Pure Industrial Real Estate Trust Announces Release of Q4 2015 and 2015 Annual Financial Results

VANCOUVER, March 10, 2016 /CNW/ - Pure Industrial Real Estate Trust (the "Trust") (TSX: AAR.UN) is pleased to announce the release of its financial results for the three months and year ended December 31, 2015.

2015 Financial Results

The 2015 annual financial results, consisting of the Trust's' audited consolidated financial statements for year ended December 31, 2015, and management's discussion and analysis of results of operations and financial condition ("MD&A") dated March 10, 2016, are available on SEDAR (www.sedar.com) and PIRET's website (www.piret.ca). Unless otherwise indicated, all amounts are in Canadian dollars.

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 period.)

  • As at December 31, 2015, the Trust's portfolio under management consists of 169 income producing properties representing gross leasable area ("GLA") of approximately 17.3 million square feet ("sf"), a decrease from 171 properties but an increase from 15.6 million sf of GLA at December 31, 2014. In addition, the Trust's portfolio consists of: 26.4 acres of land held for development; one property under development, which will comprise 422,433 sf of GLA upon completion; and one property under expansion, which will comprise an additional 59,600 sf of GLA upon completion, expected in Q2-2016.
  • Investment properties increased to $2.07 billion as at December 31, 2015 from $1.74 billion at December 31, 2014 due to the acquisition of six properties comprising 1.5 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 September 30, 2015 due primarily to progress on the Vaughan and Barrington developments, as described below, currency appreciation relating to investment properties held in the United States, and fair value increases. The increase has been offset by the disposition of $46.7 million in properties since December 31, 2014.
  • During the year ended December 31, 2015, the Trust purchased and cancelled 1,859,600 Class A Units pursuant to a normal course issuer bid at an average cost of $4.41 per Class A Unit for a total cost of $8.2 million.
  • Loan to Gross Book Value as at December 31, 2015 was 48.8%, representing a 0.3% increase from a ratio of 48.5% at December 31, 2014 due to the acquisitions of the North Carolina portfolio, the Vaughan land asset acquisition and associated development activity, and the Barrington expansion asset, partially offset by an increase in the fair market value of the portfolio and the monthly payment of mortgage principal. Although the Trust's loan to gross book value increased slightly for the year, the ratio fell from 49.1% as at September 30, 2015.
  • Funds from operations ("FFO") for the year ended December 31, 2015 increased to $74.5 million from $63.6 million in 2014. On a per unit basis, FFO for the year ended December 31, 2015 increased 5.4% to $0.389 from $0.370 in 2014. The payout ratio for the year ended December 31, 2015 decreased to 80.1% from 84.6% in 2014.
  • FFO for the three months ended December 31, 2015 increased to $19.3 million from $18.0 million for the same period in 2014. On a per unit basis, FFO for the three months ended December 31, 2015 increased 7.4% to $0.101 from $0.094 for the same period in 2014 and the payout ratio decreased to 77.3% from 83.5% for the same period in 2014.
  • Adjusted funds from operations ("AFFO") for the year ended December 31, 2015 increased to $66.5 million from $54.9 million in 2014. On a per unit basis, AFFO for the year ended December 31, 2015 increased 9.1% to $0.347 from $0.318 in 2014. The AFFO payout ratio for the year ended December 31 decreased to 89.8% from 98.0% in 2014.
  • AFFO for the three months ended December 31, 2015 increased to $17.2 million from $15.9 million for the same period in 2014. On a per unit basis, AFFO for the three months ended December 31, 2015 increased 8.4% from $0.08 for the same period in 2014 to $0.09 and the payout ratio decreased to 86.7% from 93.9% for the same period in 2014.
  • Both the Trust's FFO and AFFO per unit for the year ended December 31, 2015 include the dilutive effects of a one-time general and administrative cost of $1.4 million in Q2-2015 related to the transition to a single CEO and the development of a new compensation plan for the Trust.
  • Revenue for the year ended December 31, 2015 increased 20.0% to $171.4 million from $142.8 million in 2014. For the three months ended December 31, 2015 the Trust's revenues increased 10.3% from $39.9 million for the same period in 2014.
  • The earnings from property operations ("NOI") for the year ended December 31, 2015 increased 18.8% to $120.0 million from $101.0 million in 2014. For the three months ended December 31, 2015, the Trust's adjusted NOI, after accounting for the IFRIC 21 fair value adjustment, increased 9.0% to $30.4 million from $27.9 million in 2014.
  • The Trust's same property NOI of $90.6 million for the year ended December 31, 2015 decreased by approximately $0.6 million or 0.70% from the prior year. The decrease was due primarily to vacancies in the year, including 80,000 sf in Greater Vancouver Area ("GVA"), 180,000 sf in Calgary, 80,000 and 110,000 sf of flex office space at the Airport Corporate Centre property in the Greater Toronto Area ("GTA"). The Trust's same property NOI ("SPNOI") for the quarter decreased by approximately $0.4 million or 1.73% from 13.1 million sf and representing 79% of the Trust's overall portfolio. When including additional management fee revenue from tenants and co-owners, SPNOI decreased by 0.51% quarter-over-quarter and decreased by 0.16% on an annual basis.
  • General and administrative ("G&A") expenses for the year ended December 31, 2015 increased to $6.5 million from $5.2 million in 2014. Expenses were significantly higher 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. G&A expenses for the three months ended December 31, 2015 decreased to $1.1 million from $1.4 million for the same period in 2014.
  • The occupancy of the portfolio was 94.6% as at December 31, 2015, an increase of 0.6% from Q3-2015, but a decrease of 2.7% from December 31, 2014, with a weighted average lease term of 6.5 years. Including committed space, the occupancy was 96.2% at December 31, 2015, an increase of 1.2% from Q3- 2015.
  • Approximately 263,000 sf or 69% of the 382,000 sf of expiring space in the quarter was renewed. The Trust achieved an average increase on rental rates of 2.6% for leases which expired in Q4-2015. A total of 685,000 sf of leasing was completed in the three months ended December 31, 2015. Approximately 48% of the 2.55 million sf of 2016 lease expiries have been renewed. The average rental rate achieved to date on renewals for 2016 was $5.98 per square foot ("psf") compared to an average expiring rental rate of $5.73 psf, representing an increase of 4.4%.

Vaughan Development, Barrington Expansion, and AB and MB Acquisition

In February 2015, the Trust acquired 60 acres of development land in Vaughan, Ontario for $44.4 million for the construction of a state-of-the-art distribution and sorting facility that will serve the GTA.  The building, when completed, will comprise approximately 422,000 sf in respect of which the tenant has entered into a binding 15-year lease with two five-year renewal options.  The distribution and sorting facility is substantially complete, and the tenant was provided access on November 2, 2015 for fixturing. Upon rent commencement expected in Q2-2016, the property will deliver approximately 6.5% accretion in annualized FFO and AFFO per unit. 

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 an additional 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 the Trust's existing working capital.  The expansion is expected to generate approximately 1.0% accretion on the Trust's annualized FFO and AFFO per unit.   

In September 2015, the Trust acquired a 50% joint interest in a three-asset portfolio located in Alberta and Manitoba and subsequently entered into a co-ownership agreement with Fiera Properties to own and operate the properties.  The Trust and the third party co-owner acquired the three-asset portfolio for a total purchase price of $33.0 million.  The portfolio consists of three industrial properties located in Calgary, Edmonton and Winnipeg that comprise 191,380 sf of GLA on 47.3 acres of land, and is 100% leased to a single credit-rated tenant with 21 years of lease term remaining.  The Trust will provide, through its property management entity, certain asset management, administrative and related services to the portfolio for various fees as outlined in the co-ownership agreement.  In November, 2015, pursuant to the co-ownership agreement above, the Trust also sold a 50% ownership interest in a property located in Alberta to the same third party co-owner for gross proceeds of $5.4 million

On December 16, 2015, the Trust acquired 5.6 acres of vacant land located in Oshawa, Ontario for a total purchase price of $0.7 million.  The land is currently being held for future development as an investment property.

Dispositions

During the year ended December 31, 2015, the Trust sold its interest in 11 investment properties located in Acheson, Alberta, and Brampton, Burlington, Mississauga and Vaughan, Ontario for gross proceeds of $49.2 million, less standard closing costs and adjustments of $5.1 million, resulting in net proceeds of $44.2 million and a net gain on total acquisition cost of $2.3 million. Included in the net proceeds was financing by way of a vendor take-back receivable in the amount of $10.1 million.  The vendor take-back receivable is secured by the two investment properties sold and bears an interest rate of 4.0% for a one-year term.  The cash proceeds from the sale were used to pay down existing operating lines and mortgages on the properties sold. 

Selected Financial Information





                    Year ended

December 31

Three months ended

December 31

($000s, except per unit basis)

2015

2014

2015

2014






Revenue

$ 171,365

$ 142,798

$ 43,902

$ 39,853

Net operating income (1)

$ 120,021

$ 101,026

$ 30,415

$ 27,886






Distributions declared per Class A Unit

$ 0.31

$ 0.31

$ 0.08

$ 0.08

FFO(2) per unit (fully diluted)

$ 0.39

$ 0.37

$ 0.10

$ 0.09


Payout Ratio(3)

80.1%

84.6%

77.3%

83.5%

AFFO(2) per unit (fully diluted)

$ 0.35

$ 0.32

$ 0.09

$ 0.08


Payout ratio(3)

89.8%

98.0%

86.7%

93.9%

G&A as a Percent of Revenue

3.8%

3.6%

2.4%

3.5%






(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 the Trust's MD&A under "Distributable Income" and "Liquidity and Capital Resources" and "Non-IFRS Measures".  The Trust'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.














December

31, 2015


December

31, 2014

Debt-to-GBV




48.8%


48.5%

Employees




38


36

 

Outlook

Real Estate Fundamentals

From a leasing market perspective, according to CBRE, the Canadian National availability rate remained steady from Q3-2015 at 5.6%, with approximately 7.7 million sf of positive net absorption occurring in the quarter, led by the GTA at 4.9 million sf and GVA at 2.9 million sf and offset by 0.34 million sf negative absorption in Montreal and 0.33 million sf in Calgary.  Notably, Edmonton recorded 80,000 sf of positive net absorption in the quarter.  According to CBRE, demand nationally was driven primarily by e-commerce, transportation and logistics users.  The average net asking rent rose from $6.39 psf in the third quarter to $6.47 psf in the fourth quarter, an increase of 5.0% on an annualized basis; led by increases in the GVA and the GTA and offset by declines in Edmonton and Ottawa. 

According to the CBRE cap rate survey for the fourth quarter, demand for stabilized Class A industrial real estate nationally across Canada remains extremely strong as investors continue look for safety and security in the industrial asset class.  Estimated cap rates remained steady or lower from the previous quarter across all markets.  The overall cap rate remained at 5.92%. 

Conference Call

As previously announced on January 18, 2016 management will host the conference call at 3:00 pm (EST), 12:00 pm (PST), on Thursday, March 10, 2016, to review the financial results and corporate developments for the year ended December 31, 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 March 10, 2016, 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 March 17, 2016.

Please enter the Replay ID# 752491, 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 

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

Additional information about the Trust is available at www.piret.ca and www.sedar.com.

TSX – AAR.UN

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 the Trust, including:  (i) the Trust's portfolio consists of one property under development which will comprise 422,433 sf of GLA upon completion and one property under expansion which will comprise an additional 59,600 sf of GLA upon completion, expected in Q2-2016; (ii) the building, when completed, will comprise approximately 422,000 sf in respect of which the tenant has entered into a binding 15 year lease with two five year renewal options; (iii) development is progressing on schedule, and, upon rent commencement, expected in Q2-2016, the property will deliver approximately 6.5% accretion in annualized FFO and AFFO per unit; (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 the Trust's existing working capital; and (vi) the expansion is expected to generate approximately 1.0% accretion on the Trust's annualized FFO and AFFO per unit.

Although the Trust 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 the Trust 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 the Trust operates, prevailing economic conditions, and other factors, many of which are beyond the control of the Trust.

The forward-looking statements contained in this press release represent the Trust's expectations as of the date hereof, and are subject to change after such date. The Trust 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

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