CST: 26/07/2016 14:56:40   

Smart Real Estate Investment Trust Releases Fourth Quarter and Year End Results for 2015

166 Days ago

TORONTO, ONTARIO--(Marketwired - Feb 10, 2016) - Smart Real Estate Investment Trust ("SmartREIT" or "the Trust") (TSX:SRU.UN) is pleased to report strong results for the fourth quarter and year ended December 31, 2015.

Highlights for the quarter ended December 31, 2015:

  • Funds From Operations ("FFO") increased by 22.2% to $80.4 million and 8.3% to $0.52 on a per Unit basis compared to the same period in 2014
  • Adjusted Funds From Operations ("AFFO") payout ratio decreased by 4.0% to 82.6% compared to the same period in 2014
  • Maintained high level occupancy of 98.7%
  • Completed Developments and Earnouts of 195,337 square feet of leasable area for $91.1 million, providing an unleveraged yield of 7.5%
  • Annual distributions increased by $0.05 to $1.65 per Unit effective October 2015
  • Issued new secured debt totalling $52.0 million with a weighted average term of 10.0 years and a weighted average interest rate of 3.53%
  • Settled $100.0 million aggregate principal amount of variable rate Series K senior unsecured debentures that matured on October 16, 2015

Highlights for the year ended December 31, 2015:

  • On May 28, 2015, the Trust completed a transformative transaction involving a very significant portfolio of real estate and the SmartCentres' platform (referred to herein as the "Platform" - see the "Transaction" section which can be found in Management's Discussion & Analysis for the year ended December 31, 2015), transforming the Trust into a fully integrated REIT, with a full suite of capabilities from origination of development opportunities to construction, leasing and operations
  • Funds From Operations ("FFO") increased by 16.9% to $309.6 million and 7.7% to $2.10 on a per Unit basis compared to 2014
  • Adjusted Funds From Operations ("AFFO") payout ratio decreased by 3.6% to 81.1% compared to 2014
  • Same properties' net operating income ("NOI") for the year ended December 31, 2015 increased by 1.1% or $4.0 million compared to 2014
  • Annual distributions increased by $0.05 to $1.65 per Unit effective October 2015
  • Maintained high level occupancy of 98.7%. The Trust has two former Target store locations in the Trust's portfolio. As a result of Target's decision to leave these locations, the Trust has identified both locations for redevelopment. Had these two sites not been identified for redevelopment, the occupancy level would have been 98.1%
  • Completed Developments and Earnouts of 360,709 square feet of leasable area for $133.5 million, providing an unleveraged yield of 7.2%
  • Issued fixed rate secured debt of $596.3 million with a weighted average term of 8.9 years and a weighted average interest rate of 3.21%
  • Repaid secured debt of $168.8 million with a weighted average interest rate of 5.68%
  • On May 27, 2015, the Trust issued notice of redemption of the 5.75% convertible debentures with an aggregate principal amount outstanding of $55.6 million, to be redeemed on June 30, 2015. The debenture holders had the right until June 29, 2015 to convert their debentures into Trust Units at a conversion price of $25.75 per Unit. On June 30, 2015, the Trust redeemed the balance of the 5.75% convertible debentures for $3.3 million in cash
  • Issued $160.0 million of 3.556% Series N senior unsecured debentures due on February 6, 2025
  • Redeemed $150.0 million aggregate principal amount of 5.37% Series B senior unsecured debentures on March 9, 2015

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 138 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 outlet locations are all moving forward very positively. 2015 was an exceptional year in terms of capital market activity, with over $1.2 billion of debt and equity capital raised and $645.5 million of loans assumed, and we have created meaningful reductions in our future cost of operations through lower interest costs. Finally, the core team of professionals who support SmartREIT have a vast range of capabilities to drive the business forward in the coming years. As to the coming 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," added Thomas.

The following table summarizes SmartREIT's portfolio information:

December 31,
2015
December 31,
2014
Change
Fair value of real estate portfolio (in millions of dollars) (1) $ 8,168.6 $ 6,801.4 $ 1,367.2
Weighted average stabilized capitalization rate 5.94 % 5.98 % (0.04 )%
Built gross leasable area 31.1 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 year are as follows:

Leasable area 360,709 square feet
Investment (Cost) $133.5 million
Unleveraged yield 7.2 %

Results for the three months ended December 31, 2015

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

(in millions of dollars, except per Unit information) Three Months Ended
December 31,
2015
Three Months Ended
December 31,
2014
Change
($ or bps)
%
Change
Net income and comprehensive income $ 91.7 $ 61.2 $ 30.5 49.8 %
Rental revenue $ 178.1 $ 153.4 $ 24.7 16.1 %
Net operating income $ 114.1 $ 97.8 $ 16.3 16.7 %
FFO excluding adjustments $ 80.4 $ 65.8 $ 14.6 22.2 %
Per Unit Information
FFO per Unit excluding adjustments (fully diluted) $ 0.52 $ 0.48 $ 0.04 8.3 %
AFFO per Unit (fully diluted) $ 0.50 $ 0.46 $ 0.04 8.7 %
Distribution $ 0.41 $ 0.40 $ 0.01 2.5 %
Payout ratio (to AFFO) 82.6 % 86.6 % (4.0 )% (4.6 )%

Rentals from investment properties for the three months ended December 31, 2015 totalled $178.1 million, a $24.7 million or 16.1% increase over the three months ended December 31, 2014. Base rent increased by $16.3 million or 16.2%, primarily due to rent increases from new and renewing tenants, acquisitions (primarily the acquisition of properties in connection with the Transaction), Earnouts and completed developments that occurred during 2014 and 2015. Property operating costs recovered increased by $7.5 million or 14.7% due to the related increases in recoverable costs with the growth in the portfolio.

For the three months ended December 31, 2015, FFO excluding adjustments increased by $14.6 million or 22.2% to $80.4 million and by 8.3% to $0.52 on a per Unit basis compared to the same quarter of 2014 (three months ended December 31, 2014 - $65.8 million). The increase in FFO excluding adjustments of $14.6 million was primarily due to an increase in NOI net of tenant incentive amortization of $16.3 million, an increase in indirect interest with respect to the development portion of investment in associates of $0.1 million and an increase in salaries and related costs attributed to leasing activities of $0.8 million, partially offset by an increase in interest expense net of yield maintenance on redemption of unsecured debentures and related write-off of unamortized financing costs of $0.2 million, an increase in general and administrative expenses of $1.8 million, a decrease in interest income of $0.1 million and a decrease in acquisition and transition costs of $1.3 million.

Results for the year ended December 31, 2015

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

(in millions of dollars, except per Unit information) Year Ended
December 31,
2015
Year Ended
December 31,
2014
Change
($ or bps)
%
Change
Net income and comprehensive income $ 319.5 $ 263.7 $ 55.8 21.2 %
Rental revenue $ 670.3 $ 607.6 $ 62.7 10.3 %
Net operating income $ 438.0 $ 395.9 $ 42.1 10.6 %
FFO excluding adjustments $ 309.6 $ 264.9 $ 44.7 16.9 %
Per Unit Information
FFO per Unit excluding adjustments (fully diluted) $ 2.10 $ 1.95 $ 0.15 7.7 %
AFFO per Unit (fully diluted) $ 1.99 $ 1.84 $ 0.15 8.2 %
Distribution $ 1.61 $ 1.56 $ 0.05 3.2 %
Payout ratio (to AFFO) 81.1 % 84.7 % (3.6 )% (4.3 )%

Rentals from investment properties for the year ended December 31, 2015 totalled $670.3 million, a $62.7 million or 10.3% increase over the year ended December 31, 2014. Base rent increased by $39.8 million or 9.9%, primarily due to rent increases from new and renewing tenants, acquisitions, Earnouts and completed developments that occurred during 2014 and 2015. Property operating costs recovered increased by $20.4 million or 10.3% due to the related increases in recoverable costs with the growth in the portfolio.

The Trust recovered 98.3% of total recoverable expenses during the year ended December 31, 2015, compared to 98.0% 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 2014, NOI increased by $42.1 million or 10.6% in 2015, primarily as a result of the growth of the portfolio due to acquisitions, Earnouts and completed developments.

For the year ended December 31, 2015, FFO excluding adjustments increased by $44.7 million or 16.9% to $309.6 million and by 7.7% to $2.10 on a per Unit basis compared to the prior year (December 31, 2014 - $264.9 million). The increase in FFO excluding adjustments of $44.7 million was primarily due to an increase in NOI net of tenant incentive amortization of $42.7 million, a decrease in interest expense net of yield maintenance on redemption of unsecured debentures and related write-off of unamortized financing costs of $6.3 million, an increase in interest income of $0.7 million, an increase in indirect interest with respect to the development portion of investment in associates of $0.8 million, an increase in salaries and related costs attributed to leasing activities of $1.3 million and an increase in acquisition and transition costs of $0.3 million, partially offset by an increase in general and administrative expenses of $7.0 million (which includes $1.8 million in Long Term Incentive Plan expense).

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 year ended December 31, 2015, available on Sedar at www.sedar.com.

Full reports of the financial results of the Trust for the year ended December 31, 2015 are outlined in the audited consolidated financial statements and the related MD&A of the Trust, as well as the Trust's Annual Information form, which are all 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, February 11, 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 1-800-499-4035. 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, February 11, 2016 beginning at 12:00 p.m. (ET) through to 12:00 p.m. (ET) on Thursday, February 18, 2016. To access the recording, please call 1-888-203-1112 and enter the Replay Passcode 3486542#.

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 year ended December 31, 2015 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.

Smart Real Estate Investment Trust
Huw Thomas
President and Chief Executive Officer
(905) 326-6400 ext. 7649
hthomas@smartreit.com
Smart Real Estate Investment Trust
Peter Sweeney
Chief Financial Officer
(905) 326-6400 ext. 7865
psweeney@smartreit.com
www.smartreit.com