TORONTO, April 27, 2018 (GLOBE NEWSWIRE) — Mitchell Cohen, Chief Executive Officer and President of Urbanfund Corp. (TSX-V:UFC) (âUrbanfundâ or the âCompanyâ), confirmed today that the Company has filed its financial statements for the year ended December 31, 2017 (the âAnnual Consolidated Financial Statementsâ) and Managementâs Discussion and Analysis (âMD&Aâ) for the year ended December 31, 2017.
BUSINESS OVERVIEW AND STRATEGY
Business Overview
Urbanfund Corp. is an incorporated entity listed under the TSX Venture Exchange (âTSX-Vâ) under the symbol UFC. The Company is a reporting issuer in Alberta, British Columbia and Ontario. Urbanfundâs focus is to invest in Canadian real estate and real estate related projects with a focus on a mix of both residential and commercial properties. The Companyâs assets are located in Toronto, Brampton, Belleville, Kitchener, London, Ontario, Quebec City and Montreal, Quebec and Dartmouth, Nova Scotia.
Operational Highlights
Part of Urbanfundâs strength is the ability to attract partners with proven track records with both residential and commercial development expertise. Urbanfund continues to build alliances with its strategic partners:
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One Bloor Project – Urbanfund received its first distribution relating to a return of capital of $1,677,333, and further distributions relating to profit on the sales of real estate of $3,666,667. Urbanfund expects further distributions, however, the timing and quantum of these distributions are uncertain and are at the discretion of the projectâs managing partner.
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Edvac – The Company substantially completed renovations of the 11-13 Edvac Drive, Brampton, Ontario project. Subsequent to year end, Urbanfund received a distribution from Edvac of $1,850,000 relating to a return of capital of $971,000 and income of $879,000 relating to the profits on the sale of 33 of the 40 units.
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Alfred Kuehne – The Company completed the acquisition of 4 Alfred Kuehne, Brampton, Ontario property with plans to renovate and sell the property.
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Highfield Park Portfolio – Urbanfund invested $7,569,980 for a 20% interest in Highfield Park Residential Inc., with the remaining 80% interest retained by Westdale Construction Co. Limited (âWestdaleâ). In turn, Highfield Park Residential Inc. purchased the Highfield Park portfolio for $113,000,000 plus customary closing costs, funded by way of a $77,000,000 mortgage and $36,000,000 in equity contributions. The Highfield Park portfolio represents 1,354 units within 20 buildings spanning approximately 37 acres in Dartmouth, Nova Scotia.
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Weber Limited Partnerships – Urbanfund acquired 51, 55, 59 Scott Street, Kitchener, Ontario. Together with our previously acquired 59, 61, 65 Weber Street, the Company plans to raze the existing vacant units, amalgamate the land and construct a multi-family rental building. Approvals with the City of Kitchener are pending and are expected in Q4 of 2018 or Q1 of 2019. Subsequent to year end, we entered into a conditional agreement to sell 48 Weber Street, 61 Roy Street and 65 Roy Street. See Events after the Balance Sheet Date.
- La Corporation Headway (âQuebec Headwayâ) – With the scheduled completion of renovations of Domaine Anjou, Versant Nord and Complex Renaissance, Quebec Headway is experiencing a higher tenant occupancy. Quebec Headway plans to continue with the renovation of its Quebec City investment properties with anticipation of similar in higher tenant occupancy and NOI.
Dividend Increase
As announced on June 16, 2017, our Board of Directors approved an increase in the annual dividend rate to $0.01 per common share and $0.01 per preferred share, representing a $0.005 or 100% increase from the previous year.
PRESENTATION OF FINANCIAL INFORMATION AND NON-IFRS MEASURES
Presentation of Financial Information
Unless otherwise specified herein, financial results, including historical comparatives, contained in this Press Release are based on Urbanfundâs 2017 Annual Consolidated Financial Statements, which have been prepared in accordance with International Financial Reporting Standards (âIFRSâ) as issued by the International Accounting Standards Board (âIASBâ) and interpretations of the IFRS Interpretations Committee (âIFRICâ). Unless otherwise specified, amounts are in Canadian dollars and percentage changes are calculated using whole numbers.
RESULTS FROM OPERATIONS
In addition to reported IFRS measures, industry practice is to evaluate real estate entities giving consideration to certain non-IFRS performance measures such as funds from operations, adjusted cash flows from operations and net operating income, as reported below. For further details, please refer to Non-IFRS Measures.
Select Annual Information
| Year ended December 31, | 2017 | 2016 | 2015 | ||||||
| Operating results | |||||||||
| Revenue | $ | 5,506,270 | $ | 4,955,571 | $ | 4,955,571 | |||
| Net income before taxes | 10,844,757 | 4,657,163 | 4,032,941 | ||||||
| Net income and comprehensive income | 7,344,757 | 4,069,163 | 3,263,182 | ||||||
| Per share basis, attributable to shareholders | |||||||||
| Basic income per share | $ | 0.16 | $ | 0.08 | $ | 0.07 | |||
| Diluted income per share | $ | 0.14 | $ | 0.07 | $ | 0.06 | |||
| Non-IFRS measures | |||||||||
| FFO | $ | 3,185,350 | $ | 418,732 | $ | 2,257,688 | |||
| ACFO | 2,530,475 | 1,939,817 | 1,543,025 | ||||||
| As at December 31, | 2017 | 2016 | 2015 | ||||||
| Financial position | |||||||||
| Total assets | $ | 84,332,317 | $ | 66,781,038 | $ | 56,472,836 | |||
| Total investment properties | 61,427,685 | 55,638,439 | 45,925,489 | ||||||
| Total debt | 34,528,600 | 29,867,177 | 24,366,768 | ||||||
| Non-IFRS measures | |||||||||
| Debt to total assets | 41 | % | 45 | % | 43 | % | |||
| Debt to adjusted EBITDA | 4.80 | 16.61 | 12.11 | ||||||
| Interest coverage ratio | 5.83 | 3.46 | 2.94 | ||||||
| Debt service ratio | 2.57 | 1.78 | 1.43 | ||||||
Summary of Quarterly Results
| For the three month ended, | Revenue | Net income attributable to shareholders | Basic income per share | Diluted income per share | ||||
| December 31, 2017 | $ | 1,387,165 | $ | 4,559,257 | $ | 0.101 | $ | 0.087 |
| September 30, 2017 | 1,307,855 | 507,198 | 0.011 | 0.010 | ||||
| June 30, 2017 | 1,406,358 | 1,772,792 | 0.040 | 0.034 | ||||
| March 31, 2017 | 1,404,892 | 418,127 | 0.009 | 0.008 | ||||
| December 31, 2016 | 1,280,138 | 1,728,996 | 0.039 | 0.033 | ||||
| September 30, 2016 | 1,254,331 | 191,822 | 0.004 | 0.004 | ||||
| June 30, 2016 | 1,241,055 | 1,374,576 | 0.031 | 0.027 | ||||
| March 31, 2016 | 1,180,047 | 178,878 | 0.004 | 0.003 | ||||
Funds from Operations (âFFOâ)
| Three-months ended December 31, | Year-ended December 31, | |||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Net income and comprehensive income attributable to shareholders | 4,596,686 | 1,005,211 | 7,257,374 | 3,474,272 | ||||
| Add back / (deduct): | ||||||||
| Interest and dividend income | (16,398 | ) | (14,678 | ) | (99,415 | ) | (50,181 | ) |
| Income from equity accounted investment | (109,417 | ) | – | (109,417 | ) | – | ||
| Deferred income tax expense | 2,156,000 | 468,000 | 1,944,000 | 588,000 | ||||
| Fair value adjustment on marketable securities | (45,284 | ) | (16,456 | ) | (122,237 | ) | (30,952 | ) |
| Fair value adjustment on investment properties | (5,759,819 | ) | (1,907,729 | ) | (5,673,753 | ) | (3,652,125 | ) |
| Unrealized gain (loss) on foreign currency translation | 48 | (4,602 | ) | (3,626 | ) | (1,673 | ) | |
| Realized loss on foreign currency translation | – | – | – | 94,700 | ||||
| Straight-line of rental revenue | (1,894 | ) | (827 | ) | (7,576 | ) | (3,309 | ) |
| FFO | 819,922 | (471,081 | ) | 3,185,350 | 418,732 | |||
| Weighted average number of shares – basic | 45,097,694 | 44,459,156 | 44,804,477 | 44,195,298 | ||||
| Weighted average number of shares – diluted | 52,522,694 | 51,884,156 | 52,229,477 | 51,620,298 | ||||
| FFO per share – basic | 0.02 | (0.01 | ) | 0.07 | 0.01 | |||
| FFO per share – diluted | 0.02 | (0.01 | ) | 0.06 | 0.01 | |||
Adjusted Cash Flows from Operations
| Three-months ended December 31, | Year-ended December 31, | |||||||
| 2017 | 2016 | 2017 | 2016 | |||||
| Cash provided by operating activities | 2,830,275 | 3,864,023 | 5,275,484 | 4,069,163 | ||||
| Adjustments to working capital changes for ACFO (i) | (764,728 | ) | (678,634 | ) | (370,970 | ) | (290,912 | ) |
| Capital expenditures (ii) | (678,189 | ) | (511,240 | ) | (2,712,755 | ) | (2,044,960 | ) |
| Non-controlling interests | 21,599 | 206,526 | 338,716 | 206,526 | ||||
| ACFO | 1,387,358 | 2,674,149 | 2,530,475 | 1,939,817 | ||||
| (i) | Includes working capital changes that based on REALpac February 2017 whitepaper, are not indicative of sustainable cash flow for distribution. Which includes income taxes not relating to operating activities, tenant deposits, and deferred financing charges. | ||||
| (ii) | Capital expenditures includes the current year expenditures which estimate the ongoing capital investment required to maintain the condition of the investment properties. | ||||
LIQUIDITY AND CAPITAL RESOURCES
We expect to meet all of our obligations, including dividends to shareholders, property maintenance, capital expenditures and other commitments as they become due. The Company has various financing sources to fund future acquisitions and continues to fund working capital needs from cash flows generated from operating activities. Cash flows from operating activities are dependent on the occupancy levels of our income properties.
The following table presents liquidity as a percentage of debt:
| As at December 31, | 2017 | 2016 | ||||
| Cash and cash equivalents | $ | 8,002,475 | $ | 7,962,632 | ||
| Accounts receivable (i) | 344,596 | 227,386 | ||||
| Marketable securities | 446,825 | 336,344 | ||||
| Liquidity | $ | 8,793,896 | $ | 8,526,362 | ||
| Mortgages payable | 36,584,854 | 29,717,903 | ||||
| Debt | $ | 36,584,854 | $ | 29,717,903 | ||
| Liquidity expressed as a percentage of debt | 24.0 | % | 28.7 | % | ||
| (i) | As of the date of this MD&A, Urbanfund has collected its outstanding amounts due as at December 31, 2017, and therefore, amounts have been factored in Liquidity. | |
The Companyâs liquidity will be impacted by contractual commitments as outlined in Urbanfundâs MD&A. Urbanfundâs debt obligations can be funded by the Companyâs cash and cash equivalents, marketable securities, rental revenue from property operations.
DIVIDEND REINVESTMENT PLAN (âDRIPâ)
On June 17, 2015, the Company adopted a dividend policy (the âDividend Policyâ) and implemented dividend reinvestment plans for the Companyâs common and preferred shareholders (collectively, the âDRIPâ). The DRIP is a voluntary program permitting holders of our common and preferred shares to automatically, and without charge, reinvest quarterly dividends to acquire additional common shares at a discount to the volume-weighted average market price as of the date of payment.
On June 17, 2017, Urbanfund amended our current Dividend Policy to increase our annual dividend to a rate of $0.01 per common share and $0.01 per preferred share, payable quarterly in the amount of $0.0025 per common and preferred share.
During the three months ended December 31, 2017, 164,912 common shares were issued pursuant to our DRIP resulting in additional equity of $54,421. The average participant rate of the DRIP was 77.5%.
During the year ended December 31, 2017, 637,346 common shares were issued pursuant to our DRIP resulting in additional equity of $315,680. The average participant rate of the DRIP was 77.5%.
The Company has reserved an aggregate of 2,000,000 common shares for issuance to participants in the DRIP. As at the date of this MD&A, an aggregate remain available for issuance pursuant to the DRIP of 119,424 common shares.
The record date for dividends is the last business day of each quarter and payment is approximately two weeks from the record date. The following table summarizes our quarterly distributions for the year ended December 31, 2017:
| Payment date | Shareholders of record | |
| 2016, quarter 4 distribution | Jan. 15, 2017 | Dec. 31, 2016 |
| 2017, quarter 1 distribution | Apr. 15, 2017 | Mar. 31, 2017 |
| 2017, quarter 2 distribution | Jul. 17, 2017 | Jun. 30, 2017 |
| 2017, quarter 3 distribution | Oct. 16, 2017 | Sept. 30, 2017 |
Our fourth distribution was declared to the shareholders of record on December 31, 2017 and was paid January 16, 2018.
EVENTS AFTER THE BALANCE SHEET DATE
On February 2, 2018, Urbanfund received a distribution from Edvac of $1,850,000 relating to a return of capital of $971,000 and income of $879,000 relating to the net profits on the sale of 33 of the 40 units.
On March 16, 2018, Urbanfund entered into a conditional agreement to sell its investment properties and properties under development for an aggregate purchase price of $7,300,000, plus customary closing costs. The Company will use the proceeds to repay any remaining outstanding obligations and distribute the excess capital in accordance with the limited partnership agreement.
On April 1, 2018, Urbanfund entered into negotiations with its lenders to refinance its mortgage relating to 476-480 Wonderland Road and the vendor take back relating to Quebec Headway at similar terms and conditions (see Annual Consolidated Financial Statements note 14 for further details).
NON-IFRS MEASURES
In addition to reported IFRS measures, industry practice is to evaluate real estate entities giving consideration to certain non-IFRS performance measures such as funds from operations, adjusted cash flows from operations and net operating income. Management believes that these measures are helpful to investors because they are widely recognized measures of Urbanfundâs performance and provide a relevant basis of comparison to other real estate entities. In addition to IFRS results, these measures are also used internally to measure the operating performance of our property portfolio. These measures are not in accordance with IFRS and have no standardized definitions, as such, our computations of these non-IFRS measures may not be comparable to measures by other reporting issuers. In addition, Urbanfundâs method of calculating non-IFRS may differ from other reporting issuers, and, accordingly, may not be comparable.
The Real Property Association of Canada (âREALpacâ) issued a white paper in February 2017 prescribing revised definitions for certain non-IFRS financial measures of cash flow and operating performance commonly used by the Canadian real estate industry. Urbanfund has reviewed these guidelines and adopted certain measures, where appropriate, commencing with our fourth quarter 2017 reporting.
Funds From Operations (âFFOâ)
Funds from Operations (âFFOâ) is a non-IFRS financial measure of operating performance widely used by the Canadian real estate industry based on a white paper published in April 2014 and subsequently revised in February 2017. In the view of management, FFO better presents operating performance over IFRS net income and comprehensive income, which does not necessarily provide a complete view on performance. IFRSâs net income and comprehensive income it includes items such as fair value adjustments on investment properties which are subject to market fluctuations, which is not representative of the Companyâs year-over-year operating performance.
FFO is computed as IFRS consolidated net income and comprehensive income attributable to Urbanfundâs shareholders adjusted for items such as, but not limited to, fair value adjustments on investment properties, transaction gains and losses and fair market value adjustments on marketable securities. FFO should not be construed as an alternative to net income or cash flows provided by or used in operating activities as determined in accordance with IFRS. A reconciliation of FFO to IFRS net income is presented under Results from Operations section of this MD&A.
Adjusted Cash Flows from Operations (âACFOâ)
In February 2017, REALpac introduced a new non-IFRS measure called Adjusted Cash Flow from Operations (âACFOâ), which is intended to measure sustainable economic cash flow available for distributions. ACFO is used by management as an input, together with FFO to assess Urbanfundâs distribution payout ratios.
ACFO is computed as cash provided by or used in operating activities per IFRS plus, but not limited to adjustments for working capital items not considered to be indicative of sustainable economic cash flows for distributions, such as changes to other assets, indirect taxes payable and income taxes payable, cash distributions from investments, realized gains or losses from available-for-sale marketable securities and deducts capital expenditures. ACFO should not be construed as an alternative to cash flows provided by or used in operating activities as determined in accordance with IFRS. A reconciliation of ACFO to IFRS cash flow from or used in operating activities is presented under Results from Operations section of this MD&A.
Net Operating Income (âNOIâ)
NOI is a non-IFRS measure and is defined by Urbanfund as rental revenue from income properties less direct property costs such as utilities, property taxes adjusted to normalize the impact of the application requirements of IFRIC 21, Levies, repairs and maintenance, salaries, insurance, bad debt expenses, property management fees and other property specific costs. Management believes that NOI is a meaningful supplementary measure of the income generated from the Companyâs income properties and is used in evaluating the portfolio, as well as a key input in determining the value of the income properties.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (âAdjusted EBITDAâ)
Adjusted EBIDTA is a non-IFRS measure used by management as input in several of the debt metrics to measure Urbanfundâs debt profile in assessing the ability of the Company to satisfy obligations, including servicing of our debt. Adjusted EBITDA is used as an alternative to net income because it excludes major non-cash items such as fair value adjustments to investment properties and unrealized gains or losses on available-for-sale marketable securities, interest costs, current and deferred income tax expenses and recoveries, equity accounted investments and other items that management considers either non-operating in nature. A reconciliation of Adjusted EBITDA to IFRS net income is presented under Debt Profile section of this MD&A.
Debt to Adjusted EBITDA
Debt to Adjusted EBITDA is a non-IFRS measure calculated on a trailing 12-month basis and is defined as quarterly average total debt (net of cash and cash equivalents) divided by Adjusted EBITDA is calculated under Debt Profile section of this MD&A.
Debt Service Ratio
Debt service ratio is a non-IFRS measure calculated on a trailing 12-month basis and is defined as Adjusted EBITDA divided by the sum of total interest costs (including interest costs capitalized) and scheduled mortgage principal repayments. It measures Urbanfundâs ability to meet debt obligations. Debt service ratio is calculated under Debt Profile section of this MD&A.
Interest Coverage Ratio
Interest coverage ratio is a non-IFRS measure calculated on a trailing 12-month basis and is defined as Adjusted EBITDA divided by the sum of total interest costs (including interest costs capitalized) It measures Urbanfundâs ability to meet interest cost obligations. Interest coverage ratio is calculated under Debt Profile section of this MD&A.
ADDITIONAL INFORMATION
For comprehensive disclosure of Urbanfundâs performance for the year, reference should be made to the Companyâs Annual Consolidated Financial Statements and notes thereto and Managementâs Discussion and Analysis for the year ended December 31, 2017, which have been filed electronically with the Canadian securities regulators through the System for Electronic Document Analysis and Retrieval (âSEDARâ) and may be accessed through the SEDAR website at www.sedar.com.
FORWARD-LOOKING INFORMATION
Certain information included in this Press Release contains forward-looking information with the meaning of applicable Canadian securities laws. This information includes, but is not limited to, statements made in Business Overview and Strategy, Results from Operations, Liquidity and Capital Resources, and other statements concerning Urbanfundâs objectives, its strategies to achieve those objectives, as well as statements with respect to managementâs beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information generally can be identified by the use of forward-looking terminology such as âoutlookâ, âobjectiveâ, âmayâ, âwillâ, âwouldâ, âexpectâ, âintendâ, âestimateâ, âanticipateâ, âbelieveâ, âshouldâ, âplanâ, âcontinueâ, or similar expressions suggesting future outcomes or events or the negative thereof. Such forward-looking information reflects managementâs beliefs and is based on information currently available. All forward-looking information in this Press Release is qualified by the following cautionary statements.
Forward-looking information necessarily involve known and unknown risks and uncertainties, which may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, assumptions may not be correct and objectives, strategic goals and priorities may not be achieved. A variety of factors, many of which are beyond Urbanfundâs control, affect the operations, performance and results of the Company and its subsidiaries, and could call actual results to differ materially from current expectations of estimated or anticipated events or results.
The forward-looking information included in this press release is made as of the date hereof and should not be relied upon as representing Urbanfundâs views as of any date subsequent to the date hereof. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
A more detailed assessment of the risks that could cause actual results to materially differ than current expectations is contained in Risks and Uncertainties section of Urbanfundâs Management Discussion and Analysis for the year ended December 31, 2017.
For further information, please contact:
Mitchell Cohen
President, Chief Executive Officer and Director
Urbanfund Corp.
406-703-1877 extension 1025
Neither the TSX Venture Exchange nor its Regulation Service Provider (as defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this Press Release.