Primaris Retail REIT Announces Record Second Quarter Financial Results
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 08/07/12 -- Primaris Retail REIT (TSX: PMZ.UN) is pleased to report record second quarter operating results. These results have been prepared in accordance with International Financial Reporting Standards ("IFRS").
President and CEO, John Morrison, commented "We are very pleased with our reported results which have exceeded the expectations we had last fall. This is the result of strong leasing fundamentals, a reduction in the expected number of store closings, a deferral of certain vacancies until later in 2012 than previously expected, and the receipt of above normal lease termination income. We expect the positive fundamentals will continue for the balance of the year. During the second quarter and through certain third quarter activities to date, we have significantly strengthened the statement of financial position, preparing Primaris for future investment activity and noticeably improving our credit metrics."
Financial Results
FFO for the second quarter ended June 30, 2012 were $33.4 million, up $11.6 million from the $21.8 million reported for the second quarter of 2011. On a per unit diluted basis, funds from operations for the second quarter of 2012 were $0.376, up $0.076 from the $0.300 reported for the second quarter of 2011. The second quarter of 2011 was affected by a non-recurring charge for convertible debenture issuance costs of $3.0 million or $0.040 per unit diluted. After allowing for this charge, second quarter FFO grew $0.036 or 10.8% over the comparable amount in 2011.
Net income for the second quarter ended June 30, 2012 was $39.2 million, a decrease of $2.0 million from the $41.2 million recorded in the second quarter of 2011. The decrease is driven by fluctuations in the recording of debt instruments at fair value.
The FFO distribution payout ratio for the second quarter of 2012, calculated on a diluted basis, was 81.0% as compared to a 101.4% payout ratio for the second quarter of 2011 and 79.7% for the previous quarter ended March 31, 2012. The payout ratios are sensitive to both seasonal operating results and financial leverage.
At June 30, 2012, Primaris' total enterprise value was approximately $3.7 billion (based on the market closing price of Primaris' units on June 30, 2012 plus total debt outstanding). At June 30, 2012 Primaris had $1,621.4 million of outstanding debt, equating to a debt to total enterprise value ratio of 43.3%. Primaris' debt consisted of $1,415.6 million of fixed-rate senior debt with a weighted average interest rate of 5.4% and a weighted average term to maturity of 5.3 years, no amount drawn on the operating line of credit, $2.3 million of 6.75% fixed-rate convertible debentures, $93.5 million of 5.85% fixed-rate convertible debentures, $35.0 million of 6.30% fixed-rate convertible debentures and $75.0 million of 5.40% fixed-rate convertible debentures.
In July 2012, $13.7 million, at face value, of 6.30% series of convertible debentures was converted to 817,603 units.
On July 18, 2012 Primaris exercised its right to redeem the 5.85% series of convertible debentures. The redemption of the debentures will be effective on August 17, 2012.
Subsequent to June 30, 2012, Primaris waived conditions on a $6,950 purchase of a property adjacent to an existing shopping centre. The purchase will be funded through cash on hand, operating line, and an assumed mortgage of $1,690 with a fixed interest rate of 3.78% which matures December 1, 2014.
Primaris had a debt to total asset ratio of 43.5%. During the three months ended June 30, 2012, Primaris had an interest coverage ratio of 2.5 times as expressed by EBITDA divided by interest expense on mortgages, convertible debentures and bank indebtedness. Primaris defines EBITDA as net income increased by depreciation, finance costs, income tax expense and amortization of leasing costs and straight-line rent. EBITDA is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. See below under "Non-IFRS Measures".
Operating Results
Comparison to Prior Period Financial Results (in thousands of dollars)
Funds from operations for the quarter ended June 30, 2012 were $11.6 million ($0.076 per unit diluted) greater than the comparative period.
Net Operating Income - Same Properties (in thousands of dollars)
NOI is not a term defined under IFRS and may not be comparable to similar measures used by other Trusts. Operating revenue from properties includes an adjustment for amortization of tenant improvement allowances, tenant inducements and straight-line rent to remove non-cash transactions from revenue for the calculation of net operating income. Operating expenses include operating expenses from properties, property taxes and ground rent.
The same-property comparison consists of the 27 properties that were owned throughout both the current and comparative three month periods. NOI, on a same-property basis, increased $2.2 million, or 4.7%, in relation to the comparable three month period. Removing the effects of lease-surrender revenue, net operating income, on a same-property basis, would be $1.4 million or 3.1% higher than the comparative period.
Liquidity
At June 30, 2012, Primaris had $34.8 million of cash on hand and no amount drawn on its $100.0 million credit facility. One mortgage of $21.2 million was repaid when it matured on July 1, 2012.
On June 15, 2012 Primaris entered into a hedge agreement that is scheduled to mature February 1, 2013. The hedge was completed to mitigate the risk of interest rate volatility in anticipation of $125.0 million of new debt to be placed for a 5 year term, principally to repay loans maturing during the first quarter of 2013. Primaris achieved an effective hedge on the five year Government of Canada bond yield of 1.448%, including the cost of the hedge. The credit spread on this anticipated loan is unknown as of June 30, 2012.
Tenant Sales
For the 18 reporting properties owned throughout both the twelve month periods ended May 31, 2012 and 2011, sales per square foot, on a same-tenant basis, was the same at $468 per square foot. For the same 18 properties the all tenant total sales volume has increased 0.9%.
The same tenants' sales per square foot was virtually unchanged, while the national average tenant sales as reported by the International Council of Shopping Centers ("ICSC") for the 12-month period ended May 31, 2012, increased 2.1%. Primaris' sales productivity of $468 is lower than the ICSC average of $597, largely because the ICSC includes sales from super regional malls that have the highest sales per square foot in the country.
Leasing Activity
Primaris Retail REIT's property portfolio remains well leased.
The portfolio occupancy rate is relatively stable. It was 97.4% at June 30, 2012, compared to 96.7% at March 31, 2012, and 95.7% at June 30, 2011. These percentages include space for which signed leases are in place but where the tenant may not yet be in occupancy.
Primaris renewed or leased 435,241 square feet of space during the second quarter of 2012. Approximately 74.3% of the leased spaces during the second quarter of 2012 consisted of the renewal of existing tenants. The weighted average new rent in these leases, on a cash basis, represented a 2.3% increase over the previous rent (5.6% if the major tenants are excluded).
At year end, Primaris had a weighted average term to maturity of leases of 5.4 years.
Development Activity
During 2009 and 2011, Primaris completed phases one and two of a three phase redevelopment at Lambton Mall in Sarnia, Ontario.
Work has just begun on the third phase of the Lambton Mall redevelopment. The project involves the redevelopment of the vacant anchor space (approximately 92,000 square feet), formerly occupied by Canadian Tire. Part of the existing building will be demolished and replaced with a new Galaxy Theatre building comprising approximately 32,000 square feet, an approximately 31,000 square foot Sport Chek and 1,000 square feet of commercial retail space. The plan also creates a new mall entrance next to H&M. The project includes the acquisition of the existing 5.9 acre Cineplex property located at 1450 London Road, adjacent to Lambton Mall. Upon opening of the new Galaxy Theatre at Lambton Mall, Cineplex will close its existing theatre. This phase will cost approximately $16 million, including the purchase of 1450 London Road. A spring 2013 opening of both Galaxy and Sport Chek is expected.
A multi-phased redevelopment project is well underway at Grant Park Shopping Centre in Winnipeg, Manitoba to accommodate an expanded and repositioned Manitoba Liquor Control Commission ("MLCC") store. This project also includes the realignment and upgrade of almost 11,500 square feet of common area with new floor and ceiling finishes which has revitalized the west end of the shopping centre. A portion of the exterior of the building and the west mall entrance are also being renovated to provide a marquee entry to the new redevelopment inside. Construction activities commenced in June 2011, with relocated retail tenants opening October 2011, and an end of August 2012 opening for the flagship MLCC. The project is on budget and is expected to cost $6.5 million. This phased redevelopment has already created an additional consumer draw to the centre.
The second phase of the redevelopment at Grant Park comprises a 5,000 square foot expansion of the shopping centre, re-leasing and remerchandising of approximately 23,000 square feet of other retail area, renovation and expansion of washrooms, and upgrade of an additional 5,000 square feet of common area. Landlord pre-construction activities commenced in June 2012. Common area improvements and washroom renovations are expected to be completed by November 2012, and the expansion is expected to open in July 2013. This second phase has a $5.4 million budget.
A freestanding pad development is now complete at Place d'Orleans for a 21,000 square foot Farm Boy, an Ottawa-based specialty grocery retailer. Primaris invested $3.0 million in this project. Farm Boy will act as a driver of mid-week traffic to the mall.
Redevelopment projects will be funded through a combination of cash, draws on the operating line and mortgage refinancing.
Supplemental Information
Primaris' condensed interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the three and six months periods ended June 30, 2012 and 2011 are available on Primaris' website at .
Forward-Looking Information
The MD&A contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, Primaris' operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.
In particular, certain statements in this document discuss Primaris' anticipated outlook of future events. These statements include, but are not limited to:
Although the forward-looking statements contained in this document are based on what management of Primaris believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking 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: a less robust retail environment; relatively stable interest costs; access to equity and debt capital markets to fund, at acceptable costs, the future growth program and to enable Primaris to refinance debts as they mature and the availability of purchase opportunities for growth.
Except as required by applicable law, Primaris undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Non-IFRS Measures
Funds from operations ("FFO"), net operating income ("NOI") and earnings before interest, taxes, depreciation and amortization ("EBITDA") are widely used supplemental measures of a Canadian real estate investment trust's performance and are not defined under IFRS. Management uses these measures when comparing itself to industry data or others in the marketplace. Primaris' MD&A describes FFO, NOI and EBITDA and provides reconciliations to net income, as defined under IFRS, for FFO and EBITDA. A reconciliation of FFO to net income, as defined by IFRS, and a calculation of NOI also appear at the end of the press release. FFO, NOI and EBITDA should not be considered alternatives to net income or other measures that have been calculated in accordance with IFRS and may not be comparable to measures presented by other issuers.
Conference Call
Primaris invites you to participate in the conference call that will be held on Wednesday August 8, 2012 at 9am EST to discuss these results. Senior management will speak to the results and provide a brief corporate update. The telephone numbers for the conference call are: 416-340-8530 (within Toronto), and 1-877-240-9972 (within North America).
Audio replays of the conference call will be available immediately following the completion of the conference call, and will remain active for 24 hours, by dialling 905-694-9451 or 1-800-408-3053 and using pass code 1208535. The audio replay will also be available for download at .
Primaris is a TSX listed real estate investment trust (TSX: PMZ.UN). Primaris owns 33 income-producing properties comprising approximately 13.7 million square feet located in Canada. As of July 31, 2012, Primaris had 91,132,528 units issued and outstanding (including exchangeable units for which units have yet to be issued).
Contacts:
Primaris Retail REIT
John R. Morrison
President & Chief Executive Officer
(416) 642-7860
Primaris Retail REIT
Louis M. Forbes
Executive Vice President & Chief Financial Officer
(416) 642-7810
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Datum: 07.08.2012 - 19:42 Uhr
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