Alexis Nihon REIT Announces Second Quarter Increase Of 14.4% In Funds From Operations.MONTREAL Montreal (mŏn'trēôl`), Fr. Montréal (môNrāäl`), city (1991 pop. 1,017,666), S Que., Canada, on Montreal island, surrounded by St. Lawrence River and Rivière des Prairies. -- Alexis Nihon Alexis Louis Nihon, O.B.E. (May 15 1902 – April 8 1980) was a Belgium born Canadian inventor and businessman. He was the inventor of the tubeless tire. Born in Liège, Belgium, the son of Alexis Laurent Nihon and Marie Florentine Thiry, he moved to Canada when he was 18. Real Estate Investment Trust (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :AN.UN) today announced results for the second quarter and six months ended June June: see month. 30, 2005. Second Quarter Highlights (percentages compare 2Q05 with 2Q04) - Funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. moved up 14.4% to $8.1 million or by 10.1% per unit to $0.317 per unit - Revenues from rental RENTAL. A roll or list of the rents of an estate containing the description of the lands let, the names of the tenants, and other particulars connected with such estate. This is the same as rent roll, from which it is said to be corrupted. operations increased 24.0% to $29.0 million - Net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. rose 26.2% to $15.4 million - Distributable income gained 14.2% to $7.2 million - Distributable income payout ratio Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. improved to 98.7% from 110.3% - Debt(a) to gross book value ratio of 59.2%, below REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). limit of 65.0% - Ended quarter with $127 million capacity for acquisitions and investments (a)Including convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. "Alexis Alexis, czar of Russia Alexis (əlĕk`sĭs) (Aleksey Mikhailovich) (əlyĭksyā` mēkhī`ləvĭch), 1629–76, czar of Russia (1645–76), son and successor of Michael. Nihon's financial results for the second quarter and six months reflect the REIT's strong growth since the same periods in 2004," said Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. J. Massicotte, President and Chief Executive Officer. "The REIT has acquired 17 properties since June 30, 2004, which has significantly enlarged our scale of operations, improved our results and enhanced unitholder value." "The performance improvement of Alexis Nihon included virtually all key metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. ," said Guy Charron Guy Joseph Jean Charron (born January 24, 1949, in Verdun, Quebec) was a professional ice hockey centre. He played in the NHL from 1969 - 1981. He also coached on and off from 1990 - 2003. , Executive Vice President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . He noted if the acquisitions are excluded, the same-property, year-over-year net operating income would have been 2.9% higher for the second quarter and 5.6% higher for the six-month period. Rene RENE Recycling Network Europe RENE Rocket Engine Nozzle Ejector Fortin Fort´in n. 1. A little fort; a fortlet. , Senior Vice President and Chief Financial Officer, pointed to a significant increase in funds from operations per unit and distributable income per unit, both of which are key measures of operating performance. Alexis Nihon's expansion initiatives during the second quarter included both organic growth and acquisitions. In April the REIT announced a $7-million expansion for Centre Laval
The Centre Laval is a shopping mall located in Laval, QC Canada corner St. Martin blvd. and Le Corbusier blvd. (near the Montmorency metro station). Shopping Centre, comprising an addition of 68,830 square feet, of which 38,700 square feet is to be occupied oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. by Best Buy in October October: see month. 2005. In June the REIT acquired three industrial properties as a portfolio for $43.1 million. The properties are located in the Montreal boroughs of Lachine Lachine (ləshēn`), city (1991 pop. 35,266), S Que., Canada, on Montreal island, at the east end of Lake St. Louis just SW of Montreal. and St. Laurent Laurent may refer to: Geography
Financial Highlights
(thousands of dollars except per-unit amounts)
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Period ended June 30 3 months 6 months
---------------------------------------------------------------------
2005 2004 2005 2004
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Revenues from rental operations $28,856 $23,281 $57,844 $44,071
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Net operating income $15,405 $12,208 $29,990 $22,015
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Distributable income(1) $7,160 $6,267 $14,201 $11,073
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Distributable income per unit
(diluted)(1) $0.270 $0.253 $0.537 $0.491
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Funds from operations(1) $8,131 $7,105 $16,122 $12,530
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FFO per unit(1) $0.317 $0.288 $0.630 $0.560
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(1)Distributable income and FFO are non-GAAP measures
Additional Financial Information Attached to this news release are financial statements with accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. notes and management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial . These documents plus a supplemental information package will be filed on SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review and made available at www.alexisnihon.com. Conference Call and Webcast Management will also hold a conference call and live audio webcast on Monday Monday: see week. , August 15, 2005 at 2 p.m. (ET) to discuss the REIT's second quarter performance. The call may be accessed by dialing 1-800-814-4857 or 416-640-4127. NOTE: The webcast is accessible at www.alexisnihon.com, and will be archived for seven days. About Alexis Nihon REIT The REIT currently owns interests in 54 office, retail and industrial properties, including a 426-unit, multi-family residential Multi-family residential is a classification of housing where multiple separate housing units are contained within one building. The most common form is an apartment building. Many intentional communities incorporate multi-family residences, such as in cohousing projects. property, located in the greater Montreal area and the National Capital region. The REIT's portfolio has an aggregate of 8.3 million square feet of leasable area, of which 0.4 million square feet is co-owned. Readers are cautioned distributable income and distributable income per unit are non Generally Accepted Accounting Policy ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ") measures and should not be construed as an alternative to net earnings and earnings per share determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP as an indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the REIT's performance. The REIT's methods of calculating these measures may differ from other issuers' methods and accordingly, they may not be comparable to measures used by other issuers. This document may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Alexis Nihon REIT's operations or to the environment in which it operates, which are based on Alexis Nihon REIT's operations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. are beyond Alexis Nihon REIT's control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include those set forth in other public filings. In addition, these forward-looking statements relate to the date on which they are made. Alexis Nihon REIT disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Alexis Nihon Real Estate Investment Trust
Consolidated Financial Statements
June 30, 2005
(unaudited)
Contents
Consolidated Balance Sheets 1
Consolidated Statements of Unitholders' Equity 2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4
Notes to the Consolidated Financial Statements 5 - 13
Alexis Nihon Real Estate Investment Trust
Consolidated Balance Sheets
(in thousands of dollars)
June 30, December 31,
2005 2004
(unaudited)
---------------------------------------------------------------------
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Assets
Income-producing properties (note 5) $ 645,884 $ 603,689
Intangible assets (note 6) 38,889 31,904
Land held for development 965 964
Cash and cash equivalents - 10,000
Other assets (note 7) 24,281 16,319
Due from companies under common
control of certain trustees of the REIT 85 250
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$ 710,104 $ 663,126
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Liabilities
Debts on income-producing
properties (note 8) $ 338,726 $ 334,674
Convertible debentures
- liability component 53,401 53,338
Intangible liabilities (note 9) 3,017 3,214
Bank indebtedness (note 10) 47,295 808
Accounts payable and accrued liabilities 16,601 10,555
Distributions payable 2,213 2,281
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461,253 404,870
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Equity
Unitholders' equity 248,851 258,256
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$ 710,104 $ 663,126
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See accompanying notes
Alexis Nihon Real Estate Investment Trust
Consolidated Statements of Unitholders' Equity
For the Six Months Ended June 30
(in thousands of dollars)
(unaudited)
Other
Units Net Equity
in $ Income Components Distributions Total
---------------------------------------------------------------------
---------------------------------------------------------------------
Unitholders'
Equity -
December 31,
2004 $ 267,234 $ 34,170 $ 2,852 $ (46,000) $ 258,256
Net income - 2,423 - - 2,423
Units issued
(note 11) 2,269 - - - 2,269
Distributions - - - (14,097) (14,097)
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Unitholders'
Equity -
June 30,
2005 $ 269,503 $ 36,593 $ 2,852 $ (60,097) $ 248,851
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Unitholders'
Equity -
December 31,
2003 $ 198,107 $ 22,822 $ 1,148 $ (19,527) $ 202,550
Net income - 5,639 - - 5,639
Units issued
(note 11) 68,809 - - - 68,809
Distributions - - - (12,443) (12,443)
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Unitholders'
Equity -
June 30,
2004 $ 266,916 $ 28,461 $ 1,148 $ (31,970) $ 264,555
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See accompanying notes
Alexis Nihon Real Estate Investment Trust
Consolidated Statements of Income
For the Three Months and Six Months Ended June 30
(in thousands of dollars, except per unit amounts)
(unaudited)
Three Months Three Months Six Months Six Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
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Revenues from
Rental Operations
(note 12) $ 28,856 $ 23,281 $ 57,844 $ 44,071
Rental Property
Operating Costs 13,451 11,073 27,854 22,056
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Net Operating Income 15,405 12,208 29,990 22,015
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Expenses
Interest (note 13) 6,340 4,347 12,477 8,469
Amortization of
buildings 3,653 3,134 7,276 5,844
Other amortization
(note 14) 2,515 741 4,898 939
Internalization
of construction
management company
(note 3) - - 1,613 -
General and
administrative 792 463 1,068 769
Trust expenses 97 248 235 355
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13,397 8,933 27,567 16,376
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Net Income $ 2,008 $ 3,275 $ 2,423 $ 5,639
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Basic Net Income
Per Unit (note 15) $ 0.078 $ 0.133 $ 0.095 $ 0.252
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Diluted Net Income
Per Unit (note 15) $ 0.078 $ 0.133 $ 0.095 $ 0.252
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See accompanying notes
Alexis Nihon Real Estate Investment Trust
Consolidated Statements of Cash Flows
For the Three Months and Six Months Ended June 30
(in thousands of dollars)
(unaudited)
Three Months Three Months Six Months Six Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash Flows generated
from (used for) -
Operating Activities
Net income $ 2,008 $ 3,275 $ 2,423 $ 5,639
Items not affecting
cash:
Amortization of
buildings 3,653 3,134 7,276 5,844
Other amortization 2,515 741 4,898 939
Amortization of
above and below
market in-place
leases (65) (40) (123) (40)
Amortization of
deferred financing
costs 165 39 316 77
Interest on
convertible debentures
paid by units - - - 197
Accrued rental revenue (416) (616) (878) (884)
Internalization of
construction
management company - - 1,613 -
Tenant improvements
and leasing costs (2,495) (1,504) (4,555) (3,442)
Changes in:
Other assets (4,216) 241 (7,330) (1,396)
Accounts payable and
accrued liabilities 5,200 (2,287) 6,511 (2,987)
---------------------------------------------------------------------
Cash Flows generated
from Operating
Activities 6,349 2,983 10,151 3,947
---------------------------------------------------------------------
Financing Activities
Proceeds of public
offering of units
(net of issue costs) - 56,159 - 56,159
Increase in debts on
income-producing
properties 3,938 46,000 3,938 46,000
Repayment of debts on
income-producing
properties (3,205) (2,072) (7,589) (3,629)
Amortization of fair
value debt adjustment (33) - (66) -
Accretion on liability
component of
convertible debentures 33 - 64 -
Additions to deferred
financing costs (71) (370) (113) (420)
Bank indebtedness 40,674 (12,304) 46,487 (1,191)
Distributions (6,698) (6,264) (13,534) (11,663)
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Cash Flows generated
from Financing
Activities 34,638 81,149 29,187 85,256
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Investing Activities
Acquisition of rental
properties (note 4) (36,835) (82,434) (45,193) (82,434)
Additions to buildings (4,077) (1,603) (4,239) (6,748)
Additions to land held
for development (1) - (1) -
Additions to furniture,
fixtures and computers (35) (14) (70) (94)
Due from companies under
common control of
certain trustees of
the REIT (39) (81) 165 73
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Cash Flows used for
Investing Activities (40,987) (84,132) (49,338) (89,203)
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Decrease in Cash and
Cash Equivalents - - (10,000) -
Cash and Cash Equivalents
- Beginning of Period - - 10,000 -
---------------------------------------------------------------------
Cash and Cash Equivalents
- End of Period $ - $ - $ - $ -
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes
Alexis Nihon Real Estate Investment Trust
Notes to Consolidated Financial Statements
June 30, 2005
(dollar amounts are in thousands, except per unit amounts)
(unaudited)
1. Description of the REIT Alexis Nihon Real Estate Investment Trust (the "REIT") is an unincorporated Adj. 1. unincorporated - not organized and maintained as a legal corporation unorganised, unorganized - not having or belonging to a structured whole; "unorganized territories lack a formal government" closed-ended Closed-ended may refer to:
v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and restated as of December December: see month. 13, 2002. The REIT was established under, and is governed gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. by, the laws of the Province of Quebec Quebec, city, Canada Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. . The accompanying unaudited interim consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge are prepared in accordance with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP"). These consolidated financial statements are prepared using the same accounting policies and application thereof as the consolidated financial statements for the year ended December 31, 2004. They do not include all the information and disclosure required by Canadian GAAP for annual financial statements, and should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the December 31, 2004 consolidated financial statements. Certain prior period figures have been reclassified to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current period's presentation. 2. Change in Accounting Policy Convertible Debentures Effective July July: see month. 1, 2004, the REIT early adopted the amendment to the recommendations of Section 3860 of the CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) Handbook
This article is about reference works. For the subnotebook computer, see .
adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin . As a result, the REIT reclassified the 2002 convertible debenture from equity to liability (the value ascribed to the holder's option to convert as well as issue costs were immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. ) and the related interest expense, amounting to $84 for the three month period ending June 30, 2004, from unitholders' equity to the statement of income. Basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. net income per unit were unaffected by this change. 3. Business Acquisition On January January: see month. 1, 2005, the REIT acquired the assets of a construction management company owned by certain trustees of the REIT for a consideration of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1,638 paid by the issuance of 132,743 units of the REIT. Substantially all of the purchase price has been expensed as an internalization Internalization A decision by a brokerage to fill an order with the firm's own inventory of stock. Notes: When a brokerage receives an order they have numerous choices as to how it should be filled. of construction management services by the REIT in accordance with EIC-138 "Internalization of the management function in a royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. or income trust". The acquisition has been recorded at the exchange amount, which is the amount of the consideration established and agreed to by the related parties. The purchase price has been allocated as follows: --------------------------------------------------------------------- Furniture and fixtures $ 25 Internalization of construction management expense 1,613 --------------------------------------------------------------------- Consideration paid $ 1,638 --------------------------------------------------------------------- --------------------------------------------------------------------- The net income of the acquired company has been included in the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: statement of net income from the date of acquisition. 4. Acquisition of Rental Properties The REIT acquired during the three months ending June 30, 2005 three industrial rental properties, in addition to an industrial rental property acquired during the first quarter of 2005. The following summarizes the net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. acquired:
Total Total
Three Months Six Months
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Land $ 10,925 $ 12,022
Building 24,274 30,102
Intangible assets and liabilities:
Lease origination costs for
in-place leases 9,405 11,052
Below market in-place leases - (164)
Debts on income-producing properties (7,769) (7,769)
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Consideration paid for the net
assets acquired $ 36,835 $ 45,243
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Consideration paid, funded by:
Cash and bank indebtedness $ 36,835 $ 45,243
less deposit - (50)
---------------------------------------------------------------------
$ 36,835 $ 45,193
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The results of operations of income-producing properties are
included in the consolidated financial statements from their date of
acquisition.
5. Income-Producing Properties
June 30, December 31,
2005 2004
---------------------------------------------------------------------
Accumulated Net Carrying Net Carrying
Cost Amortization Amount Amount
---------------------------------------------------------------------
Land $ 124,974 $ - $ 124,974 $ 112,952
Building and
tenant
improvements 545,466 28,582 516,884 487,295
Leasing costs 3,632 640 2,992 2,345
Tenant improvement
recorded on
acquisitions 1,139 105 1,034 1,097
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$ 675,211 $ 29,327 $ 645,884 $ 603,689
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6. Intangible Assets
June 30, December 31,
2005 2004
---------------------------------------------------------------------
Accumulated Net Carrying Net Carrying
Cost Amortization Amount Amount
---------------------------------------------------------------------
Lease origination
costs for in-place
leases $ 44,482 $ 6,951 $ 37,531 $ 30,308
Above market
in-place leases 1,780 422 1,358 1,596
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$ 46,262 $ 7,373 $ 38,889 $ 31,904
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7. Other Assets
June 30, December 31,
2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Accounts receivable $ 4,150 $ 2,824
Deferred rent receivable 2,777 1,899
Prepaids 10,632 1,412
Unit bonus plan 96 -
Deposits on potential acquisitions 582 755
Restricted funds 2,306 5,593
Deferred financing costs 2,919 3,122
Furniture, fixtures and computers 721 714
Short-term investments 98 -
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$ 24,281 $ 16,319
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At June 30, 2005 short-term investments consists of term deposits
bearing interest at a weighted average of 1.14% and maturing no later
than June 30, 2006.
8. Debts on Income-Producing Properties
June 30, December 31,
2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Loans secured by mortgages on
income-producing properties,
bearing interest at a weighted
average annual rate of 6.30%,
repayable in blended monthly
instalments of $2,573 maturing at
various dates no later than
July 1, 2019 $ 336,718 $ 332,675
Accrued interest 1,749 1,739
---------------------------------------------------------------------
338,467 334,414
Fair value debt adjustment 259 260
---------------------------------------------------------------------
$ 338,726 $ 334,674
---------------------------------------------------------------------
---------------------------------------------------------------------
Principal repayments of debt on income-producing properties are due
as follows:
Instalment Due on
payments maturity Total
---------------------------------------------------------------------
2005 $ 4,860 $ 17,190 $ 22,050
2006 9,450 3,913 13,363
2007 8,877 79,326 88,203
2008 6,606 50,034 56,640
2009 4,732 47,064 51,796
Subsequent to 2009 39,145 65,521 104,666
---------------------------------------------------------------------
73,670 263,048 336,718
Accrued interest 1,749
---------------------------------------------------------------------
$ 338,467
---------------------------------------------------------------------
---------------------------------------------------------------------
9. Intangible Liabilities
June 30, December 31,
2005 2004
---------------------------------------------------------------------
Accumulated Net Carrying Net Carrying
Cost Amortization Amount Amount
---------------------------------------------------------------------
Below market
in-place leases $ 3,814 $ 797 $ 3,017 $ 3,214
---------------------------------------------------------------------
---------------------------------------------------------------------
10. Bank Indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. The REIT has a $50,000 credit facility which consists of a general operating loan, banker's acceptance Banker's Acceptance A short-term credit investment created by a non-financial firm and guaranteed by a bank. Notes: Acceptances are traded at a discount from face value on the secondary market. and letters of credit. Borrowings under the general operating loan bear interest at prime plus 0.5% per annum Per annum Yearly. . Borrowings under the bankers' acceptance A bankers' acceptance, or BA, is a time draft drawn on and accepted by a bank. Before acceptance, the draft is not an obligation of the bank; it is merely an order by the drawer to the bank to pay a specified sum of money on a specified date to a named person or to the bear interest at the bankers' acceptance rate plus 2.25% per annum. The letter of credit facility is limited to $5,000. The credit facility is secured by a first ranking hypothec Hy`poth´ec n. 1. (Scot. Law) A landlord's right, independently of stipulation, over the stocking (cattle, implements, etc.), and crops of his tenant, as security for payment of rent. on three income-producing properties having a net carrying amount of $44,711 and a second ranking hypothec on two income-producing properties having a net carrying amount of $238,405. The terms of the banking agreement require the REIT to meet certain financial covenants. 11. Units Issued and Outstanding The interests in the REIT are represented by a single class of units which are unlimited in number. Each unit entitles the holder to a single vote and carries the right to participate in all distributions. Changes to the balance of units issued and outstanding were as follows:
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
---------------------------------------------------------------------
Number Number
of units Amounts of units Amounts
---------------------------------------------------------------------
Balance - beginning
of period 25,515,935 $ 267,234 20,091,900 $ 198,107
Issuance of units:
Offerings - - 4,300,000 56,159
Internalization of
construction
management (note 3) 132,743 1,638 - -
Distribution
reinvestment plan 50,294 631 25,618 303
Interest on
convertible
debenture - - 16,061 197
Conversion of
convertible
debenture - - 1,056,443 12,150
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Balance - end
of period 25,698,972 $ 269,503 25,490,022 $ 266,916
---------------------------------------------------------------------
---------------------------------------------------------------------
Unit Bonus Plan The Unit Bonus Plan (the "Plan") provides for the grant of Trust Units to the chief executive officer, executive vice president and chief operating officer, senior vice presidents, vice presidents and any other employee designated by the board of directors of the REIT, up to a maximum of 40% of their overall bonus. Annually, the REIT contributes the amount of the bonus to be rendered under the Unit Bonus Plan to the trust administering TO ADMINISTER, ADMINISTERING. The stat. 9 G. IV. c. 31, S. 11, enacts "that if any person unlawfully and maliciously shall administer, or attempt to administer to any person, or shall cause to be taken by any person any poison or other destructive things," &c. every such offender, &c. the plan, which in turn purchases units of the REIT on the open market. The employees become entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to the units and the income from the distributions over a three-year period of continuous employment. The REIT's contributions and accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. distributions are recorded as deferred compensation expense (included in other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. ) and expensed over the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period. During the six month period ended June 30, 2005, the REIT contributed $128 to the Plan. An expense of $36 was recognized during the six month period ending June 30, 2005.
12. Revenues From Rental Operations
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Rental revenue contractually
due under the leases $ 28,375 $ 22,625 $ 56,843 $ 43,147
Accrued rental revenue 416 616 878 884
Amortization of above market
in-place leases (119) (5) (238) (5)
Amortization of below market
in-place leases 184 45 361 45
---------------------------------------------------------------------
$ 28,856 $ 23,281 $ 57,844 $ 44,071
---------------------------------------------------------------------
---------------------------------------------------------------------
13. Interest
Three Months Three Months Six Months Six Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Interest on debts
on income-producing
properties, at
stated rate $ 5,108 $ 4,071 $ 10,270 $ 7,854
Interest on
convertible debentres,
at stated rate 864 84 1,705 281
Accretion on liability
component of
convertible debentures 33 - 64 -
Other interest 203 153 188 257
Amortization of
deferred financing
costs 165 39 316 77
Amortization of fair
value debt adjustment (33) - (66) -
---------------------------------------------------------------------
$ 6,340 $ 4,347 $ 12,477 $ 8,469
---------------------------------------------------------------------
---------------------------------------------------------------------
Interest paid during the three months ended June 30, 2005 was $6,161
(six months - $12,153) (three months ended June 30, 2004 - $4,312
(six months - $8,370)).
14. Other Amortization
Three Months Three Months Six Months Six Months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Amortization of
tenant improvements
and leasing costs
incurred through
leasing activities $ 490 $ 182 $ 918 $ 336
Amortization of
furniture, fixtures
and computers 45 45 88 89
Amortization of lease
origination costs for
in-place leases
recorded on
acquisitions 1,949 514 3,829 514
Amortization of tenant
improvements recorded
on acquisitions 31 - 63 -
---------------------------------------------------------------------
$ 2,515 $ 741 $ 4,898 $ 939
---------------------------------------------------------------------
---------------------------------------------------------------------
15. Net Income Per Unit Calculations
Basic and diluted per unit amounts are based on the following:
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004
Basic Diluted Basic Diluted
---------------------------------------------------------------------
Net income $ 2,008 $ 2,008 $ 3,275 $ 3,275
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average number
of units outstanding 25,677,642 25,677,642 24,637,663 24,637,663
---------------------------------------------------------------------
---------------------------------------------------------------------
Six Months Ended Six Months Ended
June 30, 2005 June 30, 2004
Basic Diluted Basic Diluted
---------------------------------------------------------------------
Net income $ 2,423 $ 2,423 $ 5,639 $ 5,639
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average number
of units outstanding 25,599,567 25,599,567 22,367,316 22,367,316
---------------------------------------------------------------------
---------------------------------------------------------------------
The convertible debentures have been excluded from the calculation of the diluted net income per unit for the periods ending June 30, 2005 and 2004 as they are anti-dilutive. 16. Distributable Income Distributable income is presented because the REIT believes this measure is a relevant measure of its ability to earn and distribute cash returns to unitholders. Distributable income, which is not defined within Canadian generally accepted accounting principles, has been calculated in accordance with the terms of the Contract of Trust as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---------------------------------------------------------------------
Net income $ 2,008 $ 3,275 $ 2,423 $ 5,639
Add (deduct)
Internalization of construction
management company - - 1,613 -
Amortization of buildings 3,653 3,134 7,276 5,844
Amortization of amounts
recorded on acquisitions:
Tenant improvements 31 - 63 -
Lease origination costs for
in-place leases 1,949 514 3,829 514
Above and below market
in-place leases (65) (40) (123) (40)
Accretion on liability component
of convertible debentures 33 - 64 -
Amortization of fair value debt
adjustments (33) - (66) -
Accrued rental revenue recognized
on a straight-line basis (416) (616) (878) (884)
---------------------------------------------------------------------
Distributable income $ 7,160 $ 6,267 $ 14,201 $ 11,073
---------------------------------------------------------------------
---------------------------------------------------------------------
17. Segmented Information
Three Months Ended Multi-family
June 30, 2005 Office Retail Industrial residential Total
---------------------------------------------------------------------
Revenues from
rental
operations $ 14,243 $ 8,290 $ 4,959 $ 1,364 $ 28,856
Rental property
operating costs $ 6,897 $ 3,819 $ 1,895 $ 840 $ 13,451
---------------------------------------------------------------------
Net operating
income $ 7,346 $ 4,471 $ 3,064 $ 524 $ 15,405
---------------------------------------------------------------------
---------------------------------------------------------------------
Three Months Ended
June 30, 2004
---------------------------------------------------------------------
Revenues from
rental
operations $ 12,926 $ 6,666 $ 2,364 $ 1,325 $ 23,281
Rental property
operating costs $ 6,203 $ 3,118 $ 919 $ 833 $ 11,073
---------------------------------------------------------------------
Net operating
income $ 6,723 $ 3,548 $ 1,445 $ 492 $ 12,208
---------------------------------------------------------------------
---------------------------------------------------------------------
Six Months Ended Multi-family
June 30, 2005 Office Retail Industrial residential Total
---------------------------------------------------------------------
Revenues from
rental
operations $ 28,701 $ 16,768 $ 9,711 $ 2,664 $ 57,844
Rental property
operating
costs $ 14,689 $ 7,669 $ 3,844 $ 1,652 $ 27,854
---------------------------------------------------------------------
Net operating
income $ 14,012 $ 9,099 $ 5,867 $ 1,012 $ 29,990
---------------------------------------------------------------------
---------------------------------------------------------------------
Income-producing
properties $ 292,281 $175,347 $ 145,410 $ 32,846 $645,884
---------------------------------------------------------------------
---------------------------------------------------------------------
Intangible
assets $ 12,363 $ 6,154 $ 20,372 $ - $ 38,889
---------------------------------------------------------------------
---------------------------------------------------------------------
Six Months Ended
June 30, 2004
---------------------------------------------------------------------
Revenues from
rental
operations $ 24,583 $ 12,355 $ 4,527 $ 2,606 $ 44,071
Rental property
operating
costs $ 12,387 $ 6,126 $ 1,806 $ 1,737 $ 22,056
---------------------------------------------------------------------
Net operating
income $ 12,196 $ 6,229 $ 2,721 $ 869 $ 22,015
---------------------------------------------------------------------
---------------------------------------------------------------------
Income-producing
properties $ 275,944 $159,975 $ 61,598 $ 33,405 $530,922
---------------------------------------------------------------------
---------------------------------------------------------------------
Intangible
assets $ 8,978 $ 7,131 $ 170 $ - $ 16,279
---------------------------------------------------------------------
---------------------------------------------------------------------
18. Subsequent Event Subsequent to June 30, 2005 the REIT entered into a commitment for a hypothecary loan amounting to $18,000 on one of the properties acquired during the quarter ended June 30, 2005. The loan bears interest at a rate of 4.68% and is repayable re·pay v. re·paid , re·pay·ing, re·pays v.tr. 1. To pay back: repaid a debt. 2. over a five year period.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2005
The following discussion describes the business, the business environment, and management's expectations as at July 29, 2005. It should be read in conjunction with the consolidated financial statements of the Alexis Nihon Real Estate Investment Trust ("the REIT") for the three and six month periods ended June 30, 2005 and the notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. , as well as the management's discussion and analysis for the year ended December 31, 2004. This discussion contains forward-looking statements relating to the REIT's operations and/or to the environment in which it operates, which are based on the REIT's expectations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, and/or are beyond the REIT's control. A number of important factors may cause actual outcomes and results to differ materially from those expressed in these forward-looking statements. These factors include those set forth in other public filings of the REIT. Therefore, readers should not place undue reliance on any such forward-looking statements. In addition, these forward-looking statements speak only as of the date on which they are made and the REIT disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or otherwise. All amounts reflected in this discussion are in thousands of dollars except for per unit and square foot amounts. OVERVIEW AND OBJECTIVES The REIT is an unincorporated closed-end closed-end adj. Issuing a fixed number of shares that can be traded publicly but are not redeemable by the issuer: a closed-end investment company. real estate investment trust created pursuant to the Declaration of Trust dated October 18, 2002, as amended and restated as of December 13, 2002. The REIT is governed by the laws of the Province of Quebec and began operations on December 20, 2002. The REIT units and convertible debenture are publicly traded and listed on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (TSX) under the symbols AN.UN and AN.DB respectively. Additional information relating to the REIT is also available on the REIT's website at www.alexisnihon.com and on SEDAR at www.sedar.com. The objectives of the REIT are: i. To provide unitholders with stable and growing cash distributions, payable monthly and, to the maximum extent practicable practicable adj. when something can be done or performed. , income tax deferred; and ii. To improve and maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. unit value through future acquisitions of additional income-producing properties and the ongoing active management or redevelopment of the REIT's properties. DISTRIBUTION REINVESTMENT PLAN reinvestment plan See dividend reinvestment plan (DRIP). The REIT has a Unitholder Distribution Reinvestment Plan ("DRIP") providing unitholders with the option of reinvesting their total monthly cash distributions in additional units of the REIT, thereby allowing them to steadily increase their ownership without incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. any commission or other transaction cost. To encourage participation, unitholders registered in the DRIP will also receive additional units equal in value to 3% of the monthly distribution otherwise payable. The Plan is administered by National Bank Trust Inc., the REIT's transfer agent (1-800-341-1419). Please visit our website to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. our DRIP brochure A brochure or pamphlet is a leaflet advertisement. Brochures may advertise locations, events, hotels, products, services, etc. They are usually succinct in language and eye-catching in design. . SECOND QUARTER OVERVIEW On April 26, 2005, the REIT announced an expansion of $7 million at its Centre Laval shopping center shopping center, a concentration of retail, service, and entertainment enterprises designed to serve the surrounding region. The modern shopping center differs from its antecedents—bazaars and marketplaces—in that the shops are usually amalgamated into located at 1600 Le Corbusier Le Corbusier (lə kôrbüzyā`), pseud. of Charles Édouard Jeanneret (shärl ādwär` zhänərā`), 1887–1965, French architect, b. La Chaux-de-Fonds, Switzerland. Boulevard boulevard Broad landscaped avenue that typically permits several lanes of vehicular traffic as well as pedestrian walkways. The earliest boulevards originally followed the city walls (the word originally meant “bulwark”) and were built in the ancient Middle in Laval Laval, city, Canada Laval, city (1991 pop. 314,398), coextensive with Île-Jésus (94 sq mi/243 sq km), S Que., Canada, between the Rivière des Mille Îles and the Rivière des Prairies, just NW of Montreal. . Plans call for a 68,830 square foot expansion of which approximately 38,700 square feet is to be occupied by Best Buy and is projected to open in mid-October n. 1. the middle part of October. Noun 1. mid-October - the middle part of October period, period of time, time period - an amount of time; "a time period of 30 years"; "hastened the period of time of his recovery"; "Picasso's blue period" 2005. The net operating income generated by Best Buy is expected to be approximately $0.7 million annually. When fully leased, the expansion space is expected to generate approximately $1.0 million annually in net operating income. On June 17, 2005, the REIT announced the acquisition of a 952,960 square foot, 100% leased, portfolio of three industrial properties in Montreal, Quebec for $43.1 million representing a capitalization rate Capitalization Rate According to the Appraisal Institute, it is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the income estimate by an appropriate rate. of approximately 8.8%. As of June 30, 2005, the REIT's portfolio consisted of 54 office, retail and industrial properties, including a 426-units multi-family residential property, aggregating 8.3 million square feet of leasable area of which 0.4 million square feet is co-owned. There are 52 properties located in the Greater Montreal Area and 2 in the National Capital Region. The chart below outlines the REIT's portfolio of properties and square footage:
Property # of properties Leasable area (square feet)
----------------------------------------------------------
Type Wholly owned Co-owned Wholly owned Co-owned
---------------------------------------------------------------------
Office 19 - 2,813,741 -
Retail 4 - 1,434,400 -
Industrial 24 7(2) 3,300,722 410,417
Residential -(1) - 300,321 -
---------------------------------------------------------------------
Totals 47 7 7,849,184 410,417
---------------------------------------------------------------------
---------------------------------------------------------------------
1. With respect to the "# of properties", Place Alexis Nihon has been
included as one property in the office category. It includes two
office towers, a retail concourse and a multi-family residential
component.
2. The REIT owns 25% of 102,032 square feet (3 properties), and 50%
of 308,385 square feet (4 properties).
The portfolio has a mix of approximately 871 non-residential tenancies, including many high quality, national tenants with strong covenants. FINANCIAL PERFORMANCE The financial results of the REIT for the recently completed eight quarters are summarized in the following table:
2003 2004
---------------------------------------------------
Sept. Dec. March June Sept. Dec.
Revenues from
rental
operations $24,161 $17,197 $20,790 $23,281 $25,425 $29,254
Rental property
operating costs 7,922 8,741 10,983 11,073 11,266 13,838
---------------------------------------------------------------------
Net operating
income 16,239 8,456 9,807 12,208 14,159 15,416
---------------------------------------------------------------------
Interest 3,522 3,702 4,122 4,347 5,458 6,257
Amortization of
buildings 846 885 2,710 3,134 3,373 3,632
Other amortization 79 194 198 741 1,509 2,532
Internalization of
construction
management - - - - - -
General and
administrative 300 459 306 463 606 312
Trust 134 108 107 248 138 49
---------------------------------------------------------------------
4,881 5,348 7,443 8,933 11,084 12,782
---------------------------------------------------------------------
Net Income 11,358 3,108 2,364 3,275 3,075 2,634
Add/(Deduct):
Income Subsidy 292 264 - - - -
Cancellation fee
received (7,825) - - - - -
Amortization of
buildings 846 885 2,710 3,134 3,373 3,632
Internalization
of construction
management - - - - - -
Amortization of
amounts recorded
on acquisitions:
Tenant improvements - - - - 35 7
Lease origination
costs for in-place
leases - - - 514 866 1,742
Above and below
market in-place
leases - - - (40) (59) (153)
Accretion on
liability component
of convertible
debentures - - - - - 42
Amortization of fair
value debt
adjustments - - - - (22) (33)
Accrued rental
revenue recognized
on a straight-line
basis - - (268) (616) (507) (508)
---------------------------------------------------------------------
Distributable
Income(1) $4,671 $4,257 $4,806 $6,267 $6,761 $7,363
---------------------------------------------------------------------
---------------------------------------------------------------------
Distributions $4,664 $4,954 $5,530 $6,913 $7,013 $7,017
Distributions
per unit $0.275 $0.275 $0.275 $0.275 $0.275 $0.275
---------------------------------------------------------------------
---------------------------------------------------------------------
Funds from
operations(1) $4,800 $4,580 $5,425 $7,105 $7,910 $8,730
Funds from
operations per
unit $0.283 $0.269 $0.270 $0.288 $0.310 $0.342
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per
unit:
Basic $0.670 $0.179 $0.118 $0.133 $0.121 $0.103
Diluted(2) $0.642 $0.179 $0.118 $0.133 $0.121 $0.103
---------------------------------------------------------------------
---------------------------------------------------------------------
Distributable
income per unit:
Basic $0.276 $0.245 $0.239 $0.254 $0.265 $0.289
Diluted $0.271 $0.241 $0.237 $0.253 $0.263 $0.280
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Assets $392,965 $479,803 $670,814
$473,768 $564,405 $663,126
Total Debt(3) $216,198 $268,540 $392,627
$258,984 $288,014 $388,820
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average
number of units:
Basic 16,945,503 20,096,970 25,494,379
17,046,230 24,637,663 25,506,516
Diluted
(for net
income) 18,001,946 20,096,970 25,494,379
18,102,673 24,637,663 25,506,516
Diluted (for
distributable
income) 18,001,946 21,153,413 26,808,283
18,102,673 25,102,034 29,535,822
---------------------------------------------------------------------
---------------------------------------------------------------------
2005
------------------------------------
March June
Revenues from rental operations $28,988 $28,856
Rental property operating costs 14,403 13,451
---------------------------------------------------------------------
Net operating income 14,585 15,405
---------------------------------------------------------------------
Interest 6,137 6,340
Amortization of buildings 3,623 3,653
Other amortization 2,383 2,515
Internalization of construction
management 1,613 -
General and administrative 276 792
Trust 138 97
---------------------------------------------------------------------
14,170 13,397
---------------------------------------------------------------------
Net Income 415 2,008
Add/(Deduct):
Income Subsidy - -
Cancellation fee received - -
Amortization of buildings 3,623 3,653
Internalization of construction
management 1,613 -
Amortization of amounts recorded
on acquisitions:
Tenant improvements 32 31
Lease origination costs for
in-place leases 1,880 1,949
Above and below market in-place leases (58) (65)
Accretion on liability component of
convertible debentures 31 33
Amortization of fair value debt
adjustments (33) (33)
Accrued rental revenue recognized
on a straight-line basis (462) (416)
---------------------------------------------------------------------
Distributable Income(1) $7,041 7,160
---------------------------------------------------------------------
---------------------------------------------------------------------
Distributions $7,033 $7,064
Distributions per unit $0.275 $0.275
---------------------------------------------------------------------
---------------------------------------------------------------------
Funds from operations(1) $7,991 $8,131
Funds from operations per unit $0.313 $0.317
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per unit:
Basic $0.016 $0.078
Diluted(2) $0.016 $0.078
---------------------------------------------------------------------
---------------------------------------------------------------------
Distributable income per unit:
Basic $0.276 $0.279
Diluted $0.267 $0.270
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Assets $661,068 $710,104
Total Debt(3) $390,247 $439,422
---------------------------------------------------------------------
---------------------------------------------------------------------
Weighted average number of units:
Basic 25,520,625 25,677,642
Diluted (for net income) 25,520,625 25,677,642
Diluted (for distributable income) 29,549,931 29,706,948
---------------------------------------------------------------------
---------------------------------------------------------------------
1. Distributable income and Funds from operations are non-GAAP
measure, see definition on pages 6 and 11.
2. Convertible debentures have been excluded from the calculations of
the diluted net income per unit in 2004 and in 2005 since they are
anti-dilutive.
3. Total debt comprises debts secured by mortgages, bank
indebtedness, and the liability component of convertible
debentures.
Factors that have caused period to period variations mainly result from acquisitions completed by the REIT in 2004 and during the first six months of 2005. The increase in the weighted average number of units (basic and diluted) results from units issued via: i) the REIT's DRIP, ii) the payment of interest in the form of units of the REIT on the 2002 Convertible Debenture, iii) a new issue of units in April 2004, iv) the conversion of the 2002 Convertible Debenture in May 2004 into units of the REIT, and v) the issuance of units on the acquisition of ANC ANC abbr. African National Congress ANC African National Congress: South African political movement instrumental in bringing an end to apartheid ANC n abbr (= Construction Inc. in March 2005. NET OPERATING INCOME The quarterly and year to date ("YTD See Year-to-date. YTD See year to date (YTD). ") analysis by sector of the REIT's net operating income ("NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics ") is explained in greater detail in the segmented analysis section. In summary, for the quarter ended June 30, 2005, NOI totaled $15,405 (YTD: $29,990) which was an increase of $3,197 (YTD: $7,975) or 26.2% (YTD: 36.2%) over the same quarter last year. Of the increase, $2,841 (YTD $6,743) is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the NOI generated from the acquisition of 17 properties acquired since June 2004. In total, 2 office, 1 retail, and 14 industrial properties were acquired during this time representing 2,539,547 square feet. Had these properties been excluded, the same properties year over year ("YOY YOY Year Over Year YOY Year On Year YOY Young of the Year YOY Yield on Year ") NOI for the quarter and YTD would have totaled $12,564 and $23,247 respectively reflecting a positive variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality of $356 versus the same quarter last year and $1,232 YTD.
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- Decrease in straight-lining
of rents ($199) ($5)
- Increase in above and below market
in-place leases (re: EIC-140) 25 83
- Net (negative) positive variance
associated with occupancies and
redevelopment (48) 637
- Decrease in bad debt expense 358 61
- Decrease in non-recoverable expenses 85 17
- Positive variance in other income 103 296
- Net increase in the residential
sector NOI 32 143
---------------------------------------------------------------------
Net variance $356 $1,232
---------------------------------------------------------------------
---------------------------------------------------------------------
Excluding the impact of YOY straight-lining of rents and EIC-140, the same property portfolio reflected an increase of $530 or 4.3% (YTD: $1,154, 5.2%). INTEREST EXPENSE Interest expense consists of interest paid on secured mortgages on the income-producing properties as well as interest on the REIT's general bank indebtedness, interest on convertible debentures, accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the of the liability component of the convertible debentures, amortization of the fair value debt adjustments on mortgages assumed on acquisitions, and amortization of deferred financing costs. As at June 30, 2005, interest expense totaled $6,340 (YTD: $12,477) compared with $4,347 (YTD: $8,469) in 2004. The YOY variance results from:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- Interest on secured mortgages on
income producing properties
acquired $1,158 $2,334
- Increase in interest on convertible
debentures 780 1,424
- Interest on new mortgages put in
place YOY 281 909
- Increase on interest accretion on
convertible debentures 33 64
- Increase (decrease) in interest on
general bank indebtedness 82 (8)
- Interest savings on secured mortgages
repaid upon maturity (302) (615)
- Amortization of the fair value debt
adjustments relating to mortgages
assumed on the acquisition of certain
properties (33) (66)
- Other, net (6) (34)
---------------------------------------------------------------------
Net variance $1,993 $4,008
---------------------------------------------------------------------
---------------------------------------------------------------------
The table below reflects the weighted-average interest rate on existing mortgages by quarter and YOY as well as the weighted-average term to maturity.
2004 2005
-------------------------------------------------
Mar. June Sept. Dec. Mar. June
-------------------------------------------------
Weighted-average
interest rate 6.4% 6.3% 6.3% 6.3% 6.3% 6.3%
-------------------------------------------------
-------------------------------------------------
Weighted-average
term to maturity
(years) 3.54 5.30 6.07 5.83 5.61 5.46
-------------------------------------------------
-------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses, which consist of the REIT's net overhead costs overhead costs see fixed costs. , totaled $792 for the quarter (YTD: $1,068) of 2005 compared to $463 (YTD: $769) in 2004. The period over period variances are attributable to the following:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- YOY increase in income taxes paid
by the REIT's subsidiaries $87 $87
- YOY increase in salaries associated
with the REIT's growth 82 82
- YOY higher legal, audit and
professional fees 70 70
- YOY higher costs associated with
non-concluded acquisitions 37 37
- Other 53 23
---------------------------------------------------------------------
Net variance $329 $299
---------------------------------------------------------------------
---------------------------------------------------------------------
AMORTIZATION EXPENSE For the quarter ended June 30, 2005, total amortization (buildings and other) was $6,168 (YTD: $12,174) compared to $3,875 (YTD: $6,783) in 2004. The REIT recorded approximately $1,466 (YTD: $3,378) of amortization of lease origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real costs for in-place leases and tenant improvements incurred through acquisitions. The YOY increase also reflects approximately $418 (YTD: $ 1,231) of amortization of buildings principally for properties acquired, as well as $408 (YTD: $782) of amortization on tenant improvements, commissions and property additions. TRUST EXPENSES Trust expenses in the quarter totaled $97 (YTD: $235) versus $248 (YTD: $355) for the same period in 2004. The YOY decrease primarily results from the following:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- YOY decrease in director's and
officers insurance $(4) $(7)
- YOY lower trustee fees and expenses (16) (21)
- YOY lower audit related fees (24) (23)
- YOY lower annual filing fees (108) (74)
- YOY higher agent fees 1 5
---------------------------------------------------------------------
Net variance $(151) $(120)
---------------------------------------------------------------------
---------------------------------------------------------------------
INTERNALIZATION OF CONSTRUCTION MANAGEMENT The CICA's abstract (EIC-138) concerning the accounting for the internalization of the management function in royalty and income trusts, requires that the consideration paid for the early termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of a management contract should be charged to expense in the same period as the management internalization transaction is consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. . As a result of the acquisition and internalization of the REIT's construction management company on January 1st, 2005, substantially all of the purchase price ($1,613 of the $1,638) has been expensed by the REIT in accordance with EIC-138 with the exception of $25 for acquiring the fair value of the furniture, fixtures and computers. DISTRIBUTABLE INCOME Distributable income and distributable income per unit are non-GAAP measures and should not be construed as an alternative to net earnings and earnings per unit determined in accordance with GAAP as an indicator of the REIT's performance. The REIT's methods of calculating these measures may differ from other issuers' methods and accordingly, they may not be comparable to measures used by other issuers. Distributable income represents net income determined in accordance with Canadian GAAP, subject to certain adjustments as set out in the Declaration of Trust. These adjustments include adding back amortization (but not amortization of tenant inducements and other leasing costs), income tax expense, amounts received under the AN Income Subsidy subsidy, financial assistance granted by a government or philanthropic foundation to a person or association for the purpose of promoting an enterprise considered beneficial to the public welfare. , and excluding any gains or losses on the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of assets. Also excluded are any amounts that the Trustees in their discretion determine to be appropriate, including the impact of the change in accounting policy for the straight-lining of contractual rent increases, the full impact of EIC-140, as well as the internalization of the REIT's construction management function which was fully expensed in accordance with EIC-138. Distributable income for the quarter and YOY is as follows:
Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
-------------------------------------------
-------------------------------------------
Distributable Income $7,160 $6,267 $14,201 $11,073
Per unit:
Basic $0.279 $0.254 $0.555 $0.495
Diluted $0.270 $0.253 $0.537 $0.491
Distributions paid $7,064 $6,913 $14,097 $12,443
Distributable income
payout ratio 98.7% 110.3% 99.3% 112.4%
Increases in distributions paid reflects distributions made on units issued on the REIT's DRIP (76,208 units issued since July 2004); in addition to a treasury issue of 4,300,000 on April 16, 2004; the conversion on May 10, 2004 of the convertible debenture into 1,056,443 units; and the issuance of 132,743 new units issued as payment in the acquisition of the REIT's construction management division on March 31, 2005. LEASING DATA To date, in 2005, leases for 493,445 square feet of space expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. at a weighted average net rental rate of $9.69 per square foot. Of this amount, 260,516 square feet having a weighted average net rental rate of $8.84 was renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. at a weighted average net rental rate of $9.29 During the same period, 282,814 square feet of vacant space was leased at a weighted average net rental rate of $9.85 per square foot. The following tables reflect the REIT's average occupancies and net rental rates:
Occupancies As at June 30, 2004 As at December 31, 2004
---------------------------------------------------------------------
Area Area
Segment (sq.ft.) Occupancy (sq.ft.) Occupancy
---------------------------------------------------------------------
Office 2,604,253 88.8% 2,813,741 87.1%
Retail 1,234,776 94.4%(1) 1,432,100 96.6%
Industrial 1,564,304 93.0% 2,531,925 89.9%
Residential 300,321 96.9% 300,321 95.8%
---------------------------------------------------------------------
Overall 5,703,654 92.6%(1) 7,078,087 90.4%
---------------------------------------------------------------------
---------------------------------------------------------------------
Occupancies As at March 31, 2005 As at June 30, 2005
---------------------------------------------------------------------
Area Area
Segment (sq.ft.) Occupancy (sq.ft.) Occupancy
---------------------------------------------------------------------
Office 2,813,741 88.0% 2,813,741 86.9%
Retail 1,434,400 94.7% 1,434,400 95.5%
Industrial 2,757,535 87.1% 3,711,139 92.4%
Residential 300,321 96.0% 300,321 98.8%
---------------------------------------------------------------------
Overall 7,305,997 89.3% 8,259,601 91.3%
---------------------------------------------------------------------
---------------------------------------------------------------------
Net rental rate 2004 2005
---------------------------------------------------------------------
Segment June 30 December 31 March 31 June 30
---------------------------------------------------------------------
Office $11.04 $11.03 $11.19 $11.03
Retail 13.26 13.07 12.92 13.04
Industrial 5.02 5.38 5.28 4.97
Residential(2) 1,011.20 1,030.14 1,006.23 1,032.10
---------------------------------------------------------------------
Overall $10.19 $9.70 $9.54 $8.89
---------------------------------------------------------------------
---------------------------------------------------------------------
1. Excludes areas affected by the Centre Laval and Place Alexis Nihon
Winners redevelopments.
2. The residential sector sets forth the average monthly gross rent
per unit.
The REIT'S YOY (June 2005 vs June 2004) occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy levels and net rental rates have been affected by acquisitions of properties having lower occupancy levels and net rental rates than the existing portfolio averages. Excluding acquired properties the YOY same portfolio occupancy levels and net rental rates reflect the following:
December
June 30, 2004 31, 2004 June 30, 2005
---------------------------------------------------
Net Net Net
Segment Area Occu- rental Occu- rental Occu- rental
(sq. ft.) pancy rate pancy rate pancy rate
---------------------------------------------------------------------
Office 2,604,253 88.8% $11.04 87.7% $10.98 86.8% $10.91
Retail 1,234,776 94.4%(1) 13.26 96.2% 13.16 95.0% 13.33
Indus-
trial 1,564,304 93.0% 5.02 94.0% 5.10 92.8% 5.07
Residen-
tial(2) 300,321 96.9% 1,011.20 95.8% 1,030.14 98.8% 1,032.10
---------------------------------------------------------------------
Overall 5,703,654 92.6%(1) $10.19 91.7% $10.23 90.8% $10.19
---------------------------------------------------------------------
---------------------------------------------------------------------
1. Excludes areas affected by the Centre Laval and Place Alexis Nihon
Winners redevelopment.
2. The residential sector sets forth the average monthly gross rent
per unit.
The same portfolio occupancy levels in the retail and residential sectors show YOY favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. variances resulting from leasing activities. The YOY office sector unfavorable variance of 2.0%, which represents approximately 52,100 square feet of space, as well as the industrial sector unfavorable variance of 0.2%, representing approximately 3,100 square feet of space, is attributable principally to the expected move outs of tenants at lease expiry. Since March 31, 2005, the overall portfolio occupancy level increased by 2.0%. The office sector reflected a decrease in occupancy of 1.1% as a result of the expected move out of a tenant occupying oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. 33,615 square feet in a suburban office property. The retail, industrial and residential sectors reflected increases of 0.8%, 5.3% and 2.8% respectively and result primarily from increased leasing activity as well as from the acquisition of three 100% leased industrial properties (excluding these three properties the industrial sector QOQ QOQ Quarter on Quarter increase would have been 2.7%).
SEGMENTED ANALYSIS
Three months Six months
ended June 30 ended June 30
Office 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from rental operations $14,243 $12,926 $28,701 $24,583
Rental property operating costs 6,897 6,203 14,689 12,387
---------------------------------------------------------------------
Net operating income $7,346 $6,723 $14,012 $12,196
---------------------------------------------------------------------
---------------------------------------------------------------------
Net operating income from office rental operations totaled $7,346 for the quarter (YTD: $14,012) compared with $6,723 in 2004 (YTD: $12,196). The YOY positive variance of $623 or 9.3% (YTD: $1,816 or 14.9%) is summarized as follows:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- NOI contribution from
properties acquired $684 $2,230
- Decrease in straight-lining
of rents associated with
leasing and acquisitions (83) (127)
- Increase in above and below
market in-place leases
(re: EIC-140) 20 40
- Net negative variance associated
with occupancies (484) (581)
- Decrease in bad debt expense 358 61
- Positive variances in
non-recoverable expenses 129 138
- Cancellation fees received 8 (2)
- (Negative) positive variance in
other income (9) 57
---------------------------------------------------------------------
Net positive variance $623 $1,816
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months Six months
ended June 30 ended June 30
Retail 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from rental operations $8,290 $6,666 $16,768 $12,355
Rental property operating costs 3,819 3,118 7,669 6,126
---------------------------------------------------------------------
Net operating income $4,471 $3,548 $9,099 $6,229
---------------------------------------------------------------------
---------------------------------------------------------------------
For the quarter the retail sector net operating income totaled $4,471 (YTD: $9,099) compared with $3,548 (YTD: $6,229) in 2004. The YOY positive variance of $923 or 26.0% (YTD: $2,870 or 46.1%) is detailed as follows:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- NOI contribution from
properties acquired $625 $1,582
- (Decrease) increase in
straight-lining of rents
associated with leasing and
acquisitions (147) 43
- Increase in above and below market
in-place leases (re: EIC-140) 29 98
- Net positive variance associated
with occupancies and redevelopment 419 1,123
- (Negative) positive variance in other
income and non-recoverable expenses (3) 24
---------------------------------------------------------------------
Net positive variance $923 $2,870
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months Six months
ended June 30 ended June 30
Industrial 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from rental operations 4,959 $2,364 $9,711 $4,527
Rental property operating costs 1,895 919 3,844 1,806
---------------------------------------------------------------------
Net operating income $3,064 $1,445 $5,867 $2,721
---------------------------------------------------------------------
---------------------------------------------------------------------
The industrial sector reflects a YOY positive variance of $1,619 or 112% for the quarter (YTD: $3,146 or 115.6%). Net operating income totaled $3,064 (YTD: $5,867) compared with the $1,445 (YTD $2,721) in 2004. The contributing factors include:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- NOI contribution from properties
acquired $1,532 $2,931
- Impact of straight-lining of rents
associated with leasing and
acquisitions 31 79
- Decrease in above and below market
in-place leases (re: EIC-140) (24) (55)
- Net positive variance associated
with occupancies 17 95
- Increase in non-recoverable expenses (44) (121)
- Positive variance in other income 107 217
---------------------------------------------------------------------
Net positive variance $1,619 $3,146
---------------------------------------------------------------------
---------------------------------------------------------------------
Three months Six months
ended June 30 ended June 30
Residential 2005 2004 2005 2004
---------------------------------------------------------------------
Revenues from rental operations $1,364 $1,325 $2,664 $2,606
Rental property operating costs 840 833 1,652 1,737
---------------------------------------------------------------------
Net operating income $524 $492 $1,012 $869
---------------------------------------------------------------------
---------------------------------------------------------------------
Net operating income for the residential sector totaled $524 (YTD $1,012) representing a YOY increase of $32 or 6.5% (YTD $143 of 16.5%). In summary, variances resulted from:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------------------------------------
- Increase in revenues generated
from rental increases on regular
apartments $28 $55
- Increase in revenues generated from
the executive suites 11 3
- Net (negative) positive variances
in operating expenses (7) 85
---------------------------------------------------------------------
Net positive variance $32 $143
---------------------------------------------------------------------
---------------------------------------------------------------------
DEBT FINANCING Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay AND CONTRACTUAL OBLIGATIONS During the second quarter the REIT repaid upon maturity the mortgage on 9960-9970 Cote de Liesse, Lachine in the amount of $832. The mortgage had an interest rate of 8.2% and matured in May 2005. On June 17, 2005 the REIT acquired a portfolio of three industrial properties and assumed a mortgage of $7,704 on the property located at 2105, 32nd Avenue, Lachine. The mortgage bears interest at 5.82%, has a 20-year amortization, and matures in February February: see month. 2009. On June 30, 2005 the REIT put in place a 10-year mortgage of $3,938 on another of the properties acquired on June 17, 2005 located at 1111, 46th Avenue, Lachine. The mortgage bears interest at 4.98%, has a 25-year amortization, and matures in July 2015. As at June 30, 2005, the REIT's debt secured by income-producing properties was $386,021 representing 51.8% of gross book value (book value of the REIT's assets plus accumulated amortization less intangible liabilities was $744,946), well below its 60% threshold The point at which a signal (voltage, current, etc.) is perceived as valid. limit. Including the convertible debentures, the percentage is 59.0% (limit 65%). Floating rate debt, which cannot exceed 15% of gross book value was $47,295 or 6.4%. The REIT's contractual obligations on the other mortgages in existence as of December 31, 2004 have remained unchanged. LIQUIDITY AND CAPITAL EXPENDITURES Funds from operations ("FFO FFO See: Funds from operations ") is a measure of the funds generated from the business before reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. in the business or provision for other capital needs. The REIT considers FFO to be an indicative indicative: see mood. measure of operating performance. FFO is not a measure defined by GAAP. FFO as presented is in accordance with the recommendations of the Real Property Association of Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of ("REALPac"). It may not, however, be comparable to similar measures presented by other real estate investment trusts. The following is the calculation of FFO based on the industry's standard definition:
Three months ended Six months ended
June 30 June 30
FFO/Net Income Reconciliation: 2005 2004 2005 2004
---------------------------------------------------------------------
---------------------------------------------------------------------
Net Income (per financial
statements) $2,008 $3,275 $2,423 $5,639
Adjustments to reconcile net
income to FFO:
Internalization of construction
management company - - 1,613 -
Amortization of buildings 3,653 3,134 7,276 5,844
Other amortization, excluding
amortization of furniture,
fixtures & computers 2,470 696 4,810 850
Interest on the AN Convertible
Debentures paid by units - - - 197
---------------------------------------------------------------------
Funds from operations 8,131 7,105 16,122 12,530
---------------------------------------------------------------------
---------------------------------------------------------------------
Distribution paid 7,064 6,913 14,097 12,443
---------------------------------------------------------------------
---------------------------------------------------------------------
FFO payout ratio 86.9% 97.3% 87.4% 99.3%
---------------------------------------------------------------------
---------------------------------------------------------------------
FFO per unit $0.317 $0.288 $0.630 $0.560
---------------------------------------------------------------------
---------------------------------------------------------------------
Distributions per unit $0.275 $0.275 $0.550 $0.550
---------------------------------------------------------------------
---------------------------------------------------------------------
The cash generated from operating activities, conventional mortgage financing, as well as funds from operating and acquisition facilities, have been used to meet all of the REIT's liquidity requirements during the second quarter of 2005 and were principally utilized for funding property acquisitions, repayments of debts on income-producing properties, and distributions to unitholders. Management expects to be able to continue to meet all of the REIT's ongoing obligations and to finance future growth through the issuance of new equity as well as by using conventional real estate debt, short term financing from the REIT's credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities , and the REIT's stable cash flow. The REIT currently has a theoretical acquisition capacity of approximately $127 million for growth investments, while still meeting its debt covenants. CAPITAL EXPENDITURES, LEASING COMMISSIONS AND TENANT IMPROVEMENTS Capital expenditures, leasing commissions and tenant improvements totaled $6,572 in the second quarter of 2005 (YTD: $8,794). Details to the amounts incurred are as follows:
Three months Six months
ended ended
June 30, 2005 June 30, 2005
---------------------------------------
Additions to buildings:
Redevelopment (Centre Laval) $ 3,255 $ 3,255
Parking repairs 834 854
Non-recoverable maintenance(1) (677) (338)
Recoverable maintenance 665 468
---------------------------------------
Total additions to buildings 4,077 4,239
---------------------------------------
Tenant improvements &
leasing costs:
Renewals & vacant space lease-ups 2,025 3,406
Value enhancing(2) - 197
Redevelopment 48 93
Leasing commissions 422 859
---------------------------------------
Total tenant improvements
& leasing costs 2,495 4,555
---------------------------------------
Total $ 6,572 $ 8,794
---------------------------------------
---------------------------------------
1. Reflects certain reclassifications to "Acquisitions of rental
properties" previously reflected as additions to buildings.
2. Reflects tenant improvements and leasing commissions spent
leasing-up then vacant space on properties that have been acquired
by the REIT, to the sustainable level of occupancy.
OUTSTANDING UNITS DATA As of June 30, 2005, the Nihon/Massicotte Group hold approximately 29.65% of the 25,698,972 outstanding units of the Alexis Nihon REIT. RISKS AND UNCERTAINTIES Like any real estate ownership, there are certain risk factors inherent in the normal course of business of the REIT. All immovable property In all the civil law systems, immovable property is the equivalent of "real property" in common law systems, i.e. it is land or any permanent feature or structure above or below the surface. investments are subject to elements of risk, including general economic conditions, local real estate markets, demand of leased premises premises n. 1) in real estate, land and the improvements on it, a building, store, shop, apartment, or other designated structure. The exact premises may be important in determining if an outbuilding (shed, cabana, detached garage) is insured or whether a person and competition from other available premises. The REIT is exposed to interest rate risk on its borrowings. It minimizes this risk by restricting re·strict tr.v. re·strict·ed, re·strict·ing, re·stricts To keep or confine within limits. See Synonyms at limit. [Latin restringere, restrict- : re-, total debt, excluding convertible debentures, to 60% of gross book value (65% including convertible debentures) and to 15% of gross book value on short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. floating rate borrowings. In addition, terms to maturity of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. are staggered over time and are closely matched to the remaining average lease terms. The REIT is exposed to credit risk as an owner of real estate in that tenants may become unable to pay the contracted rents. Management mitigates this risk by carrying out appropriate credit checks and related due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. on the significant tenants. Although diversified diversified (di·verˑ·s by asset class and property type, the REIT's portfolio is concentrated in the Greater Montreal Area and National Capital Region and will derive de·rive v. 1. To obtain or receive from a source. 2. To produce or obtain a chemical compound from another substance by chemical reaction. most of its income from properties located in those regions. Consequently, the market value of the properties and the income generated from them could be negatively affected by changes in local and regional economic conditions. The REIT has been structured to ensure that mandated investment guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. and operating criteria criteria (krītēr´ē  ),n. are strictly adhered to. These policies govern such matters as the type and location of properties that the REIT can acquire, the maximum leverage allowed, the requirement for appropriate insurance coverage as well as environmental policies. The REIT has maintained its ability to properly manage both operational and financial risks. The REIT's properties are leased under long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. arrangements to a diversified base of creditworthy cred·it·wor·thy adj. Having an acceptable credit rating. cred  it·wor tenants with strong covenants and are mainly financed with long-term
fixed rate mortgages.Other than as described above, no single tenant is critical to the REIT's ability to meet its financial obligations. The REIT's broad tenant base assists in attempting to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its primary goal of maintaining a predictable cash flow. Risk is further minimized min·i·mize tr.v. min·i·mized, min·i·miz·ing, min·i·miz·es 1. a. To reduce to the smallest possible amount, extent, size, or degree. b. Usage Problem To reduce. See Usage Note at minimal. through a low vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled. 2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. rate and relatively few short-to medium-term lease renewals. OUTLOOK As appropriate, the REIT intends to pursue accretive acquisitions Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. in current and adjacent markets that present favorable opportunities, with the goal of enhancing unitholder value. The current portfolio provides a strong base from which to achieve these objectives, and, with an experienced management team, the REIT is well positioned to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. opportunities. The top priority is to prudently pru·dent adj. 1. Wise in handling practical matters; exercising good judgment or common sense. 2. Careful in regard to one's own interests; provident. 3. Careful about one's conduct; circumspect. manage and maximize the value of our current portfolio. At the same time, the REIT is equally focused on aggressively managing costs and increasing operating efficiencies. The REIT's quality, well-located properties are competitively positioned in the Greater Montreal Area and National Capital Region. Professional management and a focus on service position Alexis Nihon REIT particularly well to attract and retain long-term tenants. Barring any unanticipated events, distributions to unitholders in 2005 are expected to remain at the current level. SUBSEQUENT EVENT Subsequent to June 30, 2005 the REIT has put in place a hypothecary loan amounting to $18,000 on one of the properties acquired on June 17, 2005 (2000 Halpern This page or section lists people with the surname Halpern. If an internal link for a specific person referred you to this page, you may wish to add the given name(s) to that wikilink. , St-Laurent). The loan bears interest at a rate of 4.68%, is repayable over a five year period, and has a 25-year amortization.
ALEXIS NIHON
REAL ESTATE INVESTMENT TRUST
Three Months Ended June 30, 2005
Supplemental Information Package
The Supplemental Information Package should be read in conjunction
with the Annual Report for the year ended December 31, 2004, with
the Quarterly Reports for the three months ended March 31, 2005 and
2004, June 30, 2005 and 2004 and September 30, 2004, as well as with
the Prospectus dated December 13, 2002.
Corporate Information
Head Office Quarterly Distributions
1 Place Alexis Nihon
3400 De Maisonneuve Blvd. West Quarter Distribution
Suite 1010 ----------------------------------
Montreal, Quebec Q2/05 $0.275
H3Z 3B8 Q1/05 $0.275
Q4/04 $0.275
Q3/04 $0.275
Trading Symbol Q2/04 $0.275
Toronto Stock Exchange: AN.UN Q1/04 $0.275
----------------------------------
----------------------------------
Transfer Agent
National Bank Trust Inc. Unit Trading Activity on the
1100 University Street Toronto Stock Exchange
Montreal, Quebec
H3B 2G7 High Low Close Volume
Toll-free number: 1-800-341-1419 Quarter $ $ $ (000)
----------------------------------
Q2/05 13.22 12.20 12.85 1,500
Investor Relations Contact Q1/05 13.80 11.88 12.58 2,492
Rene Fortin, CGA Q4/04 13.41 12.06 12.55 2,013
Senior Vice President and Q3/04 12.66 11.75 12.20 2,347
Chief Financial Officer Q2/04 13.69 10.35 12.10 3,031
Tel.: 514-737-3344 Q1/04 14.25 12.17 13.65 1,432
Fax: 514-931-1618 ----------------------------------
----------------------------------
Email: rfortin@alexisnihon.com Source: Toronto Stock Exchange
Research Coverage:
Scotia Capital Himalaya Jain, CFA (416) 863-7218
National Bank Financial Michael Smith, CFA (416) 869-8022
RBC Securities Neil Downey, CA, CFA (416) 842-7835
Desjardins Securities Frank B. Mayer, MA (416) 867-3764
CIBC World Markets Rossa O'Reilly, CFA (416) 594-7296
TD Securities Sam Damiani, CFA (416) 983-9640
Canaccord Capital Shant Poladian (416) 869-6595
BMO Nesbitt Burns Karine MacIndoe (416) 359-4269
Genuity Capital Markets Marc Rothschild (416) 687-5428
Selected Quarterly Information
Quarter Ended
In thousands
of dollars,
except per June 30, March 31, Dec 31, Sept 30, June 30, March 31,
unit amounts 2005 2005 2004 2004 2004 2004
--------------------------------------------------------
Revenues
From
Rental
Operations 28,856 28,988 29,254 25,425 23,281 20,790
Net Operating
Income 15,405 14,585 15,416 14,159 12,208 9,807
Net Operating
Income Margin 53.4% 50.3% 52.7% 55.7% 52.4% 47.2%
Net Income 2,008 415 2,634 3,075 3,275 2,364
Net Income per
unit:
Basic 0.078 0.016 0.103 0.121 0.133 0.118
Diluted(a) 0.078 0.016 0.103 0.121 0.133 0.118
Distributable
Income 7,160 7,041 7,363 6,761 6,267 4,806
Distributable
Income Per
Unit:
Basic 0.279 0.276 0.289 0.265 0.254 0.239
Diluted 0.270 0.267 0.280 0.263 0.253 0.237
Distributions 7,064 7,033 7,017 7,013 6,913 5,530
Distributions
Per Unit: 0.275 0.275 0.275 0.275 0.275 0.275
Payout ratio
(12-month
basis) 99.3% 102.0% 105.1% 110.5% 110.3% 105.5%
Funds From
Operations 8,131 7,991 8,730 7,910 7,105 5,425
Funds from
Operations
Per Unit:
Basic 0.317 0.313 0.342 0.310 0.288 0.270
Payout ratio
(per quarter) 86.9% 88.0% 80.4% 88.7% 97.3% 101.9%
Income-producing
properties 645,884 608,753 603,689 603,723 530,922 463,742
Total Assets 710,104 661,068 663,126 670,814 564,405 479,803
Debts on
income-producing
properties 338,726 330,257 334,674 339,331 284,268 240,340
Bank
indebtedness 47,295 6,621 808 - 3,746 16,050
Convertible
debentures -
liability
component 53,401 53,369 53,338 53,296 - 12,150
Unitholders'
Equity 248,851 253,523 258,256 262,463 264,555 199,717
Number of
units at
end of
Period 25,698,972 25,515,935 25,490,022
25,668,306 25,501,890 20,118,544
Number of
options at
end of
Period 4,029,306 4,029,306 -
4,029,306 4,029,306 1,056,443
Weighted
Average
Number
of Units:
Basic 25,677,642 25,506,516 24,637,663
25,520,625 25,494,379 20,096,970
Diluted
(for net
income)
(a) 25,677,642 25,506,516 24,637,663
25,520,625 25,494,379 20,096,970
Diluted
(for
distributable
income) 29,706,948 29,535,822 25,102,034
29,549,931 26,808,283 21,153,413
(a) Convertible debentures have been excluded from the calculations
of the diluted net income per unit for all the above mentioned
periods since they are anti-dilutive.
Segmented Information
Segmented Revenues From Rental Operations
(in thousands of dollars) Q2/05 Q2/04 Change
$ $ Vs Q2/04
------------------------------------
Office 14,243 12,926 1,317
Retail 8,290 6,666 1,624
Industrial 4,959 2,364 2,595
Multi-family residential 1,364 1,325 39
------------------------------------
Total 28,856 23,281 5,575
------------------------------------
------------------------------------
Segmented Net Operating Income
(in thousands of dollars) Q2/05 Q2/04 Change
$ $ Vs Q2/04
------------------------------------
Office 7,346 6,723 623
Retail 4,471 3,548 923
Industrial 3,064 1,445 1,619
Multi-family residential 524 492 32
------------------------------------
Total 15,405 12,208 3,197
------------------------------------
------------------------------------
Segmented Gross Book Value of Income-Producing Properties
(in thousands of dollars) Q2/05 Q2/04 Q4/04 Change Change
$ $ $ Vs Q2/04 Vs Q4/04
---------------------------------------------
Office 306,019 281,097 301,076 24,922 4,943
Retail 182,750 162,873 180,161 19,877 2,589
Industrial 149,160 62,710 106,381 86,450 42,779
Multi-family
residential 34,428 34,148 34,300 280 128
---------------------------------------------
Total 672,357 540,828 621,918 131,529 50,439
---------------------------------------------
---------------------------------------------
Segmented Net Book Value of Income-Producing Properties
(in thousands of dollars) Q2/05 Q2/04 Q4/04 Change Change
$ $ $ Vs Q2/04 Vs Q4/04
---------------------------------------------
Office 292,281 275,944 291,564 16,337 717
Retail 175,347 159,975 174,997 15,372 350
Industrial 145,410 61,598 103,991 83,812 41,419
Multi-family
residential 32,846 33,405 33,137 (559) (291)
---------------------------------------------
Total 645,884 530,922 603,689 114,962 42,195
---------------------------------------------
---------------------------------------------
Portfolio Summary
June 30, March 31, Dec 31, Sept 30, June 30, March 31,
2005 2005 2004 2004 2004 2004
-------------------------------------------------------
Leasable
Area
(000
square
feet)
Office 2,814 2,814 2,814 2,814 2,604 2,257
Retail 1,434 1,434 1,432 1,432 1,235 1,041
Industrial(a) 3,711 2,758 2,532 2,532 1,564 1,358
Multi-family
residential 300 300 300 300 300 300
-------------------------------------------------------
Total 8,259 7,306 7,078 7,078 5,703 4,956
-------------------------------------------------------
-------------------------------------------------------
Number of
Properties
Office 19 19 19 19 17 15
Retail 4 4 4 4 3 2
Industrial(a) 31 28 27 27 17 16
Multi-family
residential(b) N/A N/A N/A N/A N/A N/A
-------------------------------------------------------
Total 54 51 50 50 37 33
-------------------------------------------------------
-------------------------------------------------------
Change of Leasable Area
Square feet (000) %
Q2/05 Q2/05
Vs Q4/04 Vs Q2/04 Vs Q4/04 Vs Q2/04
------------------------------------------
Office - 210 0.0% 8.1%
Retail 2 199 0.1% 16.1%
Industrial 1,179 2,147 46.6% 137.3%
Multi-family residential - - 0.0% 0.0%
------------------------------------------
Total 1,181 2,556 Total 16.7% 44.8%
------------------------------------------
------------------------------------------
Change of Number of Properties
No. of Properties %
Q2/05 Q2/05
Vs Q4/04 Vs Q2/04 Vs Q4/04 Vs Q2/04
------------------------------------------
Office - 2 0.0% 11.8%
Retail - 1 0.0% 33.3%
Industrial 4 14 14.8% 82.4%
Multi-family residential - - 0.0% 0.0%
Total 4 17 Total 8.0% 45.9%
------------------------------------------
------------------------------------------
(a) The REIT owns 25% of 102,032 square feet (3 properties) and 50%
of 308,385 square feet (4 properties).
(b) Place Alexis Nihon has been included in the office properties
category.
The office properties category includes 611,535 sq ft of office
space at Place Alexis Nihon.
The retail properties category includes 391,029 sq ft of retail
space at Place Alexis Nihon.
The multi-family residential properties category includes
300,321 sq ft of multi-family residential space at Place Alexis
Nihon.
Leasing Activities
Occupancy rate
Q2/05 Q2/04 Q4/04 Change Change
Occupancy Vs Q2/04 Vs Q4/04
---------------------------------------------------------------------
Office 86.9% 88.8% 87.1% -1.9% -0.2%
Retail 95.5% 94.4%(a) 96.6% 1.1% -1.1%
Industrial 92.4% 93.0% 89.9% -0.6% 2.5%
Multi-family
residential 98.8% 96.9% 95.8% 1.9% 3.0%
-------------------------------------------------
Total 91.3% 92.6%(a) 90.4% -1.3% 0.9%
-------------------------------------------------
-------------------------------------------------
(a) Excludes area affected by redevelopment.
Top 10 Tenants
% of Total
Revenues
---------------------------------------------------------------------
---------------------------------------------------------------------
1 Public Works & Government Services Canada 6.28%
2 LDL Logistics Dev. Corp. 2.31%
3 Richter Management Ltd. 1.92%
4 Club Monaco 1.77%
5 ISM Information Management Corporation 1.73%
6 CP Ships (Canada) Agencies Ltd. 1.70%
7 Hudson's Bay Company 1.43%
8 KSH Solutions Inc. 1.08%
9 Sico 1.03%
10 Brick 1.01%
---------------------------------------------------------------------
Total 20.26%
---------------------------------------------------------------------
---------------------------------------------------------------------
Leasing Activities
Lease Expirations and Renewals by Segment
Office Retail Industrial Total
Expiring Leases/2005
---------------------------------------------------------------------
Number of tenants 35 41 38 114
Area (Square feet) 146,680 52,523 294,242 493,445
Average net rent/square foot $ 13.59 $ 22.20 $ 5.52 $ 9.69
---------------------------------------------------------------------
Renewed Leases as at Q2
---------------------------------------------------------------------
Number of tenants 16 29 27 72
Area (Square feet) 49,800 28,141 182,575 260,516
Average net rent/square foot $ 10.76 $ 27.46 $ 6.08 $ 9.29
---------------------------------------------------------------------
New Leases as at Q2
---------------------------------------------------------------------
Number of tenants 28 13 24 65
Area (Square feet) 102,538 20,395 159,881 282,814
Average net rent/square foot $ 13.88 $ 19.07 $ 6.09 $ 9.85
---------------------------------------------------------------------
Lease Expirations
Office Retail Industrial Total
Number of tenants
---------------------------------------------------------------------
2006 56 29 63 148
2007 84 37 36 157
2008 67 37 36 140
2009 36 36 24 96
2010 51 38 22 111
After 66 75 16 157
---------------------------------------------------------------------
Area (square feet)
---------------------------------------------------------------------
2006 264,099 39,156 830,828 1,134,083
2007 525,994 76,354 413,663 1,016,011
2008 397,708 397,910 365,157 1,160,775
2009 175,383 143,285 262,421 581,089
2010 323,065 142,897 670,351 1,136,313
After 694,890 615,117 639,748 1,949,755
---------------------------------------------------------------------
Weighted Average Net Rent
(per square foot)
---------------------------------------------------------------------
2006 $ 9.98 $ 28.04 $ 5.20 $ 7.10
2007 $ 10.87 $ 18.50 $ 5.10 $ 9.10
2008 $ 11.68 $ 4.98 $ 5.11 $ 7.31
2009 $ 9.98 $ 12.65 $ 5.19 $ 8.48
2010 $ 10.89 $ 17.50 $ 4.67 $ 8.05
---------------------------------------------------------------------
Weighted Average Term to Maturity on Existing Leases 4.86 years
Debt Summary
Debt Maturities
Year Amount % of Total Debt Average
$ Outstanding Rate
---------------------------------------------------------------------
2005 17,498,365 5.20% 6.91%
2006 4,396,528 1.31% 7.30%
2007 84,142,783 24.99% 6.59%
2008 54,649,389 16.23% 6.44%
2009 52,852,309 15.70% 5.53%
After 123,179,028 36.58% 6.25%
-------------------------------------------------
336,718,402 100.00% 6.30%
-------------------------------------------------
-------------------------------------------------
Weighted average term: 5.46 years
Financing Activities Subsequent to June 30, 2005, the REIT obtained a new mortgage on an income-producing property for an amount of $18,000,000. The mortgage bears interest at 4.68% and is repayable over five years. In addition, the REIT completed the acquisition of three industrial income-producing properties. The REIT assumed a mortgage of $7,704,201 (FMV FMV - full-motion video $7,769,490) on one property bearing interest at 5.82% maturing February 1, 2009, and obtained a mortgage of $3,937,500 bearing interest at 4.98% maturing July 1, 2015 on a second property. A mortgage was obtained on the third property subsequent to year end as was previously described above. During the six months ended June 30, 2004 there were repayments of four mortgages amounting to approximately $2,868,000. At current gross book value, the REIT's maximum borrowing capacity is $126,800,000. Financing Capacity As at June 30, 2005, debt (excluding convertible debentures) /gross book value ratio: 51.8% As at June 30, 2005, debt (including convertible debentures) /gross book value ratio: 59.0%
Ratio analysis
June 30, March 31, Dec 31, Sept 30, June 30, March 31,
2004 2005 2004 2004 2004 2004
----------------------------------------------------------
Debt to
gross book
value
(excluding
convertible
debentures) 51.8% 48.9% 49.2% 49.7% 50.2% 52.7%
Debt to gross
book value
(including
convertible
debentures) 59.0% 56.6% 57.0% 57.5% 50.2% 52.7%
Interest
coverage ratio 2.29 2.31 2.41 2.46 2.64 2.28
Alexis Nihon Real Estate Investment Trust (TSX:AN.UN) |
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