TORONTO, ONTARIO–(Marketwired – April 29, 2016) – CHC Student Housing Corp. (“CHC” or the “Company”) (TSX VENTURE:CHC), Canada’s only publically traded Company providing high-quality purpose-built multi-residential student housing properties, today reported financial results for the three months and full year ended December 31, 2015. The financial statements and related Management’s Discussion and Analysis (“MD&A”) are available under CHC’s profile on SEDAR at www.sedar.com.
“The second half of 2015 was challenging for CHC as a direct result of the cancelled prospectus offering in July 2015, however, we firmly believe in the growth opportunities in our student housing platform and are steadfastly committed to our business model in becoming the market leader in the Canadian student housing space,” said Mark Hansen, President and CEO, CHC. “We have continued to explore a number of alternatives to enhance our existing platform with a view of returning to profitability in the future.”
“CHC has recently undertaken a number of strategic initiatives including successfully negotiating with key vendors to reduce fees relating to the cancelled offering resulting in $765,000 in combined concessions, which will be realized in future periods,” continues Mark Hansen. “Furthermore, the Company decided early in 2016 to internalize all aspects of property management at our London and Windsor properties. This move has allowed us to better serve our student community while increasing occupancy rates across the properties. In addition, the Company expects to realize annualized savings of approximately $100,000.”
Highlights during the three months and full year ending December 31, 2015:
- Property revenues of $1,371,675 and $5,194,800 respectively.
- Net Operating Income (NOI) of $561,684 and $2,278,835 respectively.
- Net loss of $4,841,243 and $9,945,796 respectively. This is due in part to expenses incurred in connection with the Company’s cancelled equity offering of $233,077 and $2,538,019 respectively. The Company successfully negotiated with certain key vendors to reduce fees to be granted combined concessions of $765,000, which will be realized in future periods. This will contribute significantly to help with the Company’s short-term payment obligations.
- There was also an interest expense on property debt of $622,921 and $2,850,268 respectively, and fair value loss on investment property of $4,176,166 for both periods. The fair value loss is attributable to underperformance of assets and capital expenditures that were not completed due to the cancelled equity offering.
- Additionally, stock based compensation of $432,726 and property forfeiture deposit of $750,000 negatively affected results for the full year.
- The Company was able to refinance two mortgages that came due during 2015 and is actively in discussions with a variety of lenders regarding upcoming debt maturities.
Summary of Selected Financial and Operational Information
The selected financial information below is based on and derived from the financial statements for the fourth quarter and full year 2015.
| Statement of financial position data | As at December 31 |
|
| 2015 | 2014 | |
| Cash | $842,808 | $2,232,112 |
| Investment properties | $64,895,000 | $68,694,530 |
| Total assets | $66,353,022 | $72,715,005 |
| Total current financial liabilities | $20,641,033 | $14,724,512 |
| Total non-current financial liabilities | $38,155,301 | $40,919,892 |
| Total liabilities | $58,796,334 | $55,644,404 |
| Statement of comprehensive loss data | Three Months Ended December 31 |
Full Year Ended December 31 |
||||||
| 2015 | 2014 | 2015 | 2014 | |||||
| Property revenues | $1,371,675 | $830,208 | $5,194,800 | $993,831 | ||||
| Property operating expenses | ($809,991 | ) | ($379,275 | ) | ($2,915,965 | ) | ($460,904 | ) |
| Net Operating Income (NOI) | $561,684 | $450,933 | $2,278,835 | $532,927 | ||||
| General & administrative expense | ($370,795 | ) | $(227,175 | ) | ($1,479,927 | ) | ($594,792 | ) |
| Transaction costs | ($233,077 | ) | ($1,385,970 | ) | ($2,538,019 | ) | ($1,710,354 | ) |
| Interest income | $32 | $7,015 | $2,475 | $20,096 | ||||
| Stock-based compensation | – | ($174,871 | ) | ($432,726 | ) | ($174,871 | ) | |
| Forfeiture of deposit | – | – | ($750,000 | ) | – | |||
| Interest expense | ($622,921 | ) | ($703,685 | ) | ($2,850,268 | ) | ($743,416 | ) |
| Fair value adjustment on investment properties | ($4,176,166 | ) | – | ($4,176,166 | ) | – | ||
| Net loss | ($4,841,243 | ) | ($2,033,753 | ) | ($9,945,796 | ) | ($2,670,410 | ) |
| Net loss per share – basic and diluted | ($2.07 | ) | ($1.09 | ) | ($4.26 | ) | ($2.66 | ) |
| Funds From Operations (FFO)(1) | ($432,000 | ) | ($647,783 | ) | ($3,231,611 | ) | ($960,056 | ) |
| FFO per share | ($0.18 | ) | ($0.35 | ) | ($1.38 | ) | ($0.96 | ) |
| Adjusted Funds From Operations (AFFO)(1) | ($518,650 | ) | ($208,007 | ) | ($2,934,289 | ) | ($513,079 | ) |
| AFFO per share | ($0.22 | ) | ($0.11 | ) | ($1.26 | ) | ($0.51 | ) |
| Distributions of cash dividends | Nil | Nil | Nil | Nil | ||||
| Weight average shares outstanding(2) | 2,335,181 | 1,864,636 | 2,335,181 | 1,004,656 | ||||
| (1) | FFO & AFFO are non-IFRS performance measures. Please refer to definition on pages 7 & 8 as well as the reconciliation from net loss on page below. |
| (2) | After giving retroactive effect to the 85 to 1 common share consolidation that occurred on February 19, 2015. |
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 December 31 |
Full Year Ended December 31 |
||||||
| 2015 | 2014 | 2015 | 2014 | |||||
| Net loss | ($4,841,243 | ) | ($2,033,753 | ) | ($9,945,796 | ) | ($2,670,410 | ) |
| Add: | ||||||||
| Transaction costs | $233,077 | $1,385,970 | $2,538,019 | $1,710,354 | ||||
| Fair value adjustment on investment properties | $4,176,166 | – | $4,176,166 | – | ||||
| Funds From Operations (FFO) | ($432,000 | ) | ($647,783 | ) | ($3,231,611 | ) | ($960,056 | ) |
| Add (subtract): | ||||||||
| Stock-based compensation(1) | – | $174,871 | $432,726 | $174,871 | ||||
| Amortization of financing transaction costs | $27,769 | $312,699 | $237,727 | $319,900 | ||||
| Straight line rent | $3,481 | ($7,026 | ) | $3,505 | ($7,026 | ) | ||
| Capital expenditures | ($117,900 | ) | ($40,768 | ) | ($376,636 | ) | ($40,768 | ) |
| Adjusted Funds From Operations | ($518,650 | ) | ($208,007 | ) | ($2,934,289 | ) | ($513,079 | ) |
| (1) | The adjustment for stock-based compensation relates to the accelerated amortization of cancelled options awarded in December 2014 and January 2015. Industry practice normally would not adjust for stock-based 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 stock-based compensation that is not cancelled. |
FFO for the three and twelve months ended December 31, 2015 amounted to ($432,000) or ($0.18) per share and ($3,231,611) or ($1.38) per share respectively. AFFO for the three and twelve months ended December 31, 2015 was a loss of ($518,650) or ($0.22) per share and ($2,934,290) or ($1.26) per share respectively.
The increased loss was a result of the costs of the cancelled equity offering, the forfeited deposit on the Taylorwood acquisition, an increase in corporate general and administrative expenses due to the full year expenses arising from the previously announced acquisitions and increased interest costs.
The following table reconciles IFRS cash used in operating activities to AFFO:
| Reconciliation from cash used in operating activity to AFFO | Three Months Ended December 31 |
Full Year Ended December 31 |
||||||
| 2015 | 2014 | 2015 | 2014 | |||||
| Cash used in operating activities | ($262,281 | ) | ($1,092,455 | ) | ($827,773 | ) | ($1,803,537 | ) |
| Add (subtract): | ||||||||
| Transaction costs | $233,077 | $1,385,970 | $2,538,019 | $1,710,354 | ||||
| Changes in non-cash working capital | ($584,506 | ) | ($331,277 | ) | ($3,307,958 | ) | ($231,233 | ) |
| Depreciation | ($1,701 | ) | ($4,355 | ) | ($7,914 | ) | ($4,355 | ) |
| Interest expense | ($595,152 | ) | ($390,981 | ) | ($2,612,541 | ) | ($423,516 | ) |
| Cash interest paid on mortgages payable | $809,813 | $265,859 | $2,410,514 | $279,976 | ||||
| Write off of deposit on property | – | – | ($750,000 | ) | – | |||
| Capital expenditures | ($117,900 | ) | ($40,768 | ) | ($376,636 | ) | ($40,768 | ) |
| Adjusted Funds From Operations | ($518,650 | ) | ($208,007 | ) | ($2,934,289 | ) | ($513,079 | ) |
Going Concern
The Company’s consolidated financial statements are prepared on a going concern basis.
The Company’s ability to continue as a going concern is subject to a number of risks and uncertainties. The Company has incurred net losses and used significant cash resources in its operating activities since incorporation. It has relied upon financing to fund its operations and acquisitions, primarily through debt and private equity placements.
If the Company is otherwise unable to satisfy its current liabilities through suitable agreements for debt refinancing, equity financing or other measures, planned operations could be scaled back and a portion of the Company’s asset could be sold. Additionally, the going concern assumption may no longer be appropriate for the consolidated financial statements and adjustments may be necessary to the carrying values of the assets and liabilities, the reported net loss and the classifications used in the statements of financial position.
About CHC Student Housing Corp.
CHC Student Housing (TSX VENTURE:CHC) is Canada’s only publically traded company offering high-quality purpose-built multi-residential student housing properties strategically located on campus or in close proximity to universities and colleges providing students a safe and secure living environment, affordable prices and high-quality amenities. CHC is focused on acquiring, developing and managing student housing in primary and well understood secondary markets in Canada. For more information, visit CHC at www.chcstudenthousing.com.
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 December 31, 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 CEO
647.288.9355