TORONTO, March 6, 2013 /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, 2012. HealthLease completed its initial public offering (the "IPO") on June 20, 2012, and the three-month period represents the REIT's second full quarter of operation.
Q4 2012 Highlights
- Closed the quarter with a strong balance sheet with 50.6% debt to gross book value, over $6.6 million in cash, and an untapped operating line of $25.0 million.
- Completed the construction, received a certificate of occupancy and began receiving rental revenue for the Mishawaka facility, in December 2012. The Mishawaka facility was completed on-time and in line with budget.
- FFO and AFFO was $2,588,000 ($0.18/unit) and $2,882,000 ($0.20/unit) versus the Forecast(1) of $2,873,000 ($0.20) and $3,063,000 ($0.23), respectfully. This was primarily as a result of the proceeds from the exercise of the IPO over-allotment option not having been invested by year-end.
- Mainstreet, the manager of the REIT, advised of five development projects that the REIT will have the right to purchase, upon construction completion, in 2013.
"During the fourth quarter, we continued to establish our presence as a public company and position HealthLease for future growth," said Zeke Turner, Chairman and CEO. Mr. Turner continued: "We completed and received a certificate of occupancy for our Mishawaka, Indiana property (December 2012) on-time and in line with budget. As previously announced, we also completed and were issued a certificate of occupancy for each of the Wabash, Indiana and Springfield, Illinois projects. Entering 2013, we are pleased that all of HealthLease's development properties are complete and are contributing to revenue in line with our strategic plan. Furthermore, we continue to see near-term attractive acquisition and development opportunities. As before, we remain focused on growing the REIT's AFFO per unit through new developments and quality, well-priced acquisitions."
Summary of Results
|000's, except per unit data|| For the three months
ended Dec. 31, 2012
| Forecast (1)
for the three months
ended Dec. 31, 2012
|Funds from Operations (FFO) (2)||$2,588||$2,873|
|Adjusted Funds from Operations (AFFO) (3)||$2,882||$3,063|
|Units Outstanding (diluted)||14,521||13,400|
|Weighted Units Outstanding (diluted)||14,521|
|FFO per unit (diluted)||$0.18||$0.20|
|AFFO per unit (diluted)||$0.20||$0.23|
|(1)||Forecast refers to financial forecast for the three-month period ended December 31, 2012, as provided in the REIT's Final Long Form Prospectus dated June 8, 2012 and filed on SEDAR at www.sedar.com.|
|(2)||Funds from operations, or FFO, is an earnings measure used by 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 2010 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.|
|(3)||Adjusted funds from operations, or AFFO, is defined by the REIT as a measure of operating cash from 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.|
Review of Q4 2012 Operating and Financial Results (rounded to nearest '000)
Revenue. Revenue represents rental income from single tenant operators who are under long-term triple-net leases. Revenue during the quarter was $4,714,000, primarily as a result of a one-month delay in commencement of operations of the Wabash, Indiana property under development. The one-month delay did not impact AFFO as a result of the Mainstreet Development Lease. None of HealthLease's current leases come up for renewal until 2022, with most maturing after 2024, and the weighted average lease maturity for the portfolio remains at 13.1 years.
Net Operating Income. Net operating income, which is revenue less property expenses, was $4,489,000. Net operating income was 95.2% of revenue for the quarter ended December 31, 2012. The high margin is the result of the triple-net structure of HealthLease's leases.
Net Earnings. Net earnings, which is revenue less all expenses (including non-cash fair market value changes in investment properties and Exchangeable Units), was $6,252,000 for the year ended December 31, 2012 and ($70,000) for the three months ended December 31, 2012.
Funds from Operations. FFO for the quarter was $2,588,000, primarily as a result of slightly lower revenues in the quarter as described above, as well as higher-than-expected trust expenses. Trust expenses were $158,000 higher than forecast as a result of increased business development efforts, some of which were non-recurring. On a per unit basis (diluted), FFO was $0.18 versus forecast of $0.21. The exercise of the overallotment option by the underwriters, which was not included in the forecast, resulted in higher units outstanding and therefore contributed to the shortfall in FFO per unit. In the future, HealthLease intends to deploy the excess cash from the exercise of the overallotment option towards accretive acquisitions, which is expected to eliminate the dilutive impact of the additional units issued.
Adjusted Funds from Operations. AFFO for the quarter was $2,882,000, with the variance attributable to higher trust expenses mentioned above. On a per unit basis (diluted), AFFO was $0.20 versus forecast of $0.23, with the exercise of the overallotment option also contributing to the variance.
Distributions. Distributions declared, including distributions on exchangeable units, totaled $3,085,000, or $0.21 per unit. This translates into a payout ratio of 107% for the quarter. If the over-allotment option had not been exercised, the payout ratio for the quarter would have been 99%. For the six months ended December 31, 2012 the payout ratio was 104% and would have been 97% if the over-allotment had not been exercised.
Cash. At December 31, 2012, the REIT had cash-on-hand amounting to $6,621,000 and restricted cash of $2,670,000. Restricted cash consists of collateral accounts required by certain partnership and debt agreements and bond proceeds reserved for completion of properties under development.
Operating Line of Credit. The REIT has an operating line of credit of US$25.0 million, secured by four properties in the U.S. At December 31, 2012, no borrowings were outstanding under the operating line of credit.
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. At December 31, 2012, the debt to gross book value was 50.6%.
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, 2012, interest coverage ratio was 3.22 times, while the weighted average cost of debt was 5.17%.
Equity and Exchangeable Units. At December 31, 2012, the REIT had 14,521,025 units outstanding. At the closing price of $11.13 per unit on December 31, 2012, the REIT had a market capitalization of $161.2 million.
HealthLease will host a conference call tomorrow, March 7, 2013, at 3:00 pm 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. The conference call will be archived for replay by telephone until Thursday, March 14, 2013 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 13654191.
With the goal of communicating fairly by providing equal access to all stakeholders, management will answer questions in written form instead of entertaining live questions during the call. All interested parties—including securities analysts, current and potential unitholders, and others—are encouraged to submit questions in writing to [email protected] by 2:30 pm ET on March 7. 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 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 a portfolio of seniors housing and care facilities located in the United States and Canada. 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 properties meets the needs 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 6, 2013 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), and Adjusted funds from operations (AFFO). See the sections entitled "Funds from Operations" and "Adjusted Funds from Operations" in Management's Discussion & Analysis of Results of Operations and Financial Condition for the year ended December 31, 2012 for the calculation of FFO and AFFO, respectively.
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
For further information:
Chief Financial Officer
HealthLease Properties REIT
(317) 420-0205 ext. 106
(416) 815-0700 ext. 242