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Enter Symbol
or Name
USA
CA



Agellan Commercial Real Estate Investment Tru
Symbol ACR
Shares Issued 23,537,359
Close 2015-05-04 C$ 9.17
Market Cap C$ 215,837,582
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Agellan pays out 19.4 cents per unit in Q1

2015-05-04 21:19 ET - News Release

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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