HALIFAX, Aug. 5 /CNW/ - Killam Properties Inc. (TSX:KMP/KMP:DB) today announced its financial results for the second quarter ended June 30, 2009.
Highlights of Killam's Second Quarter Financial Results
- Increased funds from operations ("FFO") per share by 17.6% to $0.20 per
share, from $0.17 per share generated during the second quarter of
- Maintained high occupancy rates, ending the second quarter with total
apartment occupancy of 96.6%, a 130 basis point improvement from
June 30, 2008.
- Achieved a 9.7% increase in net operating income ("NOI") from same
store properties, compared to the second quarter of 2008.
- Refinanced 11 mortgages totaling $18.5 million that matured in the
- Subsequent to the second quarter, on July 2, 2009, closed a public
share offering for gross proceeds of $24.7 million.
Financial Highlights (in thousands, except per share information)
For the three months ended, June 30, 2009 June 30, 2008 % Change
Rental Revenue $25,854 $23,725 9.0%
Net Operating Income $16,108 $14,462 11.4%
Net Income Before Tax
and Depreciation $6,313 $5,234 20.6%
Net Loss ($356) ($980) 63.7%
Funds from Operations $6,833 $5,718 19.5%
Funds from Operations per Share $0.20 $0.17 17.6%
(weighted average) 34,088 33,496 1.8%
For the six months ended, June 30, 2009 June 30, 2008 % Change
Rental Revenue $50,871 $46,692 9.0%
Net Operating Income $29,792 $26,612 11.9%
Net Income Before Tax
and Depreciation $10,235 $8,314 23.1%
Net Loss ($2,268) ($3,373) 32.8%
Funds from Operations $11,518 $9,317 23.6%
Funds from Operations per Share $0.34 $0.28 21.4%
(weighted average) 34,067 33,451 1.8%
Balance Sheet as at, June 30, 2009 Dec 31, 2008 % Change
Total Assets $734,525 $738,668 (0.6%)
Total Liabilities $572,102 $565,475 1.2%
Total Shareholders' Equity $162,423 $173,193 (6.2%)
Gross Debt as a % of Gross
Book Value 67.9% 67.7% 0.3%
FFO Per Share Increased by 17.6% in the Second Quarter
Management considers FFO per share to be a key measure of operating performance. FFO per share for the second quarter of 2009 increased by 17.6% to $0.20 per share, from $0.17 per share in the same period of 2008. This increase is primarily attributable to the Company's same store NOI growth of 9.7% in the quarter, compared to the second quarter of 2008, and the positive impact of acquisitions made during 2008, partially offset by reduced earnings from the sale of new manufactured homes.
Same Store NOI Growth of 9.7% Compared to the Second Quarter of 2008
Killam achieved same store NOI growth of 9.7% during the second quarter of 2009; same store properties account for 96% of the Company's portfolio. Consolidated rental revenue increased 5.1% quarter-over-quarter due to both increased rents and improved occupancy. Consolidated operating expenses decreased by 1.4% in the quarter as the Company benefited from decreased energy costs. Killam achieved same store NOI growth of 10.1% for the six months ended June 30, 2009.
The apartment portfolio realized same store NOI growth of 14.0% in the quarter. Improved occupancy and a 2.6% increase in average rents in the quarter resulted in a 5.5% increase in rental revenue. The apartment portfolio also benefited from a decrease in operating expenses, which fell by 5.5% during the second quarter due primarily to lower energy costs as Killam benefited from lower heating oil and natural gas prices. Killam's natural gas and oil expenses decreased by $0.7 million, or 46%, in the quarter, as the average per litre cost of heating oil and the per gigajoule cost of natural gas decreased by approximately 50% compared to the same period in 2008.
The Manufactured Home Community ("MHC") portfolio had a $0.1 million, or 2.1%, decrease in same store NOI during the quarter as a $0.2 million increase in wastewater treatment costs at one Ontario community impacted operating expenses for the portfolio, contributing to an increase in operating expenses, which more than offset the improvement in rental revenues. Excluding the non-recurring wastewater related cost, MHCs would have realized same store NOI growth of 2.3%.
Vacancy at 2.1% at June 30, 2009
Killam has maintained its trend of strong occupancy during the second quarter of 2009, achieving consolidated vacancy of 2.1% at June 30, 2009, compared to 2.7% at June 30, 2008.
The apartment portfolio had a vacancy rate of 3.4% with an average monthly rent of $747. The apartment vacancy was 130 basis points better than the vacancy of 4.7% at June 30, 2008. The MHC portfolio had a vacancy rate of 0.8%, with an average monthly rent of $218. Not included in the MHC vacancy numbers are 57 MHC sites that had not been previously rented, including some recently expanded sites, and 376 transient sites in Killam's seasonal resort portfolio. These units are excluded from vacancy statistics in the table below.
Units Vacancy Rent
------ -------- -------
Nova Scotia 4,196 3.7% $797
New Brunswick 3,310 3.6% $707
Newfoundland 732 2.2% $603
Prince Edward Island 686 1.0% $781
Total Apartment Portfolio 8,924 3.4% $747
Total MHC Portfolio 8,796 0.8% $218
New Home Sale Activity
Killam remains active in the sale of new manufactured homes; however, the Company has experienced a decrease in home sales completed during the second quarter when compared to the second quarter of 2008. During the second quarter of 2009 Killam closed 3 home sales and 4 partnership sales. This compares with the closing of 22 home sales and 3 partnership sales during the second quarter of 2008. During the first half of 2009 Killam has completed a total of 12 home sales and partnership sales compared to 39 sales during the first half of 2008.
Home sale activity levels are dependent on the timing of completion of site expansions, as well as demand for new homes across the portfolio. Killam has experienced a decrease in demand for new homes in Ontario and Western Canada compared to the first half of 2008, which has impacted sales. In addition, home sales were higher in the first half of 2008 following the completion of a 41-site expansion at a Nova Scotia MHC.
Killam continues to anticipate selling between 40 and 60 homes in 2009, of which approximately 70% will be new home sales and 30% will be partnership sales. Killam currently has commitments for an additional 14 home sales expected to be completed during the second half of the year.
Balance Sheet Strengthened with Recent Equity Raise
On July 2, 2009 Killam closed, on a bought deal basis, a $24.7 million public share offering; Killam issued 4.255 million shares at a price of $5.80. This offering strengthened Killam's balance sheet, which at June 30, 2009 had debt as percentage of the gross book value of assets of 67.9%. Following the equity close, debt as a percentage of the gross book value of assets has decreased to 66.1%.
Killam intends to use the proceeds from the offering to fund acquisitions, repay indebtedness, and for general corporate purposes. Subsequent to the end of the quarter Killam has used the funds to repay $3.1 million of debt outstanding, including the $0.9 million balance outstanding on its acquisition line.
Killam is pleased to report that financing for its properties remains strong. At the beginning of the year the Company had $71.4 million in mortgages due for refinancing in 2009, including $54.8 million in apartment mortgages and $16.6 million in MHC mortgages. During the first quarter of 2009, $19.8 million of maturing apartment mortgages were refinanced with new mortgages totaling $27.3 million, at a weighted average interest rate of 4.01%, for net proceeds of $7.5 million.
During the second quarter Killam refinanced $11.7 million of maturing apartment mortgages with new mortgages totaling $15.9 million, for net proceeds of $4.2 million, and $6.8 million of maturing MHC mortgages with new mortgages totaling $8.5 million, for net proceeds of $1.7 million. The weighted average interest rate for the apartment refinancings was 4.29%, 114 basis points better than the 5.43% weighted average interest rate being replaced. The weighted average interest rate for the MHC refinancings was 5.98%, 86 basis points higher than the 5.12% weighted average interest rate being replaced.
Subsequent to June 30, 2009, Killam has refinanced $12.3 million of maturing mortgage debt with new mortgages totaling $14.9 million, for net proceeds of $2.6 million. The weighted average interest rate on the renewed apartment and MHC mortgages were 4.15% and 6.0%, respectively. In addition, the Company has repaid a $2.2 million vendor take-back mortgage.
Net of the above refinancings, and regular principal repayments, Killam has $19.1 million of mortgages to refinance during the remainder of 2009. Management does not anticipate difficulty in refinancing this debt, benefiting from strong relationships with its lenders and Canada Mortgage and Housing Corporation ("CMHC"). As at June 30, 2009, approximately 50% of Killam's apartment mortgages were CMHC insured.
As announced on June 2, 2009, Killam has renewed and amended its revolving credit facility, which expired during the second quarter. The amount available under the updated facility varies with the value of pledged assets, to a maximum not to exceed $15 million and replaces the previous facility with a maximum line of $40 million. The amended facility includes the option for a commitment increase, allowing Killam a one-time opportunity to increase the credit limit to $40 million.
"We are pleased to report strong same store NOI growth and FFO per share growth for the second quarter", noted Philip Fraser, Killam's President and Chief Executive Officer. "Management and staff have improved occupancy, maximized rents and managed costs to achieve these results. In addition, we were pleased to benefit from lower energy costs in the quarter, which negatively impacted us in 2008."
"We are optimistic as we look forward to the second half of 2009. With our existing portfolio fully stabilized and performing well, and increased liquidity following the recently closed equity offering, we are in a strong position to take advantage of growth opportunities over the next few quarters."
Killam's June 30, 2009 Financial Statements and Notes and Management's
Discussion and Analysis can be found at www.killamproperties.com
Second Quarter Conference Call
Management will host a conference call to discuss these results on Thursday, August 6, 2009 at 11:00 AM Atlantic time (10:00 AM Eastern). The dial-in numbers for the conference call are 416-644-3422 (in Toronto) or 800-595-8550 (toll free, within North America).
A live audio webcast of the conference call will be accessible on the Company's website at www.killamproperties.com and at www.newswire.ca.
A replay will be available by dialing 416-640-1917 (Toronto) or 877-289-8525 (toll-free) and using the passcode 21310521# until August 13, 2009, or on the Company's website for 90 days after the conference call.
Killam Properties Inc, based in Halifax, Nova Scotia, is one of Canada's largest residential landlords, owning and operating multi-family apartments and manufactured home communities.
FFO is a generally accepted measure of operating performance of real estate companies; however, it is a non-GAAP measurement and readers are cautioned that Killam's calculation of FFO may be different than that used by other companies. Killam calculates FFO as net income plus depreciation and amortization, stock compensation, non-cash debenture interest and future income tax expenses.
Note: The Toronto Stock Exchange has neither approved nor disapproved of
the information contained herein. Certain statements in this report may
constitute forward-looking statements relating to our operations and the
environment in which we operate, which are based on our expectations,
estimates, forecast and projections, which we believe are reasonable as
of the current date. Such forward-looking statements involve risks,
uncertainties and other factors which may cause actual results,
performance or achievements of Killam to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. For more exhaustive information on these
risks and uncertainties, you should refer to our most recently filed
annual information form which is available at www.sedar.com. Readers,
therefore, should not place undue reliance on any such forward-looking
statements. Further, a forward-looking statement speaks only as of the
date on which such statement is made and should not be relied upon as of
any other date. Other than as required by law, Killam does not undertake
to update any of such forward-looking statements.
SOURCE Killam Properties Inc.
For further information: For further information: Dale Noseworthy, CA, CFA, Director, Investor and External RelationsKillam Properties Inc., (902) 442-0388, firstname.lastname@example.org