Agellan Commercial Real Estate Investment Trust Releases First Quarter 2014 Results

TORONTO--()--AGELLAN COMMERCIAL REAL ESTATE INVESTMENT TRUST (the “REIT”) (TSX:ACR.UN) is pleased to report its financial results for the three month period ended March 31, 2014. For the three month period ended March 31, 2014 the REIT has principally compared its results to the three month period ended December 31, 2013, instead of the three month period ended March 31, 2013, as the REIT commenced its operations on January 25, 2013 and, as such, only had 66 days of operations during the three month period ended March 31, 2013.

Summary of Financial Information:

         
FINANCIAL AND OPERATIONAL HIGHLIGHTS   March 31, 2014   December 31, 2013
(all dollar amounts in 000's, except per Unit amounts)        
 

Summary of Operational Information

Number of Properties 27 26
Gross Leasable Area ("GLA") (in 000's) 4,694 4,575
Occupancy % (at period end) 91.2% 92.5%
Average lease term to maturity (years) 4.3 4.3
 
Summary of Financial Information
Gross Book Value $571,176 $555,558
Debt $309,958 $301,991
Debt to Gross Book Value 54% 54%
Interest Coverage 3.5x 3.4x
Weighted average mortgage interest rate 3.8% 3.8%
           
For the three month period ended:
March 31, 2014 December 31, 2013 Variance
 
Total property and property related revenue $18,868 $17,474 $1,394

Adjusted net operating income(1)

$10,995 $10,242 $753
Funds from Operations ("FFO") $6,894 $6,512 $382
Adjusted Funds from Operations ("AFFO") $5,014 $4,616 $398
 
Basic and Diluted FFO per unit $0.30 $0.29 $0.01
Basic and Diluted AFFO per unit $0.22 $0.20 $0.02
Distributions per unit $0.19 $0.20 ($0.01)
 
Payout Ratio 90%
Units outstanding at period-end: 23,341,097
Weighted average Units outstanding 23,302,498        

(1)Adjusted for the application of IFRIC 21, please refer to the REIT’s Management Discussion and Analysis for the three month period ended March 31, 2014 for a discussion of IFRIC 21

Highlights of the Quarter:

  • Operating results for the three month period ended March 31, 2014 displayed FFO and AFFO per Unit growth as compared to the three month period ended December 31, 2013. FFO and AFFO for the three month period ended March 31, 2014 exceeded FFO and AFFO per unit for the three month period ended December 31, 2013 by 3.5% and 5.9% respectively.
  • FFO and AFFO for the three month period ended March 31, 2014 was $6,894 and $5,014 respectively, as compared to FFO and AFFO for the three month period ended December 31, 2013 of $6,512, and $4,616, respectively.
  • FFO and AFFO exceeded the prior quarter comparative figures mainly due to the accretive acquisitions of 10900 Corporate Center Drive (“Beltway III”) and 4920 Westway (“Beltway IV”) completed during the fourth quarter of 2013, and the accretive acquisition of 10130 Perimeter Parkway (“Linville”) on January 10, 2014.
  • On January 10, 2014, the REIT acquired Linville, a property located in Charlotte, North Carolina. The property was acquired for a total purchase price of USD $19.0 million excluding acquisition costs, representing an implied capitalization rate of 8.2%. The property was constructed in 2008 and has approximately 119,000 square feet of GLA. The property is considered a leading building in its submarket, well-positioned between Charlotte’s central business district and Lake Norman, an affluent residential area.
  • The REIT has entered into new leases with tenants occupying approximately 195,000 square feet, representing absorption of 44% of lease expirations in 2014. Included in the aforementioned new leases are approximately 89,000 of renewals that were completed with net rent that was more favourable to the REIT than the expiring in place net rent by approximately 2%, with renewals in Texas seeing growth of approximately 5%.
  • Significant leasing activity to date includes:
Property   Type   Square Footage
1100 Warrenville Renewal 32,205
5975 South Loop Renewal 20,137
9101 Jameel Renewal 7,302
4120 Freidrich Lane New Lease 14,782
3707 Interchange New Lease 14,400
9001 Jameel New Lease 7,926
6120 West by Northwest New Lease 9,000
2301 Minimax New Lease 10,063
  • The occupancy of the REIT’s portfolio decreased by 1.3% mainly as a result of two tenants who vacated a total of 59,000 square feet at two Houston properties during the first quarter of 2014.
  • The REIT ended the first quarter of 2014 with a debt ratio of 54%, comprised of a combination of fixed and floating rate debt. For the quarter, the REIT had an interest coverage ratio of 3.5x and a weighted average interest rate of 3.8%.
  • Throughout the remainder of 2014, the REIT will continue to pursue its asset recycling program where it will look to benefit from capitalization rate spreads, as well as improve the quality of the portfolio’s assets.
  • Progress continues to be made with a European car manufacturer to develop and lease a high quality facility on a minimum of 3.30 acres at Parkway Place. The REIT is currently negotiating the final lease agreement.

“For the fifth consecutive quarter, our results demonstrate our ability to deliver both internal and external growth in our portfolio,” says Frank Camenzuli, Chief Executive Officer of the REIT. “We are excited about the pace of leasing activity seen so far in 2014, as well as the advancements of the development activity at Parkway Place. In addition, we continue to make progress on our asset recycling program, which will further drive AFFO growth and enhance the overall quality of the REIT’s portfolio. We feel that our portfolio is well positioned to drive substantial internal growth going forward as a result of our exposure to high growth US markets such as Texas. In addition, the REIT’s portfolio value and AFFO are expected to continue to benefit from the strengthening U.S. dollar.”

Senior management will host a conference call to discuss the results on Wednesday, May 7, 2014 at 2:00 p.m. EST. In order to participate, please dial 1-416-340-2217 or 1-866-696-5910 and enter participant pass code: 4880154. You will be required to identify yourself and the organization on whose behalf you are participating. For operator assistance during the call, please press *0.

If you cannot participate on May 7, 2014 a replay of the conference call will be available by dialing 1-905-694-9451 or 1-800-408-3053 and entering participant pass code: 6689122. The replay will be available until May 22, 2014.

Other information:

Information appearing in this news release is a select summary of results. The consolidated financial statements along with management’s discussion and analysis for the REIT are available at www.agellancommercialreit.com and on www.sedar.com.

The REIT is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been created for the purpose of acquiring and owning industrial, office and retail properties in select major urban markets in the United States and Canada.

The REIT's current portfolio aggregates approximately 4.7 million square feet of gross leasable area in 27 properties. The properties are primarily located in major urban markets in the United States and Canada.

Non-IFRS supplemental measures:

Net operating income, FFO, AFFO, Payout Ratio, Cash Payout Ratio, Gross Book Value, Interest Coverage, Adjusted net operating income, and related per unit amounts are key measures of performance used by real estate operating companies; however, they are not defined by International Financial Reporting Standards (“IFRS”), do not have standardized meanings and are unlikely to be comparable with other issuers. These Non-IFRS measures are more fully defined in the REIT’s Management Discussion and Analysis for the three month period ended March 31, 2014, which is available on SEDAR at www.sedar.com.

Forward looking information:

This press release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information can be identified by words or expressions including, but not limited to, “plans”, “expects”, “estimates”, “anticipates”, “predicts”, “believes”, “continue”, or variations of such words and phrases or statements. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; the REIT’s ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate functions. The REIT’s objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward-looking information in this press release speaks as of the date of this press release. The REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in the REIT’s filings with securities regulators, including its latest annual information form and MD&A.

Contacts

Agellan Commercial Real Estate Investment Trust
Derek Dermott, 416-593-6800 ext. 269
President
ddermott@agellancapital.com
or
Frank Camenzuli, 416-593-6800 ext. 226
Chief Executive Officer
fcamenzuli@agellancapital.com

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Contacts

Agellan Commercial Real Estate Investment Trust
Derek Dermott, 416-593-6800 ext. 269
President
ddermott@agellancapital.com
or
Frank Camenzuli, 416-593-6800 ext. 226
Chief Executive Officer
fcamenzuli@agellancapital.com