Agellan Commercial Real Estate Investment Trust Releases
Third Quarter 2014 Results

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES

TORONTO--()--AGELLAN COMMERCIAL REAL ESTATE INVESTMENT TRUST (the “REIT”) (TSX:ACR.UN) is pleased to report its financial results for the three and nine month periods ended September 30, 2014.

“We are excited about the new leases executed this quarter, particularly in the Houston and Ottawa markets. We have noticed a substantial pick-up in the level of leasing activity throughout the portfolio and we continue to remain positive on the occupancy potential of the portfolio”

             
FINANCIAL AND OPERATIONAL HIGHLIGHTS     September 30, 2014   December 31, 2013
(all dollar amounts in 000's, except per Unit amounts)      
 

Summary of Operational Information

Number of Properties 26 26
Gross Leasable Area ("GLA") (in 000's) 4,350 4,575
Occupancy % (at period end) 91.0% 92.5%
Average lease term to maturity (years) 4.1 4.3
 
Summary of Financial Information
Gross Book Value $586,113 $555,558
Debt (face value) $318,366 $301,991
Debt to Gross Book Value 54% 54%
Interest Coverage 3.3x 3.4x
Weighted average interest rate 3.9% 3.8%
 
For the three month period ended
  September 30, 2014 September 30, 2013 Variance
 
Total property and property related revenue $18,152 $15,670 $2,482
Adjusted net operating income(1) $10,591 $9,297 $1,294
Funds from operations ("FFO") $6,631 $6,065 $566
Adjusted funds from operations ("AFFO") $5,033 $4,311 $722
 

Basic and Diluted FFO per Unit

$0.28 $0.31 ($0.03)

Basic and Diluted AFFO per Unit

$0.21 $0.22 ($0.01)
Distributions per Unit $0.194 $0.194 $0.00
 
Payout Ratio 90%
Units outstanding at period-end: 23,451,343
Weighted average Units outstanding   23,431,624        

(1)Adjusted for the application of IFRIC 21. Please refer to the REIT’s Management Discussion and Analysis for the three and nine month periods ended September 30, 2014 for a discussion of IFRIC 21.


Significant Events of the Quarter:

  • The REIT’s portfolio occupancy increased 1.0% during the three month period ended September 30, 2014, with leasing momentum being generated in both Canada and the United States.
  • During the three month period ended September 30, 2014, the REIT leased 20,733 square feet of space at its Ottawa property with a lease term that commenced on October 1, 2014.
  • The REIT’s Texas properties benefited from positive leasing momentum as occupancy increased 1.3% during the three month period ended September 30, 2014, as approximately 55,000 square feet of new leases commenced during this period.
  • The REIT’s portfolio occupancy was negatively impacted during the six month period ended June 30, 2014, primarily due to four tenants who vacated approximately 95,000 square feet of leasable space in 3 Houston properties. As of the date hereof, the REIT has leases for approximately 50,000 square feet of leasable space in these 3 Houston properties.
  • On July 31, 2014, the REIT renewed its lease with Domino’s Pizza at its Maryland property. The lease will now expire on August 31, 2024.
  • On August 13, 2014, the REIT completed the sale of 5800 West Kiest Boulevard in Dallas, Texas for approximately US$11.6 million before closing costs. This represented an in-place capitalization rate of 7.4%. The REIT expects to redeploy these funds during the fourth quarter of 2014 to acquire one or more properties in the U.S. consistent with the REIT’s strategy. Management expects that the timing between the sale and redeployment of such funds will have a negative impact on the REIT’s operating results.
  • On August 13, 2014, the REIT obtained a mortgage secured by its property located in North Carolina. The US$12.250 million mortgage has a ten year term and bears a fixed rate of interest of 3.90% per annum, extending the REIT’s weighted average term to maturity for its mortgage obligations to 5.6 years as at September 30, 2014.
  • Operating results for the three and nine month periods ended September 30, 2014 have been slightly behind management’s expectations due to slower than expected lease up in the U.S. However, as evidenced by the positive leasing momentum experienced during the three month period ended September 30, 2014, management remains optimistic in respect of the organic growth within the REIT’s portfolio.
  • FFO for the three and nine month periods ended September 30, 2014 was $0.283 and $0.868 per Unit, respectively.
  • AFFO for the three and nine month periods ended September 30, 2014 was $0.215 and 0.648 per Unit, respectively.

“We are excited about the new leases executed this quarter, particularly in the Houston and Ottawa markets. We have noticed a substantial pick-up in the level of leasing activity throughout the portfolio and we continue to remain positive on the occupancy potential of the portfolio”, says Frank Camenzuli, Chief Executive Officer of the REIT. “In addition, we continue to make progress on our asset recycling program and expect to be in a position to provide further information in respect thereof in the coming quarters. We feel that our unique opportunistic strategy positions us well to drive substantial internal growth and enhance the net asset value of the portfolio. In addition, the REIT’s portfolio value and AFFO are expected to benefit from the strengthening U.S. dollar.”

Senior management will host a conference call to discuss the results on Wednesday, October 29, 2014 at 2:00 p.m. EST. In order to participate, please dial 1-416-340-2217 or 1-866-696-5910 and enter the participant pass code: 9843604. You will be required to identify yourself and the organization on whose behalf you are participating. For operator assistance during the call, please press *0.

If you cannot participate on October 29, 2014, a replay of the conference call will be available by dialing 1-905-694-9451 or 1-800-408-3053 and entering participant pass code: 2113652. The replay will be available until November 12, 2014.

Other information:

Information appearing in this news release is a select summary of results. The consolidated financial statements along with management’s discussion and analysis for the REIT are available electronically on the REIT’s website at www.agellanreit.com and under the REIT’s issuer profile at www.sedar.com.

The REIT is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been created for the purpose of acquiring and owning industrial, office and retail properties in select major urban markets in the United States and Canada.

The REIT's current portfolio comprises approximately 4.3 million square feet of gross leasable area in 26 properties. The properties are primarily located in major urban markets in the United States and Canada.

Non-IFRS supplemental measures:

Net operating income, FFO, AFFO, Payout Ratio, Cash Payout Ratio, Gross Book Value, Interest Coverage, Adjusted net operating income, and related per unit amounts are key measures of performance used by real estate operating companies; however, they are not defined by International Financial Reporting Standards (“IFRS”), do not have standardized meanings and are unlikely to be comparable with other issuers. These Non-IFRS measures are more fully defined and reconciled to net income in the REIT’s Management Discussion and Analysis for the three and nine month periods ended September 30, 2014, which is available electronically on the REIT’s website at www.agellanreit.com and under the REIT’s issuer profile on www.sedar.com.

Forward-looking information:

This press release contains forward-looking information within the meaning of applicable securities legislation. Forward-looking information can be identified by words or expressions including, but not limited to, “plans”, “expects”, “estimates”, “anticipates”, “predicts”, “believes”, “continue”, or variations of such words and phrases or statements. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to: general and local economic and business conditions; the financial condition of tenants; the REIT’s ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate functions. The REIT’s objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. Readers, therefore, should not place undue reliance on any such forward-looking statements. All forward-looking information in this press release speaks only as of the date of this press release. The REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Additional information about these assumptions and risks and uncertainties is contained in the REIT’s filings with securities regulators, including its latest annual information form and MD&A.

Contacts

Agellan Commercial Real Estate Investment Trust
Derek Dermott, 416-593-6800, ext. 269
President
ddermott@agellancapital.com
or
Frank Camenzuli, 416-593-6800, ext. 226
Chief Executive Officer
fcamenzuli@agellancapital.com

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