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Press release from CNW Group

FAM REIT announces Q2 2013 results

Monday, August 12, 2013

FAM REIT announces Q2 2013 results

08:00 EDT Monday, August 12, 2013

TORONTO, Aug. 12, 2013 /CNW/ - FAM Real Estate Investment Trust ("FAM REIT", or the "REIT") (TSX: F.UN, F.WT) announced today its financial results for the three months and six months ended June 30, 2013.

KEY HIGHLIGHTS

  • Same-property occupancy of 97.3% as at June 30, 2013, compared to 92.3% for the IPO forecast
  • Overall portfolio occupancy of 96.9% as at June 30, 3013, which includes the acquisition of 4211 Yonge and excludes 220 Portage as a result of the disposition during the second quarter
  • IFRS based equity value per unit increased 8.3% to $11.52 at June 30, 2013 compared to $10.63 at December 31, 2012
  • FFO per unit on an as reported basis of $0.34 and Core FFO per unit of $0.25, compared to $0.24 for the IPO forecast for the three months ended June 30, 2013
  • AFFO per unit on an as reported basis of $0.13 and Core AFFO per unit of $0.24, compared to $0.21 for the IPO forecast for the three months ended June 30, 2013
  • Core AFFO payout ratio of 76% for the three months ended June 30, 2013

Shant Poladian, Chief Executive Officer of FAM REIT, commented, "These results demonstrate the strength of FAM REIT's IPO portfolio and the accretive impact of our capital redeployment initiatives. Subsequent to quarter end we waived conditions on the $39 million acquisition of The Promontory, a Class A office property in the GTA, strengthened our balance sheet and reduced leverage with a $27 million equity issue, and increased the capacity on our revolving credit line to $14 million from $8 million. We are well-positioned to navigate the current environment and are excited about the future."

Financial Highlights and Key Performance Indicators  

($000s unless otherwise noted and except per unit amounts)   Three months
ended June 30,
2013
    Forecast - Three
months ended
June 30, 2013(1)
    Three months
ended March
31, 2013
Revenue from investment properties   $ 6,601     $ 5,887     $ 6,081
Net operating income     4,130       3,582       3,886
Net income and comprehensive income     4,162       1,548       6,998
                         
Funds from operations - As Reported     2,879       2,019       2,489
Funds from operations - Core     2,081       2,019       1,978
FFO per unit (basic and diluted) - As Reported   $ 0.34     $ 0.24     $ 0.30
FFO per unit (basic and diluted) - Core   $ 0.25     $ 0.24     $ 0.23
                         
Adjusted funds from operations - As Reported     1,121       1,745       1,910
Adjusted funds from operations - Core     2,046       1,745       1,910
AFFO per unit (basic and diluted) - As Reported   $ 0.13     $ 0.21     $ 0.23
AFFO per unit (basic and diluted) - Core   $ 0.24     $ 0.21     $ 0.24
                         
Distributions per unit (basic and diluted)(3)   $ 0.19     $ 0.19     $ 0.19
AFFO pay-out ratio - Core(3)     76%       90%       82%
                         
Net operating income by asset class                      
  Industrial   $ 1,447     $ 1,386     $ 1,449
  Office     2,256       1,825       2,040
  Retail     427       371       397
      $ 4,130     $ 3,582     $ 3,886
                         
Net operating income by geographic location                      
  Manitoba   $ 1,866     $ 1,875     $ 2,100
  Ontario     1,261       804       811
  Saskatchewan     385       322       348
  Alberta     482       451       493
  Northwest Territories     136       130       134
    $ 4,130     $ 3,582     $ 3,886
                       
Interest coverage ratio (times)     2.4x       2.7x       2.8x
Leverage ratio (times)(4)*     9.3x       NF       8.1x
Debt service coverage ratio (times)     1.5x       NF       1.8x
Indebtedness ratio (%)*     56.6%       NF       52.1%
Weighted average mortgage interest rate*     4.8%       NF       5.1%
Same-property occupancy*     97.3%       92.3%       97.4%
Occupancy*                      
  Industrial     100.0%       95.3%       100.0%
  Office     95.4%       92.6%       96.5%
  Retail     90.4%       82.1%       90.4%
      96.9%       92.6%       97.4%
                       
Square footage leased (sq. ft.)*     1,690,701       1,536,466        
Rentable square footage (sq. ft.)*     1,745,292       1,659,633        
* At period-end
NF = Not forecasted        
(1) For information purposes only, select forecast financial information for the three months ended June 30, 2013 have been included in this press release, based on
the financial forecast in the initial public offering documents.
(2) The basic weighted average number of units outstanding used in the per unit calculations includes the weighted average of all REIT units and Class B LP units.
(3) Excludes distributions related to the four-day stub period from December 28, 2012 to December 31, 2012.
(4) Calculated based on average debt outstanding divided by annualized EBITDA.

 

FINANCIAL

  • Funds From Operations. FFO on an as reported basis for the three months ended June 30, 2013 was $0.34 per unit, compared to the IPO forecast of $0.24 per unit. Items of note were: (i) $0.18 per unit fair value gain on interest rate swaps, (ii) $0.03 per unit gain associated with the release of the mark-to-market adjustment on mortgages that were refinanced or discharged during the quarter, (iii) $0.07 per unit of defeasance costs related to the discharge of the 220 Portage mortgage, and (iv) $0.04 per unit of aborted transaction costs related to an acquisition that the REIT is no longer pursuing. After adjusting for these items, Core FFO for the three months ended June 30, 2013 was $0.25 per unit.
  • Adjusted Funds From Operations. AFFO on an as reported basis for the three months ended June 30, 2013 was $0.13 per unit, compared to the IPO forecast of $0.21 per unit. Items of note were: (i) $0.07 per unit of defeasance costs related to the discharge of the 220 Portage mortgage, and (ii) $0.04 per unit of aborted transaction costs. After adjusting for these items, Core AFFO for the three months ended June 30, 2013 was $0.24 per unit.

OPERATIONAL

  • Net Operating Income. During the three months ended June 30, 2013, the REIT achieved NOI of $4.1 million, which was 15.3% ahead of the forecasted NOI of $3.6 million due to higher than expected tenant retention, lease-up of vacant space, and the acquisition of 4211 Yonge, which was partly offset by the sale of 220 Portage.
  • Same property NOI growth. Same-property NOI in the second quarter of June 30, 2013 was unchanged on a sequential quarterly basis, and 3.0% or $0.1 million higher than the historical results for the three months ended December 31, 2012, due to higher occupancy and lower non-recoverable expenses.
  • Occupancy. Occupancy on a same-property basis was 97.3% as at June 30, 2013, ahead of the forecasted occupancy rate of 92.3% driven by higher than expected tenant retention and lease-up of vacant space. Overall portfolio occupancy was 96.9%, including the acquisition of 4211 Yonge, and excluding 220 Portage which was sold during the second quarter.
  • Leasing Profile. FAM REIT completed approximately 100,000 sf of lease renewals for the first six months ended June 30, 2013, achieving a 99% tenant retention rate.
  • Debt Strategy. FAM REIT discharged a $5.9 million mortgage related to 220 Portage in conjunction with the disposition of the property, and repaid a maturing $5.0 million mortgage related to Saskatchewan Place. In connection with the 4211 Yonge acquisition, the REIT entered into a mortgage financing of $25.0 million for a term of ten years at an interest rate of 3.68%. As result of these transactions, FAM REIT has only $1.7 million of mortgages maturing prior to November 2015.

OUTLOOK

The existing portfolio continues to perform well, and based on the current leasing pipeline, we expect to maintain same-property occupancy at or above 96%, with a 94% tenant retention rate in 2013. Demand fundamentals remain healthy across our key markets, and we expect to achieve positive space absorption in the second half of 2013 through lease up of vacant space in the Toronto, Winnipeg and Calgary markets.

As outlined in our press release dated July 15, 2013, FAM REIT entered into an agreement to acquire The Promontory, a 159,752 sf Class A office complex in the Greater Toronto Area, for $39 million, which was financed with a $23 million fixed mortgage for a term of ten years, and the remaining balance from the $27 million equity issue. The Promontory acquisition, together with the REIT's previously completed property transactions are expected to be accretive to FAM REIT's AFFO per unit of 4% on a leverage-neutral basis compared to our 2013 IPO forecast.

Other information

Information appearing in this press release is a select summary of results. The consolidated financial statements and management's discussion and analysis for the REIT are available at www.sedar.com and our website at www.famreit.com.

About FAM Real Estate Investment Trust

The REIT is a diversified commercial real estate investment trust focused on owning and acquiring strategically well-located office, industrial and retail real estate located primarily across Canada's large population centres.

Forward looking information

This press release contains forward-looking information within the meaning of applicable securities legislation, which reflects the REIT's current expectations regarding future events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest rate fluctuations. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward-looking information in this press release speaks as of the date of this press release. The REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in the REIT's filings with securities regulators, including its latest annual information form and MD&A.

SOURCE: FAM Real Estate Investment Trust

For further information:

Shant Poladian, Chief Executive Officer
FAM Real Estate Investment Trust
Telephone: (647) 256-5002
Email: spoladian@famreit.com

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