Dundee International REIT Continues Strong Acquisition Pace in Germany

Dundee International REIT Continues Strong Acquisition Pace in Germany and Reports Solid Third Quarter Results

doubleU, Derendorfter Allee 4, Dusseldorf 
 
 Dundee International REIT  reported its quarterly financial results for the period ended September 30, 2012.
 
 
HIGHLIGHTS
$125 million of office properties under contract in Berlin and Hamburg at an average cap rate of 7.4%
Attractive cap rate/interest rate spreads - acquisition of doubleU financed at 2.09%
$9 million of strategic dispositions closed or under contract
Finalized terms of revolving credit facility, providing additional financing of up to €45 million
58,000 square feet of net absorption in Q3
Quarterly results in line with expectations - AFFO of $0.21/unit
 
ACQUISITIONS
 
 
During the third quarter, the Trust acquired doubleU, a high-quality multi-tenant office building located at Derendorfer Allee 4 in Düsseldorf for approximately $57 million. The building was completed in early 2012, is well located and is leased for an average of over seven years to a variety of fashion and creative tenants, with MEC GmbH, one of the world's largest media companies, occupying the majority of the space. The property was acquired at a cap rate of 6.4% and the Trust obtained mortgage financing at a 58% loan-to-value with a face rate of 2.09%.
 
Year to date, the Trust has completed or has under contract approximately $280 million of office properties comprising close to 1.2 million square feet of high quality office space in Germany's top ten markets at an average cap rate of 7.2%.
 
The Trust currently has approximately $125 million of properties under contract at an average cap rate of 7.4%, an average occupancy of 91% and an average remaining lease term of 5.7 years.
Acquisitions under contract   Approx. GLA
(sq. ft.) Cap rate
(%) Estimated
closing
Greifswalder Strasse 154-156, Berlin 250,500 7.2 Q4 2012
Am Sandtorkai 37, Hamburg   113,400 8.2 Q4 2012
Hammer Strasse 30-34, Hamburg   172,300 6.9 Q1 2013
   
Total under contract 536,200 7.4  
 
DISPOSITIONS
As part of the Trust's asset management strategy, a number of assets have been identified for disposition. During the quarter, the sale of a small asset was finalized for approximately $1.1 million. In addition, five properties are currently under contract for sale for an aggregate amount of $7.9 million.
 
OPERATING AND FINANCIAL HIGHLIGHTS
    For the three months ended
September 30, 2012(1) For the nine months ended
September 30, 2012(1)
Operations     
Occupancy rate (period-end) 82%   
In-place rent per square foot $ 7.60   
Operating results     
Investment properties revenue $ 33,765 $ 102,735 
Net rental income 21,741 63,382 
Funds from operations ("FFO") (2) 12,443 35,972 
Adjusted funds from operations ("AFFO")(3) 11,862 34,277 
Financing     
Weighted average interest rate (period-end) 4.12% 4.12%
Interest coverage ratio 3.08 times 2.96 times
Per unit amounts     
Basic:     
FFO(2) $ 0.22 $ 0.65 
AFFO(3) 0.21 0.62 
Distribution rate 0.20 0.60 
Basic (excluding impact of undeployed cash) :  
FFO(2) 0.25 0.75 
AFFO(3) 0.24 0.72 
In-place rents - In-place rents in our office segment have increased significantly in the third quarter largely due to the acquisition of doubleU in Düsseldorf in July 2012. In-place rents in the mixed use and industrial segments remain below market rents, allowing for rental uplifts as space gets renewed or re-leased. Overall, average market rents in our portfolio remain approximately 6.5% above in-place rents.
September 30, 2012
   
Property type Owned GLA
(sq. ft.) Weighted
average
occupancy Average
remaining lease
term (years) In-place rent
(per sq. ft.) Market rent
(per sq. ft.)
Office 1,516,881 80.2% 6.66 $ 13.14 $ 12.78
Mixed use 9,161,336 81.1% 5.28 7.09 7.64
Industrial 2,247,035 88.1% 5.55 6.11 6.92
   
Total 12,925,252 82.2% 5.49 $  7.60 $  8.09
Funds from operations - FFO for the three months ended September 30, 2012 was $12.4 million or $0.22 per unit. Excluding the impact of undeployed cash to be used for acquisitions, FFO per unit would be $0.25 per unit.
 
Adjusted funds from operations - AFFO for the three months ended June, 2012 was $11.9 million or $0.21 per unit. Excluding the impact of undeployed cash, AFFO per unit would be $0.24 per unit.
 
CAPITAL INITIATIVES
Equity - On October 31, 2012, the Trust had 61,004,768 units outstanding. At the October 31st closing price of$11.15 per unit, the Trust's market capitalization was $680 million.
 
Public offering of units - On September 5, 2012, the Trust closed a public offering of units at $10.55 per unit pursuant to which it issued 4,420,000 Units, including the exercise of an over-allotment option of 1,020,000 Units, and the holder of the Exchangeable Notes exchanged the equivalent of $34.0 million of their remaining Exchangeable Notes into 3,400,000 Units, both of which were sold to the syndicate of underwriters.
 
Financing - During the third quarter, the Trust obtained mortgage financing for doubleU in Düsseldorf in the amount of $32.2 million (€26.0 million) at a face rate of 2.09%.
 
On September 27, 2012, the Trust finalized the terms for a revolving credit facility with a Canadian bank, providing additional financing capacity of €10 million of operating funds and up to €35 million as a bridge-to-mortgage financing.
 
Key performance indicators with respect to the Trust's financing activities are:
  September 30, 2012 December 31, 2011  
Financing activities  
Weighted average interest rate 4.12% 4.36%  
Level of debt (debt-to-book value) 55% 56%  
Interest coverage ratio 2.96 times 2.67 times  
Debt-to-EBITDFV (years) 8.7 8.0  
Debt - average term to maturity (years) 4.3 5.1  
Variable rate debt as percentage of total debt 13% 15%  

on November 5, 2012