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VANCOUVER, March 10, 2015 /CNW/ – Pure Industrial Real Estate Trust (“PIRET” or the “Trust”) (TSX: AAR.UN) is pleased to announce the release of its financial results for the year ended December 31, 2014.
2014 Financial Results
The 2014 financial results, consisting of PIRET’s audited consolidated financial statements for the year ended December 31, 2014, and Management’s Discussion and Analysis (“MD&A”) dated March 10, 2015, are available on SEDAR (www.sedar.com) or the Trust’s website (www.piret.ca).
Highlights for the year ended December 31, 2014
- As at December 31, 2014, PIRET’s portfolio consists of 171 income producing properties representing gross leasable area (“GLA”) of approximately 15.6 million square feet (“sf”), an increase from 156 properties and 12.6 million sf of GLA at December 31, 2013. In addition, PIRET’s portfolio consists of 3 properties under development representing 600,000 sf of GLA.
- PIRET raised $253.1 million by issuing 55,200,000 Class A units from two bought deal equity offerings in January and June, 2014.
- The occupancy for our portfolio was 97.3% as at December 31, 2014, with a weighted average lease term of 6.9 years. Our committed occupancy is currently at 97.7%.
- PIRET achieved a 3.5% increase in rental rates on new leases and renewals of leases expiring in Q4-2014.
- Investment properties increased to $1.74 billion as at December 31, 2014 from $1.31 billion at December 31, 2013 due to the acquisition of 24 properties with 3.6 million sf of GLA offset by several dispositions during the year. With the acquisitions, PIRET continues to execute its accretive growth strategy and build critical mass in its target markets. The acquisitions have strengthened PIRET’s high quality national and regional tenant base within Canada as well as establish its presence within key markets throughout the US.
- During the year, PIRET entered into a co-ownership agreement and sold a 75% interest in eight industrial properties located in Ontario and Quebec to a major Canadian institution. PIRET continues to provide full property management, asset management and leasing services to the portfolio that will enhance investor returns through increased fee revenues. By leveraging the quality of the Trust’s portfolio and management platform, the co-ownership agreement is expected to provide PIRET with greater capital flexibility to achieve its strategic growth plans aimed at maximizing value for unitholders.
- Loan to Gross Book Value as at December 31, 2014 was 48.5%, a 5.6% reduction from the December 31, 2013 ratio of 54.1%.
- Revenue for the year ended December 31, 2014 increased 31% from $108.8 million in 2013 to $142.8 million in 2014. For the three months ended December 31, 2014, PIRET’s revenues increased 27% from $31.2 million in 2013 compared to $39.9 million in 2014.
- Earnings from property operations (“NOI”) increased by 28% for the year ended December 31, 2014 compared to the same period in 2013 from $78.9 million to $101.0 million. For the three months ended December 31, 2014, PIRET’s earnings from property operations increased 27% from $22.0 million in 2013 to $27.9 million in 2014. On a same-property basis, NOI in Q4-2014 increased by 4.1% over Q4 2013 as a result of a 3.5% increase in rent and the full quarterly impact of the ContainerWorld expansion in BC, and offset by a slight decrease in occupancy since Q4-2013.
- On a go-forward basis, including the expected NOI from the three properties under development at the end of the year, the geographic concentration of PIRET’s portfolio by NOI is as follows: British Columbia 18%, Alberta 24%, Ontario 36%, U.S. 14%, and others 8%.
- Funds from operations (“FFO”) for the year ended December 31, 2014 increased to $63.6 million compared to $49.4 million for the same period in 2013. On a per unit basis, FFO for the year ended December 31, 2014 decreased to $0.37 compared to $0.40 for the same period in 2013. The payout ratio for the year ended December 31, 2014 increased to 84.6% from 78.7% for the same period in 2013. The FFO per unit and payout ratio were impacted significantly by the bought deal equity offerings in January and June, the subsequent timing of the acquisitions and 3 properties which were still under development at the end of the year.
For the three months ended December 31, 2014, FFO increased to $18.0 million compared to $12.9 million for the same period in 2013. On a per unit basis, FFO for the three months ended December 31, 2014 was $0.09, similar to $0.09 for the same period in 2013 and the payout ratio increased nominally to 83.5% from 82.9% in the same period in 2013.
- On an adjusted funds from operations (“AFFO”) basis, there was an increase from $44.5 million for the year ended December 31, 2013 to $54.9 million for the same period in 2014. On a per unit basis, AFFO was $0.32 for the year ended December 31, 2014 compared to $0.36 for the year ended December 31, 2013. The AFFO payout ratio for the year was 98.0% in 2014 compared to 87.4% in 2013 for the year. Similar to the FFO metrics, the AFFO payout ratio and the per unit basis AFFO were significantly impacted by the bought deal equity offerings in January and June, the subsequent timing of the acquisitions and the 3 properties which were still under development at the end of the year. Refer to the table on the following page for AFFO per unit and the corresponding payout ratio on a stabilized basis following completion of the remaining 3 US properties under development as at December 31, 2014.
AFFO increased from $12.0 million to $16.0 million for the three months ended December 31, 2014 compared to 2013. On a per unit basis, AFFO was $0.08 for the three months ended December 31, 2014 compared to $0.09 for the three months ended December 31, 2013. The AFFO payout ratio for the three months ended December 31 increased from 88.9% in 2013 to 93.9% for the same period in 2014.
Selected Financial Information
|
Year ended December 31 |
Three months ended December 31 |
||||
|
($000s, except per unit basis) |
2014 |
2013 |
2014 |
2013 |
|
|
Revenue |
142,798 |
$ 108,762 |
$ 39,853 |
$ 31,187 |
|
|
Net operating income |
101,026 |
78,940 |
27,886 |
21,973 |
|
|
Distributions declared per Unit |
0.31 |
0.31 |
0.08 |
0.08 |
|
|
FFO(1) per Class A Unit (fully diluted) |
0.37 |
0.40 |
0.09 |
0.09 |
|
|
Payout ratio(2) |
84.6% |
78.7% |
83.5% |
82.9% |
|
|
AFFO(1) per Class A Unit (fully diluted) |
0.32 |
0.36 |
0.08 |
0.09 |
|
|
Payout ratio(2) |
98.0% |
87.4% |
93.9% |
88.9% |
|
|
G&A as a Percent of Revenue |
3.6% |
3.7% |
3.5% |
3.9% |
|
|
(1) |
IFRS to non-IFRS reconciliation is performed in Section II Distributable Income, and Liquidity and Capital Resources. FFO and AFFO |
||||
|
(2) |
FFO and AFFO payout ratios are calculated based on the ratio of distribution rate to fully diluted FFO and AFFO per unit. |
||||
|
As at December 31 |
|||||
|
2014 |
2013 |
||||
|
Debt-to-GBV |
48.5% |
54.1% |
|||
|
Employees |
36 |
32 |
|||
Stabilized Results
PIRET’s 2014 and fourth quarter results have been negatively impacted by the three properties still under development at the end of the year and the divestment of a 75% interest in 8 properties during Q4. The reduction in leverage from 54.9% at the end of 2013 to 48.5% at the end of 2014 has also negatively impacted PIRET’s FFO and AFFO per unit and the corresponding payout ratios. Following the completion of the remaining properties under development, PIRET’s FFO and AFFO payout ratios are expected to be 79.5% and 88.9% respectively.
The table below illustrates the impact on PIRET’s quarterly stabilized NOI, AFFO per unit, and AFFO payout ratio post completion of the three FedEx properties, the last of which is expected to be generating income by March 2015.
|
NOI ($000s) |
AFFO per unit |
AFFO Payout Ratio |
|
|
For the 3 months ended December 31, 2014 |
$27,886 |
$0.083 |
93.9% |
|
Incremental contribution from one FedEx property under development, full quarterly impact of Q4 acquisitions and dispositions |
633 |
0.002 |
|
|
Three FedEx properties under development |
1,248 |
0.003 |
|
|
Stabilized |
$ 29,767 |
$0.088 |
88.9% |
Outlook
Real Estate Fundamentals â Leasing demand remains strong across our core markets, offset by continued slow leasing activity in Winnipeg. CBRE’s 2015 Canadian Market Outlook reported that industrial availability fell by 50bps nationally to 5.3%, and is projected to fall to 5.1% by the end of 2015. For the Greater Toronto Area, which represents over 75% of our expiring GLA in 2015, the availability rate declined by 50bps to 4.1% in 2014 and is forecast to drop to 3.9% in 2015, as demand remains strong for well-located, functional distribution space. Despite a lack of evidence of declining occupancy or rents in the fourth quarter due to a lower price of oil, we have nevertheless conservatively reduced our market rent assumptions for most of our properties in Alberta and Saskatchewan. It should be further noted that CBRE reported that Calgary and Edmonton combined for over 2.5 million sf of positive net absorption for Q4-2014, despite recording almost 2.3 million sf of new supply over that period. With over 1.8 million sf of expiring leases this year, our same-property NOI growth will be negatively impacted by releasing costs in the near term, offset by expected rental rate growth for the longer term.
Increased Returns from Announced Developments & Acquisitions â As tabled on page 3, the full impact of our acquisitions and development in the fourth quarter, combined with the completion of the three remaining US developments in Q1 2015, is expected to significantly increase our NOI, FFO and AFFO per unit to $0.155, $0.098 and $0.088, respectively, on a stabilized basis. Subsequently, on February 9 and 19, 2015, we closed on the acquisition of a 60-acre parcel of land for a $128 million development in Vaughan, Ontario, and a 51% interest in a 1.3 million sf portfolio in Greensboro, North Carolina, respectively. The North Carolina portfolio is expected to add over $2.0 million in NOI in 2015 alone, while the Vaughan development is expected to generate over $8.0 million in income for the Trust upon stabilization in Q2-2016. As mentioned, both acquisitions were fully funded with new debt financing and existing working capital, and did not require additional new equity.
Embedded Net Asset Value Growth â In the fourth quarter, the fair market value of our portfolio increased by $23.7 million, and for 2014 by $37.4 million, driven primarily by gains from external appraisals for properties in BC and Ontario, offset by losses on properties in Saskatchewan and New Brunswick and transaction costs related to acquisitions completed during the year. The value of the properties acquired in the US in 2014, including the four development properties, were carried at the cost of acquisition, with no adjustment to fair market value as at December 31, 2014. Based on recent sales transactions involving comparable product in our existing markets, there appears to be significant embedded value in that portfolio yet to be realized. This can also be said for the Vaughan development property once it is completed in Q2 of 2016.
Improved Geographic Diversification & Lower Leverage â We believe that the actions we took in 2014 to reduce our leverage and further diversify our portfolio by geography has positioned us more effectively for sustainable success in a rising interest rate environment and to capitalize on a greater number of opportunities for growth. Reducing our leverage by over 5.5% from a year ago has enabled us to complete two strategic and highly accretive transactions which is expected to improve our per unit returns considerably. Furthermore, our acquisitions in 2014 reduced our exposure to Alberta from 28% to 23% by December 31 (including the 3 US properties under development), and this exposure has been further reduced by our subsequent acquisitions so far in 2015. Alberta will certainly remain a core market of ours, but for now we will focus on growth opportunities in our other target markets in Canada and the US on a selective basis.
Conference Call
As previously announced on February 11, 2015, management will host the conference call at 5:00 pm (EST), 2:00 pm (PST), on Tuesday March 10, 2015, to review the financial results and corporate developments for the year ended December 31, 2014.
To participate in this conference call, please dial one of the following numbers approximately 10 minutes prior to the commencement of the call, and ask to join the Pure Industrial Real Estate Trust Conference Call.
Dial in numbers:
Toll free dial in number (from Canada and USA)………………………………………. 1-888-390-0546
International or Local Toronto……………………………………………………………… 1-416-764-8688
Conference Call Replay
If you cannot participate on March 10, 2015, a replay of the conference call will be available by dialing one of the following replay numbers. You will be able to dial in and listen to the conference 120 minutes after the meeting end time, and the replay will be available until March 17, 2015.
Please enter the Replay ID# 638259, followed by the # key.
Replay toll free dial in number (from Canada and USA)……………………………… 1-888-390-0541
Replay international or local Toronto…………………………………………………….. 1-416-764-8677
About Pure Industrial Real Estate Trust
PIRET is an unincorporated, open-ended investment trust that owns and operates a diversified portfolio of income-producing industrial properties in leading markets. PIRET is an internally managed REIT that focuses exclusively on investing in industrial properties.
Additional information about PIRET is available at www.piret.ca or www.sedar.com.
TSX â AAR.UN
Forward-Looking Information:
Certain statements contained in this press release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “anticipate”, “plan”, “expect”, “may”, “will”, “intend”, “should”, and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The forward-looking statements contained in this news release are based on certain key expectations and assumptions made by PIRET.
Although PIRET believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because PIRET can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the property acquisitions, competitive factors in the industries in which PIRET operates, prevailing economic conditions, and other factors, many of which are beyond the control of the PIRET.
The forward-looking statements contained in this press release represent PIRET’s expectations as of the date hereof, and are subject to change after such date. PIRET disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.
The Toronto Stock Exchange has not reviewed nor approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.
SOURCE Pure Industrial Real Estate Trust (PIRET)
