Melcor REIT announces first quarter 2017 results

EDMONTON, AB–(Marketwired – May 04, 2017) –

Highlights

• Portfolio performance remained steady in Q1-2017
• Rental Revenue of $17.00 million for growth of 2% over Q1-2016
• Net operating income of $10.74 million for growth of 1% over Q1-2016
• Adjusted funds from operations (AFFO) grew 6% to $5.81 million or $0.23 per unit
• Debt to Gross Book Value (GBV) ratio of 55%, below our maximum threshold of 65%
• Distributions of $0.05625 per trust unit were paid in January, February and March for a payout ratio of 73%

Melcor REIT (TSX: MR.UN) today announced results for the first quarter ended March 31, 2017. Rental revenue grew 2% to $17.00 million compared to $16.63 million in Q1-2016. Net operating income grew 1% to $10.74 million compared to $10.61 million in Q1-2016. The net loss of $13.49 million is a result of non-cash fair value adjustments on investment properties recorded in the period due to an increase in capitalization rates. Management believes Adjusted funds from operations (AFFO) is a better reflection of our true operating performance. AFFO grew 6% to $5.81 million ($0.23 per unit) to date in 2017.

Andrew Melton, President & CEO of Melcor REIT commented: “It is my pleasure to report on a successful quarter for the REIT. Our portfolio continues to perform steadily, thanks to the dedicated efforts of our team of operators, property managers and portfolio administrators. With over 90,000 square feet of new and renewed leases completed in Q1, occupancy is stable and our retention rate is a healthy 75%. At 73%, our payout ratio continues to demonstrate our overall health and ongoing ability to maintain distributions.

I look forward to working with the Melcor Developments team to continue progressing our growth strategy throughout 2017.”

Q1-2017 Activity:

Our portfolio performance remained steady throughout Q1-2017. The stability and diversity of our portfolio with respect to both tenant profile and asset class position the REIT well for managing through economic cycles. We are focused on the real estate fundamentals of asset enhancement and property management while conservatively managing our debt. At 73%, our payout ratio is a strong indicator of our overall health and our ability to sustain distributions at current rates.

Highlights of our performance in the first quarter include:

• Stable property income, with revenue up 2% and NOI growth of 1% over Q1-2016.
• Growth of 6% in AFFO as a result of higher NOI and lower cash finance costs over the comparative period.
• Stable occupancy in all asset classes and operating regions, with 92.5% occupancy at March 31, 2017.
  We continued to execute on our proactive leasing strategy to both retain existing and attract new tenants. Through the first quarter of 2017 we completed 90,265 sf in new and renewed leasing with a quarterly retention rate of 75.3%.
• We achieved an on-time response rate in our signature care program of 98% in Q1-2017. We view this metric as an important indication of our commitment to ongoing client care, which contributes to tenant satisfaction and ultimately retention.
• We paid distributions of $0.05625 per trust unit in January, February and March for a quarterly payout ratio of 73%.
• As at March 31, 2017 we have $0.99 million in cash and additional capacity under our revolving credit facility. Our working capital position remains healthy and we continue to collect receivables in a timely manner to ensure near-term liquidity.
• Subsequent to the quarter we completed the sale of LC Industrial, a 67,610 sf industrial building in Lethbridge, Alberta for $7.76 million (including transaction costs).
• On March 17, 2017 we announced the appointment of Andrew Melton as the REIT’s second President & Chief Executive Officer and that Ralph Young would assume the position of Board Chair effective April 15, 2017.

Selected Highlights

(1) Calculated as the sum of trust units and Class B LP Units at their book value. Class B LP Units are presented as a financial liability in the condensed interim consolidated financial statements.
(2) Calculated as the sum of total amount drawn on revolving credit facility, mortgages payable, Class C LP Units, excluding unamortized fair value adjustment on Class C LP Units and convertible debenture, excluding unamortized discount and transaction costs.
(3) Excluding convertible debentures, Debt to GBV ratio is 50% (December 31, 2016 – 50%).
(4) Calculated as the sum of FFO and finance costs; divided by finance costs, excluding distributions on Class B LP Units and fair value adjustments on derivative financial instruments.
(5) Calculated as FFO divided by sum of contractual principal repayments on mortgages payable and distributions of Class C LP Units, excluding amortization of fair value adjustment on Class C LP Units.