TORONTO, ONTARIO–(Marketwired – Aug. 31, 2015) – CHC Student Housing Corp. (“CHC” or the “Company”) (TSX VENTURE:CHC) is pleased to announce that it has filed its audited financial statements and related management’s discussion and analysis (“MD&A”) for the three and six months ended June 30, 2015. The financial statements and MD&A are available under CHC’s profile on SEDAR at www.sedar.com.
Highlights
- Property revenue for the quarter of $1.2 million and $2.6 million year to date
- NOI of $0.5 million for the quarter and $1.1 million year to date
- Net loss of $3.8 million for the quarter and $4.8 million year to date, principally due to expenses incurred in connection with CHC’s proposed equity offering of approximately $2.6 million and interest expense on property debt of $0.7 million for the quarter and $1.5 million year to date
Subsequent to the end of the quarter, CHC determined not to proceed with its proposed public equity offering previously announced on May 14, 2015 due to macro driven volatility within equity markets especially for real estate companies and the inability to achieve offering terms acceptable to the Company, and withdrew its preliminary short form prospectus in respect of the offering. In connection with the termination of the offering, CHC determined not to proceed with the various property acquisitions described in the prospectus, with the exception of the proposed acquisition of the student housing property in Sudbury, Ontario, which remains under contract. As a result of terminating these acquisitions, CHC forfeited non-refundable deposits in the amount of $750,000 while refundable deposits in the amount of $375,000 were returned to the Company. Subsequent to the end of the quarter, CHC also extended the outside date for the proposed acquisition of the Sudbury property until September 30, 2016, in return for which the vendor agreed to return to CHC $450,000 of the funds previously held on deposit.
“Although we decided to withdraw our proposed offering, we received positive feedback about the student housing sector and CHC’s strategy from institutional investors, and we believe strongly in our strategy to consolidate and build this specialized asset class,” commented Mark Hansen, CHC’s President and CEO. “We intend to continue to pursue CHC’s stated strategy and business plan, and we are reviewing various strategic alternatives to the offering and for financing our operations and plan. In the meantime, we are focused in the short term on refinancing certain portions of our property debt in respect of our London property and on operational enhancements in order to improve our financial position and resources.”
Summary of Selected Financial and Operational Information
The selected financial information set out below is based on and derived from the financial statements for the three and six month period ended June 30, 2015, as well as the comparative periods from 2014 (which were also prepared in accordance with IFRS).
| Statement of Comprehensive Loss Data | Three Months Ended June 30, 2015 |
Three Months Ended June 30, 2014 |
Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 | ||||||||||||
| Property revenues | $ | 1,239,622 | $ | 59,692 | $ | 2,603,341 | $ | 59,692 | ||||||||
| Property operating expenses | (748,743 | ) | 26,414 | 1,458,475 | 26,414 | |||||||||||
| NOI | 490,879 | 33,278 | 1,144,866 | 33,278 | ||||||||||||
| General & administrative expense | (3,329,121 | ) | (131,001 | ) | (4,063,765 | ) | (139,754 | ) | ||||||||
| Acquisition transaction costs | (228,258 | ) | (189,242 | ) | (348,338 | ) | (207,703 | ) | ||||||||
| Interest income | 39 | 4,902 | 466 | 8,639 | ||||||||||||
| Interest expense | (742,225 | ) | (15,401 | ) | (1,512,172 | ) | (15,401 | ) | ||||||||
| Net loss | (3,808,686 | ) | $ | (297,464 | ) | (4,778,942 | ) | $ | (320,941 | ) | ||||||
| Net loss per share – basic and diluted | $ | (1.63 | ) | $ | (0.46 | ) | $ | (2.05 | ) | $ | (0.50 | ) | ||||
| FFO(1) | (3,580,428 | ) | $ | (108,222 | ) | (3,680,604 | ) | $ | (113,238 | ) | ||||||
| FFO per share | $ | (1.53 | ) | $ | (0.17 | ) | $ | (1.58 | ) | $ | (0.18 | ) | ||||
| AFFO(1) | (3,465,190 | ) | $ | (103,334 | ) | (3,764,507 | ) | $ | (108,350 | ) | ||||||
| AFFO per share | $ | (1.48 | ) | $ | (0.16 | ) | $ | (1.61 | ) | $ | (0.17 | ) | ||||
| Weight average shares outstanding | 2,335,181 | 647,059 | 2,335,181 | 647,059 | ||||||||||||
| 1 – FFO & AFFO are non-GAAP performance measures. Please refer to the note below on non-IFRS measures, the MD&A as well as the reconciliation from net loss on the page below. |
| Statement of Financial Position Data | As at June 30, 2015 |
As at December 31, 2014 |
||||
| Cash | $ | 507,972 | $ | 2,232,112 | ||
| Investment properties | $ | 68,936,148 | $ | 68,694,530 | ||
| Total assets | $ | 71,125,590 | $ | 72,715,005 | ||
| Mortgages payable, current | $ | 13,816,979 | $ | 13,730,604 | ||
| Mortgages payable, non-current | $ | 40,945,607 | $ | 40,919,892 | ||
| Total liabilities | $ | 58,401,950 | $ | 55,644,404 | ||
FFO & AFFO Reconciliation
The following table reconciles FFO and AFFO to GAAP net loss and comprehensive loss:
| Reconciliation from net loss to FFO & AFFO | Three Months Ended June 30, 2015 |
Three Months Ended June 30, 2014 |
Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 |
|||||||||||||
| Net loss | $ | (3,808,686 | ) | $ | (297,464 | ) | $ | (4,778,942 | ) | $ | (320,941 | ) | |||||
| Add: | |||||||||||||||||
| Acquisition transaction costs | 228,258 | 189,242 | 348,338 | 207,703 | |||||||||||||
| Funds From Operations | (3,580,428 | ) | $ | (108,222 | ) | (4,430,604 | ) | $ | (113,238 | ) | |||||||
| Add (subtract): | |||||||||||||||||
| Non-cash compensation(1) | – | – | 432,726 | – | |||||||||||||
| Rental guarantee | 66,275 | – | 132,549 | – | |||||||||||||
| Amortization of financing transaction costs | 92,363 | 5,788 | 186,867 | 5,788 | |||||||||||||
| Straight line rent | (2,300 | ) | – | (3,845 | ) | – | |||||||||||
| Maintenance capital expenditures reserve(2) | (41,100 | ) | (900 | ) | (82,200 | ) | (900 | ) | |||||||||
| Adjusted Funds From Operations | $ | (3,465,190 | ) | $ | (103,334 | ) | $ | (3,764,507 | ) | $ | (108,350 | ) | |||||
- The adjustment for non-cash compensation relates to the accelerated amortization of cancelled options awarded in December 2014. Industry practice normally would not adjust for non-cash compensation in the calculation of AFFO. However, as the options were cancelled and the balance expensed in the fiscal first quarter in its entirety, the Company has determined that under the circumstances adjusting AFFO is reasonable. The Company will follow industry practices under normal course for non-cash compensation that is not cancelled.
- Actual total capital expenditures for the three and six month periods ended June 30, 2015 were $107,047 and $241,618 respectively. Of these amounts only $8,692 and $10,217 respectively were classified as maintenance capital expenditures.
FFO for the three months ended June 30, 2015 and 2014 amounted to ($3,580,428) or ($1.53) per share and ($108,222) or ($0.17) per share, respectively. AFFO for the three months ended June 30, 2015 and 2014 was loss of ($3,465,190) and ($103,334) or ($1.48) per share and ($0.16) per share, respectively. The increased loss is primarily attributable to the costs of the cancelled equity offering of $2,567,582, the write off of the forfeited deposit on the Taylorwood acquisition, as well as an increase in corporate general and administrative expenses.
FFO for the six months ended June 30, 2015 and 2014 amounted to ($4,430, 604) or ($1.90) per share and ($113,238) or ($0.18) per share. AFFO for the six months ended June 30, 2015 and 2014 was ($3,764,507) and ($108,350) respectively. On a per share basis AFFO for the six month periods was ($1.61) and ($0.17) respectively. The increased loss was a result of the costs of the cancelled equity offering and an increase in corporate general and administrative expenses.
The following table reconciles GAAP cash used in operating activities to AFFO:
| Reconciliation from cash used in operating activity to AFFO | Three Months Ended June 30, 2015 |
Three Months Ended June 30, 2014 |
Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 |
|||||||||||||
| Cash used in operating activities | $ | (628,377 | ) | $ | (297,050 | ) | $ | (652,882 | ) | $ | (308,440 | ) | |||||
| Add (subtract): | |||||||||||||||||
| Acquisition transaction costs | 228,258 | 189,242 | 348,338 | 207,703 | |||||||||||||
| Write off of deposit on property | (750,000 | ) | – | (750,000 | ) | – | |||||||||||
| Changes in non-cash working capital | (2,282,860 | ) | 5,374 | (2,395,840 | ) | (6,713 | ) | ||||||||||
| Rental guarantee | 66,275 | – | 132,549 | – | |||||||||||||
| Depreciation | (2,137 | ) | – | (3,036 | ) | – | |||||||||||
| Non-cash interest expense | (55,250 | ) | – | (361,437 | ) | – | |||||||||||
| Capital expenditure reserve | (41,100 | ) | (900 | ) | (82,200 | ) | (900 | ) | |||||||||
| Adjusted Funds From Operations | $ | (3,465,190 | ) | $ | (103,334 | ) | $ | (3,764,507 | ) | $ | (108,350 | ) | |||||
About CHC Student Housing Corp.
CHC Student Housing Corp. is an owner and operator of student housing properties which is focused on acquiring high quality properties in close proximity to universities in primary and well understood secondary markets in Canada.
Non-IFRS measures
The Company’s consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS“). The following measures: net operating income (or “NOI“), funds from operations (or “FFO“), FFO per share, adjusted funds from operations (or “AFFO“) and AFFO per share, are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS, and should not be compared to or construed as alternatives to profit/loss, cash flow from operating activities or other measures of financial performance determined in accordance with IFRS. However, these non-IFRS measures are recognized supplemental measures of performance for real estate issuers widely used by the real estate industry, particularly by those publicly traded entities that own and operate income-producing properties, and the Company believes they provide useful supplemental information to both management and readers in measuring the financial performance of the Company. Further details on non-IFRS measures are set out in the Company’s Management’s Discussion and Analysis for the period ended June 30, 2015 and available on the Company’s profile on SEDAR at www.sedar.com.
Cautions Regarding Future Plans and Forward Looking Information
This press release contains forward-looking information within the meaning of Canadian securities laws. Forward-looking information is provided for the purposes of assisting the reader in understanding the Company’s financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Such information includes, without limitation, information regarding the business strategies of CHC. Although CHC believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct. Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. CHC cautions investors that any forward-looking information provided by CHC is not a guarantee of future results or performance, and that actual results may differ materially from those in forward-looking information as a result of various factors, including, but not limited to: CHC’s ability to complete proposed or contemplated transactions; the state of the real estate sector generally; recent market volatility; CHC’s ability to secure the necessary financing or to be fully able to implement its business strategies; and other risks and factors that CHC is unaware of at this time. A variety of factors, many of which are beyond the CHC’s control, affect the operations, performance and results of the Company and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in CHC’s materials filed with Canadian securities regulatory authorities from time to time, copies of which may be accessed through CHC’s profile on SEDAR at www.sedar.com. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information as there can be no assurance that actual results will be consistent with such forward-looking information
The forward-looking information included in this press release relate only to events or information as of the date hereof. Except as specifically required by applicable Canadian law, CHC undertakes no obligation to update or revise publicly any forward-looking information, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor shall there by any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
Neither the TSX Venture Exchange (“TSXV“) nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
Mark Hansen
President and Chief Executive Officer
(647) 288-9355
mhansen@chcrealty.ca
CHC Student Housing Corp.
Robert Waxman
Chief Financial Officer
(647) 288-9375
rwaxman@chcrealty.ca