TORONTO, May 10, 2016 /CNW/ – Summit Industrial Income REIT (“Summit II” or the “REIT”) (TSX: SMU.UN) announced today its results for the three months ended March 31, 2016.
First Quarter 2016 Highlights:
- 99.8% occupancy at March 31, 2016 with remaining vacant space leased subsequent to quarter-end.
- Completed 449,730 square feet of new and renewal leasing compared to 67,000 in Q1 last year.
- Only 2.8% of lease expiries remain in 2016 as at March 31, 2016.
- Acquired a 50% interest in three properties in Montreal totaling 74,362 sq. ft. for $12.0 million.
- Acquired a 50% interest in value-add property in Montreal totaling 77,865 sq. ft. for $3.6 million.
- Secured $7.5 million in mortgage debt at a rate of 2.78% with a five-year term to maturity.
- 84.4% FFO payout ratio without DRIP benefit and 71.1% with DRIP benefit.
- Manager and Insiders interest remains strongly aligned with Unitholders through 13.9% insider ownership of REIT Units outstanding.
“We performed very well at the property level in the first quarter of 2016, benefiting from our 2015 acquisitions and continued solid organic growth,” commented Paul Dykeman, Chief Executive Officer. “We were also very active on the leasing front during the quarter, and with only 2.8% of our leases remaining to be renewed through the remainder of the year, and the portfolio now fully occupied, we look for continued strong performance going forward.”
STRONG OPERATING AND FINANCIAL RESULTS
Operating revenues increased to $10.2 million for the three months ended March 31, 2016 from $9.0 million in the same period last year due primarily to the REIT’s portfolio growth and successful leasing activities. Occupancy remained essentially full at 99.8% as at March 31, 2016. Net Operating Income (NOI) rose to $6.9 million in the first quarter of 2016 compared to $6.3 million in the same prior year period.
Funds from Operations (FFO) for the three months ended March 31, 2016 were $4.3 million ($0.149 per Unit) up from $4.1 million ($0.145 per Unit) in the same quarter of 2015. The REIT’s FFO payout ratio was 84.4% (71.1% including benefit of DRIP) in the first quarter of 2016 compared to 86.9% (71.2% including benefit of DRIP) in the same period in the prior year.
ACTIVE LEASING PROGRAM
The portfolio occupancy at March 31, 2016 was essentially full at 99.8%. Vacancy at March 31, 2016 related to one unit of 8,307 square feet which has been leased subsequent to the end of the quarter. The weighted average lease term for the portfolio was approximately 5.6 years at March 31, 2016 with leases containing contractual steps in rent of approximately 1.6% 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 $1.5 million in the period compared to $194,000 in the first quarter of 2015. During the first quarter of 2016, 313,738 square feet of renewal leasing were completed as well as 135,992 square feet of new leases for a total of 449,730 square feet compared to only 67,000 square feet in the first quarter of 2015. As a result, as at March 31, 2016, only 2.8% 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 232,000 square feet of leasing at an average cost of approximately $2.60 per square foot.
SOLID BALANCE SHEET AND LIQUIDITY POSITION
Total assets increased to $423.5 million at March 31, 2016, up from $406.4 million at December 31, 2015 due to the acquisition of interests in one value-add and three income producing properties in the targeted Greater Montreal Areas during the first quarter of 2016, partially offset by the sale of a 75% interest in two properties for $24.9 million in April 2015.
Total debt was $234.5 million at March 31, 2016 compared to $218.4 million at December 31, 2015. In conjunction with the acquisition of interests in one value-add and three income producing Montreal properties in the first quarter of 2016, mortgage financing of $6.9 million was arranged at an average interest rate of 3.63% and an average term to maturity of 7.1 years. As well, a new $7.5 million mortgage was obtained with a term to maturity of five years at an effective interest rate at 2.78%. The proceeds from the new mortgage financing was used to pay down the revolving credit facility.
As of March 31, 2016, $38.0 million was drawn on the revolving credit facility.
As at March 31, 2016 the REIT’s debt leverage ratio was 55.4% compared to 53.7% at December 31, 2015. The weighted average effective interest rate on the REIT’s mortgage portfolio was 3.47% at March 31, 2016, down from 3.52% at the prior year end, with a weighted average term to maturity of 4.5 years, consistent with the prior year end. Debt service and interest coverage ratios were 1.73 times and 2.89 times, respectively, compared to 1.77 times and 3.01 times, respectively, at December 31, 2015.
INVESTOR CONFERENCE CALL
A conference call will be hosted by Summit II’s management team on Wednesday, May 11, 2016 at 8:30 am ET. The telephone numbers to participate in the conference call are North America Toll Free: (866) 223-7781 and Local Toronto / International: (416) 340-2216. 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 3003160#. A webcast of the call will also be archived on the REIT’s web site at www.summitIIreit.com.
2015 ANNUAL UNITHOLDERS’ MEETING
Summit II’s 2015 Annual Meeting of Unitholders will be held on Wednesday, May 11, 2016 at 10:30 am in the TD Bank Tower, 66 Wellington Street West, Suite 5300, Toronto, Ontario M5K 1E6.
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FINANCIAL AND OPERATING HIGHLIGHTS |
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(in Thousands of Canadian dollars) |
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(except per Unit amounts) |
Three months ended |
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March 31, 2016 |
December 31, 2015 |
March 31, 2015 |
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Portfolio Performance |
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Occupancy (%) |
99.8% |
98.1% |
100.0% |
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Revenue from income properties |
$ |
10,164 |
$ |
9,708 |
$ |
9,049 |
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Property operating expenses |
3,306 |
2,966 |
2,750 |
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Net operating income |
6,858 |
6,742 |
6,299 |
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Interest expense |
2,090 |
2,008 |
1,925 |
||||||
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Net income |
4,285 |
4,956 |
3,638 |
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Operating Performance |
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FFO per Unit (1) |
0.149 |
0.150 |
0.145 |
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Regular Distributions per Unit declared to Unitholders |
0.1260 |
0.1260 |
0.1260 |
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Regular FFO payout ratio without DRIP benefit |
84.4% |
84.3% |
86.8% |
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Regular FFO payout ratio with DRIP benefit (2) |
71.1% |
70.8% |
71.2% |
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Total Distributions per Unit declared to Unitholders |
0.1260 |
0.1260 |
0.1260 |
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Weighted average Units outstanding(1) |
28,961 |
28,860 |
28,226 |
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Liquidity and Leverage |
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Total assets |
423,507 |
406,411 |
407,680 |
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Total debt (loans and borrowings) |
234,504 |
218,369 |
225,612 |
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Weighted average effective mortgage interest rate |
3.47% |
3.52% |
3.57% |
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Weighted average mortgage term (years) |
4.45 |
4.47 |
5.10 |
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Leverage ratio (3) |
55.4% |
53.7% |
55.3% |
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Interest coverage (times) |
2.89 |
3.01 |
2.90 |
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Debt service coverage (times) |
1.73 |
1.77 |
1.82 |
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Other |
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Properties acquired |
4 |
– |
10 |
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Non-core properties disposed |
– |
– |
– |
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(1) On January 7, 2015, approximately 5,130,000 Units were issued on completion of a public offering. |
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(2) On March 15, 2013, the Trust announced a cash distribution policy to pay $0.0408 per Trust Unit starting on April 15, 2013, to Unitholders of |
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record on March 29, 2013. On May 6, 2014, the Trust announced a cash distribution increase to $0.042 per Trust Unit. |
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(3) Average leverage was 55.0% during the first quarter of 2016 compared to 51.8% in the same period of 2015. |
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Summit II’s Interim Consolidated Financial Statements and MD&A for the three months ended March 31, 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
