TORONTO, ONTARIO–(Marketwired – Nov. 21, 2016) – CHC Student Housing Corp. (“CHC” or the “Company”) (TSX VENTURE:CHC), Canada’s only publicly traded company providing high-quality purpose-built multi-residential student housing properties, today reported financial results for the three and nine months ended September 30, 2016. The financial statements and related Management’s Discussion and Analysis (“MD&A”) are available under CHC’s profile on SEDAR at www.sedar.com.
“As previously announced on August 25, 2016, we entered into an arrangement agreement with Dundee Acquisition Ltd. (TSX:DAQ.A)(TSX:DAQ.WT).” The pro forma company would be renamed Canadian Student Living Group Inc. and own interests in up to 18 properties comprising 3,655 student housing beds with an aggregate transaction value of approximately $364 million. “We remain extremely excited about this transaction and believe it creates a strong platform going forward for the benefit of all current CHC stakeholders. Continued progress is being made towards completing the proposed transaction in mid-December,” said Mark Hansen, President and CEO, CHC.
“Internalization of property management for the Company’s London and Windsor properties has been a success and has created many efficiencies. Through intentional, direct supervision and diligent monitoring of expenses, the operations continue to improve month after month as demonstrated by our Q3 results. In addition, these efforts have led to improved student occupancy levels for the next two quarters. Our focus remains twofold in completing the proposed transaction and ensuring sound operational performance.”
The Company’s consolidated financial statements are prepared on a going concern basis. The proposed business combination mentioned above is subject to certain risks and uncertainties due to the complexity of the transaction, it will be subject to certain conditions such as corporate and regulatory approvals, and there can be no assurance that it will be completed. The Company has taken certain measures to seek to ensure there is adequate capital in place to continue operations to the close of the transaction with DAQ.
Highlights during the three and nine months ending September 30, 2016:
- Property revenues of $1,255,977 and $3,806,698 respectively.
- Net Operating Income (NOI) of $668,589 and $1,839,440 respectively.
- Net income (loss) of ($302,728) and ($243,843) respectively.
Summary of Selected Financial and Operational Information
The selected financial information below is based on and derived from the financial statements for the third quarter of 2016.
| Statement of financial position data | As at 30-Sep-16 |
As at 31-Dec-15 |
||||
| Cash | 392,784 | 842,808 | ||||
| Investment properties | 64,994,578 | 64,895,000 | ||||
| Total assets | $ | 65,908,347 | $ | 66,353,022 | ||
| Total current financial liabilities | $ | 20,563,690 | $ | 20,641,033 | ||
| Total non-current financial liabilities | $ | 38,091,812 | $ | 38,155,301 | ||
| Total liabilities | $ | 58,655,502 | $ | 58,796,334 | ||
| Statement of comprehensive income (loss) data | Three Months Ended 30-September |
Nine Months Ended 30-September |
||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Property revenues | $ | 1,255,977 | $ | 1,219,784 | $ | 3,806,698 | $ | 3,823,125 | ||||||||
| Property operating expenses | (587,388 | ) | (649,160 | ) | (1,967,258 | ) | (2,107,635 | ) | ||||||||
| Net Operating Income (NOI) | 668,589 | 570,624 | 1,839,440 | 1,715,490 | ||||||||||||
| General & administrative expense | 281,035 | 159,783 | 825,739 | 687,623 | ||||||||||||
| Transaction costs | 20,566 | 23,251 | (733,088 | ) | 2,724,789 | |||||||||||
| Interest income | – | 1,976 | 40 | 2,443 | ||||||||||||
| Stock-based compensation/(recovery) | 1,000 | – | (33,000 | ) | 432,726 | |||||||||||
| Forfeiture of deposit | – | – | – | 750,000 | ||||||||||||
| Interest | 668,716 | 715,175 | 2,023,672 | 2,227,347 | ||||||||||||
| Net income (loss) | $ | (302,728 | ) | $ | (325,609 | ) | $ | (243,843 | ) | $ | (5,104,552 | ) | ||||
| Net income (loss) per share – basic and diluted | $ | (0.13 | ) | $ | (0.14 | ) | $ | (0.10 | ) | $ | (2.19 | ) | ||||
| Funds From Operations (FFO)(1) | $ | (282,162 | ) | $ | (302,358 | ) | $ | (976,931 | ) | $ | (2,379,763 | ) | ||||
| FFO per share | $ | (0.12 | ) | $ | (0.13 | ) | $ | (0.42 | ) | $ | (1.02 | ) | ||||
| Adjusted Funds From Operations (AFFO)(1) | $ | (258,493 | ) | $ | (290,950 | ) | $ | (1,029,238 | ) | $ | (1,995,792 | ) | ||||
| AFFO per share | $ | (0.11 | ) | $ | (0.13 | ) | $ | (0.44 | ) | $ | (0.85 | ) | ||||
| Distributions of cash dividends | Nil | Nil | Nil | Nil | ||||||||||||
| Weight average shares outstanding(2) | 2,335,181 | 2,335,181 | 2,335,181 | 2,335,181 | ||||||||||||
| (1) FFO & AFFO are non-IFRS performance measures. Please refer to definition on pages 6 & 7 as well as the reconciliation from net loss on page below. |
| (2) After giving retroactive effect to the 85 to 1 common share consolidation that occurred on February 19, 2015. |
FFO & AFFO Reconciliation
The following table reconciles FFO and AFFO to GAAP net income (loss) and comprehensive income (loss):
| Reconciliation from net income (loss) to FFO & AFFO | Three Months Ended 30-Sep |
Nine Months Ended 30-Sep |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net income (loss) | $ | (302,728 | ) | $ | (325,609 | ) | $ | (243,843 | ) | $ | (5,104,552 | ) | |||||
| Add: | – | ||||||||||||||||
| Transaction costs | 20,566 | 23,251 | (733,088 | ) | 2,724,789 | ||||||||||||
| Funds From Operations (FFO) | $ | (282,162 | ) | $ | (302,358 | ) | $ | (976,931 | ) | $ | (2,379,763 | ) | |||||
| Add (subtract): | |||||||||||||||||
| Stock-based compensation/(recovery)(1) | 1,000 | – | (33,000 | ) | 432,726 | ||||||||||||
| Amortization of financing transaction costs | 19,615 | 23,092 | 78,068 | 209,958 | |||||||||||||
| Straight line rent | 3,054 | 3,869 | 2,203 | 24 | |||||||||||||
| Capital expenditures | – | (15,553 | ) | (99,578 | ) | (258,737 | ) | ||||||||||
| Adjusted Funds From Operations | $ | (258,493 | ) | $ | (290,950 | ) | $ | (1,029,238 | ) | $ | (1,995,792 | ) | |||||
| (1) Compensation expense for option grants is based on the fair value of the options at the grant date and is recognized over the period from the grant date to the date the award is vested. A liability is recognized for outstanding options based upon the fair value as the Company is a mutual fund corporation and there are retraction rights to the share conditions attached to the common shares. During the period in which options are outstanding, the liability is adjusted for changes in the fair value with such adjustments being recognized as expense in the period in which they occur. |
The three and nine months ended September 30, 2016 adjustment for stock-based compensation/(recovery) relates to the mark-to-market adjustment of options awarded in December 2014 and January 2015.
FFO for the three months ended September 30, 2016 and 2015 amounted to ($282,162) or ($0.12) per share and ($302,358) or ($0.13) per share respectively. FFO for the nine months ended September 30, 2016 and 2015 amounted to ($976,931) or ($0.42) per share and ($2,379,763) or ($1.02) per share respectively. AFFO for the three months ended September 30, 2016 and 2015 was ($258,493) or ($0.11) per share and ($290,950) or ($0.13) per share respectively. AFFO for the nine months ended September 30, 2016 and 2015 was ($1,029,238) or ($0.44) per share and ($1,995,792) or ($0.85) per share respectively. The AFFO improvement is primarily driven by a reduction in capital and operating costs.
The following table reconciles IFRS cash used in operating activities to AFFO:
| Reconciliation from cash used in operating activity to AFFO | Three Months Ended 30-Sep |
Nine Months Ended 30-Sep |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Cash used in operating activities | $ | 59,606 | $ | 87,391 | $ | (401,608 | ) | $ | (565,491 | ) | |||||||
| Add (subtract): | |||||||||||||||||
| Net changes in working capital | (313,869 | ) | (304,361 | ) | (436,265 | ) | 1,337 | ||||||||||
| Depreciation | (4,772 | ) | (3,177 | ) | (11,060 | ) | (6,213 | ) | |||||||||
| Interest expense on mortgages payable | (649,101 | ) | (692,083 | ) | (1,945,604 | ) | (2,017,389 | ) | |||||||||
| Cash interest paid | 649,643 | 636,833 | 1,864,877 | 1,600,701 | |||||||||||||
| Write off of deposit on property | – | – | – | (750,000 | ) | ||||||||||||
| Capital expenditures | – | (15,553 | ) | (99,578 | ) | (258,737 | ) | ||||||||||
| Adjusted Funds From Operations | $ | (258,493 | ) | $ | (290,950 | ) | $ | (1,029,238 | ) | $ | (1,995,792 | ) | |||||
Going Concern
The Company’s ability to continue as a going concern is subject to material risks and uncertainties. The Company has incurred net losses and used significant cash resources in its operating activities since incorporation and it has relied upon financing to fund its operations and acquisitions, primarily through debt and private equity placements. The uncertainties above cast a significant doubt about the Company’s ability to continue as a going concern.
As announced on August 25, 2016, the Company has entered into an arrangement agreement with Dundee Acquisition Ltd. (“DAQ”), to effect a business combination under which the Company and DAQ will merge and concurrently acquire a number of additional student housing properties from various third party vendors. It is currently contemplated that the transaction will close towards mid-December 2016. The transaction is subject to certain conditions such as corporate or regulatory approvals, and there can be no assurance that it will be completed.
The Company has taken certain measures to seek to ensure there is adequate capital in place to continue operations to the close of the transaction with DAQ.
If the transaction with DAQ is not completed and the Company is otherwise unable to satisfy its current liabilities through suitable agreements for debt refinancing, equity financing or other measures, planned operations could be scaled back and a portion of the Company’s assets could be sold. Additionally, the going concern assumption may no longer be appropriate and adjustments would be necessary to the carrying values of the assets and liabilities, the reported net income (loss) and the classifications used in the statements of financial position.
About CHC Student Housing Corp.
CHC Student Housing (TSX VENTURE:CHC) is Canada’s only publicly traded company offering high-quality purpose-built multi-residential student housing properties strategically located on campus or in close proximity to universities and colleges providing students a safe and secure living environment, affordable prices and high-quality amenities. CHC is focused on acquiring, developing and managing student housing in primary and well understood secondary markets in Canada. For more information, visit CHC at www.chcstudenthousing.com.
Non-IFRS measures
The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). The following measures: net operating income (or “NOI”), funds from operations (or “FFO”), FFO per share, adjusted funds from operations (or “AFFO”) and AFFO per share, are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS, and should not be compared to or construed as alternatives to profit/loss, cash flow from operating activities or other measures of financial performance determined in accordance with IFRS. However, these non-IFRS measures are recognized supplemental measures of performance for real estate issuers widely used by the real estate industry, particularly by those publicly traded entities that own and operate income-producing properties, and the Company believes they provide useful supplemental information to both management and readers in measuring the financial performance of the Company. Further details on non-IFRS measures are set out in the Company’s Management’s Discussion and Analysis for the period ended December 31, 2015 and available on the Company’s profile on SEDAR at www.sedar.com.
Cautions Regarding Future Plans and Forward Looking Information
This press release contains forward-looking information within the meaning of Canadian securities laws. Forward-looking information is provided for the purposes of assisting the reader in understanding the Company’s financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Such information includes, without limitation, information regarding the business strategies of CHC. Although CHC believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct. Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. CHC cautions investors that any forward-looking information provided by CHC is not a guarantee of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to: CHC’s ability to complete proposed or contemplated transactions; the state of the real estate sector generally; recent market volatility; CHC’s ability to secure the necessary financing or to be fully able to implement its business strategies; and other risks and factors that CHC is unaware of at this time. A variety of factors, many of which are beyond the CHC’s control, affect the operations, performance and results of the Company and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in CHC’s materials filed with Canadian securities regulatory authorities from time to time, copies of which may be accessed through CHC’s profile on SEDAR at www.sedar.com. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information, as there can be no assurance that actual results will be consistent with such forward-looking information
The forward-looking information included in this press release relate only to events or information as of the date hereof. Except as specifically required by applicable Canadian law, CHC undertakes no obligation to update or revise publicly any forward-looking information, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there by any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
Neither the TSX Venture Exchange (“TSXV”) nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
Mark Hansen
President and CEO
647.288.9355
