WINNIPEG, Aug. 23, 2018 /CNW/ – Lanesborough Real Estate Investment Trust (“LREIT”) (TSXV: LRT.UN) today reported its operating results for the quarter ended June 30, 2018. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with interim management’s discussion & analysis â quarterly highlights and the interim financial statements for the quarter ended June 30, 2018, which may be obtained from the LREIT website at www.lreit.com or the SEDAR website at www.sedar.com.
ANALYSIS OF OPERATING RESULTS
|
Analysis of Loss |
||||||||||||||||||
|
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||||
|
Increase (Decrease) in Income |
||||||||||||||||||
|
2018 |
2017 |
Amount |
% |
2018 |
2017 |
|||||||||||||
|
Rentals from investment properties |
$ |
4,449,474 |
$ |
4,880,593 |
$ |
(431,119) |
(9)% |
$ |
8,916,977 |
$ |
9,525,108 |
|||||||
|
Property operating costs |
(2,828,493) |
(2,406,449) |
(422,044) |
(18)% |
(5,647,063) |
(4,818,851) |
||||||||||||
|
Net operating income |
1,620,981 |
2,474,144 |
(853,163) |
(34)% |
3,269,914 |
4,706,257 |
||||||||||||
|
Interest income |
50,758 |
44,612 |
6,146 |
14% |
100,584 |
90,224 |
||||||||||||
|
Interest expense |
(3,749,689) |
(3,713,754) |
(35,935) |
(1)% |
(7,395,823) |
(7,400,008) |
||||||||||||
|
Trust expense |
(322,573) |
(357,490) |
34,917 |
10% |
(703,447) |
(772,968) |
||||||||||||
|
Loss before the following |
(2,400,523) |
(1,552,488) |
(848,035) |
(55)% |
(4,728,772) |
(3,376,495) |
||||||||||||
|
Gain (loss) on sale of investment property |
(48,077) |
– |
(48,077) |
n/a |
(82,959) |
58,377 |
||||||||||||
|
Fair value adjustments |
(8,399,644) |
(7,346,907) |
(1,052,737) |
(14)% |
(23,505,387) |
(10,273,086) |
||||||||||||
|
Loss before discontinued operations |
(10,848,244) |
(8,899,395) |
(1,948,849) |
(22)% |
(28,317,118) |
(13,591,204) |
||||||||||||
|
Income (loss) from discontinued operations |
(152,608) |
(10,543) |
(142,065) |
(1,347) |
(178,462) |
35,547 |
||||||||||||
|
Loss and comprehensive loss |
$ |
(11,000,852) |
$ |
(8,909,938) |
$ |
(2,090,914) |
(23)% |
$ |
(28,495,580) |
$ |
(13,555,657) |
|||||||
Overall Operating Results
LREIT completed Q2-2018 with a loss and comprehensive loss of $11.00 million, compared to a loss and comprehensive loss of $8.91 million during Q2-2017. The increase in the loss mainly reflects $1.05 million unfavourable variance in the fair value adjustments of the investment properties and the investment property classified as held for sale, as well as a $0.85 million decrease in net operating income.
Losses related to fair value adjustments during both Q2-2018 and Q2-2017 were due to reduced revenue expectations as a result of reductions in the anticipated positive impact of the postâwildfire rebuilding efforts on the Fort McMurray rental market and increasing uncertainty surrounding a recovery of the Fort McMurray rental market.
The decrease in net operating income mainly reflects a decrease in rental revenue of $0.43 million and an increase in operating costs of $0.42 million. The decrease in rental revenue is mainly due to the decreased revenue of the held for sale and/or sold property segment, as a result of reduced occupancy and average rental rates at Woodland Park, the property that is classified as held for sale. The increase in property operating costs is mainly due to an increase in insurance related costs, an increase in utility costs, and an increase in property taxes. Also contributing to the increase in property operating costs was an increase in the property operating costs for the held for sale and/or sold properties as a result of certain condominium fees paid to the condominium corporation established as part of the Woodland Park Condominium Sales Program.
LREIT completed Q2-2018 with negative funds from operations (“FFO”) of $2.55 million, compared to negative FFO of $1.56 million during Q2-2017, representing a decrease in FFO of $0.99 million. The decrease in FFO is mainly due to a decrease in net operating income and an increase in loss from discontinued operations.
Revenues
|
Rental Revenue |
||||||||||||||||
|
Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
|
Increase (Decrease) |
||||||||||||||||
|
2018 |
2017 |
Amount |
% |
2018 |
2017 |
|||||||||||
|
Fort McMurray properties |
$ |
3,693,273 |
$ |
3,800,949 |
$ |
(107,676) |
(3)% |
$ |
7,349,353 |
$ |
7,371,036 |
|||||
|
Other investment properties |
369,677 |
391,025 |
(21,348) |
(5)% |
787,825 |
774,218 |
||||||||||
|
Subâtotal |
4,062,950 |
4,191,974 |
(129,024) |
(3)% |
8,137,178 |
8,145,254 |
||||||||||
|
Held for sale and/or sold properties |
386,524 |
688,619 |
(302,095) |
(44)% |
779,799 |
1,379,854 |
||||||||||
|
Total |
$ |
4,449,474 |
$ |
4,880,593 |
$ |
(431,119) |
(9)% |
$ |
8,916,977 |
$ |
9,525,108 |
|||||
|
Average Occupancy Level, by Quarter |
||||||||||||
|
2017 |
2018 |
|||||||||||
|
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
|||||||
|
Fort McMurray properties |
68% |
71% |
73% |
72% |
69% |
72% |
||||||
|
Other investment properties |
71% |
73% |
73% |
75% |
77% |
68% |
||||||
|
Total |
68% |
72% |
73% |
72% |
70% |
71% |
||||||
|
Held for sale and/or sold properties |
79% |
79% |
69% |
61% |
46% |
51% |
||||||
|
Average Monthly Rents, by Quarter |
||||||||||||
|
2017 |
2018 |
|||||||||||
|
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
|||||||
|
Fort McMurray properties |
$1,684 |
$1,707 |
$1,711 |
$1,697 |
$1,685 |
$1,650 |
||||||
|
Other investment properties |
$909 |
$909 |
$903 |
$905 |
$907 |
$909 |
||||||
|
Total |
$1,554 |
$1,573 |
$1,575 |
$1,563 |
$1,554 |
$1,525 |
||||||
|
Held for sale and/or sold properties |
$2,593 |
$2,611 |
$2,597 |
$2,549 |
$2,484 |
$2,258 |
||||||
During Q2-2018, total investment property revenue, excluding held for sale and/or sold properties, decreased by $0.13 million or 3%, compared to Q2-2017, mainly due to a decrease in the average rental rate of the Fort McMurray property portfolio.
During Q2-2018, revenue from the held for sale and/or sold properties decreased by $0.30 million or 44%, compared to Q2-2017, due to a decrease in the average occupancy level and average rental rate of Woodland Park (the property classified as held for sale).
The decrease in average occupancy is mainly due to the transfer of two corporate tenants to other LREIT properties that offered lower rental rates or were closer to urban amenities, and due to the departure of tenants who were awaiting the reconstruction of their homes. The Woodland Park property had a relatively high proportion of tenants awaiting the reconstruction of their homes as a result of the property’s townhome offering and their proximity to the area of Fort McMurray where the majority of the homes were lost to the wildfire.
The decrease in the average rental rate is mainly due to the turnover of a number of threeâbedroom units and townhome units, which had been rented shortly after the wildfire at rates that were higher than the competitive rates required in the current market environment.
Property Operating Costs
|
Analysis of Property Operating Costs |
|||||||||||||||||
|
Three Months Ended June 30 |
Six Months Ended June 30 |
||||||||||||||||
|
Increase (Decrease) |
|||||||||||||||||
|
2018 |
2017 |
Amount |
% |
2018 |
2017 |
||||||||||||
|
Fort McMurray properties |
$ |
2,145,605 |
$ |
1,883,781 |
$ |
261,824 |
14% |
$ |
4,353,123 |
$ |
3,743,618 |
||||||
|
Other investment properties |
389,788 |
300,223 |
89,565 |
30% |
746,070 |
604,955 |
|||||||||||
|
Subâtotal |
2,535,393 |
2,184,004 |
351,389 |
16% |
5,099,193 |
4,348,573 |
|||||||||||
|
Held for sale and/or sold properties |
293,100 |
222,445 |
70,655 |
32% |
547,870 |
470,278 |
|||||||||||
|
Total |
$ |
2,828,493 |
$ |
2,406,449 |
$ |
422,044 |
18% |
$ |
5,647,063 |
$ |
4,818,851 |
||||||
During Q2-2018, property operating costs, excluding the held for sale and/or sold properties, increased by $0.35 million or 16%, compared to Q2-2017, mainly due to an increase in insurance related costs. Other factors contributing to the increase in property operating costs were an increase in utility costs and an increase in property taxes.
After accounting for held for sale and/or sold properties, total property operating costs increased by $0.42 million or 18% during Q2-2018, compared to Q2-2017, The operating costs of the held for sale and/or sold properties increased by $0.07 million and was primarily due to the capital reserve portion of condominium fees paid by LREIT for its portion of ownership of Woodland Park. Prior to the establishment of the condominium sales program, capital expenditures at Woodland Park were capitalized.
Net Operating Income and Operating Margin
|
Three Months Ended June 30, 2018 and 2017 |
||||||||||||||||||
|
Net Operating Income |
||||||||||||||||||
|
Three Months Ended June 30 |
Increase (Decrease) |
Percent of Total |
Operating Margin |
|||||||||||||||
|
2018 |
2017 |
Amount |
% |
2018 |
2017 |
2018 |
2017 |
|||||||||||
|
Fort McMurray properties |
$ |
1,547,668 |
$ |
1,917,168 |
$ |
(369,500) |
(19)% |
95% |
77% |
42% |
50% |
|||||||
|
Other investment properties |
(20,111) |
90,802 |
(110,913) |
(122)% |
(1)% |
4% |
(5)% |
23% |
||||||||||
|
Subâtotal |
1,527,557 |
2,007,970 |
(480,413) |
(24)% |
94% |
81% |
38% |
48% |
||||||||||
|
Held for sale and/or sold properties |
93,424 |
466,174 |
(372,750) |
(80)% |
6% |
19% |
24% |
68% |
||||||||||
|
Total |
$ |
1,620,981 |
$ |
2,474,144 |
$ |
(853,163) |
(34)% |
100% |
100% |
36% |
51% |
|||||||
|
Six Months Ended June 30, 2018 and 2017 |
||||||||||||||||||
|
Net Operating Income |
||||||||||||||||||
|
Six Months Ended June 30 |
Increase (Decrease) |
Percent of Total |
Operating Margin |
|||||||||||||||
|
2018 |
2017 |
Amount |
% |
2018 |
2017 |
2018 |
2017 |
|||||||||||
|
Fort McMurray properties |
$ |
2,996,230 |
$ |
3,627,418 |
$ |
(631,188) |
(17)% |
92% |
77% |
41% |
49% |
|||||||
|
Other investment properties |
41,755 |
169,263 |
(127,508) |
(75)% |
1% |
4% |
5% |
22% |
||||||||||
|
Subâtotal |
3,037,985 |
3,796,681 |
(758,696) |
(20)% |
93% |
81% |
37% |
47% |
||||||||||
|
Held for sale and/or sold properties |
231,929 |
909,576 |
(677,647) |
(75)% |
7% |
19% |
30% |
66% |
||||||||||
|
Total |
$ |
3,269,914 |
$ |
4,706,257 |
$ |
(1,436,343) |
(31)% |
100% |
100% |
37% |
49% |
|||||||
During Q2-2018, the net operating income for the investment properties portfolio, excluding held for sale and/or sold properties, decreased by $0.48 million or 24%, compared to Q2-2017. The operating margin, excluding held for sale and/or sold properties, decreased from 48% during Q2-2017 to 38% during Q2-2018. The decreases are primarily due to the decrease in revenue and the increase in the property operating costs of the Fort McMurray property portfolio, as discussed above.
ABOUT LREIT
LREIT is a real estate investment trust, which is listed on the TSX Venture Exchange under the symbols LRT.UN (Trust Units) and LRT.DB.G (Series G Debentures). For further information on LREIT, please visit our website at www.lreit.com.
This press release contains certain statements that could be considered as forward-looking information. The forward-looking information is subject to certain risks and uncertainties, which could result in actual results differing materially from the forward-looking statements.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as the term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE Lanesborough Real Estate Investment Trust
View original content: http://www.newswire.ca/en/releases/archive/August2018/23/c5328.html