TORONTO,
Aug. 20, 2013 /CNW/ - Summit
Industrial Income REIT ("Summit II" or the "REIT") (TSXV: SMU.UN)
announced today its operating and financial results for the three
and six months ended June 30,
2013.
SUMMARY OF QUARTERLY RESULTS:
($,000 except per Unit amounts) |
|
|
|
June 30, 2013 |
|
|
March 30, 2013 |
|
|
Dec. 31, 2012 |
|
|
Sept. 30, 2012 |
Revenue from Income properties |
|
|
|
5,655 |
|
|
2,683 |
|
|
1,670 |
|
|
306 |
Net Operating Income (NOI) |
|
|
|
4,419 |
|
|
2,109 |
|
|
1,237 |
|
|
311 |
Funds from Operations (FFO) |
|
|
|
2,715 |
|
|
1,229 |
|
|
778 |
|
|
33 |
FFO per Unit |
|
|
|
$0.15 |
|
|
$0.11 |
|
|
$0.11 |
|
|
$0.04 |
Adjusted Funds from Operations
(AFFO) |
|
|
|
2,502 |
|
|
1,161 |
|
|
720 |
|
|
33 |
AFFO per Unit |
|
|
|
$0.14 |
|
|
$0.11 |
|
|
$0.10 |
|
|
$0.04 |
Weighted Average Units Outstanding |
|
|
|
18,029 |
|
|
11,094 |
|
|
6,893 |
|
|
940 |
FFO Payout Ratio (%) |
|
|
|
81.3% |
|
|
- |
|
|
- |
|
|
- |
AFFO Payout Ratio (%) |
|
|
|
88.2% |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt to Gross Book Value (%) |
|
|
|
53.9% |
|
|
54.6% |
|
|
47.0% |
|
|
40.7% |
Debt Service Coverage (times) |
|
|
|
2.04 |
|
|
2.48 |
|
|
2.39 |
|
|
2.64 |
Interest Coverage (times) |
|
|
|
2.90 |
|
|
2.98 |
|
|
2.40 |
|
|
3.37 |
HIGHLIGHTS:
- Q2 2013 FFO payout ratio of 81.3%
- Q2 2013 AFFO payout ratio of 88.2% well ahead of forecast
95%
- Acquired fifteen light industrial properties through first six
months of 2013 totaling 2.0 million sq. ft. of GLA for $171.2 million at an average cap rate of
6.8%
- Sold two non-core properties in second quarter, with a third
held for sale
- Subsequent to June 30, 2013
waived conditions on six light industrial properties totaling
653,000 sq.ft. and one fully occupied office property for
$52.7 million at an average cap rate
of 7.2%
- Completed transactions will increase portfolio to 29 properties
aggregating 3.3 million sq. ft. of GLA
- Announced monthly cash distributions of $0.0408 per Unit (annualized $0.4896 per Unit)
- Implemented new DRIP with 5% bonus. Current participation rate
approximately 13.2%
- Acquisitions contribute to significant growth in FFO and AFFO
per unit in 2013
- Manager's ownership interest of 10.2% fully aligns interests
with all Unitholders
"Our acquisitions are generating significant
growth in our key performance benchmarks and we look to build on
this progress in the quarters ahead," stated Paul Dykeman, CEO. "We were particularly pleased
that our actual FFO and AFFO payout ratios in the second quarter
were well ahead of the forecast in our February equity offering
prospectus."
"As the REIT's manager, we continue to elect to
take the majority of the fees owing under our Management Agreement
in the form of Trust Units, and have participated in all the REIT's
equity offerings," added Lou Maroun,
Chairman. "Today our ownership interest in the REIT is
approximately 10.2%, and we will continue to maintain and grow this
participation going forward, fully aligning our interests with all
Unitholders."
STRONG PORTFOLIO GROWTH
Through the first six months of 2013 the REIT completed the
acquisition of 15 light industrial properties well-located in
Edmonton Alberta, the Greater Toronto Area, and Moncton New Brunswick aggregating
approximately 2.0 million square feet of gross leaseable area (GLA)
for a total purchase price of $171.2
million. The acquisitions were funded by cash raised in a
successful offering of Trust Units completed on February 26, 2013 raising $75.1 million in gross proceeds, and new mortgage
financings totaling $90.6
million.
Subsequent to the end of the second quarter the
REIT waived conditions and will be acquiring an additional six
light industrial properties totaling 653,000 square feet of GLA in
Brampton Ontario, Barrie Ontario and the Greater Montreal
Region, as well as one fully occupied office building in
Montreal, for a total purchase
price of approximately $52.7 million
satisfied by the assumption of an existing $5.4 million mortgage, new mortgages totaling
$26.3 million, with the balance in
cash from the REIT's revolving credit facility.
With the completion of the above-mentioned
acquisitions and the disposition of non-core properties, the REIT's
total property portfolio will consist of 29 properties totaling
approximately 3.3 million square feet of GLA with occupancy of
99.5% generating current annualized NOI of approximately
$21.0 million.
STRONG FINANCIAL RESULTS
Operating revenues increased to $5.7
million for the three months ended June 30, 2013 compared to $2.7 million for the three months ended
March 31, 2013 and $0.3 million in the prior year's second quarter.
The REIT's revenue growth is due primarily to acquisitions
completed over the last ten months, continuing strong occupancies
of 100% at June 30, 2013 compared to
99% at March 31, 2013, as well as
steady progress in leasing activities. For the six months ended
June 30, 2013 operating revenues were
$8.3 million compared to $0.5 million in the same period last year.
Net Operating Income (NOI) rose to $4.4 million in the second quarter of 2013
compared to $2.1 million in the first
quarter of the year and $0.2 million
in the second quarter of 2012. For the first six months of 2013 NOI
was $6.5 million compared to
$0.4 million last year.
Funds from Operations (FFO) for the three months
ended June 30, 2013 were $2.7 million ($0.151 per Unit) compared to $1.2 million ($0.111 per Unit) for the quarter ended
March 31, 2013 and $18,000 ($0.028 per
Unit) in the second quarter of 2012. The increase in 2013 is due to
the contribution from acquisitions completed over the last ten
months, improved occupancies and strong leasing activities. For the
six months ended June 30, 2013 FFO
was $3.9 million ($0.271 per Unit) compared to $95,000 ($0.145 per
Unit) in the same period last year.
Adjusted Funds from Operations (AFFO) in the
second quarter of 2013 rose to $2.5
million ($0.139 per Unit) from
$1.2 million ($0.111 per Unit) in the first quarter of the year
and $18,000 ($0.028 per Unit) in the second quarter of 2012.
For the six months ended June 30,
2013 AFFO was $3.7 million
($0.251 per Unit) compared to
$95,000 ($0.145 per Unit) in the same period last year.
The REIT's AFFO payout ratio was 88.2% through the second quarter
of 2013, well ahead of the 95% forecast in its February 2013 offering prospectus. Including the
benefit of the REIT's DRIP program, the effective payout ratio was
a conservative 76.5% in the quarter. As of June 30, 2013, the DRIP participation rate was
approximately 13.2%. The REIT established its monthly distribution
policy of $0.0408 per Unit, or
$0.4896 on an annual basis, on
March 15, 2013.
The REIT's growth has been highly accretive as,
despite the 62.5% increase in the weighted average number of Units
outstanding in the second quarter of 2013 compared to the first
quarter of the year, FFO per Unit and AFFO per Unit have increased
36.0% and 32.4 %, respectively.
ACTIVE LEASING PROGRAM
During and subsequent to the first six months of 2013 the REIT made
significant progress in leasing approximately 287,000 square feet
of space subject to leases with applicable property vendors (Head
Leases) with terms ending December
2014 and September 2015. Of
this space, 50,000 square feet is not set to commence until
November 2013. To date, leases have
been secured for 51,595 square feet of head lease space with offers
currently under negotiation for another 197,000 square feet.
Overall, leases representing only 1.4% of the
total property portfolio, or 39,000 square feet, renew in 2013 with
312,000 square feet, or 11.7% of the total portfolio, up for
renewal in 2014. The weighted average term to maturity for the
lease portfolio is approximately 5.9 years.
SOLID BALANCE SHEET AND LIQUIDITY
POSITION
Total assets increased to $253.4
million as at June 30, 2013
compared to $81.6 million at
December 31, 2012. Total debt
increased to $136.6 million at
June 30, 2013 from $38.3 million at December
31, 2013. The increases are due to the REIT's acquisitions
and related mortgage and other financings to complete the
purchases. At June 30, 2013 the
REIT's debt leverage ratio was 53.9% compared to 47.0% at
December 31, 2012. The weighted
average interest rate on the REIT's mortgage portfolio improved to
3.6% from 4.0% at December 31, 2012,
with a weighted average term to maturity of 5.7 years. Debt service
and interest coverage ratios for the six month period, improved to
2.14 times and 2.89 times, respectively, compared to 2.39 times and
2.40 times at December 31, 2012.
On March 11, 2013
the REIT increased its credit facility to $55 million, of which $40.6 million was drawn on the loan as at
June 30, 2013. Subsequent to the end
of the quarter the facility was increased to $68 million. If the REIT increased its borrowing
to the 65% maximum allowed under its Declaration of Trust, it would
have the capacity to purchase approximately $80 million in new properties as at August 20, 2013.
Under the terms of the REIT's Management
Agreement with Sigma Asset Management Limited (the Manager), the
Manager can elect to take the fees payable to it in the form of
Trust Units rather than in cash. In the first six months of 2013
the Manager used its acquisition fee proceeds of approximately
$1.6 million to acquire 240,444
Units, from the February 26, 2013
offering of 11,120,000 Units, further aligning the interests of the
Manager with all Unitholders. As well, certain members of the
Manager acquired 239,235 Units during the February offering. In
addition, through the six months ended June
30, 2013 certain members of the Manager acquired an
additional 223,000 Units on the TSX Venture Exchange, resulting in
the Manager owning directly and indirectly a retained interest of
approximately 10.2%.
INVESTOR CONFERENCE CALL
A conference call will be hosted by Summit II's management
team tomorrow, Wednesday August 21,
2013 at 10.00 am ET. The
telephone numbers to participate in the conference call are
North America Toll Free: (866)
226-1792 and Local Toronto
/ International: (416) 340-2216. The live audio conference call
will also be available as a webcast. To access the audio webcast
please access the link on the Investor Information page on our web
site at www.summitIIreit.com. The telephone numbers to listen to
the call after it is completed (Instant Replay) are North American
Toll Free (800) 408-3053 or Local Toronto / International (905)
694-9451. The Passcode for the Instant Replay is 5062738#. The
Instant Replay will be available until August 27, 2013. A webcast of the call will also
be archived on the REIT's web site at www.summitIIreit.com.
FINANCIAL AND OPERATING HIGHLIGHTS
|
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(in Thousands of Canadian dollars) |
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Three
months |
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|
Three months |
|
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|
Six
Months |
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|
Six Months |
(except where noted) |
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|
June 30,
2013 |
|
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|
June 30,
2012 |
|
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|
June 30,
2013 |
|
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|
June 30,
2012 |
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Portfolio Performance |
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|
Occupancy (1) |
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100% |
|
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|
100% |
|
|
|
100% |
|
|
|
100% |
Operating revenues |
|
|
|
|
5,655 |
|
|
|
263 |
|
|
|
8,338 |
|
|
|
521 |
Net operating income (NOI) |
|
|
|
|
4,419 |
|
|
|
185 |
|
|
|
6,528 |
|
|
|
432 |
|
|
|
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Operating Performance |
|
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Funds from operations (FFO) |
|
|
|
|
2,715 |
|
|
|
18 |
|
|
|
3,944 |
|
|
|
95 |
FFO per Unit (basic) |
|
|
|
$ |
0.151 |
|
|
$ |
0.028 |
|
|
$ |
0.271 |
|
|
$ |
0.145 |
Adjusted funds from operations (AFFO) |
|
|
|
|
2,502 |
|
|
|
18 |
|
|
|
3,663 |
|
|
|
95 |
AFFO per Unit (basic) |
|
|
|
$ |
0.139 |
|
|
$ |
0.028 |
|
|
$ |
0.251 |
|
|
$ |
0.145 |
Weighted average number of Units |
|
|
|
|
18,029 |
|
|
|
654 |
|
|
|
14,578 |
|
|
|
654 |
Cash distributions declared |
|
|
|
|
2,207 |
|
|
|
- |
|
|
|
2,942 |
|
|
|
13,346 |
Cash distributions declared per Unit (basic) |
|
|
|
$ |
0.1224 |
|
|
$ |
- |
|
|
$ |
0.1632 |
|
|
$ |
1.70 |
Cash distributions paid (2) |
|
|
|
|
1,914 |
|
|
|
- |
|
|
|
1,914 |
|
|
|
13,346 |
Proceeds from Units issued under
DRIP plan (2) |
|
|
|
|
291 |
|
|
|
- |
|
|
|
291 |
|
|
|
- |
FFO payout ratio without DRIP benefit
(2) |
|
|
|
|
81.3% |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
FFO payout ratio with DRIP benefit
(2) |
|
|
|
|
70.5% |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
AFFO payout ratio without DRIP benefit
(2) |
|
|
|
|
88.2% |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
AFFO payout ratio with DRIP benefit
(2) |
|
|
|
|
76.5% |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
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|
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|
Liquidity and Leverage |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
253,443 |
|
|
|
11,905 |
|
|
|
253,443 |
|
|
|
11,905 |
Total debt to gross book value |
|
|
|
|
53.9% |
|
|
|
70.4% |
|
|
|
53.9% |
|
|
|
70.4% |
Weighted average mortgage interest rate |
|
|
|
|
3.6% |
|
|
|
4.0% |
|
|
|
3.6% |
|
|
|
4.0% |
Weighted average mortgage term (years) |
|
|
|
|
5.7 years |
|
|
|
3.1 years |
|
|
|
5.7 years |
|
|
|
3.1 years |
Debt service coverage (times) |
|
|
|
|
2.04 times |
|
|
|
N/A |
|
|
|
2.14 times |
|
|
|
N/A |
Interest coverage (times) |
|
|
|
|
2.90 times |
|
|
|
N/A |
|
|
|
2.89 times |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
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|
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|
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|
Other |
|
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|
|
|
|
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|
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|
Properties acquired |
|
|
|
|
- |
|
|
|
- |
|
|
|
15 |
|
|
|
- |
Non-core properties disposed |
|
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
14 |
(1) Approximately 237,000 square feet (9% of total
GLA) is currently under Head Leases with an additional 50,000
square feet set
to commence November 2013. Approximately 50,600 square feet (2% of
total GLA), currently under Head Leases has been leased
and 154,000 square feet (6% of total GLA) is under short-term
leases (see "Active Leasing Program"). |
(2) On March 15, 2013, the Trust announced a cash
distribution policy to pay $0.0408 per Trust Unit. The first cash
distribution
was paid on April 15, 2013 to Unitholders of record on March 29,
2013. The three months ended June 2013 represents the first
quarter of distributions having been paid. |
About Summit II
Summit Industrial Income REIT is an unincorporated open-end trust
focused on growing and managing a portfolio of light industrial
properties across Canada. Summit
II's units are listed on the TSX-V and trade under the symbol
SMU.UN. For more information, please visit our web site at
www.summitIIreit.com.
Caution Regarding Forward Looking Information
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "believe", "plans", "intends",
"goal" and similar expressions are intended to identify
forward-looking information or statements. The forward-looking
statements and information are based on certain key expectations
and assumptions made by Summit II, including general economic
conditions. Although Summit II believes that the expectations and
assumptions on which such forward-looking statements and
information are based are reasonable, undue reliance should not be
placed on the forward looking statements and information because
Summit II can give no assurance that they will prove to be correct.
By its nature, such forward-looking information is subject to
various risks and uncertainties, which could cause the actual
results and expectations to differ materially from the anticipated
results or expectations expressed. These risks and uncertainties
include, but are not limited to, tenant risks, current economic
environment, environmental matters, general insured and uninsured
risks and Summit II being unable to obtain any required financing
and approvals. Readers are cautioned not to place undue reliance on
this forward-looking information, which is given as of the date
hereof, and to not use such forward looking information for
anything other than its intended purpose. Summit II undertake no
obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by law.
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 Summit Industrial Income REIT