Message from Management
Considering the uncertainty from COVID-19, Management is satisfied with the Q2 outcomes. For our residential properties, we are pleased that vacancy rates are currently at 1.2%, lower than our 2% goal, with minimal deferrals. The majority of our commercial assets are performing well, with the exception of retail tenant properties, in respect of which we are currently submitting applications for Canada Emergency Commercial Rent Assistance (CECRA) funding.
Although the duration of this pandemic is currently unknown, Management has confidence in the quality of our underlying assets, the processes that are in place, and, above all, in the fundamentals of investing on Vancouver Island.
To this effect, Management is shifting from a more defensive stance to a more growth oriented position. When long term interest rates dropped, Management took advantage of the situation by raising debt on unencumbered assets while also generating cash on refinancing at underwriting rates below 2%. Management believes that locking in these rates for 10 years will be accretive to equity returns as the excess cash is deployed.
Portfolio Overview – June 30, 2020
- The residential occupancy rate was 96.3% for the year to June, and has increased to 98.8% for August
- Management is working to achieve maximum rent values upon
turnover, which may result in a month delay to lease up - Commercial vacancy was at 14.5%
Capital Update
- An equity raise of $3.0M closed mid-June 2020
- Net proceeds are expected to be used to acquire additional properties, as opportunities arise
- To date, an average blended 10-year CMHC secured underwriting rate of 1.97% on $7,792,200 of debt raised and refinanced
- Management is in the process of raising around $4.0 million in
additional debt against unencumbered assets at more favourable rates
July Rent Collection
- Less than 1% of residential rents are outstanding due to deferrals
- Management remains positive about the continued stability of our
residential tenant base - Rent was received for all of AIE REIT’s 14 commercial tenants in July
Unitholder Distributions
- A quarterly distribution of 9.975 cents per Unit was made in July
- The next quarterly distribution is expected to be made in October for all unitholders on record September 30, 2020
(1) As of June 30, 2020.
(2) AFFO Payout ratio is a non-IFRS measure used to evaluate the Trust’s ability to cover its distributions.
(3) An annualized return based on a single unit investment in the AIE REIT, inclusive of unit price changes and distributions.
Legal Disclaimers
These materials are not to be distributed, reproduced or communicated to a third party without the express written consent of All Island Equity REIT. These materials should be read in conjunction with the Trust’s Offering Memorandum dated May 12, 2020, including the risk factors identified therein. This letter has been provided for general information purposes only and is not intended to be a solicitation to purchase Units of AIE REIT or advice regarding the suitability of the investment for specific investors. This letter contains forward-looking statements. These statements relate to future events or the Trust’s views or predictions of possible future performance, operations, acquisitions and strategy based on assumptions and expectations which may not prove to be accurate. Such forward-looking statements involve risks, uncertainties and other factors, including the impact, severity and duration, of COVID-19, which may cause actual results, performance or achievements of AIE REIT to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For more information on these risks and uncertainties, you should refer to the Trust’s most recent Offering Memorandum. Any opinions expressed herein are effective as at the date of the letter. Management does not undertake to notify the reader of any subsequent change of circumstance or opinion unless required by law. Past results are not indicative of future performance. There is no assurance that the properties acquired by the Trust will perform as expected. NAV and AFFO are not measures recognized under IFRS and does not have standardized meaning prescribed by IFRS. The Trust’s calculation of NAV, AFFO, and Annualize Returns may differ from other REITs.