Allied Properties Real Estate Investment Trust

Allied Properties Real Estate Investment Trust

March 06, 2012 20:00 ET

Allied Properties Real Estate Investment Trust Announces Fourth-Quarter and Year-End Results for 2011

TORONTO, ONTARIO--(Marketwire - March 6, 2012) - Allied Properties REIT (TSX:AP.UN) today announced results for its fourth quarter and year ended December 31, 2011.

The results for the fourth quarter are summarized below and compared to the prior quarter and the same quarter in 2010:

(In thousands except for per unit and % amounts) Q4 2011 Q3 2011 Change %Change Q4 2010* Change %Change
Net income 19,073 15,491 3,582 23.1% 15,456 3,617 23.4%
Funds from operations ("FFO") 20,706 17,559 3,147 17.9% 16,782 3,924 23.4%
FFO per unit (diluted) $0.40 $0.36 $0.04 11.1% $0.40 $0.00 0.0%
FFO pay-out ratio 81.9% 93.2% (11.3% ) 82.5% (0.6% )
Adjusted FFO ("AFFO") 16,594 13,152 3,442 26.2% 12,630 3,964 31.4%
AFFO per unit (diluted) $0.33 $0.27 $0.06 22.2% $0.30 $0.03 10.0%
AFFO pay-out ratio 102.1 124.4% (22.3% ) 109.7% (7.6% )
Debt ratio (% of fair value) 44.8% 44.7% 0.1% 44.6% 0.2%
Interest coverage ratio 3.1:1 2.8:1 0.3:1 3.0:1 0.1:1
* normalized by adding back one-time management restructuring costs

Allied's financial performance measures were up significantly from the third quarter and generally up from the fourth quarter of last year, reflecting return to a normal level of occupancy.

The results for 2011 are summarized below and compared to the prior year:
(In thousands except for per unit and % amounts) 2011 2010* Change %Change
Net income 59,949 61,015 (1,066 ) (1.7% )
Funds from operations ("FFO") 66,091 63,394 2,697 4.3%
FFO per unit (diluted) $1.39 $1.58 ($0.19 ) (12.0% )
FFO pay-out ratio 95.2% 83.3% 11.9%
Adjusted FFO ("AFFO") 51,083 49,338 1,745 3.5%
AFFO per unit (diluted) $1.07 $1.23 ($0.16 ) (13.0% )
AFFO pay-out ratio 123.2% 107.0% 16.2%
Debt ratio (% of fair value) 44.8% 44.6% 0.2%
Interest coverage ratio 2.8:1 3.1:1 (0.3:1 )
* normalized by adding back one-time management restructuring costs and lease termination payment

Allied's financial performance measures for the year were down from 2010 due to an unusually large amount of turnover vacancy at Cité Multimédia in Montréal. With replacement tenants now in place, Allied has returned to a normal level of occupancy.

Allied leased 1.42 million square feet in 2011, finishing the year with leased area of 94.3% of its rental portfolio (excluding upgrade properties), up 288 basis points from the end of last year. By year- end, Allied had renewed or replaced 90.2% of its maturing leases, resulting in an overall increase of 5.9% in net rental income per square foot from the affected space. Allied also addressed most of its large-scale lease maturities in the 2011 to 2015 timeframe, bringing its weighted average lease term to 5.1 years and reducing the average annual maturity over the next five years to 9.1% of its rental portfolio. Allied strengthened other key portfolio attributes in 2011. Its tenant-mix improved considerably, particularly at Cité Multimédia in Montréal, which by year-end was 93.5% leased to a diverse group of high-calibre tenants for longer than normal lease-terms. Its exposure to its top-10 tenants declined from 28% to 23% of gross revenue, continuing a long-established trend in risk reduction. While the risk of NOI volatility can never be eliminated, the material improvement in Allied's key portfolio attributes certainly reduced this risk going forward.

In addition, Allied acquired, or announced the acquisition of, 22 properties for $456 million in 2011, increasing its portfolio area to 7.8 million square feet. By year-end, Allied had a national portfolio of urban office properties with three clear attributes -- proximity to the core, distinctive internal and external environments and lower overall occupancy costs. In addition to enhancing geographic diversification and enabling it to participate in Western Canada's economic growth, this will enable Allied to serve its tenants better and to expand its universe of acquisition and value-creation opportunities.

Allied financed its acquisitions in the proven manner, raising $86 million in equity in March of 2011 at $22 per unit and another $104 million in August of 2011 at $23.50 per unit, in each case locking in an all-time low cost of equity. Allied also secured $300 million in first mortgage financing over the course of the year, most for terms of eight years or longer, at a weighted average interest rate of 4.8%. By year-end, its overall debt ratio was a conservative 45%, the weighted average interest rate on its mortgages had declined to 5.3% and the weighted average term of its mortgages had stretched out to five years.

Finally, Allied accelerated its value-creation activity in 2011. In addition to acquiring two sizeable upgrade properties and working toward the completion of two redevelopment projects, Allied continued the marketing of 250,000 square feet of approved intensification potential in Toronto (Phase I of QRC West) and began preparing another 750,000 square feet of approved intensification potential for marketing (171 Front Street West). Allied also put three potential new intensification projects aggregating approximately 1.2 million square feet into the municipal approval process.

"With a national urban office portfolio operating at a high level of occupancy, we're very well positioned for 2012," said Michael Emory, President and CEO. "We expect our AFFO per unit to grow considerably and our value-creation activity to continue to accelerate. We also believe that our clean and conservative balance sheet, low debt ratio, moderate mortgage maturity schedule and abundant liquidity will provide stability and facilitate growth going forward."

FFO and AFFO are not financial measures defined by International Financial Reporting Standards ("IFRS"). Please see Allied's MD&A for a description of these measures and their reconciliation to net income and comprehensive income under IFRS, as presented in Allied's condensed consolidated financial statements for the year ended December 31, 2011. These statements, together with accompanying notes and MD&A, have been filed with SEDAR,, and are also available on Allied's web-site,

Net operating income ("NOI") is not a measure recognized under IFRS and does not have any standardized meaning prescribed by IFRS. NOI is presented in this press release because management of Allied believes that this non-IFRS measure is an important financial performance indicator. NOI, as computed by Allied, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to NOI reported by such organizations.

This press release may contain forward-looking statements with respect to Allied, its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward looking words such as "may", "will", "expect", "estimate", "anticipate", intends", "believe" or "continue" or the negative thereof or similar variations. Allied's actual results and performance 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. 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 regulations and the factors described under "Risk Factors" in the Allied's Annual Information Form which is available at The cautionary statements qualify all forward-looking statements attributable to Allied and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release, and Allied has no obligation to update such statements.

Allied Properties REIT is a leading owner, manager and developer of urban office environments that enrich experience and enhance profitability for business tenants operating in Canada's major cities. Its objectives are to provide stable and growing cash distributions to unitholders and to maximize unitholder value through effective management and accretive portfolio growth.

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