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May 9, 2019 7:56 AM ET

SmartCentres Real Estate Investment Trust Releases First Quarter Results For 2019


SmartCentres Real Estate Investment Trust Releases First Quarter Results For 2019

iCrowd Newswire - May 9, 2019

TORONTO,– SmartCentres Real Estate Investment Trust (“SmartCentres” or the “Trust”) (TSX: SRU.UN) is pleased to report its financial and operating results for the three months ended March 31, 2019.

“The Trust provided strong and stable performance in the quarter, while growing our excellent development platform,” said President & CEO Peter Forde. “Our core 34 million square foot retail portfolio continued its 98% occupancy and increased its ACFO with one time adjustments. We also strengthened our balance sheet by completing several significant debt and equity offerings that were well received by the capital markets. On the development front, we entered into a number of major agreements that will result in growth of both NAV and FFO per unit.”

Key business development highlights for the three months ended March 31, 2019 include the following:

Operational

Financial

Development and Intensification

Subsequent to Quarter End:

(1)     Represents a GAAP measure.
(2)     Represents a non-GAAP measure. See “Presentation of Non-GAAP Measures” in the MD&A.

Selected Consolidated Financial and Operational Information
The consolidated financial and operational information shown in the table below includes the Trust’s share of equity accounted investments, see the “Equity Accounted Investments” section in the MD&A for details, and represents key operational and financial information for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018.

         
(in thousands of dollars, except per Unit and other non-financial data) March 31, 2019 December 31, 2018 March 31, 2018  
Operational Information        
Number of retail and other properties 152 152 153  
Number of properties under development 7 7 7  
Number of office properties 1 1 1  
Number of mixed-use properties 4 4 2  
Total number of properties with an ownership interest 164 164 163  
Gross leasable area (in thousands of sq. ft.) 34,326 34,379 34,158  
Future estimated retail development area (in thousands of sq. ft.) 3,228 3,214 3,961  
Lands under Mezzanine Financing (in thousands of sq. ft.) 615 615 615  
Committed occupancy rate 98.0% 98.1% 98.1%  
In-place occupancy rate 97.8% 98.0% 98.0%  
Average lease term to maturity 5.3 years 5.4 years 5.7 years  
Net rental rate (per occupied sq. ft.) $15.41 $15.38 $15.29  
Net rental rate excluding Anchors (per occupied sq. ft.) $21.99 $21.82 $21.67  
         
Financial Information        
Investment properties(2)(3) 9,196,055 9,155,173 8,984,949  
Total assets(1) 9,608,647 9,459,632 9,416,938  
Total unencumbered assets(2) 4,451,600 4,250,800 3,524,500  
Debt(2)(3) 4,139,682 4,236,364 4,269,593  
Debt to Aggregate Assets(2)(3) 42.2% 43.9% 45.0%  
Adjusted Debt to Adjusted Aggregate Assets(2)(3) 41.7% 43.9% 45.0%  
Debt to Gross Book Value(2)(3) 49.0% 51.1% 51.8%  
Interest Coverage(2)(3) 3.3X 3.3X 3.1X  
Interest coverage (net of capitalized interest expense)(2)(3) 3.8X 3.8X 3.6X  
Debt to Adjusted EBITDA(2)(3) 8.0X 8.2X 8.5X  
Equity (book value)(1) 5,250,361 5,008,331 4,871,886  

 

(1) Represents a GAAP measure.
(2) Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and accordingly may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to the “Presentation of Non-GAAP Measures” section in the MD&A.
(3) Includes the Trust’s share of equity accounted investments.
   

The following table represents key financial, per Unit, and payout ratio information for the three months ended March 31, 2019 and March 31, 2018:

         
(in thousands of dollars, except per Unit information) March 31, 2019 March 31, 2018 Variance  
Financial Information      
Rentals from investment properties and other(1) 206,433 198,433 8,000  
Net income and comprehensive income(1) 79,973 100,466 (20,493 )
Cash flows provided by operating activities(1) 56,768 44,063 12,705  
Net income and comprehensive income excluding loss on disposition and fair value adjustments(2)(3) 82,751 84,815 (2,064 )
NOI(2)(3) 125,934 122,839 3,095  
FFO(2)(3)(4)(5) 88,296 89,287 (991 )
FFO with one time adjustment and before Transactional FFO(2)(3)(4) 91,821 89,287 2,534  
FFO with one time adjustment and Transactional FFO(2)(3)(4) 91,821 89,777 2,044  
ACFO(2)(3)(4)(5) 80,375 81,808 (1,433 )
ACFO with one time adjustment(2)(3)(4) 83,900 81,808 2,092  
Distributions declared 76,716 70,408 6,308  
Surplus of ACFO with one time adjustment over distributions declared(2) 7,184 11,400 (4,216 )
Surplus of ACFO with one time adjustment over distributions paid(2) 24,178 24,794 (616 )
       
Units outstanding(6) 169,609,625 160,173,698 9,435,927  
Weighted average – basic 167,541,581 159,943,580 7,598,001  
Weighted average – diluted(7) 168,448,169 160,687,906 7,760,263  
       
Per Unit Information (Basic/Diluted)      
Net income and comprehensive income $0.48/$0.47 $0.63/$0.63 $-0.15/$-0.16  
Net income and comprehensive income excluding loss on disposition and fair value adjustments $0.49/$0.49 $0.53/$0.53 $-0.04/$-0.04  
FFO(2)(3)(4)(5) $0.53/$0.52 $0.56/$0.56 $-0.03/$-0.04  
FFO with one time adjustment and before Transactional FFO(2)(3)(4) $0.55/$0.55 $0.56/$0.56 $-0.01/$-0.01  
FFO with one time adjustment and Transactional FFO(2)(3)(4) $0.55/$0.55 $0.56/$0.56 $-0.01/$-0.01  
Distributions declared $0.450 $0.437 $0.013  
       
Payout Ratio Information      
Payout ratio to FFO(2)(3)(4)(5) 85.8% 78.7% 7.1%  
Payout ratio to FFO with one time adjustment and before Transactional FFO(2)(3)(4) 82.6% 78.7% 3.9%  
Payout ratio to FFO with one time adjustment and Transactional FFO(2)(3)(4) 82.6% 78.3% 4.3%  
Payout ratio to ACFO(2)(3)(4)(5) 95.4% 86.1% 9.3%  
Payout ratio to ACFO with one time adjustment(2)(3)(4) 91.4% 86.1% 5.3%  

 

(1) Represents a GAAP measure.
(2) Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and accordingly may not be comparable. For definitions and basis of presentation of the Trust’s non-GAAP measures, refer to the “Presentation of Non-GAAP Measures” section in the MD&A.
(3) Includes the Trust’s share of equity accounted investments.
(4) See “Other Measures of Performance” in the MD&A for a reconciliation of these measures to the nearest consolidated financial statement measure.
(5)  The calculation of the Trust’s FFO and ACFO and related payout ratios, including comparative amounts, are financial metrics that were determined based on the February 2019 REALpac White Paper on FFO and ACFO, respectively. Comparison with other reporting issuers may not be appropriate. The payout ratio to FFO and the payout ratio to ACFO are calculated as declared distributions divided by FFO and ACFO, respectively. 
(6)  Total Units outstanding include Trust Units and LP Units, including Units classified as liabilities. LP Units classified as equity in the unaudited interim condensed consolidated financial statements are presented as non-controlling interests.
(7) The diluted weighted average includes the vested portion of the deferred unit plan.
   

Operational Highlights

For the three months ended March 31, 2019, net income and comprehensive income decreased by $20.5 million or 20.4% compared to the same period in 2018. This decrease was primarily attributed to the following:

Partially offset by:

For the three months ended March 31, 2019, NOI increased by $3.1 million or 2.5% compared to the same period in 2018. This increase was primarily attributed to the following:

Partially offset by:

With respect to the total recovery ratio (including the Trust’s share of equity accounted investments), both including and excluding prior year adjustments, the Trust recovered 95.9% and 95.4%, respectively, of total recoverable expenses during the three months ended March 31, 2019, compared to 96.5% and 96.5%, respectively, in the same quarter in 2018.

FFO Highlights

For the three months ended March 31, 2019, FFO with one time adjustment and before Transactional FFO increased by $2.5 million or 2.8% to $91.8 million, and decreased by $0.01 or 1.8% to $0.55 on a per Unit basis, compared to the same period in 2018. This increase was primarily attributed to: i) a $3.1 million increase in NOI, ii) a $0.5 million increase in interest income, and partially offset by iii) a $1.4 million increase in general and administrative expense. The per unit decrease resulted primarily because of dilution associated with the additional units issued in the January 2019 equity offering.

ACFO Highlights

For the three months ended March 31, 2019, ACFO with one time adjustment increased by $2.1 million or 2.6% to $83.9 million compared to the same quarter in 2018, which was primarily due to items previously identified (see Operational Highlights section above).

The Payout Ratio relating to ACFO with one time adjustment for the three months ended March 31, 2019 increased by 5.3% to 91.4% compared to the same quarter last year, primarily due to the dilutive impact of the $230.0 million equity offering in January 2019 and higher spending on capital expenditures during the three months ended March 31, 2019.

Development and Intensification Summary

Collectively, the various new mixed-use initiatives that the Trust is planning, will create substantial opportunities for inherent growth in both NAV and FFO per unit. In addition, these initiatives are consistent with the Trust’s diversification strategy that will enable SmartCentres to substantially add to and expand its retail platform. As outlined below, these new mixed-use initiatives will provide investors with a much larger, and more sustainable NOI that is unique in Canada. Currently, 168 intensification initiatives have been identified to commence over the next five years on 76 of the 164 properties owned by SmartCentres. In addition, the Trust continues to assess each of our existing properties to identify additional opportunities for mixed use development. The table below identifies the current status of the 168 identified initiatives.

         
Description # Projects Underway   # Projects In
Active Planning
  # Projects
Identified for
Future (Minimum)
  Total Minimum #
Projects Currently
Underway, In
Active Planning
and Identified for
Future
 
Apartment Rentals 9   7   22   38  
Residential Condominiums 7   9   13   29  
Residential Townhomes 1   4   10   15  
Seniors’ Residences 2   13   30   45  
Office 1   2     3  
Self-Storage 13   14   11   38  
Total 33   49   86   168  
                 

These various initiatives will be developed primarily on sites that are in the Trust’s existing portfolio of properties across Canada. Accordingly, SmartCentres will not be required to purchase expensive development land. In addition to improving a project’s economic returns, because most of these initiatives are being planned on properties that the Trust has owned for many years and have previously developed, for each of these respective properties, the Trust has an enormous competitive advantage. In this regard, SmartCentres is familiar with: i) the needs and concerns of the communities and their municipal administrations, ii) the existing complement of services and any proposed future improvements to infrastructure and services, iii) any geo-technical and environmental constraints, and iv) the realistic timeframes expected for rezoning and similar entitlements. The financial benefits associated with these various development initiatives will soon begin to manifest in the Trust’s operating results.

Non-GAAP Measures

The non-GAAP measures used in this Press Release, including FFO, Transactional FFO, ACFO, NOI, Same Property NOI, average yield rates, 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-GAAP measures are more fully defined and discussed in the ‘Management Discussion and Analysis’ (“MD&A”) of the Trust for the three months ended March 31, 2019, available on SEDAR at www.sedar.com.

Full reports of the financial results of the Trust for the three months ended March 31, 2019 are outlined in the unaudited interim condensed consolidated financial statements and the related MD&A of the Trust, which are available on SEDAR at www.sedar.com. In addition, supplemental information is available on the Trust’s website at www.smartcentres.com.

Conference Call

SmartCentres will hold a conference call on Wednesday, May 8, 2019 at 5:30 p.m. (ET). Participating on the call will be members of SmartCentres’ senior management.

Investors are invited to access the call by dialing 1-800-458-4121. 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 Wednesday, May 8, 2019 beginning at 8:30 p.m. (ET) through to 8:30 p.m. (ET) on Wednesday, May 15, 2019. To access the recording, please call 1-888-203-1112 and enter the Replay Passcode 6867110#.

About SmartCentres

SmartCentres is one of Canada’s largest real estate investment trusts with total assets of approximately $9.6 billion. It owns and manages 34 million square feet of retail space in value-oriented, principally Walmart-anchored retail centres, having the strongest national and regional retailers as well as strong neighbourhood merchants. In addition, SmartCentres is a joint-venture partner in the Premium Outlets locations in Toronto and Montreal with Simon Property Group.

SmartCentres is expanding the breadth of its portfolio to include residential (single-family, condominium and rental), retirement homes, office, and self-storage, either on its large urban properties such as the Vaughan Metropolitan Centre or as an adjunct to its well-located existing shopping centres. For more information on SmartCentres, visit www.smartcentres.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 further outlined under the headings “Business Overview and Strategic Direction”, “Other Measures of Performance” and “Outlook” in the Trust’s Management’s Discussion & Analysis for the three months ended March 31, 2019. 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 three months ended March 31, 2019 and under the heading “Risk Factors” in its Annual Information Form for the year ended December 31, 2018. 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.

Contact Information:

Peter Forde Peter Sweeney
President & CEO Chief Financial Officer
SmartCentres SmartCentres
(905) 326-6400 ext. 7615 (905) 326-6400 ext. 7865
[email protected] [email protected]








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