MISSISSAUGA, ON, March 12, 2012 /CNW/ - TransGlobe Apartment Real Estate Investment Trust (TSX: TGA.UN) (the "REIT") announced today its results for the fourth quarter and year ended December 31, 2011.
- Same property NOI up 3.1% in fourth quarter, as compared to same period in 2010 on improved NOI margin.
- Acquisitions of 13,513 apartment and townhouse suites for total acquisition price of approximately $1.25 billion make significant contribution to growth and performance.
- Overall Occupancy of 96.7% at year-end provides opportunity for future revenue increases.
- Strong occupancy of 98.2% at year-end for Ontario (70.3% of portfolio), up from 97.4% last year.
- Same property Average Monthly Rents of $910 per suite, up from $901 last year.
- Significant sequential quarterly increases in revenues, NOI and AFFO throughout 2011.
- Weighted average interest rate of mortgages at December 31, 2011 of 3.73%, lower than 4.05% weighted average at December 31, 2010.
- Increased weighted average term to maturity of mortgages to 3.44 years at December 31, 2011 from 3.01 years at December 31, 2010.
- Internalization of property and asset management functions effective September 1, 2011 proceeding well and expected to enhance operating performance going forward.
- Eastern Canada portfolio transitioned to internal management, effective January 1, 2012.
During 2011, the REIT acquired a total of 13,513 apartment and townhouse suites in 109 properties well-located in urban centres in Alberta, Ontario, Québec, New Brunswick and Nova Scotia. Total acquisition costs of approximately $1.25 billion were funded by the issuance of $333.9 million in Trust Units, $48.1 million in convertible debentures, the assumption of approximately $500.7 million in mortgages, the sale of two non-core properties, and cash. With these acquisitions, the REIT has grown to become one of Canada's largest apartment landlords owning 21,523 suites as at December 31, 2011, up from 8,297 suites at December 31, 2010.
"With our Initial Public Offering in May 2010, we committed to rapidly grow our portfolio and expand our presence in key markets across Canada," commented Kelly Hanczyk, Chief Executive Officer. "Our acquisitions in 2011 clearly demonstrate that we are meeting this objective, and we will continue to prudently build on this progress going forward."
"Looking ahead, we are confident 2012 will be an even better year as the acquisitions completed in 2011 make a full year's contribution to our results, our recently internalized property and asset management functions generate increased revenues and enhanced operating efficiencies, and we capitalize on the synergies and economies of scale resulting from the significant growth in our property portfolio," Mr. Hanczyk added.
Strong Operating Performance
The REIT's operating results for the year ended December 31, 2011 are not directly comparable to the prior year due to the significant growth in suites in 2011 as well as the REIT only commencing operations on May 14, 2010, resulting in 2010 being only 232 days.
Property revenues for the three months ended December 31, 2011 were $57.6 million, up significantly from $22.3 million for the same period last year primarily due to the contribution of acquisitions completed over the prior twelve months. Property revenues for the year ended December 31, 2011 were $161.6 million compared to $55.4 million for the 232-day period ended December 31, 2010.
Average Monthly Rents ("AMR") per suite for properties owned prior to December 31, 2010 were $910 at December 31, 2011, up from $901 at December 31, 2010. Overall AMR per suite was $880 at December 31, 2011 compared to $901 in the prior year. The lower overall AMR is largely as a result of 2,487 units acquired in Atlantic Canada during the year which had lower average rents than the portfolio average at December 31, 2010.
Portfolio occupancy for properties owned prior to December 31, 2010 was 96.9% at December 31, 2011 compared to 97.0% at December 31, 2010. Overall portfolio occupancy of 96.7% at December 31, 2011 was slightly lower than the 97.0% at the prior year end due to higher vacancies at certain acquisitions completed during the year and lower occupancy in the Atlantic Canada region. The Ontario market which accounts for 70.3% of the suites in the REIT's portfolio, had occupancy of 98.2% at December 31, 2011, up from 97.4% at the end of 2010.
Net Operating Income ("NOI") for the three months ended December 31, 2011 increased to $30.4 million from $11.7 million in the prior year due to the significant portfolio growth. For the year ended December 31, 2011, NOI was $87.2 million compared to $31.7 million for the 232-day period ended December 31, 2010. The NOI margin rose to 52.8% in the fourth quarter of 2011 from 52.5% in the prior year's fourth quarter due to increasing economies of scale resulting from the significant portfolio growth through 2011. For the year ended December 31, 2011 the NOI margin was lower at 53.9% compared to 57.1% for the 232-day period in 2010 due to the prior year's results not including the first quarter during which higher utility costs impacted performance. Management expects the NOI margin will improve as occupancies and average rents rise and the REIT benefits from cost savings and operating synergies arising from the completion of its management internalization and the increased size and scale of its portfolio.
In the fourth quarter of 2011, same property revenues rose 1.6% while same property operating costs and property taxes remained consistent with the prior year. As a result, same property NOI rose 3.1% in the fourth quarter of 2011 compared to the same period in the prior year, generating an improved 53.5% same property NOI margin compared to 52.8% in last year's fourth quarter.
Basic Funds from Operations ("FFO") for the three months ended December 31, 2011 were $17.2 million ($0.24 per Unit), up from $6.6 million ($0.22 per Unit) in the fourth quarter of last year due primarily to the contribution from acquisitions. Basic FFO for the year ended December 31, 2011 was $51.4 million ($0.98 per Unit) compared to $18.9 million ($0.63 per Unit) for the 232-day period ended December 31, 2010.
Basic Adjusted Funds from Operations ("AFFO") for the three months ended December 31, 2011 was $13.7 million ($0.19 per Unit), up from $5.2 million ($0.18 per Unit) in the fourth quarter last year due to the contribution from acquisitions. Basic AFFO for the year ended December 31, 2011 was $40.8 million ($0.78 per Unit) compared to $15.2 million ($0.51 per Unit) for the 232-day period ended December 31, 2010. The REIT generated an AFFO payout ratio of 99.3% in 2011 and 98.9% in the fourth quarter of the year.
Solid Financial and Liquidity Position
The REIT maintained a strong balance sheet and liquidity position as at December 31, 2011 with a debt to Gross Book Value ratio of 61.4% and a solid interest coverage ratio of 2.11 times. The weighted average interest rate on its mortgage portfolio of 3.73% was down from 4.05% at December 31, 2010, with the weighted average term to maturity of 3.44 years up from 3.01 years at the end of 2010. Following the completion of a refinancing in January 2012, the weighted average term to maturity was extended further to 3.98 years. As at December 31, 2011, approximately 32% of the total mortgage portfolio was CMHC-insured, and management believes it will benefit from lower interest rate spreads as it continues to increase its exposure to CMHC-insured debt as mortgages mature in the future.
During 2011, the REIT assumed $500.7 million in mortgages on the acquisition of new properties with a weighted average interest rate of 3.81% and a weighted average term to maturity of 2.04 years. In addition, the REIT secured $241.5 million in new mortgages during the year related to acquisitions with a weighted average interest rate of 3.35% and a weighted average term to maturity of 6.23 years at the end of 2011. The REIT repaid mortgages of $95.6 million in 2011, and refinanced the principal amount of $96.7 million with a weighted average interest rate of 3.75% and a weighted average term to maturity of 5.86 years at the end of 2011. As at December 31, 2011 the REIT had available liquidity under its operating credit facility of approximately $37.0 million.
Investing in the Portfolio
Management remains committed to improving its operating performance by incurring appropriate capital expenditures in order to replace and maintain the productive capacity of its property portfolio so as to sustain its rental income generating potential over the portfolio's useful life. During 2011, the REIT incurred capital expenditures of approximately $26.9 million on such items as window, balcony and roof replacements, garage improvements, common area improvements and new energy-efficient heating equipment. Included in this amount is approximately $4.4 million in capital expenditures identified at the time of the acquisition of certain properties, for which the REIT received a purchase price reduction on closing.
With the REIT's recent significant growth in Eastern Canada, it gave notice to its existing third party property manager that the REIT will take over the management of all of its properties in Nova Scotia and New Brunswick effective January 1, 2012. The additional scale of operations in the region has made it cost effective and more efficient to internalize the previously outsourced management function. The REIT has successfully completed the transition of the management to its internal team and expects it will have a positive impact on future performance in the region.
On January 17, 2012 the REIT repaid $51.9 million of maturing debt with a weighted average interest rate of 3.86%. The debt was repaid with the proceeds of new financings of $53.3 million with a weighted average interest rate of 3.53% and an average term to maturity of 9.0 years.
About TransGlobe Apartment Real Estate Investment Trust
TransGlobe Apartment Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust owning a portfolio of approximately 21,500 high quality apartment and town- house suites that are well-located in urban centres in Alberta, Ontario, Québec, New Brunswick and Nova Scotia.
Investor Conference Call
A conference call (and live audio webcast) hosted by the REIT's management team will be held Tuesday, March 13, 2012 at 10.00 a.m. (ET). The call-in numbers for participants are local/international (416) 849-2698 or North American Toll-Free at (866) 400-2270. Please connect with the conference call at least five minutes before the start time. An audio replay of the call will be available after the live call by dialing (416) 915-1035 or (866) 245-6755 and entering access code 868879#. A recording of the call will also be available on the REIT's website at www.tgareit.com.
| As at
| As at
|Number of properties||174||67|
|Weighted average in-place rent||$880||$901|
|Summary of Financial Information|
|Gross Book Value (1)||$2,042,382||$780,300|
|Indebtedness to Gross Book Value (3)||61.41%||59.82%|
|Weighted average mortgage interest rate (4)||3.73%||4.05%|
|Weighted average mortgage term to maturity||3.44 years||3.01 years|
| Period from May
14, 2010 to
|Summary of Financial Information|
|Interest coverage (5)||2.11 x||2.58 x|
|Indebtedness coverage ratio (6)||1.67 x||1.85 x|
|Revenue from property operations||$161,630||$55,417|
|Net income and comprehensive income||$82,979||$28,242|
|FFO - basic||$51,358||$18,865|
|FFO - diluted||$52,505||$19,264|
|FFO per unit - basic||$0.98||$0.63|
|FFO per unit - diluted||$0.97||$0.62|
|AFFO - basic||$40,841||$15,155|
|AFFO - diluted||$41,988||$15,554|
|AFFO per unit - basic||$0.78||$0.51|
|AFFO per unit - diluted||$0.78||$0.50|
|Distributions per unit (annualized) - basic||$0.75||$0.75|
|FFO payout ratio (7)||78.97%||75.35%|
|AFFO payout ratio (7)||99.30%||93.80%|
|Units outstanding at period-end for FFO and AFFO per unit:|
|Weighted average (000s) - basic (8)||52,670||29,987|
|Add: Unexercised Unit Options||30||1|
|Weighted average (000s) - diluted (8)||54,048||30,948|
|(1)||"Gross Book Value" is defined in the DOT and excludes impact of any fair value adjustment of investment properties.|
|(2)||"Indebtedness" is defined in the DOT and excludes mark-to-market premium of $24,102 and $11,207, unamortized financing costs and Canada Mortgage and Housing Corporation ("CMHC") premium of $6,359 and $160 at December 30, 2011 and December 31, 2010, respectively and contingent liabilities and includes face value of the 2018 Debentures of $50,000 and $nil at December 31, 2011 and December 31, 2010, respectively.|
|(3)||Defined as Indebtedness divided by Gross Book Value.|
|(4)||Excludes 2018 Debentures and IPO Debentures. Market weighted average mortgage interest rates at December 31, 2011 and December 31, 2010 were 4.51% and 3.86%, respectively.|
|(5)||Defined as net income plus finance and transaction costs, less finance income and adjusted for non-cash items divided by interest expense, net of amortization of mortgage premium, distributions on Class B LP Units and Instalment Note receipts.|
|(6)||Contractual payments on mortgages, 2018 Debentures, IPO Debentures, and gives effect to the payments provided by DrimmerCo under the Instalment Notes.|
|(7)||Based on FFO and AFFO and monthly distributions for the year ended December 31, 2011 and the pro-rated distributions for the 48 day period ended June 30, 2010 and monthly distributions for the six months ended December 31, 2010.|
|(8)||For purposes of calculating FFO and AFFO per unit, Class B LP Units are included as Units outstanding on both a basic and diluted basis.|
Non-IFRS Financial Measures
NOI, FFO and AFFO do not have standardized meanings prescribed by IFRS and should not be construed as alternatives to profit/loss, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Such measures as computed by the REIT may differ from similar measures as reported by other trusts or companies in similar or different industries.
Management considers NOI to be an important measure of the REIT's operating performance and uses this measure to assess the REIT's property operating performance on an unlevered basis. FFO is a measure of operating performance based on the funds generated from the business of the REIT before reinvestment or provision for other capital needs. Management considers NOI and FFO to be important measures of the REIT's operating performance and AFFO to be an important performance measure to determine the sustainability of future distributions paid to holders of trust REIT units after provision for maintenance capital expenditures. AFFO should not be interpreted as an indicator of cash generated from operating activities as it does not consider changes in working capital.
A reconciliation of FFO and AFFO is provided in the "Non-IFRS Financial Measures" section of the MD&A. A reconciliation of NOI is provided in the "Financial Performance" section of the MD&A.
Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding the REIT's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to future results, performance, achievements, events, prospects or opportunities for the REIT or the real estate industry and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding NOI margins, revenues, operating efficiencies, capital expenditures, occupancy levels, AMR and the REIT's use of CMHC-insured mortgages are forward-looking statements. In some cases, forward-looking information can be identified by such terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.
Forward-looking statements necessarily involve known and unknown risks and uncertainties, that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which, are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to the risks discussed in the REIT's materials filed with Canadian securities regulatory authorities from time to time. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements as there can be no assurance that actual results will be consistent with such forward-looking statements.
Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; and the referenced above, collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.
The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. Except as specifically required by applicable Canadian law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
For further information:
Chief Executive Officer
905-293-9400 ext. 1970
Chief Financial Officer
(905) 293-9400 ext. 1985