HALIFAX, March 2 /CNW/ - Killam Properties Inc. (TSX:KMP/KMP:DB) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.
Highlights of Killam's Q4 Financial Results
- Increased same store net operating income ("NOI") by 5.0% during the
- Achieved same store operating revenue increase of 2.8% during the
- Increased funds from operations ("FFO") by 14.7% to $6.4 million from
$5.6 million in the fourth quarter of 2008.
- Notwithstanding a 13.6% increase in shares outstanding, maintained FFO
of $0.17 per share.
- Refinanced $17.6 million in mortgage debt that matured during the
- Repurchased, for $8.9 million, $10 million (face value) of the
Company's $20 million outstanding unsecured subordinated debentures
scheduled to mature in 2013. The transaction resulted in a $0.6 million
gain in the fourth quarter.
Highlights of Killam's 2009 Year-End Financial and Operating Results
- Increased FFO by 9.0% to $0.73 per share, versus $0.67 per share
- Increased same store NOI by 8.4% in 2009.
- Achieved same store operating revenue increase of 4.2% during 2009.
- Maintained high occupancy rates throughout the year, with average
quarter-end occupancy of 98.3%, compared to 97.8% in 2008.
- Strengthened balance sheet with the successful completion of a
$24.7 million public share offering and the repurchase of $10 million
of the Company's subordinated debentures, reducing total gross debt to
gross book value of assets to 65.2% at December 31, 2009 from 67.7%
at December 31, 2008.
- Successfully refinanced $56.3 million of mortgage debt that matured
in 2009 for a net cash inflow of $19.6 million.
- Completed 25 manufactured home sales and 9 home sale placements.
Financial Highlights (in thousands, except per share information)
For the three months ended, Dec 31, 2009 Dec 31, 2008 % Change
Rental Revenue $26,220 $25,190 4.1%
Net Operating Income $15,320 $14,716 4.1%
Net Income Before Tax and
Depreciation $6,512 $5,063 28.6%
Net Loss ($172) ($1,693) 89.8%
Funds from Operations $6,416 $5,595 14.7%
Funds from Operations per Share $0.17 $0.17 -
Shares Outstanding (weighted
average) 38,487 33,885 13.6%
For the year ended, Dec 31, 2009 Dec 31, 2008 % Change
Rental Revenue $103,899 $97,454 6.6%
Net Operating Income $62,840 $57,630 9.0%
Net Income Before Tax and
Depreciation $24,608 $20,392 20.7%
Net Loss ($1,843) ($5,008) 63.2%
Funds from Operations $26,339 $22,461 17.3%
Funds from Operations per Share $0.73 $0.67 9.0%
Shares Outstanding (weighted
average) 36,247 33,604 7.9%
Balance Sheet as at, Dec 31, 2009 Dec 31, 2008 % Change
Total Assets $739,373 $738,668 0.1%
Total Liabilities $562,171 $565,475 (0.6%)
Total Shareholders' Equity $177,202 $173,193 2.3%
Debt as a % of Gross Book Value 65.2% 67.7% (3.7%)
FFO of $0.17 Per Share in the Fourth Quarter
Killam generated $6.4 million in FFO in the fourth quarter of 2009, a 14.7% increase from $5.6 million in the fourth quarter of 2008. The increase was primarily attributable to the apartment portfolio's same store NOI growth of 8.1%, driven by higher rents and a 9.5% reduction in utility and energy costs. The $0.8 million improvement in the apartment portfolio's NOI was partially offset by fewer new manufactured home sales in the quarter and a 3.9% decrease in NOI from the same store manufactured home community ("MHC") portfolio, due to higher operating expenses and property taxes.
Management considers FFO per share to be a key measure of operating performance and believes that many of its analysts and shareholders also find this measure of value. The Company provides the components of FFO and a reconciliation between FFO and net income in its Managements Discussion and Analysis. 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 and non-cash debenture interest, less gains on debt retirement and future income tax recovery.
FFO per share for the fourth quarter of 2009 was $0.17 per share, consistent with $0.17 per share earned during the same period of 2008. It is noteworthy that the 14.7% increase in FFO for the quarter was not reflected in the FFO per share results due to the 13.6% increase in the weighted average share balance following the issuance of an additional 4.255 million shares during the third quarter of 2009; the $23.4 million of net proceeds from the issuance was not fully deployed during the fourth quarter.
FFO Per Share Increased by 9.0% in 2009
FFO per share for the year ended December 31, 2009 increased by 9.0% to $0.73 per share, from $0.67 per share in 2008. As in the fourth quarter of 2009, the growth in funds from operations, which increased 17.3% during the year, was partially offset by the increase in shares outstanding.
The 17.3% increase in FFO in the year related primarily to rental revenue growth and lower energy costs, the combination of which led to higher gross margins generated by Killam's portfolio of 60.0% in 2009, compared to 57.7% in 2008 and 59.1% in 2007. These operational improvements were partially offset by a decrease in the number of manufactured home sales during the year. The impact on FFO attributable to the decreased manufactured home sales in 2009 was approximately $0.9 million, or $0.03 per share.
Same Store NOI Growth of 8.4% in 2009
Killam achieved consolidated same store NOI growth of 8.4% during 2009, the highest same store NOI growth in Killam's history. Same store properties account for 95% of the Company's portfolio. Improvements in NOI were seen in both the apartment and MHC portfolios, with increases of 10.0% and 4.0%, respectively.
Killam's apartment revenue increased by 4.3% in 2009 following rent increases averaging 3.7%, and occupancy improvements. The apartment portfolio also benefited from decreased operating costs, down 2.7% in the year due primarily to decreased energy and utility costs.
MHCs realized same store revenue growth of 3.8% during 2009, benefiting from average rent increases of 1.8%, revenue improvements from the Company's seasonal resort communities, and the positive impact of collecting rent from newly expanded sites. Property expenses on the MHC portfolio increased modestly by 3.5% in 2009.
Vacancy of 1.6% at December 31, 2009
Killam maintained low vacancy throughout the year. Consolidated vacancy was 1.6% at December 31, 2009, compared to 1.5% at December 31, 2008. The apartment portfolio had a vacancy rate of 2.3% with an average monthly rent of $758. The MHC portfolio had a vacancy rate of 1.0%, with an average monthly rent of $221. Not included in the MHC vacancy numbers are 169 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 4,229 2.8% $810
New Brunswick 3,310 2.0% $715
Newfoundland 732 2.3% $615
Prince Edward Island 686 0.6% $796
Total Apartment Portfolio 8,957 2.3% $758
Total MHC Portfolio 8,745 1.0% $221
Stable Atlantic Canadian Economy
Killam's strong presence in Atlantic Canada has been an advantage during the past year as the relative stability of the Atlantic Canadian economy has led to employment growth and positive net migration to many of the urban centers. Atlantic Canada's largest cities also continue to attract people from rural areas. The positive population growth continues to support demand for rental accommodations, leading to strong occupancy and the ability to increase rents in Killam's markets.
New Home Sale Activity
Killam completed 25 home sales and 9 partnership sales during 2009, generating income from home sales of $0.2 million. This compares with the closing of 65 home sales and 18 partnership sales during 2008, which generated income of $1.2 million. The decrease in home sale activity reflects the economic downturn, which impacted sales activities in Ontario and Western Canada during 2009. The timing of completion of expansion projects also contributed to decreased sales activity. Management expects stronger sales in 2010 and is projecting sales of between 40 and 50 new manufactured homes.
Decreased Debt Levels
The Company strengthened its balance sheet during 2009, ending the year with total gross debt as a percentage of the gross book value of assets of 65.2%, compared to 67.7% at December 31, 2008. The lower debt levels reflect the impact of a $24.7 million public share offering of 4.255 million shares that closed on July 2, 2009. The proceeds were raised to fund acquisitions, repay indebtedness and for general corporate purposes.
Also contributing to the improved debt levels was the fact that in December of 2009 Killam repurchased $10 million of the $20 million outstanding subordinated debentures scheduled to mature in January 2013. The debentures, which were retired, were purchased for $8.9 million in cash. The transaction resulted in a $0.6 million accounting gain, recognized in the fourth quarter. This gain has been excluded in the calculation of FFO in 2009, as per Killam's definition of FFO.
Killam completed one acquisition transaction in 2009, increasing its ownership in Garden Park Apartments in Halifax from 17% to 30% in December. Garden Park Apartments, centrally located in Halifax, is one of only two properties in Killam's portfolio that is not fully owned by the Company. The transaction, representing 13.3%, or 33 units, of the 246-unit concrete apartment building, was $2.9 million, or approximately $90,000 per unit. Subsequent to December 31, 2009 Killam acquired another 8.3% of the building for $1.8 million, increasing Killam's ownership of the building to 39%.
"We are pleased to report our 2009 financial results", noted Philip Fraser, Killam's President and Chief Executive Officer. "In a year marked by job losses and global economic slowdown we delivered outstanding operating results, growing the cash flow from our portfolio and increasing funds from operations per share."
"We made progress in strengthening our balance sheet in 2009. Decreasing debt levels has been a focus of management since 2007 and our goal has been to maintain debt levels of between 65% and 70% of the gross book value of assets. We believe that a lower percentage of debt gives the Company more flexibility, and brings our debt levels more in line with many of our peers."
"Strong fundamentals for the apartment market and access to low interest rate CMHC insured mortgages have supported stable capitalization rates for apartments throughout the year. Killam has been actively looking at properties in Ontario and we have made progress in expanding our understanding of the range of different quality and age of apartments in this core market. We see opportunities for Killam to grow in Ontario by focusing on high quality properties, including newer buildings and more established buildings in prime locations. After a slow year on the acquisition front in 2009, we expect to expand our portfolio in 2010 by $100 million to $150 million, with a focus in Ontario and Atlantic Canada."
Killam's December 31, 2009 Audited Financial Statements and Notes and Management's Discussion and Analysis can be found under the 2009 Financial Reports of the Investors section of Killam's website at www.killamproperties.com/investors.
Q4 Conference Call
Management will host a conference call to discuss these results on Wednesday, March 3, 2010 at 11:00 AM Atlantic time (10:00 AM Eastern). The dial-in numbers for the conference call are 647-427-7450 (in Toronto) or 888-231-8191 (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/events-and-presentations and at www.newswire.ca.
A replay will be available by dialing 416-849-0833 (Toronto) or 800-642-1687 (toll-free) and using the passcode 52465082 until March 10, 2010, 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.
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 Relations, Killam Properties Inc., (902) 442-0388, Fax: (902) 455-4525, firstname.lastname@example.org