TORONTO, Nov. 9, 2012 /CNW/ - HealthLease Properties Real Estate Investment Trust (HLP.UN) ("HealthLease" or "the REIT") today announced its financial results for the three months ended September 30, 2012.
Q3 2012 Highlights
- Q3 2012 marks first full quarter since initial public offering
- Results generally in line with forecast
- Over-allotment option resulted in issuance of 1.1 million units for additional gross proceeds of $11.0 million, or total IPO gross proceeds of $121.0 million
Summary of Results
| 000's, except per unit data
| For the three months
ended Sept. 30, 2012
| Forecast (1)
for the three months
ended Sept. 30, 2012
|Funds from Operations (FFO) (2)||$2,613||$2,737|
|Adjusted Funds from Operations (AFFO) (3)||$3,019||$3,032|
|Units Outstanding (diluted)||14,500||13,400|
|Weighted Units Outstanding (diluted)||14,369|
|FFO per unit (diluted)||$0.18||$0.20|
|AFFO per unit (diluted)||$0.21||$0.22|
"We are very pleased with the results from our first full quarter of operation," said Zeke Turner, Chairman and CEO. "Our results were largely in line with forecast. The FFO and AFFO per unit were slightly lower primarily due to additional units issued as a result of the over-allotment option being exercised. Without the over-allotment, the AFFO per unit would have met the forecasted amount and the payout ratio would have been 94%. Overall, we are excited about our achievements during the first three months and are looking forward to opportunities to grow the REIT's business. We are on track to see the completion of two health care properties in Indiana in the fourth quarter and a property in Illinois in the first quarter of next year, which should organically increase rental income over the next two quarters."
Review of Q3 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. None of our current leases come up for renewal until 2022, with most maturing after 2024. Revenue during the quarter of $4,586,000 was slightly below forecast as a result of actual annual rent based on final project costs at the Marion, Indiana facility being lower than projected.
Net Operating Income. Net operating income, which is revenue less property expenses, was $4,352,000, slightly lower than forecast of $4,365,000 due to lower actual rent from the Marion, Indiana facility. Net operating income was 94.9% of revenue for the quarter ended September 30, 2012.
Funds from Operations. FFO for the quarter was $2,613,000, or $124,000 less than forecast. The shortfall was largely due to higher-than-expected loan fees, in addition to higher-than-planned trust expenses related to the hiring of an employee at the REIT level.
Adjusted Funds from Operations. AFFO for the quarter was $3,019,000, or $0.21 per unit (diluted). This was $13,000 below forecast, with the variance attributable to higher-than-anticipated trust expense mentioned above, offset by the higher development lease payments during the quarter related to the IPO closing on June 20, 2012, instead of July 1, 2012 as contemplated by forecast.
Distributions. Distributions declared, including distributions on exchangeable units, totaled $3,081,000, or $0.21 per unit (diluted). This translates into a payout ratio of 102% for the quarter.
Cash. At September 30, 2012, the REIT had cash-on-hand amounting to $6,206,000 and restricted cash of $5,604,000. 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 September 30, 2012, the operating line of credit had a balance of $0.
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 September 30, 2012, the debt to gross book value was 49.4%.
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 September 30, 2012, interest coverage ratio was 3.24, while the weighted average cost of debt was 5.08%.
Equity. At September 30, 2012, the REIT had 14,500,000 units outstanding (diluted). At the closing price of $10.50 per unit on September 30, 2012, the REIT had a market capitalization of $152.3 million.
HealthLease will host a conference call today, November 9, 2012, at 10:00am ET to discuss its third 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 Friday, November 16, 2012 at midnight. To access the archived conference call, dial 1-855-859-2056 and enter the reservation number 37347801.
As indicated in the news release dated October 30, 2012 and 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 11:30am ET on November 9. 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 Third Quarter Interim Financial Statements have been filed on SEDAR and can also be viewed in the Investor Information section of the HealthLease's website at www.hlpreit.com.
|(1)||Forecast refers to financial forecast for the three-month period ended September 30, 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.|
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 final prospectus dated June 8, 2012 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 three and nine months ended September 30, 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