Summit Industrial Income REIT Announces Continued Strong Growth in Second
TORONTO, Aug. 20, 2013 /CNW/ - Summit Industrial Income REIT ("Summit II" or
the "REIT") (TSXV: SMU.UN) announced today its operating and financial results
for the three and six months ended June 30, 2013.
SUMMARY OF QUARTERLY RESULTS:
($,000 June 30, March 30, Dec. 31, Sept. 30,
except per 2013 2013 2012 2012
Revenue from 5,655 2,683 1,670 306
Net 4,419 2,109 1,237 311
Funds from 2,715 1,229 778 33
FFO per Unit $0.15 $0.11 $0.11 $0.04
Adjusted 2,502 1,161 720 33
AFFO per $0.14 $0.11 $0.10 $0.04
Weighted 18,029 11,094 6,893 940
FFO Payout 81.3% - - -
AFFO Payout 88.2% - - -
Total Debt 53.9% 54.6% 47.0% 40.7%
Debt Service 2.04 2.48 2.39 2.64
Interest 2.90 2.98 2.40 3.37
-- Q2 2013 FFO payout ratio of 81.3%
-- Q2 2013 AFFO payout ratio of 88.2% well ahead of forecast 95%
-- Acquired fifteen light industrial properties through first six
months of 2013 totaling 2.0 million sq. ft. of GLA for $171.2
million at an average cap rate of 6.8%
-- Sold two non-core properties in second quarter, with a third
held for sale
-- Subsequent to June 30, 2013 waived conditions on six light
industrial properties totaling 653,000 sq.ft. and one fully
occupied office property for $52.7 million at an average cap
rate of 7.2%
-- Completed transactions will increase portfolio to 29 properties
aggregating 3.3 million sq. ft. of GLA
-- Announced monthly cash distributions of $0.0408 per Unit
(annualized $0.4896 per Unit)
-- Implemented new DRIP with 5% bonus. Current participation rate
-- Acquisitions contribute to significant growth in FFO and AFFO
per unit in 2013
-- Manager's ownership interest of 10.2% fully aligns interests
with all Unitholders
"Our acquisitions are generating significant growth in our key performance
benchmarks and we look to build on this progress in the quarters ahead,"
stated Paul Dykeman, CEO. "We were particularly pleased that our actual FFO
and AFFO payout ratios in the second quarter were well ahead of the forecast
in our February equity offering prospectus."
"As the REIT's manager, we continue to elect to take the majority of the fees
owing under our Management Agreement in the form of Trust Units, and have
participated in all the REIT's equity offerings," added Lou Maroun, Chairman.
"Today our ownership interest in the REIT is approximately 10.2%, and we will
continue to maintain and grow this participation going forward, fully aligning
our interests with all Unitholders."
STRONG PORTFOLIO GROWTH
Through the first six months of 2013 the REIT completed the acquisition of 15
light industrial properties well-located in Edmonton Alberta, the Greater
Toronto Area, and Moncton New Brunswick aggregating approximately 2.0 million
square feet of gross leaseable area (GLA) for a total purchase price of $171.2
million. The acquisitions were funded by cash raised in a successful offering
of Trust Units completed on February 26, 2013 raising $75.1 million in gross
proceeds, and new mortgage financings totaling $90.6 million.
Subsequent to the end of the second quarter the REIT waived conditions and
will be acquiring an additional six light industrial properties totaling
653,000 square feet of GLA in Brampton Ontario, Barrie Ontario and the Greater
Montreal Region, as well as one fully occupied office building in Montreal,
for a total purchase price of approximately $52.7 million satisfied by the
assumption of an existing $5.4 million mortgage, new mortgages totaling $26.3
million, with the balance in cash from the REIT's revolving credit facility.
With the completion of the above-mentioned acquisitions and the disposition of
non-core properties, the REIT's total property portfolio will consist of 29
properties totaling approximately 3.3 million square feet of GLA with
occupancy of 99.5% generating current annualized NOI of approximately $21.0
STRONG FINANCIAL RESULTS
Operating revenues increased to $5.7 million for the three months ended June
30, 2013 compared to $2.7 million for the three months ended March 31, 2013
and $0.3 million in the prior year's second quarter. The REIT's revenue growth
is due primarily to acquisitions completed over the last ten months,
continuing strong occupancies of 100% at June 30, 2013 compared to 99% at
March 31, 2013, as well as steady progress in leasing activities. For the six
months ended June 30, 2013 operating revenues were $8.3 million compared to
$0.5 million in the same period last year.
Net Operating Income (NOI) rose to $4.4 million in the second quarter of 2013
compared to $2.1 million in the first quarter of the year and $0.2 million in
the second quarter of 2012. For the first six months of 2013 NOI was $6.5
million compared to $0.4 million last year.
Funds from Operations (FFO) for the three months ended June 30, 2013 were $2.7
million ($0.151 per Unit) compared to $1.2 million ($0.111 per Unit) for the
quarter ended March 31, 2013 and $18,000 ($0.028 per Unit) in the second
quarter of 2012. The increase in 2013 is due to the contribution from
acquisitions completed over the last ten months, improved occupancies and
strong leasing activities. For the six months ended June 30, 2013 FFO was $3.9
million ($0.271 per Unit) compared to $95,000 ($0.145 per Unit) in the same
period last year.
Adjusted Funds from Operations (AFFO) in the second quarter of 2013 rose to
$2.5 million ($0.139 per Unit) from $1.2 million ($0.111 per Unit) in the
first quarter of the year and $18,000 ($0.028 per Unit) in the second quarter
of 2012. For the six months ended June 30, 2013 AFFO was $3.7 million ($0.251
per Unit) compared to $95,000 ($0.145 per Unit) in the same period last year.
The REIT's AFFO payout ratio was 88.2% through the second quarter of 2013,
well ahead of the 95% forecast in its February 2013 offering prospectus.
Including the benefit of the REIT's DRIP program, the effective payout ratio
was a conservative 76.5% in the quarter. As of June 30, 2013, the DRIP
participation rate was approximately 13.2%. The REIT established its monthly
distribution policy of $0.0408 per Unit, or $0.4896 on an annual basis, on
March 15, 2013.
The REIT's growth has been highly accretive as, despite the 62.5% increase in
the weighted average number of Units outstanding in the second quarter of 2013
compared to the first quarter of the year, FFO per Unit and AFFO per Unit have
increased 36.0% and 32.4 %, respectively.
ACTIVE LEASING PROGRAM
During and subsequent to the first six months of 2013 the REIT made
significant progress in leasing approximately 287,000 square feet of space
subject to leases with applicable property vendors (Head Leases) with terms
ending December 2014 and September 2015. Of this space, 50,000 square feet is
not set to commence until November 2013. To date, leases have been secured for
51,595 square feet of head lease space with offers currently under negotiation
for another 197,000 square feet.
Overall, leases representing only 1.4% of the total property portfolio, or
39,000 square feet, renew in 2013 with 312,000 square feet, or 11.7% of the
total portfolio, up for renewal in 2014. The weighted average term to maturity
for the lease portfolio is approximately 5.9 years.
SOLID BALANCE SHEET AND LIQUIDITY POSITION
Total assets increased to $253.4 million as at June 30, 2013 compared to $81.6
million at December 31, 2012. Total debt increased to $136.6 million at June
30, 2013 from $38.3 million at December 31, 2013. The increases are due to the
REIT's acquisitions and related mortgage and other financings to complete the
purchases. At June 30, 2013 the REIT's debt leverage ratio was 53.9% compared
to 47.0% at December 31, 2012. The weighted average interest rate on the
REIT's mortgage portfolio improved to 3.6% from 4.0% at December 31, 2012,
with a weighted average term to maturity of 5.7 years. Debt service and
interest coverage ratios for the six month period, improved to 2.14 times and
2.89 times, respectively, compared to 2.39 times and 2.40 times at December
On March 11, 2013 the REIT increased its credit facility to $55 million, of
which $40.6 million was drawn on the loan as at June 30, 2013. Subsequent to
the end of the quarter the facility was increased to $68 million. If the REIT
increased its borrowing to the 65% maximum allowed under its Declaration of
Trust, it would have the capacity to purchase approximately $80 million in new
properties as at August 20, 2013.
Under the terms of the REIT's Management Agreement with Sigma Asset Management
Limited (the Manager), the Manager can elect to take the fees payable to it in
the form of Trust Units rather than in cash. In the first six months of 2013
the Manager used its acquisition fee proceeds of approximately $1.6 million to
acquire 240,444 Units, from the February 26, 2013 offering of 11,120,000
Units, further aligning the interests of the Manager with all Unitholders. As
well, certain members of the Manager acquired 239,235 Units during the
February offering. In addition, through the six months ended June 30, 2013
certain members of the Manager acquired an additional 223,000 Units on the TSX
Venture Exchange, resulting in the Manager owning directly and indirectly a
retained interest of approximately 10.2%.
INVESTOR CONFERENCE CALL
A conference call will be hosted by Summit II's management team tomorrow,
Wednesday August 21, 2013 at 10.00 am ET. The telephone numbers to participate
in the conference call are North America Toll Free: (866) 226-1792 and Local
Toronto / International: (416) 340-2216. The live audio conference call will
also be available as a webcast. To access the audio webcast please access the
link on the Investor Information page on our web site at www.summitIIreit.com.
The telephone numbers to listen to the call after it is completed (Instant
Replay) are North American Toll Free (800) 408-3053 or Local Toronto /
International (905) 694-9451. The Passcode for the Instant Replay is 5062738#.
The Instant Replay will be available until August 27, 2013. A webcast of the
call will also be archived on the REIT's web site at www.summitIIreit.com.
FINANCIAL AND OPERATING HIGHLIGHTS
of Canadian Three Three Six Six
dollars) months months Months Months
(except where June June June
noted) 30, 30, 30, June 30,
2013 2012 2013 2012
(1)) 100% 100% 100% 100%
revenues 5,655 263 8,338 521
income (NOI) 4,419 185 6,528 432
(FFO) 2,715 18 3,944 95
FFO per Unit $ $ $ $
(basic) 0.151 0.028 0.271 0.145
(AFFO) 2,502 18 3,663 95
AFFO per Unit $ $ $ $
(basic) 0.139 0.028 0.251 0.145
Units 18,029 654 14,578 654
declared 2,207 - 2,942 13,346
distributions $ $ $ $
Unit (basic) 0.1224 - 0.1632 1.70
paid ((2)) 1,914 - 1,914 13,346
plan ((2)) 291 - 291 -
((2)) 81.3% N/A N/A N/A
((2)) 70.5% N/A N/A N/A
((2)) 88.2% N/A N/A N/A
((2)) 76.5% N/A N/A N/A
Total assets 253,443 11,905 253,443 11,905
Total debt to
value 53.9% 70.4% 53.9% 70.4%
interest rate 3.6% 4.0% 3.6% 4.0%
mortgage term 5.7 3.1 5.7 3.1
(years) years years years years
coverage 2.04 2.14
(times) times N/A times N/A
coverage 2.90 2.89
(times) times N/A times N/A
acquired - - 15 -
disposed 2 1 2 14
((1)) Approximately 237,000 square feet (9% of total GLA) is currently
under Head Leases with an additional 50,000 square feet set
to commence November 2013. Approximately 50,600 square feet (2% of
total GLA), currently under Head Leases has been leased
and 154,000 square feet (6% of total GLA) is under short-term leases
(see "Active Leasing Program").
((2)) On March 15, 2013, the Trust announced a cash distribution policy
to pay $0.0408 per Trust Unit. The first cash distribution
was paid on April 15, 2013 to Unitholders of record on March 29, 2013.
The three months ended June 2013 represents the first
quarter of distributions having been paid.
About Summit II
Summit Industrial Income REIT is an unincorporated open-end trust focused on
growing and managing a portfolio of light industrial properties across Canada.
Summit II's units are listed on the TSX-V and trade under the symbol SMU.UN.
For more information, please visit our web site at www.summitIIreit.com.
Caution Regarding Forward Looking Information
This news release contains forward-looking statements and forward-looking
information within the meaning of applicable securities laws. The use of any
of the words "expect", "anticipate", "continue", "estimate", "objective",
"ongoing", "may", "will", "project", "should", "believe", "plans", "intends",
"goal" and similar expressions are intended to identify forward-looking
information or statements. The forward-looking statements and information are
based on certain key expectations and assumptions made by Summit II, including
general economic conditions. Although Summit II believes that the expectations
and assumptions on which such forward-looking statements and information are
based are reasonable, undue reliance should not be placed on the forward
looking statements and information because Summit II can give no assurance
that they will prove to be correct. By its nature, such forward-looking
information is subject to various risks and uncertainties, which could cause
the actual results and expectations to differ materially from the anticipated
results or expectations expressed. These risks and uncertainties include, but
are not limited to, tenant risks, current economic environment, environmental
matters, general insured and uninsured risks and Summit II being unable to
obtain any required financing and approvals. Readers are cautioned not to
place undue reliance on this forward-looking information, which is given as of
the date hereof, and to not use such forward looking information for anything
other than its intended purpose. Summit II undertake no obligation to update
publicly or revise any forward-looking information, whether as a result of new
information, future events or otherwise, except as required by law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
SOURCE Summit Industrial Income REIT
Paul Dykeman, CEO at (902) 405-8813 email@example.com
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