- 31.1% year-over-year increase in property revenue from Q1 2019
- 22.4% year-over-year increase in net operating income1 from Q1 2019
- $18.4 million increase in net income and comprehensive income from Q1 2019
- Same property NOI1 comparable to Q1 2019
- 24.0% year-over-year increase in AFFO1 from Q1 2019
- 74% of leases maturing in 2020 renewed with 2% average annual rent increase
MONTRÉAL, May 13, 2020 /CNW Telbec/ - PRO Real Estate Investment Trust ("PROREIT" or the "REIT") (TSX: PRV.UN) today reported its financial and operating results for the three-month period (or "first quarter") ended March 31, 2020.
"Given the unprecedented social and economic impacts of the COVID-19 pandemic and the rapidly changing business environment we must all adapt to, we are pleased to report increases in property revenue, net operating income, adjusted funds from operations and comparable same property net operating income for the first quarter of 2020," said Jim Beckerleg, President and CEO, PROREIT.
"Our April rent collection has been very good given the economic context we are operating in. These results reflect the effectiveness of our established diversification strategies, both in terms of asset class and geography, as well as our resilient and well-diversified tenant base, 87% of which by base rent are national and government tenants. In the retail sector, our performance has benefited from our strategy of focusing on strip malls anchored by needs-based community services including grocery stores, pharmacies and government service providers. Finally, it also reflects the strong tenant relationships we strive to maintain," added Mr. Beckerleg.
"We have sufficient liquidity and cash flow for all expected expenses, and no mortgages coming due in 2020. In the interest of prudence and short-term financial flexibility, we are proactively managing our balance sheet, costs and liquidity position, while continuing to build a strong profile for the use of our capital going forward."
"With our solid foundation and first quarter results within targets, we believe we are well positioned to meet the challenges ahead and resume our growth plans once markets stabilize. I wish to sincerely thank our employees, tenants and their clients for their incredible efforts and dedication, with a special thanks to those serving our communities directly and helping Canadians through these difficult times," concluded Mr. Beckerleg.
TABLE 1- FINANCIAL HIGHLIGHTS | ||||||
(CAD $ thousands except unit, per unit amounts and unless otherwise stated) | 3 Months | 3 Months | ||||
| ||||||
Property revenue | $ | 17,707 | $ | 13,510 | ||
Net operating income (NOI) (1) | $ | 10,355 | $ | 8,458 | ||
Total assets | $ | 650,987 | $ | 516,875 | ||
Debt to Gross Book Value (1) | 58.06% | 58.58% | ||||
Interest Coverage Ratio (1) | 2.7x | 2.6x | ||||
Debt Service Coverage Ratio (1) | 1.6x | 1.6x | ||||
Weighted average interest rate on mortgage debt | 3.72% | 3.88% | ||||
Net cash flows provided from operating activities | $ | 3,300 | $ | 4,541 | ||
Funds from Operations (FFO) (1) | $ | 5,756 | $ | 4,360 | ||
Basic FFO per unit (1)(2) | $ | 0.1442 | $ | 0.1389 | ||
Diluted FFO per unit (1)(2) | $ | 0.1415 | $ | 0.1359 | ||
Adjusted Funds from Operations (AFFO) (1) | $ | 5,989 | $ | 4,829 | ||
Basic AFFO per unit (1)(2) | $ | 0.1500 | $ | 0.1539 | ||
Diluted AFFO per unit (1)(2) | $ | 0.1473 | $ | 0.1505 | ||
AFFO Payout Ratio – Basic (1) | 105.0% | 102.3% | ||||
AFFO Payout Ratio – Diluted (1) | 106.9% | 104.6% | ||||
(1) | Non‑IFRS measure. See "Non‑IFRS and Operational Key Performance Indicators". |
(2) | Total basic units consist of trust units of PROREIT and Class B LP Units (as defined herein). Total diluted units also include deferred trust units and restricted trust units issued under the REIT's long‑term incentive plan. |
PROREIT owned 93 investment properties at March 31, 2020, compared to 84 properties at the same time last year. Total assets amounted to $651.0 million at March 31, 2020, representing an increase of $134.1 million, or 25.9%, compared to $516.9 million at March 31, 2019. The increase is mainly due to the acquisition of nine investment properties in the twelve-month period ended March 31, 2020. During the first quarter, PROREIT acquired a 100% interest in a 135,494 square-foot light industrial property in Moncton, New Brunswick, for $8.4 million before closing costs.
For the first quarter ended March 31, 2020:
- Property revenue amounted to $17.7 million. The increase of $4.2 million, or 31.1%, compared to the same period last year, is primarily due to incremental revenues from the property acquisitions completed in the twelve-month period ended March 31, 2020.
- Same property net operating income1 amounted to $8.2 million, which is comparable to the same period last year.
- Net operating income1 was $10.4 million, an increase of $1.9 million, or 22.4%, compared to $8.5 million for the same period last year. This increase results primarily from the favourable impact of property acquisitions completed in the twelve-month period ended March 31, 2020.
- AFFO1 totalled $6.0 million, a $1.2 million increase compared to $4.8 million for the same period last year, or a 24.0% increase year-over-year. This increase is mainly due to the property acquisitions completed in the twelve-month period ended March 31, 2020.
- AFFO payout ratio1 stood at 105.0% compared to 102.3% for the same period last year. The difference mainly relates to the impact of the lag between the full redeployment of funds from the mid-August 2019 equity offering and the timing of the March 2020 acquisition.
TABLE 2- RECONCILIATION OF NET OPERATING INCOME TO NET COMPREHENSIVE INCOME | ||||||
(CAD $ thousands) | 3 Months | 3 Months | ||||
Property revenue | $ | 17,707 | $ | 13,510 | ||
Property operating expenses | 7,352 | 5,052 | ||||
Net operating income (NOI) (1) | 10,355 | 8,458 | ||||
General and administrative expenses | 683 | 523 | ||||
Long‑term incentive plan expense | (3,258) | 1,272 | ||||
Depreciation of property and equipment | 74 | 18 | ||||
Amortization of intangible assets | 93 | 93 | ||||
Interest and financing costs | 3,889 | 3,225 | ||||
Distributions ‑ Class B LP Units | 398 | 429 | ||||
Fair value adjustment ‑ Class B LP Units | (9,388) | 3,355 | ||||
Fair value adjustment ‑ investment properties | (42) | 49 | ||||
Other income | (509) | (526) | ||||
Other expenses | 278 | 319 | ||||
Transaction costs | - | 31 | ||||
Net income (loss) and comprehensive income (loss) | $ | 18,137 | $ | (330) | ||
(1) | See "Non‑IFRS and Operational Key Performance Indicators". |
For the three months ended March 31, 2020, net income and comprehensive income amounted to $18.1 million, compared to a net loss and comprehensive loss of $0.3 million for the same prior year period. The $18.4 million increase mainly relates to the $12.7 million favourable impact in the non-cash fair value adjustment on Class B LP Units combined with the $4.5 million favourable impact in the long-term incentive plan expense for the quarter ended March 31, 2020 compared to the same period in 2019.
Strong Balance Sheet and Solid Cash Position
PROREIT continued to demonstrate prudent capital management and remains committed to a conservative balance sheet. At the end of the quarter, debt to gross book value1 ratio stood at 58.06% and the weighted average interest on mortgage debt was 3.72%. PROREIT has no mortgage maturities coming due in 2020, while only $6 million will be due in 2021.
PROREIT has an adequate liquidity position, with $11 million of cash-on-hand at May 13, 2020, and $3.5 million available through its revolving credit facility.
TABLE 3- TOTAL PORTFOLIO BASE RENT | ||||
BY ASSET CLASS | ||||
March 31, 2020 | March 31, 2019 | |||
Number of | % | Number of | % | |
Retail | 49 | 36.5 | 49 | 46.0 |
Commercial Mixed Use | 8 | 17.6 | 7 | 10.5 |
Office | 10 | 15.8 | 9 | 16.1 |
Industrial | 26 | 30.1 | 19 | 27.4 |
TOTAL | 93 | 100.0 | 84 | 100.0 |
BY PROVINCE | ||||
March 31, 2020 | March 31, 2019 | |||
Number ofproperties | % Base Rent | Numberof properties | % Base Rent | |
Maritime Provinces | 39 | 42.6 | 32 | 43.2 |
Quebec | 16 | 15.1 | 16 | 18.9 |
Western Canada | 26 | 14.2 | 26 | 18.2 |
Ontario | 12 | 28.1 | 10 | 19.6 |
Acquisitions made during the last twelve-month period contributed to the diversification of PROREIT's asset portfolio. PROREIT's industrial exposure rose to 30.1% while the combined commercial mixed-use and office exposure increased to 33.4% at the end of the first quarter of 2020. The acquisitions increased exposure in the Ontario, Quebec and Maritime markets to 85.8% during the same period.
TABLE 4- OPERATIONAL HIGHLIGHTS | ||
March 31 | March 31 | |
| ||
Number of properties | 93 | 84 |
Gross leasable area (square feet) ("GLA") | 4,580,932 | 3,702,430 |
Occupancy rate (1) | 98.3% | 98.0% |
Weighted average lease term to maturity (years) | 5.5 | 5.8 |
(1) | Occupancy rate includes lease contracts for future occupancy of currently vacant space. Management believes the inclusion of this committed space provides a more balanced reporting. The committed space at March 31, 2020 was approximately 12,636 square feet of GLA (7,915 square feet of GLA at March 31, 2019). |
GLA increased 23.7% to 4,580,932 square feet at March 31, 2020, compared to 3,702,430 square feet at March 31, 2019. The increase of 878,502 square feet in GLA is a result of the acquisition of nine investment properties in the twelve-month period ended March 31, 2020.
Well-diversified Tenant Base
Occupancy rate remained firm at 98.3% as at March 31, 2020, compared to 98.0% a year earlier. The anchored, high profile 10 largest tenants by base rent in PROREIT's portfolio accounted for approximately 35.3% of base rent at March 31, 2020, and comprise approximately 7.2 years of remaining lease term. Credit quality tenants represent 44.0% of in-place annualized base rent, and 87% of the portfolio base rent is from national and government tenants. 65% of the base rent in the retail segment is from tenants providing essential services to the public, including grocery stores, pharmacies, financial institutions, government offices and medical offices.
Weighted average lease term to maturity stood at 5.5 years, and over 74% of PROREIT's leases maturing in 2020 have been renewed to date, at an additional 2% average annual rent increase.
Distributions and DRIP
Distributions to unitholders totaling $0.0525 per trust unit of the REIT were declared monthly during the three months ended March 31, 2020, representing distributions of $0.63 per unit on an annual basis. Equivalent distributions are paid on the Class B limited partnership units ("Class B LP Units") of PRO REIT Limited Partnership, a subsidiary of the REIT.
As announced on April 22, 2020, subsequent to quarter-end, PROREIT's Board of Trustees revised its distribution policy and declared a cash distribution of $0.0375 per trust unit of the REIT for the month of April 2020, or $0.45 on an annualized basis, payable on May 15, 2020, to unitholders of record as at April 30, 2020. This will allow for a reduction in PROREIT's payout ratio and leverage, as well as provide additional flexibility in allocating capital to the benefit of unitholders.
In response to the current stock market disruption and volatility caused by the COVID-19 pandemic, PROREIT also announced on April 22, 2020 the suspension of its distribution reinvestment plan ("DRIP"), effective immediately. The DRIP will remain suspended until further notice and distributions of PROREIT will be paid only in cash.
COVID-19 Impact and Outlook
Throughout the ongoing COVID-19 global pandemic, PROREIT has remained fully committed to ensuring the health and safety of its employees, tenants and the communities in which it owns properties. PROREIT continues to closely monitor the evolving response to the pandemic by the federal and provincial governments of Canada in order to combat the virus, which have caused significant disruption to businesses in Canada and globally.
In this context, PROREIT continues to operate and manage its business prudently, while maintaining its long-standing and strong relationships with its tenants. April 2020 rent collected, which reflects a full month of pandemic impact, provides an indication of PROREIT's collection capacity for May 2020. Subsequent to quarter-end, PROREIT received 92.5% of contractual April 2020 rental payments and entered into temporary rental deferral agreements with tenants representing 5.3% of gross rent, the majority of which will be payable in the second half of 2020. 2.2% of gross rent in arrears are with smaller tenants and discussions are ongoing and managed on a case-by-case basis.
PROREIT will continue to proactively adapt its strategy in reaction to the developing economic and social impacts of the pandemic and to mitigate the risks facing its business.
While it is impossible to predict the extent or the duration of the impact of the COVID-19 pandemic, once the situation stabilizes, PROREIT expects to be well positioned to leverage its strengths and resume its long-term growth strategy, including the acquisition of high-quality, low-risk real estate in favourable secondary markets to the benefit of its unitholders.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its first quarter 2020 results on May 14, 2020, at 10:30 a.m. EDT. There will be a question period reserved for financial analysts. To access the conference call, please dial (888) 664-6383 or 416-764-8650 or 514-225-6995 (conference id: 13869270). A recording of the call will be available until May 21, 2020 by dialing (888) 390-0541 or 416-764-8677, access code for participants 869270 #.
The conference call will also be accessible via live webcast on PROREIT's website at www.proreit.com or
https://produceredition.webcasts.com/starthere.jsp?ei=1316020&tp_key=6fe17abfd5
Virtual Annual Meeting of Unitholders
PROREIT's Annual Meeting of Unitholders will be held on Thursday, June 11, 2020, at 11:00 a.m. (Montreal time). In light of the COVID-19 pandemic and out of concern for the health and wellbeing of the REIT's unitholders, employees and other stakeholders, and the public health protocols that federal, provincial, and local governments have imposed, this year's annual meeting will be held in a virtual only format, which will be conducted via live audio webcast online at https://web.lumiagm.com/271046443 password: PRV2020 (case sensitive). Unitholders will have an equal opportunity to attend the meeting online regardless of their geographic location. Please refer to the management information circular of PROREIT dated April 30, 2020, available under PROREIT's SEDAR profile at www.sedar.com and at www.proreit.com, for important information and detailed instructions about how to participate at the meeting and vote on the business to be conducted at the meeting.
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). In this press release, as a complement to results provided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including same property net operating income (or same property NOI), adjusted funds from operations or AFFO, AFFO payout ratio, net operating income or NOI, debt to gross book value, gross book value, interest coverage ratio, debt service coverage ratio, and funds from operations or FFO. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. PROREIT has presented such non-IFRS measures as management of the REIT believes they are relevant measures of PROREIT's underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance with IFRS as indicators of PROREIT's performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the "Non-IFRS and Operational Key Performance Indicators" section in PROREIT's management's discussion and analysis for the three months ended March 31, 2020 (the "Q1 2020 MD&A"), available under PROREIT's profile on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond PROREIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.
Forward-looking statements contained in this press release include, without limitation, statements pertaining to the ability of the REIT to executive its growth strategy, the duration and impact on the REIT and its tenants of the COVID-19 pandemic, the liquidity position and cash flow of the REIT and its capacity to pay all expenses, the future use of capital available to the REIT, the future performance of the REIT. PROREIT's objectives and forward-looking statements are based on certain assumptions, including management's perceptions of historical trends, current conditions and expected future developments.
The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.
Additional information about these assumptions and risks and uncertainties is contained under "Risk Factors" in PROREIT's latest annual information form and "Risks and Uncertainties" in the Q1 2020 MD&A, both of which are available under PROREIT's profile on SEDAR at www.sedar.com.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
About PROREIT
PROREIT (www.proreit.com) is an unincorporated open-ended real estate investment trust owning a diversified portfolio of 93 commercial properties across Canada representing over 4.5 million square feet of GLA. Established in March 2013, PROREIT is mainly focused on strong primary and secondary markets in Québec, Atlantic Canada and Ontario, with selective exposure in Western Canada.
__________________ | |
1 | Non-IFRS measure. See "Non-IFRS and Operational Key Performance Indicators". |
SOURCE PROREIT
PRO Real Estate Investment Trust, James W. Beckerleg, President and Chief Executive Officer, 514-933-9552; PRO Real Estate Investment Trust, Gordon G. Lawlor, CPA, CA, Executive Vice President, Chief Financial Officer and Secretary, 514-933-9552
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