Pure Industrial Real Estate Trust Announces Release of Q1 2015 Financial Results
VANCOUVER, May 14, 2015 /PRNewswire/ - Pure Industrial Real Estate Trust ("PIRET" or the "Trust") (TSX: AAR.UN) is pleased to announce the release of its financial results for the three months ended March 31, 2015.
Q1 2015 Financial Results
The Q1 2015 financial results, consisting of PIRET's unaudited condensed consolidated interim financial statements for the three months ended March 31, 2015, and Management's Discussion and Analysis ("MD&A") dated May 14, 2015, are available on SEDAR (www.sedar.com) or PIRET's website (www.piret.ca).
Highlights
(All metrics have been normalized for IFRIC 21 and assumes all property taxes have been pro-rated and accrued based on number of days of ownership within the reporting year.)
Acquisition of North Carolina Portfolio and Vaughan Property Under Development
- As at March 31, 2015, PIRET's portfolio consists of 173 income producing properties representing gross leasable area ("GLA") of approximately 17.4 million square feet ("sf") under management, an increase from 171 properties and 15.6 million sf of GLA at December 31, 2014. In addition, PIRET's portfolio consists of 1 property under development which will comprise 422,433 sf of GLA when completed.
- PIRET purchased and cancelled 593,900 Class A Units under its NCIB program at an average cost of $4.33 per unit for a total cost of $2,588,562.
- The occupancy of the portfolio was 96.0% as at March 31, 2015, with a weighted average lease term of 6.7 years. The Trust's committed occupancy is currently at 96.6%.
- PIRET achieved a 13.1% increase in rental rates on new leases and renewals of leases expiring in Q1-2015.
- Investment properties increased to $1.90 billion as at March 31, 2015 from $1.75 billion at December 31, 2014 due to the acquisition of a portfolio of 3 properties with 1.3 million sf of GLA and the acquisition of a property under development that will add an additional 0.4 million sf of GLA upon completion. With these acquisitions, PIRET continues to execute its accretive growth strategy and build critical mass in its target markets. The acquisitions have strengthened PIRET's high quality national and regional tenant base within Canada as well as establish its presence within key markets throughout the U.S.
- Loan to Gross Book Value as at March 31, 2015 was 49.9%, a 1.4% increase from the December 31, 2014 ratio of 48.5% at December 31, 2014 due primarily to the temporary financing for the North Carolina acquisition and the construction financing for the Vaughan development.
- Revenue for the three months ended March 31, 2015 increased 28% from $33.0 million in 2014 to $42.3 million in 2015.
- The adjusted earnings from property operations ("NOI"), after accounting for the IFRIC 21 fair value adjustment, increased by 26% for the three months ended March 31, 2015 compared to the same period in 2014 from $23.4 million to $29.4 million. On a same-property basis, NOI in Q1-2015 increased by 2.1% over Q1 2014 as a result of a 1.5% increase in rent, offset by a 1.7% decrease in occupancy, and the impact of the ContainerWorld expansion in British Columbia.
- On a go-forward basis, the geographic concentration of PIRET's portfolio by NOI is as follows: British Columbia 17%; Alberta 24%; Ontario 33%; U.S. 19%; and others 7%.
- Funds from operations ("FFO") for the three months ended March 31, 2015 increased to $18.7 million compared to $14.4 million for the same period in 2014. On a per unit basis, FFO for the three months ended March 31, 2015 increased slightly at $0.098 compared to $0.097 for the same period in 2014. The payout ratio for the three months ended March 31, 2015 decreased slightly to 80.0% from 80.3% in 2014.
- On an adjusted funds from operations ("AFFO") basis, there was an increase from $12.8 million for the three months ended March 31, 2014 to $16.8 million for the same period in 2015. On a per unit basis, AFFO increased slightly to $0.088 for the three months ended March 31, 2015 compared to $0.086 for 2014. The AFFO payout ratio for the three months ended March 31 decreased from 90.9% in 2014 to 89.0% in 2015.
- General and administrative ("G&A") expenses were higher than expected for the quarter due to a $484,000 fair value adjustment for non-cash compensation expense and an increase in our professional fees related to the development of the Trust's new executive compensation plan as well as the transition to a single CEO. Other increases in G&A relates to the increase in other professional services for items such as audits, compliance, reviews and taxation.
In February 2015, the Trust acquired 60 acres of development land in Vaughan, Ontario for $44,353,575 for the construction of a state-of-the-art distribution and sorting facility that will serve the Greater Toronto Area ("GTA"). The building, when completed, will comprise approximately 422,433 square feet in respect of which the tenant has entered into a binding fifteen year lease with 2 five year renewal options.
In February 2015, the Trust also acquired a 51% controlling interest in a portfolio of three income producing investment properties located in North Carolina for a total price of $71,170,200 (US $57,000,000). The portfolio consists of three bulk distribution and warehouse facilities, comprising approximately 1.33 million sf of GLA and is 100% leased to three credit-rated tenants. PIRET will provide certain asset management, administrative and related services for the North Carolina portfolio for a fee equal to 37.5 basis points of the gross book value of the portfolio for its services.
Dispositions
During the three months ended March 31, 2015, PIRET sold its interest in four investment properties located in Burlington, Mississauga, and Vaughan, Ontario for gross proceeds of $11.1 million less standard closing costs and adjustments of $0.8 million resulting in net proceeds of $10.3 million and a net gain on sale of $1.1 million.
Selected Financial Information
| For the three months ended |
||||||
| ($000s, except per unit basis) |
2015 |
2014 |
2013 |
|||
| Revenue |
$42,304 |
$32,972 |
$19,226 |
|||
| Net operating income (1) |
$29,412 |
$23,401 |
$14,260 |
|||
| Distributions declared per unit |
0.08 |
0.08 |
0.08 |
|||
| FFO(2) per Class A Unit (fully diluted) |
0.10 |
0.10 |
0.09 |
|||
| Payout Ratio(3) |
80.0% |
80.3% |
82.4% |
|||
| AFFO(2) per Class A Unit (fully diluted) |
0.09 |
0.09 |
0.08 |
|||
| Payout ratio(3) |
89.0% |
90.9% |
92.4% |
|||
| G&A as a Percent of Revenue |
3.7% |
3.3% |
3.6% |
|||
| (1) |
Net operating income has been normalized for IFRIC 21 and assumes all property taxes have been pro-rated and accrued based on number of days of ownership within the reporting year. |
| (2) |
FFO and AFFO are widely accepted supplemental measures of financial performance for real estate entities. These measures are not defined under IFRS, however. For a description of these measures and an IFRS to non-IFRS reconciliation, see PIRET's MD&A under "Distributable Income and Liquidity and Capital Resources". PIRET's MD&A is available on SEDAR at www.sedar.com. |
| (3) |
FFO and AFFO payout ratios are calculated based on the ratio of distribution rate to fully diluted FFO and AFFO per unit. |
| Mar 31, |
Dec 31, |
Dec 31, |
||||
| Debt-to-GBV |
49.9% |
48.5% |
54.1% |
|||
| Employees |
37 |
36 |
32 |
Outlook
Real Estate Fundamentals
With the majority of our lease expiries occurring in Ontario in 2015, we anticipate decent rental growth for 2015, but that gain will be offset in the short term by a temporary increase in vacancy in the first half of the year. Over 80% of our leasing activity in 2014 took place in the second and third quarters, and we anticipate a similar pattern in 2015 and 2016. Although our same-property NOI growth will be negatively impacted by vacancy and related releasing costs in the near term, rental rate increases being achieved are expected to provide strong growth over the long term.
Increased Returns from Announced Developments & Acquisitions
Our interest coverage ratio, debt coverage ratio and debt-to EBITDA are all expected to fall in the next quarter as we realize the full quarterly income from the development properties delivered in the first quarter and the North Carolina acquisition properties.
Site work on the Vaughan development is progressing well. Excavation of the storm water retention pond and construction of the retaining wall are now complete and the building foundation work is expected to commence in the following weeks. Upon final completion of the building in 2016-Q2, the property will deliver approximately $8.0 million in additional NOI representing an increase of 6.5% over annualized Q1 NOI.
In addition to the development in Vaughan, we are in discussions with existing tenants in Canada and the US to expand their premises in 2015 and 2016, and hope to provide further details shortly. These expansions will further increase our NOI in 2016 and 2017.
The Trust's net asset value per unit is expected to increase in the second quarter as we update our independent appraisals for the US FedEx portfolio, which is now fully stabilized.
Conference Call
As previously announced on April 20, 2015, management will host the conference call at 3:00 pm (EST), 12:00 pm (PST), on Thursday, May 14, 2015, to review the financial results and corporate developments for the three months ended March 31, 2015.
To participate in this conference call, please dial one of the following numbers approximately 10 minutes prior to the commencement of the call, and ask to join the Pure Industrial Real Estate Trust Conference Call.
Dial in numbers:
Toll free dial in number (from Canada and USA)......................................... 1-888-390-0546
International or Local Toronto................................................................... 1-416-764-8688
Conference Call Replay
If you cannot participate on May 14, 2015, a replay of the conference call will be available by dialing one of the following replay numbers. You will be able to dial in and listen to the conference 120 minutes after the meeting end time, and the replay will be available until May 21, 2015.
Please enter the Replay ID# 493115, followed by the # key.
Replay toll free dial in number (from Canada and USA).............................. 1-888-390-0541
Replay international or local Toronto........................................................ 1-416-764-8677
About Pure Industrial Real Estate Trust
PIRET is an unincorporated, open-ended investment trust that owns and operates a diversified portfolio of income-producing industrial properties in leading markets. PIRET is an internally managed REIT that focuses exclusively on investing in industrial properties.
Additional information about PIRET is available at www.piret.ca or www.sedar.com.
TSX – AAR.UN
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 "anticipate", "plan", "expect", "may", "will", "intend", "should", 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 PIRET, including: (i) with the majority of PIRET's lease expiries occurring in Ontario in 2015, management anticipates decent rental growth for 2015, but that gain will be offset in the short term by a temporary increase in vacancy in the first half of the year; (ii) over 80% of the Trust's leasing activity in 2014 took place in the second and third quarters, and management anticipates a similar pattern in 2015 and 2016; (iii) although the same-property NOI growth will be negatively impacted by vacancy and related releasing costs in the near term, rental rate increases being achieved are expected to provide strong growth over the long term; (iv) PIRET's interest coverage ratio, debt coverage ratio and debt-to-EBITDA are all expected to fall in the next quarter as the Trust realizes the full quarterly income from the development properties delivered in the first quarter and the North Carolina portfolio acquisition; (v) excavation of the storm water retention pond and construction of the retaining wall are now complete and the building foundation work is expected to commence in the following weeks; (vi) upon final completion of the building, which is expected in 2016-Q2, the property is expected to deliver approximately $8.0 million in additional NOI, representing an increase of 6.5% over annualized Q1-2015 NOI; (vii) these expansions, if and when completed, are expected further increase the Trust's NOI in 2016 and 2017; and (viii) the Trust's NAV per Unit is expected to increase in the second quarter of 2015 as PIRET updates its independent appraisals for the U.S. FedEx portfolio, which is now fully stabilized.
Although PIRET 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 PIRET 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 PIRET operates, prevailing economic conditions, and other factors, many of which are beyond the control of the PIRET.
The forward-looking statements contained in this press release represent PIRET's expectations as of the date hereof, and are subject to change after such date. PIRET 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.
SOURCE Pure Industrial Real Estate Trust (PIRET)
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