- FFO per unit up for the year -
developments/redevelopments, lower finance costs and lease buyout
revenues drive increase
FREDERICTON, Feb. 22, 2018 /CNW/ - Plaza Retail REIT
(TSX: PLZ.UN) ("Plaza" or the "REIT") today announced its results
for the three months and year ended December
31, 2017.
Michael Zakuta, President and CEO
said, "We are pleased with our results for the year. Our
focus continues to be on delivering per unit growth through
value-add developments and redevelopments of high quality retail
projects leased to national retailers."
|
Financial Results
Summary
|
(CAD$000s, except
percentages, per unit amounts
and coverage
ratios)
|
Three Months
Ended
Dec 31,
2017
|
Three Months
Ended
Dec 31,
2016
|
Change
|
Twelve Months
Ended
Dec 31,
2017
|
Twelve Months
Ended
Dec 31,
2016
|
Change
|
Total property rental
revenue
|
$25,679
|
$25,241
|
+1.7%
|
$102,887
|
$100,215
|
+2.7%
|
Total property
operating expenses
|
$10,190
|
$9,585
|
+6.3%
|
$38,529
|
$37,543
|
+2.6%
|
Total NOI
|
$15,489
|
$15,656
|
-1.1%
|
$64,358
|
$62,672
|
+2.7%
|
|
|
|
|
|
|
|
Same-asset rental
revenue
|
$21,879
|
$21,722
|
+0.7%
|
$87,922
|
$87,844
|
+0.1%
|
Same-asset operating
expenses
|
$7,682
|
$7,329
|
+4.8%
|
$29,805
|
$29,771
|
+0.1%
|
Same-asset
NOI
|
$14,197
|
$14,393
|
-1.4%
|
$58,117
|
$58,073
|
+0.1%
|
|
|
|
|
|
|
|
FFO
|
$8,508
|
$8,619
|
-1.3%
|
$35,888
|
$32,650
|
+9.9%
|
FFO per
unit
|
$0.083
|
$0.087
|
-4.6%
|
$0.351
|
$0.333
|
+5.4%
|
FFO payout
ratio
|
81.5%
|
75.1%
|
+8.5%
|
77.1%
|
78.5%
|
-1.8%
|
|
|
|
|
|
|
|
AFFO
|
$7,862
|
$7,658
|
+2.7%
|
$33,288
|
$29,259
|
+13.8%
|
AFFO per
unit
|
$0.077
|
$0.077
|
+0.0%
|
$0.325
|
$0.298
|
+9.1%
|
AFFO payout
ratio
|
88.2%
|
84.5%
|
+4.4%
|
83.1%
|
87.6%
|
-5.1%
|
|
|
|
|
|
|
|
Profit and total
comprehensive income
|
$9,530
|
$9,574
|
-0.5%
|
$23,447
|
$32,758
|
-28.4%
|
|
|
|
|
|
|
|
EBITDA
|
$14,620
|
$14,969
|
-2.3%
|
$60,016
|
$58,661
|
+2.3%
|
|
|
|
|
|
|
|
Total distributions
to unitholders
|
$6,937
|
$6,472
|
+7.2%
|
$27,674
|
$25,621
|
+8.0%
|
|
|
|
|
|
|
|
Interest coverage
ratio
|
2.30 x
|
2.27 x
|
+1.3%
|
2.36 x
|
2.18 x
|
+8.3%
|
Debt coverage
ratio
|
1.63 x
|
1.64 x
|
-0.6%
|
1.68 x
|
1.58 x
|
+6.3%
|
|
|
|
Refer to "Non-IFRS
Financial Measures" below for further explanations.
|
Three Months Ended December 31,
2017 Financial Highlights
- Funds from operations ("FFO") per unit decreased to
$0.083, down 4.6% from $0.087 in the prior year and adjusted funds from
operations ("AFFO") per unit was $0.077, consistent with 2016. FFO and AFFO per
unit amounts for the current quarter were impacted by the vacancies
caused by two significant lease buyouts concluded in 2017, as well
as a larger number of units outstanding due to the conversion of
$14.6 million in Series C convertible
debentures into 2.8 million units in late 2016 and January 2017, upon the issuance of a redemption
notice for the Series C convertible debentures in November 2016;
- FFO and AFFO payout ratios were 81.5% and 88.2%, respectively,
compared to 75.1% and 84.5% in 2016;
- Net property operating income ("NOI") was $15.5 million, down 1.1% from $15.7 million in the same period in the prior
year, impacted mainly by: a decrease in same-asset NOI and higher
administrative expenses charged to NOI, partly offset by growth in
NOI from developments and redevelopments in the current
quarter;
- Same-asset NOI was $14.2 million
compared to $14.4 million for the
same period in the prior year, down 1.4%, mainly due to vacancies
from two lease buyouts concluded during the year, accounting for
$180 thousand of the decrease, as
well as vacancies incurred in Q4 in the portfolio, mainly from one
of the REIT's enclosed malls where a 40 thousand square foot second
floor office tenant vacated. These were partly offset by rent steps
in the portfolio;
- Profit and total comprehensive income for the quarter was
consistent at $9.5 million compared
to the prior year;
- The interest coverage and debt coverage ratios remained
relatively consistent with the prior year, with a reduction in
EBITDA being offset by a decrease in finance costs.
Twelve Months Ended December 31,
2017 Financial Highlights
- FFO per unit increased to $0.351,
up 5.4% from $0.333 in the prior year
and AFFO per unit was $0.325, up
9.1%, from $0.298 in 2016. FFO and
AFFO per unit were positively impacted by growth from developments
and redevelopments, significantly higher non-recurring lease buyout
fees received in the current year compared to the prior year and a
decrease in finance costs;
- Even excluding the impact of lease buyouts, FFO and AFFO per
unit increased by 3.5% and 7.0%, respectively;
- FFO and AFFO payout ratios were 77.1% and 83.1%, respectively,
compared to 78.5% and 87.6% in 2016;
- NOI increased to $64.4 million,
up 2.7% from $62.7 million in the
same period in the prior year, impacted mainly by NOI from
developments and redevelopments, as well as the lease buyout fees
recorded relating to two lease buyout transactions;
- Same-asset NOI of $58.1 million
was 0.1% higher than the prior year. Rent steps in the portfolio
more than offset vacancies and the vacancies caused by the lease
buyouts. The two significant lease buyouts decreased same-asset NOI
by $445 thousand;
- Profit and total comprehensive income for the twelve months
ended December 31, 2017 was down to
$23.4 million from $32.8 million for the twelve months ended
December 31, 2016, mainly due to
non-cash fair value adjustments driven by the decrease in the fair
value of investment properties for the twelve months ended
December 31, 2017, largely due to
changes in NOI and cost overruns on current development projects;
and
- The interest coverage ratio improved from 2.18x for the twelve
months ended December 31, 2016 to
2.36x for the twelve months ended December
31, 2017. The debt coverage ratio also improved to 1.68x
from 1.58x for the twelve months ended December 31, 2016. The improvements in the ratios
reflect higher EBITDA due to higher NOI and lower finance costs due
to the redemption of both the Series B and C convertible
debentures.
Leasing and Occupancy
- Same-asset committed occupancy and total committed occupancy
were 95.1% and 95.2%, respectively, at December 31, 2017, compared to 96.3% and 96.1%,
respectively, at December 31, 2016.
The two significant lease buyouts completed in 2017 negatively
impacted occupancy by 0.6%; and
- The weighted average lease term is 5.8 years.
Acquisitions/Dispositions
- During the year, Plaza purchased various lands for a total of
$2.1 million.
- During the year, Plaza purchased a 50% interest in development
lands in Mississauga, ON for
$6.1 million, which will add
approximately 70,000 square feet of retail space at completion (at
100%) and purchased a 50% interest in a former Sears store in
Saguenay, QC for redevelopment for $3.3
million, which will add approximately 84,000 square feet of
retail space upon completion (at 100%).
- Plaza sold various parcels of surplus land as well as
properties for total net proceeds of $2.1
million. The Trust also disposed of a 50% non-managing
interest in eight properties in Atlantic
Canada for net proceeds of $17.3
million ($7.3 million after
assumption of 50% of the existing mortgages).
Balance Sheet, Liquidity and Capital Structure
- At the end of the quarter, investment properties were valued
using an overall weighted average capitalization rate of 7.02%, a
drop of one basis point from the year ended December 31, 2016. Fair value adjustments are
determined based on the movement of various parameters, including
changes in stabilized NOI and capitalization rates. The fair value
decreases were largely due to changes in NOI as well as cost
overruns on current development projects (development projects are
valued at fair value less costs to complete).
- To fund ongoing operating and development activities, the REIT
has the following facilities in place:
-
- a $44.0 million revolving
operating facility with a Canadian chartered bank. At December 31, 2017 there was $11.0 million available on this facility (net of
letters of credit issued).
- two revolving development facilities with Canadian chartered
banks available upon pledging of specific development assets. One
is a $20 million one-year revolving
facility and the other is a $15
million two-year revolving facility. At December 31, 2017 there was $27.7 million available on these development
facilities.
- The REIT ended the quarter with total mortgages payable
(excluding development, construction and operating lines) of
$432 million with a weighted average
interest rate on fixed rate mortgages of 4.39% and a weighted
average maturity of 6.0 years.
- Debt to gross assets, excluding convertible debentures, at
December 31, 2017 was 48.4% and
including convertible debentures was 52.2%. These compare to 47.7%
and 53.0%, respectively at December 31,
2016. The increase over the prior year excluding convertible
debentures was mainly due to the issuance of $6.0 million Series II unsecured non-convertible
debentures and an increase in the operating line balance. Including
convertible debentures, the current year ratio was also impacted by
the redemption of the Series B and C convertible debentures.
Further Information
A more detailed analysis of the
REIT's financial and operating results is included in the REIT's
Management's Discussion and Analysis and Consolidated Financial
Statements, which have been filed on SEDAR and can be viewed at
www.sedar.com or on the REIT's website at www.plaza.ca.
Conference Call
Michael
Zakuta, President and CEO, and Floriana Cipollone, CFO,
will host a conference call for the investment community on
Monday, February 26,
2018 at 10:00 a.m. ET (11:00
a.m. AT). The call-in numbers for participants are
647-427-7450 or 888-231-8191.
A replay of the call will be available until Monday, March
5, 2018. To access the replay, dial 416-849-0833 or 855-859-2056
(Passcode: 6594025). The audio replay will also be available for
download on the REIT's website for 90 days following the conference
call.
About Plaza
Plaza is an open-ended real estate
investment trust and is a leading retail property owner and
developer, particularly in Eastern Canada. Plaza's portfolio
at December 31, 2017 includes
interests in 298 properties totaling approximately 7.8 million
square feet across Canada and
additional lands held for development. Plaza's properties include a
mix of strip plazas, stand-alone small box retail outlets and
enclosed shopping centres, anchored by approximately 90% national
tenants. For more information, please
visit www.plaza.ca.
Non-IFRS Financial Measures
This press release
contains certain non-IFRS financial measures including FFO, AFFO,
same-asset NOI and EBITDA. These measures are commonly used
by entities in the real estate industry as useful metrics for
measuring performance. However, they do not have any
standardized meaning prescribed by IFRS and are not necessarily
comparable to similar measures presented by other publicly traded
entities. These measures should be considered as supplemental
in nature and not as a substitute for related financial information
prepared in accordance with IFRS. Please refer to the REIT's
Management's Discussion and Analysis for a reconciliation of these
non-IFRS measures to standardized IFRS measures.
Forward-looking Information
This news release
contains forward looking statements relating to our operations and
the environment in which we operate, which are based on our
expectations, estimates, forecasts and projections. Forward
looking statements are not future guarantees of future performance
and involve risks and uncertainties that are difficult to control
or predict. Therefore, actual outcomes and results may differ
materially from those expressed in these forward looking
statements. Readers, therefore, should not place undue
reliance on any such forward looking statements. Further, a
forward looking statement speaks only as of the date on which such
statement is made. We undertake no obligation to publicly
update any such statement, to reflect new information or the
occurrence of future events or circumstances, except for
forward-looking information disclosed in prior disclosures which,
in light of intervening events, requires further explanation to
avoid being misleading. More detailed information about risks
and uncertainties that could affect Plaza is described in Plaza's
Annual Information Form for the year ended December 31, 2016 and Management's Discussion and
Analysis for the period ended December 31,
2017 which can be obtained on SEDAR at
www.sedar.com.
The TSX does not accept responsibility for the adequacy or
accuracy of this release.
SOURCE Plaza Retail REIT