MONTREAL, May 11, 2021 /CNW/ - PRO Real Estate
Investment Trust ("PROREIT" or the "REIT") (TSX: PRV.UN) today
reported its financial and operating results for the three-month
(or "first quarter" or "Q1") period ended March 31, 2021.
First Quarter 2021 Highlights
- Sale of three non-strategic properties in twelve-month period
ended March 31, 2021
- Announcement of proposed acquisition of 12 industrial assets
for $86.8 million (excluding closing
costs) during Q1 2021, of which $49.2
million have been completed in April
2021
- Close to 100% of gross rent collected in Q1 2021
- 98.2% occupancy rate at March 31,
2021
- 80% of square feet maturing in 2021 renewed to date
- Same property net operating income[1] of $9.8 million in Q1 2021, comparable to pre-COVID
Q1 2020
- Net operating income1 of $10.1 million in Q1 2021, slightly higher than Q4
2020
- Net income and comprehensive income of $1.6 million in Q1 2021
- Over $30 million in operating
liquidity at March 31, 2021, and
successful $50 million private
placement with major equity investor announced during and closed
subsequent to Q1 2021
- AFFO payout ratio1 of 83.0% for Q1 2021, compared to
105.0% for Q1 2020
- Debt to gross book value ratio1 of 57.49% at
March 31, 2021, compared to 58.06% at
same date last year
- Refinancing of $52 million of
mortgages at lower rates and extended 7 and 10-year terms,
including a $24.8 million seven-year
mortgage commitment to refinance six retail properties subsequent
to quarter-end
"PROREIT is off to a solid start to the year, benefiting from a
disciplined approach throughout 2020 that now allows us to
successfully resume our growth as the economy re-opens. Our strong
performance through the pandemic − one of the best amongst our
industry peers − is a testament to the stability of our operations,
underpinned by our well-positioned portfolio," said James Beckerleg, CEO of PROREIT.
"In the first quarter of 2021, we successfully executed our
strategy on many fronts. We are strengthening our portfolio with
our announced accretive transactions in the industrial space, while
successfully divesting a small number of non-strategic assets. Our
recently completed private placement has also further strengthened
our ability to capitalize on transformational opportunities as we
actively pursue acquisitions in our strong pipeline, mainly in the
industrial sector.
"We solidified our financial position in the first quarter of
2021, notably with additional operating liquidity, while reducing
our debt and improving our payout ratio, in addition to renewing
mortgages at lower rates and extended terms. We also partnered with
the Bragg Group of Companies through our private placement and we
are pleased to have such a high caliber equity investor by our side
to support our growth.
"Our operational metrics also remained robust in the first
quarter, with high occupancy rates and successful leasing
activities, as evidenced by our renewal rate of 80% of total square
feet maturing in 2021 at positive spreads averaging 5%.
"We are moving forward with optimism, poised to benefit from the
strong restart of the economy and as vaccination rates increase
across Canada. We will continue to
execute on our strategy with the same discipline with which we have
successfully grown the company to-date in order to create
sustainable value for our unitholders," Mr. Beckerleg
concluded.
_____________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
COVID-19 Impact
PROREIT has worked closely with its tenants since the beginning
of the pandemic, including supporting select tenants through rent
deferrals and participation in the Canada Emergency Commercial Rent Assistance
program ("CECRA") from April 1, 2020
to September 30, 2020. As at
March 31, 2021, PROREIT has
approximately $0.3 million of rent
deferrals to be repaid by tenants over various terms generally not
exceeding 12 months. These amounts are being consistently collected
on schedule and as per deferral agreements in place. As noted
below, monthly gross rent collections have been almost 100% in the
previous four months.
PROREIT's monthly collection of gross rent in 2021 is as
follows:
|
April
2021
|
March
2021
|
February
2021
|
January
2021
|
Gross rent
collections, including government and other tenants who typically
pay at the end of the month, based on historical collection
cycles
|
99.9%
|
99.9%
|
99.8%
|
99.8%
|
Breakdown:
|
|
|
|
|
Industrial tenants
(1)
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Office
tenants
|
100.0%
|
100.0%
|
100.0%
|
100.0%
|
Retail
tenants
|
99.6%
|
99.6%
|
99.5%
|
99.5%
|
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
|
0.1%
|
0.1%
|
0.2%
|
0.2%
|
(1)
|
As of January 1,
2021, the REIT reclassed its Commercial Mixed-Use assets to
Industrial assets to be consistent with other diversified Canadian
REITs.
|
FINANCIAL RESULTS
Table 1- Financial
Highlights
(CAD $ thousands
except unit, per unit amounts and unless otherwise
stated)
|
3 Months
Ended
March 31
2021
|
3 Months
Ended
March 31
2020
|
Financial data
|
|
|
Property
revenue
|
$
|
17,390
|
$
|
17,707
|
Net operating income
(NOI) (1)
|
$
|
10,093
|
$
|
10,355
|
Total
assets
|
$
|
636,338
|
$
|
650,987
|
Debt to Gross Book
Value (1)
|
57.49%
|
58.06%
|
Interest Coverage
Ratio (1)
|
2.7x
|
2.7x
|
Debt Service Coverage
Ratio (1)
|
1.6x
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
3.66%
|
3.72%
|
Net cash flows
provided from operating activities
|
$
|
207
|
$
|
3,300
|
Funds from Operations
(FFO) (1)
|
$
|
3,878
|
$
|
5,756
|
Basic FFO per unit
(1)(2)
|
$
|
0.0969
|
$
|
0.1442
|
Diluted FFO per unit
(1)(2)
|
$
|
0.0946
|
$
|
0.1415
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
5,422
|
$
|
5,989
|
Basic AFFO per unit
(1)(2)
|
$
|
0.1355
|
$
|
0.1500
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.1323
|
$
|
0.1473
|
AFFO Payout Ratio –
Basic (1)
|
83.0%
|
105.0%
|
AFFO Payout Ratio –
Diluted (1)
|
85.0%
|
106.9%
|
(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 90 investment properties as at March 31, 2021 compared to 93 properties at the
same time last year. Total assets amounted to $636.3 million as at March
31, 2021, representing a decrease of $14.6 million, or (2.3)%, compared to
$651.0 million as at March 31, 2020. PROREIT sold three non-strategic
investment properties at or above their related carrying values
during the twelve-month period ended March
31, 2021. Gross proceeds were used to reduce debt and
increase operating liquidity.
For the first quarter ended March
31, 2021:
- Property revenue amounted to $17.4
million, a decrease of $0.3
million, or (1.8)%, compared to $17.7
million for the same prior year period. The decrease relates
to the sale of three investment properties in the twelve-month
period ended March 31, 2021.
- Same property net operating income2 reached
$9.8 million, comparable to the same
prior year period. Excluding COVID-related expenses of $0.1 million, same property net operating income
increased by 0.7% in Q1 2021 compared to the same prior year
period.
- Net operating income1 reached $10.1 million, $0.1
million higher than the fourth quarter of 2020, but a
decrease of $0.3 million, or (2.5)%,
compared to $10.4 million in the same
period in 2020. The change mainly relates to the sale of investment
properties.
- AFFO1 totaled $5.4
million, comparable with the fourth quarter of 2020, but a
decrease of $0.6 million, or (9.5)%,
compared to $6.0 million for the same
prior year period. The change was mainly driven by the sale of
three investment properties, increased capital maintenance
expenditures and stabilized leasing costs.
- AFFO payout ratio1 stood at 83.0% compared to 105.0%
for the same prior year period, providing greater flexibility for
capital allocation decisions.
_____________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
RESULTS OF OPERATIONS
Table 2- Reconciliation of Net Operating Income to Net Income
and Comprehensive Income
(CAD $
thousands)
|
3 Months
Ended
March 31
2021
|
3 Months
Ended
March 31
2020
|
Property
revenue
|
$
|
17,390
|
$
|
17,707
|
Property operating
expenses
|
7,297
|
7,352
|
Net operating income
(NOI) (1)
|
10,093
|
10,355
|
General and
administrative expenses
|
1,069
|
683
|
Long–term incentive
plan expense
|
537
|
(3,258)
|
Depreciation of
property and equipment
|
87
|
74
|
Amortization of
intangible assets
|
93
|
93
|
Interest and
financing costs
|
3,901
|
3,889
|
Distributions – Class
B LP Units
|
166
|
398
|
Fair value adjustment
– Class B LP Units
|
432
|
(9,388)
|
Fair value adjustment
– investment properties
|
1,170
|
(42)
|
Other
income
|
(561)
|
(509)
|
Other
expenses
|
262
|
278
|
Debt settlement
costs
|
1,303
|
-
|
Net income and
comprehensive income
|
$
|
1,634
|
$
|
18,137
|
(1) See "Non–IFRS and
Operational Key Performance Indicators".
|
For the three months ended March 31,
2021, net income and comprehensive income amounted to
$1.6 million, compared to
$18.1 million for the same prior year
period. The $16.5 million decrease
mainly relates to the $9.8 million
impact of the non-cash fair value of Class B LP Units (as defined
below), the $3.8 million variance in
non-cash long-term incentive plan expense, the $1.3 million of debt settlement costs in
connection with the repayment of approximately $29 million of mortgages maturing in 2021 and
2022 and the $1.2 million difference
in non-cash fair value adjustment on investment properties for the
first quarter of 2021 compared to the same prior year period.
Solid Balance Sheet and Liquidity Position
PROREIT is committed to steady improvements to its balance sheet
and liquidity position, including improving its debt to gross book
value ratio.
As at March 31, 2021, PROREIT had
in excess of $30 million of operating
liquidity through cash on hand and undrawn operating facilities.
Debt to gross book value[3] ratio was 57.49% at March 31, 2021, down from 58.06% at
March 31, 2020, reflecting debt reduction from three asset
sales. The weighted average interest on mortgage debt was 3.66% at
March 31, 2021, compared to 3.72% at
March 31, 2020.
During the first quarter, PROREIT received $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 totaled $1.3
million. The remaining net $16.3 million was used to reduce operating
facilities, increasing liquidity as noted above.
On March 15, 2021, PROREIT
announced a binding subscription agreement to issue 8,264,463 trust
units from treasury on a non–brokered private placement basis at a
price of $6.05 per unit to
Collingwood Investments Incorporated, a member of the Bragg Group
of Companies, from Nova Scotia,
for aggregate gross proceeds of approximately $50 million. The private placement closed in
April 2021 and proceeds will be used
to partially fund the announced acquisitions, repay certain
indebtedness, and the balance if any, to fund future acquisitions
and for general business and working capital.
_____________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
Portfolio Transactions
PROREIT's portfolio is diversified by asset class and geography,
focused on strategic locations in attractive mid-sized Canadian
markets.
During the first quarter of 2021, PROREIT sold a non-strategic
light industrial building located in the greater Montreal area, for gross proceeds of
$8.0 million. The proceeds of the
sale were used to repay the property mortgage and for general
corporate purposes.
On March 15, 2021, PROREIT
announced the proposed acquisition of 12 industrial assets – three
properties in Ottawa, Ontario and
nine properties in Winnipeg,
Manitoba− comprising total gross leasable area ("GLA") of 572,000
square feet, for an aggregate purchase price of approximately
$86.8 million (excluding closing
costs). This transaction will increase PROREIT's portfolio to 5.0
million square feet of GLA and approximately $700 million of Gross Book
Value4 on a pro forma basis.5
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
|
|
54%
|
|
70%
|
Quebec
|
|
12%
|
|
16%
|
|
Retail
|
|
33%
|
|
21%
|
Western
Canada
|
|
17%
|
|
16%
|
|
Office
|
|
13%
|
|
9%
|
Ontario
|
|
33%
|
|
31%
|
|
|
|
|
|
|
Total
|
|
100%
|
|
100%
|
|
|
|
100%
|
|
100%
|
PROREIT has a strong acquisition pipeline, currently including
conditional agreements to acquire six institutional-quality
industrial assets in Atlantic
Canada comprising approximately 500,000 square feet for
approximately $47 million. One of
these agreements, for a $4.5 million
acquisition, is binding on PROREIT, and includes customary closing
conditions.
_____________________________
|
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
2
|
Gross Book Value at
March 31, 2021, pro forma the closing of the acquisitions on
anticipated terms.
|
OPERATIONAL RESULTS
Table 3 - Operational Highlights
|
March 31,
2021
|
March 31,
2020
|
Operational data
|
|
|
Number of
properties
|
90
|
93
|
Gross leasable area
(square feet)
|
4,459,225
|
4,580,932
|
Occupancy rate
(1)
|
98.2%
|
98.3%
|
Weighted average
lease term to maturity (years)
|
5.0
|
5.5
|
(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 March
31, 2021 was approximately 5,146 square feet of GLA (12,636 square
feet of GLA at March 31, 2020).
|
GLA decreased (2.7)% to 4,459,225 square feet at March 31, 2021, compared to 4,580,932 square feet
at March 31, 2020. The decrease
of 121,707 square feet in GLA is mainly attributable to the sale of
three investment properties in the twelve-month period ended
March 31, 2021.
Occupancy rate remained stable at 98.2% as at March 31,
2021, compared to 98.3% a year earlier. PROREIT's tenant mix is
well diversified by industry sector. At March 31, 2021, approximately 86% of the
portfolio base rent is from national and government tenants and the
top ten tenants represent 37.5% of annual base rent. At
March 31, 2021, 66.4% 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
37.5% on annualized in-place and committed base rent as at
March 31, 2021 and have an average
remaining lease term of 6.5 years.
SUBSEQUENT EVENTS
On April 14, 2021, PROREIT closed
its previously announced private placement of $50 million, with 8,264,463 Units issued from
treasury at a price of $6.05 per Unit
to Collingwood Investments Incorporated, a member of the Bragg
Group of Companies. Together with a related party, Collingwood
Investments Incorporated has a voting and economic interest of
approximately 19.6% in PROREIT.
On April 26, 2021, PROREIT
completed the previously announced acquisition of three properties
located in Ottawa for an aggregate
purchase price of approximately $49.2
million (excluding closing costs). The remaining nine
previously announced acquisitions in Winnipeg, Manitoba, are expected to close in
the second quarter of 2021 and are subject to customary closing
conditions.
On April 28, 2021, PROREIT sold a
non-strategic retail property located in Fredericton, New Brunswick, for gross proceeds
of $4.9 million, marginally above
IFRS carrying value. The proceeds were used to repay the property
mortgage and for general corporate purposes.
On May 7, 2021, PROREIT received a
seven-year $24.8 million mortgage
commitment to refinance six retail properties having $21.7 million in mortgages maturing in
2022.
Distributions
Distributions to unitholders totaling $0.0375 per trust unit of the REIT were declared
monthly during the three months ended March
31, 2021, 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.
STRATEGY AND OUTLOOK
PROREIT remains committed to driving growth and creating value
for its unitholders, while maintaining a solid financial position
to permit sound capital allocation decisions 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 has resumed its
growth strategy, focused on the acquisition of high-quality,
low-risk real estate in the many attractive Canadian mid-sized
cities, with increased exposure to the industrial sector.
Investor Conference Call and Webcast Details
PROREIT will hold a conference call to discuss its first quarter
2021 results on May 12, 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 May 19,
2021 by dialing 888-390-0541 or 416-764-8677
Access code: 438569 #
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=1458481&tp_key=297ae457dd
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 is contained in the REIT's
information circular 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 month period
ended March 31, 2021, 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 remaining
announced acquisitions, the future economic activity, PROREIT's
acquisition pipeline, economic conditions 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 or agreements PROREIT may have concerning future
acquisitions will result in definitive agreements or property
acquisitions, 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 three month period
ended March 31, 2021, which are
available under PROREIT's profile on SEDAR at www.sedar.com.
SOURCE PROREIT