- 21.1% year-over-year increase in property revenue from
2019
- Net operating income1 grew 14.2% on
year-over-year basis
- Net income and comprehensive income up 40.7% from
2019
- 9.9% year-over-year increase in AFFO1 from 2019
- 97% of leases matured in 2020 renewed
MONTREAL, March 24, 2021 /CNW Telbec/ - PRO Real Estate
Investment Trust ("PROREIT" or the "REIT") (TSX: PRV.UN) today
reported its financial and operating results for the three-month
(or "fourth quarter") and twelve-month (or "full year") periods
ended December 31,
2020.
"I am proud of what we achieved in 2020 in the context of a
global pandemic with far reaching public health and economic
repercussions. We adapted with agility in a shifting environment,
taking proactive steps to mitigate the impact on our employees,
tenants and the communities where we own properties," said
Jim Beckerleg, President and CEO,
PROREIT.
"Our solid 2020 financial and operational results confirmed the
resiliency of our high-quality portfolio and the soundness of our
business model. Our consistently robust rent collection rates
across every asset class throughout the pandemic is a testament to
the strength of our well-diversified tenant base and the quality of
our long-standing tenant relationships. Adjusted for the sale of a
small non-strategic property, our renewal rate for 2020 exceeded
97%, at positive spreads of 3.5% in year one.
"Underpinned by the stability of our cash flows, the
prudent management of our operations and solid liquidity levels
served us well in 2020. We successfully strengthened our balance
sheet with attractive mortgage refinancing, new term loans, and
non-strategic property sales.
"Our solid foundation enabled us to return to our growth
strategy in early 2021, in a re-opening and expanding economy. On
March 15, 2021, we announced the
proposed acquisition of 12 assets for $86.8
million, increasing our exposure in the strong industrial
sector in the attractive Ottawa
and Winnipeg markets.
Coincidently, we also announced a $50
million private placement with a major Canadian private
investor, Collingwood Investments Incorporated, a member of the
Bragg Group of Companies, of Oxford, Nova
Scotia. These funds will in part support the announced
acquisitions and increase our liquidity position, which in turn
will allow us to capture significant growth opportunities in the
pipeline. With these opportunities propelling PROREIT to the next
stage of growth, we can move forward with our strategic
priorities with sound capital allocation in order to create value
for our unitholders," Mr. Beckerleg concluded.
COVID-19 Impact
PROREIT has worked closely with its tenants throughout the year,
including supporting select tenants through rent deferrals and
participation in the Canada
Emergency Commercial Rent Assistance program ("CECRA"). CECRA
provides qualifying tenants with a 75% gross rent reduction, 50%
funded by the government and 25% by the landlord incurring a rent
abatement. As at December 31, 2020,
PROREIT has approximately $0.3
million of rent deferrals to be repaid by tenants over
various terms not exceeding 12 months. These amounts are being
consistently collected on schedule and as per deferral agreements
in place. For the year ended December 31, 2020, PROREIT
recorded $0.8 million of COVID–19
related provisions, including $0.1
million of CECRA participation.
_____________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
As previously announced, PROREIT's monthly collection of gross
rent since November 2020 is as
follows:
|
|
|
|
|
|
February
2021
|
January
2021
|
December
2020
|
November
2020
|
Gross rent
collections, including government and other tenants who
typically
pay at the end of the month, based on historical collection
cycles
|
99.8%
|
99.8%
|
99.8%
|
99.8%
|
Breakdown:
|
|
|
|
|
Industrial
tenants
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Mixed-use commercial
tenants
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Office
tenants
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Retail
tenants
|
99.5%
|
99.5%
|
99.3%
|
99.2%
|
Temporary rent
deferral agreements under fixed repayment terms
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Gross rent in arrears
and discussions with the tenants are ongoing and managed
on a case-by-case basis
|
0.2%
|
0.2%
|
0.2%
|
0.2%
|
Financial Results
Table 1- FINANCIAL HIGHLIGHTS
(CAD $ thousands
except unit, per unit amounts and
unless otherwise stated)
|
3 Months
Ended
December 31
2020
|
3 Months
Ended
December 31
2019
|
Year
Ended
December 31
2020
|
Year Ended
December 31
2019
|
Financial
data
|
|
|
|
|
Property
revenue
|
$
|
17,589
|
$
|
17,315
|
$
|
69,810
|
$
|
57,627
|
Net operating income
(NOI) (1)
|
$
|
10,002
|
$
|
10,050
|
$
|
40,529
|
$
|
35,481
|
Total
assets
|
$
|
634,484
|
$
|
634,737
|
$
|
634,484
|
$
|
634,737
|
Debt to Gross Book
Value (1)
|
57.82%
|
57.52%
|
57.82%
|
57.52%
|
Interest Coverage
Ratio (1)
|
2.6x
|
2.6x
|
2.6x
|
2.6x
|
Debt Service Coverage
Ratio (1)
|
1.6x
|
1.6x
|
1.6x
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
3.73%
|
3.74%
|
3.73%
|
3.74%
|
Net cash flows
provided from operating activities
|
$
|
10,273
|
$
|
7,937
|
$
|
23,410
|
$
|
17,435
|
Funds from Operations
(FFO) (1)
|
$
|
4,789
|
$
|
5,017
|
$
|
20,908
|
$
|
15,296
|
Basic FFO per unit
(1)(2)
|
$
|
0.1197
|
$
|
0.1259
|
$
|
0.5227
|
$
|
0.4417
|
Diluted FFO per unit
(1)(2)
|
$
|
0.1169
|
$
|
0.1233
|
$
|
0.5112
|
$
|
0.4314
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,366
|
$
|
5,676
|
$
|
22,436
|
$
|
20,422
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1341
|
$
|
0.1425
|
$
|
0.5609
|
$
|
0.5897
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1310
|
$
|
0.1395
|
$
|
0.5486
|
$
|
0.5759
|
AFFO Payout Ratio –
Basic (1)
|
83.9%
|
110.5%
|
88.3%
|
106.8%
|
AFFO Payout Ratio –
Diluted (1)
|
85.9%
|
112.9%
|
90.2%
|
109.4%
|
(1)
|
Non–IFRS measure. See
"Non–IFRS and Operational Key Performance Indicators.
|
(2)
|
Total basic units
consist of trust units and Class B LP Units (as defined herein).
Total diluted units also include deferred trust units and
restricted trust units issued under the REIT's long–term incentive
plan.
|
PROREIT owned 91 investment properties as at December 31, 2020 compared to 92 properties at
the end of 2019. Total assets amounted to $634.5 million as at December 31, 2020, compared to $634.7 million as at December 31, 2019, a decrease of $0.2 million. PROREIT acquired one
investment property and sold two investment properties during the
twelve-month period ended December 31,
2020.
During the fourth quarter of 2020, PROREIT completed the sale of
a non-strategic office building located in the greater Montreal area for gross proceeds of
$5.0 million, marginally higher than
its IFRS carrying value. The sale was the result of an unsolicited
offer and proceeds were used to reduce debt, more specifically
operating facilities, and for general corporate purposes.
For the twelve-month period ended December 31, 2020:
- Property revenue amounted to $69.8
million, an increase of $12.2
million, or 21.1%, compared to $57.6
million for the same prior year period. The increase was
mainly driven by the incremental revenue from net acquisition
activity over the past two years.
- Same property net operating income1 amounted to
$31.2 million, a slight decrease of
$0.7 million, or 2.2%, compared to
the same prior year period. The decrease was primarily driven by
COVID-19 related bad debt provisions, CECRA participation and
rental abatements, as well as the decreased retail and office
occupancy, partially offset by contractual rent increases and
higher rental rates on lease renewals.
- Net operating income1 was $40.5 million, an increase of $5.0 million, or 14.2%, compared to $35.5 million in 2019. The increase is mainly the
result from the favourable impact of net property acquisitions
completed over the past two years.
- AFFO1 totaled $22.4
million, an increase of $2.0
million, or 9.9%, compared to $20.4
million for the same prior year period. The increase mainly
relates to the net acquisition activity over the past two
years.
- AFFO payout ratio1 stood at 88.3% compared to 106.8%
for the same prior year period. The favourable variance mainly
relates to the revision of PROREIT's monthly distributions to
$0.0375 per unit from $0.0525 commencing April
2020.
For the fourth quarter ended December 31,
2020:
- Property revenue amounted to $17.6
million, an increase of $0.3
million, or 1.6%, compared to $17.3
million for the same prior year period. The increase was
mainly driven by contractual rent increases and higher rental rates
on lease renewals.
- Same property net operating income1 reached
$9.7 million, an increase of
$0.1 million, or 0.6%, compared to
the same prior year period. The increase was mainly driven by
contractual rent increases and higher rental rates on lease
renewals, offset by a slight decrease in average occupancy.
- Net operating income1 amounted to $10.0 million, comparable to the same period in
2019.
- AFFO1 totaled $5.4
million, a decrease of $0.3
million, or 5.5%, compared to $5.7
million for the same prior year period. The decrease
reflects an increase in maintenance capital expenditures and
leasing commissions.
- AFFO payout ratio1 stood at 83.9% compared to 110.5%
for the same prior year period. The improvement resulted from the
same reason noted for the twelve-month period above.
_____________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
TABLE 2- RECONCILIATION OF NET OPERATING INCOME TO NET INCOME
AND COMPREHENSIVE INCOME
(CAD $
thousands)
|
3 Months
Ended
December 31
2020
|
3 Months
Ended
December 31
2019
|
Year
Ended
December 31
2020
|
Year Ended
December 31
2019
|
Property
revenue
|
$
|
17,589
|
$
|
17,315
|
$
|
69,810
|
$
|
57,627
|
Property operating
expenses
|
7,587
|
7,265
|
29,281
|
22,146
|
Net operating income
(NOI) (1)
|
10,002
|
10,050
|
40,529
|
35,481
|
General and
administrative expenses
|
899
|
598
|
3,328
|
2,318
|
Long–term incentive
plan expense
|
2,112
|
714
|
585
|
3,043
|
Depreciation of
property and equipment
|
92
|
60
|
299
|
197
|
Amortization of
intangible assets
|
93
|
93
|
372
|
372
|
Interest and
financing costs
|
3,877
|
3,847
|
15,382
|
13,491
|
Distributions – Class
B LP Units
|
171
|
407
|
928
|
1,662
|
Fair value adjustment
– Class B LP Units
|
2,104
|
466
|
(5,257)
|
4,547
|
Fair value adjustment
– investment properties
|
(5,604)
|
2,554
|
4,667
|
(7,429)
|
Other
income
|
(549)
|
(425)
|
(2,110)
|
(2,369)
|
Other
expenses
|
394
|
287
|
1,263
|
1,467
|
Transaction
costs
|
-
|
131
|
-
|
3,207
|
Net income and
comprehensive income
|
$
|
6,413
|
$
|
1,318
|
$
|
21,072
|
$
|
14,975
|
(1)
|
See "Non–IFRS and
Operational Key Performance Indicators".
|
For the year ended December 31,
2020, net income and comprehensive income amounted to
$21.1 million, an increase of
$6.1 million compared to $15.0 million for the same prior year period.
This mainly reflects the favourable $9.8
million impact of the non-cash fair value adjustment on
Class B LP Units (as defined herein), the $5.0 million favourable impact in net operating
income[3] as well as the $2.5
million favourable variance in non-cash long-term incentive
plan expense, partially offset by the $12.1
million difference in non-cash fair value adjustment on
investment properties for the twelve-month period ended
December 30, 2020 compared to the
same period last year.
During the year ended December 31,
2020, PROREIT updated independent external appraisals for 70
of its 91 properties resulting in a fair market value gain of
approximately $4.0 million.
For the three months ended December 31,
2020, net income and comprehensive income amounted to
$6.4 million, compared to
$1.3 million for the same prior year
period. The $5.1 million increase
mainly relates to a favourable $8.1 million impact in the non-cash fair
value adjustment on investment properties for the fourth quarter of
2020 compared to the same prior year period, partially offset by
the $1.4 million variance in non-cash
long-term incentive plan expense for the quarter ended December 31, 2020 compared to the same period in
2019.
_____________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
Solid Balance Sheet and Liquidity Position
PROREIT continued to exercise prudent capital management and
remains committed to a strong balance sheet. Debt to gross book
value1 ratio remained stable at 57.82% at
December 31, 2020, from 57.52% at
December 31, 2019. The weighted average interest on mortgage
debt was 3.73% at December 31, 2020, compared to 3.74% at
December 31, 2019.
On November 26, 2020, PROREIT
entered into a new financing commitment with a current lender to
increase its operating liquidity. Secured by a second charge
security on a pool of 14 properties, the new term loan of
$13.3 million has a three–year term
at an annual interest rate of 6.45%. Net proceeds of the loan were
used to pay down portions of certain term loans and credit
facilities, increasing the REIT's operating liquidity by
approximately $9 million.
As announced on March 4, 2021
subsequent to year-end, PROREIT increased its operating liquidity
to approximately $35 million of
availability through cash on hand and undrawn operating facilities,
following a mortgage refinancing and asset sales. These
transactions are expected to improve PROREIT's debt to gross book
value ratio.
OPERATIONAL RESULTS
TABLE 3- OPERATIONAL HIGHLIGHTS
|
December 31
2020
|
December 31
2019
|
Operational
data
|
|
|
Number of
properties
|
91
|
92
|
Gross leasable area
(square feet) ("GLA")
|
4,547,317
|
4,445,498
|
Occupancy rate
(1)
|
98.0%
|
98.4%
|
Weighted average
lease term to maturity (years)
|
5.2
|
5.6
|
(1)
|
Occupancy rate
includes lease contracts for future occupancy of currently vacant
space. Management believes the inclusion of this committed space
provides a more balanced reporting. The committed space at December
31, 2020 was approximately 20,879 square feet of GLA (33,464 square
feet of GLA at December 31, 2019).
|
GLA increased 2.2% to 4,547,317 square feet at December 31, 2020, compared to 4,445,498 square
feet at year-end 2019. The increase of 101,819 square feet in
GLA is mainly attributable to the acquisition of one property,
offset by the sale of two smaller buildings in the twelve-month
period ended December 31,
2020.
Occupancy rate remains stable at 98.0% as at December 31,
2020, slightly down from 98.4% a year earlier.
PROREIT's tenant mix is well diversified by industry sector. At
December 31, 2020, approximately 86%
of the portfolio base rent is from national and government tenants
and the top ten tenants represent 37.1% of annual base rent. 66.5%
of the base rent in the retail segment is from tenants providing
necessary services to the public, including groceries, pharmacies,
financial institutions, government offices and medical
offices. The ten largest tenants in PROREIT's portfolio
accounted for approximately 37.1% on annualized in-place and
committed base rent as at December 31,
2020 and have an average remaining lease term of 6.5
years.
______________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
PROREIT's diverse tenant base has a staggered lease maturity
profile with no more than 18.2% of base rent maturing in any given
period before 2026. 78.2% of leases maturing in 2021 are currently
renewed.
SUBSEQUENT EVENTS
On March 15, 2021, PROREIT
announced the proposed acquisition of 12 institutional-quality
industrial assets comprising total GLA of 572,000 square feet
located in Ottawa and Winnipeg. The aggregate purchase price is
approximately $86.8 million
(excluding closing costs) and is expected to be satisfied by a
combination of approximately $33.1
million in cash from a private placement of trust units and
approximately $53.7 million aggregate
principal amount of new 5-year mortgage financings. PROREIT also
announced a strong acquisition pipeline, including non-binding
letters of intent to acquire six institutional-quality industrial
assets in Atlantic Canada
comprising approximately 500,000 square feet for approximately
$47 million. The private placement
and the acquisitions are subject to customary conditions, including
regulatory approvals.
Impact of the 12 acquisitions on PROREIT's overall
portfolio:
Pro Forma Portfolio
Province
|
|
Based Rent
%
|
|
GLA %
|
|
Asset
Class
|
|
Base Rent
%
|
|
GLA %
|
Maritime
Provinces
|
|
38%
|
|
38%
|
|
Industrial and
commercial mixed-
use
|
|
54%
|
|
70%
|
Quebec
|
|
12%
|
|
16%
|
|
Retail
|
|
33%
|
|
21%
|
Western
Canada
|
|
17%
|
|
16%
|
|
Office
|
|
13%
|
|
9%
|
Ontario
|
|
33%
|
|
31%
|
|
|
|
|
|
|
Total
|
|
100%
|
|
100%
|
|
|
|
100%
|
|
100%
|
On February 26, 2021, PROREIT
announced proceeds of $46.6 million
in new mortgage financing with an extended ten-year repayment term
at a rate of 3.21%. Proceeds were used to repay approximately
$29.0 million of mortgages maturing
in 2021 and 2022 and to pay yield maintenance fees which totalled
$1.3 million. The remaining net
$16.3 million will be used to
reduce operating facilities and for general corporate purposes.
On February 18, 2021, PROREIT
announced the sale of a non-strategic light industrial building
located in the greater Montreal
area, for gross proceeds of $8.0
million. The proceeds of sale were used to repay the
property mortgage and for general corporate
purposes.
Distributions
Distributions to unitholders totaling $0.0375 per trust unit of the REIT were declared
monthly during the three months ended December 31, 2020, representing distributions of
$0.45 per unit on an annual
basis. Equivalent distributions are paid on the Class B limited
partnership units of PRO REIT Limited Partnership ("Class B LP
Units"), a subsidiary of the REIT.
As announced on April 22, 2020,
monthly distributions, which were previously of $0.0525 per unit, were revised to $0.0375 per unit, allowing for a reduction of
PROREIT'S debt and for flexibility in allocating capital to the
benefit of unitholders. Concurrently, in response to stock market
volatility flowing from the COVID-19 pandemic, PROREIT suspended
its distribution reinvestment plan ("DRIP") effective April 22, 2020, with distributions only being
paid in cash. The DRIP will remain suspended until further notice
and distributions of PROREIT will be paid only in cash.
STRATEGY AND OUTLOOK
PROREIT remains committed to driving growth and creating value
for its unitholders, while maintaining a strong balance sheet and
managing capital on a long-term basis.
With the ongoing economic recovery and debt financing available
at historically low interest rates benefiting the real estate
market, business outlook is positive. PROREIT is well positioned to
resume its growth strategy, including the acquisition of
high-quality, low-risk real estate in favourable secondary
markets.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its 2020 fiscal
year and fourth quarter 2020 results on March 25, 2021, at
10:30 a.m. EDT. There will be a
question period reserved for financial analysts. To access the
conference call, please dial 888-664-6383 or 416-764-8650 or
514-225-6995. A recording of the call will be available until
April 1, 2021 by
dialing 888-390-0541 or 416-764-8677 Access code:
739382#
The conference call will also be accessible via live webcast on
PROREIT's website at www.proreit.com or at
https://produceredition.webcasts.com/starthere.jsp?ei=1436883&tp_key=70c86e67c5
Annual Meeting of Unitholders
Due to the COVID-19 pandemic and to prioritize the well-being of
its unitholders and employees, PROREIT will host its annual meeting
virtually, accessible via webcast on June 8,
2021 at 2 p.m. EDT. Additional
information regarding the meeting will be contained in the REIT's
information circular to be prepared in connection with the
meeting.
About PROREIT
PROREIT (TSX:PRV.UN) is an unincorporated open-ended real estate
investment trust owning a diversified portfolio of diversified
commercial properties across Canada. Established in March 2013, PROREIT is mainly focused on strong
primary and secondary markets in Québec, Atlantic Canada and Ontario, with selective exposure in
Western Canada. For more
information, go to: www.proreit.com
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards
("IFRS"). In this press release, as a complement to results
provided in accordance with IFRS, PROREIT discloses and discusses
certain non-IFRS financial measures, including net operating income
("NOI"), adjusted funds from operations ("AFFO"), debt to gross
book value, interest coverage ratio, debt service coverage ratio,
funds from operations ("FFO"), AFFO payout ratio and same property
net operating income ("same property NOI"). These non-IFRS measures
are not defined by IFRS, do not have a standardized meaning and may
not be comparable with similar measures presented by other issuers.
PROREIT has presented such non-IFRS measures as management of the
REIT believes they are relevant measures of PROREIT's underlying
operating performance and debt management. Non-IFRS measures should
not be considered as alternatives to net income, cash generated
from (utilized in) operating activities or comparable metrics
determined in accordance with IFRS as indicators of PROREIT's
performance, liquidity, cash flow, and profitability. For a full
description of these measures and, where applicable, a
reconciliation to the most directly comparable measure calculated
in accordance with IFRS, please refer to the "Non-IFRS and
Operational Key Performance Indicators" section in PROREIT's
management's discussion and analysis for the three months and year
ended December 31, 2020, available
under PROREIT's profile on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of applicable securities legislation. Forward-looking
statements are based on a number of assumptions and are subject to
a number of risks and uncertainties, many of which are beyond
PROREIT's control, that could cause actual results and events to
differ materially from those that are disclosed in or implied by
such forward-looking statements.
Forward-looking statements contained in this press release
include, without limitation, statements pertaining to the execution
by PROREIT of its growth strategy, the intended use of proceeds of
the private placement, the anticipated closing of the private
placement and each of the announced acquisitions, the future
economic activity and the future performance of PROREIT. PROREIT's
objectives and forward-looking statements are based on certain
assumptions, including that (i) PROREIT will receive financing on
favourable terms; (ii) the future level of indebtedness of PROREIT
and its future growth potential will remain consistent with the
REIT's current expectations; (iii) there will be no changes to tax
laws adversely affecting PROREIT's financing capacity or
operations; (iv) the impact of the current economic climate and the
current global financial conditions on PROREIT's operations,
including its financing capacity and asset value, will remain
consistent with PROREIT's current expectations; (v) the performance
of PROREIT's investments in Canada
will proceed on a basis consistent with PROREIT's current
expectations; and (vi) capital markets will provide PROREIT with
readily available access to equity and/or debt. Without limitation,
there can be no assurance that any discussions PROREIT may have
concerning future acquisitions, or that the proposed acquisitions
for which PROREIT has entered into letters of intent, will result
in definitive agreements and, if they do, what the terms or timing
of any such acquisitions would be.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by this cautionary
statement. All forward-looking statements in this press release are
made as of the date of this press release. PROREIT does not
undertake to update any such forward-looking information whether as
a result of new information, future events or otherwise, except as
required by law.
Additional information about these assumptions and risks and
uncertainties is contained under "Risk Factors" in PROREIT's latest
annual information form and "Risk and Uncertainties" in PROREIT's
management's discussion and analysis for the year ended
December 31, 2020, which are
available under PROREIT's profile on SEDAR at www.sedar.com.
SOURCE PROREIT