measures

and an IFRS to non-IFRS reconciliation, see PIRET's MD&A under "Distributable Income and Liquidity

and Capital Resources" and "Non-IFRS Measures".  PIRET's MD&A is available on SEDAR

at www.sedar.com. 

(3)

FFO and AFFO payout ratios are calculated based on the ratio of distribution rate to fully diluted FFO

and AFFO per unit.












June 30,

2015

Dec 31,

2014

Dec 31,

2013

Debt-to-GBV




49.6%

48.5%

54.1%

Employees




39

36

32

Outlook

Real Estate Fundamentals

Despite roughly 8.5 million sf of absorption nationally in Q2-2015 according to CBRE, leasing activity for the portfolio was slower than expected in the first half of 2015, with tenants exercising caution in reviewing their requirements and committing to new space.  With the majority of the Trust's lease expiries occurring in Ontario in 2015, the Trust anticipates strong rental rate growth during the year, but that gain will be offset in the short term by an increase in vacancy and releasing costs in the year.  Over 80% of the Trust's leasing activity in 2014 took place in the second and third quarters, and management anticipates a similar pattern in 2015 and 2016.  Although the Trust's same-property NOI growth will be negatively impacted by vacancy and related releasing costs in the near term, rental rate increases being achieved are expected to provide strong NOI growth moving forward.

Conference Call

As previously announced on July 17, 2015, management will host the conference call at 3:00 pm (EST), 12:00 pm (PST), on Thursday, August 13, 2015, to review the financial results and corporate developments for the three and six months ended June 30, 2015.

To participate in this conference call, please dial one of the following numbers approximately 10 minutes prior to the commencement of the call, and ask to join the Pure Industrial Real Estate Trust Conference Call.

Dial in numbers:
Toll free dial in number (from Canada and USA)............................................................................. 1-888-390-0546
International or Local Toronto........................................................................................................1-416-764-8688

Conference Call Replay

If you cannot participate on August 13, 2015, a replay of the conference call will be available by dialing one of the following replay numbers.  You will be able to dial in and listen to the conference 120 minutes after the meeting end time, and the replay will be available until August 20, 2015.

Please enter the Replay ID# 126051, followed by the # key.

Replay toll free dial in number (from Canada and USA)................................................................. 1-888-390-0541
Replay international or local Toronto............................................................................................1-416-764-8677

About Pure Industrial Real Estate Trust 

PIRET is an unincorporated, open-ended investment trust that owns and operates a diversified portfolio of income-producing industrial properties in leading markets. PIRET is an internally managed REIT that focuses exclusively on investing in industrial properties.

Additional information about PIRET is available at www.piret.ca or www.sedar.com.

Forward-Looking Information:

Certain statements contained in this press release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The forward-looking statements contained in this news release are based on certain key expectations and assumptions made by PIRET, including:  (i) PIRET's portfolio consists of one property under development which will comprise 422,433 sf of GLA when completed and one property under expansion which will comprise an additional 59,600 sf of GLA upon completion; (ii) the building, when completed, will comprise approximately 422,433 sf in respect of which the tenant has entered into a binding fifteen year lease with 2 five year renewal options; (iii) the property is expected to deliver approximately $8.0 million in annual NOI upon completion in Q2-2016; (iv) the tenant is expected to commence occupancy of the expansion premises on April 15, 2016 for a term of ten years and has agreed to extend its existing lease by approximately four years making it co-terminus with the expansion premises; (v) the total project cost is estimated to be US$9.1 million and will be funded with PIRET's existing working capital; (vi) the expansion is expected to increase the property's annual net rent by approximately US$900,000; (vii) the Trust anticipates strong rental rate growth during the year, but that gain will be offset in the short term by an increase in vacancy and releasing costs in the year; (viii) over 80% of the Trust's leasing activity in 2014 took place in the second and third quarters, and management anticipates a similar pattern in 2015 and 2016; and (ix) although the Trust's same-property NOI growth will be negatively impacted by vacancy and related releasing costs in the near term, rental rate increases being achieved are expected to provide strong NOI growth moving forward.

Although PIRET believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because PIRET can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the property acquisitions, competitive factors in the industries in which PIRET operates, prevailing economic conditions, and other factors, many of which are beyond the control of the PIRET.

The forward-looking statements contained in this press release represent PIRET's expectations as of the date hereof, and are subject to change after such date. PIRET disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

The Toronto Stock Exchange has not reviewed nor approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.

SOURCE Pure Industrial Real Estate Trust (PIRET)

For further information: Andrew Greig, Director of Investor Relations, Suite 910, 925 West Georgia Street, Vancouver, BC V6C 3L2, Phone: (604) 398-2836 or (888) 681-5959, E-mail: agreig@piret.ca, TSX - AAR.UN

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