Mr. Derek Dermott reports
AGELLAN COMMERCIAL REAL ESTATE INVESTMENT TRUST RELEASES FIRST QUARTER 2015 RESULTS
Agellan Commercial Real Estate Investment Trust has released its financial results for the
three-month period ended March 31, 2015. (All dollar amounts (except per-unit amounts) are in thousands of Canadian dollars, unless
otherwise stated.)
FINANCIAL AND OPERATIONAL HIGHLIGHTS
(all dollar amounts in $000s, except per-unit amounts)
March 31, 2015 Dec. 31, 2014
Summary of operational information
Number of properties 32 27
Gross leasable area (GLA) (in 000s) 4,613 4,349
Occupancy % (at period-end) 93.7% 92.6%
Average lease term to maturity (years) 3.8 3.9
Summary of financial information
Gross book value $634,229 $597,461
Debt (face value) $335,056 $316,546
Debt to gross book value 53% 53%
Interest coverage 3.9x 3.3x
Weighted-average annual interest rate 4.0% 3.9%
For the three-month period ended
March 31, 2015 March 31, 2014
Total property and property-related revenue $20,663 $18,868
Adjusted net operating income $12,091 $10,995
Funds from operations (FFO) $7,283 $6,894
Adjusted funds from operations (AFFO) $5,565 $5,014
Basic and diluted FFO per unit $0.31 $0.30
Basic and diluted AFFO per unit $0.24 $0.22
Distributions per unit $0.194 $0.194
Summary of significant events
For the three-month period ended March 31, 2015, the REIT achieved funds from operations
per unit of 31.0 cents and adjusted funds from operations per unit of 23.7 cents. For the three-month
period ended March 31, 2014, the REIT reported FFO and AFFO per unit
of 29.6 cents and 21.5 cents, respectively. The increases in FFO and AFFO
represent FFO and AFFO growth of 5.6 per cent and 10.4 per cent, respectively.
The REIT's payout ratio for the three-month period ended March 31,
2015, decreased to 82 per cent from the payout ratio of 90 per cent for the three-month
period ended March 31, 2014.
During the three-month period ended March 31, 2015, the REIT's board
of trustees approved a new U.S.-focused investment strategy that was
recommended by the REIT's external asset manager pursuant to which the
REIT intends to seek to dispose of all or substantially all of its
existing Canadian real estate assets and reinvest the related proceeds
of disposition in real estate assets in the United States. The REIT
believes that acquiring additional assets located in the United States
will be in the best interest of the REIT and its unitholders as
valuations, financing and operating fundamentals in the United States
are currently more attractive than in Canada. The disposition of all
or substantially all of the REIT's existing Canadian real estate assets
would increase the taxable portion of the REIT's distribution to its
unitholders in the year of disposition.
The REIT has experienced strong net operating income, FFO and AFFO growth during the
first quarter of 2015 primarily as a result of occupancy gains from
the REIT's U.S. assets, and strength in the U.S. economy displayed
through the increased value in the United States dollar compared with the Canadian dollar.
As at Jan. 1, 2015, the occupancy rate of the REIT's U.S. assets
was 93.4 per cent and increased during the first quarter of 2015. As at April
1, 2015, the comparable occupancy rate of the REIT's U.S. assets was
94.0 per cent, excluding the Oakbrook Technology Center,
which was acquired on Feb. 9, 2015.
The aforementioned occupancy gains and strength in the U.S. dollar compared with
the Canadian dollar were positively reflected in the REIT's same-store adjusted
NOI, which grew $977, or 9.5 per cent, quarter over quarter, including the
impact of foreign exchange.
On Feb. 2, 2015, the REIT completed the lease renewal of 103,645
square feet of the expiring 117,437 square feet in Austin, Tex., to
Life Technologies Corp., a wholly owned subsidiary of Thermo
Fisher Scientific Inc., for a term of five years ending June, 2020. The
lease includes an increase in net rent per square foot of
approximately 27 per cent versus the tenant's in-place net rent per square
foot. As well, the lease renewal represented approximately 33 per cent of all
of the REIT's Texas lease expiries during 2015.
On Feb. 5, 2015, consistent with the REIT's strategy of disposing
all or substantially all of its existing Canadian real estate assets,
the REIT completed the sale of 20 Valleywood Dr. in Markham, Ont.,
to a third party purchaser for approximately $8.2-million before
closing costs, which represented an in-place capitalization rate of
approximately 5.9 per cent.
On Feb. 9, 2015, the REIT completed the acquisition of six
industrial properties located in
Atlanta, Ga., for an aggregate purchase price of approximately
$12.9-million (U.S.) before closing costs. The purchase price represented a
going-in capitalization rate of approximately 8.4 per cent. The Oakbrook
Technology Centre consists of approximately 299,000 square feet in a
parklike setting and is 95 per cent occupied with 28 tenants.
On March 2, 2015, the REIT obtained $10-million (U.S.) of additional debt
financing on three office properties located in Houston, Tex. The
interest rate on this additional debt was effectively fixed by the
REIT by entering into an interest rate swap agreement, at a weighted-average interest rate of approximately 3.5 per cent per annum. These funds
were used to temporarily reduce the amount drawn from the REIT's
credit facility.
On March 6, 2015, the REIT announced that Anthony Messina was
appointed by the board of trustees of the REIT to serve as a new
independent trustee of the REIT. In addition, the REIT announced that
Richard Dansereau, an independent trustee of the REIT and former
interim chair of the board of trustees of the REIT, was appointed as
chair of the board of trustees of the REIT.
On April 21, 2015, the REIT disposed of a 70,000-square-foot
single-tenant industrial building located at 8271 Anderson Ct. in
Odenton, Md. The sale price for this non-core asset of the REIT
was approximately $11.3-million (U.S.) before closing costs, which
represented an in-place capitalization rate of approximately 6.5 per cent. A
$3.7-million (U.S.) mortgage of the REIT that was previously secured by the
property is now secured by cash until a replacement property is
acquired by the REIT and secured under the mortgage.
Subsequent to March 31, 2015, the occupancy rate of the REIT's
Consumers Road complex decreased by 7 per cent due to the impact of IBM
Canada's early renewal that was completed during the second quarter of
2013. IBM Canada's renewal premises comprises both office and data
centre space, as well as approximately 20,000 square feet of enclosed
space outside the building's BOMA GLA that is used to support IBM's
data centre space. The lease renewal consisted of IBM renewing
approximately 102,000 square feet (which commenced on April 1, 2015)
compared with approximately 168,000 square feet that were previously
occupied. IBM's lease term, however, was extended for an additional 10
years until March 31, 2025, and reflected an increase in the net rent
per square foot paid by IBM. The reduction in occupancy was partially
offset by approximately 10,000 square feet of new leasing that was
completed at the Consumers Road complex within the three-month period
ended March 31, 2015. The result of this renewal and of the new leasing
represents a decrease of approximately 1.25 cents of AFFO per unit per
quarter assuming no other changes at the Consumers Road complex.
"As evidenced by the leasing activity that our portfolio experienced
during the first quarter of 2015, the U.S. commercial real estate market
has continued to gain momentum," said Frank Camenzuli, chief executive
officer of the REIT. "We continue to be strong believers in the U.S.
commercial real estate market and intend to invest in specific areas
where we can maximize the growth potential of the assets."
The REIT will hold a conference call to discuss the REIT's financial
performance for the period ended March 31, 2015, on May 5, 2015,
at 4 p.m. EST. To access the call, please dial 1-416-695-7806 or
1-866-696-5910 and enter the participant passcode 2232295. For
operator assistance during the call, please press star zero. A replay of the
conference call will be available from 5 p.m. EST on May 5, 2015,
until midnight EST, May 19, 2015. To access the replay, call
1-905-694-9451 or 1-800-408-3053 and enter participant passcode
2288555.
Other information
Information appearing in this news release is a select summary of
results. The REIT's consolidated financial statements, along with
management's discussion and analysis, for the three-month period ended
March 31, 2015, are available electronically on the REIT's
website
and under the REIT's issuer profile at SEDAR.
We seek Safe Harbor.
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