VANCOUVER, May 14, 2018 /PRNewswire/ - Pure Industrial
Real Estate Trust (the "Trust") (TSX: AAR.UN) is pleased to
announce the release of its financial results for the three months
ended March 31, 2018.
Q1-2018 Financial Results
The Q1-2018 financial results, consisting of the Trust's
unaudited consolidated interim financial statements for the three
months ended March 31, 2018, and
management's discussion and analysis of results of operations and
financial condition ("MD&A") dated May
14, 2018, are available on SEDAR (www.sedar.com) and the
Trust's website (www.piret.ca). Unless otherwise indicated, all
amounts are in thousands of Canadian dollars.
Q1-2018 Highlights
(All metrics have been normalized for IFRIC 21 and assumes
all property taxes have been pro-rated and accrued based on the
number of days of ownership within the reporting year.)
- As at March 31, 2018, the Trust's
portfolio under management consists of 173 income producing
properties representing gross leasable area ("GLA") of 25.4 million
square feet ("sf"), an increase from 25.3 million sf as at
December 31, 2017. In addition, the
Trust's portfolio consists of 145.8 acres of land held for future
development and three properties under development.
- Investment properties fair value, including properties
classified as assets held for sale as at March 31, 2018, is $3,231,286, a $101,892 increase from December 31, 2017. The increase in investment
properties is due primarily to net acquisition activities during
the three months ended March 31, 2018
and a foreign exchange related increase due to the U.S. exchange
rate increasing from USD:CAD 1.2545
as at December 31, 2017 to
USD:CAD 1.2894 as at March 31, 2018, partially offset by an aggregate
fair value loss across the portfolio of $1,549.
- The occupancy of the Trust's portfolio was 93.1% as at
March 31, 2018, excluding properties
classified as assets held for sale, a decrease of 230 basis points
from December 31, 2017. Including
committed leasing, the occupancy is 95.7% as at March 31, 2018 compared to 95.6% as at
December 31, 2017. On December 14, 2017, the Trust acquired a
newly-constructed 760,256 sf distribution centre, as vacant.
Normalizing for this vacancy, the occupancy as at March 31, 2018 would be 95.9%, and including
committed leasing, the occupancy would be 98.6%. The weighted
average lease term for the Trust's portfolio increased from 6.3
years to 6.5 years between Q4-2017 and Q1-2018.
- Net asset value per unit increased to $6.23 as at March 31,
2018 from $6.19 as at
December 31, 2017.
- Debt to Gross Book Value, as defined in the MD&A, as
at March 31, 2018 was 39.4%, a 160
basis point increase from 37.8% as at December 31, 2017. The increase in the leverage
metric was predominately attributable to the Trust drawing the
remaining $25,000 available on its
unsecured term loan, draws on the operating line, as well as the
assumption of three new mortgages, all pertaining to acquisitions
completed in the quarter.
- Revenues for the three months ended March 31, 2018 increased by 17.3% compared to the
same period in the prior year. The increase is primarily related to
the acquisition activity in 2017 and Q1-2018, contributions from
the development in Richmond, British
Columbia which became income producing during December 2017.
- Adjusted Net Operating Income ("NOI"), as defined in the
MD&A, for the three months ended March
31, 2018 increased 15.5% to $44,272 from $38,317 for the same period in 2017. The increase
in NOI is primarily due to the impact from fifteen properties
acquired from April 2017 to
March 2018 and the contribution from
the development in Richmond, British
Columbia which became income producing in December 2017. The increase was partially offset
by the disposition of sixteen properties from April 2017 to March
2018 and an unfavourable average US dollar exchange rate for
the three months ended March 31, 2018
(US$1:00:C$1.2647) compared to the same period in the
prior year (US$1.00:C$1.3238).
- For the three months ended March 31,
2018, the Trust's same property NOI ("SPNOI"), as
defined in the MD&A, increased by $36 or 0.1% compared to the same period in 2017,
from 19.2 million sf representing 75.1% of the Trust's overall
portfolio. On a constant currency basis, eliminating for the
impact of the change in the U.S. dollar exchange rate quarter over
quarter, the Trust's SPNOI increased 1.1% for the three months
ended March 31, 2018 relative to the
same period in the prior year. SPNOI was also impacted by the
departure of tenant Best Buy from the Trust's Bolton, ON property effective February 28, 2018. Adjusting for this vacancy in
the quarter, SPNOI was 1.27% higher when compared to the same
period in 2017.
- Funds from Operations ("FFO"), as defined in the
MD&A, for the three months ended March
31, 2018 increased 20.6% over the same period in the prior
year and was relatively flat when compared to Q4-2017, increasing
by $13 or an increase of 0.04%. FFO
in the first quarter of 2018 relative to the first quarter of 2017
was positively impacted by SPNOI increases, FFO from net new
acquisitions, and from the completion of the development in
Richmond, British Columbia which
became income producing in December
2017, offset partially by the unfavourable average US dollar
exchange rate in the period.
- FFO per Unit ("FFOPU"), as defined in the MD&A, of
$0.10 decreased by 4.0% for the three
months ended March 31, 2018 over the
same quarter in the prior year and was flat when compared to
Q4-2017. The flat FFOPU during the quarter compared to Q4-2017 is
due to incremental NOI earned from the three properties acquired
during the quarter, offset by the unfavourable average US dollar
exchange rate in the periods.
- Adjusted Funds from Operations ("AFFO"), as defined in
the MD&A, for the three months ended March 31, 2018 increased 17.8% over the same
period in the prior year and increased by 0.9% when compared to
Q4-2017. The increase in AFFO over the same period in the prior
year is due to higher SPNOI and successful acquisition and
development activity during the 2017 and the current year, offset
partially by the unfavourable average US dollar exchange rate in
the period.
- Adjusted Funds from Operations per Unit ("AFFOPU"), as
defined in the MD&A, of $0.09
decreased by 5.4% for the three months ended March 31, 2018 compared to the prior year and
increased by 0.9% from Q4-2017, mostly due to lower capital
expenditures in Q1-2018 compared to Q4-2017.
- G&A expenses for the three months ended March 31, 2018 increased $3,363 or 145% relative to the same period in the
prior year, representing 9.0% and 4.3% of rental and recoveries
revenue, respectively. The increase is primarily due to the
increase in non-cash compensation and $2,068 in special transactions costs which relate
to the Trust's announced transaction with Blackstone Property
Partners (see "Subsequent Events" below). Included in G&A
expense for the three months ended March 31,
2018 is the non-cash fair value adjustment relating to the
re-measurement of the Trust's unit-based compensation liabilities,
totaling $1,773 expense, an increase
of $1,138 relative to Q1-2017.
G&A expenses excluding the special transaction costs and the
non-cash fair value component of unit-based compensation,
represents 2.9% and 3.1% of rental and recoveries revenue, for the
three months ended March 31, 2018 and
for the same period in the prior year, respectively.
- During the three months ended March 31,
2018, approximately 101,000 sf of new leases were signed and
340,000 sf of expiring space was renewed.
Acquisitions and Dispositions
- On January 31, 2018 the Trust
completed the acquisition of a 14,818 sf property in
Acheson, Alberta for a purchase
price of $1,900, plus standard
closing costs and adjustments of $50,
which was immediately transferred to properties under development.
As at March 31, 2018, the costs
incurred to date amounted to $226 and
the total costs for the redevelopment are estimated to be
approximately $1,070.
- On February 1, 2018, the Trust
completed the acquisition of a newly-constructed 287,338 sf
property in Montreal, Quebec for a
purchase price of $32,500 plus
standard closing costs and adjustments of $30. The property includes a 40-year ground lease
with Aéroports de Montreal. The
acquisition was funded with the Trust's operating line and an
assumed mortgage in the amount of $22,807 with a remaining term of 7.5 years and
annual interest rate of 3.48%, fixed with an interest rate
swap.
- On February 22, 2018, the Trust
completed the acquisition of a 12,647 sf building on 38.1
acres of land, and an adjacent 14.2 acres of income-producing land
located in Acheson, Alberta for a
purchase price of $48,000 plus
standard closing costs and adjustments of $40. The acquisition was funded with the Trust's
operating line and two assumed mortgages totaling $25,482 with 3 years remaining on the terms and
with fixed interest rates of 3.47% and 3.75% per annum (weighted
average interest rate of 3.53%).
- During the three months ended March 31,
2018, the Trust completed the disposition of a 17,180
sf investment property located in Vaughan, Ontario, for gross proceeds of
$3,608. The property was unencumbered
at the time of sale and was not classified as held for sale as at
December 31, 2017.
Subsequent events
- On January 9, 2018, the Trust
announced that it entered into an arrangement agreement with an
affiliate of Blackstone Property Partners ("Blackstone"), pursuant
to which Blackstone will acquire all of the outstanding trust units
of the Trust ("the Transaction") for $8.10 per unit in cash. The Transaction is
structured as a statutory plan of arrangement under the British
Columbia Business Corporations Act. Completion of the Transaction,
is subject to customary conditions, including approval of at least
66 2/3% of the votes cast by Unitholders at a special meeting of
Unitholders, court approval and regulatory approval (Investment
Canada Act).
-
- On February 26, 2018, the
Commissioner of Competition issued an Advance Ruling Certificate
approving the Transaction.
- On March 23, 2018, at a special
meeting of Unitholders, the Transaction was approved by Unitholders
where approximately 99.66% of the votes cast were voted in favour
of the Transaction.
- On March 29, 2018, the Supreme
Court of British Columbia issued a
final order approving the plan of arrangement for the
Transaction.
- On April 11, 2018, Blackstone
received Investment Canada Act approval in connection with the
Transaction.
Completion of the Transaction is expected to occur in the second
quarter of 2018.
- On May 1, 2018, the Trust
completed the disposition of the Trust's 50% interest in four
investment properties, three located in Alberta and one in Manitoba, to an existing joint venture
partner, for gross proceeds of $23,750. The joint venture paid out four
mortgages associated with the sold properties, with the Trust's
share totaling $10,059.
- On May 14, 2018, the Trust
completed the disposition of an investment property located in
Edmonton, Alberta for gross
proceeds of $2,400. The property was
classified as held for sale as at March 31,
2018 and was unencumbered at the time of sale.
Selected Financial Information
|
|
|
|
|
|
March 31,
2018
|
December 31,
2017
|
Investment properties
($000s)
|
|
$3,209,951
|
$3,108,059
|
Mortgages payable and
other loans ($000s)
|
|
$1,292,753
|
$1,211,920
|
Weighted average debt
term to maturity on mortgages (years)
|
|
4.6
|
4.7
|
Debt to gross book
value1
|
|
39.4%
|
37.8%
|
Debt to
EBITDA1
|
|
8.4
|
8.0
|
|
|
March 31,
2018
|
December 31,
2017
|
Occupancy, end of
period including committed*2
|
|
95.7%
|
95.6%
|
Occupancy, end of
period*2
|
|
93.1%
|
95.4%
|
Occupancy, average
for the three months ended
|
|
94.4%
|
96.8%
|
|
|
*
|
Includes 760,256 sf
vacant space acquired in December 2017 ("King Mill II Acquisition",
as defined in the MD&A). Excluding this space, occupancy at the
end of the period is 95.9% and committed occupancy is
98.6%.
|
|
|
|
|
|
|
Three months ended
March 31
|
($000s, except per
unit basis)
|
|
2018
|
2017
|
Revenue
|
|
$62,832
|
$53,574
|
Net operating income
3
|
|
$44,272
|
$38,317
|
Distributions
declared per unit
|
|
$0.08
|
$0.08
|
FFO4 per
unit (fully diluted)
|
|
$0.10
|
$0.10
|
Payout
Ratio5
|
|
77.8%
|
75.3%
|
AFFO4 per
unit (fully diluted)
|
|
$0.09
|
$0.09
|
Payout
Ratio5
|
|
89.6%
|
84.7%
|
G&A as a Percent
of Revenue
|
|
9.0%
|
4.3%
|
|
|
1
|
Non-IFRS measure and
further defined in Section VI "Additional IFRS and Non-IFRS
Measures" in the Trust's MD&A.
|
2
|
Excludes properties
classified as assets held for sale.
|
3
|
Net operating income
has been normalized for IFRIC 21 ("Adjusted NOI") and assumes all
property taxes have been pro-rated and accrued based on number of
days of ownership within the reporting year.
|
4
|
FFO and AFFO are
widely accepted supplemental measures of financial performance for
real estate entities. These measures are not defined under
the International Financial Reporting Standards ("IFRS"). For a
description of these measures and an IFRS to non-IFRS
reconciliation, see the Trust's MD&A under "Funds from
Operations and Adjusted Funds from Operations" and "Operational and
Financial Highlights" and "Non-IFRS Measures". The Trust's MD&A
is available on SEDAR at www.sedar.com.
|
5
|
FFO and AFFO payout
ratios are calculated based on the ratio of distribution rate to
fully diluted FFO and AFFO per unit.
|
About Pure Industrial Real Estate Trust
Pure Industrial Real Estate Trust is an unincorporated,
open-ended investment trust that owns and operates a diversified
portfolio of income-producing industrial properties in leading
markets across Canada and key
distribution and logistics markets in the
United States. The Trust is an internally managed REIT and
is one of the largest publicly-traded REITs in Canada that offers investors exposure to
industrial real estate assets in Canada and the
United States. Additional information about the Trust is
available at www.piret.ca and www.sedar.com.
TSX – AAR.UN
Non-GAAP Measures:
The Trust prepares and releases audited consolidated annual
financial statements prepared in accordance with IFRS (GAAP). In
this release, the Trust discloses and discusses certain non-GAAP
financial measures, including FFO, FFO per Unit, AFFO, AFFO per
Unit, adjusted net operating income (Adjusted NOI), Net Asset Value
per Unit, occupancy, Loan to Gross Book Value, and capitalization
rate. The non-GAAP measures are further defined and discussed in
the MD&A dated May 14, 2018 and
filed on SEDAR, which should be read in conjunction with this
release. Since FFO, FFO per Unit, AFFO, AFFO per Unit, adjusted net
operating income (Adjusted NOI), Net Asset Value per Unit,
occupancy, Loan to Gross Book Value, and capitalization rate are
not determined by IFRS, such measures may not be comparable to
similar measures reported by other issuers. The Trust has presented
such non-GAAP measures as management believes the measures are a
relevant measure of the ability of the Trust to earn and distribute
cash returns to Unitholders and to evaluate the Trust's
performance. These non-GAAP measures should not be construed as
alternatives to net income (loss) or cash flow from operating
activities determined in accordance with GAAP as an indicator of
the Trust's performance. Please refer to "Additional IFRS Measures
and Non-IFRS Measures" in the Trust's MD&A.
Forward-Looking Information:
Certain statements contained in this press release may
constitute forward-looking statements. Forward-looking statements
are often, but not always, identified by the use of words such as
such as "outlook", "believe", "expect", "may", "anticipate",
"should", "intend", "estimates" and similar expressions. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. The forward-looking statements contained in this news
release are based on certain key expectations and assumptions made
by the Trust, including: (i) the accretive acquisition of
properties and the anticipated extent of the accretion of any
acquisitions, which could be impacted by demand for properties and
the effect that demand has on acquisition capitalization rates and
changes in the cost of capital; (ii) the maintaining of occupancy
levels and rental revenue, which could be impacted by changes in
demand for the Trust's properties, tenant bankruptcies, the effects
of general economic conditions and supply of competitive locations
in proximity to the Trust's locations; (iii) the overall
indebtedness levels and the Trust's ability to refinance expiring
debt, which could be impacted by the level of acquisition activity
and the state of debt markets in general; (iv) The Trust's REIT
status, which can be impacted by regulatory changes enacted by
governmental authorities; (v) The Trust's cost estimates and
expected yields pertaining to development activity which could be
impacted by construction cost overruns or delays; (vi) the
anticipated distributions and payout ratios, which could be
impacted by capital expenditures, results of operations and capital
resource allocation decisions; and (vii) the anticipated
replacement of expiring tenancies, which could be impacted by the
effects of general economic conditions and the supply of
competitive locations.
Although the Trust believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because the Trust can give no assurance
that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to, the failure to obtain necessary regulatory approvals or
satisfy the conditions to closing the property acquisitions,
competitive factors in the industries in which the Trust operates,
prevailing economic conditions, and other factors, many of which
are beyond the control of the Trust.
The forward-looking statements contained in this press
release represent the Trust's expectations as of the date hereof,
and are subject to change after such date. The Trust disclaims any
intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or
otherwise, except as required under applicable securities
regulations.
The Toronto Stock Exchange has not reviewed nor approved the
contents of this press release and does not accept responsibility
for the adequacy or accuracy of this press release.
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SOURCE Pure Industrial Real Estate Trust (PIRET)