FIRST QUARTER HIGHLIGHTS (1)
Portfolio Activity
- Disposed of four office properties and one parcel of development land in
Calgary, Alberta and one office property inOttawa, Ontario , for an aggregate sale price of$140.3 million .
Financial and Operational
- Reported FFO per unit of
$0.33 for the first quarter of 2020, compared to$0.34 for the first quarter of 2019. - Reported AFFO per unit of
$0.24 for the first quarter of 2020, compared to$0.25 for the first quarter of 2019. - Reported a conservative AFFO payout ratio of 58.3% for the first quarter of 2020, compared to 56.0% for the first quarter of 2019.
- Stabilized Same Property NOI in Canadian dollars increased 2.1% for the first quarter of 2020.
- Same Property NOI in Canadian dollars increased 1.5%, or increased 0.7% in functional currency for the first quarter of 2020.
- Reported the seventh consecutive quarter of positive Same Property NOI growth.
- Weighted-average rental rate on renewals that commenced during the first quarter of 2020 increased 4.5%.
- Reported portfolio occupancy of 90.7% (92.7% including commitments) at
March 31, 2020 , compared to 91.5% atDecember 31, 2019 .
Balance Sheet and Liquidity
- Reported NAV per unit of
$15.52 atMarch 31, 2020 , compared to$15.56 atDecember 31, 2019 . - Reported unencumbered assets of
$1.9 billion atMarch 31, 2020 , compared to$2.0 billion atDecember 31, 2019 . - Reported total long-term debt and credit facilities to GBV of 52.6% at
March 31, 2020 , compared to 52.3% atDecember 31, 2019 . - Reported total long-term debt and credit facilities to EBITDA of 9.3 at
March 31, 2020 , compared to 8.8 atDecember 31, 2019 . - Increased EBITDA interest coverage ratio to 3.08 times for the first quarter of 2020, compared to 2.96 times for the first quarter of 2019.
Capital Structure
- Utilized the normal course issuer bid ("NCIB") to purchase 783,268 common units at a weighted-average price of
$7.69 and 35,948 preferred units at a weighted-average price$15.97 . - Repaid the outstanding face value of the Series B senior unsecured debentures upon maturity in the amount of
$200.0 million . - Entered into a two-year unsecured non-revolving term credit facility agreement in the amount of
$200.0 million , bearing interest at prime plus 0.60% or the bankers' acceptance rate plus 1.60%.
(1) Inclusive of properties held under joint venture arrangements. |
IMPACT OF COVID-19
Health and Safety of Stakeholders
Artis' first priority is the health and safety of our tenants, employees and the community. We continue to monitor guidance and direction provided by public health agencies and have implemented numerous protocols to help reduce the risk of spreading COVID-19 and to protect the health of our stakeholders. In accordance with current recommendations, we have increased common area cleaning at all properties and have imposed strict cleanliness protocols for our employees and contractors. Where appropriate, we have made accommodations for employees to work remotely from home and have restricted all business travel.
Tenant Support Program
Due to government-mandated closure of non-essential businesses, a number of retail tenants have had to limit operations or close their businesses temporarily. In an effort to support tenants through this difficult time, qualifying tenants who are in need of assistance have been given the option to defer a portion of their base rent for the months of April and
As a diversified REIT, our portfolio comprises office, retail and industrial properties which, at
Conservative Distribution Payout Ratio
For the first quarter of 2020, our AFFO payout ratio was 58.3%, which is among the most conservative of commercial real estate investment trusts in
Unit Purchases Under Normal Course Issuer Bid ("NCIB")
Due to recent market volatility, we believe that the current trading price of Artis' units does not reflect their underlying value. This has provided a highly accretive opportunity to purchase units under the NCIB. During the first quarter, we purchased 783,268 common units at a weighted-average price of
Financial Position and Liquidity
Since
Our current liquidity sufficiently meets working capital requirements, obligations and capital commitments related to ongoing development projects and distribution payments to unitholders. We will continue to monitor this rapidly evolving situation closely and to prudently manage our capital resources.
Risks
Due to uncertainty with respect to the duration and severity of the COVID-19 pandemic, it is not possible to reliably estimate the future impact of COVID-19 on financial results and operations. For more information on risks related to the COVID-19 pandemic, please refer to the Risks and Uncertainties section of the Q1-20 MD&A.
Overall, our first priority is to maintain a safe environment for our tenants, employees and the community. During this unprecedented and uncertain time, we are committed to minimizing the impact on our business and, as a diversified REIT, we are confident that we are well-positioned to handle the economic challenges that may lie ahead.
FINANCIAL AND OPERATIONAL RESULTS
Selected Financial Information
Three Months ended | ||||||||
2020 | 2019 | % Change | ||||||
Revenue | $ | 118,541 | $ | 133,547 | (11.2) | % | ||
Property NOI (1) | 69,152 | 78,478 | (11.9) | % | ||||
Net (loss) income | (111,330) | 25,356 | (539.1) | % | ||||
Total comprehensive income (loss) | 14,197 | (4,508) | (414.9) | % | ||||
Distributions per common unit | 0.14 | 0.14 | — | % | ||||
FFO (1) | 46,441 | 50,284 | (7.6) | % | ||||
FFO per unit (1) | 0.33 | 0.34 | (2.9) | % | ||||
FFO payout ratio (1) | 42.4 | % | 41.2 | % | 1.2 | % | ||
AFFO (1) | 33,661 | 37,607 | (10.5) | % | ||||
AFFO per unit (1) | 0.24 | 0.25 | (4.0) | % | ||||
AFFO payout ratio (1) | 58.3 | % | 56.0 | % | 2.3 | % |
(1) Represents a non-GAAP measure. Refer to the Notice with Respect to non-GAAP Measures. |
Same Property NOI
The REIT is pleased to report a seventh consecutive quarter of Same Property NOI growth.
Q1-20 | Q4-19 | Q3-19 | Q2-19 | Q1-19 | ||||||
Same Property NOI growth | 1.5 | % | 3.3 | % | 2.0 | % | 4.6 | % | 5.1 | % |
Stabilized Same Property NOI growth | 2.1 | % | 4.4 | % | 3.8 | % | 6.3 | % | 5.7 | % |
Occupancy and Leasing
Occupancy at
Artis' portfolio has a stable lease expiry profile with 48.0% of gross leasable area expiring in 2024 or later and 51.7% of the remaining 2020 expiries renewed or committed to new leases at
2020 | 2021 | 2022 | 2023 | 2024 | ||||||||||||||||
Expiring square footage | 10.0 | % | 12.9 | % | 10.8 | % | 9.1 | % | 48.0 | % | ||||||||||
Committed percentage | 51.7 | % | 7.0 | % | 4.1 | % | 6.9 | % | 5.3 | % | ||||||||||
In-place rents | $ | 14.78 | $ | 13.04 | $ | 10.79 | $ | 14.46 | $ | 12.20 | ||||||||||
Comparison of market to in-place rents | 3.2 | % | (2.5) | % | 4.5 | % | 0.2 | % | 0.2 | % | ||||||||||
BALANCE SHEET AND LIQUIDITY
Balance Sheet Highlights and Metrics
The REIT's balance sheet highlights and metrics, on a Proportionate Share basis, are as follows:
2020 | 2019 | ||||||
Fair value of investment properties | $ 5,238,094 | $ 5,249,275 | |||||
Fair value of unencumbered assets | 1,891,542 | 1,968,369 | |||||
NAV per unit (1) | 15.52 | 15.56 | |||||
Secured mortgages and loans to GBV (1) | 28.7 | % | 27.9 | % | |||
Total long-term debt and credit facilities to GBV (1) | 52.6 | % | 52.3 | % | |||
Total long-term debt and credit facilities to EBITDA (1) | 9.3 | 8.8 | |||||
EBITDA interest coverage ratio (1) | 3.08 | 3.05 | |||||
Unencumbered assets to unsecured debt | 1.44 | 1.47 |
(1) Represents a non-GAAP measure. Refer to the Notice with Respect to non-GAAP Measures. |
Information regarding the REIT's mortgage financing, on a Proportionate Share basis, is as follows:
2020 | 2019 | ||||||
Weighted-average effective interest rate | 3.68 | % | 3.98 | % | |||
Weighted-average term to maturity (in years) | 2.2 | 2.4 | |||||
Unhedged variable rate mortgage debt as a percentage of total debt | 21.4 | % | 22.7 | % | |||
Liquidity and Capital Resources
At
PORTFOLIO ACTIVITY
Dispositions
During the first quarter of 2020, Artis disposed the following properties:
Property | Property Count | Location | Disposition Date | Asset Class | Owned share of GLA | Sale Price | ||||
Centre 15 Building | 1 | Office | 76,021 | $ | 14,000 | |||||
2 | Office | 497,635 | 77,814 | |||||||
1 | Office | 258,445 | 26,000 | |||||||
1 | Office | 180,689 | 22,500 | |||||||
5 | 1,012,790 | $ | 140,314 |
(1) Disposition includes a parcel of development land.
Artis sold the properties listed above for a total sale price of
New Developments
The table below lists Artis' ongoing development projects and completion progress, inclusive of properties held under joint venture arrangements. Additional information pertaining to each project can be found in the Q1-20 MD&A.
Property | Location | Asset class | Owned share of GLA | % Complete | % Committed (1) | ||||
330 Main | Retail | 27,000 | 85.0 | % | 90.0 | % | |||
300 Main | Residential / Multi-Family | 580,000 | 38.0 | % | 0.0 | % | |||
Park 8Ninety IV | Industrial | 95,000 | 46.0 | % | 100.0 | % | |||
Linden Ridge Shopping Centre II | Retail | 17,000 | 56.0 | % | 100.0 | % |
(1) Percentage committed is based on occupancy at |
UPDATE ON NEW INITIATIVES
In
NCIB Activity and Preferred Unit Redemption
During the first quarter of 2020, we purchased 783,268 common units at a weighted-average price of
On
Property Dispositions
Artis' intention is to sell between
Property | Property count | Location | Disposition date | Asset class | Owned share of GLA | Annualized Property NOI (1) | Capitalization rate (2) | Sale price | Fair value (3) | |||||||||
1 | Office | 51,723 | $ | 1,479 | 6.00 % | $ | 27,250 | $ | 26,106 | |||||||||
169 Drive | 1 | Area, CO | Office | 118,518 | (146) | N/A | 36,113 | 46,590 | ||||||||||
1 | Retail | 65,713 | 1,258 | 6.00% | 20,550 | 18,315 | ||||||||||||
1 | Office | 133,897 | (269) | N/A | 10,650 | 10,101 | ||||||||||||
Nanaimo Portfolio | 4 | Office / Retail | 112,327 | 2,079 | 4.60% | 37,038 | 36,621 | |||||||||||
1 | Greater Denver Area, CO | Office | 394,151 | 8,867 | N/A | 104,325 | 111,196 | |||||||||||
GSA Professional | 1 | Greater Phoenix Area, AZ | Office | 210,202 | 7,008 | 5.81% | 121,825 | 117,958 | ||||||||||
1 | Greater Toronto Area, ON | Office | 192,036 | 4,600 | 3.71% | 124,000 | 94,801 | |||||||||||
Estevan Retail Portfolio | 2 | Retail | 167,114 | 1,153 | 9.52% | 13,000 | 12,867 | |||||||||||
1 | Office | 106,195 | 2,509 | 6.28% | 39,000 | 37,143 | ||||||||||||
Centre 70 Building | 1 | Office | 134,293 | 2,467 | N/A | 23,500 | 25,124 | |||||||||||
Minnesota Retail Portfolio(5) | 6 | Area, MN | Retail | 298,232 | 4,487 | 10.75% | 45,870 | 52,035 | ||||||||||
Centre 15 Building | 1 | Office | 76,021 | 1,349 | 7.50% | 14,000 | 13,991 | |||||||||||
Portfolio (5) | 2 | Office | 497,635 | 6,727 | 8.75% | 77,814 | 78,872 | |||||||||||
1 | Office | 258,445 | 2,418 | 8.00% | 26,000 | 25,854 | ||||||||||||
1165 Street | 1 | Office | 180,689 | 638 | N/A | 22,500 | 22,437 | |||||||||||
26 | 2,997,191 | $ | 46,624 | $ | 743,435 | $ | 730,011 |
(1) Based on the annualized Property NOI reported for the quarter prior to disposition. Property NOI for |
(2) Capitalization rates are based on 12-month forward looking Property NOI, as of the date of closing. |
(3) Based on the fair value reported at the quarter prior to disposition. |
(4) The REIT disposed of its 50% interest in |
(5) Disposition includes a parcel of development land. |
At
New Developments
Since the New Initiatives were announced, the REIT has completed five new industrial development projects located in key target markets in the
The REIT will continue to provide updates on the New Initiatives as progress is made.
UPCOMING WEBCAST AND CONFERENCE CALL
Interested parties are invited to participate in a conference call with management on
Alternatively, you may access the simultaneous webcast by following the link from our website at www.artisreit.com/investor-link/conference-calls/ during or after the conference call and webcast. Prior to the webcast, you may follow the link to confirm you have the right software and system requirements.
If you cannot participate on
NOTICE WITH RESPECT TO NON-GAAP MEASURES
In addition to reported IFRS measures, the following non-GAAP measures are commonly used by Canadian real estate investment trusts as an indicator of financial performance: Proportionate Share, Property NOI, Same Property NOI, FFO, AFFO, FFO and AFFO Payout Ratios, NAV per Unit, Debt to GBV, EBITDA Interest Coverage Ratio and Debt to EBITDA. "GAAP" means the generally accepted accounting principles described by the CPA Canada Handbook - Accounting, which are applicable as at the date on which any calculation using GAAP is to be made. Artis applies IFRS, which is the section of GAAP applicable to publicly accountable enterprises. These non-GAAP measures are not defined under IFRS and are not intended to represent operating profits for the period, or from a property, nor should any of these measures be viewed as an alternative to net income, cash flow from operations or other measures of financial performance calculated in accordance with IFRS. Readers should be further cautioned that the following measures as calculated by Artis may not be comparable to similar measures presented by other issuers. These non-GAAP measures are defined in the Q1-20 MD&A.
CAUTIONARY STATEMENTS
This press release contains forward-looking statements. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Particularly, statements regarding the REIT's future operating results, performance and achievements, including the COVID-19 pandemic and the implementation of Artis' new initiatives, are forward-looking statements. Without limiting the foregoing, the words "expects", "anticipates", "intends", "estimates", "projects", and similar expressions are intended to identify forward-looking statements.
Artis is subject to significant risks and uncertainties which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied in these forward-looking statements. Such risk factors include, but are not limited to, risks related to risks related to the COVID-19 pandemic, implementation of Artis' new initiatives, risks associated with real property ownership, debt financing, foreign currency, credit and tenant concentration, lease rollover, availability of cash flow, general uninsured losses, future property acquisitions and dispositions, environmental matters, tax related matters, changes in legislation and changes in the tax treatment of trusts, cyber security, new or (re)developments, unitholder liability, potential conflicts of interest, potential dilution and reliance on key personnel. Artis cannot assure investors that actual results will be consistent with any forward-looking statements and Artis assumes no obligation to update or revise such forward-looking statements to reflect actual events or new circumstances. All forward-looking statements contained in this press release are qualified by this cautionary statement.
ABOUT
Artis is a diversified Canadian real estate investment trust investing in office, retail and industrial properties. Since 2004, Artis has executed an aggressive but disciplined growth strategy, building a portfolio of commercial properties in select markets in
During the three months ended
T 204.947.1250 F 204.947.0453
www.artisreit.com
AX.UN on the TSX
SOURCE
© Canada Newswire, source