VANCOUVER, BC–(Marketwired – May 10, 2017) – Pure Industrial Real Estate Trust (the “Trust”) (TSX: AAR.UN) is pleased to announce the release of its financial results for the three months ended March 31, 2017.
Q1-2017 Financial Results
The Q1-2017 financial results, consisting of the Trust’s unaudited condensed consolidated interim financial statements for the three months ended March 31, 2017, and management’s discussion and analysis of results of operations and financial condition (“MD&A”) dated May 9, 2017, are available on SEDAR (www.sedar.com) and the Trust’s website (www.piret.ca). Unless otherwise indicated, all amounts are in thousands of Canadian dollars.
Q1-2017 Highlights
(All metrics have been normalized for IFRIC 21 and assumes all property taxes have been pro-rated and accrued based on the number of days of ownership within the reporting year.)
- As at March 31, 2017, the Trust’s portfolio under management consists of 162 income producing properties representing gross leasable area (“GLA”) of 20.2 million square feet (“sf”), an increase from 19.6 million sf as at December 31, 2016. In addition, the Trust’s portfolio consists of 42.4 acres of land held for future development and one property under development, which will add 330,000 sf of GLA to the Trust’s portfolio, upon completion.
- Investment properties fair value including properties classified as assets held for sale as at March 31, 2017 is $2,475,513, a $43,836 increase from December 31, 2016. The increase in investment properties is due primarily to the acquisition of an 800,000 sf property in the U.S. of $51,536 and fair value gains of $63,332 of which 79% of the fair value gains were recognized in the Province of Ontario and GTA specifically, offset by the disposition of two properties in Alberta and Ontario with a combined fair value of $28,200, the disposition of a 75% interest in five properties to an existing joint venture partner with a fair value of $47,300, and the impact of a lower U.S. exchange rate at March 31, 2017 compared to December 31, 2016.
- Net asset value per unit increased to $5.74 per unit as at March 31, 2017 from $5.51 as at December 31, 2016, driven by fair value gains in the Trust’s portfolio and the net positive effect of the Trust’s portfolio upgrading initiatives.
- Debt to Gross Book Value, as defined in the MD&A, as at March 31, 2017 was 41.8%, a 50 basis point decrease from 42.3% as at December 31, 2016. The improvement in the leverage metric was predominantly attributable to the fair value increase to investment properties.
- Revenues for the three months ended March 31, 2017 increased 23.0% to $53,574 from $43,546 in the same period of 2016, primarily related to acquisition activity in 2016, increasing GLA from 17.4 million sf as at March 31, 2016 to 20.2 million sf as at March 31, 2017, and same property revenue growth.
- Adjusted Net Operating Income (“NOI”), as defined in the MD&A, for the three months ended March 31, 2017 increased 26.8% to $38,317 from $30,219 for the same period in 2016, primarily due to the acquisition of eight industrial properties in Alberta (the “Alberta Acquisition”) and the acquisition of six industrial properties in the Southeastern U.S. (the “U.S. Acquisition”) in Q4-2016, the closing of the Atlanta Acquisition (defined herein) in Q1-2017, and the NOI contribution generated by the completion of the Vaughan distribution facility and the Barrington, New Jersey expansion, both in Q2-2016.
- For the three months ended March 31, 2017, the Trust’s same property NOI (“SPNOI”), as defined in the MD&A, increased by $837 or 3.0% compared to the same period in prior year, from 16.9 million sf representing 80.0% of the Trust’s overall portfolio. The increase in SPNOI is primarily due to an average occupancy increase of 257,000 sf in Ontario and 135,000 sf in Alberta, offset by 160,000 sf of average vacancy in the USA due to an expected move out of a tenant in North Carolina. Excluding the expansion activities completed during 2016 in Ontario, New Jersey and Texas, SPNOI increased by 1.4% in aggregate and for the USA segment specifically, SPNOI decreased 10.6% (7.1% decrease in US$)
- Funds from Operations (“FFO”)1, as defined in the MD&A, for the three months ended March 31, 2017 increased 32.9% over the same period in the prior year and also increased 3.2% when compared to Q4-2016. FFO in the first quarter of 2017 relative to the first quarter of 2016 was positively impacted by SPNOI increases and FFO from net new acquisitions.
- FFO per Unit (“FFOPU”), as defined in the MD&A, of $0.10 remained consistent for the three months ended March 31, 2017 over the same period in the prior year and increased 2.0% when compared to Q4-2016.
- Adjusted Funds from Operations (“AFFO”)1, as defined in the MD&A, for the three months ended March 31, 2017 increased 34.2% over the same period in the prior year and increased 13.4% when compared to Q4-2016. The increase in AFFO, compared to the prior year, is primarily due to an increase in SPNOI, and a result of development and acquisition activities during fiscal 2016, partially offset by lost NOI from disposition activities in 2016 and the first quarter of 2017, and higher capital expenditures related to leasing activity.
- Adjusted Funds from Operations per Unit (“AFFOPU”), as defined in the MD&A, of $0.09 for the three months ended March 31, 2017 remained relatively flat to the prior year comparative and increased 12.2% from Q4-2016.
- G&A expenses for the three months ended March 31, 2017 increased to $2,315 from $1,640 compared to the same period in the prior year, representing 4.3% and 3.8% of rental revenues, respectively. Included in G&A expense is the non-cash fair value adjustment relating to the re-measurement of the Trust’s unit-based compensation liabilities, totaling $635, an increase of $140 relative to the three months ending March 31, 2016. G&A expenses, excluding the fair value re-measurement, represents 3.1% and 2.6% of rental revenues, respectively.
- The occupancy of the Trust’s portfolio was 96.3% as at March 31, 2017, excluding properties classified as assets held for sale, a decrease of 140 basis points from December 31, 2016. Including committed leasing, the occupancy is 97.3% as at March 31, 2017, compared to 98.4% as at December 31, 2016. The weighted average remaining lease term decreased from 6.4 years to 6.1 years between Q4-2016 and Q1-2017.
- During the three months ended March 31, 2017, 1.1 million sf of space expired. The Trust completed 658,000 sf of lease renewals, comprising 59.5% of the 1.1 million sf of expiring space, at rents with an average increase of 2.2% relative to the expiring rents, and approximately 149,000 sf of new leases were signed.
1 Definitions for FFO and AFFO have been revised to conform to industry standards prescribed by REALpac as further described in Section II “Funds from Operations and Adjusted Funds from Operations” in the MD&A.
Acquisitions and Dispositions
- On February 1, 2017, the Trust completed the acquisition of one investment property in Atlanta, Georgia (the “Atlanta Acquisition“) for a total purchase price of $51,536 (US$39,500) plus standard closing costs and adjustments of $300 (US$226). The acquisition was funded with existing cash on hand and the Trust’s operating line. On February 6, 2017, the Trust entered into a new mortgage secured by the asset in the amount of $25,062 (US$19,150) with an approximate 8-year term and a fixed interest rate of 3.82% per annum.
- On March 8, 2017, the Trust completed the acquisition of land adjacent to an existing property in San Antonio, Texas for a total purchase price of $3,718 (US$2,754) plus standard closing costs and adjustments of $181 (US$134). The acquisition was funded with cash on hand.
- During the three months ended March 31, 2017, the Trust completed the disposition of two investment properties located in North York, Ontario (included in assets held for sale as at December 31, 2016) and Calgary, Alberta for gross proceeds of $28,200. The Trust repaid related mortgages of $9,153 resulting in net proceeds of $19,047, before closing costs.
- In March, 2017 the Trust also completed the disposition of a 75% interest in five investment properties, four located in Alberta and one in Ontario, to an existing joint-venture partner, for gross proceeds of $47,300. The joint venture partner assumed their proportionate interest in the related mortgages totalling $17,772, for net proceeds to the Trust of $29,528, before closing costs.
Subsequent Events
- On April 1, 2017, the Trust completed the disposition of a 101,039 sf asset in Mississauga, Ontario for gross proceeds of $7,750. The asset has been classified as an asset held for sale since December 31, 2016 and was unencumbered at the time of sale.
- On April 4, 2017, the Trust completed the acquisition of the Cedar Port Distribution Centre, consisting of two newly-constructed buildings comprising a total of 996,482 sf in Houston, Texas (the “Houston Acquisition“) for $83,500 (US$63,500). The Houston Acquisition was funded with existing cash on hand and the Trust’s operating line. Subsequently, on April 7, 2017, the Trust entered into a new mortgage secured by the assets in the amount of $42,200 (US$31,500) with a 10-year term and a fixed interest rate of 3.88% per annum. Amounts drawn on the Trust’s operating line were subsequently repaid in full.
- On April 5, 2017, the Trust completed an equity offering and issued 23,977,500 Class A units, inclusive of 3,127,500 units issued pursuant to the exercise in full of the over-allotment option, on a bought deal basis, at a price of $6.00 per unit for total gross proceeds of $143,865.
- On April 7, 2017, the Trust completed the disposition of three assets totaling 112,783 sf in British Columbia for gross proceeds of $21,000. The three assets have been classified as assets held for sale since December 31, 2016 and were unencumbered at the time of sale.
- On April 12, 2017, the Trust entered into an unsecured $150,000 revolving operating loan facility (the “Unsecured Credit Facility“). The Unsecured Credit Facility has a three-year term and matures on April 12, 2020, bears interest currently at the lender’s prime rate plus 70 basis points or at the lender’s banker’s acceptance rate plus 170 basis points. The Unsecured Credit Facility provides that should the Trust achieve an investment grade rating, the applicable interest rates decline with improved credit ratings. The Trust has the option to increase the Unsecured Credit Facility up to an additional $100,000 for a total facility limit of $250,000. Concurrent with the closing of the Unsecured Credit Facility, the Trust terminated its $110,000 secured revolving operating loan facility on the same day. As of today’s date $nil are drawn on the Unsecured Credit Facility.
- On April 25, 2017, the Trust completed the disposition of a 30,082 sf asset in Calgary, Alberta for gross proceeds of $3,475. The asset has been classified as an asset held for sale since December 31, 2016 and was unencumbered at the time of sale.
- On May 1, 2017, the Trust completed the disposition of a 32,351 sf asset in Winnipeg, Manitoba for gross proceeds of $3,510. The asset has been classified as an asset held for sale since December 31, 2016 and was unencumbered at the time of sale.
- Pro-forma the impact of disposition activity in the first quarter of 2017 and subsequent to the quarter, as of today’s date, the Trust’s assets held for sale consists of 9 properties with a carrying value of $69,204 and related mortgage liabilities of $18,448.
- In April and May, the Trust repaid $22,821 of maturing mortgages. As a result of these mortgage repayments, the Trust’s unencumbered asset pool as of today’s date, has increased to $379,089.
Selected Financial Information
| March 31, | December 31, | |||
| 2017 | 2016 | |||
| Investment properties ($000s) | $2,370,574 | $2,320,845 | ||
| Mortgages payable and other loans ($000s) | $1,068,703 | $1,043,491 | ||
| Weighted average debt term to maturity on mortgages (years) | 5.0 | 5.0 | ||
| Debt to gross book value1 | 41.8% | 42.3% | ||
| Debt to EBITDA1 | 7.6 | 8.3 | ||
| Occupancy, end of period including committed2 | 97.3% | 98.4% | ||
| Occupancy, end of period2 | 96.3% | 97.7% | ||
| Occupancy, average for the three months ended | 97.1% | 97.2% | ||
| Three months ended March 31 | ||||
| ($000s, except per unit basis) | 2017 | 2016 | ||
| Revenue | $53,574 | $43,546 | ||
| Net operating income3 | $38,317 | $30,219 | ||
| Distributions declared per unit | $0.08 | $0.08 | ||
| FFO4per unit (fully diluted) | $0.10 | $0.10 | ||
| Payout Ratio5 | 75.3% | 77.2% | ||
| AFFO4per unit (fully diluted) | $0.09 | $0.09 | ||
| Payout Ratio5 | 84.7% | 87.7% | ||
| G&A as a Percent of Revenue | 4.3% | 3.8% | ||
| 1 | Non-IFRS measure and further defined in Section IV “Additional IFRS and Non-IFRS Measures” in the Trust’s MD&A. |
| 2 | Excludes properties classified as assets held for sale. |
| 3 | Net operating income has been normalized for IFRIC 21 (“Adjusted NOI”) and assumes all property taxes have been pro-rated and accrued based on number of days of ownership within the reporting year. |
| 4 | FFO and AFFO are widely accepted supplemental measures of financial performance for real estate entities. These measures are not defined under the International Financial Reporting Standards (“IFRS”). Definitions for FFO and AFFO have been revised to conform to industry standards. For a description of these measures and an IFRS to non-IFRS reconciliation, see the Trust’s MD&A under “Funds from Operations and Adjusted Funds from Operations” and “Operational and Financial Highlights” and “Non-IFRS Measures”. The Trust’s MD&A is available on SEDAR at www.sedar.com. |
| 5 | FFO and AFFO payout ratios are calculated based on the ratio of distribution rate to fully diluted FFO and AFFO per unit. |
Conference Call
As previously announced on April 12, 2017, management will host the conference call at 11:00 am (EDT) on Thursday, May 11, 2017, to review the financial results and operational developments for the quarter ended March 31, 2017.
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 11, 2017, 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 Thursday, May 18, 2017.
| Please enter the Replay ID# 140795, 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
Pure Industrial Real Estate Trust is an unincorporated, open-ended investment trust that owns and operates a diversified portfolio of income-producing industrial properties in leading markets across Canada and key distribution and logistics markets in the United States. The Trust is an internally managed REIT and is one of the largest publicly-traded REITs in Canada that offers investors exposure to industrial real estate assets in Canada and the United States. Additional information about the Trust is available at www.piret.ca and www.sedar.com.
Non-GAAP Measures:
The Trust prepares and releases condensed consolidated interim financial statements prepared in accordance with IFRS (GAAP). In this release, the Trust discloses and discusses certain non-GAAP financial measures, including FFO, FFO per Unit, AFFO, AFFO per Unit, adjusted net operating income (Adjusted NOI), Net Asset Value per Unit, occupancy, Loan to Gross Book Value, and capitalization rate. The non-GAAP measures are further defined and discussed in the MD&A dated May 9, 2017 and filed on SEDAR, which should be read in conjunction with this release. Since FFO, FFO per Unit, AFFO, AFFO per Unit, adjusted net operating income (Adjusted NOI), Net Asset Value per Unit, occupancy, Loan to Gross Book Value, and capitalization rate are not determined by IFRS, such measures may not be comparable to similar measures reported by other issuers. The Trust has presented such non-GAAP measures as management believes the measures are a relevant measure of the ability of the Trust to earn and distribute cash returns to Unitholders and to evaluate the Trust’s performance. These non-GAAP measures should not be construed as alternatives to net income (loss) or cash flow from operating activities determined in accordance with GAAP as an indicator of the Trust’s performance. Please refer to “Additional IFRS Measures and Non-IFRS Measures” in the Trust’s MD&A.
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 such as “outlook”, “believe”, “expect”, “may”, “anticipate”, “should”, “intend”, “estimates” 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 the Trust, including: (i)the accretive acquisition of properties and the anticipated extent of the accretion of any acquisitions, which could be impacted by demand for properties and the effect that demand has on acquisition capitalization rates and changes in the cost of capital; (ii) the maintaining of occupancy levels and rental revenue, which could be impacted by changes in demand for the Trust’s properties, tenant bankruptcies, the effects of general economic conditions and supply of competitive locations in proximity to the Trust’s locations; (iii) the overall indebtedness levels and the Trust’s ability to refinance expiring debt, which could be impacted by the level of acquisition activity and the state of debt markets in general; (iv) The Trust’s REIT status, which can be impacted by regulatory changes enacted by governmental authorities; (v) The Trust’s cost estimates and expected yields pertaining to development activity which could be impacted by construction cost overruns or delays; (vi) the anticipated distributions and payout ratios, which could be impacted by capital expenditures, results of operations and capital resource allocation decisions; and (vii) the anticipated replacement of expiring tenancies, which could be impacted by the effects of general economic conditions and the supply of competitive locations.
Although the Trust 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 the Trust 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 the Trust operates, prevailing economic conditions, and other factors, many of which are beyond the control of the Trust.
The forward-looking statements contained in this press release represent the Trust’s expectations as of the date hereof, and are subject to change after such date. The Trust 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.
For more information please contact:
Sylvia Slaughter,
Director of Investor Relations
(416) 479-8590 Ext 267
E-mail: sslaughter@piret.ca
TSX – AAR.UN