TORONTO, March 12, 2014 /CNW/ - HealthLease Properties Real Estate Investment Trust (HLP.UN) ("HealthLease" or "the REIT") today announced its financial results for the three months and year ended December 31, 2013.
Full Year 2013 Highlights
- FFO of $0.97/unit.
- AFFO of $0.93/unit.
- Payout ratio of 91.7% of AFFO.
- Revenue of $40.0 million, up 252%, from $11.4 million in 2012.
- Net Profit of $13.4 million, up 116%, from $6.2 million in 2012.
- Tripled the REIT's asset portfolio from its initial portfolio of 15 assets to 45 assets.
Q4 2013 Highlights
- FFO of $0.26/unit, up 44%, from $0.18/unit in Q4 2012.
- AFFO of $0.24/unit, up 20%, from $0.20/unit in Q4 2012.
- Acquisition of two properties - Willows at Hamburg, a 123-bed facility located In Lexington, Kentucky, was purchased for US$14.1 million from Health Care REIT, Inc. Wellbrooke of Crawfordsville, a newly built 100-bed facility located in Crawfordsville, Indiana, was purchased from Mainstreet Property Group, LLC at a purchase price of US$16.9 million.
- Closed a bought-deal offering of $50 million in unsecured convertible debentures with a conversion price of $14.00 per unit and an annual interest rate of 5.75%.
- The REIT invested US$20 million in Mainstreet Mezzanine and Development Fund II, consisting of US$15 million of mezzanine financing and US$5 million of equity financing, to advance future acquisition opportunities from Mainstreet Property Group, LLC.
- At quarter end, the REIT had a debt to gross book value of 58.5% including convertible debentures, payout ratio of 89.4% of AFFO, cash balance of $8.5 million and undrawn availability of $38.2 million on its secured operating line of credit.
- Subsequent to quarter-end:
- On January 31, 2014, the REIT increased its credit facility to US$250 million from US$120 million.
- During Q1 2014, Mainstreet Property Group, LLC entered into new leasing agreements with, The Ensign Group, one of the largest national senior operators in the U.S. It is expected that this will generate further new properties for the REIT to acquire.
"In 2013, we have tripled our asset portfolio to 45 properties with the addition of 30 high-quality, triple-net leased senior housing and care facilities and we continue to grow," said Zeke Turner, Chairman and CEO. "This is the result of our business model which enables us to capitalize on accretive opportunities while also acquiring high quality properties through our exclusive partnership with Mainstreet Property Group."
"The growth we have experienced has strengthened our balance sheet and has enabled the REIT to achieve a conservative and sustainable payout ratio," added Adlai Chester, Chief Financial Officer of the REIT. "This, along with initiatives like increasing our secured operating credit facility, maintains our financial flexibility positioning us well for future growth."
In addition, the board of trustees of the REIT approved an amendment to the management agreement with Mainstreet, the external manager of the REIT. In order to further align management with unitholders and to cover costs associated with managing the REIT, the amendment provides an annual incentive fee which will be based on 15% of AFFO per unit above a certain threshold. This threshold will be established by the board of trustees based upon the forecast for each year.
|Summary of Results|
except per unit
| For the three
Dec. 31, 2013
| For the three
Dec. 31, 2012
| For the year
Dec. 31, 2013
| For the year
Dec. 31, 2012
|Funds from Operations (FFO) (1)||$7,679||$2,588||196.7||$22,243||$6,055||267.3|
|Adjusted Funds from Operations (AFFO) (2)||$6,987||$2,882||142.4||$21,344||$6,889||209.8|
|Weighted Units Outstanding (diluted)||29,407||14,521||-||23,020||-||-|
|FFO per unit (diluted)||$0.26||$0.18||44.4||$0.97||-||-|
|AFFO per unit (diluted)||$0.24||$0.20||20.0||$0.93||-||-|
|(1)||Funds from operations, or FFO, is an earnings measure used by most publicly traded real estate entities. FFO is not defined under International Financial Reporting Standards ("IFRS"). HealthLease calculates FFO in accordance with the Real Property Association of Canada ("RealPAC") White Paper on Funds from Operations issued in 2004 and revised in 2012 for the impact of IFRS. FFO is defined as net earnings in accordance with IFRS, (i) plus or minus fair value adjustments on investment properties; (ii) plus or minus gains or losses from sales of investment properties; (iii) plus or minus other fair value adjustments; (iv) plus acquisition costs expensed as a result of the purchase of a property being accounted for as a business combination; (v) plus distributions on exchangeable units; and (vi) plus deferred income tax expense, after adjustments for equity accounted entities and joint ventures calculated to reflect FFO on the same basis as consolidated properties.|
|(2)||Adjusted funds from operations, or AFFO, is defined by the REIT as a measure of operating cash generated from the business. AFFO is calculated as FFO subject to certain adjustments, including: (i) amortization of fair value mark-to-market adjustments on mortgages, amortization of deferred financing costs, and compensation expense related to deferred unit incentive plans, (ii) adjusting for any differences resulting from recognizing property rental revenues on a straight-line basis, (iii) adding an amount in respect of Mainstreet development lease payments owed or paid, and (iv) deducting a reserve for normalized maintenance capital expenditures and leasing costs, as determined by the REIT. Other adjustments may be made to AFFO as determined by our Trustees in their sole discretion.|
|(3)||Payout ratio is a measure of the distributions (inclusive of distributions paid on Exchangeable Units) compared to the AFFO.|
Q4 2013 and Year End 2013 Operating and Financial Results
Revenue. Revenue is rental income from single tenant operators who are under long-term triple-net leases and interest income from loans. Revenue generated for Q4 2013 was $14.1 million, an increase from $4.7 million a year ago. The increase was driven by the addition of 29 properties that generated additional revenue of $9.4 million. For the year ended December 31, 2013 revenue increased to $40 million from $11.4 million for the same period one year ago.
Net Operating Income. Net operating income, which is revenue less property expenses, for Q4 2013 was $13.5 million. Net operating income represents 95.7% of revenue for the quarter ended December 31, 2013. The high margin is attributable to minimal operating expenses as a result of the triple-net structure of HealthLease's leases. For the year ended December 31, 2013, net operating income was $38.3 million, up 255%, from $10.8 million for the same period one year ago.
Net Profit. Net profit, which is revenue less all expenses (including non-cash fair market value changes in investment properties and Exchangeable Units), for Q4 2013 was $3.2 million up from a net loss of $70,000 for the same period one year ago. For the year ended December 31, 2013, net profit was $13.4 million, up 115.8%, from $6.2 million for the same period one year ago.
Funds from Operations ("FFO"). Funds from operations, which is net profit with amortization and depreciation added back, for Q4 2013 was $7.7 million or $0.26 per unit. The increase in FFO was driven by the addition of new properties contributing to rental revenue. For the year ended December 31, 2013, FFO was $22.2 million or $0.97 per unit. This represent a 116% increase in FFO for the same period one year ago.
Adjusted Funds from Operations ("AFFO"). Adjusted Funds from Operations, which is FFO subject to certain adjustments, for Q4 2013 was $7.0 million of $0.24 per unit. The increase in AFFO was driven by the addition of new properties contributing to rental revenue. For year ended December 31, 2013, AFFO was $21.3 million or $0.93 per unit. This represents a 210% increase in AFFO for the same period one year ago.
Distributions. For the quarter ended December 31, 2013, distributions paid on weighted average outstanding units, including distributions on Exchangeable Units, totaled $6.2 million, or $0.21 per unit. This translates into a payout ratio of 89.4% for the quarter. For the year ended December 31, 2013, distributions were $0.85 per unit and resulted in a payout ratio was 91.7%.
Cash. At December 31, 2013, the REIT had cash-on-hand amounting to $8.5 million and restricted cash of $3.1 million.
Operating Line of Credit. At December 31, 2013, the REIT had a secured operating line of credit of $120 million secured by 18 properties in the U.S.; $30.6 million was available on the secured operating line at the end of the quarter.
Debt to Gross Book Value. Debt to gross book value is calculated by dividing total indebtedness, net of loan costs, by the total assets of the REIT. As at December 31, 2013, the debt to gross book value was 58.5%, inclusive of convertible debentures issued in November 2013, compared to 50.5% for the same period one year ago. The debt to gross book value without convertible debentures is 51.4 % as of December 31, 2013.
Interest Coverage Ratio. Interest coverage ratio, a measure of credit risk, is calculated by dividing net operating income by net interest expense. For the three months ended December 31, 2013, interest coverage ratio was 2.99 times, while the weighted average cost of debt was 4.45%.
Equity and Exchangeable Units. At December 31, 2013, the REIT had 29.6 million units outstanding, including Exchangeable Units. The REIT's closing unit price on December 31, 2013 was $9.79 per unit resulting in a market capitalization of $289.8 million. As of March 11, 2013 the closing unit price was $10.60 per unit resulting in a market capitalization of $314.6 million.
Acquisition of Senior Care Properties
On October 23, 2013, the REIT indirectly acquired, through the U.S. Partnership, a senior housing and care facility in Lexington, Kentucky for a purchase price of US$14.1 million.
On December 9, 2013, the REIT indirectly acquired, through the Partnership, a senior housing and care facility located in Crawfordsville, Indiana for a purchase price of US$16.9 million. As part of the acquisition, 181,246 Exchangeable Units were issued to Mainstreet Property Group, a related party, at a price of $9.71 per unit. The remainder of the purchase price was paid for through the assumption of debt and cash.
|HealthLease Owned Properties|
|Location|| Number of
|SNF/LTC Beds||AL/ALZ/ILF Beds||Total Beds|
|*The REIT has non-amortizing mortgages on these two properties in Michigan. The REIT has the option to purchase the properties on maturity of the loans for the principal loan balance outstanding plus US$1.00.|
HealthLease will host a conference call, March 12, 2014, at 9:00 am ET to discuss its fourth quarter financial results. To access the conference call, please dial 647-427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call to ensure participation. Following management's remarks, HealthLease will conduct a question and answer session during the conference call. The conference call will be archived for replay by telephone until Wednesday, March 19, 2014 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 3515944.
With the goal of communicating fairly by providing equal access to all stakeholders, management will answer additional questions in written form. All interested parties—including securities analysts, current and potential unitholders, and others—are encouraged to submit questions in writing to email@example.com by 11:30 am ET on March 12. The REIT will then issue and file on SEDAR a press release before the end of the same day that lists the questions received and the REIT's answers. Related questions will be combined and provided a single answer.
Supplemental Financial Information
This news release is not in any way a substitute for reading HealthLease's financial statements, including notes to the financial statements, and Management's Discussion and Analysis. The REIT's Fiscal Fourth Quarter and Year-End Financial Statements and Management Discussion and Analysis have been filed on SEDAR and can also be viewed in the Investor Information section of HealthLease's website at www.hlpreit.com.
About HealthLease Properties Real Estate Investment Trust
HealthLease Properties Real Estate Investment Trust (TSX: HLP.UN) owns one of the youngest and highest quality portfolios of seniors housing and care facilities with 12 properties located in two provinces of Canada and 33 properties located in seven states of the United States for a total of 4,435 beds. The facilities are leased to experienced tenant operators who have significant operational experience in the U.S. and Canada. The leases are structured as long-term and triple-net: features that provide stability and dependability to the REIT's cash flow and distributions. The REIT's best-in-class portfolio of premier properties meets the growing demands of modern seniors by emphasizing features such as hotel-like design, private rooms and baths and hospitality-inspired amenities. For more information, visit www.hlpreit.com.
This news release contains forward-looking statements which reflect the REIT's current expectations regarding future events. The forward-looking statements involve risks and uncertainties, including those set forth in the REIT's AIF dated March 11, 2014 under the section "Risk Factors", a copy of which can be obtained at www.sedar.com. Actual results could differ materially from those projected herein. The REIT disclaims any obligation to update these forward-looking statements.
The REIT reports its financial results in accordance with IFRS. Included in this news release are certain non-IFRS financial measures as supplemental indicators used by management to track the REIT's performance. These non-IFRS measures are Net operating income (NOI), Funds from operations (FFO), Adjusted funds from operations (AFFO), payout ratio, weighted average cost of capital and debt to gross book value (Debt to GBV). See the sections entitled "Summary of the Key Performance Indicators for the Three Months and Year Ended December 31, 2013" in Management's Discussion & Analysis of Results of Operations and Financial Condition for the quarter ended December 31, 2013 for the definitions of these non-IFRS measures.
The REIT believes that these non-IFRS financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the REIT. These measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other real estate investment trusts or enterprises, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.
SOURCE: HealthLease Properties Real Estate Investment Trust
Executive Vice President - Finance
HealthLease Properties REIT
(416) 815-0700 ext. 258