Artis releases first quarter 2010 results; reports solid same Property NOI
growth of 6.1% and year-over-year increases in revenues and Property NOI
WINNIPEG, May 12 /CNW/ - Today Artis Real Estate Investment Trust ("Artis" or "the REIT") issued its financial results and achievements for the three month period ended March 31, 2010.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
- Acquired eight income-producing properties, comprising 231,000 square
feet of retail space and 1.1 million square feet of industrial space.
The properties, which are located in Saskatchewan, Alberta and
British Columbia, were acquired for a total of $158.3 million, which
was settled with cash on hand and from the proceeds of $104.2 million
of new or assumed mortgage financing.
- Raised $115.8 million of new equity capital pursuant to the issue of
5,290,000 units at $11.00 per on unit on January 26, 2010, the issue
of 4,450,000 units at $11.25 per unit on March 16, 2010 and the issue
of 667,500 units at $11.25 per unit on March 23, 2010.
- Repaid the balance of $30.7 million drawn on the line of credit and a
$20.0 million vendor take-back mortgage.
- Increased year-over-year revenue by 7.8% to $37.3 million; increased
year-over-year Property NOI by 8.8% to $25.7 million and increased
year-over-year same Property NOI by 6.1%.
- Reduced mortgage debt to gross book value ("GBV") to 45.4% at March
31, 2010, compared to 47.4% at December 31, 2009.
- Increased interest coverage ratio to 2.35 at March 31, 2010, compared
to 2.22 at December 31, 2009. Reported portfolio occupancy of 96.2%
(97.9% including committed space) at March 31, 2010.
- Continued to meet the prescribed conditions for status as a tax-
exempt Canadian real estate investment trust.
SELECTED FINANCIAL INFORMATION
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Three month period ended
$000's, except per unit amounts March 31,
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2010 2009
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Revenue $ 37,307 $ 34,606
Property NOI 25,669 23,586
DI 13,787 13,898
FFO 14,100 14,245
DI per unit (basic) 0.32 0.42
FFO per unit (basic) 0.33 0.43
Distributions 0.27 0.27
FFO payout ratio 81.8% 62.8%
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March 31, December 31,
$000's 2010 2009
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Total assets $ 1,351,037 $ 1,190,209
GBV 1,531,447 1,356,994
Mortgages, loans and bank indebtedness 695,626 642,963
Debt to GBV 45.4% 47.4%
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"We are pleased to report strong year-over-year growth in revenues and Property NOI for Q1-10, in addition to another quarter of same Property NOI growth," said Armin Martens, Chief Executive Officer of Artis REIT. "We look forward to further improvements in the future, as we continue to deploy recently raised capital into high quality commercial property acquisitions."
Financing Activities
On January 26, 2010, Artis issued 4,600,000 units at a price of $11.00 per unit for aggregate gross proceeds of $50.6 million. Also on January 26, 2010, the underwriting syndicate exercised its full over-allotment option and a further 690,000 units were issued for gross proceeds of $7.6 million.
On March 16, 2010, Artis issued 4,450,000 units at a price of $11.25 per unit for aggregate gross proceeds of $50.1 million. On March 23, 2010, the underwriting syndicate exercised its full over-allotment option and a further 667,500 units were issued for gross proceeds of $7.5 million.
Subsequent to March 31, 2010, Artis raised aggregate gross proceeds of $86.3 million pursuant to a prospectus offering of Series F convertible debentures and the concurrent exercise of the underwriters' overallotment option. The Series F convertible debentures pay coupon interest at a rate of 6.0% per annum and mature June 30, 2020. The offering and overallotment closed on April 22, 2010.
During Q1-10, Artis repaid the balance of $30.7 million drawn on the line of credit and a $20.0 million vendor take-back mortgage. Artis also refinanced an existing mortgage related to the Canarama Mall, obtaining an additional $3.2 million of mortgage financing.
Approximately 6.1% of Artis' maturing mortgage debt comes up for renewal in the remainder of 2010 and 6.0% in 2011. Management is currently in discussion with various lenders with respect to the renewal or refinancing of the mortgages.
Portfolio Acquisition Activity
During Q1-10, Artis acquired eight properties, as follows:
Leasable
Area
Asset (in Acquisition
Property Location Class square feet) Date
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Westbank Zellers(1) Westbank/West Retail 105,670 January 14, 2010
Kelowna,
British
Columbia
Maple Leaf Saskatoon, Industrial 163,418 January 29, 2010
Building Saskatchewan
Sherwood Centre Edmonton, Industrial 162,860 January 29, 2010
Alberta
Alberta Edmonton, Industrial 811,307 March 30, 2010
Industrial Acheson(2)
Portfolio(2) and Calgary,
Alberta
Westbank Westbank / Retail 124,862 March 31, 2010
Hub Centre West Kelowna,
North(1)(3) British Columbia
(1) The REIT acquired a leasehold interest in these properties.
(2) The Alberta Industrial Portfolio is comprised of 2 single-tenant and
2 multi-tenant properties.
(3) The REIT acquired a 50% interest in this property, which is
proportionately consolidated in the accounts of the REIT.
The aggregate purchase price of the acquisitions was $158.3 million which represented a weighted-average going-in capitalization rate of 7.53%. The purchase prices were settled with cash on hand and from the proceeds of new or assumed mortgage financing. The weighted average term to maturity on the mortgages is 4.9 years, and the weighted average interest rate is 5.0%.
Subsequent to March 31, 2010, Artis acquired four properties, as follows:
Leasable
Area
Asset (in Acquisition
Property Location Class square feet) Date
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Sunrise Towne Spruce Retail 111,978 April 1, 2010
Square Grove, Alberta
Visions Electronics Calgary, Retail 50,045 April 12, 2010
Building Alberta
Tamarack Burnaby, Retail 287,741 April 15, 2010
Mall British Columbia
Winnipeg Square Winnipeg, Parkade n/a April 30, 2010
Parkade Manitoba (978 stalls)
The aggregate purchase price of the acquisitions was $84.2 million which represented a weighted-average going-in capitalization rate of 7.9%. The purchase prices were settled with cash on hand, from the proceeds of new or assumed mortgage financing and the line of credit. The weighted average term to maturity on the mortgages is 5.4 years, and the weighted average interest rate is 5.2%.
Artis has also entered into additional conditional and unconditional agreements to acquire properties for aggregate purchase prices of $140.5 million representing weighted-average going-in capitalization rates of 8.0% These acquisitions are expected to be financed with cash on hand and from the proceeds of new or assumed mortgage financing. Additional information about the REIT's proposed acquisitions can be found in the Management's Discussion and Analysis for the three month period ending March 31, 2010 or in press releases available on the REIT's web site at www.artisreit.com.
Liquidity and Capital Resources
As at March 31, 2010, Artis had $40.0 million of cash and cash equivalents on hand in addition to $60.0 million available on the line of credit. Subsequent to March 31, 2010, Artis realized $86.3 million of gross proceeds from the issuance of Series F debentures. A portion of these proceeds, in addition to newly arranged or assumed mortgage financings, was used to fund $84.2 million of acquisitions that closed subsequent to March 31, 2010.
At March 31, 2010, Artis had no balance drawn on the line of credit. Subsequent to March 31, 2010 $8.0 million was drawn with respect to the purchase of the Tamarack Mall property. The remaining $52.0 million line can be utilized to fund future acquisitions. Alternately, up to $10.0 million of the undrawn facility may be utilized for general corporate purposes, up to $10.0 million may be utilized to provide mezzanine financing and up to $7.5 million may be utilized to purchase units under the REIT's normal course issuer bid. The maturity date on the line of credit is September 28, 2010.
At March 31, 2010, the ratio of mortgages, loans and bank indebtedness to GBV was 45.4%, a decrease from 47.4% at December 31, 2009. The ratio is well within the 70.0% limit set out in the REIT's Amended and Restated Declaration of Trust. Including the convertible debentures, the ratio is 50.2% at March 31, 2010, a decrease from 53.7% at December 31, 2009.
Liquidity and capital resources will be impacted by the financing and acquisition activities announced subsequent to March 31, 2010.
Operational Improvements and Internal Growth
Artis' portfolio occupancy level at March 31, 2010 remained strong at 96.2% (excluding properties currently in redevelopment), compared to 96.6% at December 31, 2009 and 95.8% at March 31, 2009. At March 31, 2010, occupancy plus executed lease commitments on vacancy is 97.9%. Of the 191,000 square feet currently considered to be undergoing redevelopment, lease commitments are in place on 43.5% of the leasable area.
Excluding GAAP adjustments for straight-line rent and above- and below-market rent adjustments, Q1-10 same Property NOI results increased 6.1% over Q1-09. Year-over-year quarterly growth was recorded for all asset class and provincial portfolio segments. This is primarily attributed to rate increases and absorption in Alberta and Winnipeg office properties and to rate increases achieved in Alberta and Saskatchewan retail properties.
Considering all properties owned at March 31, 2010, 10.6% of the portfolio's leasable area is set to expire in the remainder of 2010 and 14.5% in 2011. As of today's date, 72.3% of the 2010 and 15.1% of the 2011 leasing programs are complete. The tenant retention ratio for 2010 thus far is 84.8% and a weighted-average rental increase of 3.3% has been achieved on renewals.
Artis' management reviews the current market rents across its portfolio on an on-going basis. Management estimates that the weighted average market rent rates at March 31, 2010 for the remaining 2010 and 2011 lease expiries are approximately 11.5% and 4.6% higher than the rates in place at lease expiry.
Portfolio Leasing and Tenant Profile
Considering all properties owned at March 31, 2010, Artis' portfolio includes over 1,280 tenant leases with a weighted average term to maturity of 5.7 years. Approximately 66.6% of the REIT's GLA is occupied by national or government tenants. The top twenty (non-government) tenants account for 30.8% of the portfolio's gross revenues at March 31, 2010, with a weighted-average lease term to maturity of 9.6 years. The REIT's largest tenant is AMEC Americas Ltd. which accounts for 5.3% of the REIT's gross revenues. No other tenant in the portfolio accounts for more than 5.0% of gross revenues.
Additional information about the REIT's portfolio can be found in the Management's Discussion and Analysis for the three month period ending March 31, 2010.
Upcoming Webcast and Conference Call:
Interested parties are invited to participate in a conference call with management the following day: Thursday, May 13, 2010 at 3:00 p.m. CST (4:00 p.m. EST). In order to participate, please dial 1-416-340-8018 or 1-866-223-7781. You will be required to identify yourself and the organization on whose behalf you are participating.
Alternatively, you may access the simultaneous webcast by following the link from our website at http://www.artisreit.ca/areit_investor.php. Prior to the webcast, you may follow the link to confirm you have the right software and system requirements.
If you cannot participate on May 13, 2010, a replay of the conference call will be available by dialing 1-416-695-5800 or 1-800-408-3053 and entering passcode No.6000138. The replay will be available until May 27, 2010. The webcast will be archived 24 hours after the end of the conference call and will be accessible for 90 days.
Artis is a real estate investment trust focused exclusively on commercial properties located in primary and growing secondary markets in western Canada. The REIT's goal is to provide unitholders the opportunity to invest in high quality western Canadian office, retail and industrial properties, as well as to provide monthly cash distributions that are stable, tax efficient, and growing over time.
The REIT's Distribution Reinvestment Plan ("DRIP") allows unitholders to have their monthly cash distributions used to purchase trust units without incurring commission or brokerage fees, and receive bonus units equal to 4% of their monthly cash distributions. More information can be obtained at www.artisreit.com.
Non-GAAP Performance Measures
DI, Property NOI and FFO are non GAAP measures commonly used by Canadian income trusts as an indicator of financial performance. Management uses DI, Property NOI and FFO to analyze operating performance. DI, Property NOI and FFO may not be comparable to similar measures presented by other issuers. DI, Property NOI and FFO are not intended to represent operating profits for the period or from a property nor should any such measure be viewed as an alternative to net income, cash flow from operating activities or other measures of financial performance calculated in accordance with GAAP.
Cautionary Statements
The comments and highlights herein should be read in conjunction with the consolidated financial statements and management's discussion and analysis for the same period. These documents are available on the SEDAR website at www.sedar.com. They are also posted on the Artis web site at www.artisreit.com.
This press release contains forward looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward looking statements. Without limiting the foregoing, the words "expects", "anticipates", "intends", "estimates", "projects", and similar expressions are intended to identify forward looking statements. Artis is subject to significant risks and uncertainties which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied in these forward looking statements. Artis cannot assure investors that actual results will be consistent with any forward looking statements and Artis assumes no obligation to update or revise such forward looking statements to reflect actual events or new circumstances. All forward looking statements contained in this press release are qualified by this cautionary statement.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
For further information: Mr. Armin Martens, President and Chief Executive Officer, Mr. Jim Green, Chief Financial Officer or Ms. Kirsty Stevens, Senior Vice President of the REIT at (204) 947-1250
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