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TRANSGLOBE APARTMENT REIT ANNOUNCES FOURTH QUARTER 2010 RESULTS

^{Published on 2011-03-10 13:46:01 - Market Wire}
 

TORONTO, March 10 /CNW/ - TransGlobe Apartment Real Estate Investment Trust (TSX: TGA.UN) (the "REIT") announced today results for the three months ended December 31, 2010 and the period since the completion of its Initial Public Offering ("IPO") on May 14, 2010 to December 31, 2010. The REIT had no operations prior to the completion of its IPO. Certain numbers in the REIT's IPO forecast have been pro-rated to correspond with the reporting periods below.

HIGHLIGHTS:

• Occupancy levels continue to strengthen to 96.9% at December 31, 2010
• Average Monthly Rents up to $901 at December 31, 2010
• AFFO impacted primarily by higher than forecast utility costs and energy consumption
• Accretive acquisitions during and subsequent to year-end to enhance AFFO going forward

Operating Results

Property revenues of $22.8 million in the three months ended December 31, 2010 were slightly higher than forecast primarily due to the inclusion of one month's contribution from the acquisition of the Bathurst properties which closed on December 1, 2010. These properties were not included in the forecast. For the period from May 14, 2010 to December 31, 2010 property revenues were $56.6 million, slightly lower than forecast due to lower than forecast occupancy levels in the three months ended September 30, 2010. Occupancy levels continued to improve steadily throughout the fourth quarter. At December 31, 2010 occupancy was at 96.9%, higher than forecast of 96.7% and higher than the 96.6% occupancy level at September 30, 2010.

Net Operating Income ("NOI") for the three months and period ended December 31, 2010 were $11.7 million and $31.7 million respectively, both slightly lower than forecast. The key factor for the lower than forecast NOI was higher utility costs and energy consumption than originally forecast due to the much colder winter than anticipated in the REIT's markets. Management has commenced investing in a number of energy savings initiatives in an effort to achieve further efficiencies in the REIT's future utility costs.

As a result of the lower than forecast NOI in the three months ended December 31, 2010, Funds from Operations ("FFO") for the three months ended December 31, 2010 of $7.1 million ($0.24 per Unit) were slightly lower than the forecast of $7.4 million ($0.25 per Unit). FFO for the period from May 14, 2010 to December 31, 2010 of $20.0 million ($0.67 per Unit) was generally in-line with the forecast of $20.2million ($0.67 per Unit) for the period.

Adjusted Funds from Operations ("AFFO") for the three months and period ended December 31, 2010 were $5.1 million ($0.17 per Unit) and $15.0 million ($0.50 per Unit), respectively, again slightly lower than the forecast of $5.4 million ($0.18 per Unit) and $15.4 million ($0.51 per Unit), respectively, due primarily to the lower than forecast NOI.

"Our proactive property management activities and investments in suite improvements are generating solid increases in occupancies and average monthly rents, and we expect this progress to continue going forward," commented Kelly Hanczyk, Chief Executive Officer. "We have also initiated a number of programs and capital investments to reduce our energy costs and enhance NOI over the long term."

Strong Financial Position

The REIT maintained a strong balance sheet and liquidity position at year end with a conservative debt to Gross Book Value ratio of 59.8% and solid interest coverage ratio of 2.6 times. The weighted average interest rate on its mortgage portfolio was 4.05% with a weighted average term to maturity of 3.0 years. The REIT has mortgages maturing in 2011 of approximately $95.6 million, or approximately 20% of the total mortgage portfolio, and expects to complete the renewals using predominantly mortgages insured by the Canada Mortgage and Housing Corporation ("CMHC").

Subsequent Events

On January 13, 2011, the REIT closed a Subscription Receipts offering whereby 10,662,570 subscription receipts (including an over-allotment option of 1,390,770) were issued at $10.30 per subscription receipt on a bought deal basis.

On January 28, 2011, the REIT acquired twenty residential properties comprising 3,108 units from TransGlobe and certain third party co-owners for a purchase price of $277.0 million. As the acquisition constituted a related party transaction, approval of a majority of unitholders was obtained at a unitholders' meeting held on January 27, 2011. As part of the acquisition, the REIT assumed mortgages with a carrying value of $169.6 million and issued Class B LP units in the amount of $18.0 million. Concurrent with the closing of the acquisition transaction, the subscription receipts were converted into units of the REIT for a total of $109.8 million.

On March 1, 2010 the REIT acquired from a third party a 543 unit portfolio of five complexes comprising twenty residential properties in Moncton, Dieppe and Shediac, New Brunswick. The purchase price of the portfolio was $38.4 million and was satisfied by the assumption of mortgages of approximately $19.5 million with the balance utilizing cash raised primarily through the over-allotment option from the January 13, 2011 bought-deal Subscription Receipts offering.

"We are generally satisfied with our financial and operating performance and the execution of our value enhancing strategies since our IPO in May 2010," Mr. Hanczyk concluded. "One of our key objectives is to increase the size and scope of our portfolio over time in order to capture available operating synergies and economies of scale. The accretive acquisitions completed during and subsequent to 2010 have significantly strengthened and further diversified the portfolio, and we look for continued growth and enhanced performance in the quarters ahead."

About TransGlobe Apartment Real Estate Investment Trust

TransGlobe Apartment Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust owning a growing portfolio of high quality apartment and town house properties well-located in urban centres in Alberta, Ontario, Québec, New Brunswick and Nova Scotia.

Investor Conference Call

A conference call (and live audio webcast) hosted by the REIT's management team will be held Friday, March 11, 2011 at 9:00 a.m. (ET). The call-in numbers for participants are local/international (416) 849-2698 or North American Toll-Free at (866) 400-2270. Please connect with the conference call at least five minutes before the start time.

An audio replay of the call will be after the live call by dialing (416) 915-1035 or (866) 245-6755 and entering access code 653362#. A recording of the call will also be available on the REIT's website at [ www.tgareit.com ].

For the complete 2010 financial statements and Management's Discussion and Analysis, please visit [ www.sedar.com ] or the REIT's web site at [ www.tgareit.com ].

Non-GAAP Financial Measures

NOI,  FFO and AFFO do not have standardized meanings prescribed by GAAP and should not be construed as alternatives to net income/loss, cash flow from operating activities or other measures of financial performance calculated in accordance with GAAP. Such measures as computed by the REIT may differ from similar measures as reported by other trusts or companies in similar or different industries.

Management considers NOI to be an important measure of the REIT's operating performance and uses this measure to assess the REIT's property operating performance on an unlevered basis.  FFO is a measure of operating performance based on the funds generated from the business of the REIT before reinvestment or provision for other capital needs. Management considers FFO to be an important measure of the REIT's operating performance and AFFO to be an important performance measure to determine the sustainability of future distributions paid to holders of trust REIT units after provision for maintenance capital expenditures. AFFO should not be interpreted as an indicator of cash generated from operating activities as it does not consider changes in working capital. 

Forward-looking Statements

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding the REIT's financial position and results of operations as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT.  Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

Forward-looking statements necessarily involve known and unknown risks and uncertainties, that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which, are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in the REIT's materials filed with Canadian securities regulatory authorities from time to time.  The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements as there can be no assurance that actual results will be consistent with such forward-looking statements.

Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; TGIM and its affiliates will continue their involvement with the REIT; and the risks identified or referenced above, collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release.  Except as specifically required by law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.