Allied Properties Real Estate Investment Trust

Allied Properties Real Estate Investment Trust

November 08, 2011 19:04 ET

Allied Properties Real Estate Investment Trust Announces Third-Quarter Results

TORONTO, ONTARIO--(Marketwire - Nov. 8, 2011) - Allied Properties REIT (TSX:AP.UN) today announced results for its third quarter ended September 30, 2011. They are summarized below and compared to the prior quarter and the same quarter in 2010:

(In thousands except for per unit and % amounts) Q3 2011 Q2 2011 Change %
Q3 2010 Change %
Net income 15,491 12,550 2,941 23.4 % 15,053 438 2.9 %
Funds from operations ("FFO") 17,559 14,683 2,876 19.6 % 15,920 1,639 10.3 %
FFO per unit (diluted) $ 0.36 $ 0.32 $ 0.04 12.5 % $ 0.40 $ (0.04 ) (10.0 %)
FFO pay-out ratio 93.2 % 104.2 % (11.0 %) 83.0 % 10.2 %
Adjusted FFO ("AFFO") 13,152 10,822 2,330 21.5 % 11,549 1,603 13.9 %
AFFO per unit (diluted) $ 0.27 $ 0.23 $ 0.04 17.4 % $ 0.29 $ (0.02 ) (6.9 %)
AFFO pay-out ratio 124.4 % 141.3 % (16.9 %) 114.4 % 10.0 %
Debt ratio (% of fair value) 44.7 % 43.4 % 1.3 % 45.7 % (1.0 %)
Interest coverage ratio 2.8:1 2.7:1 0.1:1 3.0:1 0.2:1

While down from the same quarter in 2010 due to an unusually large amount of turnover vacancy at Cité Multimédia in Montréal, Allied's financial performance measures were up from the second quarter of this year, reflecting the partial return to a normal level of occupancy. Based on recent leasing achievements, Allied expects to return to a normal level of occupancy by the beginning of 2012.

Allied leased nearly 1.2 million square feet in the first nine months of the year, finishing the third quarter with leased area of 93.1% (excluding upgrade properties), up 172 basis points from the end of last year. By the end of the third quarter, Allied had renewed or replaced 71.6% of its maturing leases in 2011, resulting in an overall increase of 8.3% 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, extending its weighted average lease term to six years.

In addition, Allied completed the acquisition of 18 properties for $345 million in the first nine months of the year, increasing its portfolio area to 7.8 million square feet, up 23% from the end of last year. 13 of the properties are in Western Canada, four in Toronto and one in Montréal. 16 of the properties are operating at or near stabilized levels of NOI, and two are upgrade properties where Allied plans to boost NOI materially over 24 to 36 months.

The blended capitalization rate for the 16 stabilized properties was approximately 7%, compared to 6.1% for the two upgrade properties. Consistent with past practice, Allied financed its acquisitions with a combination of equity and first mortgages. It raised $86 million in equity in March at $22 per unit and another $104 million in August at $23.50 per unit, in each case locking in an all-time low cost of equity. For most of the stabilized properties, Allied arranged 10-year first mortgage financing at very favourable rates of interest, the lowest being 3.86% per year on $75 million secured by its largest portfolio acquisition of the year. For the two upgrade properties, where it expects to create significant value and boost mortgage financing potential in the near-term, Allied arranged three-year first mortgage financing at interest rates of just over 3% per year.

"We're well positioned for the coming year," said Michael Emory, President and CEO. "We expect our AFFO per unit to grow considerably as a result of our leasing, acquisition and financing achievements this year. We believe that our clean and conservative balance sheet, low debt ratio, moderate mortgage maturity schedule and abundant liquidity will provide stability in most any environment."

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 interim consolidated financial statements for the quarter ended September 30, 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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