Canada NewsWire
TORONTO, April 25, 2018
TORONTO, April 25, 2018 /CNW/ - Choice Properties Real Estate Investment Trust ("Choice Properties" or the "Trust") (TSX: CHP.UN) today announced its consolidated financial results for the first quarter ended March 31, 2018. The Trust's Quarterly Report will be available in the Investor Relations section of the Trust's website at www.choicereit.ca, filed with SEDAR and available at www.sedar.com.
Quarter Highlights:
"Choice Properties' progress this quarter is a reflection of the strength of our operations, the quality of our portfolio and the potential of our pipeline. We delivered another quarter of growth with a 2.3% increase in organic NOI driven by the underlying fundamentals of our real estate business," said John Morrison, President and Chief Executive Officer. "Our plans to combine CREIT with Choice Properties to create Canada's preeminent diversified REIT will build on our strong base of business with an expanded portfolio of quality real estate and a best-in-class platform to drive long-term value."
See "Non-GAAP Financial Measures" beginning on page 5. |
Financial and Operational Summary
As at or for the three months ended March 31 | | | | | |
($ thousands except where otherwise indicated) | | | | | |
(unaudited) | | | 2018 | | 2017 |
Number of properties | | | 548 | | 536 |
Gross Leasable Area ("GLA") (in millions of square feet) | | | 44.2 | | 43.7 |
Occupancy | | | 98.8% | | 98.8% |
Rental revenue(i) | | $ | 215,027 | $ | 203,433 |
Net Operating Income ("NOI")(1) | | $ | 149,783 | $ | 142,424 |
Net Income(i) | | $ | 626,991 | $ | 24,250 |
Net Income(i) per unit diluted | | $ | 1.513 | $ | 0.059 |
Funds from Operations ("FFO")(1) per unit diluted | | $ | 0.255 | $ | 0.264 |
Adjusted Cash Flow from Operations ("ACFO")(1) | | $ | 83,600 | $ | 90,776 |
Adjusted Cash Flow from Operations(1) payout ratio | | | 91.5% | | 80.3% |
Distribution declared per unit | | $ | 0.1850 | $ | 0.1775 |
Total assets (in millions) | | $ | 11,121 | $ | 9,380 |
Debt to total assets(ii) | | | 51.9% | | 46.3% |
Debt service coverage(ii) | | | 3.5x | | 3.6x |
(i) | Net income, for the three months ended March 31, 2018, included positive fair value adjustments of $555,200 and $33,260 for Exchangeable Units and Investment Properties, respectively. The quarter also included acquisition transactions costs of $12,054. Net income before acquisition transaction costs and adjustments to fair value(1) was $50,585 for the three months ended March 31, 2018. |
| Net income, for the three months ended March 31, 2017, included a negative fair value adjustment of $117,656 for Exchangeable Units and a positive fair value adjustment of $92,843 for investment properties. The quarter also included a negative fair value adjustment of $1,250 for investment property held in an equity accounted joint venture. Net income before acquisition transaction costs and adjustments to fair value(1) was $50,313 for the three months ended March 31, 2017. |
(ii) | Debt ratios include Class C LP Units but exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the Trust Indentures, as supplemented. |
Financial Results for the Quarter:
(1) See "Non-GAAP Financial Measures" beginning on page 5. |
Operational Results for the Quarter:
Capital Structure:
Agreement to Acquire Canadian Real Estate Investment Trust
As previously announced on February 14, 2018, Choice Properties entered into an arrangement agreement to acquire all the assets and assume all the liabilities of CREIT, including long term debt and all residual liabilities. CREIT will then redeem all of its outstanding units for an aggregate of $22.50 in cash and 2.4904 Trust Units per unit of CREIT on a fully prorated basis.
The aggregate consideration will consist of approximately 58% in Trust Units and 42% in cash. CREIT unitholders will have the ability to choose whether to receive $53.75 in cash or 4.2835 Trust Units for each CREIT unit held, subject to proration. The maximum amount of cash to be paid will be approximately $1,651,312 and approximately 183 million Trust Units will be issued, based on the fully diluted number of CREIT units outstanding on the date of the closing of the transaction.
The Acquisition Transaction was approved by CREIT unitholders at a special meeting held on April 11, 2018 and the plan of arrangement was approved by the Ontario Superior Court of Justice (Commercial List) on April 24, 2018. As more fully described in the arrangement agreement, the completion of the Acquisition Transaction depends on a number of conditions being satisfied or waived, including, among others, the Competition Act approval being obtained. While work will continue towards final approval under the Competition Act, and may continue post-closing, the Acquisition Transaction is expected to close on May 4, 2018, however, there can be no certainty, nor can Choice Properties provide any assurance, that all of the closing conditions will be satisfied or, if satisfied, when they will be satisfied. If the Acquisition Transaction is not completed, Choice Properties will not receive any reimbursement from CREIT for the fees, costs and expenses it has incurred in connection with the Acquisition Transaction. If the Acquisition Transaction is not completed or is materially delayed, the market price of the Trust Units may be materially adversely affected. While the Acquisition Transaction is pending, Choice Properties and CREIT are subject to customary interim operating covenants.
Outlook
Choice Properties expects to continue to drive value creation through strategic acquisitions, value-add development and active management of its portfolio of properties. This strategy supports the Trust's goal to expand its asset base and increase monthly distributions to Unitholders over time.
Choice Properties is well positioned to meet its current obligations and to invest for future growth. The Trust's competitive advantages include: a sizable asset base that is geographically diverse across Canada; long-term leases and a strategic alliance with Loblaw; and an existing development pipeline, supported by sound financial management focused on maintaining a solid balance sheet and its investment grade credit ratings. With these key differentiators, Choice Properties believes that it is well positioned to achieve its strategic goals within a potentially rising interest rate environment and despite an increasingly competitive landscape, underscored by ever changing square footage requirements in the retail industry.
For 2018, Choice Properties expects to:
(1) | See "Non-GAAP Financial Measures" beginning on page 5. |
(2) | Debt ratios include Class C LP Units but exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the Trust Indentures, as supplemented. |
Forward-Looking Statements
This press release contains forward-looking statements about Choice Properties' objectives, outlook, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities, and legal and regulatory matters. Specific statements with respect to anticipated future results and events, including the proposed arrangement transaction to acquire CREIT, can be found in various sections of this press release and in the MD&A of Choice Properties' 2017 Annual Report to Unitholders. Forward-looking statements are typically identified by words such as "expect", "anticipate", "believe", "foresee", "could", "estimate", "goal", "intend", "plan", "seek", "strive", "will", "may", "should" and similar expressions, as they relate to Choice Properties and its management.
Forward-looking statements reflect Choice Properties' current estimates, beliefs and assumptions, which are based on management's perception of historic trends, current conditions, outlook and expected future developments, as well as other factors it believes are appropriate in the circumstances. Choice Properties' expectation of operating and financial performance is based on certain assumptions, including assumptions about future growth potential, prospects and opportunities, industry trends, future levels of indebtedness, tax laws, economic conditions and competition. Management's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. Choice Properties can give no assurance that such estimates, beliefs and assumptions will prove to be correct.
Numerous risks and uncertainties could cause Choice Properties' actual results to differ materially from those expressed, implied or projected in the forward-looking statements, including, those described in Section 10, "Enterprise Risks and Risk Management", in the MD&A of Choice Properties' 2017 Annual Report. Such risks and uncertainties include:
This is not an exhaustive list of the factors that may affect Choice Properties' forward-looking statements. Other risks and uncertainties not presently known to Choice Properties could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in Choice Properties' materials filed with the Canadian securities regulatory authorities from time to time, including the Trust's 2017 Annual Information Form. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Choice Properties' expectations only as of the date of this press release. Except as required by applicable law, Choice Properties does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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