C2C Industrial Properties Inc.

TSX VENTURE : CCH


C2C Industrial Properties Inc.

November 20, 2012 16:37 ET

C2C Industrial Properties Inc. Reports Continued Strong Growth in Third Quarter 2012

TORONTO, ONTARIO--(Marketwire - Nov. 20, 2012) - C2C Industrial Properties Inc. ("C2C" or the "Company") (TSX VENTURE:CCH) announced today continued acquisition growth for the three and nine months ended September 30, 2012.

THIRD QUARTER 2012 HIGHLIGHTS:
  • As at November 20, 2012, C2C's portfolio consisted of 22 light industrial properties aggregating 2.1 million sq. ft. of gross leasable area.
  • Acquired portfolio of seven income producing industrial properties located in Montreal, Mississauga and Edmonton on July 18, 2012,
  • Acquired income producing industrial property containing two buildings in Brampton Ontario, on November 2, 2012.
  • Completed private placement equity offering of 4.8 million common shares for gross proceeds of approximately $22.0 million.
  • Rental revenue up 41% from the previous quarter due to contribution from acquisitions.
  • Net operating income up 50% from the previous quarter due to contribution from acquisitions.
  • Adjusted funds from operations increases to $1.2 million from $0.8 million in Q2 2012.
  • Accretive growth as AFFO rises to $0.07 per share from $0.06 per share in Q2 2012 even with a 25% increase in weighted average number of common shares outstanding.
  • On October 15, 2012, paid quarterly dividend of $0.0265 per common share to the shareholders on record on September 28, 2012.
  • $20.1 million bought-deal convertible unsecured subordinated debenture offering completed on October 24, 2012 with net proceeds of $18.8 million to be used for portfolio growth.

"The substantial growth in our property portfolio over the last few quarters is now contributing to strong and sustainable increases in our operational and financial performance. We expect to see further growth as we continue to prudently expand our presence in targeted light industrial markets," commented Chris Ross, President.

"Looking ahead, our focus remains on successfully executing a three-part strategic growth plan aimed at increasing AFFO through accretive acquisitions and capitalizing on the highly fragmented nature of the Canadian light industrial real estate sector. First, we expect to purchase properties with high initial capitalization rates that can contribute immediately to our cash flows. Second, we will examine opportunities where we believe we can add incremental value over time through our active asset and property management programs. Third, we will look at acquisitions where our proven property development and re-development expertise will generate enhanced value," stated David Wright, Chief Executive Officer.

Strong Operating and Financial Performance

Primarily as a result of recent acquisitions, rental income and Net Operating Income ("NOI") for the three months ending September 30, 2012 were significantly higher than the previous quarters. Rental income increased to $4.6 million in the third quarter from $3.2 million in the second quarter of the year while NOI increased to $2.9 million from $1.9 million in the previous quarter of the year.

Funds from Operations ("FFO") for the three months ended September 30, 2012 were $1.3 million, up from $0.9 million in the previous quarter. Adjusted Funds from Operations ("AFFO") for the third quarter of 2012 were $1.2 million, up from $0.8 million in the previous quarter. The Company's accretive acquisitions have resulted in AFFO in the third quarter of $0.07 per diluted common share, up from $0.06 per share in the second quarter, even with a 25.3% increase in the weighted average number of common shares outstanding compared to the prior quarter.

The Company had a debt to gross book value ratio of 56.1% at September 30, 2012, with its mortgage portfolio having a weighted average effective interest rate of 4.7%. The weighted average effective interest rate is reduced slightly from 4.8% as at the prior quarter-end and significantly reduced from 7.1% as at December 31, 2011, as the company manages its mortgage portfolio to diversify its lender base and spread out maturities between 5 year and 10 year terms.

On July 18, 2012 the Company completed the acquisition of a portfolio of seven income producing industrial properties located in Montreal, Mississauga and Edmonton (the "MME" acquisition). The portfolio is comprised of 792,658 square feet of gross leasable area, and was purchased for the aggregate purchase price of approximately $69.2 million, excluding closing costs. The Company financed the purchase with the assumption of an existing first mortgage in the approximate principal amount of $10.0 million (at 3.25% for a term of 2 years), new mortgage financing in the principal of $34.8 million (at prime + 2.0% for a term of 3 years), and mezzanine financing of $21.5 million (at 9.25% for a term of 1.5 years).

On July 31, 2012, the Company completed a private placement equity offering of 4.8 million common shares at a price of $4.55 per common share for gross proceeds of approximately $22.0 million. Proceeds of the equity offering were used to repay the mezzanine loan used for the MME acquisition.

Subsequent to quarter end, on October 24, 2012 the Company completed an offering of $20.1 million aggregate principal amount of convertible unsecured subordinated debentures (the "Debentures"), at a price of $1,000 per debenture. The offering was completed on a bought deal basis. Net proceeds from the offering are less underwriting fees and expenses of approximately $1.3 million. The Debentures mature on November 30, 2017 and bear interest of 6.75% per annum, payable semi-annually on May 31, and November 30 in each year. Subject to certain terms and conditions, the Debentures are convertible at the request of the holder at a conversion price of $5.55 per Common Share.

On November 2, 2012 the Company announced it had completed the acquisition of property comprised of two light industrial buildings aggregating approximately 82,000 square feet of GLA located in Brampton, Ontario. The property is well located, close to major highways and Pearson International Airport, and is 100% leased. The purchase price was approximately $8.5 million, excluding closing costs. The Company financed the acquisition with a new $5.53 million five-year mortgage bearing an interest rate of 3.75%, the issuance of $0.5 million in the Company's common shares to the vendor at $5.00 per share, with the balance in cash. The property is being acquired at a going-in capitalization rate of approximately 7.5%.

FINANCIAL & OPERATING HIGHLIGHTS
For the periods ending
CDN $ Thousands September 30, 2012 June 30, 2012 December 31, 2011
Operations Information
Number of properties 21 14 10
Gross leasable area (square feet) 2,003,122 1,210,464 722,565
Portfolio occupancy 95.20 % 97.2 % 94.3 %
In-place rental rates (per sq. ft.) $ 6.48 $ 6.44 $ 7.18
Financial Information
Revenue producing properties $ 180,100 $ 106,690 $ 63,030
Total assets $ 188,938 $ 117,033 $ 66,591
Mortgage payable $ 105,959 $ 60,880 $ 60,828
Weighted average effective interest rate 4.7 % 4.8 % 7.1 %
Debt to gross book value 56.1 % 52.0 % 91.4 %
Shareholders' equity $ 77,704 $ 53,390 $ 4,136
Shares outstanding(1) 17,128,180 12,292,980 1,444,001
$CDN Thousands 3 months ending September 30, 2012 9 months ending September 31, 2012 3 months ending June 30, 2012 March 16 - December 31, 2011
Results of Operations
Rental income $ 4,575 $ 10,314 $ 3,248 $ 1,222
Net operating income (2) $ 2,889 $ 6,324 $ 1,930 $ 808
Net income (loss) $ 3,575 $ 8,710 $ 4,260 $ (1,298 )
Diluted income (loss) per share $ 0.22 $ 0.80 $ 0.33 $ (1.09 )
Funds from operations(3) $ 1,347 $ 2,291 $ 891 $ (207 )
FFO per diluted share $ 0.08 $ 0.21 $ 0.07 $ (0.17 )
Adjusted funds from operations $ 1,219 $ 2,059 $ 822 $ (129 )
AFFO per diluted share $ 0.07 $ 0.19 $ 0.06 $ (0.11 )
Share price $ 4.10 $ 4.10 $ 5.35 $ 4.50
Weighted average diluted common shares - FFO and AFFO(1)
16,241,334
10,933,143
12,970,761
1,196,106
(1) On April 11, 2012, C2C did a 25 to 1 share consolidation reducing the total December 31, 2012 outstanding shares to 1,444,001 from 36,100,025.
(2) Net operating income is property rental revenue, less property operating costs, property taxes and property management fees.
(3) The Company has revised it's definition of FFO to add back the amortization of mortgage transaction and debt settlement costs, previously treated as an add back to AFFO. The FFO values for the prior periods have been restated for this change.

Forward Looking Statements

This document contains forward-looking statements relating to C2C and the industry in which it operates and its strategy, action plans and investments, which may involve estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond C2C's control. Consequently, readers should not place any undue reliance on such forward-looking statements. These forward-looking statements are made as of the date of this press release. C2C is under no obligation to update any forward-looking statements contained herein should material facts change due to new information, future events or other factors, unless otherwise required to do so by applicable law. All forward-looking statements attributable to C2C are expressly qualified by these cautionary statements.

About C2C Industrial Properties Inc.

C2C is a real estate investment corporation specializing in the acquisition, ownership and operation of light industrial properties across Canada. C2C currently owns 22 industrial assets totalling approximately 2.1 million square feet of gross leaseable area. More information about C2C (TSX VENTURE:CCH) is available at www.c2cip.com.

The TSX Venture Exchange has neither approved nor disapproved the contents of this press release. 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 press release.

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