Smart Real Estate Investment Trust
TSX : SRU.UN

Smart Real Estate Investment Trust

May 11, 2016 17:43 ET

Smart Real Estate Investment Trust Releases First Quarter Results for 2016

TORONTO, ONTARIO--(Marketwired - May 11, 2016) - Smart Real Estate Investment Trust ("SmartREIT" or "the Trust") (TSX:SRU.UN) is pleased to report positive results for the first quarter ended March 31, 2016.

Highlights for the quarter ended March 31, 2016:

  • Funds From Operations ("FFO") increased by 16.6% to $82.9 million and 3.8% to $0.54 on a per Unit basis compared to the same period in 2015
  • Adjusted Funds From Operations ("AFFO") increased by 18.2% to $78.8 million and 6.3% to $0.51 on a per Unit basis compared to the same period in 2015
  • AFFO payout ratio decreased by 1.6% to 81.0% compared to the same period in 2015
  • Same properties' NOI for the three months ended March 31, 2016 increased by 1.0% or $1.0 million compared to the same period in 2015
  • Maintained a high level of occupancy at 98.5%
  • Completed Developments and Earnouts of 47,384 square feet of leasable area for $17.0 million, providing an unleveraged yield of 6.0%
  • Issued fixed rate secured debt of $31.0 million with a term of 10 years and an interest rate of 3.24%
  • Repaid secured debt of $14.0 million with an interest rate of 6.18%
  • Handed over the VMC space to KPMG for commencement of their fit-out for occupancy in the fall of 2016
  • Actively moving forward with Toronto Premium Outlets' expansion of both the shopping centre and parking facility

Huw Thomas, President and CEO of SmartREIT said, "As I look back on what has been a transformational year for SmartREIT, I am very pleased with the progress we have made. Our core property portfolio of 139 principally Walmart-anchored shopping centres continues to deliver an exceptional shopping experience for our tenants and consumers alike. Our suite of development initiatives continues to grow and will provide short, medium and long term benefits. In particular our key development projects such as the Vaughan Metropolitan Centre, the Toronto StudioCentre site and our Premium Outlets locations are all moving forward very positively and the core team of professionals who support SmartREIT have a significant range of capabilities to drive the business forward in the coming years. For the current year, I believe the value orientation of our portfolio and our long history of stable cash flows will be of particular benefit in a potentially volatile operating environment."

The following table summarizes SmartREIT's portfolio information:

March 31,
2016
December 31,
2015
Change
Fair value of real estate portfolio (in millions of dollars) (1) $8,215.5 $8,168.6 $46.9
Weighted average stabilized capitalization rate 5.91% 5.94% (0.03)%
Built gross leasable area 31.0 million square feet
Future estimated development area 5.0 million square feet
Lands under Mezzanine Financing 0.7 million square feet
Number of retail properties 139
Number of properties under development 11
(1) Includes the Trust's share of investments in associates

Developments completed during the quarter are as follows:

Leasable area 47,384 square feet
Investment (Cost) $17.0 million
Unleveraged yield 6.0%

The following table summarizes SmartREIT's key financial highlights for the three months ended March 31 (including the Trust's share of investment in associates):

(in millions of dollars, except per Unit information) Three Months
Ended
March 31,
2016
Three Months
Ended
March 31,
2015
Change
($ or bps)
% Change
Net income and comprehensive income $98.9 $55.2 $43.7 79.2%
Rental revenue $179.6 $158.7 $20.9 13.2%
Net operating income $114.3 $101.7 $12.6 12.4%
FFO excluding adjustments $82.9 $71.1 $11.8 16.6%
Per Unit Information
FFO per Unit excluding adjustments (fully diluted) $0.54 $0.52 $0.02 3.8%
AFFO per Unit (fully diluted) $0.51 $0.48 $0.03 6.3%
Distribution $0.41 $0.40 $0.01 2.5%
Payout ratio (to AFFO) 81.0% 82.6% (1.6)% (1.9)%

Rentals from investment properties for the three months ended March 31, 2016 totalled $179.6 million, a $20.9 million or 13.2% increase over the three months ended March 31, 2015. Base rent increased by $16.2 million or 16.2%, primarily due to rent increases from new and renewing tenants, acquisitions, Earnouts and completed developments that occurred during 2015 and year to date in 2016. Property operating costs recovered increased by $6.8 million or 12.7% due to the related increases in recoverable costs with the growth in the portfolio.

The Trust recovered 96.5% of total recoverable expenses during the three months ended March 31, 2016, compared to 97.9% in the same period last year. Non-recovery of most of the remaining costs results from fixed recovery rates for some tenants and restrictions contained in certain anchor tenant leases. In comparison to the same period of 2015, NOI increased by $12.6 million or 12.4% in 2016, primarily as a result of the growth of the portfolio mainly due to the Transaction that closed on May 28, 2015, resulting in an increase to NOI of $14.4 million, partially offset by the $2.4 million decrease in lease terminations and other adjustments compared to the same period in 2015.

For the three months ended March 31, 2016, FFO excluding adjustments increased by $11.8 million or 16.6% to $82.9 million and by 3.8% to $0.54 on a per Unit basis compared to the same quarter of 2015. The increase in FFO excluding adjustments of $11.8 million was primarily due to an increase in NOI net of tenant incentive amortization of $12.6 million and a decrease in interest expense net of yield maintenance of $0.4 million, partially offset by a $2.1 million increase in general and administrative expenses (which includes an increase in salaries and related costs attributed to leasing activities of $1.2 million and additional costs associated with the Trust's Deferred Unit Plan ("DUP") and Long Term Incentive Plan ("LTIP") of $0.8 million) and a decrease in interest income of $0.2 million.

The non-IFRS measures used in this Press Release, including AFFO, FFO, NOI and payout ratio do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and are therefore unlikely to be comparable to similar measures presented by other issuers. These non-IFRS measures are more fully defined and discussed in the 'Management Discussion and Analysis' (MD&A) of the Trust for the three months ended March 31, 2016, available on Sedar at www.sedar.com.

Full reports of the financial results of the Trust for the three months ended March 31, 2016 are outlined in the unaudited interim condensed consolidated financial statements and the related MD&A of the Trust, which are available on SEDAR at www.sedar.com. In addition, supplemental information is available on the Trust's website at www.smartreit.com.

SmartREIT will hold a conference call on Thursday, May 12, 2016 at 9:00 a.m. (ET). Participating on the call will be members of SmartREIT's senior management.

Investors are invited to access the call by dialing 1-866-530-1553. You will be required to identify yourself and the organization on whose behalf you are participating. A recording of this call will be made available Thursday, May 12, 2016 beginning at 12:00 p.m. (ET) through to 12:00 p.m. (ET) on Wednesday, May 18, 2016. To access the recording, please call 1-888-203-1112 and enter the Replay Passcode 8854123#.

About SmartREIT

SmartREIT is one of Canada's largest real estate investment trusts with total assets of approximately $8.5 billion. It owns and manages in excess of 30 million square feet in value-oriented, principally Walmart-anchored retail centres, having the strongest national and regional retailers as well as strong neighbourhood merchants. In addition, SmartREIT is a joint-venture partner in the Toronto and Montreal Premium Outlets with Simon Property Group. SmartREIT's core vision is to provide a value-oriented shopping experience in all forms to Canadian consumers and over time create high quality mixed use developments in urban settings.

With SmartREIT's 2015 acquisition of SmartCentres, SmartREIT has transformed into a fully integrated real estate provider. SmartREIT and SmartCentres have had a long and successful alliance, helping to provide Canadians with value-focused retail shopping centres across the country. Now, our alliance has grown even stronger, the result is a fully integrated real estate provider with expertise in planning, development, leasing, operations, and construction - all under one roof. Our name is a reflection of our combined capabilities: SmartREIT. For more information on SmartREIT, visit www.smartreit.com.

Certain statements in this Press Release are "forward-looking statements" that reflect management's expectations regarding the Trust's future growth, results of operations, performance and business prospects and opportunities as outlined under the headings "Business Overview and Strategic Direction" and "Outlook". More specifically, certain statements contained in this Press Release, including statements related to the Trust's maintenance of productive capacity, estimated future development plans and costs, view of term mortgage renewals including rates and upfinancing amounts, timing of future payments of obligations, intentions to secure additional financing and potential financing sources, and vacancy and leasing assumptions, and statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions and statements relating to matters that are not historical facts, constitute "forward-looking statements". These forward-looking statements are presented for the purpose of assisting the Trust's Unitholders and financial analysts in understanding the Trust's operating environment, and may not be appropriate for other purposes. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. However, such forward-looking statements involve significant risks and uncertainties, including those discussed under the heading "Risks and Uncertainties" and elsewhere in the Trust's Management's Discussion & Analysis for the three months ended March 31, 2016 and under the heading "Risk Factors" in its Annual Information Form for the year ended December 31, 2015. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. Although the forward-looking statements contained in this Press Release are based on what management believes to be reasonable assumptions, the Trust cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as at the date of this Press Release and the Trust assumes no obligation to update or revise them to reflect new events or circumstances unless otherwise required by applicable securities legislation.

The Toronto Stock Exchange neither approves nor disapproves of the contents of this Press Release.

Contact Information

  • Huw Thomas
    President and Chief Executive Officer
    Smart Real Estate Investment Trust
    (905) 326-6400 ext. 7649
    hthomas@smartreit.com

    Peter Sweeney
    Chief Financial Officer
    Smart Real Estate Investment Trust
    (905) 326-6400 ext. 7865
    psweeney@smartreit.com