AGELLAN COMMERCIAL REAL ESTATE INVESTMENT TRUST Releases Second Quarter 2015 Results and Announces Intention to Commence a Normal Course Issuer Bid

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TORONTO, Aug. 10, 2015 /CNW/ – 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, 2015. All dollar amounts (except per Unit amounts) are in thousands of Canadian dollars (“CAD”), unless otherwise stated.

 ⁽¹⁾ This is a non-IFRS measure. Please see “Non-IFRS supplemental measures” below.

Summary of Significant Events:

• For the six month period ended June 30, 2015, the REIT achieved FFO per Unit of $0.591 and AFFO per Unit of $0.451. For the six month period ended June 30, 2014, the REIT reported FFO and AFFO per Unit of $0.585 and $0.433, respectively. The increases in FFO and AFFO represent growth of 1.0% and 4.2%, respectively.
• For the three month period ended June 30, 2015, the REIT achieved FFO per Unit of $0.282 and AFFO per Unit of $0.215. For the three month period ended June 30, 2014, the REIT reported FFO and AFFO per Unit of $0.290 and $0.218, respectively.
• The REIT’s Payout Ratio for the six month period ended June 30, 2015 decreased to 86% from 90% for the six month period ended June 30, 2014.
• The REIT has experienced NOI, FFO and AFFO growth during the first half 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 to the CAD.
• As at July 1, 2015, the occupancy of the REIT’s Same Store U.S. assets was 95.2%, which is an increase of approximately 5.5% from July 1, 2014. This increased occupancy has translated into Same Store NOI growth from U.S. assets, exclusive of the currency impact, of approximately 2.8% and 3.1% for the three and six month periods ended June 30, 2015 and 2014, respectively.
• Although the REIT’s NOI growth is primarily attributable to its U.S. assets, subsequent to June 30, 2015, the REIT entered into leases totalling approximately 18,000 square feet in Canada, inclusive of approximately 2,000 square feet of space that was previously subject to a vendor lease.
• On April 21, 2015, the REIT disposed of a 70,000 square foot single-tenant industrial building located at 8271 Anderson Court in Odenton, Maryland (“8271 Anderson Court“). The sale price for this non-core asset of the REIT was approximately US$11.3 million before closing costs, which represented an in-place capitalization rate of 6.5%. A US$3.7 million mortgage of the REIT that was previously secured by the property is now secured by 1800 Sandy Plains Industrial Parkway in Atlanta, Georgia (“1800 Sandy Plains Industrial Parkway”) as discussed below.
• On July 8, 2015, the REIT completed the acquisition of 1800 Sandy Plains Industrial Parkway, a multi-tenant property. The property consists of 3 buildings containing approximately 167,000 square feet of gross leasable area, and is currently 98% occupied by 18 tenants. In addition, the property contains approximately 4 acres of vacant land which provides an attractive potential future development opportunity for the REIT. The aggregate purchase price of approximately US$11.0 million before closing costs represents a going-in capitalization rate of approximately 8.13%. The REIT satisfied the purchase price for the property with certain of the net proceeds that it previously received in connection with the disposition of 8271 Anderson Court. In addition, a mortgage that was previously secured by 8271 Anderson Court is now secured by 1800 Sandy Plains Industrial Parkway.

“As evidenced by the leasing activity that our portfolio experienced during the second 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 June 30, 2015 on Tuesday, August 11, 2015 at 2:00 p.m. EST. To access the call, please dial 1-416-340-2217 or 1-866-696-5910 and enter the participant pass code: 6188197. For operator assistance during the call, please press *0.  A replay of the conference call will be available from 5:00 p.m. EST on August 11, 2015 until midnight EST on August 25, 2015. To access the replay, call 1-905-694-9451 or 1-800-408-3053 and enter participant pass code: 3618254.

Normal Course Issuer Bid and Suspension of Distribution Reinvestment Plan:

In addition, the REIT announced today that the Toronto Stock Exchange (the “TSX”) has accepted the REIT’s notice of intention to commence a normal course issuer bid for a portion of its issued and outstanding trust units (the “Units”).

The board of trustees of the REIT believes that the purchase by the REIT of a portion of its outstanding Units may, from time to time, be an appropriate use of available resources and in the best interest of the REIT and its unitholders. The board of trustees also believes that the ongoing purchase by the REIT of certain of its Units will afford additional liquidity for the issued and outstanding Units. It will also benefit all remaining unitholders by increasing their proportionate equity and voting interests in the REIT.

As of the date hereof, 23,602,796 Units are outstanding.  Pursuant to the notice, the REIT may purchase for cancellation up to a maximum of 1,000,000 Units, or approximately 5% of the public float of 19,185,833 Units, over the 12-month period commencing August 13, 2015 and ending on August 12, 2016 (or such earlier date as the REIT completes its purchases pursuant to the normal course issuer bid).  Any purchase under the normal course issuer bid will be made through the facilities of the TSX, Alpha and/or alternate trading systems in Canada and in accordance with applicable regulatory requirements at market prices prevailing at the time of acquisition.  In accordance with TSX rules, the number of Units that may be purchased pursuant to the normal course issuer bid is subject to a daily maximum of 6,853 Units (which is equal to 25% of the average daily trading volume of the Units for the six months ended July 31, 2015, being 27,413 Units).  Any Units purchased under the normal course issuer bid will be cancelled following purchase.  The REIT intends to fund the purchases of Units under the normal course issuer bid out of its available cash and/or undrawn credit facilities.

From time to time, when the REIT does not possess material non-public information about itself or its securities, it will enter into a pre-defined plan with its broker to allow for the repurchase of Units at times when the REIT ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise. Any such plans entered into with the REIT’s broker will be adopted in accordance with applicable Canadian securities laws.

In conjunction with the REIT’s intention to commence a normal course issuer bid, the REIT has suspended its distribution reinvestment plan (the “DRIP”) until further notice.  The DRIP had permitted Unitholders to apply their cash distributions to purchase Units of the REIT and receive a “bonus distribution” of Units equal in value to 3% of each distribution.  Unitholders who elected to participate in the DRIP will now receive cash distributions on the payment date.  In the event that the REIT elects to reinstate the DRIP in the future, Unitholders that were enrolled in the DRIP at the time of its suspension and remain enrolled at the time of its reinstatement will automatically resume participation in the DRIP.

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 and six month periods ended June 30, 2015 (“MD&A”) are available electronically on the REIT’s website at www.agellanreit.com and under the REIT’s issuer profile at 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 comprises approximately 4.7 million square feet of gross leasable area in 32 properties. The properties are primarily located in major urban markets in the United States and Canada.

Non-IFRS supplemental measures:

Certain terms used in this news release are not recognized under International Financial Reporting Standards (“IFRS”) and therefore these terms should not be construed as alternatives to IFRS measures, such as net income or cash flow from operating activities, nor are these terms necessarily comparable to similar measures presented by other reporting issuers. These terms are used by management to measure, compare and explain the operating results and financial performance of the REIT. Management believes that these terms are relevant measures in comparing the REIT’s performance to industry data and the REIT’s ability to earn and distribute cash to holders of the REIT’s units. These non-IFRS measures, including FFO, AFFO, Payout Ratio, Gross Book Value, NOI, and related per Unit amounts are defined and FFO and AFFO are reconciled to net income in the REIT’s MD&A, which should be read in conjunction with this news release.

Forward-looking information:

This press release contains 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”, “scheduled”, “estimates”, “intends”, “anticipates”, “predicts”, “projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “should”, “might”, “occur”, “be achieved” or “continue” or similar expressions. Forward-looking information is necessarily based on a number of estimates and assumptions that are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies, 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: the REIT’s future growth potential; results of operations; future prospects for additional investment opportunities in Canada and the U.S., including access to debt and equity capital at acceptable costs and the ability to obtain necessary approvals and to minimize any unexpected costs or liabilities, environmental or otherwise, relating to any acquisitions or dispositions; demographic and industry trends remaining unchanged, including occupancy levels, lease renewals, rental increases and retailer competition; future levels of the REIT’s indebtedness remaining at acceptable levels, including its credit rating; tax laws as currently in effect remaining unchanged, including applicable SIFT rules; and current economic conditions remaining unchanged, including interest rates and applicable foreign exchange rates. Readers, therefore, should not place undue reliance on any such forward-looking statements. All forward-looking information in this press release speaks only 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, except as required by applicable securities laws. All forward-looking statements in this press release are qualified by these cautionary statements. 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.

SOURCE Agellan Commercial Real Estate Investment Trust