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- Total assets reached $509.7
million, a 39% year-over-year increase
- Net comprehensive income grew 86.7% on a year-over-year
basis
- Net operating income1 grew 42.6% on a
year-over-year basis
- AFFO1 increased 38.9% year-over-year
- Occupancy rate rose 250 basis points to 98.2%
- Internalization of asset management effective April 1, 2019
- Update on TSX graduation process
MONTREAL, March 27, 2019 /CNW/ - PRO Real Estate Investment
Trust ("PROREIT" or the "REIT") (TSXV: PRV.UN) today reported its
financial and operating results for the three-month (or "fourth
quarter") and twelve-month (or "full year") periods ended
December 31, 2018.
"Our strong results in the fourth quarter of 2018 cap off an
outstanding year for PROREIT," said Jim
Beckerleg, President and CEO, PROREIT.
"We reached significant milestones, as we surpassed our
$500 million asset target, improved
our financial and operational performance and completed the
internalization of our property management platform," added
Mr. Beckerleg. "We achieved greater diversification both in
terms of asset class and geography, and we have reduced our overall
operating and financial risks."
"We now have a truly national footprint comprised of 84
high-quality commercial properties in nine provinces, with access
to an even larger and higher quality pool of acquisitions. Our
increased scale brings added potential to generate internal growth
and economies of scale. We intend to leverage our new position to
improve our cost of capital and increase our growth per unit to the
benefit of our unitholders, and we remain focused on our objective
to build a mid-cap, diversified commercial Canadian REIT,"
Mr. Beckerleg concluded.
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
FINANCIAL HIGHLIGHTS
(CAD $ THOUSANDS
EXCEPT UNIT, PER UNIT AMOUNTS AND UNLESS OTHERWISE
STATED)
|
3 Months
Ended
December 31
2018
|
3 Months
Ended
December 31
2017
|
Year
Ended
December
31
2018
|
Year Ended
December
31
2017
|
Financial
data
|
|
|
|
|
|
|
|
|
Property
revenue
|
$
|
12,207
|
$
|
8,161
|
$
|
40,889
|
$
|
29,639
|
Net operating income
(NOI) (1)
|
$
|
7,661
|
$
|
4,954
|
$
|
26,049
|
$
|
18,266
|
Total
assets
|
$
|
509,663
|
$
|
365,894
|
$
|
509,663
|
$
|
365,894
|
Debt to Gross Book
Value (1)
|
|
58.63%
|
|
62.30%
|
|
58.63%
|
|
62.30%
|
Interest Coverage
Ratio (1)
|
|
2.6x
|
|
2.6x
|
|
2.6x
|
|
2.7x
|
Debt Service Coverage
Ratio (1)
|
|
1.6x
|
|
1.6x
|
|
1.6x
|
|
1.6x
|
Weighted average
interest rate on mortgage debt
|
|
3.89%
|
|
3.73%
|
|
3.89%
|
|
3.73%
|
Net cash flows
provided from operating activities
|
$
|
5,102
|
$
|
3,917
|
$
|
13,885
|
$
|
9,053
|
Funds from Operations
(FFO) (1)
|
$
|
3,921
|
$
|
2,317
|
$
|
12,255
|
$
|
9,400
|
Basic FFO per unit
(1)(2)
|
$
|
0.0417
|
$
|
0.0379
|
$
|
0.1559
|
$
|
0.1722
|
Diluted FFO per unit
(1)(2)
|
$
|
0.0410
|
$
|
0.0371
|
$
|
0.1529
|
$
|
0.0168
|
Adjusted Funds from
Operations (AFFO) (1)
|
$
|
4,234
|
$
|
2,813
|
$
|
14,340
|
$
|
10,325
|
Basic AFFO per unit
(1)(2)
|
$
|
0.0450
|
$
|
0.0460
|
$
|
0.1825
|
$
|
0.1892
|
Diluted AFFO per unit
(1)(2)
|
$
|
0.0442
|
$
|
0.0451
|
$
|
0.1789
|
$
|
0.1854
|
AFFO Payout Ratio –
Basic (1)
|
|
116.7%
|
|
114.1%
|
|
115.1%
|
|
111.0%
|
AFFO Payout Ratio –
Diluted (1)
|
|
118.8%
|
|
116.4%
|
|
117.4%
|
|
113.3%
|
(1)
|
Non‑IFRS measure. See
"Non‑IFRS and Operational Key Performance Indicators".
|
(2)
|
Total basic units
consist of Units (as defined herein) and Class B LP Units (as
defined herein). Total diluted units also include deferred trust
units and restricted trust units issued under the REIT's long-term
incentive plan.
|
Total assets amounted to $509.7
million as at December 31,
2018, representing an increase of $143.8 million, or 39.3%, compared to
$365.9 million as at December 31, 2017. During the twelve-month period
ended December 31, 2018, PROREIT
acquired 19 properties, purchased the remaining 50% interest in
another property, and sold one property.
During the fourth quarter of 2018, acquisitions totaled
$77.1 million and contributed to
diversifying the REIT's portfolio. PROREIT's industrial
exposure rose to 27.0% at the end of the fourth quarter of 2018
compared to 25.9% at the end of the third quarter of 2018.
Office exposure rose to 16.5% at the end of the fourth
quarter of 2018 compared to 7.4% at the end of the third quarter of
2018. The acquisitions also increased the REIT's exposure to
the Ontario market, which rose
from 7.3% of the portfolio at end of the third quarter of 2018 to
19.5% at the end of the fourth quarter of 2018.
For the twelve-month period ended December 31, 2018:
- Property revenue amounted to $40.9
million, representing an increase of $11.3 million, or 38.0%, compared to $29.6 million for the same period last year. The
increase was mainly driven by the acquisitions made in 2018.
- Net comprehensive income reached $18.8
million, an increase of $8.7
million, or 86.7%, compared to $10.1
million for the same period last year.
- Net operating income1 was $26.0 million, an increase of $7.7 million compared to $18.3 million for the comparable period in 2017,
or 42.6% year-over-year. The increase resulted mainly from the
incremental revenues derived from the 2018 acquisitions, the
overall increase in occupancy during the year and the synergies
related to the Compass Commercial Realty Limited ("Compass")
acquisition, partially offset by the incremental expenses from the
2018 acquisitions.
- AFFO1 totaled $14.3
million, a $4.0 million
increase compared to $10.3 million
for the same period last year, or a 38.9% increase
year-over-year.
For the fourth-quarter ending December
31, 2018:
- Property revenue amounted to $12.2
million, representing an increase of $4.0 million, or 49.6%, compared to $8.2 million for the same period last year. The
increase was mainly driven by the incremental revenues derived from
the acquisitions.
- Net comprehensive income reached $6.5
million, an increase of $1.6
million, or 31.2%, compared to $4.9
million for the same period last year.
- Net operating income1 was at $7.7 million, an increase of $2.7 million, or 54.6%, compared to $5.0 million for the comparable period in 2017.
The increase resulted from the same explanations noted for the
twelve-month period above.
- AFFO1 totaled $4.2
million, a $1.4 million, or
50.5%, increase compared to $2.8
million for the same period last year.
PROREIT continued to exercise prudent capital management
resulting in a strong balance sheet at December 31, 2018. Debt to gross book
value1 ratio improved from 62.3% at December 31, 2017 to 58.6% at December 31, 2018. The weighted average interest
on mortgage debt was 3.89% at the end of 2018, compared to 3.73% at
December 31, 2017.
Distributions of $0.0175 per trust
unit of the REIT ("Units") and Class B limited partnership units of
PRO REIT Limited Partnership ("Class B LP Units"), a subsidiary of
the REIT, were declared monthly during the twelve-month period
ending 2018, representing distributions of $0.2100 on an annual basis. PROREIT has declared
uninterrupted monthly distributions since January 2014.
In 2018, PROREIT completed two equity financings, on a bought
deal basis, totaling $69.1 million,
and the funds were fully deployed by year end. The impact on the
AFFO contributions will therefore be fully reflected in the first
quarter of 2019, marking a significant improvement in the AFFO
payout ratio1.
1
|
Non-IFRS measure. See
"Non-IFRS and Operational Key Performance Indicators".
|
OPERATIONAL HIGHLIGHTS
|
|
December
31
2018
|
December
31
2017
|
Operational
data
|
|
|
|
Number of
properties
|
|
84
|
66
|
Gross leasable area
(square feet)
|
|
3,702,901
|
2,689,536
|
Occupancy rate
(1)
|
|
98.2%
|
95.7%
|
Weighted average
lease term to maturity (years)
|
|
6.1
|
6.9
|
GLA increased 37.7% to 3,702,901 square feet at December 31, 2018, compared to 2,689,536 square
feet at year-end 2017. The increase of 1,013,365 square feet
in GLA is mainly attributable to the acquisitions made in 2018.
Occupancy rate continued to increase for the second consecutive
year and stood at 98.2% as at December 31,
2018, up from 95.7% a year earlier, along with same property
net operating income1 also improving with a 1.1%
increase year-over-year. The ten largest tenants in the REIT's
portfolio accounted for approximately 35.9% on annualized in-place
and committed base rent and comprise approximately 8.3 years of
remaining lease term.
In 2018, PROREIT acquired and integrated the assets of Compass,
an established property manager with 60 properties under management
at closing. This strategic transaction enabled PROREIT to
internalize the property management function for its properties and
to repatriate property management fees.
SUBSEQUENT EVENTS
Internalization of Asset Management
On March 27, 2019, PROREIT
exercised its option to complete the internalization of its asset
management function in accordance with the terms of its external
management agreement with Labec Realty Advisors Inc., its external
manager. The internalization will result in the elimination of the
asset management and acquisition fees payable to the external
manager, will facilitate economies of scale and provide greater
transparency. PROREIT and the external manager have agreed that the
internalization will be effective April 1,
2019. Following the completion of the internalization, the
REIT's executive officers, James
Beckerleg and Gordon Lawlor,
will be employed directly by the REIT, and Gordon Lawlor will be promoted to the position
of Executive Vice President, in addition to his current role of
Chief Financial Officer and Secretary.
In accordance with the terms of the external management
agreement, the external manager will be entitled to a termination
payment of approximately $2.3
million, representing one time the management fees and
expenses paid to it in the most recent fiscal year prior to the
internalization.
TSX Graduation and Related Matters
PROREIT is pleased to report that the Toronto Stock Exchange
(the "TSX") has conditionally approved the graduation of the REIT
from the TSX Venture Exchange to the TSX. The listing of the Units
on the TSX is subject to PROREIT fulfilling all of the requirements
of the TSX. In conjunction with the graduation to the TSX, the
Units would be voluntarily delisted from the TSX Venture Exchange
prior to the commencement of trading on the TSX. The Units would
continue to trade under the symbol "PRV.UN".
In connection with and subject to the graduation to the TSX, the
REIT intends to consolidate its Units on a basis of 3
pre-consolidation Units for 1 post-consolidation Unit. Based on the
number of Units currently outstanding, the REIT would have a total
of approximately 31.4 million units issued and outstanding after
giving effect to the consolidation. Management and Trustees believe
the consolidation is in the best interests of the REIT and its
stakeholders, potentially increasing the pool of investors who
would consider PROREIT an eligible investment.
STRATEGY AND OUTLOOK
PROREIT remains focused on strong secondary markets, where many
of Canada's largest REITs are
currently divesting assets in order to concentrate on Canada's largest urban centres. This strategy
provides PROREIT with numerous and significant opportunities to
acquire high-quality, low-risk real estate in attractive urban
markets and regional economic centres, including: outside central
Vancouver, Toronto and Montreal. PROREIT is also committed to
selecting high-quality Class B assets, given the strong upside of a
real estate market in transformation. PROREIT is focused on
driving growth and creating value for its unitholders, while
maintaining a strong balance sheet.
Commercial real estate markets in Canada continue to perform well and property
values in PROREIT's markets are generally rising. Based on
current visibility, management believes that interest rates and
capital markets will remain stable.
Annual Meeting of Unitholders
All unitholders are invited to participate in the Annual Meeting
of Unitholders, which will be held this year on June 4, 2019 in the Blue room at the Ritz-Carlton
Hotel, 1228 Sherbrooke Street West in Montreal, at 11:00 a.m. Management and
Trustees of the REIT will be on hand to meet and chat with
unitholders over a light lunch, following the meeting.
About PROREIT
PROREIT is an unincorporated open-ended real estate investment
trust owning a diversified portfolio of 84 commercial properties
across Canada representing over
3.7 million square feet of gross leasable area. Established in
2013, PROREIT is mainly focused on strong secondary markets in
Quebec, Atlantic Canada and Ontario, with selective exposure in
Western Canada.
Non-IFRS and Operational Key Performance Indicators
PROREIT's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards
("IFRS"). In this press release, as a complement to results
provided in accordance with IFRS, PROREIT discloses and discusses
certain non-IFRS financial measures, including net operating income
("NOI"), adjusted funds from operations ("AFFO"), debt to gross
book value, interest coverage ratio, debt service coverage ratio,
funds from operations ("FFO"), AFFO payout ratio and same property
net operating income ("same property NOI"). These non-IFRS measures
are not defined by IFRS, do not have a standardized meaning and may
not be comparable with similar measures presented by other issuers.
PROREIT has presented such non-IFRS measures as Management believes
they are relevant measures of PROREIT's underlying operating
performance and debt management. Non-IFRS measures should not be
considered as alternatives to net income, cash generated from
(utilized in) operating activities or comparable metrics determined
in accordance with IFRS as indicators of PROREIT's performance,
liquidity, cash flow, and profitability. For a full description of
these measures and, where applicable, a reconciliation to the most
directly comparable measure calculated in accordance with IFRS,
please refer to the "Non-IFRS and Operational Key Performance
Indicators" section in PROREIT's management's discussion and
analysis for the three months and year ended December 31, 2018, available under PROREIT's
profile on SEDAR at www.sedar.com.
Forward-Looking Statements
This news release contains forward-looking statements within the
meaning of applicable securities legislation. Forward-looking
statements are based on a number of assumptions and are subject to
a number of risks and uncertainties, many of which are beyond
PROREIT's control, that could cause actual results and events to
differ materially from those that are disclosed in or implied by
such forward-looking statements.
Forward-looking statements contained in this press release
include, without limitation, statements pertaining to PROREIT's
future financial performance, the execution of its growth strategy,
including its objective to build a mid-cap diversified commercial
REIT, the internalization of its asset management function and its
proposed graduation to the TSX. PROREIT's objectives and
forward-looking statements are based on certain assumptions,
including that (i) PROREIT will receive financing on favourable
terms; (ii) the future level of indebtedness of PROREIT and its
future growth potential will remain consistent with the REIT's
current expectations; (iii) there will be no changes to tax laws
adversely affecting PROREIT's financing capacity or operations;
(iv) the impact of the current economic climate and the current
global financial conditions on PROREIT's operations, including its
financing capacity and asset value, will remain consistent with
PROREIT's current expectations; (v) the performance of PROREIT's
investments in Canada will proceed
on a basis consistent with PROREIT's current expectations; and (vi)
capital markets will provide PROREIT with readily available access
to equity and/or debt.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by this cautionary
statement. All forward-looking statements in this press release are
made as of the date of this press release. PROREIT does not
undertake to update any such forward-looking information whether as
a result of new information, future events or otherwise, except as
required by law.
Additional information about these assumptions and risks and
uncertainties is contained under "Risk Factors" in PROREIT's latest
annual information form, which is available on SEDAR at
www.sedar.com.
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 PROREIT