Whiterock Real Estate Investment Trust
TSX : WRK.UN

Whiterock Real Estate Investment Trust

November 08, 2011 07:00 ET

Whiterock REIT Announces Strong Third Quarter 2011 Results

TORONTO, ONTARIO--(Marketwire - Nov. 8, 2011) - Whiterock Real Estate Investment Trust ("Whiterock") (TSX:WRK.UN) today announced strong financial results for the quarter ended September 30, 2011.

Whiterock's recurring funds from operations ("FFO") per unit and recurring adjusted funds from operations ("AFFO") per unit (both adjusted for mortgage prepayment penalties of $1.6 million) increased to $0.32 and $0.29, respectively, representing a recurring FFO payout ratio of 88.2% and a recurring AFFO payout ratio of 97.1%. Whiterock also achieved same-property NOI growth of 1.8% (1.9% on a cash basis) year-over-year, along with an overall portfolio occupancy rate of 96.9%.

The equity offering completed by Whiterock in July for gross proceeds of $85.8 million funded acquisitions that were subsequently completed in July and August. The first full quarter impact of the acquisitions completed in the third quarter will be realized in the fourth quarter. Recurring run rate AFFO per unit for the third quarter of 2011, based on a full quarter impact of the acquisitions completed in the third quarter, was $0.31 (or $1.24 annualized), representing a recurring run rate AFFO payout ratio of 90.3%.

"We are very pleased with our results in the third quarter," said Jason Underwood, CEO of Whiterock. "Our disciplined and accretive acquisition program and our internal growth initiatives continue to drive increasing FFO and AFFO per unit, exceeding our distributions to unitholders. Even with the new equity raised in July, we achieved impressive recurring FFO and recurring AFFO per unit growth (year-over-year) of approximately 7% and 8%, respectively. We look forward to the upcoming fourth quarter to demonstrate the first full quarter impact of our recently completed acquisitions, which amounted to $334 million (before closing costs)."

The following highlights should be read in conjunction with the consolidated financial statements and management's discussion and analysis for the quarter ended September 30, 2011. These will be available on Whiterock's website at http://www.whiterockreit.ca/financial-reports.php.

HIGHLIGHTS – September 30, 2011

Increasing FFO and AFFO – Recurring FFO per unit (adjusted for mortgage prepayment penalties of $1.6 million) was $0.32 for the third quarter of 2011 (or $1.27 annualized), as compared to $0.30 for the third quarter of 2010 (6.6% year-over-year growth), representing a recurring FFO payout ratio of 88.2%. Recurring AFFO per unit (adjusted for mortgage prepayment penalties of $1.6 million) was $0.29 for the third quarter of 2011 (or $1.15 annualized), as compared to $0.27 for the third quarter of 2010 (8.3% year-over-year growth), representing a recurring AFFO payout ratio of 97.1%. The equity offering completed in July for gross proceeds of $85.8 million funded acquisitions that were subsequently completed in July and August. The first full quarter impact of the acquisitions completed in the third quarter will be realized in the fourth quarter.
Strong Run Rate AFFO – Recurring run rate AFFO per unit for the third quarter of 2011, based on a full quarter impact of the acquisitions completed in the third quarter, was $0.31 (or $1.24 annualized), representing a recurring run rate AFFO payout ratio of 90.3%.
Strong Same-Property NOI Growth – Same-property NOI growth was 1.8% (1.9% on a cash NOI basis) in the third quarter of 2011 as compared to the third quarter of 2010.
Increasing Occupancy – Occupancy rate increased to 96.9% at September 30, 2011, an increase of 60 basis points year–over–year.
Strong Leasing Performance – Over 82% of the 2011 leasing program has been completed as at September 30, 2011, with rental rates increasing by an average of 15% on renewals and re-leases. Almost 25% of the 2012 leasing program has been completed at September 30, 2011, with rental rates increasing by an average of 8% on renewals and re-leases.
Improving Leverage – Total debt to gross book value leverage ratio at September 30, 2011 was 52.2%, an improvement of 330 basis points from the leverage ratio of 55.5% at September 30, 2010.
Improving Interest Coverage – Interest coverage ratio for the third quarter of 2011 improved to 2.7x, a 17% increase over the 2.3x coverage ratio for the third quarter of 2010.
Successful Mortgage Refinancings – In the third quarter of 2011, Whiterock upward refinanced existing mortgages on 3 wholly-owned office and industrial properties in Regina, Saskatchewan that had benefited from significant value appreciation. The refinancings generated net cash proceeds of approximately $13.5 million, reduced the average interest rate from 5.7% to 3.6%, and extended the average remaining term from 2 years to 5 years.
Increasing Financial Flexibility – In the third quarter of 2011, Whiterock increased its existing revolving acquisition and operating credit facility with a major Canadian chartered bank from $20 million to $35 million, while at the same time reducing the interest rate by 88 basis points and extending the remaining term from 1 year to 2 years.
Successful Equity Offering – In the third quarter of 2011, Whiterock completed a public offering of trust units at a price of $13.30 per unit, for gross proceeds of $85.8 million to fund identified acquisitions, which were subsequently completed throughout the third quarter of 2011.
Successful Acquisitions – In the third quarter of 2011, Whiterock completed the acquisitions of 4 high-quality properties in Ontario for $257 million (before closing costs), including 3 multi-tenanted office complexes in London and Mississauga and 1 grocery-anchored retail centre in Tillsonburg. The third quarter of 2011 also marked Whiterock's entry into the United States, with the acquisitions of 2 high-quality properties for US$77 million (before closing costs), consisting of 1 office building in Kansas and 1 industrial facility in Tennessee, with both properties being newly built and single-tenanted with investment grade long-term leases.
Growing Portfolio of Properties – As at September 30, 2011, the fair value of Whiterock's portfolio of investment properties (including Whiterock's proportionate share of properties accounted for under the equity method) plus the fair value of Whiterock's long-term leased asset, crossed the $1 billion threshold, with a total fair value of $1.2 billion, of which over $600 million is in the Greater Toronto Area, representing a significant milestone for Whiterock.
New Compensation Plan for CEO – As part of Whiterock's rapid and successful evolution from an entrepreneurial start-up platform to a sophisticated, internally managed institutional platform, the compensation plan for the CEO will be changed. Whiterock's Governance and Compensation Committee has engaged Towers Watson, a leading compensation consulting firm, to provide a recommendation for a new compensation plan (the "Plan") for the CEO. The Plan will be structured to reflect the following:
To be supportive of Whiterock's long-term value creation objectives;
To be comparable to compensation plans at other best-in-class Canadian REITs; and
To be competitive in the Canadian real estate market.
The Plan will likely be comprised of the following components, each awarded on an annual basis:
Base salary;
Incentive bonus based on pre-determined annual key performance indicators ("KPI"); and
Long-term incentive bonus based on pre-determined KPI.
The Governance and Compensation Committee will make a formal recommendation to the Board of Trustees for approval and implementation of the Plan in the near future.
FINANCIAL HIGHLIGHTS
Key Performance Indicators
Three Months Ended Nine Months Ended
September 30, 2011 September 30,
2010(1)
September 30,
2011
September 30,
2010(1)
FFO per unit (basic) $ 0.27 $ 0.30 $ 0.90 $ 0.85
AFFO per unit (basic) $ 0.24 $ 0.27 $ 0.82 $ 0.74
Recurring FFO per unit (basic)(2) $ 0.32 $ 0.30 $ 0.95 $ 0.85
Recurring AFFO per unit (basic)(2) $ 0.29 $ 0.27 $ 0.87 $ 0.74
NOI $ 19,621,842 $ 14,682,907 $ 52,234,102 $ 38,676,072
NOI – Same-Property (accrual basis)(3) $ 14,761,554 $ 14,494,931 $ 40,382,392 $ 38,227,039
NOI – Same-Property (cash basis)(3) $ 14,379,727 $ 14,108,317 $ 39,397,926 $ 37,034,074
Recurring FFO payout ratio(2) 88.2% 93.8% 87.9% 106.4%
Recurring cash FFO payout ratio(2)(4) 80.7% 82.8% 80.3% 89.4%
Recurring AFFO payout ratio(2) 97.1% 104.9% 96.3% 122.4%
Recurring cash AFFO payout ratio(2)(4) 88.8% 92.6% 88.0% 102.8%
Interest coverage ratio(5) 2.7x 2.3x 2.6x 2.1x
Interest coverage ratio (proportionate consolidation)(5) 2.2x 2.0x 2.1x 1.9x
As at September 30, 2011 December 31,
2010(1)
Investment in real estate assets – wholly-owned(6) $ 697,280,200 $ 557,680,000
Investment in real estate assets – equity accounted(7) $ 185,474,799 $ 96,665,488
Investment in real estate assets – long-term leased(8) $ 16,283,333 $ 20,783,333
Weighted average mortgage rate 5.3% 5.5%
Weighted average debenture rate 6.1% 6.6%
Debt to gross book value ratio(9) 52.2% 53.2%
Debt to gross book value ratio (proportionate consolidation)(9) 61.6% 59.4%
Equity market capitalization (basic)(10) $ 405,191,315 $ 352,624,971
Average lease term (in years) 6.3 6.2
Occupancy rate 96.9% 96.5%
(1) 2010 restated in accordance with IFRS.
(2) Recurring FFO and AFFO for the three and nine months ended September 30, 2011 exclude the impact of mortgage prepayment penalties of $1.6 million.
(3) See "Net Operating Income" in the MD&A for the calculation.
(4) FFO and AFFO cash payout ratios are calculated as net cash distributions paid (net of the reinvestment of distributions in new units issued under Whiterock's Distribution Reinvestment Plan) divided by FFO per unit and AFFO per unit.
(5) Interest coverage is calculated based on net operating income plus income from equity accounted investments plus fee income, less G&A, divided by interest expense (including debentures and financing fee amortization), net of interest and other income. Interest coverage (proportionate consolidation) is calculated on the basis that equity accounted investments are proportionately consolidated.
(6) The fair values of investment properties do not include Airway Centre 2–4 under a 30-year ground lease, which has a fair value, as determined by management, of approximately $132 million as at September 30, 2011 (December 31, 2010 – $131 million), for which the purchase price would have been $117.9 million if the put option were exercised.
(7) September 30, 2011 includes Whiterock's share of $972 million of real estate assets accounted for using the equity method (December 31, 2010 – $516 million).
(8) Prepaid ground rent related to Airway Centre 2–4 under a 30-year ground lease.
(9) See "Total Indebtedness to Gross Book Value" in the MD&A for the calculation.
(10) Equity market capitalization is calculated as period end units outstanding multiplied by the period end unit closing price.

FFO and AFFO are supplemental non-IFRS financial measures used by the real estate industry to measure and compare the operating performance of real estate organizations. Whiterock's method of calculating FFO and AFFO may be different from methods used by other REITs or corporations. A description of Whiterock's calculation of FFO and AFFO is included in Whiterock's Management's Discussion and Analysis ("MD&A") for the quarter ended September 30, 2011.

Whiterock's Consolidated Financial Statements and MD&A for the quarter ended September 30, 2011 are posted on Whiterock's website. Readers are directed to these documents for a more detailed discussion of Whiterock's results.

CONFERENCE CALL

Whiterock invites you to participate in its live conference call with senior management on Tuesday, November 8, 2011 at 11:00 a.m. E.S.T., to discuss the Whiterock's third quarter 2011 results and achievements. Investors can click on the link www.whiterockreit.ca/financial-reports.php to access the third quarter financial statements and MD&A. A three-page quarterly summary to accompany management's comments during the call will be available on Whiterock's website. To view it, please go to www.whiterockreit.ca/presentations.php.

To participate in the live conference call, please dial 1-866-605-3852 (within Canada) or 1-877-317-6789 (within the U.S.). To ensure your participation, please call five minutes prior to the scheduled start of the call.

Whiterock's conference call will also be broadcast through a live, listen-only audio webcast, which can be accessed by clicking on the following link:

http://services.choruscall.com/links/wrk111108.html

The webcast will be archived 24 hours after the end of the conference call and can be accessed for one year. Listeners who wish to participate in the Q&A session will not be able to do so through the webcast and must join the live conference call.

About Whiterock REIT

Whiterock REIT is a growth-oriented diversified commercial REIT with a wholly-owned, co-owned, and long-term leased aggregate real estate portfolio that totals over 10.1 million square feet of gross leasable area across 79 properties, geographically diversified across 8 Canadian provinces and 2 U.S. states.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect" "estimate", "anticipate", "intend", "believe" or "continue", the negative forms thereof and similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future events or performance and, by their nature, are based on Whiterock's estimates and assumptions, which are subject to known and unknown risks, uncertainties and other factors that may cause the actual events, results or prospects to be materially different from those expressed or implied herein. Readers are cautioned that a number of factors, including those discussed in the section entitled "Risk Factors" in Whiterock's Annual Information Form, which can be obtained at www.sedar.com, could cause actual events, results or prospects to differ materially from those stated or implied. These factors should be considered carefully, and a reader should not place undue reliance on forward-looking statements, as there can be no assurance that actual events, results or prospects will be consistent with such statements. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a relatively stable leasing environment, the maintenance of current occupancy levels, stable interest costs, limited dilution from conversion of convertible debentures; stable acquisition capitalization rates and available access to equity and debt capital markets to fund, at acceptable costs, Whiterock's future growth plans, and to enable Whiterock to refinance its debt as it matures. In addition, historic performance is not necessarily indicative of future results. Except as specifically required by applicable law, Whiterock does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Whiterock Real Estate Investment Trust
    Jason Underwood
    CEO
    (416) 907-4861

    Whiterock Real Estate Investment Trust
    Kursat Kacira
    CFO
    (416) 572-0427
    www.whiterockreit.ca