Edgefront Real Estate Investment Trust
TSX VENTURE : ED.UN

August 17, 2016 19:35 ET

Edgefront Real Estate Investment Trust Announces Strong Q2 Results, Trustee Changes, Distributions, and Update on Acquisition

CALGARY, ALBERTA--(Marketwired - Aug. 17, 2016) - Edgefront Real Estate Investment Trust (the "REIT") (TSX VENTURE:ED.UN) announced today its results for the three and six months ended June 30, 2016, trustee changes, August and September distributions and an update on the previously announced acquisition.

Highlights

  • AFFO per unit of $0.055 for the quarter, increase of 6.4% over Q2 2015; increase of 3.2% over Q1 2016 normalized AFFO.
  • AFFO payout ratio of 73.4% for the quarter, down from the normalized AFFO payout ratio of 75.7% in the previous quarter; down from 78.1% in Q2 2015.
  • Conservative debt to total assets ratio of 49.2%.
  • Attractive yield of 8.9% based on June 30th closing price of $1.80 per unit and $0.16 annual distributions
  • $8.4 million acquisition announced subsequent to quarter end
  • Earnings call scheduled for August 18, 2016 at 1PM Eastern Standard Time.

"We continue to provide a unique investment vehicle for investors," stated Kelly Hanczyk, the REIT's Chief Executive Officer. "Our long-term leases, combined with embedded rental increases and minimal capital expenditures provide stability to our cash flow, as we have maintained a 100% occupancy rate since inception. We will continue to source accretive acquisitions from across Canada in the second half of the year that will add to our free cash flow."

Summary of Results

Included in the table that follows and elsewhere in this news release are non-IFRS measures that should not be construed as an alternative to net income / loss, cash from operating activities or other measures of financial performance calculated in accordance with IFRS, and may not be comparable to similar measures as reported by other issuers. Readers are encouraged to refer to the REIT's MD&A for further discussion of the non-IFRS measures presented.

Three months ended
June 30,
Six months ended
June 30,
2016 2015 2016 2015
Financial Highlights $ $ $ $
FFO (1) (4) 1,958,865 1,258,375 4,091,185 2,516,975
AFFO (1) (4) 2,193,380 1,489,895 4,562,283 2,977,439
Distributions declared (2) declared (2) 1,609,305 1,163,412 3,208,882 1,157,839
Weighted average units outstanding - basic and diluted (3) 40,193,668 29,049,258 40,074,261 28,910,053
Distributions per unit (2) 0.040 0.040 0.080 0.080
FFO per unit, basic and diluted (1) (4) 0.049 0.043 0.102 0.087
AFFO per unit, basic and diluted (1) (4) 0.055 0.051 0.114 0.103
AFFO payout ratio, basic (1) (2) (4) 73.4% 78.1% 70.3% 78.0%
Debt to total assets ratio 49.2% 46.8% 49.2% 46.8%
(1) See Non-IFRS Measures
(2) Includes distributions payable to holders of Class B LP Units which are accounted for as interest expense in the consolidated financial statements.
(3) Weighted average number of units includes the Class B LP Units.
(4) For the six months ended June 30, 2016, FFO and AFFO include $256,528 of other income relating to the release in the first quarter of 2016 of funds previously held in an environmental escrow in connection with the acquisition ten industrial properties on January 14, 2014. This is a one-time item which is excluded from normalized FFO and normalized AFFO of $3,834,657 and $4,305,755, respectively for the six months ended June 30, 2016. Normalized FFO per unit, normalized AFFO per unit and the normalized AFFO payout ratio for the six months ended June 30, 2016 are $0.096, $0.107, and 74.5%, respectively.
Three months ended
June 30,
Six months ended
June 30,
2016 2015 2016 2015
Financial Results $ $ $ $
Property revenue 3,810,928 2,697,831 7,535,469 5,412,206
Net operating income 3,138,447 2,201,251 6,288,802 4,404,344
Net income 592,806 856,688 2,919,558 2,076,024
Net income excluding fair value adjustments, loss on sale of investment property and other income 1,737,445 1,351,445 3,384,658 2,544,381

Revenues and Results from Operations in Line with Expectations

Property revenue increased to $3,810,928 in the quarter as compared to $2,697,831 in the same quarter of 2015. Net operating income grew to $3,138,447 in the quarter as compared to $2,201,251 in same quarter of 2015. The growth in property revenue and net operating income is primarily attributable to the impact of acquisitions completed in the second half of 2015, and contractual rent increases adding $34,000 of operating income in the quarter as compared to the same quarter of 2015.

The REIT generated FFO and AFFO of $1,958,865 and $2,193,380 respectively, in the quarter, and FFO per unit and AFFO per unit of $0.049 and $0.055, respectively. FFO per unit and AFFO per unit increased 12.5% and 6.4%, respectively, as compared to FFO and AFFO, respectively, in the same quarter of 2015.

Distributions of $0.04 per unit were declared for the quarter. The AFFO payout ratio for the quarter was 73.4%.

Balance Sheet and Liquidity

The REIT's debt to total assets ratio was 49.2% at June 30, 2016. The REIT intends to maintain a debt to total assets ratio of less than 55%.

Earnings Call

Kelly Hanczyk, President and Chief Executive Officer of the REIT, and Robert Chiasson, Chief Financial Officer, will host a conference call at 1:00 PM Eastern Standard Time on Thursday August 18, 2016 to review the financial results and operations.

To participate in the conference call, please dial 416-340-2216 or 1-866-223-7781 (toll free in Canada and the US) and ask to join the Edgefront REIT conference call.

A recording of the conference call will be available until September 1, 2016. To access the recording, please dial 905-694-9451 or 1-800-408-3053 (toll free in Canada and the US) and enter passcode 1161455.

Board of Trustee Changes

Mr. Robert Dickson is stepping down as a trustee of the REIT to focus on other ventures. Rob led our audit committee since joining the REIT's board of trustees in January 2014, and has been invaluable to the REIT in its early stages of development. We thank Rob for the wisdom and guidance he's provided both as Audit Committee Chair and as a board member, and we wish him nothing but the very best.

Brad Cutsey, President of Interrent REIT, will join the board of trustees as audit committee chair, bringing 18 years of real estate and capital markets experience to the REIT. Prior to his current role, Mr. Cutsey held the position of Managing Director and Head of Real Estate Investment Banking with Dundee Capital Markets. He is a Chartered Financial Analyst and brings a wealth of knowledge and experience to the Board.

"I am pleased to announce that Brad Cutsey will be joining the Edgefront Board of Trustees as Audit Committee Chair. Brad is uniquely familiar with our story, was instrumental in the creation of the REIT in January 2014, and will be a valuable asset as we continue to grow. I'd also like to express my sincere thanks to Rob Dickson for the valuable contributions he has made to the REIT," stated Kelly Hanczyk.

August and September 2016 Distributions

The REIT will make a cash distribution in the amount of $0.01333 per unit, representing $0.16 on an annualized basis, payable September 15, 2016 to unitholders of record as of August 31, 2016.

The REIT will also make a cash distribution in the amount of $0.01333 per unit, representing $0.16 per unit on an annualized basis, payable October 14, 2016 to unitholders of record as of September 30, 2016.

The REIT's current distribution per unit continues to be $0.01333 per month. The REIT's distribution reinvestment program ("DRIP") entitles eligible unitholders to elect to receive all, or a portion of the cash distributions of the REIT reinvested in units of the REIT. Eligible unitholders who so elect will receive a bonus distribution of units equal to 4% of each distribution that was reinvested by them under the DRIP.

Update on Acquisition

As originally press released on July 27, 2016, the REIT has waived due diligence conditions to acquire a 150,000 sq ft industrial property located in Cambridge, Ontario for a purchase price of $8,400,000, representing a going-in cap rate of 7.5%. The property was appraised at $9,200,000 by a qualified independent appraiser.

The purchase price will be partially satisfied through the issuance of 1,000,000 Class B LP Units at a deemed issuance price of $1.90 per unit, with the remainder of the purchase price to be funded from the proceeds of new 5-year term mortgage financing in the principal amount of $5,500,000 and available cash.

A trustee of the REIT controls the company from which the REIT is purchasing the property. The transaction was unanimously approved by the REIT's board of trustees, with the trustee party to the transaction abstaining from voting on this matter. Both the purchase price and the appraised value of the property represent less than 25% of the REIT's market capitalization and as such, the transaction is exempt from the formal valuation and minority approval requirements of applicable securities legislation. Such trustee currently has control or direction over approximately 1.0% of the total number of outstanding REIT Units and Class B LP Units of subsidiary limited partnerships of the REIT, and it is expected that this will increase to approximately 3.4% on completion of the transaction.

On August 9, 2016, the REIT received final approval from the TSXV for the completion of the transaction, which is expected to close on August 22, 2016.

About the REIT

Edgefront REIT is a growth oriented real estate investment trust focused on increasing unitholder value through the acquisition, ownership and management of industrial properties located in primary and secondary markets in North America. The REIT currently owns a portfolio of 19 properties comprising approximately 1,030,000 square feet of rentable area. The REIT has approximately 35,491,179 units issued and outstanding. Additionally, there are 4,962,565 Class B LP units of subsidiary limited partnerships of the REIT issued and outstanding.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this new release constitute forward-looking statements which reflect the REIT's current expectations and projections about future results. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect.

While the REIT anticipates that subsequent events and developments may cause its views to change, the REIT specifically disclaims any obligation to update these forward-looking statements except as required by applicable law. These forward-looking statements should not be relied upon as representing the REIT's views as of any date subsequent to the date of this news release. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The factors identified above are not intended to represent a complete list of the factors that could affect the REIT.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: Edgefront Real Estate Investment Trust

Contact Information

  • Kelly C. Hanczyk
    President and CEO
    (403) 817-9497

    Rob Chiasson
    CFO
    (403) 817-9496