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Lanesborough REIT Reports 2016 First Quarter Results
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WINNIPEG, May 11, 2016
WINNIPEG, May 11, 2016 /CNW/ - Lanesborough Real Estate Investment Trust ("LREIT") (TSX: LRT.UN) today reported its operating results for the quarter ended March 31, 2016. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with Management's Discussion & Analysis and the financial statements for the quarter ended March 31, 2016, which may be obtained from the LREIT website at www.lreit.com or the SEDAR website at www.sedar.com.
Since crude oil prices commenced their decline in the autumn of 2014, LREIT has experienced sustained downward pressure on occupancy and rental rates in its primary rental market of Fort McMurray, Alberta. However, after more than eighteen months of declining occupancy, there are signs that conditions may be stabilizing. Specifically, although the average quarterly occupancy level of the Fort McMurray properties dropped from 54% in Q4-2015 to 52% in Q1-2016, the average monthly occupancy level of the Fort McMurray properties showed improvement throughout the first quarter after experiencing an average monthly occupancy level of 50% in January 2016. In addition, occupancy has continued to increase subsequent to the end of Q1-2016 as the Fort McMurray properties commenced the month of May 2016 with an occupancy level of 56%. LREIT remains optimistic that seasonal factors may accelerate this trend. The improvement in occupancy, however, is tempered by the fact that LREIT has lowered its rental rates to remain competitive.
Overall Results
LREIT completed Q1-2016 with negative funds from operations (FFO) of $4.3 million, compared to negative FFO of $1.9 million in Q1-2015. The decrease in FFO is mainly due to a decrease in the net operating income of the Fort McMurray portfolio and the sale of Colony Square in 2015, partially offset by a decrease in interest expense.
Overall, LREIT completed Q1-2016 with a net loss of $7.6 million, compared to a net loss of $3.8 million during Q1-2015. The increase in net loss was driven by the same factors discussed above and a $1.2 million increase in loss from fair value adjustments.
Cash Flow Results
During Q1-2016, LREIT continued to require significant additional sources of capital to fund operating activities, as well as debt service obligations and capital expenditure requirements. For the three month period ended March 31, 2016, the cash outflow from operating activities amounted to $1.4 million and the cash shortfall, after accounting for regular mortgage principal repayments, capital expenditures and transaction costs, was $3.0 million, compared to a cash outflow from operating activities of $0.3 million and a cash shortfall of $2.5 million during the same period in 2015. The cash shortfall was primarily funded by additional advances under the revolving loan facility from 2668921 Manitoba Ltd.
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Liquidity and Capital Resources
After removing the impact of one‑time lump‑sum principal repayments, the mortgage loan debt service coverage ratio decreased to 0.76 during 2015, indicating that net operating income was insufficient to fund LREIT's debt service obligations. Consequently, LREIT requested concessions from certain of its lenders and commenced payments in accordance with the concessions during Q1-2016. As a result, LREIT defaulted on the debt service requirements of twelve mortgage loans with an aggregate balance of $194.0 million, relating to all thirteen properties in Fort McMurray. In addition, LREIT remained in breach of an annual debt covenant requirement on a $4.2 million mortgage loan, relating to a property classified under discontinued operations.
Continuing Operations and Ongoing Initiatives
As previously reported, in an effort to sustain its operations into the foreseeable future, LREIT expanded its divestiture program and has been actively pursuing debt restructuring arrangements with certain of its lenders. LREIT is pleased to report, that although there is still a substantial amount of work to be done, significant progress has been made on both of these initiatives in 2016.
Through the cooperation and support it has received from its lenders with respect to debt restructuring initiatives, LREIT renewed three mortgage loans, inclusive of interest rate and deferred payment concessions; received amended terms on one mortgage loan, inclusive of an extension and deferred payment concessions, and secured a forbearance agreement, inclusive of deferred payment concessions, for another mortgage loan, covering approximately 60% of LREIT's total outstanding mortgage loan debt in Fort McMurray. With respect to the mortgage loans that remain in default as of the date of this report, LREIT has signed a pre‑negotiation agreement with one lender and remains in discussions with the other lender. In the interim, LREIT is continuing to make reduced debt service payments to these lenders in accordance with previously requested concessions. As of the date of this report, these lenders have taken no further action against LREIT and LREIT is hopeful that ongoing discussions will result in additional concessions that will help LREIT turn around its operations.
On May 1, 2016 LREIT completed the sales of Beck Court and Willowdale Gardens with a combined gross selling price of $32.0 million. The net proceeds of $9.3 million were used to fully repay a $5.4 million second mortgage loan secured by Willowdale Gardens and to pay down the revolving loan from 2668921 Manitoba Ltd. by approximately $3.9 million.
During May 2016, LREIT will propose, subject to the approval of the debenture holders, that the terms of the Series G debentures be amended to extend the maturity date to June 30, 2022, to reduce the interest rate for the period after December 31, 2015 from 9.5% to 5% and to defer all payments of interest until to the amended maturity date. Upon approval of the amendments, 2668921 Manitoba Ltd. has agreed to reduce the interest rate of the revolving loan from 12% to 5% per annum.
Shelter and 2668921 Manitoba Ltd. have participated equitably in LREIT's debt restructuring initiatives by allowing the deferral of property management fees, service fees and interest on the revolving loan as well as interest on the second mortgage loan, acquired by 2668921 Manitoba Ltd. during the quarter.
While LREIT is pleased to report on the progress of its debt restructuring initiatives, certain lenders may be unwilling to participate in the restructuring of LREIT's debt to the extent or for the duration required to sustain operations. Such an event could result in an acceleration of mortgage payments or foreclosures.
Outlook
LREIT has made progress in 2016 with respect to its divestiture and debt restructuring initiatives, furthering its efforts to sustain operations in anticipation of an eventual recovery. Although there are signs that the Fort McMurray rental market may be stabilizing, LREIT anticipates that 2016 and 2017 will be extremely challenging years. The timely completion of additional property sales and completion of debt restructuring initiatives, in conjunction with the continued support of Shelter and its parent company, 2668921 Manitoba Ltd., will be paramount in LREIT's efforts to remain viable until conditions in Fort McMurray improve.
To the best of our knowledge, none of LREIT's properties suffered structural damage during the May wildfires in Fort McMurray. LREIT will join with others in supporting the re-building of the Regional Municipality of Wood Buffalo.
FINANCIAL SUMMARY
| | March 31 | December 31 | ||||||
| | | 2016 | | 2015 | | 2014 | ||
| STATEMENT OF FINANCIAL POSITION | | | | | | | ||
| | Total assets | | $ 275,886,136 | | $ 278,524,804 | | $ 442,773,600 | |
| | Total long‑term financial liabilities (1) | | $ 282,158,073 | | $ 279,529,237 | | $ 327,980,499 | |
| | Weighted average interest rate | | | | | | | |
| | | ‑ Mortgage loan debt | | 5.7% | | 6.0% | | 5.7% |
| | | ‑ Total debt | | 6.4% | | 6.4% | | 6.3% |
| | | | | | | | | |
| (1) Long‑term financial liabilities consist of mortgage loans, debentures, a defeased liability, the revolving loan from 2668921 |
| Manitoba Ltd., an interest rate swap liability and mortgage bonds. The mortgage bonds are included at face value. |
| | Three Months Ended March 31 | ||||||||
| | 2016 | | 2015 | | 2014 | ||||
| KEY FINANCIAL PERFORMANCE INDICATORS | | | | | | ||||
| Operating Results | | | | | | ||||
| | Rentals from investment properties | $ | 4,451,462 | | $ | 8,731,719 | | $ | 8,908,725 |
| | Net operating income | $ | 1,659,357 | | $ | 4,752,982 | | $ | 4,504,067 |
| | Income (loss) before discontinued operations | $ | (7,640,229) | | $ | (3,919,811) | | $ | (2,515,948) |
| | Income (loss) and comprehensive income (loss) | $ | (7,599,297) | | $ | (3,812,046) | | $ | (2,404,013) |
| | Funds from Operations (FFO) | $ | (4,280,574) | | $ | (1,915,224) | | $ | (2,475,248) |
| | | | | | | ||||
| Cash Flows | | | | | | ||||
| | Cash provided by (used in) operating activities | $ | (1,412,372) | | $ | (292,138) | | $ | 718,641 |
| | Adjusted Funds from Operations (AFFO) | $ | (4,603,418) Werbung Mehr Nachrichten zum Optionsschein (WKN: ) kostenlos abonnieren
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