TORONTO, Aug. 20, 2013 /CNW/ - Summit Industrial Income REIT ("Summit II" or the "REIT") (TSXV: SMU.UN) announced today its operating and financial results for the three and six months ended June 30, 2013.
SUMMARY OF QUARTERLY RESULTS:
|($,000 except per Unit amounts)||June 30, 2013||March 30, 2013||Dec. 31, 2012||Sept. 30, 2012|
|Revenue from Income properties||5,655||2,683||1,670||306|
|Net Operating Income (NOI)||4,419||2,109||1,237||311|
|Funds from Operations (FFO)||2,715||1,229||778||33|
|FFO per Unit||$0.15||$0.11||$0.11||$0.04|
|Adjusted Funds from Operations (AFFO)||2,502||1,161||720||33|
|AFFO per Unit||$0.14||$0.11||$0.10||$0.04|
|Weighted Average Units Outstanding||18,029||11,094||6,893||940|
|FFO Payout Ratio (%)||81.3%||-||-||-|
|AFFO Payout Ratio (%)||88.2%||-||-||-|
|Total Debt to Gross Book Value (%)||53.9%||54.6%||47.0%||40.7%|
|Debt Service Coverage (times)||2.04||2.48||2.39||2.64|
|Interest Coverage (times)||2.90||2.98||2.40||3.37|
- Q2 2013 FFO payout ratio of 81.3%
- Q2 2013 AFFO payout ratio of 88.2% well ahead of forecast 95%
- Acquired fifteen light industrial properties through first six months of 2013 totaling 2.0 million sq. ft. of GLA for $171.2 million at an average cap rate of 6.8%
- Sold two non-core properties in second quarter, with a third held for sale
- Subsequent to June 30, 2013 waived conditions on six light industrial properties totaling 653,000 sq.ft. and one fully occupied office property for $52.7 million at an average cap rate of 7.2%
- Completed transactions will increase portfolio to 29 properties aggregating 3.3 million sq. ft. of GLA
- Announced monthly cash distributions of $0.0408 per Unit (annualized $0.4896 per Unit)
- Implemented new DRIP with 5% bonus. Current participation rate approximately 13.2%
- Acquisitions contribute to significant growth in FFO and AFFO per unit in 2013
- Manager's ownership interest of 10.2% fully aligns interests with all Unitholders
"Our acquisitions are generating significant growth in our key performance benchmarks and we look to build on this progress in the quarters ahead," stated Paul Dykeman, CEO. "We were particularly pleased that our actual FFO and AFFO payout ratios in the second quarter were well ahead of the forecast in our February equity offering prospectus."
"As the REIT's manager, we continue to elect to take the majority of the fees owing under our Management Agreement in the form of Trust Units, and have participated in all the REIT's equity offerings," added Lou Maroun, Chairman. "Today our ownership interest in the REIT is approximately 10.2%, and we will continue to maintain and grow this participation going forward, fully aligning our interests with all Unitholders."
STRONG PORTFOLIO GROWTH
Through the first six months of 2013 the REIT completed the acquisition of 15 light industrial properties well-located in Edmonton Alberta, the Greater Toronto Area, and Moncton New Brunswick aggregating approximately 2.0 million square feet of gross leaseable area (GLA) for a total purchase price of $171.2 million. The acquisitions were funded by cash raised in a successful offering of Trust Units completed on February 26, 2013 raising $75.1 million in gross proceeds, and new mortgage financings totaling $90.6 million.
Subsequent to the end of the second quarter the REIT waived conditions and will be acquiring an additional six light industrial properties totaling 653,000 square feet of GLA in Brampton Ontario, Barrie Ontario and the Greater Montreal Region, as well as one fully occupied office building in Montreal, for a total purchase price of approximately $52.7 million satisfied by the assumption of an existing $5.4 million mortgage, new mortgages totaling $26.3 million, with the balance in cash from the REIT's revolving credit facility.
With the completion of the above-mentioned acquisitions and the disposition of non-core properties, the REIT's total property portfolio will consist of 29 properties totaling approximately 3.3 million square feet of GLA with occupancy of 99.5% generating current annualized NOI of approximately $21.0 million.
STRONG FINANCIAL RESULTS
Operating revenues increased to $5.7 million for the three months ended June 30, 2013 compared to $2.7 million for the three months ended March 31, 2013 and $0.3 million in the prior year's second quarter. The REIT's revenue growth is due primarily to acquisitions completed over the last ten months, continuing strong occupancies of 100% at June 30, 2013 compared to 99% at March 31, 2013, as well as steady progress in leasing activities. For the six months ended June 30, 2013 operating revenues were $8.3 million compared to $0.5 million in the same period last year.
Net Operating Income (NOI) rose to $4.4 million in the second quarter of 2013 compared to $2.1 million in the first quarter of the year and $0.2 million in the second quarter of 2012. For the first six months of 2013 NOI was $6.5 million compared to $0.4 million last year.
Funds from Operations (FFO) for the three months ended June 30, 2013 were $2.7 million ($0.151 per Unit) compared to $1.2 million ($0.111 per Unit) for the quarter ended March 31, 2013 and $18,000 ($0.028 per Unit) in the second quarter of 2012. The increase in 2013 is due to the contribution from acquisitions completed over the last ten months, improved occupancies and strong leasing activities. For the six months ended June 30, 2013 FFO was $3.9 million ($0.271 per Unit) compared to $95,000 ($0.145 per Unit) in the same period last year.
Adjusted Funds from Operations (AFFO) in the second quarter of 2013 rose to $2.5 million ($0.139 per Unit) from $1.2 million ($0.111 per Unit) in the first quarter of the year and $18,000 ($0.028 per Unit) in the second quarter of 2012. For the six months ended June 30, 2013 AFFO was $3.7 million ($0.251 per Unit) compared to $95,000 ($0.145 per Unit) in the same period last year. The REIT's AFFO payout ratio was 88.2% through the second quarter of 2013, well ahead of the 95% forecast in its February 2013 offering prospectus. Including the benefit of the REIT's DRIP program, the effective payout ratio was a conservative 76.5% in the quarter. As of June 30, 2013, the DRIP participation rate was approximately 13.2%. The REIT established its monthly distribution policy of $0.0408 per Unit, or $0.4896 on an annual basis, on March 15, 2013.
The REIT's growth has been highly accretive as, despite the 62.5% increase in the weighted average number of Units outstanding in the second quarter of 2013 compared to the first quarter of the year, FFO per Unit and AFFO per Unit have increased 36.0% and 32.4 %, respectively.
ACTIVE LEASING PROGRAM
During and subsequent to the first six months of 2013 the REIT made significant progress in leasing approximately 287,000 square feet of space subject to leases with applicable property vendors (Head Leases) with terms ending December 2014 and September 2015. Of this space, 50,000 square feet is not set to commence until November 2013. To date, leases have been secured for 51,595 square feet of head lease space with offers currently under negotiation for another 197,000 square feet.
Overall, leases representing only 1.4% of the total property portfolio, or 39,000 square feet, renew in 2013 with 312,000 square feet, or 11.7% of the total portfolio, up for renewal in 2014. The weighted average term to maturity for the lease portfolio is approximately 5.9 years.
SOLID BALANCE SHEET AND LIQUIDITY POSITION
Total assets increased to $253.4 million as at June 30, 2013 compared to $81.6 million at December 31, 2012. Total debt increased to $136.6 million at June 30, 2013 from $38.3 million at December 31, 2013. The increases are due to the REIT's acquisitions and related mortgage and other financings to complete the purchases. At June 30, 2013 the REIT's debt leverage ratio was 53.9% compared to 47.0% at December 31, 2012. The weighted average interest rate on the REIT's mortgage portfolio improved to 3.6% from 4.0% at December 31, 2012, with a weighted average term to maturity of 5.7 years. Debt service and interest coverage ratios for the six month period, improved to 2.14 times and 2.89 times, respectively, compared to 2.39 times and 2.40 times at December 31, 2012.
On March 11, 2013 the REIT increased its credit facility to $55 million, of which $40.6 million was drawn on the loan as at June 30, 2013. Subsequent to the end of the quarter the facility was increased to $68 million. If the REIT increased its borrowing to the 65% maximum allowed under its Declaration of Trust, it would have the capacity to purchase approximately $80 million in new properties as at August 20, 2013.
Under the terms of the REIT's Management Agreement with Sigma Asset Management Limited (the Manager), the Manager can elect to take the fees payable to it in the form of Trust Units rather than in cash. In the first six months of 2013 the Manager used its acquisition fee proceeds of approximately $1.6 million to acquire 240,444 Units, from the February 26, 2013 offering of 11,120,000 Units, further aligning the interests of the Manager with all Unitholders. As well, certain members of the Manager acquired 239,235 Units during the February offering. In addition, through the six months ended June 30, 2013 certain members of the Manager acquired an additional 223,000 Units on the TSX Venture Exchange, resulting in the Manager owning directly and indirectly a retained interest of approximately 10.2%.
INVESTOR CONFERENCE CALL
A conference call will be hosted by Summit II's management team tomorrow, Wednesday August 21, 2013 at 10.00 am ET. The telephone numbers to participate in the conference call are North America Toll Free: (866) 226-1792 and Local Toronto / International: (416) 340-2216. The live audio conference call will also be available as a webcast. To access the audio webcast please access the link on the Investor Information page on our web site at www.summitIIreit.com. The telephone numbers to listen to the call after it is completed (Instant Replay) are North American Toll Free (800) 408-3053 or Local Toronto / International (905) 694-9451. The Passcode for the Instant Replay is 5062738#. The Instant Replay will be available until August 27, 2013. A webcast of the call will also be archived on the REIT's web site at www.summitIIreit.com.
FINANCIAL AND OPERATING HIGHLIGHTS
|(in Thousands of Canadian dollars)||Three months||Three months||Six Months||Six Months|
|(except where noted)||June 30, 2013||June 30, 2012||June 30, 2013||June 30, 2012|
|Net operating income (NOI)||4,419||185||6,528||432|
|Funds from operations (FFO)||2,715||18||3,944||95|
|FFO per Unit (basic)||$||0.151||$||0.028||$||0.271||$||0.145|
|Adjusted funds from operations (AFFO)||2,502||18||3,663||95|
|AFFO per Unit (basic)||$||0.139||$||0.028||$||0.251||$||0.145|
|Weighted average number of Units||18,029||654||14,578||654|
|Cash distributions declared||2,207||-||2,942||13,346|
|Cash distributions declared per Unit (basic)||$||0.1224||$||-||$||0.1632||$||1.70|
|Cash distributions paid (2)||1,914||-||1,914||13,346|
|Proceeds from Units issued under DRIP plan (2)||291||-||291||-|
|FFO payout ratio without DRIP benefit (2)||81.3%||N/A||N/A||N/A|
|FFO payout ratio with DRIP benefit (2)||70.5%||N/A||N/A||N/A|
|AFFO payout ratio without DRIP benefit (2)||88.2%||N/A||N/A||N/A|
|AFFO payout ratio with DRIP benefit (2)||76.5%||N/A||N/A||N/A|
|Liquidity and Leverage|
|Total debt to gross book value||53.9%||70.4%||53.9%||70.4%|
|Weighted average mortgage interest rate||3.6%||4.0%||3.6%||4.0%|
|Weighted average mortgage term (years)||5.7 years||3.1 years||5.7 years||3.1 years|
|Debt service coverage (times)||2.04 times||N/A||2.14 times||N/A|
|Interest coverage (times)||2.90 times||N/A||2.89 times||N/A|
|Non-core properties disposed||2||1||2||14|
(1) Approximately 237,000 square feet (9% of total GLA) is currently under
Head Leases with an additional 50,000 square feet set
to commence November 2013. Approximately 50,600 square feet (2% of total GLA), currently under Head Leases has been leased
and 154,000 square feet (6% of total GLA) is under short-term leases (see "Active Leasing Program").
(2) On March 15, 2013, the Trust announced a cash distribution policy to
pay $0.0408 per Trust Unit. The first cash distribution
was paid on April 15, 2013 to Unitholders of record on March 29, 2013. The three months ended June 2013 represents the first
quarter of distributions having been paid.
About Summit II
Summit Industrial Income REIT is an unincorporated open-end trust focused on growing and managing a portfolio of light industrial properties across Canada. Summit II's units are listed on the TSX-V and trade under the symbol SMU.UN. For more information, please visit our web site at www.summitIIreit.com.
Caution Regarding Forward Looking Information
This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "goal" and similar expressions are intended to identify forward-looking information or statements. The forward-looking statements and information are based on certain key expectations and assumptions made by Summit II, including general economic conditions. Although Summit II believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Summit II can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to, tenant risks, current economic environment, environmental matters, general insured and uninsured risks and Summit II being unable to obtain any required financing and approvals. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward looking information for anything other than its intended purpose. Summit II undertake no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Summit Industrial Income REIT