Allied Properties Real Estate Investment Trust ("Allied") (TSX:
"AP.UN") today announced results for its second quarter ended
June 30, 2021. “Our operating and leasing momentum continued
to accelerate in the second quarter,” said Michael Emory, President
& CEO. “FFO and AFFO per unit rose to record levels of 60.2
cents and 53.3 cents, respectively, consistent with our
expectations. Average in-place net rent per occupied square foot
rose again in the second quarter, coming in at $24.30 compared to
$24.13 in the first quarter and $23.29 in the comparable quarter
last year. Despite the pandemic, our space has become more
productive economically over the past six quarters.”
Operations
Gross monthly rent due in the second quarter was
$170 million. 1.2% of the total amount due derives from parking
use, 7.8% from retail use, 16.4% from urban-data-centre (UDC) use
and 74.6% from office use. Allied collected 97.2% of the total
amount due in the quarter and afforded deferrals aggregating $4.8
million, primarily to storefront retail users, at least $2.2
million of which is expected to be paid pursuant to the Canada
Emergency Rent Subsidy (CERS). Management continues the process of
scaling down its pandemic-related deferral program through
extensive case-by-case discussions with Allied’s storefront retail
users, most of which are exceptionally well located in downtown
Toronto. Accordingly, Allied did not adjust the provision in the
quarter, and Allied's total provision related to deferrals is $3
million. Allied has not yet utilized any portion of the
provision.
Leasing
In the second half of 2020 and thus far in 2021,
Allied experienced accelerating leasing momentum in both its
urban-workspace portfolio and UDC portfolio. Most notably, Allied
leased 22,447 square feet of space at 250 Front Street West in the
second quarter and 7,070 square feet at 151 Front Street West in
July, bringing the leased area of the facilities to 85.9% and 100%,
respectively, and the leased area of its UDC portfolio to
95.2%.
The occupied area of Allied’s rental portfolio
at the end of the second quarter was 91.1%, with leased area at
91.6%, essentially in-line with the prior quarter. Allied's average
in-place net rent per occupied square foot rose again in the second
quarter, coming in at $24.30 compared to $24.13 in the first
quarter and $23.29 in the comparable quarter last year. Space
available for sub-lease in Allied's portfolio continued to decline
in the second quarter, as expected.
Allied renewed or replaced leases for 59.5% of
the space that matured in the quarter. This resulted in an overall
increase of 14.2% in net rent per square foot from the affected
space (14.7% excluding leases that matured in Calgary) and a
weighted-average lease term of 5.6 years for the entire rental
portfolio.
Second-Quarter Results
Allied’s financial and operating results are
summarized below:
|
As at June 30 |
(In
thousands except for per unit and % amounts) |
2021 |
2020 |
Change |
% Change |
Investment properties |
$ |
9,068,005 |
|
$ |
8,582,075 |
|
$ |
485,930 |
|
5.7 |
% |
Unencumbered
investment properties |
$ |
7,052,930 |
|
$ |
6,322,810 |
|
$ |
730,120 |
|
11.5 |
% |
Cost of PUD as a % of
GBV |
10.1 |
% |
9.0 |
% |
1.1 |
% |
— |
|
NAV per
unit |
$ |
49.07 |
|
$ |
48.52 |
|
$ |
0.55 |
|
1.1 |
% |
Total indebtedness
ratio |
31.0 |
% |
29.3 |
% |
1.7 |
% |
— |
|
Annualized Adjusted
EBITDA |
$ |
360,532 |
|
$ |
342,146 |
|
$ |
18,386 |
|
5.4 |
% |
Net debt as a multiple
of Annualized Adjusted EBITDA |
|
8.1x |
|
|
7.6x |
|
|
0.5x |
|
— |
|
Interest-coverage ratio including capitalized interest and
excluding prepayment costs |
|
3.3x |
|
|
3.3x |
|
|
— |
|
— |
|
|
For the three months ended June 30 |
(In
thousands except for per unit and % amounts) |
2021 |
2020 |
Change |
% Change |
Adjusted EBITDA |
$ |
91,220 |
|
$ |
85,429 |
|
$ |
5,791 |
|
6.8 |
% |
Net income excluding
fair value adjustments and prepayment costs |
$ |
66,311 |
|
$ |
57,430 |
|
$ |
8,881 |
|
15.5 |
% |
Net
income |
$ |
98,523 |
|
$ |
92,961 |
|
$ |
5,562 |
|
6.0 |
% |
Same asset NOI -
rental portfolio |
$ |
83,528 |
|
$ |
78,495 |
|
$ |
5,033 |
|
6.4 |
% |
Same asset NOI - total
portfolio |
$ |
84,608 |
|
$ |
79,732 |
|
$ |
4,876 |
|
6.1 |
% |
FFO |
$ |
76,580 |
|
$ |
68,624 |
|
$ |
7,956 |
|
11.6 |
% |
All amounts below are
excluding condominium related items and prepayment
costs |
|
|
|
|
FFO |
$ |
76,705 |
|
$ |
68,652 |
|
$ |
8,053 |
|
11.7 |
% |
FFO per unit (diluted) |
$ |
0.602 |
|
$ |
0.557 |
|
$ |
0.045 |
|
8.1 |
% |
FFO pay-out ratio |
70.5 |
% |
74.0 |
% |
(3.5 |
%) |
— |
|
AFFO |
$ |
67,980 |
|
$ |
61,216 |
|
$ |
6,764 |
|
11.0 |
% |
AFFO per unit (diluted) |
$ |
0.533 |
|
$ |
0.497 |
|
$ |
0.036 |
|
7.2 |
% |
AFFO pay-out ratio |
79.6 |
% |
83.0 |
% |
(3.4 |
%) |
— |
|
|
For the six months ended June 30 |
(In
thousands except for per unit and % amounts) |
2021 |
2020 |
Change |
% Change |
Adjusted EBITDA |
$ |
180,266 |
|
$ |
171,073 |
|
$ |
9,193 |
|
5.4 |
% |
Net income excluding
fair value adjustments and prepayment costs |
$ |
129,181 |
|
$ |
118,147 |
|
$ |
11,034 |
|
9.3 |
% |
Net
income |
$ |
176,045 |
|
$ |
347,874 |
|
$ |
(171,829 |
) |
(49.4 |
%) |
Same asset NOI -
rental portfolio |
$ |
157,387 |
|
$ |
154,075 |
|
$ |
3,312 |
|
2.1 |
% |
Same asset NOI - total
portfolio |
$ |
161,682 |
|
$ |
155,976 |
|
$ |
5,706 |
|
3.7 |
% |
FFO |
$ |
135,995 |
|
$ |
139,714 |
|
$ |
(3,719 |
) |
(2.7 |
%) |
All amounts below are
excluding condominium related items and prepayment
costs |
|
|
|
|
FFO |
$ |
150,502 |
|
$ |
140,329 |
|
$ |
10,173 |
|
7.2 |
% |
FFO per unit (diluted) |
$ |
1.182 |
|
$ |
1.139 |
|
$ |
0.043 |
|
3.8 |
% |
FFO pay-out ratio |
71.9 |
% |
72.4 |
% |
(0.5 |
%) |
— |
|
AFFO |
$ |
134,309 |
|
$ |
123,584 |
|
$ |
10,725 |
|
8.7 |
% |
AFFO per unit (diluted) |
$ |
1.054 |
|
$ |
1.003 |
|
$ |
0.051 |
|
5.1 |
% |
AFFO pay-out ratio |
80.6 |
% |
82.2 |
% |
(1.6 |
%) |
— |
|
The operating results are summarized below:
|
For the six months ended June 30 |
|
2021 |
2020 |
Change |
% Change |
Leased area |
91.6 |
% |
94.7 |
% |
(3.1 |
%) |
— |
|
Occupied
area |
91.1 |
% |
94.4 |
% |
(3.3 |
%) |
— |
|
Average in-place net
rent per occupied square foot |
$ |
24.30 |
|
$ |
23.29 |
|
$ |
1.01 |
|
4.3 |
% |
Renewal and
replacement rate for leases maturing in the period |
64.9 |
% |
67.9 |
% |
(3.0 |
%) |
— |
|
Increase in net rent on maturing leases |
8.6 |
% |
19.3 |
% |
(10.7 |
%) |
— |
|
In the second quarter, same-asset NOI for the
rental portfolio was up 6.4%, FFO per unit was up 8.1% and AFFO per
unit was up 7.2%. In addition, NAV per unit increased by 1.1% from
the comparable quarter last year.
Allocation of Capital and
Funding
Allied continues to make strategic in-fill
acquisitions, principally in downtown Toronto. These afford
respectable yields and augment existing concentrations with future
intensification potential. Allied allocated $100 million to
acquisitions like these in 2020 and $94 million thus far in 2021.
Allied expects to allocate more capital in this way over the
remainder of the year.
Allied recently announced a large acquisition in
Montréal, the urban office component of Place Gare Viger. It will
significantly enhance Allied’s ability to provide distinctive urban
workspace to knowledge-based organizations. The acquisition will
also help Allied begin to expand the range of knowledge-based
organizations it serves to include the burgeoning biotech and
life-sciences sector.
Allied continues to allocate large amounts of
capital to development activity with completion and return
estimates remaining intact. Management estimates that current
developments will increase Allied’s annual EBITDA by approximately
$79 million and have a weighted average lease term of 13
years.
Outlook
Allied’s internal forecast for 2021 calls for
low-to-mid-single-digit percentage growth in each of same-asset
NOI, FFO per unit and AFFO per unit. While Allied does not forecast
NAV per unit growth, it does expect to propel further growth in
2021. Allied also expects to allocate a large amount of capital in
2021 with the same strategic coherence and discipline it
demonstrated in prior years.
There are material areas of uncertainty in the
current economic environment, one of the most significant for
commercial real estate being the lack of visibility as to how
office users, retail users and consumers will respond once
physical-distancing measures are lifted or relaxed across Canada.
There is also limited visibility as to the ultimate extent and
severity of the general economic disruption flowing from the global
pandemic.
Allied continues to have deep confidence in, and
commitment to, its strategy of consolidating and intensifying
distinctive urban workspace and network-dense UDCs in Canada’s
major cities. Allied firmly believes that its strategy is
underpinned by the most important secular trends in Canadian and
global real estate. Allied also firmly believes that it has the
properties, the financial strength, the people and the platform
necessary to execute its strategy for the ongoing benefit of its
unitholders.
Cautionary Statements
FFO, AFFO, NAV, EBITDA, Adjusted EBITDA, total
debt and net debt are not financial measures defined by
International Financial Reporting Standards (“IFRS”). Please see
Allied’s MD&A for a description of these measures and their
reconciliation to financial measures defined by IFRS, as presented
in Allied’s most recent financial statements. These statements,
together with accompanying notes and MD&A, have been filed on
SEDAR, www.sedar.com, and are also available on Allied’s website,
www.alliedreit.com.
NOI is not a measure recognized under IFRS and
does not have any standardized meaning prescribed by IFRS. NOI is
presented in this press release because Management of Allied
believes that this non-IFRS measure is an important financial
performance indicator. NOI, as computed by Allied, may differ from
similar computations as reported by other similar organizations
and, accordingly, may not be comparable to NOI reported by such
organizations.
This press release may contain forward-looking
statements with respect to Allied, its operations, strategy,
financial performance and condition and the expected impact of the
global pandemic and consequent economic disruption. These
statements generally can be identified by use of forward-looking
words such as "forecast", “may”, “will”, “expect”, “estimate”,
“anticipate”, “intends”, “believe” or “continue” or the negative
thereof or similar variations. Allied’s actual results and
performance discussed herein could differ materially from those
expressed or implied by such statements. Such statements are
qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations, including the effect of the global
pandemic and consequent economic disruption. Important factors that
could cause actual results to differ materially from expectations
include, among other things, general economic and market factors,
competition, changes in government regulations and the factors
described under “Risk Factors” in Allied’s Annual Information Form
which is available at www.sedar.com. The cautionary statements
qualify all forward-looking statements attributable to Allied and
persons acting on its behalf. Unless otherwise stated, all
forward-looking statements speak only as of the date of this press
release, and Allied has no obligation to update such
statements.
About Allied
Allied is a leading owner, manager and developer
of (i) distinctive urban workspace in Canada’s major cities and
(ii) network-dense urban data centres in Toronto that form Canada’s
hub for global connectivity. Allied’s business is providing
knowledge-based organizations with distinctive urban environments
for creativity and connectivity.
FOR FURTHER INFORMATION, PLEASE
CONTACT:
Michael EmoryPresident &
Chief Executive Officer(416)
977-0643memory@alliedreit.com |
Cecilia WilliamsExecutive Vice
President & Chief Financial Officer(416)
977-9002cwilliams@alliedreit.com |
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