Summit Industrial Income REIT Announces Strong Growth in First Quarter 2013
HALIFAX, May 22, 2013 /CNW/ - Summit Industrial Income REIT ("Summit II" or the "REIT") (TSXV: SMU.UN) announced today its operating and financial results for the three months ended March 31, 2013.
- Trust Unit consolidation completed January 28, 2013
- Completed offering of 11.1 million Units on February 26, 2013 for proceeds of $75.1 million
- Acquired fifteen light industrial properties totaling 2.0 million sq. ft. of GLA for $171.2 million
- Sold two non-core properties, with a third held for sale
- Total portfolio now 25 properties aggregating 2.7 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
- $300 million in accretive acquisitions and property expansions targeted for 2013
- Acquisitions contribute to significant growth in first quarter results
"Our focus on prudent and accretive portfolio growth is now beginning to have a significant and positive impact on our financial and operating results," stated Paul Dykeman, CEO. "Looking ahead, we are confident our cash flows will continue to grow as our recent acquisitions make a full contribution to our results and we achieve our target of acquiring a total of $300 million in new assets this year."
SIGNIFICANT PORTFOLIO GROWTH
In late February and through March 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 $69.5 million in net proceeds, and new mortgage financings totaling $107.5 million with attractive interest rates ranging between 3.2% and 3.7% and maturities between five and seven years.
Subsequent to the end of the first quarter of 2013 the REIT sold two non-core properties in Saskatoon for a total sale price of approximately $5.4 million with mortgages of $4.2 million being repaid. Net cash proceeds of approximately $1.2 million were used to reduce debt. A third non-core property in Saskatchewan is being held for sale.
With the completion of the above transactions, the REIT's total property portfolio will consist of 25 properties totaling approximately 2.7 million square feet of GLA generating current annualized net operating income (NOI) of approximately $17.2 million.
STRONG FINANCIAL RESULTS
Operating revenues increased to $2.7 million for the three months ended March 31, 2013 compared to $1.7 million for the three months ended December 31, 2012 and $0.3 million in the prior year's first quarter. The REIT acquired two properties late in the fourth quarter of 2012 and another 15 properties in late February and March 2013. Portfolio occupancy stood at 99% at March 31, 2013 compared to 97% at December 31, 2012. NOI rose to $2.1 million in the first quarter of 2013 compared to $1.2 million in the fourth quarter of 2012 and $0.2 million in the first quarter of the 2012.
Funds from Operations (FFO) for the three months ended March 31, 2013 were $1.2 million ($0.111 per Unit) compared to $0.4 million ($0.055 per Unit) in the fourth quarter of 2012 and $77,000 ($0.118 per Unit) in the first quarter of 2012. The quarterly increase in 2013 is due to the contribution from acquisitions completed in the first quarter of 2013 and fourth quarter of 2012. As the REIT had no leasing costs or capital expenditures in the first quarter of 2013, Adjusted Funds from Operations (AFFO) and AFFO per Unit amounts are the same as FFO amounts. Per Unit amounts have been adjusted to reflect the twelve for one trust unit consolidation completed on January 28, 2013.
Net income for the three months ended March 31, 2013 was $1.2 million ($0.111 per Unit) compared to $7.7 million ($1.118 per Unit) in the fourth quarter of 2012, which included a $7.7 million fair value adjustment to investment properties, and $77,000 ($0.118 per Unit) in the first quarter of 2012. There were no fair value appraisal increases in the first quarter of 2013.
On March 15, 2013 the Trust announced a cash distribution policy to pay $0.0408 per Trust Unit on a monthly basis to Unitholders, aggregating $0.4896 on an annual basis. The first cash distribution in the amount of $0.7 million was paid on April 15, 2013 to Unitholders of record on March 29, 2013.
ACTIVE LEASING PROGRAM
During and subsequent to the first quarter 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. Approximately 199,000 square feet (7% of the REIT's total GLA) under Head Leases is occupied by tenants under short term leases and approximately 50,000 square feet of Head Lease space is not set to commence until November 2013. As of March 31, 2013 long-term leases have been secured for 22,000 square feet of Head Lease space, with offers under negotiation for another 249,000 square feet.
Overall, leases representing only 2.0% of the total property portfolio, or 53,000 square feet, renew in 2013 with 384,000 square feet, or 14.4% of the total portfolio, up for renewal in 2014. The weighted average term to maturity for the lease portfolio is approximately 6.1 years.
SOLID BALANCE SHEET AND LIQUIDITY POSITION
Total assets increased to $257.5 million as at March 31, 2013 compared to $81.6 million at December 31, 2012. Total debt increased to $140.6 million at March 31, 2013 from $38.3 million at December 31, 2013. The increases are due to the REIT's acquisition of 15 properties and related mortgage and other financing to complete the purchases. At March 31, 2013 the REIT's debt leverage ratio was 54.6% compared to 47.0% at December 31, 2012. The weighted average interest rate on the REIT's mortgage portfolio improved to 3.7% from 3.9% at December 31, 2012, with a weighted average term to maturity of 5.8 years. Debt service and interest coverage ratios improved to 2.48 times and 2.98 times, respectively, compared to 2.39 times and 2.40 times at December 31, 2012.
As of March 31, 2013 the REIT had increased its credit facility to $55 million, of which $38.9 million was drawn on the loan. If the REIT increased its borrowing to the 65% maximum allowed under its Declaration of Trust, it would have the capacity to purchase approximately $76 million in new properties as at March 31, 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 quarter of 2013 the manager used its acquisition fee proceeds of approximately $1.6 million to acquire 240,444 Units, from the offering of 11,120,000 Units, further aligning the interests of the Manager with all Unitholders.
FINANCIAL AND OPERATING HIGHLIGHTS
|($,000 except where noted)||
|Net Operating Income (NOI)||2,109||1,237||247|
|Funds from Operations (FFO)||1,229||376||77|
|FFO per Unit (basic)||$0.111||$0.055||$0.118|
|Adjusted Funds from Operations (AFFO)||1,229||376||77|
|AFFO per Unit (basic)||$0.111||$0.055||$0.010|
|Weighted Average Number of Units||11,094||6,893||654|
|Cash Distributions Declared||735||-||13,346|
|Cash Distributions Declared per Unit (basic)||$0.0408||-||$1.70|
|Liquidity and Leverage|
|Total Debt to Gross Book Value||54.6%||47.0%||69.1%|
|Weighted Average Mortgage Interest Rate||3.7%||3.9%||4.5%|
|Weighted Average Mortgage Term (years)||5.8 years||4.0 years||3.9 years|
|Debt Service Coverage (times)||2.48 times||2.39 times||N/A|
|Interest Coverage (times)||2.98 times||2.40 times||N/A|
|Non-Core Properties Disposed||-||2||14|
*Approximately 237,000 square feet (9% of total GLA) is under Head
Leases, of which approximately 199,000
square feet (7% of total GLA) is under short-term leases.
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 Venture Exchange 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. 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