Whiterock REIT Announces Strong First Quarter 2011 Results; AFFO Per Unit Increases 26% over Q1 2010

TORONTO, May 25, 2011 /CNW/ - Whiterock Real Estate Investment Trust ("Whiterock") today announced strong financial results for the quarter ended March 31, 2011.

Whiterock's annualized FFO and AFFO increased to $1.24 and $1.14 per unit, respectively. FFO cash payout ratio was 82.8%. 42% of Whiterock's revenue came from government and other investment grade tenants, and the average lease term for the portfolio was 6.1 years, with a 5.2 year average term for its mortgage debt.

"We are very pleased with our results in the first quarter," said Jason Underwood, CEO of Whiterock. "Our accretive acquisition program and internal growth has led to both FFO and AFFO per unit exceeding our distributions. We look forward to reporting further progress throughout 2011, as we continue to execute on our disciplined and strategic growth plan."

The following highlights should be read in conjunction with the consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2011. These will be available on Whiterock's website at http://www.whiterockreit.ca/financial-reports.php. The results incorporate changes required pursuant to International Financial Reporting Standards ("IFRS").


  • Increasing FFO - FFO per unit was $0.31 for the three months ended March 31, 2011, up 15% year over year. This represents an 82.8% FFO cash payout ratio.

  • Growing AFFO - AFFO per unit was $0.29 for the three months ended March 31, 2011, the fifth consecutive quarterly increase and up 26% from March 2010's AFFO per unit of $0.23.

  • Same Property NOI Growth - On a same property basis, Net Operating Income ("NOI") for the three months ended March 31, 2011 increased by 3.7% on a cash basis, as compared to the same period a year ago.

  • Declining Leverage - Debt to gross book value leverage ratio was 53.4% at March 31, 2011, improved from 60.5% a year ago.

  • Increasing Occupancy - 96.7% occupancy rate at March 31, 2011, increasing 20bps over December 31, 2010 and 140bps over March 31, 2010.

  • Strong Leasing Performance - At March 31, 2011, Whiterock completed approximately 42% of its 2011 leasing program, and rental rates increased an average 25% on renewals and re-leasing.

  • Improved Interest Coverage - Interest coverage ratio for the three months ended March 31, 2011 was 2.5x, a 39% increase over the 1.8x coverage a year ago.

  • First Series of Unsecured Debentures - Subsequent to March 31, 2011 Whiterock entered into its first offering of $35 million 5.95% senior unsecured (non-convertible) debentures. The debentures represent a significant milestone for Whiterock as the Trust reduces its use of convertible debentures. Whiterock used the $25 million first tranche of the offering to complete the early repayment of its more costly 7.5% Series D debentures and to fund announced acquisitions.

  • Growing Portfolio in Major Markets - Whiterock acquired an interest in $119 million (before closing costs) of owned and co-owned assets in the first quarter of 2011, approximately 48% of which are in Toronto. Subsequent to March 31, 2011, Whiterock acquired an interest in $73 million of acquisitions (before closing costs) totaling approximately 372,000 square feet of high quality, long-term leased office and retail properties in British Columbia.

Impact of IFRS

Whiterock's first quarter 2011 results reflect the impact of the required transition to International Financial Reporting Standards ("IFRS") from historic generally accepted accounting principles ("GAAP").  The net impact of the change is an increase in Whiterock's December 31, 2010 unitholders' equity of approximately $142 million. Most of this change results from recording Whiterock properties, both wholly-owned and equity accounted, at their fair market values under IFRS rather than their depreciated values under GAAP.

Whiterock elected to adopt the fair value model under IFRS with the initial increase in fair value on the transition date recorded in unitholders' equity as at January 1, 2010, and subsequent changes being recorded in the income statement on a quarterly basis in future periods.

Valuation Process and Results

At January 1, 2010 and December 31, 2010, Whiterock's management conducted an internal valuation of its investment properties on an individual basis, with no portfolio effect considered, to determine the fair value of its property portfolio. The internal valuation was supported by external appraisals, comprising 46% of the total fair value at January 1, 2010 and 52% at December 31, 2010. The appraisals were undertaken by external national valuators who hold relevant professional qualifications and have recent experience in the location and category of the investment property being valued.  The cumulative difference for all externally appraised properties, between the internal and external appraisals was not considered material in either period. Management generally determined the fair value of each income property based upon the direct capitalization income approach method of valuation. The fair value was determined by applying a capitalization rate to stabilized net operating income ("NOI"), which incorporates allowances for vacancy and management fees. The resulting capitalized value was further adjusted, where appropriate, for capital expenditures.

Individual properties were valued using capitalization rates in the range of 6.3% to 8.9% at December 31, 2010 applied to a stabilized NOI.  The overall weighted average capitalization rate was 7.0% at March 31, 2011 (7.1% at December 31, 2010).  As a result of reflecting the fair value of Whiterock's investment properties under IFRS, Whiterock's leverage calculation as at March 31, 2011 was 53.4% (December 31, 2010 - 53.1%).  Further details regarding changes as a result of the transition to IFRS are outlined in Whiterock's' financial statements and Management's Discussion and Analysis for the three months ended March 31, 2011.


In the first quarter of 2011, Whiterock increased its AFFO per unit (to $1.14 annualized) as a result of accretive office and industrial property acquisitions in Toronto and Montreal, and a full quarter's impact from the interest rate savings from the refinancing of $14.3 million of 9.5% second mortgages with 6% second mortgages.

Subsequent to the first quarter of 2011, Whiterock completed the purchase of an interest in a $40.7 million (before closing costs) grocery-anchored retail centre and a $32 million (before closing costs) Class A office building in British Columbia, Canada. The average remaining lease term across the assets is approximately 5.6 years. These properties were purchased in partnership with Return on Innovation Capital Ltd., with Whiterock owning a 40% interest and providing property management for all buildings. The average capitalization rate on the assets is 7.5% and the average interest rate on the first mortgages is approximately 4.7%.

With the completion of its recent acquisitions, Whiterock's wholly-owned, co-owned and managed aggregate real estate portfolio now totals approximately 8.1 million square feet across 76 properties.

Management expects that over the next two quarters, the impact from the acquisitions completed part way through the first quarter plus the annualized impact of acquisitions already completed in the second quarter will add approximately 5 cents to the first quarter's $1.14 annualized AFFO.  The full impact of this expected increase to AFFO will be realized by the third quarter of 2011.


For the three months ended March 31, 2011   March 31, 2010 (1)
FFO (basic) per unit (2) $ 0.31   $ 0.27
AFFO (basic) per unit (3) $ 0.29   $ 0.23
NOI - continuing $ 11,362,327   $ 8,858,232
NOI - same asset (cash basis)(4) $ 8,800,330   $ 8,483,300
FFO cash payout ratio (5)   82.8%     95.1%
Interest coverage ratio  (6)   2.5     1.8
As at March 31, 2011   December 31, 2010 (1)
Investment in real estate assets - wholly owned $ 579,250,000   $ 557,680,000
Investment in real estate assets - equity accounted (7) $ 114,204,984   $ 96,665,488
Investment in real estate assets - long-term leased (8) $ 19,283,333   $ 20,783,333
Weighted average mortgage rate   5.4%     5.5%
Weighted average debenture rate (9)   6.5%     6.6%
Debt to gross book value ratio (10)   53.4%     53.1%
Equity market capitalization (11)   371,939,570     352,624,971
Average lease term (in years)   6.1     6.2
Occupancy level   96.7%     96.5%

(1)     2010 restated to in accordance with IFRS.
(2)     Based on FFO of $8,295,979 and $4,810,435 in the three months ended March 31, 2011 and March 31, 2010.
(3)     Based on AFFO of $7,622,088 and $4,000,095 in the three months ended March 31, 2011 and March 31, 2010.
(4)     This represents a 3.7% increase over the same period in 2010
(5)     FFO cash payout ratio is calculated as cash distributions divided by FFO for the three months ended March 31, 2011 and 2010.  FFO payout ratio calculated using total distributions per unit (including value of units issued under Whiterock's Distribution Re-investment Plan) divided by FFO per unit for the three months ended March 31, 2011 and 2010 is 89.8% and 106.8% respectively.
(6)     Interest coverage is calculated based on continuing property operating income, income from equity investments and fee income less G&A, divided by interest expense (including debentures and financing fee amortization) net of interest and other income. 
(7)     March 31, 2011 includes Whiterock's co-ownership share of $628 million of real estate assets accounted for using the equity method (Dec 31, 2010 - $516 million).
(8)     March 31, 2011 includes prepaid rent related to the $119 million Airway Centre 2-4 under a 30 year lease (excludes security deposits).
(9)     Weighted average debenture rate is 6.3% after April 2011 repayment of Series  D (7.5%) convertible debentures.
(10)     See "Total Indebtedness to Gross Book Value" in the Management's  Discussion and Analysis dated March 31, 2011.
(11)     Equity market capitalization is calculated as period end Units outstanding times the period end Unit closing price.

FFO and AFFO are supplemental non-IFRS financial measures used by the real estate industry to measure and compare the operating performance of real estate organizations.  Whiterock's method of calculating FFO and AFFO may be different from methods used by other REITs or corporations. A description of Whiterock's calculation of FFO and AFFO is included in Whiterock's Management's Discussion and Analysis ("MD&A") for the quarter ended March 31, 2011.

Whiterock's Consolidated Financial Statements and MD&A for the quarter ended March 31, 2011 are posted on Whiterock's website.  Readers are directed to these documents for a more detailed discussion of Whiterock's results.


Whiterock invites you to participate in its conference call with senior management on Wednesday, May 25, 2011 at 1:00 p.m. E.D.T., to discuss the REIT's first quarter 2011 results and achievements. Investors can click on the link http://www.whiterockreit.ca/financial-reports.php to access the first quarter financial statements and MD&A. A presentation to accompany management's comments during the call will be available on Whiterock's website.  To view it, please go to http://www.whiterockreit.ca/presentations.php.

To participate in the live conference call, please dial 1-866-966-5335. To ensure your participation, please call five minutes prior to the scheduled start of the call. The call will be recorded and archived on Whiterock's website.

Whiterock's conference call will also be broadcast through a live, listen-only audio webcast, which can be accessed by clicking on the following link: http://www.meetview.com/whiterock20110525. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 90 days. Listeners who wish to participate in the Q&A session will not be able to do so through the webcast and must join the live conference call.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect" "estimate", "anticipate", "intend", "believe" or "continue", the negative forms thereof and similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future events or performance and, by their nature, are based on Whiterock's estimates and assumptions, which are subject to known and unknown risks, uncertainties and other factors that may cause the actual events, results or prospects to be materially different from those expressed or implied herein.  Readers are cautioned that a number of factors, including those discussed in the section entitled "Risk Factors" in Whiterock's Annual Information Form which can be obtained at www.sedar.com, could cause actual events, results or prospects to differ materially from those stated or implied.  These factors should be considered carefully, and a reader should not place undue reliance on forward-looking statements, as there can be no assurance that actual events, results or prospects will be consistent with such statements.  In particular, but without limitation, there can be no assurance that Whiterock will be to able to increase its FFO or AFFO.  Except as required by law, Whiterock does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

The Toronto Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.






SOURCE Whiterock Real Estate Investment Trust

For further information:


Frank Bucys, CFO, 416-907-4864
Esam El-Makkawy, 416-642-4726

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