Canada NewsWire
QUÉBEC CITY, Nov. 8, 2019
QUÉBEC CITY, Nov. 8, 2019 /CNW Telbec/ - Cominar Real Estate Investment Trust ("Cominar" or the "REIT") (TSX: CUF.UN) is pleased to announce its results for the quarter ended September 30, 2019.
2019 THIRD QUARTER – HIGHLIGHTS
"We are pleased with the progress we have made in the third quarter toward our objectives of improving our organic growth, strengthening and de-risking our balance sheet, optimizing our portfolio and setting a path to value creation through intensification opportunities. Our same property NOI growth was 3.8%, with positive organic growth coming from each of our asset classes and each of our portfolio geographies", said Sylvain Cossette, President and Chief Executive Officer of Cominar. "Our unrelenting focus on the execution of our strategic plan is delivering meaningful results and while there is still more work to do, it is clear that we have hit an inflection point. The team is excited about the prospects for the remainder of 2019 and for the potential to build on our momentum. I am confident that our new strategic direction, which is structured to deliver operating efficiencies, accelerate NOI growth and crystallize untapped portfolio value will create short and long-term value for unitholders" added Mr. Cossette.
"Although we have sold $210 million of assets year-to-date, we delivered FFO per unit of $0.29 (excluding restructuring costs, debt redemption costs and a one-time payment from Target), unchanged from the third quarter of 2018, which is a reflection of the positive impact of our strategic initiatives on our bottom line", stated Heather C. Kirk, Executive Vice President and Chief Financial Officer. "Financing activity remained active in the third quarter and we continue to pursue additional initiatives to strengthen our balance sheet and improve financial flexibility. Year to date we have originated $1.3 billion of new debt including a $400 million unsecured revolving line of credit, a $300 million secured line of credit, $200 million of unsecured debentures and $381 million of secured mortgage financings. We are exploring opportunities to early-repay high interest rate, low LTV mortgages in order to reduce interest costs, enhance our unencumbered asset test ratio and extend mortgage terms. The current interest rate environment positions us well to refinance debt in support of FFO growth", added Ms. Kirk.
FINANCIAL AND OPERATING HIGHLIGHTS
BALANCE SHEET AND LIQUIDITY HIGHLIGHTS
INVESTMENT HIGHLIGHTS
(1) | Refer to section "Non-IFRS financial measures" in this press release. |
NON-IFRS FINANCIAL MEASURES
Cominar's financial statements are prepared in accordance with IFRS. Management uses a number of measures, which are not standardized under IFRS and should not be construed as an alternative to financial measures calculated in accordance with IFRS. Cominar use those measures to better assess its performance. Cominar's proportionate share, same property net operating income, funds from operations (FFO), adjusted funds from operations (AFFO), debt ratio and debt to EBITDA are not measures recognized by International Financial Reporting Standards (IFRS) and do not have standardized meanings prescribed by IFRS. Such measures may differ from similar computations as reported by similar entities and, accordingly, may not be comparable to similar measures reported by such other entities. These non-IFRS financial measures are more fully defined and discussed in Cominar's management discussion and analysis for the three and nine-month periods ended September 30, 2019, available at Cominar.com and on Sedar.com.
RESULTS OF OPERATIONS | |||||
Quarter | Year-to-date (nine months) | ||||
For the periods ended September 30 | 2019 | 2018 | 2019 | 2018(1) | |
$ | $ | $ | $ | ||
Operating revenues | 171,539 | 172,665 | 530,110 | 558,577 | |
Operating expenses | (80,101) | (81,688) | (263,004) | (277,241) | |
Net operating income | 91,438 | 90,977 | 267,106 | 281,336 | |
Finance charges | (37,486) | (36,373) | (110,635) | (115,844) | |
Trust administrative expenses | (3,818) | (4,314) | (13,109) | (17,149) | |
Change in fair value of investment properties | (2,559) | 13,393 | 5,511 | 9,062 | |
Share of joint ventures' net income | 1,487 | 1,560 | 4,378 | 4,093 | |
Transaction costs | (748) | — | (5,238) | (19,981) | |
Restructuring costs | (858) | — | (4,774) | — | |
Derecognition of goodwill | — | (594) | — | (594) | |
Net income before income taxes | 47,456 | 64,649 | 143,239 | 140,923 | |
Income taxes | |||||
Current | — | — | — | (6,391) | |
Deferred | — | — | — | 6,539 | |
— | — | — | 148 | ||
Net income | 47,456 | 64,649 | 143,239 | 141,071 |
(1) | The nine-month period ended September 30, 2018 includes results of 95 non-core properties sold to Slate for total consideration of $1.14 billion during the first quarter of 2018. |
Net income for the third quarter of 2019 amounted to $47.5 million compared to $64.6 million in 2018. This reflects an increase of $0.9 million in restructuring costs, a decrease of $0.5 million in trust administrative expenses and a $16.0 million change in the fair value of investment properties. Excluding the change in fair value of investment properties, which is non-monetary as well as for severance allowances, transaction costs, restructuring costs and governance and strategic alternatives consulting fees which are not related to the trend in occupancy levels, rental rates and property operating costs, adjusted net income would have been $51.7 million compared to $51.9 million in 2018.
SAME PROPERTY NET OPERATING INCOME
Same property NOI is a non-IFRS measure used by Cominar to provide an indication of the period-over-period operating profitability of the same property portfolio, that is, Cominar's ability to increase revenues, manage costs, and generate organic growth. The same property NOI includes the results of properties owned by Cominar as at December 31 2017, with the exception of results from the properties sold, acquired and under development in 2018 and 2019, as well as the rental income arising from the recognition of leases on a straight-line basis that is a non-cash item and which, by excluding it, will allow this measure to present the impact of actual rents collected by Cominar.
Quarter | Year-to-date (nine months) | ||||||
For the periods ended September 30 | 2019 | 2018 | 2019 | 2018 | |||
$ | $ | % Δ | $ | $ | % Δ | ||
Property type | |||||||
Office | 37,415 | 35,950 | 4.1 | 108,480 | 105,131 | 3.2 | |
Retail | 31,599 | 31,396 | 0.6 | 92,012 | 92,938 | (1.0) | |
Industrial and flex | 23,706 | 21,938 | 8.1 | 68,754 | 64,048 | 7.3 | |
Same property NOI(1) – Cominar's proportionate share(2) | 92,720 | 89,284 | 3.8 | 269,246 | 262,117 | 2.7 | |
Properties sold, acquired and under development in 2018 and 2019 | 1,194 | 4,264 | (72.0) | 5,214 | 26,314 | (80.2) | |
NOI – Cominar's proportionate share(2) | 93,914 | 93,548 | 0.4 | 274,460 | 288,431 | (4.8) | |
NOI – Financial statements | 91,438 | 90,977 | 0.5 | 267,106 | 281,336 | (5.1) | |
NOI – Joint ventures | 2,476 | 2,571 | (3.7) | 7,354 | 7,095 | 3.7 |
(1) | The same property net operating income revenues includes the results of properties owned by Cominar as at December 31 2017, with the exception of results from the properties sold, acquired and under development in 2018 and 2019, as well as the rental income arising from the recognition of leases on a straight-line basis. |
(2) | Refer to section "Non-IFRS financial measures" in this press release. |
Third quarter increase of 3.8% in same property NOI according to Cominar's proportionate share is attributable to the increase, in all property types and in all geographic markets, of the average in-place occupancy rate for the quarter ended September 30, 3019 when compared to the corresponding period of 2018.
FUNDS FROM OPERATIONS (FFO) AND ADJUSTED FUNDS FROM OPERATIONS (AFFO)
FFO is a non-IFRS measure which represents a standard real estate benchmark used to measure an entity's performance, and is calculated by Cominar as defined by REALpac as net income (calculated in accordance with IFRS) adjusted for, among other things, changes in the fair value of investment properties, deferred taxes and income taxes related to a disposition of properties, derecognition and impairment of goodwill, initial and re-leasing salary costs, adjustments relating to the accounting of joint ventures and transaction costs incurred upon a business combination or a disposition of properties. Management believes FFO to be a useful earnings measure as it adjusts net income for items that are not related to the trend in occupancy levels, rental rates and property operating costs.
AFFO is a non-IFRS measure which, by excluding from the calculation of FFO the rental income arising from the recognition of leases on a straight-line basis, the investments needed to maintain the property portfolio's capacity to generate rental income and a provision for leasing costs is calculated as defined by REALpac. Management believes AFFO provides a meaningful measure of Cominar's capacity to generate steady profits.
The following table presents a reconciliation of net income, as determined in accordance with IFRS, and funds from operations and adjusted funds from operations:
Quarter | Year-to-date (nine months) | ||||
For the periods ended September 30 | 2019 | 2018 | 2019 | 2018(1) | |
$ | $ | $ | $ | ||
Net income | 47,456 | 64,649 | 143,239 | 141,071 | |
Taxes on disposition of properties | — | — | — | 6,391 | |
Deferred income taxes | — | — | — | (6,539) | |
Initial and re-leasing salary costs | 879 | 729 | 2,481 | 2,635 | |
Change in fair value of investment properties(2) | 2,559 | (13,393) | (5,511) | (9,062) | |
Capitalizable interest on properties under development – joint ventures | 160 | 154 | 515 | 462 | |
Transaction costs | 748 | — | 5,238 | 19,981 | |
Derecognition of goodwill | — | 594 | — | 594 | |
FFO(2)(3) | 51,802 | 52,733 | 145,962 | 155,533 | |
Provision for leasing costs | (8,075) | (7,306) | (24,524) | (21,612) | |
Recognition of leases on a straight-line basis(2) | 254 | (159) | 128 | (1,016) | |
Capital expenditures – maintenance of rental income generating capacity | (5,611) | (4,019) | (16,228) | (11,801) | |
AFFO(2)(3) | 38,370 | 41,249 | 105,338 | 121,104 | |
Per unit information: | |||||
FFO (FD)(3)(4) | 0.28 | 0.29 | 0.80 | 0.85 | |
AFFO (FD)(3)(4) | 0.21 | 0.23 | 0.58 | 0.66 | |
Weighted average number of units outstanding (FD)(4) | 182,405,977 | 182,230,018 | 181,321,925 | 182,361,216 | |
Payout ratio of AFFO(3)(4) | 85.7% | 78.3% | 93.1% | 89.7% |
(1) | FFO and AFFO for the nine-month period ended September 30, 2018 include results of 95 non-core properties sold for total consideration of $1.14 billion during the first quarter of 2018. |
(2) | Including Cominar's proportionate share in joint ventures. |
(3) | Refer to section "Non-IFRS financial measures" in this press release. |
(4) | Fully diluted. |
FFO and AFFO for the third quarter ended September 30, 2019 include, among others, debenture redemption costs of $1.1 million, restructuring costs of $0.9 million and a settlement from Target Canada of $1.0 million. Excluding these adjustments, FFO per unit would have been stable at $0.29 per unit compared to 2018.
OCCUPANCY RATES | |||||||||||
Montreal | Québec City | Ottawa | Total | ||||||||
Committed | In-Place | Committed | In-Place | Committed | In-Place | Committed | In-Place | ||||
Property Type | |||||||||||
Office | 89.2% | 85.9% | 97.7% | 95.5% | 94.3% | 89.0% | 92.1% | 88.7% | |||
Retail | 95.0% | 86.9% | 92.9% | 86.3% | 89.7% | 55.5% | 94.0% | 85.4% | |||
Industrial and flex | 96.1% | 94.2% | 97.2% | 95.4% | N/A | N/A | 96.4% | 94.5% | |||
Portfolio total | 93.9% | 90.3% | 95.6% | 91.7% | 93.8% | 83.9% | 94.4% | 90.3% |
ADDITIONAL FINANCIAL INFORMATION
Cominar's condensed interim consolidated financial statements and interim management's discussion and analysis for the third quarter of 2019 are filed with SEDAR at sedar.com and are available on Cominar's website at cominar.com.
CONFERENCE CALL ON NOVEMBER 8, 2019
On Friday, November 8, 2019 at 11 a.m. (ET), Cominar's management will hold a conference call to present the results for the third quarter of 2019. In order to participate please dial 1 888 390‑0546. A presentation will be available before the conference call on the REIT's website at cominar.com, under the Conference Call header. In addition, a replay of the conference call will be available from Friday, November 8, 2019 at 2 p.m. to Friday, November 15, 2019 at 11:59 p.m., by dialing 1 888 390-0541 and entering passcode: 464278#.
PROFILE AS AT NOVEMBER 8, 2019
Cominar is one of the largest diversified real estate investment trusts in Canada and is the largest commercial property owner in the Province of Québec. Our portfolio consists of 331 high-quality office, retail and industrial properties, totalling 36.5 million square feet located in the Montreal, Québec City and Ottawa areas. Cominar's primary objective is to maximize total return to unitholders by way of tax-efficient distributions and maximizing the unit value through the proactive management of our portfolio.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements with respect to Cominar and its operations, strategy, financial performance and financial position. These statements generally can be identified by the use of forward-looking words such as "may", "will", "expect", "estimate", "anticipate", "intend", "believe" or "continue" or the negative thereof or similar variations and the use of conditional and future tenses. The actual results and performance of Cominar discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Some important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulation and the factors described under "Risk Factors" in Cominar's Annual Information Form. The cautionary statements qualify all forward-looking statements attributable to Cominar and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release. Cominar does not assume any obligation to update the aforementioned forward-looking statements, except as required by applicable laws.
SOURCE COMINAR REAL ESTATE INVESTMENT TRUST
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