TRADING SYMBOL: RLX and RLX.A (TSXV)
CALGARY, Dec. 3 /CNW/ - Realex Properties Corp. ("Realex" or "Corporation") today announced its fiscal 2009 fourth quarter and annual results from operations.
Financial highlights for the three months and year ended September 30, 2009 are as follows:
Income Statement Summary Data
Three Months Ended Year Ended
September 30, September 30,
($000's except per
share amounts) 2009 2008 % change 2009 2008 % change
Revenues 15,471 8,662 79% 59,606 34,230 74%
Net Income 1,138 4,255 (73)% 1,585 2,373 (33)%
Net income per
share - basic/
diluted 0.007 0.038 (82)% 0.010 0.021 (52)%
NOI(1) 7,674 4,834 59% 30,452 19,348 57%
FFO(1) 1,170 3,882 (70)% 15,088 14,170 6%
FFO per share -
basic/diluted 0.007 0.034 (79)% 0.097 0.124 (22)%
AFFO(1) 2,587 2,918 (11)% 13,831 11,194 24%
AFFO per share -
basic/diluted 0.016 0.025 (36)% 0.089 0.098 (9)%
Dividends on common
shares 1,192 855 39% 4,665 3,417 37%
(000's) 158,998 114,520 155,610 113,956
Balance Sheet Summary Data
($000's) September 30, 2009 September 30, 2008
Income Properties 366,242 374,856
Assets 435,565 435,770
Debt 250,740 252,562
Shares outstanding (000's) 158,951 153,364
(1) Refer to the "Non-GAAP Measures" section for further details.
The fourth quarter saw Realex's attention focused toward the execution of several key initiatives which the Corporation had identified as near term priorities. These initiatives are designed to address the current environment and to reposition the Corporation as a focused, growth vehicle, poised to take advantage of opportunities expected to evolve over the next several years. Highlights of these initiatives and Realex's progress to date are summarized as follows:
* Leased and renewed over 200,000 square feet of office rentable area
within its owned portfolio;
* Maintained the property portfolio occupancy rate at 95%;
* Renewed the Corporation's operating line of credit ($20.6 million
available at September 30, 2009, of which $11.3 million was drawn at
September 30, 2009);
* Renegotiated the $25 million Acquisition Loan, extended the term to
March 29, 2011 and paid down $10.5 million in principal as of
December 3, 2009. The interest rate on the loan currently in effect
is approximately 7%;
* Completed the sale of a non-core property for $1.83 million in July,
2009, which resulted in a gain of $621,000; and
* Internalized the remaining property management contracts which will
result in all Realex owned assets (both wholly owned as well as those
held in joint ventures) being managed and leased by Realex;
* Completed a reorganization of its senior management which is intended
to bring greater focus to each of its key geographic regions and
position the Corporation for growth in its core business of investing
in, owning and operating office and industrial properties across
* Established clear business lines and a singular focus on growth
through acquisitions of urban and suburban office and industrial
Realex is pleased with the significant progress it has made on all fronts with respect to these initiatives.
Review of 2009 Operations
The results for the three months and year ended September 30, 2009 reflect the added operations of the Kitchener/Waterloo portfolio acquired at the end of Q4 2008, and the revenue gains from Realex's portfolio in Western Canada. When comparing the financial results for the year ended September 30, 2009, to the prior year, net income decreased by $788,000 (33%), revenue increased by $25.4 million (74%), NOI increased by $11.1 million (57%), FFO increased by $0.9 million (6%) and AFFO increased by $2.6 million (24%). Net income per share ($0.010), FFO per share ($0.097) and AFFO per share ($0.089) decreased when comparing the results for the year ended September 30, 2009 with the prior year. The per share results were negatively impacted by internalization costs and G&A costs for severance, placement and relocation costs, and capital taxes.
A discussion of Realex's business units follows.
The Western region at the beginning of the year had lease expiries totaling 89,970 square feet in calendar 2009. As of September 30, 2009, 83,219 square feet have been renewed and 1,543 square feet were vacated. In addition, during the year 7,378 square feet of leases expiring in years later than 2009 became vacant. Of the 6,979 square feet of remaining expiries for calendar 2009, 249 square feet is expected to renew.
During the year ended September 30, 2009, the Corporation's St. Albert Trail Centre building in Edmonton consisting of 96,800 square feet (50% of which is Realex owned) was leased for a 10 year term commencing July 2009 (rent payments to commence December 1, 2009, after tenant fit up period). The annual base rent at $18 per square foot is over 2.5 times higher than the previous contractual base rent and represents a significant achievement for the Corporation in the current market.
The Corporation's forward re-leasing exposure in downtown Calgary is limited, with only 8% (32,157 square feet) of Realex's downtown leased area currently vacant or expiring before the end of calendar 2012. Although the Western portfolio has a low vacancy rate and limited exposure to lease expiries within the next three years, the significant supply of office space expected to be completed in the 2010 to 2012 period in Calgary, along with the continued weaknesses in the oil and gas sector, will foster an increased likelihood that rates of default and vacancy will rise. It is also anticipated that lease rates, when compared to those achieved in the past few years, will be lower.
Within the Corporation's Western portfolio, one tenant occupying 29,000 square feet of rentable office space has undergone a financial and operational restructuring. Realex has negotiated a rent abatement program with the tenant, the terms of which provide for reduced base rent for a period of one year commencing September 1, 2009. Total rent to be abated amounts to $819,000 which will be recovered over the remaining term of the lease commencing September 1, 2010.
Occupancy levels in the Western region stood at 97.96% at September 30, 2009 compared to 98.93% at September 30, 2008.
Southwestern Ontario Region
The Southwestern Ontario region at at the beginning of the year had lease expiries totaling 102,771 square feet in calendar 2009. As of September 30, 2009, 86,847 square feet have been renewed and 5,341 square feet was vacated. In addition, vacant space totaling 33,480 square feet was renewed during the year. Of the 12,456 square feet of remaining expiries for calendar 2009, 1,279 square feet is expected to renew.
The Southwestern Ontario management team successfully renewed its most significant lease expiry for calendar 2009, a 36,974 square foot tenancy expiring on October 31, 2009. This lease was renewed for a five year term and the existing tenancy was expanded by 1,090 square feet.
Occupancy levels in the Southwestern Ontario region increased to 93.45% at September 30, 2009 from 91.22% at September 30, 2008.
During the fourth quarter a 38,700 square foot facility was purchased in Whitecourt, Alberta. This acquisition was completed as an accretive addition to the operating portfolio. The Real Storage partnership continued its lease marketing program for its five, newly completed operating properties now totalling 360,000 square feet of net rentable area have been leasing well and are in line with management absorption expectations. The current occupancy of the portfolio is 44.5%. The partnership has two additional properties in the development planning and approval stage which would add a further 185,000 square feet of net rentable area to the portfolio upon completion. The five operating storage facilities are state of the art and amongst the finest in the province of Alberta and BC. The partnership's continued focus will be on leasing and cash flow improvement and will not proceed with acquisitions or developments for the foreseeable future.
Through the process of refining our strategic plan and determining that our focus will be on the growth of the office and industrial portfolio, the Corporation has determined to seek a thoughtful exit from the self storage asset class in 2010. We believe that the Real Storage partnership's position in the self storage market and its current growth prospects will be seen as having significant value by those interested in pursuing the opportunities that this asset class presents.
Mezzanine Loan Portfolio
Realex's mezzanine loan portfolio consists of a partial interest in 10 loans with a total principal balance for Realex's share being $5.63 million. This represents barely 1% of Realex's total asset base by net book value. Of the principal balance owed to Realex, $1.33 million is performing and $4.3 million is non-performing. At the end of Q2 2009 Realex recorded a $980,000 impairment loss. In light of continued deterioration in the portfolio market values and the increase in the expected time required to realize the mortgage security (primarily that portion of the portfolio secured by land in Alberta), Realex will take an additional $966,000 impairment loss on the portfolio. In total, Realex will have provisioned the portfolio by 27% of the total principal balance owed or 36% provision on the non-performing principal portion of the portfolio. Realex will retain loan repayment proceeds for general corporate purposes as they are received and will discontinue further investment in mezzanine lending.
The Board of Directors has authorized the payment of a dividend for the quarter ended September 30, 2009 to common and non-voting shareholders at the rate of $0.0075 per share (the "Dividend"). The Dividend will be paid January 15, 2010 to shareholders of record on December 31, 2009 and is designated as an eligible dividend pursuant to subsection 89(14) of the Income Tax Act. An eligible dividend paid to a Canadian resident individual is entitled to the enhanced dividend tax credit.
Realex is pleased with the significant progress made during the year in meeting its leasing objectives, executing its near term capital plan and advancing key initiatives. We strongly believe that numerous investment opportunities will surface across Canada in the coming years. To this extent, we continue to position the Corporation to be best able to take advantage of coming opportunities and are focused on improving Realex's share price to a FFO multiple that is more closely aligned with those of our peer group. "Through these initiatives," said Mr. Tom Heslip, Realex's President and CEO, "Realex is now well positioned to address the challenges of the current economic climate and, at the same time, take advantage of the opportunities that we expect will arise over the coming months and years. Our belief at Realex is that opportunities will increase, and that the Corporation now has a strong management platform with the ability to grow through acquisition in markets where we already have a strong presence, as well as new markets we can move into and leverage our current management and operational expertise. Being in a strong financial position, well capitalized, nimble and well prepared to act, remains our primary focus."
Net Operating Income (NOI) is a measure used to assist management to evaluate the Corporation's profitability from its principal business activities without regard to the manner in which these activities are financed or amortized, the allocation of general, administrative and stock-based compensation costs, or the manner in which the results are taxed. Realex defines NOI as rent from income properties, excluding straight lining of rents and amortization of above- and below-market leases, less property operating costs.
Funds From Operations (FFO) is a measure used to assist management to evaluate the Corporation's operating performance. As FFO excludes, among other items, depreciation, leasing cost amortization, future income tax and gains and losses from certain property dispositions, it provides an operating performance measure that, when compared period over period, reflects the impact on operations of trends in occupancy levels, rentals rates, operating costs and realty taxes, acquisition activities and interest costs and provides a perspective of the financial performance that is not immediately apparent from net income determined in accordance with GAAP. FFO as presented should not be viewed as an alternative to cash from operations, net income, or other measures calculated in accordance with GAAP. Realex defines FFO as being net income for the period before amortization (which includes amortization of buildings, tenant improvements, in place lease values, tenant relationship values and deferred leasing costs), future income tax expense and extraordinary items. The method of calculation of FFO has been changed commencing October 1, 2008 so as to provide additional comparability to other real estate issuers, and to correspond with the definition provided by the Real Property Association of Canada ("REALpac").
Adjusted Funds From Operations (AFFO) is a measure used to assist management to evaluate the Corporation's ability to generate cash, evaluate its return on projects and evaluate the performance of the enterprise as a whole. AFFO as presented should not be viewed as an alternative to cash from operations, net income, or other measures calculated in accordance with GAAP. Users are cautioned that this measure may not be comparable to other issuers calculation of AFFO. Realex defines AFFO as being FFO for the period, adjusted for amortization of above- and below-market leases, straight-lining of rents, amortization of fair value mortgages payable adjustment and deferred financing costs, stock based compensation expense, internalization costs, amortization of non-recoverable maintenance capital expenditures, amortization of deferred leasing costs and impairment losses on mortgages receivable.
NOI, FFO and AFFO do not have any standardized meaning prescribed by GAAP and users are cautioned that these measures may not be comparable to similar measures presented by other issuers, and should not be construed as an alternative or replacement to GAAP measures.
Full reports of the financial results are outlined in the audited Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations, which are available on SEDAR and on the Realex Properties Corp. website at www.realexproperties.ca.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release contains forward looking statements subject to various significant risks and uncertainties which may cause actual results, performances and achievements of Realex to be materially different from any future results, performances or achievements, expressed or implied by such forward looking statements. Realex cannot assure investors that actual results will be consistent with these forward looking statements and Realex assumes no obligation to update or revise them to reflect new events or circumstances.
SOURCE REALEX PROPERTIES CORP.
For further information: For further information: Tom Heslip, President and Chief Executive Officer, Realex Properties Corp., Telephone: (403) 264-5889, Facsimile: (403) 264-5892; Mark Suchan, Chief Financial Officer, Realex Properties Corp., Telephone: (403) 206-3143, Facsimile: (403) 264-5892