TORONTO, Nov. 8, 2016 /CNW/ – Summit Industrial Income REIT (“Summit II” or the “REIT”) (TSX: SMU.UN) announced today continued growth and solid operating performance for the three and nine months ended September 30, 2016.
2016 Highlights:
- Acquired seven income-producing properties totaling 763,898 sq. ft. for cost of $80.9 million at average cap rate of 7.05%.
- Entered into first value-add transaction with acquisition of 50% interest in 155,730 sq. ft. Montreal property.
- Portfolio growth generates 12.3% increase in revenues. FFO up 11.6% for first nine months of 2016 on revenue growth and strong operating performance. Third quarter FFO up 23.2%.
- Growth accretive as FFO per Unit up 1.8% despite 9.5% increase in Units outstanding.
- Strong 83.6% FFO payout ratio (69.7% with DRIP benefit) for nine months ended September 30, 2016.
- Completed successful $34.2 million bought-deal equity offering on June 17, 2016.
- Occupancy remains strong at 99.2% with an average lease term of 5.7 years and contractual rent steps of 1.7% per year.
- Only 0.5% of leases up for renewal through balance of 2016.
- Obtained $20.4 million in new mortgage financings at average 3.2% fixed interest rate for average eight year term to maturity.
- Manager and Insiders interest remains strongly aligned with Unitholders through 12.2% insider ownership of REIT Units outstanding.
“Our accretive portfolio growth and strong operating performance continue to generate solid benefits for our Unitholders through stable and sustainable increases in revenues and FFO combined with solid and conservative payout ratios,” commented Paul Dykeman, Chief Executive Officer. “Looking ahead, we are evaluating additional strategic acquisition opportunities in our targeted markets that we are confident will drive further growth and enhanced Unitholder value over the long term.”
STRONG OPERATING AND FINANCIAL RESULTS
Operating revenues increased to $11.5 million and $32.2 million for the three and nine months ended September 30, 2016, respectively, from $9.9 million and $28.7 million, respectively, in the same periods last year due primarily to the REIT’s portfolio growth and successful leasing activities. Occupancy remained strong at 99.2% at September 30, 2016 compared to 99.1% last year. Net Operating Income (NOI) rose to $8.0 million and $21.9 million in the third quarter and first nine months of 2016 compared to $6.8 million and $19.8 million in the same prior year periods.
Funds from Operations (FFO) for the three and nine months ended September 30, 2016 were $5.3 million ($0.153 per Unit) and $14.1 million ($0.452 per Unit) compared to $4.3 million ($0.151 per Unit) and $12.7 million ($0.444 per Unit) in the same periods last year. The REIT’s FFO payout ratio was 83.6% (69.7% including benefit of DRIP) for the first nine months of 2016 compared to 85.2% (71.6% including benefit of DRIP) last year.
ACTIVE LEASING PROGRAM
Portfolio occupancy at September 30, 2016 was 99.2%, up from 99.1% at the end of the third quarter of 2015. The weighted average lease term for the portfolio was approximately 5.7 years at September 30, 2016 with leases containing contractual steps in rent of approximately 1.7% per year over this term. The REIT continues to be proactive in addressing lease expiries well in advance of their expiry date. Leasing costs were approximately $1.8 million through the first nine months of 2016 compared to $1.3 million in the same period last year. During the first nine months of 2016, 390,525 square feet of renewal leasing was completed as well as 193,047 square feet of new leases for a total of 583,572 square feet compared to 350,841 square feet in the first nine months of 2015. As a result, as at September 30, 2016, only 0.5% of the total portfolio is up for lease renewal through the remainder of 2016. Management is confident leasing costs will decline significantly through the remainder of the year. For the balance of this year, the REIT expects to complete approximately 88,000 square feet of leasing at an average cost of approximately $3.17 per square foot.
SOLID BALANCE SHEET AND LIQUIDITY POSITION
Total assets increased to $493.6 million at September 30, 2016, up from $406.4 million at December 31, 2015 due to the acquisition of interests in one value-add and seven income producing properties during the first nine months of 2016, partially offset by the sale of a 75% interest in two properties for $24.9 million in April 2015.
Total debt was $269.4 million at September 30, 2016 compared to $218.4 million at December 31, 2015. The increase was due primarily to financings related to property acquisitions completed through the first nine months of 2016, offset by the $32.5 million in net proceeds from a public offering of approximately 5.7 million Trust Units completed on June 17, 2016. As of September 30, 2016, $31.3 million was drawn on the revolving credit facility.
As at September 30, 2016 the REIT’s debt leverage ratio was 54.6% compared to 53.7% at December 31, 2015. The weighted average effective interest rate on the REIT’s mortgage portfolio reduced to 3.43% at September 30, 2016, down from 3.52% at the prior year end, with a weighted average term to maturity of 4.8 years, consistent with the prior year end. Debt service and interest coverage ratios were 1.79 times and 3.01 times, respectively, compared to 1.77 times and 2.94 times, respectively, at December 31, 2015.
INVESTOR CONFERENCE CALL
A conference call will be hosted by Summit II’s management team on Wednesday, November 9, 2016 at 8:30 am ET. The telephone numbers to participate in the conference call are North America Toll Free: (866) 225-0198 and Local Toronto / International: (416) 340-2218. The live audio conference call will also be available as a webcast. To access the audio webcast please access the link on the Investor Information page on our web site at www.summitIIreit.com. The telephone numbers to listen to the call after it is completed (Instant Replay) are North American Toll Free (800) 408-3053 or Local Toronto / International (905) 694-9451. The Passcode for the Instant Replay is 6387811#. A webcast of the call will also be archived on the REIT’s web site at www.summitIIreit.com.
FINANCIAL AND OPERATING HIGHLIGHTS
|
(in thousands of Canadian dollars) |
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|
(except per Unit amounts) |
Three months ended September 30 |
Nine months ended September 30 |
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|
2016 |
2015 |
2016 |
2015 |
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|
Portfolio Performance |
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|
Occupancy (%) |
99.2% |
99.1% |
99.2% |
99.1% |
||||
|
Revenue from income properties |
$ 11,516 |
$ 9,903 |
$ 32,184 |
$ 28,669 |
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|
Property operating expenses |
3,482 |
3,107 |
10,268 |
8,899 |
||||
|
Net operating income |
8,034 |
6,796 |
21,916 |
19,770 |
||||
|
Interest expense |
2,306 |
2,079 |
6,561 |
6,092 |
||||
|
Net income |
6,392 |
3,329 |
14,546 |
12,979 |
||||
|
Operating Performance |
||||||||
|
FFO per Unit (1) |
0.153 |
0.151 |
0.452 |
0.444 |
||||
|
Regular Distributions per Unit declared to Unitholders |
0.126 |
0.126 |
0.378 |
0.378 |
||||
|
Special Distributions per Unit declared to Unitholders (2) |
– |
– |
– |
0.016 |
||||
|
Regular FFO payout ratio without DRIP benefit |
82.2% |
83.6% |
83.6% |
85.2% |
||||
|
Regular FFO payout ratio with DRIP benefit |
69.8% |
71.0% |
69.7% |
71.6% |
||||
|
Total Distributions per Unit declared to Unitholders |
0.126 |
0.126 |
0.378 |
0.394 |
||||
|
Weighted average Units outstanding(1) |
34,821 |
28,761 |
31,252 |
28,550 |
||||
|
Liquidity and Leverage |
||||||||
|
Total assets |
493,645 |
403,693 |
493,645 |
403,693 |
||||
|
Total debt (loans and borrowings) |
269,359 |
218,536 |
269,359 |
218,536 |
||||
|
Weighted average effective mortgage interest rate |
3.43% |
3.52% |
3.43% |
3.52% |
||||
|
Weighted average mortgage term (years) |
4.75 |
4.72 |
4.75 |
4.72 |
||||
|
Leverage ratio (3) |
54.6% |
54.1% |
54.6% |
54.1% |
||||
|
Interest coverage (times) |
3.17 |
2.95 |
3.01 |
2.92 |
||||
|
Debt service coverage (times) |
1.86 |
1.71 |
1.79 |
1.76 |
||||
|
Other |
||||||||
|
Properties acquired |
3 |
– |
8 |
11 |
||||
|
Non-core properties disposed |
– |
– |
– |
– |
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|
(1)On June 17, 2016, approximately 5,650,000 Units were issued on completion of a public offering. On January 7, 2015, approximately 5,130,000 Units |
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were issued on completion of a public offering. |
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(2)On the sale of a 75% interest in two properties, the Trustees approved a special distribution of $0.016 per Unit payable to shareholders of record |
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May 31, 2015 which was paid June 15, 2015. |
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(3)Average leverage was 53.0% during the third quarter of 2016 compared to 53.7% in the same period of 2015. |
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Summit II’s Interim Consolidated Financial Statements and MD&A for the three and nine months ended September 30, 2016 are available on the REIT’s website at www.summitIIreit.com.
About Summit II
Summit Industrial Income REIT is an unincorporated open-end trust focused on growing and managing a portfolio of light industrial properties across Canada. Summit II’s units are listed on the TSX and trade under the symbol SMU.UN. For more information, please visit our web site at www.summitIIreit.com.
Caution Regarding Forward Looking Information
This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “goal” and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this news release contains forward looking statements and information concerning the goal to build Summit II’s property portfolio. The forward-looking statements and information are based on certain key expectations and assumptions made by Summit II, including general economic conditions. Although Summit II believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Summit II can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to, tenant risks, current economic environment, environmental matters, general insured and uninsured risks and Summit II being unable to obtain any required financing and approvals. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward looking information for anything other than its intended purpose. Summit II undertake no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
SOURCE Summit Industrial Income REIT
