Agellan Commercial Real Estate Investment Trust Releases Second 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 and six month periods ended June 30, 2014.

                   
FINANCIAL AND OPERATIONAL HIGHLIGHTS         June 30, 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 sqft) 4,693 4,575
Occupancy % (at period end) 90.7% 92.5%
Average lease term to maturity (years) 4.2 4.3
 
Summary of Financial Information
Gross Book Value $558,596 $555,558
Debt $301,245 $301,991
Debt to Gross Book Value 54% 54%
Interest Coverage 3.3x 3.4x
Weighted average mortgage interest rate 3.7% 3.8%
 
For the three month period ended
      June 30, 2014     June 30, 2013     Variance
 
Total property and property related revenue $18,034 $14,647 $3,387
Adjusted net operating income(1) $10,818 $8,866 $1,952
Funds from operations ("FFO") $6,770 $5,772 $998
Adjusted funds from operations ("AFFO") $5,096 $4,212 $884
 
Basic and diluted FFO per Unit $0.29 $0.30 ($0.01)
Basic and diluted AFFO per Unit $0.22 $0.22 $0.00
Distributions per Unit $0.194 $0.193 $0.001
 
Payout Ratio 89%
Units outstanding at period-end: 23,411,408
Weighted average Units outstanding     23,381,338            

(1)Adjusted for the application of IFRIC 21. Please refer to the REIT’s Management Discussion and Analysis for the three and six month periods ended June 30, 2014 for a discussion of IFRIC 21.

Significant Events of the Quarter:

  • FFO for the three month and six month periods ended June 30, 2014 was $0.290 per Unit and $0.585 per unit, respectively compared to $0.297 per Unit and $0.510 per Unit, respectively for the same periods ended June 30, 2013. AFFO for the three and six month periods ended June 30, 2014 was $0.218 per unit and $0.433 per Unit, respectively compared to $0.217 per unit and $0.369 per Unit, respectively for the same periods ended June 30, 2013.
  • The REIT’s financial results are impacted by lower than expected retention, driving a 2% reduction in the portfolio’s occupancy since the beginning of the fiscal year. This decrease is principally attributable to four tenants who vacated their Houston properties since the start of the year, leaving approximately 95,000 sqft of vacancy.
  • Management of the REIT remains optimistic about the Houston market, and has seen significant activity at the REIT’s Houston properties, including, subsequent to the quarter ended, leasing 2 units totalling approximately 36,000 sqft of the aforementioned 95,000 sqft vacated during the first six months of 2014. These new leases, on average, were executed with net rental rates $1 per square foot or 15% greater than the previously expired leases. Management of the REIT remains confident that the vacancy in the REIT’s Houston properties will be reduced over the remaining two quarters of 2014.
  • During the second quarter the REIT:
    • Leased the entire vendor head lease space at Plaza Bellehumeur to a third party tenant for a term of 5 years.
    • Expanded its lending network, strategically adding Wells Fargo Bank and the Royal Bank of Canada in place of debt previously held by Bank of America who is exiting the Canadian real estate lending market.
    • Extended the maturity of the first tranche of its credit facility. The tranche previously maturing January 25, 2015, was renewed and is now coterminous with the second tranche and matures January 25, 2017.
    • Came to agreement to sell 5800 West Kiest Boulevard in Dallas, Texas for US$11.6 million before closing costs, representing an in-place capitalization rate of 7.4%. The sale price represents an increase of approximately US$1.6 million, or 16%, from the purchase price paid by the REIT when it acquired the property in conjunction with its initial public offering in January 2013. The REIT intends to use the proceeds from the property sale to acquire properties in accordance with the REIT’s previously stated strategy.
  • Subsequent to the end of the second quarter the REIT:
    • Executed a binding offer to lease for 20,733 square feet of space at its Ottawa property for a lease term of 2 years.
    • Renewed its lease with Dominos at the REIT’s Maryland property. The lease will expire August 31, 2024.

“While our leasing retention levels were lower than expected in the quarter, we continue to remain positive on the occupancy potential of the portfolio,” says Frank Camenzuli, Chief Executive Officer of the REIT. “We are excited about the pace of leasing activity seen subsequent to the quarter, particularly in the Houston and Ottawa markets. 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, August 13, 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: 7409738. 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 August 13, 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: 4795537. The replay will be available until August 27, 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 and six month periods ended June 30, 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