"Leasing activity was strong across all of our asset classes and markets throughout the second quarter," said
SECOND QUARTER HIGHLIGHTS
Business Strategy Update
- Utilized the normal course issuer bid ("NCIB") to purchase 3,543,855 common units at a weighted-average price of
$12.54 and 59,300 preferred units at a weighted-average price of$24.32 . - Invested in equity securities for an aggregate cost of
$158.1 million . - Disposed of one office property located in
Canada and one industrial property located in theU.S. for an aggregate sale price of$68.7 million . - Completed the development of
Blaine 35 I, an industrial property comprising 118,500 square feet, located inthe Twin Cities Area ,Minnesota .
Balance Sheet and Liquidity
- Issued Series E senior unsecured debentures for gross proceeds of
$200.0 million , maturing onApril 29, 2025 and bearing interest at a fixed rate of 5.60% per annum. - Renewed the non-revolving credit facility maturing
July 18, 2022 in the amount of$150.0 million for a one-year term. - Increased NAV per unit (1) to
$19.37 atJune 30, 2022 , compared to$17.37 atDecember 31, 2021 . - Reported total debt to GBV (1) of 46.0% at
June 30, 2022 , compared to 42.9% atDecember 31, 2021 . - Reported total debt to Adjusted EBITDA (1) of 8.9 at
June 30, 2022 , compared to 8.2 atDecember 31, 2021 . - Reported Adjusted EBITDA interest coverage ratio (1) of 3.35 for the second quarter of 2022, compared to 3.86 for the second quarter of 2021.
Financial and Operational
- Increased FFO per unit (1) to
$0.38 for the second quarter of 2022, compared to$0.34 for the second quarter of 2021, and increased AFFO per unit (1) to$0.27 for the second quarter of 2022, compared to$0.25 for the second quarter of 2021. - Reported a conservative AFFO payout ratio (1) of 55.6% for the second quarter of 2022, improved from 60.0% for the second quarter of 2021.
- Same Property NOI (1) in Canadian dollars for the second quarter of 2022 increased 0.7% compared to the second quarter of 2021.
- Reported portfolio occupancy of 90.7% (92.0% including commitments) at
June 30, 2022 , increased from 89.5% (91.6% including commitments) atMarch 31, 2022 . - Renewals totalling 388,424 square feet and new leases totalling 227,201 square feet commenced during the second quarter of 2022.
- Weighted-average rental rate on renewals that commenced during the second quarter of 2022 increased 3.7%.
(1) Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure. |
BUSINESS STRATEGY UPDATE
Strengthening the Balance Sheet
A pillar of the REIT's strategy is to strengthen the balance sheet through accretive dispositions, unit repurchases and debt reduction.
During Q2-22, the REIT continued unlocking value through the monetization of certain assets and sold one office property located in
Also during Q2-22, the REIT utilized the NCIB to purchase 3,543,855 common units at a weighted-average price of
The REIT also has a commercial and residential development project under construction. 300 Main is a 580,000 square foot building located in
During Q2-22, the REIT invested in equity securities for an aggregate cost of
BALANCE SHEET AND LIQUIDITY
The REIT's balance sheet highlights and metrics, are as follows:
2022 | 2021 | ||||
Total investment properties | $ 4,016,838 | $ 3,999,609 | |||
Unencumbered assets | 1,954,006 | 1,902,748 | |||
NAV per unit (1) | 19.37 | 17.37 | |||
Total debt to GBV (1) | 46.0 % | 42.9 % | |||
Total debt to Adjusted EBITDA (1) | 8.9 | 8.2 | |||
Adjusted EBITDA interest coverage ratio (1) | 3.35 | 3.77 | |||
Unencumbered assets to unsecured debt (1) | 1.56 | 2.20 |
(1) Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure. |
At
Liquidity and capital resources may be impacted by financing activities, portfolio acquisition, disposition and development activities or debt repayments occurring subsequent to
FINANCIAL AND OPERATIONAL RESULTS
Three months ended | Six months ended | ||||||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||
Revenue | $ 91,055 | $ 103,299 | (11.9) % | $ 184,296 | $ 224,176 | (17.8) % | |||
Net operating income | 52,425 | 62,037 | (15.5) % | 103,887 | 126,269 | (17.7) % | |||
Net (loss) income | (19,556) | 217,056 | (109.0) % | 217,457 | 288,916 | (24.7) % | |||
Total comprehensive income | 30,553 | 198,431 | (84.6) % | 244,329 | 253,422 | (3.6) % | |||
Distributions per common unit | 0.15 | 0.15 | — % | 0.30 | 0.29 | 3.4 % | |||
FFO (1) | $ 44,939 | $ 45,428 | (1.1) % | $ 86,947 | $ 92,001 | (5.5) % | |||
FFO per unit (1) | 0.38 | 0.34 | 11.8 % | 0.72 | 0.69 | 4.3 % | |||
FFO payout ratio (1) | 39.5 % | 44.1 % | (4.6) % | 41.7 % | 42.0 % | (0.3) % | |||
AFFO (1) | $ 31,567 | $ 32,795 | (3.7) % | $ 61,138 | $ 66,730 | (8.4) % | |||
AFFO per unit (1) | 0.27 | 0.25 | 8.0 % | 0.51 | 0.50 | 2.0 % | |||
AFFO payout ratio (1) | 55.6 % | 60.0 % | (4.4) % | 58.8 % | 58.0 % | 0.8 % |
(1) Represents a non-GAAP measure, ratio or other supplementary financial measure. Refer to the Notice with Respect to Non-GAAP & Supplementary Financial Measures Disclosure. |
Artis reported portfolio occupancy of 90.7% at
Artis' portfolio has a stable lease expiry profile with 48.5% of gross leasable area expiring in 2026 or later. Weighted-average in-place rents for the total portfolio are
Current | Monthly | 2022 | 2023 | 2024 | 2025 | 2026 & later | Total | ||||||||
Expiring square footage | 9.3 % | 0.3 % | 9.1 % | 13.0 % | 12.3 % | 7.5 % | 48.5 % | 100.0 % | |||||||
In-place rents | N/A | N/A | $ 13.56 | ||||||||||||
Market rents | N/A | N/A | $ 13.77 |
UPCOMING WEBCAST AND CONFERENCE CALL
A conference call with management will be held on
Alternatively, you may access the simultaneous webcast by following the link from our website at http://www.artisreit.com/investor-link/conference-calls/. Prior to the webcast, you may follow the link to confirm you have the right software and system requirements.
If you cannot participate on
This press release contains forward-looking statements within the meaning of applicable Canadian securities laws. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "outlook", "objective", "expects", "anticipates", "intends", "estimates", "projects", "believes", "plans", "seeks", and similar expressions or variations of such words and phrases suggesting future outcomes or events, or which state that certain actions, events or results ''may'', ''would'', "should" or ''will'' occur or be achieved are intended to identify forward-looking statements. Such forward-looking information reflects management's current beliefs and is based on information currently available to management.
Forward-looking statements are based on a number of factors and assumptions which are subject to numerous risks and uncertainties, which have been used to develop such statements, but which may prove to be incorrect. Although Artis believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Assumptions have been made regarding, among other things: the general stability of the economic and political environment in which Artis operates, treatment under governmental regulatory regimes, securities laws and tax laws, the ability of Artis and its service providers to obtain and retain qualified staff, equipment and services in a timely and cost efficient manner, currency, exchange and interest rates, global economic, financial markets and economic conditions in
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 risk related to tax matters; and, credit, market, currency, operational, liquidity and funding risks generally and relating specifically to the Cominar Transaction; the COVID-19 pandemic, real property ownership, geographic concentration, current economic conditions, strategic initiatives, debt financing, interest rate fluctuations, foreign currency, tenants, SIFT rules, other tax-related factors, illiquidity, competition, reliance on key personnel, future property transactions, general uninsured losses, dependence on information technology, cyber security, environmental matters and climate change, land and air rights leases, public markets, market price of common units, changes in legislation and investment eligibility, availability of cash flow, fluctuations in cash distributions, nature of units, legal rights attaching to units, preferred units, debentures, dilution, unitholder liability, failure to obtain additional financing, potential conflicts of interest, developments and trustees.
For more information on the risks, uncertainties and assumptions that could cause Artis' actual results to materially differ from current expectations, refer to the section entitled "Risk Factors" of Artis' Annual Information Form for the year ended
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 other than as required by applicable securities laws. All forward-looking statements contained in this press release are qualified by this cautionary statement.
In addition to reported IFRS measures, certain non-GAAP and supplementary financial measures are commonly used by Canadian real estate investment trusts as an indicator of financial performance. "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.
Non-GAAP measures and ratios include Same Property Net Operating Income ("Same Property NOI"), Funds From Operations ("FFO"), Adjusted Funds from Operations ("AFFO"), FFO per Unit, AFFO per Unit, FFO Payout Ratio, AFFO Payout Ratio, NAV per Unit, Total Debt to GBV, Adjusted EBITDA Interest Coverage Ratio and Total Debt to Adjusted EBITDA.
Supplementary financial measures includes unencumbered assets to unsecured debt.
Management believes that these measures are helpful to investors because they are widely recognized measures of Artis' performance and provide a relevant basis for comparison among real estate entities.
These non-GAAP and supplementary financial measures are not defined under IFRS and are not intended to represent financial performance, financial position or cash flows for the period, 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.
The above measures are not standardized financial measures under the financial reporting framework used to prepare the financial statements of Artis. Readers should be further cautioned that the above measures as calculated by Artis may not be comparable to similar measures presented by other issuers. Refer to the Notice With Respect to Non-GAAP & Supplementary Financial Measures Disclosure of Artis' Q2-22 MD&A, which is incorporated by reference herein, for further information (available on SEDAR at www.sedar.com or Artis' website at www.artisreit.com).
The reconciliation for each non-GAAP measure or ratio and other supplementary financial measures included in this Press Release is outlined below.
NAV per Unit
|
| ||
Unitholders' equity | $ 2,550,704 | $ 2,455,353 | |
Less face value of preferred equity | (296,174) | (299,017) | |
NAV attributable to common unitholders | $ 2,254,530 | $ 2,156,336 | |
Total number of dilutive units outstanding: | |||
Common units | 115,787,008 | 123,544,536 | |
Restricted units | 465,254 | 462,891 | |
Deferred units | 164,957 | 133,552 | |
116,417,219 | 124,140,979 | ||
NAV per unit | $ 19.37 | $ 17.37 |
Total Debt to GBV
|
| ||
Total assets | $ 4,998,257 | $ 4,576,024 | |
Add: accumulated depreciation | 9,916 | 9,275 | |
Gross book value | 5,008,173 | 4,585,299 | |
Secured mortgages and loans | 1,024,668 | 1,085,039 | |
Preferred shares liability | 904 | 889 | |
Carrying value of debentures | 448,807 | 249,346 | |
Credit facilities | 827,510 | 631,253 | |
Total debt | $ 2,301,889 | $ 1,966,527 | |
Total debt to GBV | 46.0 % | 42.9 % |
Unencumbered Assets to Unsecured Debt
|
| ||
Unencumbered assets | $ 1,954,006 | $ 1,902,748 | |
Unencumbered assets in properties held under joint venture arrangements | 37,408 | 36,805 | |
Total unencumbered assets | 1,991,414 | 1,939,553 | |
Senior unsecured debentures | 448,807 | 249,346 | |
Unsecured credit facilities | 827,510 | 631,253 | |
Total unsecured debt | $ 1,276,317 | $ 880,599 | |
Unencumbered assets to unsecured debt | 1.56 | 2.20 |
Adjusted EBITDA Interest Coverage Ratio
Three months ended | Six months ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net (loss) income | $ (19,556) | $ 217,056 | $ 217,457 | $ 288,916 | |||
Add (deduct): | |||||||
Tenant inducements amortized to revenue | 6,429 | 6,420 | 12,835 | 12,743 | |||
Straight-line rent adjustments | (243) | (1,178) | (531) | (2,217) | |||
Interest expense | 19,903 | 17,562 | 35,960 | 36,350 | |||
Net (income) loss from equity accounted investments | (7,310) | 136 | (147,594) | (6,209) | |||
Distributions from equity accounted investments (1) | 728 | 628 | 2,613 | 2,173 | |||
Fair value loss (gain) on investment properties | 18,767 | (173,874) | (52,174) | (192,221) | |||
Foreign currency translation loss | 2,573 | 3,716 | 1,310 | 5,771 | |||
Transaction costs | — | — | — | 11 | |||
Strategic initiative expenses | — | — | — | 18 | |||
Fair value loss (gain) on financial instruments | 43,854 | (6,026) | 23,661 | (13,144) | |||
Depreciation of property and equipment | 314 | 344 | 628 | 671 | |||
Income tax (recovery) expense | (790) | 667 | 31,177 | 801 | |||
Adjusted EBITDA | 64,669 | 65,451 | 125,342 | 133,663 | |||
Interest expense | 19,903 | 17,562 | 35,960 | 36,350 | |||
Add (deduct): | |||||||
Amortization of financing costs | (801) | (803) | (1,528) | (1,730) | |||
Amortization of above- and below-market mortgages, net | 219 | 185 | 437 | 366 | |||
Adjusted interest expense | $ 19,321 | $ 16,944 | $ 34,869 | $ 34,986 | |||
Adjusted EBITDA interest coverage ratio | 3.35 | 3.86 | 3.59 | 3.82 |
(1) Excludes distributions from proceeds of the sale of investment properties. |
Total Debt to Adjusted EBITDA
|
| ||
Secured mortgages and loans | $ 1,024,668 | $ 1,085,039 | |
Preferred shares liability | 904 | 889 | |
Carrying value of debentures | 448,807 | 249,346 | |
Credit facilities | 827,510 | 631,253 | |
Total debt | 2,301,889 | 1,966,527 | |
Quarterly Adjusted EBITDA | 64,669 | 59,781 | |
Annualized Adjusted EBITDA | 258,676 | 239,124 | |
Total Debt to Adjusted EBITDA | 8.9 | 8.2 |
Same Property NOI
Three months ended | Six months ended | ||||||||||||
% Change | % Change | ||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||
Net operating income | $ 52,425 | $ 62,037 | |||||||||||
Add (deduct) net operating income from: | |||||||||||||
Joint venture arrangements | 2,607 | 2,044 | 4,864 | 4,434 | |||||||||
Dispositions and unconditional dispositions | (395) | (7,744) | (505) | (16,407) | |||||||||
(Re)development properties | 462 | 196 | 742 | 322 | |||||||||
Lease termination income adjustments | (1,470) | (220) | (3,006) | (419) | |||||||||
Disposition of condominium units | — | (133) | — | (1,091) | |||||||||
Other | (423) | (1,454) | (359) | (2,441) | |||||||||
781 | (7,311) | 1,736 | (15,602) | ||||||||||
Straight-line rent adjustments (1) | (358) | (1,476) | (776) | (2,826) | |||||||||
Tenant inducements amortized to revenue (1) | 6,513 | 5,707 | 13,081 | 11,238 | |||||||||
Same Property NOI | $ 59,361 | $ 58,957 | $ 404 | 0.7 % | $ (1,151) | (1.0) % |
(1) Includes joint venture arrangements. |
FFO and AFFO
Three months ended | Six months ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net (loss) income | $ (19,556) | $ 217,056 | $ 217,457 | $ 288,916 | |||
Add (deduct): | |||||||
Fair value loss (gain) on investment properties | 18,767 | (173,874) | (52,174) | (192,221) | |||
Tenant inducements amortized to revenue | 6,429 | 6,420 | 12,835 | 12,743 | |||
Transaction costs on acquisitions | — | — | — | 11 | |||
Adjustments for equity accounted investments | (2,112) | 1,638 | (139,936) | (2,898) | |||
Strategic initiative expenses | — | — | — | 18 | |||
Foreign currency translation loss | 2,573 | 3,716 | 1,310 | 5,771 | |||
Fair value loss (gain) on financial instruments | 43,854 | (6,026) | 23,661 | (13,144) | |||
Deferred income tax (recovery) expense | (1,054) | (19) | 30,819 | (15) | |||
Remeasurement component of unit-based compensation | (611) | (4) | (271) | (129) | |||
Distributions on preferred shares treated as interest expense | 59 | 41 | 117 | 83 | |||
Incremental leasing costs | 849 | 802 | 1,665 | 1,525 | |||
Preferred unit distributions | (4,259) | (4,322) | (8,536) | (8,659) | |||
FFO | $ 44,939 | $ 45,428 | $ 86,947 | $ 92,001 | |||
Add (deduct): | |||||||
Amortization of recoverable capital expenditures | $ (1,899) | $ (2,301) | $ (3,775) | $ (4,738) | |||
Straight-line rent adjustments | (243) | (1,178) | (531) | (2,217) | |||
Adjustments for equity accounted investments | (2,130) | (154) | (3,303) | (316) | |||
Non-recoverable property maintenance reserve | (1,100) | (1,100) | (2,200) | (2,200) | |||
Leasing costs reserve | (8,000) | (7,900) | (16,000) | (15,800) | |||
AFFO | $ 31,567 | $ 32,795 | $ 61,138 | $ 66,730 |
FFO and AFFO Per Unit
Three months ended | Six months ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Basic units | 118,364,595 | 131,594,822 | 120,116,779 | 132,843,890 | |||
Add: | |||||||
Restricted units | 425,446 | 384,412 | 391,093 | 362,845 | |||
Deferred units | 164,957 | 78,817 | 158,371 | 69,817 | |||
Diluted units | 118,954,998 | 132,058,051 | 120,666,243 | 133,276,552 |
Three months ended | Six months ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
FFO per unit: | |||||||
Basic | $ 0.38 | $ 0.35 | $ 0.72 | $ 0.69 | |||
Diluted | 0.38 | 0.34 | 0.72 | 0.69 | |||
AFFO per unit: | |||||||
Basic | $ 0.27 | $ 0.25 | $ 0.51 | $ 0.50 | |||
Diluted | 0.27 | 0.25 | 0.51 | 0.50 |
FFO and AFFO Payout Ratios
Three months ended | Six months ended | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Distributions per common unit | $ 0.15 | $ 0.15 | $ 0.30 | $ 0.29 | |||
FFO per unit | 0.38 | 0.34 | 0.72 | 0.69 | |||
FFO payout ratio | 39.5 % | 44.1 % | 41.7 % | 42.0 % | |||
Distributions per common unit | $ 0.15 | $ 0.15 | $ 0.30 | $ 0.29 | |||
AFFO per unit | 0.27 | 0.25 | 0.51 | 0.50 | |||
AFFO payout ratio | 55.6 % | 60.0 % | 58.8 % | 58.0 % |
ABOUT
Artis is a diversified Canadian real estate investment trust with a portfolio of industrial, office and retail properties in
T 204.947.1250 F 204.947.0453
www.artisreit.com
AX.UN on the TSX
SOURCE
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