– FFO per unit up for the year – developments/redevelopments, lower finance costs and lease buyout revenues drive increase
FREDERICTON, Feb. 22, 2018 /CNW/ – Plaza Retail REIT (TSX: PLZ.UN) (“Plaza” or the “REIT”) today announced its results for the three months and year ended December 31, 2017.
Michael Zakuta, President and CEO said, “We are pleased with our results for the year. Our focus continues to be on delivering per unit growth through value-add developments and redevelopments of high quality retail projects leased to national retailers.”
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Financial Results Summary |
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(CAD$000s, except percentages, per unit amounts and coverage ratios) |
Three Months Ended Dec 31, 2017 |
Three Months Ended Dec 31, 2016 |
Change |
Twelve Months Ended Dec 31, 2017 |
Twelve Months Ended Dec 31, 2016 |
Change |
|
Total property rental revenue |
$25,679 |
$25,241 |
+1.7% |
$102,887 |
$100,215 |
+2.7% |
|
Total property operating expenses |
$10,190 |
$9,585 |
+6.3% |
$38,529 |
$37,543 |
+2.6% |
|
Total NOI |
$15,489 |
$15,656 |
-1.1% |
$64,358 |
$62,672 |
+2.7% |
|
Same-asset rental revenue |
$21,879 |
$21,722 |
+0.7% |
$87,922 |
$87,844 |
+0.1% |
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Same-asset operating expenses |
$7,682 |
$7,329 |
+4.8% |
$29,805 |
$29,771 |
+0.1% |
|
Same-asset NOI |
$14,197 |
$14,393 |
-1.4% |
$58,117 |
$58,073 |
+0.1% |
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FFO |
$8,508 |
$8,619 |
-1.3% |
$35,888 |
$32,650 |
+9.9% |
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FFO per unit |
$0.083 |
$0.087 |
-4.6% |
$0.351 |
$0.333 |
+5.4% |
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FFO payout ratio |
81.5% |
75.1% |
+8.5% |
77.1% |
78.5% |
-1.8% |
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AFFO |
$7,862 |
$7,658 |
+2.7% |
$33,288 |
$29,259 |
+13.8% |
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AFFO per unit |
$0.077 |
$0.077 |
+0.0% |
$0.325 |
$0.298 |
+9.1% |
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AFFO payout ratio |
88.2% |
84.5% |
+4.4% |
83.1% |
87.6% |
-5.1% |
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Profit and total comprehensive income |
$9,530 |
$9,574 |
-0.5% |
$23,447 |
$32,758 |
-28.4% |
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EBITDA |
$14,620 |
$14,969 |
-2.3% |
$60,016 |
$58,661 |
+2.3% |
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Total distributions to unitholders |
$6,937 |
$6,472 |
+7.2% |
$27,674 |
$25,621 |
+8.0% |
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Interest coverage ratio |
2.30 x |
2.27 x |
+1.3% |
2.36 x |
2.18 x |
+8.3% |
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Debt coverage ratio |
1.63 x |
1.64 x |
-0.6% |
1.68 x |
1.58 x |
+6.3% |
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Refer to “Non-IFRS Financial Measures” below for further explanations. |
Three Months Ended December 31, 2017 Financial Highlights
- Funds from operations (“FFO”) per unit decreased to $0.083, down 4.6% from $0.087 in the prior year and adjusted funds from operations (“AFFO”) per unit was $0.077, consistent with 2016. FFO and AFFO per unit amounts for the current quarter were impacted by the vacancies caused by two significant lease buyouts concluded in 2017, as well as a larger number of units outstanding due to the conversion of $14.6 million in Series C convertible debentures into 2.8 million units in late 2016 and January 2017, upon the issuance of a redemption notice for the Series C convertible debentures in November 2016;
- FFO and AFFO payout ratios were 81.5% and 88.2%, respectively, compared to 75.1% and 84.5% in 2016;
- Net property operating income (“NOI”) was $15.5 million, down 1.1% from $15.7 million in the same period in the prior year, impacted mainly by: a decrease in same-asset NOI and higher administrative expenses charged to NOI, partly offset by growth in NOI from developments and redevelopments in the current quarter;
- Same-asset NOI was $14.2 million compared to $14.4 million for the same period in the prior year, down 1.4%, mainly due to vacancies from two lease buyouts concluded during the year, accounting for $180 thousand of the decrease, as well as vacancies incurred in Q4 in the portfolio, mainly from one of the REIT’s enclosed malls where a 40 thousand square foot second floor office tenant vacated. These were partly offset by rent steps in the portfolio;
- Profit and total comprehensive income for the quarter was consistent at $9.5 million compared to the prior year;
- The interest coverage and debt coverage ratios remained relatively consistent with the prior year, with a reduction in EBITDA being offset by a decrease in finance costs.
Twelve Months Ended December 31, 2017 Financial Highlights
- FFO per unit increased to $0.351, up 5.4% from $0.333 in the prior year and AFFO per unit was $0.325, up 9.1%, from $0.298 in 2016. FFO and AFFO per unit were positively impacted by growth from developments and redevelopments, significantly higher non-recurring lease buyout fees received in the current year compared to the prior year and a decrease in finance costs;
- Even excluding the impact of lease buyouts, FFO and AFFO per unit increased by 3.5% and 7.0%, respectively;
- FFO and AFFO payout ratios were 77.1% and 83.1%, respectively, compared to 78.5% and 87.6% in 2016;
- NOI increased to $64.4 million, up 2.7% from $62.7 million in the same period in the prior year, impacted mainly by NOI from developments and redevelopments, as well as the lease buyout fees recorded relating to two lease buyout transactions;
- Same-asset NOI of $58.1 million was 0.1% higher than the prior year. Rent steps in the portfolio more than offset vacancies and the vacancies caused by the lease buyouts. The two significant lease buyouts decreased same-asset NOI by $445 thousand;
- Profit and total comprehensive income for the twelve months ended December 31, 2017 was down to $23.4 million from $32.8 million for the twelve months ended December 31, 2016, mainly due to non-cash fair value adjustments driven by the decrease in the fair value of investment properties for the twelve months ended December 31, 2017, largely due to changes in NOI and cost overruns on current development projects; and
- The interest coverage ratio improved from 2.18x for the twelve months ended December 31, 2016 to 2.36x for the twelve months ended December 31, 2017. The debt coverage ratio also improved to 1.68x from 1.58x for the twelve months ended December 31, 2016. The improvements in the ratios reflect higher EBITDA due to higher NOI and lower finance costs due to the redemption of both the Series B and C convertible debentures.
Leasing and Occupancy
- Same-asset committed occupancy and total committed occupancy were 95.1% and 95.2%, respectively, at December 31, 2017, compared to 96.3% and 96.1%, respectively, at December 31, 2016. The two significant lease buyouts completed in 2017 negatively impacted occupancy by 0.6%; and
- The weighted average lease term is 5.8 years.
Acquisitions/Dispositions
- During the year, Plaza purchased various lands for a total of $2.1 million.
- During the year, Plaza purchased a 50% interest in development lands in Mississauga, ON for $6.1 million, which will add approximately 70,000 square feet of retail space at completion (at 100%) and purchased a 50% interest in a former Sears store in Saguenay, QC for redevelopment for $3.3 million, which will add approximately 84,000 square feet of retail space upon completion (at 100%).
- Plaza sold various parcels of surplus land as well as properties for total net proceeds of $2.1 million. The Trust also disposed of a 50% non-managing interest in eight properties in Atlantic Canada for net proceeds of $17.3 million ($7.3 million after assumption of 50% of the existing mortgages).
Balance Sheet, Liquidity and Capital Structure
- At the end of the quarter, investment properties were valued using an overall weighted average capitalization rate of 7.02%, a drop of one basis point from the year ended December 31, 2016. Fair value adjustments are determined based on the movement of various parameters, including changes in stabilized NOI and capitalization rates. The fair value decreases were largely due to changes in NOI as well as cost overruns on current development projects (development projects are valued at fair value less costs to complete).
- To fund ongoing operating and development activities, the REIT has the following facilities in place:
- a $44.0 million revolving operating facility with a Canadian chartered bank. At December 31, 2017 there was $11.0 million available on this facility (net of letters of credit issued).
- two revolving development facilities with Canadian chartered banks available upon pledging of specific development assets. One is a $20 million one-year revolving facility and the other is a $15 million two-year revolving facility. At December 31, 2017 there was $27.7 million available on these development facilities.
- The REIT ended the quarter with total mortgages payable (excluding development, construction and operating lines) of $432 million with a weighted average interest rate on fixed rate mortgages of 4.39% and a weighted average maturity of 6.0 years.
- Debt to gross assets, excluding convertible debentures, at December 31, 2017 was 48.4% and including convertible debentures was 52.2%. These compare to 47.7% and 53.0%, respectively at December 31, 2016. The increase over the prior year excluding convertible debentures was mainly due to the issuance of $6.0 million Series II unsecured non-convertible debentures and an increase in the operating line balance. Including convertible debentures, the current year ratio was also impacted by the redemption of the Series B and C convertible debentures.
Further Information
A more detailed analysis of the REIT’s financial and operating results is included in the REIT’s Management’s Discussion and Analysis and Consolidated Financial Statements, which have been filed on SEDAR and can be viewed at www.sedar.com or on the REIT’s website at www.plaza.ca.
Conference Call
Michael Zakuta, President and CEO, and Floriana Cipollone, CFO, will host a conference call for the investment community on Monday, February 26, 2018 at 10:00 a.m. ET (11:00 a.m. AT). The call-in numbers for participants are 647-427-7450 or 888-231-8191.
A replay of the call will be available until Monday, March 5, 2018. To access the replay, dial 416-849-0833 or 855-859-2056 (Passcode: 6594025). The audio replay will also be available for download on the REIT’s website for 90 days following the conference call.
About Plaza
Plaza is an open-ended real estate investment trust and is a leading retail property owner and developer, particularly in Eastern Canada. Plaza’s portfolio at December 31, 2017 includes interests in 298 properties totaling approximately 7.8 million square feet across Canada and additional lands held for development. Plaza’s properties include a mix of strip plazas, stand-alone small box retail outlets and enclosed shopping centres, anchored by approximately 90% national tenants. For more information, please visit www.plaza.ca.
Non-IFRS Financial Measures
This press release contains certain non-IFRS financial measures including FFO, AFFO, same-asset NOI and EBITDA. These measures are commonly used by entities in the real estate industry as useful metrics for measuring performance. However, they do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other publicly traded entities. These measures should be considered as supplemental in nature and not as a substitute for related financial information prepared in accordance with IFRS. Please refer to the REIT’s Management’s Discussion and Analysis for a reconciliation of these non-IFRS measures to standardized IFRS measures.
Forward-looking Information
This news release contains forward looking statements relating to our operations and the environment in which we operate, which are based on our expectations, estimates, forecasts and projections. Forward looking statements are not future guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward looking statements. Readers, therefore, should not place undue reliance on any such forward looking statements. Further, a forward looking statement speaks only as of the date on which such statement is made. We undertake no obligation to publicly update any such statement, to reflect new information or the occurrence of future events or circumstances, except for forward-looking information disclosed in prior disclosures which, in light of intervening events, requires further explanation to avoid being misleading. More detailed information about risks and uncertainties that could affect Plaza is described in Plaza’s Annual Information Form for the year ended December 31, 2016 and Management’s Discussion and Analysis for the period ended December 31, 2017 which can be obtained on SEDAR at www.sedar.com.
The TSX does not accept responsibility for the adequacy or accuracy of this release.
SOURCE Plaza Retail REIT
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