Highlights for the Quarter
- Completed over 184,000 square feet of leasing transactions
- Core - FFO per unit increased 5% compared to three months ended
in the prior year
- Rental rates for new leases increased 15.2% above building
in-place rent
- Rental rates for renewed leases increased 21.9% over expiring
rents
- Completion of the $430 million
Fortis Portfolio acquisition in which the REIT has a $304 million investment; the contribution to net
operating income from the acquisition will begin in the third
quarter of 2015.
- Rent commenced at the MTS Data Centre in Winnipeg, Manitoba and based on a 50%
ownership is expected to contribute $2.2
million to year one Funds from Operations on an annualized
basis
- Subsequent to the quarter end, the loan provided to the 50%
partner in the MTS Data Centre development was converted into a
further 30% equity interest for the REIT, with the remaining 20%
anticipated to be acquired by the REIT at fair market value in
third quarter 2015
- Further corporate governance enhancements with the addition of
Nora Duke as the REIT's sixth
independent trustee
TORONTO, Aug. 6, 2015 /CNW/ - Slate Office REIT (the
"REIT") (TSX: SOT.UN/SOT.WT) today announced its financial results
for the three months and six months ended June 30, 2015.
Scott Antoniak, Chief Executive
Officer of the REIT, said:
"We are delighted to report another highly successful quarter
for Slate Office REIT. The acquisition of the Fortis
Portfolio in Atlantic Canada
creates a meaningful contribution to net operating income,
establishes a national presence for the REIT, and provides another
excellent avenue through which we can continue to create value for
our stakeholders. That we've virtually tripled the size of
our portfolio in eight months is 100 per cent attributable to our
remarkable operations team and Slate Asset Management's breadth of
resources and market intelligence.
"In keeping with our commitment to hands-on real estate
operations, we have also delivered another robust quarter of
leasing activity with over 184,000 square feet of transactions that
resulted in double-digit rental rate spreads." Added Mr.
Antoniak.
Key Performance Indicators
Compared with the three
months ended June 30, 2014,
- Net Operating Income ("NOI") increased $3.1 million
- Core - Funds from Operations ("Core - FFO") increased by
$1.7 million
- Adjusted Funds from Operations ("AFFO") increased by
$1.4 million
- Balance sheet remains strong with debt to gross book value
ratio of 61.5% and 2.7x interest coverage ratio
(Thousands of
Canadian dollars excluding ratios, per unit values)
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Three months
ended
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Three months
ended
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June 30,
2015
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June 30,
2014
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Revenue from
investment properties
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$
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14,390
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$
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7,972
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Net operating
income
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8,003
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4,927
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Weighted average
number of trust units (000s)
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20,204
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13,551
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Funds from operations
(FFO)
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5,575
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2,074
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Core Funds from
Operations (Core- FFO)
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4,658
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2,930
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Adjusted funds from
Operations (AFFO)
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3,670
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2,228
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FFO per unit
(1)
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$0.28
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$0.15
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Core - FFO per unit
(1)
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$0.23
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$0.22
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AFFO per unit
(1)
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$0.18
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$0.16
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Portfolio
Occupancy
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90.0 %
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97.8 %
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AFFO pay-out ratio
(1)
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105.0 %
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117.0 %
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Debt/GBV
ratio
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61.5 %
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47.6 %
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Interest
coverage
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2.7x
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2.8x
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(1) See
Non-IFRS Measures below
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Operations
During the quarter the REIT completed
34,838 square feet of new leasing and 149,280 square feet of
renewals. On a quarter-over-quarter basis, the committed occupancy
rate, which includes completed lease transactions with commencement
dates subsequent to quarter-end, increased from 92.3% to 92.4%, for
the same property portfolio.
Net rents on new deals increased by 15.2% over building in-place
rents on a weighted-average basis. Net rents on renewals increased
by 21.9% over the previous contractual rents on a weighted-average
basis.
Since March 31, 2015, the in-place
occupancy for the same property portfolio decreased from 91.6% to
90.2%, equivalent to a reduction of 37,875 square feet. This
reduction is the net result of 42,333 square feet of new vacancy
offset by 4,458 square feet of new leases that commenced during the
quarter. The new vacancy includes the impact of a previously
disclosed tenant insolvency in Grande
Prairie, Alberta - the insolvent tenant vacated a single-use
33,280 square foot industrial building in April 2015.
Acquisition of Fortis Portfolio
On June 30, 2015, the REIT successfully completed
the $430 million acquisition of a
14-property portfolio from Fortis Properties (the "Portfolio") in
which the REIT retained a $304
million interest. Primarily consisting of high quality
office properties, the acquisition makes the REIT one of
Atlantic Canada's preeminent
commercial real estate investors while at the same time further
establishing the REIT's national footprint, which now spans seven
provinces. Consistent with management's stated strategy of focusing
on high-quality office properties, this asset class - including
properties in the Portfolio - now generates approximately 90% of
the REIT's net operating income. The contribution to net operating
income from the acquisition will begin in the third quarter of
2015.
Update on the MTS Data Centre
Construction of the MTS
Data Centre (the "Data Centre"), a fully pre-leased development in
Winnipeg, Manitoba, has been
completed and rent commenced on June 5,
2015. The REIT owns a 50% equity interest in a limited
partnership that owns the Data Centre through a $9.5 million investment. The 15-year lease with
MTS is on a quadruple net basis. The Data Centre is expected to
have a significant positive impact on the REIT's financial
performance. On an annualized basis, the incremental year one
contribution to Funds from Operations will be approximately
$2.2 million based on 50% equity
ownership.
Subsequent to the June 30, 2015
reporting period, the mezzanine loan provided to the 50% limited
partner to fund their share of the Data Centre development with a
due date of July 31, 2015 was
converted into a further 30% equity ownership interest in the Data
Centre partnership. Additionally, the REIT and the limited
partner agreed that the REIT will acquire the remaining 20% equity
interest in the Data Centre partnership at fair market value by way
of the exercise of the put-call option as contemplated in the
limited partnership agreement. The REIT is expected to
purchase this 20% interest in the third quarter of 2015 to increase
its ownership to 100%.
Appointment of John O'Bryan as
Chair of the Board of Trustees
Mr. O'Bryan was appointed as
an Independent Trustee in March 2015
and serves as Chair of the REIT's Investment Committee. He has been
appointed as Chair of the Board of Trustees, effective
immediately.
Mr. O'Bryan has over 40 years of experience in the commercial
real estate industry. Over the course of his career, John has
advised on many of the country's largest commercial real estate
sales, having completed more than $9 billion in
transactions. Until 2014, John was the Chairman of CBRE
Limited, Canada. Prior to this, John was a Managing Director
in the commercial brokerage arm of TD Securities. In addition, he
spent 24 years with Cushman & Wakefield in Canada and
the United Kingdom where he was responsible for the
firm's appraisal and national investment operations.
John's numerous professional affiliations include board
positions with the Urban Land Institute (ULI) and REALpac in
addition to being an associate of the Royal Institution of
Chartered Surveyors. He is a past president of the National
Association of Industrial and Office Properties (NAIOP) and former
member of the Appraisal Institute of Canada (AIC).
Distributions and Distribution Reinvestment Plan
The
REIT pays a monthly distribution of $0.0625 per unit of the REIT, representing
$0.75 per unit on an annualized
basis.
Eligible unitholders (which includes holders of Class B limited
partnership units that are exchangeable into trust units of the
REIT) that elect to participate in the Distribution Reinvestment
Plan (the "DRIP") will have their cash distributions used to
purchase trust units of the REIT and will also receive a "bonus
distribution" of units equal in value to 3% of each distribution.
Unitholders wishing to participate should contact their investment
advisors to enroll in the DRIP. Additional details and information
can be found on the REIT's website at slateam.com/SOT.
The REIT may issue up to 1,045,000 trust units of the REIT under
the DRIP. The REIT may increase the number of trust units available
to be issued under the DRIP at any time at its discretion subject
to (a) the approval of the Board of Trustees, (b) the approval of
any stock exchange upon which the trust units trade, and (c) public
disclosure of such an increase.
Slate Management Corp., a wholly-owned subsidiary of Slate Asset
Management L.P. ("Slate"), is the REIT's manager.
Forward-Looking Statements
Certain information herein
constitutes "forward-looking statements" within the meaning of
applicable securities legislation. Forward looking statements
include statements about management's expectations regarding
objectives, plans, goals, strategies, future growth, operating
results and performance, business prospects and opportunities of
the REIT. Forward-looking statements can be identified by the use
of forward-looking terminology such as "believes", "expects",
"may", "might", "should", "seeks", "intends", "plans", "pro forma",
"estimates" or "anticipates"; or variations of such words; and
phrases or statements that certain actions, events or results
"may", "could" or "might" occur or be achieved; or the negative
connotation thereof. Forward-looking statements are made based on
reasonable assumptions, however, there is no assurance that the
events or circumstances reflected in forward-looking statements
will occur or be achieved. Forward-looking statements are based on
numerous assumptions of factors that if untrue, could cause actual
results to differ materially from those that are implied by such
forward-looking statements. These factors include but are not
limited to: general and local economic and real estate business
conditions; the financial condition of tenants; occupancy rates;
rental rates; the ability of the REIT to refinance maturing debt;
the REIT's ability to source and complete accretive acquisitions;
changes in government, environmental and tax regulations; inflation
and interest rate fluctuations; the REIT's ability to obtain equity
or debt financing for additional funding requirements; and adequacy
of insurance.
Forward-looking statements are subject to risks and
uncertainties, many of which are beyond the REIT's control. These
risks and uncertainties include, but are not limited to: risks
related to general and local financial conditions including
available equity and debt financing at reasonable costs and
interest rate fluctuations; operational risks including timely
leasing of vacant space and re-leasing of occupied space on
expiration of current leases on terms at current or anticipated
rental rates; tenant defaults and bankruptcies; uncertainties of
acquisition activities including availability of suitable property
acquisitions and integration of acquisitions; competition including
development of properties in close proximity to the REIT's
properties; loss of key management and employees; governmental,
environmental, taxation and other regulatory risks; litigation
risks and other risks and factors described from time to time in
the documents filed by the REIT with the securities regulators.
The REIT has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking statements. However, there may be other factors
that could cause results to not be as anticipated, estimated or
intended. Forward-looking statements are provided to inform readers
about management's current expectations and plans and allow
investors and others to better understand the REIT's operating
environment. However, readers should not place undue reliance on
forward looking statements, as forward-looking statements involve
significant risks and uncertainties and should not be read as
guarantees of future performance or results, or of the timing that
such performance or results will be achieved. Additional
information about risks and uncertainties is contained in Slate
Office REIT's annual information form for the year ended
December 31, 2014 available on SEDAR
at www.sedar.com.
Non-IFRS Financial Measures
The REIT has employed
certain non-IFRS financial measures. Management believes that in
addition to conventional measures prepared in accordance with IFRS,
investors in the real estate industry use these non-IFRS financial
measures to evaluate the REIT's performance and ability to generate
cash flows. Accordingly, these non-IFRS financial measures are
intended to provide additional information and should not be
considered in isolation or as a substitute for performance measures
prepared in accordance with IFRS. In addition, they do not have
standardized meanings and may not be comparable to measures used by
other issuers in the real estate industry or other industries.
About Slate Office REIT
Slate Office REIT is an
open-ended real estate investment trust. The REIT's portfolio
currently comprises 48 strategic and well-located real estate
assets located primarily across Canada's major population centres. The REIT is
focused on maximizing value through internal organic rental and
occupancy growth and strategic acquisitions.
Visit slateam.com/SOT to learn more.
About Slate
Slate Asset Management L.P. is a leading
real estate investment platform with $3
billion in assets under management. Slate is a
value-oriented company and a significant sponsor of all its private
and publicly-traded investment vehicles, which are tailored to the
unique goals and objectives of its investors. The firm's careful
and selective investment approach creates long term value with an
emphasis on capital preservation and outsized returns. Slate is
supported by exceptional people, flexible capital and a proven
ability to originate and execute on a wide range of compelling
investment opportunities. Visit slateam.com to learn
more.
SOURCE Slate Office REIT