- Improving returns on management platform as fee-bearing capital increases to $274 million from $207 million in the same quarter in the prior year resulting in sharp increases in gross margin to 28% from 3%.
- Improving fundamentals in investment property portfolio as occupancy increases to 74.2% at March 31, 2014 compared to 73.6% at December 31, 2013 due to new lease-up in British Columbia and Manitoba.
- Quarterly results reflect the structural cost savings from recent management changes resulting in a $0.5 million reduction in annual recurring general and administrative costs.
- In April 2014, management monetized a $5.0 million vendor take-back loan receivable, further strengthening the Corporation's liquidity.
- Invested $7.4 million in a recent FAM REIT equity financing, largely funded by the monetization of a vendor take-back loan receivable which, overall, preserved Huntingdon's total liquidity.
- Credit risk profile strong with approximately $43 million of available cash and leverage at 38.4%.
|SELECTED FINANCIAL INFORMATION||For the three months ended|
|(stated in $000s unless otherwise noted)||Mar 31, 2014||Dec 31, 2013||Mar 31, 2013|
|Management fee revenue||$823||$936||$491|
|Investment Portfolio (Same-property metrics)|
|Occupancy rate (period end)||74.2%||73.6%||76.5%|
|Revenue from investment properties||$8,502||$9,220||$8,989|
|Net operating income ("NOI")||3,347||4,037||4,162|
|Consolidated operating results|
|Net operating income ("NOI")||3,363||4,175||4,203|
|Funds from operations ("FFO")||1,173||3,257||3,053|
|Weighted average mortgage interest rate (period end)||5.26%||5.25%||5.46%|
|Weighted average term to maturity (years) (period end)||6.01||6.22||6.51|
|Interest coverage ratio1||2.3x||3.1x||2.0x|
|Debt to total assets ratio2||38.4%||38.8%||37.8%|
|Debt to EBITDA ratio3||6.51x||6.65x||4.35x|
|Net debt to EBITDA ratio4||3.84x||3.88x||2.55x|
|FFO per share amounts|
FINANCIAL HIGHLIGHTS AND KEY PERFORMANCE INDICATORS
- General and administration costs: Savings in general and administrative expenses (excluding share-based and other incentive compensation) which declined from $2.3 million in Q1 2013 to $0.5 million in Q1 2014.
- Same-property analysis: On a same-property basis, NOI was $3.3 million in the first quarter of 2014 compared to $4.2 million in the first quarter of 2013. NOI declined as a result of lower occupancy and higher operating costs associated with ground leases and significant snow removal and utility costs due to unusually severe weather conditions in Manitoba. The comparative period also included a one-time credit of $0.2 million relating to the recovery of a previously written off receivable.
- FFO: FFO decreased to $1.2 million in the current quarter from $3.1 million in the first quarter of 2013. The decline in FFO relative to the first quarter of 2013 is due to the decline in net operating income, a decrease in the share of FFO from FAM REIT and joint venture offset by lower general and administration costs. Additional factors impacting the decline relative to the first quarter of 2013 include the sale of a property in 2013 partly offset by an increase in management fee revenue. FFO in the current quarter includes an incentive award of $0.5 million that will vest over a three year period beginning in 2015. Also, the comparative period includes a non-recurring $1.5 mm gain in investments. Excluding these items, FFO declined marginally from $1.8 million in Q1 2013 to $1.7 million in Q1 2014.
- Management fees platform: Management platform generated $0.8 million in the first quarter of 2014 compared to $0.5 million in the first quarter of 2013. Gross margin on fees in the first quarter of 2014 was 28.4%.
- Leasing activity: Leasing prospects are strengthening in core markets of British Columbia and Manitoba. Management is securing long-term renewals at market rates as well as generating favorable interest from prospective tenants. Major highlight for the quarter includes the agreement of principal terms with an international logistics company for a 20-year term at a Winnipeg aviation infrastructure asset.
- Liquidity: Collection of a third party vendor take-back loan in April 2014 of $5.0 million continues to build liquidity with $43 million of cash-on-hand to fund opportunistic transactions to grow its management platform or pursue other accretive transactions.
- On February 19, 2014, Huntingdon announced that the Board of Directors approved a strategic review process aimed at enhancing shareholder value. This process was initiated to address the persistent discrepancy between the market price of Huntingdon's shares and the Board's view of the Corporation's intrinsic value. Completion of the review is anticipated for June 2014. Management continues to carry on normal operations during this process.
- Management remains committed to supporting the growth of FAM REIT, which will generate incremental management fees and distribution income for Huntingdon. FAM REIT recently announced it is investing $16.0 million in a joint venture data centre development in Winnipeg ("MTS Data Centre"). Via a private placement, Huntingdon invested $7.4 million in exchange for 831,639 FAM REIT trust units at a price of $8.85 per trust unit, to fund this investment and to maintain its pro rata interest in FAM REIT of approximately 29.8%. This investment reflects a yield of 8.5% on the attractively valued and comparatively low-levered portfolio of FAM REIT. Huntingdon has also been awarded the management contract of the MTS Data Centre which will generate $0.1 million of management fees annually.
Sandeep Manak, President and CEO noted, "The fundamentals of our business continue to strengthen as we stabilize properties and ready these assets for realization. Over the past two quarters, we have announced four major long-term lease transactions with government or credit rated tenants. The Huntingdon team is working on strategic plans to unlock the value of the balance of the portfolio and generate returns for our investors."
Information appearing in this press release is a select summary of results. The financial statements and management's discussion and analysis for the Corporation are available at www.huntingdoncapital.com and on www.sedar.com.
|| Interest coverage ratio does not have a standard meaning prescribed under IFRS and as such may not be comparable to similarly titled measures presented by other publicly traded entities.
|| Computed as total mortgages including mortgages related to assets held for sale adjusted for transaction costs plus secured debentures divided by total assets.
|| Earnings before interest, taxes, depreciation and amortization ("EBITDA") is defined as net income adjusted for income taxes, fair value adjustments to investments and investment properties, realized gains or losses on disposal of investment properties, dilution loss from investment in FAM REIT, adjustments to equity investees, and finance costs. The amount is calculated on a trailing twelve-month basis. EBITDA is a supplemental non-IFRS financial measure of operating performance and is not defined under IFRS. EBITDA as computed by the Corporation may differ from computations reported by other similar organizations and, accordingly, the ratio calculated above may not be comparable.
|| Net debt to EBITDA is computed as total mortgages and secured debentures as per footnote #3 less cash and cash equivalents divided by EBITDA as per footnote #3.
NOI and FFO are not recognized as appropriate earnings measures under IFRS, and are not construed as an alternative to earnings determined in accordance with IFRS, but are considered a useful supplemental indicator of the Corporation's performance.
Huntingdon is a real estate operating company listed on the TSX (Common Shares: HNT; Debentures: HNT.DB; Warrants: HNT.WT). Huntingdon owns and manages a portfolio of 35 industrial, office, retail and aviation-related properties throughout Canada that have a total gross leasable area of 2.7 million square feet. In addition, Huntingdon owns a 29.8% interest in FAM REIT (TSX: F.UN, F.WT) and manages, on behalf of FAM REIT, a portfolio of 28 industrial, office, and retail properties throughout Canada that have a gross leasable area of 1.8 million square feet.
Certain statements contained in this press release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of our tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest rate fluctuations. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. The forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results or events to differ materially from current expectations including, but not limited to, the risks detailed from time to time in Huntingdon's filings with Canadian provincial securities regulators, including its most recent annual information form and management's discussion and analysis. Huntingdon cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and Huntingdon does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by applicable law.
The Toronto Stock Exchange has not reviewed nor approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.
SOURCE: Huntingdon Capital Corp.
For further information:
Sandeep Manak, President and Chief Executive Officer
Tel: (604) 249-5113
Fax: (604) 249-5101
Email: [email protected]