WINNIPEG, MB, Aug. 4, 2021 /CNW/ - Artis Real Estate Investment
Trust ("Artis" or the "REIT") (TSX: AX.UN, AX.PR.A, AX.PR.E,
AX.PR.I) announced today its financial results for the three and
six months ended June 30, 2021.
The second quarter press release should be read in conjunction with
the REIT's consolidated financial statements and Management's
Discussion and Analysis ("MD&A") for the period ended
June 30, 2021. All amounts are in
thousands of Canadian dollars, unless otherwise noted.
"We are pleased to report our results and achievements for the
second quarter and to demonstrate the strong progress we've made
during these early stages of execution of our new vision and
strategy," said Samir Manji, CEO of
Artis. "During the quarter, we entered into a sale agreement
for our GTA industrial portfolio for a sale price that represented
a 36% increase over the IFRS fair value reported prior to the sale,
and closed the strategic disposition of four non-core assets, also
at sale prices that exceeded their most recently reported IFRS fair
values. These dispositions are milestones on our journey to
fortify our balance sheet by using the proceeds to reduce debt and
provide Artis with financial flexibility. At June 30, 2021, we reported improvements to NAV
per unit and debt to gross book value, both of which are key
performance indicators of the REIT and critical to the successful
execution of our Business Transformation Plan. We are pleased
with the progress we have made in a short amount of time and look
forward to continuing to demonstrate our ability to execute our
strategy and deliver on our commitment to create long-term value
for our owners."
SECOND QUARTER HIGHLIGHTS (1)
Business Strategy and Management Updates
- Entered into a sale agreement to monetize industrial assets
located in the Greater Toronto
Area, Ontario, with
proceeds expected to reduce leverage and provide financial
flexibility to pursue return of capital and value investing
strategies.
- Entered into an agreement with Sandpiper Asset Management, Inc.
("Sandpiper") to provide certain services to support the REIT's
strategy to acquire meaningful and influential active ownership
positions in undervalued publicly-listed real estate entities.
- Appointed Kim Riley to Chief
Operating Officer, a newly created position at Artis, effective
April 1, 2021.
- Appointed Jaclyn Koenig to Chief
Financial Officer, effective May 24,
2021.
Portfolio Activity
- Acquired a parcel of industrial development land in
the Twin Cities Area, Minnesota, for a purchase price of
US$1.5 million.
- Disposed of an office property in Calgary, Alberta, three retail properties in
Regina, Saskatchewan, and a
portion of a retail property in Fort
McMurray, Alberta, for an aggregate sale price of
$62.0 million.
- At June 30, 2021, Artis had
entered into an agreement to sell the GTA Industrial Portfolio,
comprising 28 industrial properties located in the Greater Toronto Area, Ontario. On July 15,
2021, the REIT closed on 26 of the 28 properties for an
aggregate sale price of $696.7
million. One of the remaining properties is expected to
close in the third quarter of 2021 and generate gross proceeds of
$26.7 million. Subsequent to
June 30, 2021, the remaining property
is no longer under a sale agreement and will be actively marketed
for sale.
- Subsequent to June 30, 2021,
disposed of the King Edward Industrial Portfolio, comprised of two
industrial properties located in Winnipeg, Manitoba, for a sale price of
$3.2 million.
Financial and Operational
- Reported a conservative AFFO payout ratio of 60.0% for the
second quarter of 2021, compared to 51.9% for the second quarter of
2020.
- Reported FFO per unit of $0.34
for the second quarter of 2021, compared to $0.36 for the second quarter of 2020.
- Reported AFFO per unit of $0.25
for the second quarter of 2021, compared to $0.27 for the second quarter of 2020.
- Same Property NOI in Canadian dollars for the second quarter of
2021 decreased 3.9% compared to the second quarter of 2020.
- Same Property NOI in functional currency for the second quarter
of 2021 increased 3.4% compared to the second quarter of 2020.
- Reported portfolio occupancy of 90.3% (91.8% including
commitments) at June 30, 2021,
compared to 91.0% (92.5% including commitments) at March 31, 2021.
- Renewals totalling 326,397 square feet and new leases totalling
113,866 square feet commenced during the second quarter of
2021.
- Weighted-average rental rate on renewals that commenced during
the second quarter of 2021 increased 7.3%.
Balance Sheet and Liquidity
- Increased NAV per unit to $16.78
at June 30, 2021, compared to
$15.03 at December 31, 2020.
- Improved secured mortgages and loans to GBV to 24.8% at
June 30, 2021, compared to 27.7% at
December 31, 2020.
- Improved total long-term debt and credit facilities to GBV to
48.2% at June 30, 2021, compared to
50.2% at December 31, 2020.
- Increased unencumbered assets to $2.4
billion at June 30, 2021,
compared to $1.9 billion at
December 31, 2020.
- Improved total long-term debt and credit facilities to Adjusted
EBITDA to 9.1 at June 30, 2021,
compared to 9.4 at December 31,
2020.
- Improved Adjusted EBITDA interest coverage ratio to 3.81 for
the second quarter of 2021, compared to 3.50 for the second quarter
of 2020.
Capital Structure
- Utilized the normal course issuer bid ("NCIB") to purchase
2,881,668 common units at a weighted-average price of $11.03 and 48,872 preferred units at a
weighted-average price of $23.40.
- Invested in equity securities representing an aggregate fair
value of $6.4 million at June 30, 2021.
FINANCIAL AND OPERATIONAL RESULTS
|
|
|
|
|
|
Three months
ended
June 30,
|
|
Six months
ended
June 30,
|
|
$000's, except per
unit amounts
|
2021
|
2020
|
%
Change
|
2021
|
2020
|
%
Change
|
|
|
|
|
|
|
|
Revenue
|
$
|
103,299
|
$
|
114,038
|
(9.4)%
|
$
|
224,176
|
$
|
232,579
|
(3.6)%
|
Net operating
income
|
62,037
|
67,139
|
(7.6)%
|
126,269
|
136,291
|
(7.4)%
|
Net income
(loss)
|
217,056
|
54,750
|
296.4%
|
288,916
|
(56,580)
|
(610.6)%
|
Total comprehensive
(loss)
|
198,431
|
(3,242)
|
(6220.6)%
|
253,422
|
10,955
|
2,213.3%
|
Distributions per
common unit
|
0.15
|
0.14
|
7.1%
|
0.29
|
0.27
|
7.4%
|
|
|
|
|
|
|
|
FFO
(1)
|
$
|
45,428
|
$
|
49,358
|
(8.0)%
|
$
|
92,001
|
$
|
95,799
|
(4.0)%
|
FFO per unit
(1)
|
0.34
|
0.36
|
(5.6)%
|
0.69
|
0.69
|
—%
|
FFO payout ratio
(1)
|
44.1%
|
38.9%
|
5.2%
|
42.0%
|
39.1%
|
2.9%
|
|
|
|
|
|
|
|
AFFO
(1)
|
$
|
32,795
|
$
|
36,499
|
(10.1)%
|
$
|
66,730
|
$
|
70,160
|
(4.9)%
|
AFFO per unit
(1)
|
0.25
|
0.27
|
(7.4)%
|
0.50
|
0.51
|
(2.0)%
|
AFFO payout ratio
(1)
|
60.0%
|
51.9%
|
8.1%
|
58.0%
|
52.9%
|
5.1%
|
(1) Represents a non-GAAP measure. Refer to the
Notice with Respect to non-GAAP Measures.
Artis reported portfolio occupancy of 90.3% (91.8% including
commitments) at June 30, 2021,
compared to 91.0% (92.5% including commitments) at March 31, 2021. Weighted-average rental rate on
renewals that commenced during the second quarter of 2021 increased
7.3%.
Artis' portfolio has a stable lease expiry profile with 47.5% of
gross leasable area expiring in 2025 or later. Weighted-average
in-place rents for the total portfolio are $12.64 per square foot and are estimated to be
0.9% below market rents. Information about Artis' lease
expiry profile is as follows:
|
|
|
|
|
|
|
|
|
|
Current
vacancy
|
Monthly
Tenants
|
2021
|
2022
|
2023
|
2024
|
2025 & later
|
Total
portfolio
|
|
|
|
|
|
|
|
|
|
Expiring square
footage
|
9.7%
|
0.1%
|
10.9%
|
11.0%
|
10.1%
|
10.7%
|
47.5%
|
100.0%
|
In-place
rents
|
N/A
|
N/A
|
$
|
13.51
|
$
|
11.16
|
$
|
13.66
|
$
|
12.39
|
$
|
12.61
|
$
|
12.64
|
Market
rents
|
N/A
|
N/A
|
$
|
12.96
|
$
|
11.57
|
$
|
13.57
|
$
|
12.60
|
$
|
12.85
|
$
|
12.76
|
BALANCE SHEET AND LIQUIDITY
The REIT's balance sheet highlights and metrics, on a
Proportionate Share basis, are as follows:
|
|
|
|
|
June
30,
|
|
December
31,
|
|
2021
|
|
2020
|
|
|
|
|
|
|
Fair value of
investment properties
|
$
4,933,973
|
|
$
4,844,086
|
Fair value of
unencumbered assets
|
2,401,426
|
|
1,941,959
|
NAV per unit
(1)
|
|
16.78
|
|
|
15.03
|
Secured mortgages and
loans to GBV (1)
|
24.8%
|
|
27.7%
|
Total long-term debt
and credit facilities to GBV (1)
|
48.2%
|
|
50.2%%
|
Total long-term debt
and credit facilities to Adjusted EBITDA (1)
|
|
9.1
|
|
|
9.4
|
Adjusted EBITDA
interest coverage ratio (1)
|
|
3.81
|
|
|
3.29
|
Unencumbered assets
to unsecured debt
|
2.03
|
|
1.73
|
(1) Represents a non-GAAP measure. Refer to the
Notice with Respect to non-GAAP Measures.
At June 30, 2021, NAV per unit was
$16.78, compared to $15.03 at December 31,
2020.
At June 30, 2021, Artis had
$31.5 million of cash on hand and
$263.6 million available on its
revolving term credit facilities.
Liquidity and capital resources may be impacted by financing
activities, portfolio acquisition, disposition and development
activities, debt repayments, unit purchases under the NCIB or
purchases of equity securities occurring subsequent to June 30, 2021.
PORTFOLIO ACTIVITY
Acquisition
On May 7, 2021, the REIT acquired
a parcel of industrial development land in Twin Cities Area, Minnesota for a purchase price of US$1.5 million.
Dispositions
|
|
|
|
|
|
|
|
|
Property
|
Property
count
|
|
Location
|
Disposition
date
|
Asset
class
|
Owned
share of
GLA
|
|
Sale
price
|
|
|
|
|
|
|
|
|
|
Signal Centre
(1)
|
—
|
|
Fort McMurray,
Alberta
|
April 12,
2021
|
Retail
|
11,690
|
|
$
|
4,600
|
Victoria Square
Retail
Portfolio
|
2
|
|
Regina,
Saskatchewan
|
April 15,
2021
|
Retail
|
329,574
|
|
45,000
|
Fleet Street
Crossing
|
1
|
|
Regina,
Saskatchewan
|
April 28,
2021
|
Retail
|
37,736
|
|
7,600
|
Sierra
Place
|
1
|
|
Calgary,
Alberta
|
May 4,
2021
|
Office
|
92,108
|
|
4,750
|
(1) Signal Centre was comprised of two parcels of land
with two buildings on each respective parcel. On April 12, 2021, the REIT sold one of these
parcels.
At June 30, 2021, Artis had
entered into an agreement to sell the GTA Industrial Portfolio,
comprising 28 industrial properties located in the Greater Toronto Area, Ontario. On
July 15, 2021, the REIT closed on 26
of the 28 properties for an aggregate sale price of $696.7 million. One of the remaining
properties is expected to close in the third quarter of 2021 and
generate gross proceeds of $26.7
million. Subsequent to June 30,
2021, the remaining property is no longer under a sale
agreement and will be actively marketed for sale.
At June 30, 2021, Artis had
entered into an unconditional sale agreement for the King Edward
Industrial Portfolio, comprised of two industrial properties
located in Winnipeg Manitoba, for
a sale price of $3.2 million, which
closed on July 21, 2021.
Subsequent to June 30, 2021, the
REIT entered into an unconditional sale agreement for the East
Landing Retail Portfolio, comprised of two retail properties
located in Regina, Saskatchewan
for a sale price of $19.1 million,
representing a capitalization rate of 6.4%. The sale is
anticipated to close in August
2021.
New Developments
At June 30, 2021, the REIT had
four ongoing development projects: 300 Main, Park 8Ninety V,
Park Lucero East and Blaine 35.
300 Main is a mixed-used commercial and residential/multi-family
property located in Winnipeg,
Manitoba. Park 8Ninety V is the final phase of an industrial
development project in the Greater
Houston Area, Texas, and is
expected to comprise three buildings totalling 677,000 square feet
once complete. Artis has a 95% interest in Park 8Ninety V in
the form of a joint venture arrangement. Park Lucero East is a state-of-the-art
industrial development project located in the Greater Phoenix Area, Arizona, which is expected to comprise three
Class A industrial buildings totalling approximately 561,000 square
feet upon completion. Artis has a 10% interest in
Park Lucero East in the form of an
investment in an associate. Blaine 35 is an industrial development
project located in the Twin Cities
Area, Minnesota, with
prominent interstate frontage at the intersection of I-35W and 85th
Ave N. Blaine 35 includes three buildings anticipated to
comprise approximately 317,400 square feet of leasable area.
Further details regarding these projects can be found in the Q2-21
MD&A.
IMPACT OF COVID-19
As a diversified REIT, Artis' portfolio comprises industrial,
office and retail properties which, at June
30, 2021, were 90.3% leased (91.8% including commitments on
vacant space) to high-quality tenants across Canada and the U.S. with a weighted-average
remaining lease term of 5.2 years.
Rent collection has been a key focus during this time. As
at June 30, 2021, 99.1% of rent
charges (both excluding and including deferred rent charges) have
been collected for the three months ended June 30, 2021.
Due to government-mandated capacity restrictions and temporary
closures of certain non-essential businesses throughout the course
of the COVID-19 pandemic, a number of tenants had to limit
operations. To support tenants through this difficult time,
qualifying tenants who were in need of assistance were given the
option to defer a portion of their rent, with an agreement to repay
the amount at a specified later date. As at June 30, 2021, the outstanding balance of rent
deferrals granted to tenants was $2.2
million ($2.3 million on a
Proportionate Share basis).
The REIT anticipates that the majority of rent deferrals and
rents receivable will be collected, however, there are certain
tenants that may not be able to pay their outstanding rent.
As at June 30, 2021, an allowance for
doubtful accounts in the amount of $1.6
million ($1.6 million on a
Proportionate Share basis) has been recorded, compared to
$2.0 million ($2.0 million on a Proportionate Share basis) at
December 31, 2020.
Overall, Artis' first priority is to maintain a safe environment
for its tenants, employees and the community. During this
unprecedented and uncertain time, Artis is committed to minimizing
the impact on its business and, as a diversified REIT, Artis is
confident that it is well-positioned to handle the economic
challenges that may lie ahead.
NEW VISION, BUSINESS TRANSFORMATION PLAN AND AGREEMENT WITH
SANDPIPER
On March 10, 2021, the REIT
announced a new vision: to become a best-in-class real estate asset
management and investment platform focused on growing NAV per unit
and distributions for its investors through value investing.
In conjunction with this announcement, the REIT unveiled a detailed
strategy (the "Business Transformation Plan") to achieve its vision
and to create Canada's pre-eminent
asset management and investment platform, focused on value
investing in real estate.
The Business Transformation Plan includes: (1) strengthening the
balance sheet to provide significant liquidity and flexibility, (2)
focusing on value investing by identifying real estate
opportunities that are mispriced, misunderstood or mismanaged, (3)
driving organic growth, and (4) institutionalizing the new
platform.
The goal of the Business Transformation Plan is to generate
meaningful long-term growth in NAV per unit and distributions by
monetizing assets, strengthening the balance sheet and scaling-up
through value investing. Artis will concentrate its ownership
in the highest and best return opportunities to maximize long-term
value for unitholders.
In connection with the Business Transformation Plan, Artis has
engaged Sandpiper to provide certain services to support the REIT's
strategy to acquire meaningful and influential active ownership
positions in undervalued publicly-listed real estate
entities. A copy of the Services Agreement is
available on the REIT's profile on SEDAR.
UPCOMING WEBCAST
Interested parties are invited to participate in a webcast with
management on Thursday, August 5,
2021, at 11:00 a.m. CT
(12:00 p.m. ET). In order to
participate, please register for the event by following the link:
https://us02web.zoom.us/webinar/register/WN_7YSyafijSJyOAs8uUi0bog.
You will be required to identify yourself at the time of
registration.
If you cannot participate on Thursday,
August 5, 2021, a replay of the webcast will be available on
Artis' website at
www.artisreit.com/investor-link/conference-calls/. The replay will
be available until Thursday, November 4,
2021.
NOTICE WITH RESPECT TO NON-GAAP MEASURES
In addition to reported IFRS measures, the following non-GAAP
measures are commonly used by Canadian real estate investment
trusts as an indicator of financial performance: Proportionate
Share, Property NOI, Same Property NOI, FFO, AFFO, FFO and AFFO
Payout Ratios, NAV per Unit, Debt to GBV, Adjusted EBITDA Interest
Coverage Ratio and Debt to Adjusted EBITDA. "GAAP" means the
generally accepted accounting principles described by the CPA
Canada Handbook - Accounting, which are applicable as at the date
on which any calculation using GAAP is to be made. Artis
applies IFRS, which is the section of GAAP applicable to publicly
accountable enterprises. These non-GAAP measures are not
defined under IFRS and are not intended to represent operating
profits for the period, or from a property, nor should any of these
measures be viewed as an alternative to net income, cash flow from
operations or other measures of financial performance calculated in
accordance with IFRS.
Readers should be further cautioned that these non-GAAP measures
as calculated by Artis may not be comparable to similar measures
presented by other issuers. These non-GAAP measures are defined in
the REIT's Q2-21 MD&A.
CAUTIONARY STATEMENTS
This press release contains forward-looking statements.
For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "expects",
"anticipates", "intends", "estimates", "projects", "seeks", and
similar expressions or variations of such words and phrases or
state that certain actions, events or results ''may'', ''would'' or
''will'' occur or be achieved are intended to identify
forward-looking statements. Particularly, statements
regarding expected distributions by the REIT, the Business
Transformation Plan, the steps required to implement the Business
Transformation Plan, planned divestitures, the use of proceeds from
divestitures, prospective investments and investment strategy,
Artis' plans to optimize the value and performance of its assets,
Artis' goals to grow net asset value ("NAV") per unit and
distributions, efficiencies and cost savings, the tax treatment of
Artis, Artis' status(es) under the Tax Act and the tax treatment of
divestitures are forward-looking statements. Forward-looking
statements are based on a number of factors and assumptions which
have been used to develop such statements, but which may prove to
be incorrect. Although Artis believes that the expectations
reflected in the forward-looking statements are reasonable, it
cannot guarantee future results, levels of activity, performance or
achievement since such expectations are inherently subject to
significant business, economic, competitive, political and social
uncertainties and contingencies. Assumptions have been made
regarding, among other things: the general stability of the
economic and political environment in which Artis operates,
treatment under governmental regulatory regimes, securities laws
and tax laws, the ability of Artis and its service providers to
obtain and retain qualified staff, equipment and services in a
timely and cost efficient manner, currency, exchange and interest
rates, global economic, financial markets and economic conditions
in Canada and the United States will not, in the long term,
be adversely impacted by the COVID-19 pandemic, disruptions
resulting from the temporary restrictions that governments imposed
on businesses to address the COVID-19 pandemic will not be long
term.
Artis is subject to significant risks and uncertainties 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 in these
forward-looking statements. Such risk factors include, but
are not limited to, risks associated with the COVID-19 pandemic,
real property ownership, geographic concentration, current economic
conditions, strategic initiatives, debt financing, interest rate
fluctuations, foreign currency, tenants, SIFT rules, other
tax-related factors, illiquidity, competition, reliance on key
personnel, future property transactions, general uninsured losses,
dependence on information technology, cyber security, environmental
matters and climate change, land and air rights leases, public
markets, market price of common units, changes in legislation and
investment eligibility, availability of cash flow, fluctuations in
cash distributions, nature of units, legal rights attaching to
units, preferred units, debentures, dilution, unitholder liability,
failure to obtain additional financing, potential conflicts of
interest, developments and trustees. Further, the Business
Transformation Plan has additional risk factors including, but not
limited to: failure to obtain requisite approvals for the Business
Transformation Plan, failure to execute the Business Transformation
Plan in part or at all, the ability to achieve certain efficiencies
to generate savings in general and administrative expenses, pace of
completing investments and divestitures, Sandpiper's ability to
provide the services to Artis, risk of not obtaining control or
significant influence in portfolio companies, risks associated with
minority investments, reliance on the performance of underlying
assets, operating and financial risks of investments, ranking of
Artis' investments and structural subordination, follow-on
investments, investments in private issuers, valuation
methodologies involve subjective judgments, risks associated with
owning illiquid assets, competitive market for investment
opportunities, risks upon disposition of investments, reputation of
Artis and Sandpiper, unknown merits and risks of future
investments; resources could be wasted in researching investment
opportunities that are not ultimately completed, credit risk, tax
risk, regulatory changes, foreign security risk, foreign exchange
risk, potential conflicts of interest with Sandpiper and market
discount.
Artis cannot assure investors that actual results will be
consistent with any forward-looking statements and Artis assumes no
obligation to update or revise such forward-looking statements to
reflect actual events or new circumstances other than as required
by applicable securities laws. All forward-looking statements
contained in this press release are qualified by this cautionary
statement.
ABOUT ARTIS REAL ESTATE INVESTMENT TRUST
Artis is a diversified Canadian real estate investment trust
with a portfolio of industrial, office and retail properties in
Canada and the United States. Artis' vision is to build a
best-in-class asset management and investment platform focused on
growing net asset value per unit and distributions for investors
through value investing in real estate.
SOURCE Artis Real Estate Investment Trust