QUÉBEC CITY, QC, Feb. 28, 2022
/CNW/ - Cominar Real Estate Investment Trust ("Cominar" or
the "REIT") (TSX: CUF.UN) announces its results for the fourth
quarter and year ended December 31,
2021.
2021 FOURTH QUARTER AND FULL YEAR - HIGHLIGHTS
- FFO1 per unit of $0.17 for the quarter compared to $0.28 for the same period in 2020 and
$0.98 for 2021 compared to
$0.96 for 2020. Excluding
$17.8 million of consulting fees
spent on the strategic review process and Sears Canada $2.7 million settlement, FFO adjusted per unit
was $1.06 for 2021. FFO per unit
includes the positive impact of a partial reversal of last year
credit losses provisions in the amount of $8.6 million
- AFFO1 per unit of $0.07 for the quarter compared to $0.24 for the same period in 2020 and
$0.63 for 2021 compared to
$0.71 for 2020. Excluding
$17.8 million of consulting fees
spent on the strategic review process and Sears Canada $2.7 million settlement, AFFO adjusted per unit
was $0.71 for 2021. AFFO per unit
includes the positive impact of a partial reversal of last last
year credit losses provisions in the amount of $8.6 million
- AFFO payout ratio1 of 42.9% for 2021 compared
to 80.3% for 2020
- Same property NOI1 increase of 2.9% for
2021 and decrease of 7.8% for the quarter, including a decrease of
(22.5)% for the office segment, a decrease of 3.6% for the retail
segment and an increase of 10.0% for the industrial and flex
segment
- Expected credit losses of $3.6
million or 0.6% of operating revenues for 2021, mainly due
to partial reversals of prior year provisions of $(8.6) million
- Investment properties negative change in fair value of
$(370.7) million for 2021 on a
proportionate basis1 and $(233.7)
million for the fourth quarter of 2021
- In-place occupancy rate was stable at 91.7% as at
December 31, 2021 compared to
December 31, 2020
- New and renewal leasing represented 106.8% of 2021 lease
maturities
- Growth in the average net rent of renewed leases during
2021 stood at 7.5%, driven by a 22.4% increase in the industrial
segment, a 7.0% increase in the office segment and a (2.1)%
decrease in the retail segment
- As at December 31, 2021,
available liquidity of $74.9 million
consisted of $67.3 million of
availability under our credit facilities and $7.6 million of cash and cash equivalents
- Debt ratio was 56.9% as at December 31,
2021, up from 55.3% as at December
31, 2020
"Despite the continuing challenges brought by the pandemic on
the real estate industry in our markets, Cominar's operating and
financial results further have improved in 2021 with a strong
growth in the average net rent of renewed leases of 7.5% for our
portfolio, coupled with new and renewal leasing representing 106.8%
of 2021 lease maturities" said Sylvain
Cossette, President and Chief Executive Officer of Cominar.
Mr. Cossette added "Following the Arrangement Agreement
announcement in October, we are pleased to announce that the
Transaction is scheduled to close on March
1st, 2022"
"Operating results have pursued their recovery despite the
challenges brought by the pandemic on the real estate industry, as
evidenced by the SPNOI growth of 2.9% in 2021 compared to 2020.
Expected credit losses further reduced to 0.6% of operating
revenues in 2021" stated Antoine Tronquoy, Executive Vice-President
and Chief Financial Officer.
FINANCIAL AND OPERATING HIGHLIGHTS
Net Loss : Net loss for the year ended
December 31, 2021 amounted to
$(195.3) million compared to net
loss of $(329.3) million for
2020. The net loss decrease of $134.0
million is mainly due to a $15.1
million increase in NOI and the change in fair value of
investment properties of $121.9
million, partially offset by a $16.1
million increase in strategic alternatives consulting
fees.
Same Property NOI1 ("SPNOI"): SPNOI
increased by $9.8 million or
2.9% when compared with 2020. The increase in SPNOI resulted
mainly from a decrease of $30.2
million in the expected credit losses and an increase in the
average net rent of renewed leases in office and industrial and
flex portfolios, partly offset by a decrease in project management
revenues and parking revenues in our office portfolio (mainly
related to the financial difficulties of a third-party parking
manager).
Expected credit losses: For the year ended December 31, 2021, expected credit losses of
$3.6 million were recorded
($33.6 million in 2020) of which $—
million is for office ($3.9 million
in 2020), $4.3 million is for retail
($25.9 million in 2020) and
$(0.7) million is for industrial and
flex ($3.9 million in 2020). 2021
expected credit losses were driven by a partial reversal of 2020
expected credit losses provisions in the amount of $8.6 million and the Trust recorded $6.4 million of rent reductions, of which
$2.6 million was previously included
in expected credit losses provision.
FFO1: FFO for the year ended December 31, 2021 amounted to $178.9 million or $0.98 per unit compared to $0.96 per unit for the previous year due to the
$15.1 million increase in NOI (refer
to the NOI section) and a decrease in finance charges, partly
offset by an increase of $16.1
million in strategic alternatives consulting fees. FFO
adjusted for 2021 amounted to $194.0
million or 1.06 per unit.
AFFO1: AFFO for the year ended
December 31, 2021 amounted to
$115.2 million or $0.63 per
unit compared to $129.9 million
or $0.71 per unit for the
previous year. AFFO decreased from 2020 due to the increases in the
provision for leasing costs and capital expenditures - maintenance
of rental income generating capacity, partially offset by the
increase in FFO. AFFO adjusted for 2021 amounted to
$130.3 million or 0.71 per unit.
AFFO payout ratio1 for 2021 was 42.9%, down from
80.3% in 2020, as a consequence of the suspension of the
distribution for October, November and December 2021 combined with the decrease in
distributions effective since August
2020.
Investment properties fair value: During 2021,
management revalued the entire real estate portfolio and determined
that a net decrease of $347.9 million
was necessary to adjust the carrying amount of investment
properties to fair value.
Occupancy: As at December 31,
2021, Cominar's in-place occupancy was 91.7%, stable
when compared to year-end 2020. As at December 31, 2021 the committed occupancy rate
was 93.4%, compared to 94.0% at year-end 2020.
Leasing activity: The retention rate for 2021 was
74.1% at the end of 2021. Average net rent on 4.0 million
square feet of lease renewals for the year ending December 31, 2021 increased by
7.5% (increases of 22.4% for the industrial and flex
portfolio, 7.0% for the office portfolio and (2.1)% for the
retail portfolio). New leasing totaled 1.8 million square
feet for 2021. New and renewal leasing represented 106.8%
of 2021 lease maturities.
BALANCE SHEET AND LIQUIDITY HIGHLIGHTS
Debt ratio: The debt ratio was 56.9% as at December 31, 2021, up from 55.3% as at
December 31, 2020.
Debt to EBITDA1 : As at December 31, 2021, the debt to EBITDA1
was 10.7x compared to 11.3x as at December
31, 2020.
Unencumbered asset to unsecured debt ratio: As at
December 31, 2021, the unencumbered
asset to unsecured debt ratio was 1.64:1, down from 1.76:1 as at
December 31, 2020. Our pool of
unencumbered properties totaled $1.6
billion as at December 31,
2021.
Secured debt to gross book value: Was 40.7% as at
December 31, 2021, up from 37.5% as
at December 31, 2020.
As at December 31, 2021, Cominar
had $7.6 million of cash on hand,
$67.3 million of availability on its
credit facilities, resulting in total liquidity of $74.9 million.
INVESTMENT HIGHLIGHTS
For the year ended December 31,
2021, investments in income properties including capital
expenditures, leasing costs and leasehold improvements totaled
$130.3 million, up 1.3% from
$128.7 million for last year.
Including investments in development activities, capital
expenditures totaled $145.3 million,
down 5.5% from $153.7 million in
2020.
STRATEGIC REVIEW PROCESS
On October 24, 2021, Cominar
announced that it has entered into an arrangement agreement (the
"Arrangement Agreement") to be acquired by Iris Acquisition II LP,
an entity created by a consortium led by Canderel Real Estate
Property Inc. and including FrontFour Capital Group LLC, Artis REIT
and partnerships managed by the Sandpiper Group (collectively, the
"Purchaser") (the "Transaction").
Under the terms of the Arrangement Agreement, the Purchaser will
acquire, for a consideration of $11.75 in cash per unit (the "Consideration"),
all of the issued and outstanding units of Cominar. The Transaction
was approved at a special meeting of unitholders called to consider
the Transaction on December 21, 2021
and subsequently by the Court on December
23, 2021. Closing of the Transaction is scheduled to occur
on March 1st, 2022.
NON-IFRS AND OTHER FINANCIAL MEASURES
Cominar's consolidated financial statements are prepared in
accordance with IFRS. Management uses a number of measures, which
are not standardized under IFRS and should not be construed as an
alternative to financial measures calculated in accordance with
IFRS. Cominar uses those measures to better assess its performance.
Cominar's proportionate share, same property net operating income,
funds from operations (FFO), adjusted funds from operations (AFFO)
and debt to EBITDA are not measures recognized by International
Financial Reporting Standards (IFRS) and do not have standardized
meanings prescribed by IFRS. Such measures may differ from similar
computations as reported by similar entities and, accordingly, may
not be comparable to similar measures reported by such other
entities. These non-IFRS financial measures are more fully defined
and discussed in Cominar's management's discussion and analysis for
the fourth quarter and year ended December
31, 2021, available at Cominar.com and on Sedar.com.
RESULTS OF OPERATIONS
|
Year
|
|
Year
|
Periods ended
December 31
|
2021 ¹
|
2020 ¹
|
2021 ²
|
2020 ²
|
|
$
|
$
|
|
$
|
$
|
Operating
revenues
|
162,911
|
166,156
|
|
658,594
|
661,320
|
Operating
expenses
|
(80,035)
|
(78,200)
|
|
(316,356)
|
(334,133)
|
Net operating
income
|
82,876
|
87,956
|
|
342,238
|
327,187
|
Finance
charges
|
(36,773)
|
(33,901)
|
|
(136,350)
|
(143,640)
|
Trust administrative
expenses
|
(17,239)
|
(4,212)
|
|
(34,709)
|
(16,973)
|
Change in fair value
of investment properties
|
(217,719)
|
(150,295)
|
|
(347,855)
|
(469,763)
|
Share of joint
ventures' net income (loss)
|
(14,771)
|
252
|
|
(17,638)
|
(5,058)
|
Transaction
costs
|
(715)
|
(77)
|
|
(1,052)
|
(5,375)
|
Impairment of
goodwill
|
—
|
—
|
|
—
|
(15,721)
|
Net loss before
income taxes
|
(204,341)
|
(100,277)
|
|
(195,366)
|
(329,343)
|
Current income
taxes
|
—
|
—
|
|
—
|
66
|
Deferred
|
58
|
—
|
|
58
|
—
|
Net loss and
comprehensive loss
|
(204,283)
|
(100,277)
|
|
(195,308)
|
(329,277)
|
|
|
|
|
|
|
Office
Portfolio
|
(149,903)
|
(113,128)
|
|
(160,505)
|
(84,865)
|
Retail
Portfolio
|
(69,400)
|
(143,027)
|
|
(287,300)
|
(351,989)
|
Industrial and Flex
Portfolio
|
49,795
|
177,674
|
|
342,473
|
184,791
|
Corporate
|
(34,775)
|
(21,796)
|
|
(89,976)
|
(77,214)
|
Net loss and
comprehensive loss
|
(204,283)
|
(100,277)
|
|
(195,308)
|
(329,277)
|
1
|
Quarter ended
December 31, 2021 includes $12.8 million of strategic alternatives
consulting fees (quarter ended December 31, 2020 includes $1.4
million of strategic alternatives consulting fees).
|
2
|
In addition to the
quarter events explained above, year ended December 31,
2021 includes $5.0 million of strategic alternatives
consulting fees and a $2.7 million distribution received in respect
of a claim settlement regarding Sears Canada (year ended December
31, 2020 includes $0.3 million of strategic alternatives consulting
fees, $2.5 million of yield maintenance fees paid in connection
with the Series 4 debenture redemption and $4.6 million of
penalties paid on mortgage repayments before maturity).
|
The decrease in operating revenues according to the
consolidated financial statements in 2021 compared with 2020
resulted mainly from a decrease in the average in-place occupancy
rate, a decrease in project management revenues and parking
revenues in our office portfolio (mainly related to the financial
difficulties of a third-party parking manager) and a decrease in
the average net rent of renewed leases in our retail portfolio,
partly offset by an increase in the average net rent of renewed
leases in our office and industrial and flex portfolios and an
increase in the in-place occupancy rate in our industrial and flex
portfolio.
The decrease in operating expenses according to the
consolidated financial statements in 2021 compared with 2020
resulted mainly from a decrease of $30.2
million in expected credit losses, partly offset by an
increase in property taxes billed to single tenants (also included
in operating revenues, no impact on NOI) and a slight increase in
operating expense and property maintenance.
Finance charges were down in 2021 mainly due to a decrease in
interest on debentures related to the net redemption of
$250.0 million of debentures in 2020
and a decrease in interest on mortgages payable related to a
mortgage repayment of $81.0 million
in September 2020, partially offset
by a decrease in capitalized interest and higher usage of the
credit facilities.
Finally, excluding strategic alternatives consulting fees, Trust
administrative expenses increased by $1.6
million when compared to the corresponding 2020 period due
to a higher level of legal fees related to bankruptcies and
litigation and the impact on salaries of lesser Canadian emergency
wage subsidies recorded in 2021.
SAME PROPERTY NET OPERATING INCOME
Same property NOI is a non-IFRS measure used by Cominar to
provide an indication of the period-over-period operating
profitability of the same property portfolio, that is, Cominar's
ability to increase revenues, manage costs, and generate organic
growth. The same property NOI includes the results of properties
owned by Cominar as at December 31
2019, with the exception of results from the properties sold,
acquired and under development in 2020 and 2021, as well as the
rental income arising from the recognition of leases on a
straight-line basis that is a non-cash item and which, by excluding
it, will allow this measure to present the impact of actual rents
collected by Cominar.
|
Quarter
|
|
Year
|
Periods ended
December 31
|
2021
|
2020
|
|
2021
|
2020
|
|
|
$
|
$
|
% Δ
|
|
$
|
$
|
% Δ
|
Property
type
|
|
|
|
|
|
|
|
Office
|
29,158
|
37,647
|
(22.5)
|
|
130,583
|
142,095
|
(8.1)
|
Retail
|
26,910
|
27,911
|
(3.6)
|
|
110,491
|
98,669
|
12.0
|
Industrial and
flex
|
27,176
|
24,704
|
10.0
|
|
103,648
|
94,182
|
10.1
|
Same property NOI
— Cominar's proportionate share 1
|
83,244
|
90,262
|
(7.8)
|
|
344,722
|
334,946
|
2.9
|
Properties sold,
acquired and under development in 2020 and 2021
|
1,791
|
151
|
1,086.1
|
|
6,455
|
2,270
|
184.4
|
NOI — Cominar's
proportionate share 1
|
85,035
|
90,413
|
(5.9)
|
|
351,177
|
337,216
|
4.1
|
NOI — Financial
statements
|
82,876
|
87,956
|
(5.8)
|
|
342,238
|
327,187
|
4.6
|
NOI — Joint
ventures
|
2,159
|
2,457
|
(12.1)
|
|
8,939
|
10,029
|
(10.9)
|
1 Refer to
section "Non-IFRS and other financial measures" in this press
release.
|
2021 fourth quarter SPNOI decreased 7.8% when compared with the
corresponding quarter of 2020. This decrease resulted mainly from
decreases in project management revenues, parking revenues and year
end adjustments in our office portfolio, partly offset by the
decrease of expected credit losses.
The decrease in same property operating revenues in 2021
compared with 2020 resulted mainly from a decrease in the average
in-place occupancy rate, a decrease in project management revenues
and parking revenues in our office portfolio (mainly related to the
financial difficulties of a third-party parking manager) and a
decrease in the average net rent of renewed leases in our retail
portfolio, partly offset by an increase in the average net rent of
renewed leases in our office and industrial and flex portfolios and
an increase in the in-place occupancy rate in our industrial and
flex portfolio.
FUNDS FROM OPERATIONS (FFO) AND ADJUSTED FUNDS FROM
OPERATIONS (AFFO)
FFO is a non-IFRS measure which represents a standard real
estate benchmark used to measure an entity's performance, and is
calculated by Cominar as defined by REALpac as net income
(calculated in accordance with IFRS) adjusted for, among other
things, changes in the fair value of investment properties,
deferred taxes and income taxes related to a disposition of
properties, derecognition and impairment of goodwill, initial and
re-leasing salary costs, adjustments relating to the accounting of
joint ventures and transaction costs incurred upon a business
combination or a disposition of properties. Management believes FFO
to be a useful earnings measure as it adjusts net income for items
that are not related to the trend in occupancy levels, rental rates
and property operating costs.
AFFO is a non-IFRS measure which, by excluding from the
calculation of FFO the rental income arising from the recognition
of leases on a straight-line basis, the investments needed to
maintain the property portfolio's capacity to generate rental
income and a provision for leasing costs is calculated as defined
by REALpac. Management believes AFFO provides a meaningful measure
of Cominar's capacity to generate steady profits.
The following table presents a reconciliation of net loss, as
determined in accordance with IFRS, and funds from operations and
adjusted funds from operations:
|
Quarter
|
|
Year
|
Periods ended
December 31
|
2021 ¹
|
2020 ¹
|
2021 ²
|
2020 ²
|
|
$
|
$
|
|
$
|
$
|
Net
loss
|
(204,283)
|
(100,277)
|
|
(195,308)
|
(329,277)
|
Deferred income
taxes
|
(58)
|
—
|
|
(58)
|
—
|
Initial and
re-leasing salary costs
|
600
|
(603)
|
|
2,340
|
2,233
|
Change in fair value
of investment properties 3
|
233,717
|
151,554
|
|
370,670
|
481,025
|
Capitalizable
interest on properties under development — joint
ventures
|
48
|
192
|
|
192
|
561
|
Transaction
costs
|
715
|
77
|
|
1,052
|
5,375
|
Impairment of
goodwill
|
—
|
—
|
|
—
|
15,721
|
FFO
3,4
|
30,739
|
50,943
|
|
178,888
|
175,638
|
Provision for leasing
costs
|
(8,000)
|
(7,750)
|
|
(32,833)
|
(30,236)
|
Recognition of leases
on a straight-line basis 3
|
(1,205)
|
1,125
|
|
(2,200)
|
1,522
|
Capital expenditures
— maintenance of rental income generating capacity
|
(8,450)
|
(50)
|
|
(28,700)
|
(17,000)
|
AFFO
3,4
|
13,084
|
44,268
|
|
115,155
|
129,924
|
Per unit
information:
|
|
|
|
|
|
FFO (FD) 4,
5
|
0.17
|
0.28
|
|
0.98
|
0.96
|
AFFO (FD) 4,
5
|
0.07
|
0.24
|
|
0.63
|
0.71
|
Weighted average
number of units outstanding (FD) 5
|
182,988,040
|
182,923,330
|
|
182,967,202
|
182,893,802
|
Payout ratio of AFFO
4, 5
|
—
%
|
37.5 %
|
|
42.9
%
|
80.3 %
|
1
|
Quarter ended
December 31, 2021 $12.8 million of strategic alternatives
consulting fees (quarter ended December 31, 2020 $1.4 million of
strategic alternatives consulting fees).
|
2
|
In addition to the
quarter events explained above, the year ended December 31, 2021
includes $5.0 million of strategic alternatives consulting fees and
a $2.7 million distribution received in respect of a claim
settlement regarding Sears Canada (the year ended December 31, 2020
includes $0.3 million of strategic alternatives consulting
fees, $2.5 million in yield maintenance fees paid in connection
with the Series 4 debenture redemption and $4.6 million of
penalties paid on mortgage repayments before maturity).
|
3
|
Including Cominar's
proportionate share in joint ventures.
|
4
|
Refer to section
"Non-IFRS and Other financial measures" in this press
release.
|
5
|
Fully
diluted.
|
For 2021, excluding strategic alternatives consulting fees, FFO
would have been $194.0 million
or $1.06 per unit in 2021 compared to
$184.4 million or $1.01 per unit in 2020 and AFFO would have been
$130.3 million or $0.71 per unit in 2021 compared to $138.7 million or $0.76 per unit in 2020 and consequently the AFFO
adjusted payout ratio would have been 38.0% compared to 75.0% in
2020.
OCCUPANCY RATES
|
Montreal
|
|
Québec
City
|
|
Ottawa
|
|
Total
|
December 31,
2021
|
Committed
|
In-Place
|
|
Committed
|
In-Place
|
|
Committed
|
In-Place
|
|
Committed
|
In-Place
|
Property
type
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
87.6 %
|
86.0 %
|
|
96.3 %
|
96.0 %
|
|
89.8 %
|
86.5 %
|
|
90.0 %
|
88.3 %
|
Retail
|
91.7 %
|
88.4 %
|
|
90.0 %
|
86.6 %
|
|
84.3 %
|
75.1
%
|
|
90.7 %
|
87.2 %
|
Industrial and
flex
|
97.2 %
|
96.8 %
|
|
97.8 %
|
97.0 %
|
|
—
|
—
|
|
97.4 %
|
96.9 %
|
Portfolio
total
|
93.4
%
|
92.0
%
|
|
94.4
%
|
92.7
%
|
|
89.0
%
|
84.9
%
|
|
93.4
%
|
91.7
%
|
SUBSEQUENT EVENTS
On January 14, 2021, Cominar
entered into a new 3-month unsecured credit facility of up to
$175.0 million maturing in
March 2022 which bears interest at
the prime rate plus 175 basis points or at the bankers' acceptance
rate plus 275 basis points.
On January 18, 2022, Cominar
declared a monthly distribution of $0.015 per unit payable on February 15, 2022.
On February 21, 2022, Cominar
declared a monthly distribution of $0.03 per unit payable on March 15, 2022.
On February 21 2022, Cominar
announced that the closing of the plan arrangement for the
acquisition of Cominar by Iris Acquisition II LP was scheduled to
occur on March 1, 2022.
Post year-end, Cominar completed the sale of 1 industrial and
flex property and 2 retail properties for a total amount of
$18.5 million.
ADDITIONAL FINANCIAL INFORMATION
Cominar's consolidated financial statements and management's
discussion and analysis for 2021 are filed with SEDAR at sedar.com
and are available on Cominar's website at cominar.com.
PROFILE AS AT FEBRUARY 28,
2022
Cominar is one of the largest diversified real estate investment
trusts in Canada and is the
largest commercial property owner in the Province of Québec. Our
portfolio consists of 306 high-quality office, retail and
industrial properties, totaling 35.4 million square feet located in
the Montreal, Québec City and
Ottawa areas. Cominar's primary
objective is to maximize total return to unitholders by way of
tax-efficient distributions and maximizing the unit value through
the proactive management of our portfolio.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements with
respect to Cominar and its operations, strategy, financial
performance and financial position. These statements generally can
be identified by the use of forward-looking words such as "may",
"will", "expect", "estimate", "anticipate", "intend", "believe" or
"continue" or the negative thereof or similar variations and the
use of conditional and future tenses. The actual results and
performance of Cominar discussed herein could differ materially
from those expressed or implied by such statements. Such statements
are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations. Some important
factors that could cause actual results to differ materially from
expectations include, among other things, general economic and
market factors, competition, changes in government regulation and
the factors described under "Risk Factors" in Cominar's Annual
Information Form. The cautionary statements qualify all
forward-looking statements attributable to Cominar and persons
acting on its behalf. Unless otherwise stated, all forward-looking
statements speak only as of the date of this press release. Cominar
does not assume any obligation to update the aforementioned
forward-looking statements, except as required by applicable
laws.
1
Refer to section "Non-IFRS and other financial measures" in this
press release.
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SOURCE COMINAR REAL ESTATE INVESTMENT TRUST