Regal Lifestyle Communities Inc. Announces Results for the Quarter Ended June 30, 2013
TORONTO, Aug. 8, 2013 /CNW/ - Regal Lifestyle Communities Inc. ("Regal") (TSX:RLC) announced today results for the second quarter ended June 30, 2013.
Q2 2013 Highlights:
- Revenue from the portfolio, excluding Valley Stream Manor, was 3.8% above previous quarter and 2.1% above forecast, offset by a drop in revenue at Valley Stream Manor arising from the ending of the funded bed program, resulting in a net drop of 3.3% from Q1 and 4.5% from forecast;
- Net operating income, excluding Valley Stream Manor was 4.7% above previous quarter and 6.5% below forecast;
- Continued strong lease up in Brampton property currently at 83% occupancy;
- Suite conversion at Plymouth is now complete and four of the suites are leased;
- Six of the seven new suites in Regina are now leased;
- Corporate expenses are lower than prior period though higher than forecast, mainly due to timing; and
- Accretive acquisitions continue to be primary focus for growth.
"We are pleased to report on our progress this quarter," said Mr. Nyilassy, President and CEO. "The transition from funded beds to private pay suites at Valley Stream Manor is now complete," he added "and while there is a short-term loss of revenue, we anticipate this and other enhancements will improve our bottom line and key performance metrics when stabilized occupancy is achieved."
For the balance of 2013, Regal expects its stabilized properties to continue to operate at current high occupancy levels and operating margins to be in line with forecast. The properties in lease up, in Brampton and Ottawa (Valley Stream), are expected to reach stabilized, 90% plus occupancy levels by early (to mid) 2014.
Financial Highlights
| (in $000's, except for unit amounts and as otherwise indicated) |
Actuals for the three months ended June 30, 2013 |
Financial forecast for the three months ended June 30, 2013 |
Actuals for the three months ended March 31, 2013 |
Actuals for the six months ended June 30, 2013 |
Actuals for the 258-day period from October 16, 2012 to June 30, 2013 |
Financial forecast for the 258-day period from October 16, 2012 to June 30, 2013(1) |
||||||
| Operating Revenue | $ | 13,214 | $ | 13,832 | $ | 13,663 | $ | 26,877 | $ | 38,301 | $ | 38,561 |
| Net Operating Income | $ | 4,930 | $ | 5,751 | $ | 5,327 | $ | 10,257 | $ | 14,697 | $ | 15,779 |
| AFFO (2) | $ | 2,739 | $ | 3,229 | $ | 2,893 | $ | 5,632 | $ | 8,299 | $ | 8,952 |
| AFFO per share - basic(2) | $ | 0.144 | $ | 0.187 | $ | 0.153 | $ | 0.297 | $ | 0.444 | $ | 0.523 |
| AFFO per share - dilutive (2) | $ | 0.144 | $ | 0.187 | $ | 0.153 | $ | 0.297 | $ | 0.444 | $ | 0.520 |
| Dividends | $ | 3,321 | $ | 3,028 | $ | 3,312 | $ | 6,633 | $ | 9,361 | $ | 8,549 |
| Dividends per share - basic | $ | 0.175 | $ | 0.175 | $ | 0.175 | $ | 0.350 | $ | 0.501 | $ | 0.500 |
| Dividends per share - dilutive | $ | 0.175 | $ | 0.175 | $ | 0.175 | $ | 0.350 | $ | 0.501 | $ | 0.497 |
| Dividends as a % of AFFO | 121.2% | 93.8% | 114.5% | 117.8% | 112.8% | 95.5% | ||||||
| (1) | Financial forecast - refers to the financial forecast for the nine-month period ended June 30, 2013 included in Regal's prospectus dated October 5, 2012; pro-rated to reflect Regal's ownership of the Initial Communities commencing on October 16, 2012. |
| (2) | AFFO, AFFO per share basic and dilutive are measures used by Management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-IFRS Measures" in this press release. |
Operating revenue for the complete portfolio was $13,214 for the quarter ended June 30, 2013, 3.3% below the previous quarter and 4.5% below forecast. These variances are mainly due to the impact of the properties in lease up, in particular Valley Stream Manor as a result of the termination of the 36 LTC beds which reduced operating revenue by $725 or 5.2% against forecast and 5.3% against the prior quarter. The remaining portfolio performed well, with revenue 3.8% higher than the previous quarter and 2.1% above forecast.
Net operating income for the complete portfolio of $4,930 was 7.4% below the previous quarter and 14.3% below forecast for the quarter primarily due to the impact of the properties in lease-up. Specifically, the ramp up in operational expenses for Brampton's new assisted living wing which opened at the end of 2012; the revisions to the new suite plans at Plymouth Cordage which were completed in July; the termination of the 36 LTC beds and the conversion and lease up of the newly converted 17 AL suites at Valley Stream Manor have impacted net operating income in the quarter.
AFFO for the second quarter of $2,739 was lower than the previous quarter by 5.3% and lower than forecast of $3,229 by $490 or 15.2% mainly due to the lower net operating income as noted above, as well as higher corporate expenses offset by lower finance costs. On a per share basis, AFFO was $0.144 compared to a forecast of $0.187 and $0.153 in the previous quarter.
Dividends during the period were $3,321 compared to the forecast of $3,028 and $3,312 in the previous quarter. The increase was due to the issuance of approximately 2.2 million shares for the over allotment and the earn-out on Valley Stream Manor and Barrhaven Manor in the fourth quarter of 2012 and a further 0.2 million shares in the first quarter of 2013.
Total mortgage debt is $195,495 compared to $207,605 at IPO. The reduction relates to the repayment of a $10 million term loan on Greenway Retirement Village using a portion of the over allotment proceeds and regular monthly principal payments. The repayment of this debt also reduced Regal's weighted average interest rate from the forecast of 4.03% to 3.97% (3.66% after interest rate subsidy).
Operating Performance
| (in $000's except for otherwise indicated) | Actuals for the three months ended June 30, 2013 |
Financial forecast for the three months ended June 30, 2013 |
Actuals for the three months ended March 31, 2013 |
Actuals for the six months ended June 30, 2013 |
Actuals for the 258-day period from October 16, 2012 to June 30, 2013 |
Financial forecast for the 258-day period from October 16, 2012 to June 30, 2013(1) |
||||||
| Weighted average occupancy % | 89.9% | 92.8% | 90.7% | 90.3% | 90.3% | 91.7% | ||||||
| Operating revenue | $ | 13,214 | $ | 13,832 | $ | 13,663 | $ | 26,877 | $ | 38,301 | $ | 38,561 |
| Operating expenses | $ | 8,284 | $ | 8,081 | $ | 8,336 | $ | 16,620 | $ | 23,604 | $ | 22,782 |
| Net operating income (NOI)(2) | $ | 4,930 | $ | 5,751 | $ | 5,327 | $ | 10,257 | $ | 14,697 | $ | 15,779 |
| G&A expenses | $ | 943 | $ | 810 | $ | 1,075 | $ | 2,018 | $ | 2,626 | $ | 2,303 |
| G&A expenses as a % of revenue | 7.1% | 5.9% | 7.9% | 7.5% | 6.9% | 6.0% | ||||||
| Loss | $ | (625) | $ | 257 | $ | (711) | $ | (1,336) | $ | (5,262) | $ | 371 |
| (1) | Financial forecast - refers to the financial forecast for the nine-month period ended June 30, 2013 included in Regal's prospectus dated October 5, 2012; pro-rated to reflect Regal's ownership of the Initial Communities commencing on October 16, 2012. |
| (2) | NOI is a measure used by Management in evaluating operating performance. Please refer to the cautionary statements under the heading "Non-IFRS Measures" in this press release. |
Weighted average occupancy for the portfolio was 89.9% compared to forecast of 92.8% and previous quarter of 90.7%. The lower occupancy is primarily due to the conversion of the LTC beds to AL suites in Valley Stream Manor. Portfolio weighted average occupancy, excluding Valley Stream Manor, of 92.1% was 1.4% higher than the previous quarter and marginally below forecast.
For the three months ended June 30, 2013 operating margins were 1.7% lower than the first quarter and 4.3% below forecast due primarily to Valley Stream Manor. Excluding the impact of Valley Stream, margin improved 0.3% over last quarter but are still below forecast by 3.6%, mainly resulting from the ramp up in assisted living in Brampton. Management expects overall margins to be substantially in line with forecast by the fourth quarter.
General and administrative ("G&A") expenses of $943 were lower than the previous quarter by 12.3% but $133 higher than forecast due primarily to the timing of expenditures on public company costs and professional fees as well as investment in corporate marketing. Management expects annual general and administrative expenses to be substantially in line with forecasted levels by December 31, 2013.
Loss was higher than forecast by $882 primarily due to factors noted above as well as higher than forecasted non-cash expenses of depreciation off-set by non-cash gains in fair value changes and finance costs of $1,728, compared to a forecast of $1,912. This reduction in finance costs primarily relates to the repayment of the $10 million term loan on Greenway Retirement Village utilizing a portion of the over allotment proceeds.
Financial Position
At June 30, 2013 cash on hand was $1.4 million offset by bank indebtedness of $1.9 million and the unused borrowing capacity on Regal's revolving credit facility and revolving loan was $18.7 million.
Debt to gross book value is slightly below the target range of 55% to 60%. The debt service coverage ratio for the quarter ended June 30, 2013 was 1.3 times. Regal's weighted average interest rate is 3.66% after interest rate subsidy. Regal's debt strategy is to obtain secured mortgage financing on a primarily fixed rate, property-by-property basis with staggered maturity dates once a property reaches a stabilized lease-up level. Regal's objectives are to: (i) achieve and maintain staggered debt maturities to lessen exposure to interest rate fluctuations and re-financing risk in any particular period; and (ii) fix the interest rates and extend loan terms as long as possible when borrowing conditions are favourable.
Mr. Nyilassy said, "We continue to maintain a strong liquidity position and lower than target leverage levels that puts us in a good position to execute on acquisitions as opportunities crystallize." He added, "We continue to actively pursue a variety of opportunities in both Regal's existing market as well as new markets in Canada."
Investor Conference Call
Simon Nyilassy, President and Chief Executive Officer and Harold Atterton, Chief Financial Officer, will host a conference call tomorrow, August 9, 2013 at 8:00am ET. The telephone numbers for the conference call are: Local (416) 695-7806 or Toll Free 1-888-789-9572. The participant passcode is #7275852.
The conference call can be replayed (Instant Replay) until September 9, 2013 by dialing: Local (905) 694-9451 or Toll Free 1-800-408-3053. The passcode for the Instant Replay is #6985555. The call will also be archived on the Regal website at www.regallc.com.
About Regal Lifestyle Communities Inc.
Regal Lifestyle Communities Inc. is a corporation incorporated under the laws of the Province of Ontario. With the completion of its initial public offering and related transactions, the Company acquired a portfolio consisting of income-producing retirement communities offering primarily independent serviced living and assisted living programs. The Company's portfolio is comprised of ten "current generation" retirement communities with an average age of approximately five years, consisting of over 1,400 suites, primarily located in the Province of Ontario and including a property located in each of the Provinces of Saskatchewan and Newfoundland and Labrador.
Forward-Looking Information
This press release contains forward-looking information that reflects the current expectations, estimates and projections of management about the future results, performance, achievements, prospects or opportunities for Regal and the seniors housing industry. The words such as "may", "would", "could", "will", "anticipate", "believe", "plan", "expect", "intend", "estimate", "aim", "endeavour", "project", "continue" and similar expressions have been used to identify these forward-looking statements. Forward-looking statements are based upon a number of assumptions and are subject to a number of known and unknown risks and uncertainties, many of which are beyond management's control, and that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking statements.
While we anticipate that subsequent events and developments may cause our views to change, we do not intend to update this forward-looking information, except as required by applicable securities laws. This forward-looking information represents our views as of the date of this press release and such information should not be relied upon as representing management's views as of any date subsequent to the date of this document. Management has attempted to identify important factors that could cause actual results, performance or achievements to vary from current expectations or estimates, expressed or implied, by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These factors are not intended to represent a complete list of the factors that could affect us. See "Risks and Uncertainties" in the MD&A, "Risk Factors" in the prospectus and risk factors highlighted in materials filed with the securities regulatory authorities of Canada from time to time, including but not limited to Regal's most recent annual information form.
Non-IFRS Measures
FFO, AFFO, NOI, and Debt Service Coverage Ratio are not measures defined by International Financial Reporting Standards ("IFRS"). They are presented because Management believes these non-IFRS measures are relevant and meaningful measures of Regal's performance. FFO, AFFO, NOI and Debt Service Coverage Ratio as computed may differ from similar computations as reported by other issuers and may not be comparable to those reported by such issuers. Regal's Management Discussion and Analysis of Results of Operations and Financial Condition for the three months and six months ended June 30, 2013 ("Q2 2013 MD&A") contains a reconciliation of loss to FFO and a reconciliation of cash provided by (used in) operating activities to AFFO for the three months and six months ended June 30, 2013. Detailed descriptions of the terms are contained Regal's Q2 2013 MD&A, available at www.sedar.com.
SOURCE: Regal Lifestyle Communities Inc.
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