Message from Management
As a new normal sets in, operations have largely stabilized from the uncertainty caused by the COVID-19 pandemic. Residential vacancies that were vacant for longer periods of time due to the pandemic have been filled, while unit turnover has slowed down compared to previous years. Our current vacancy rate of 1.7% is below our target and represents units that are being renovated. All available units have been rented. After losing some commercial tenants earlier in the year, the existing tenant base has remained stable. Management is confident in the processes that were put in place to deal with COVID-19 and remains vigilant as cases in British Columbia are on the rise.
Insurance has been a challenge across the real estate spectrum, and AIE REIT is also affected. Premiums have increased dramatically as certain providers exit the market. These increases in operating costs put pressure on future net operating income growth since annual rental increases are capped and turnovers are down as people move less during the pandemic. Management is focused on finding creative solutions to this challenge.
Management still believes in the fundamentals of investing in Vancouver Island and is focusing on growing the portfolio by taking advantage of low interest rates and our operational efficiencies in our core markets.
If you are aware of a larger real estate acquisition opportunity in the Ladysmith to Campbell River region – let us know.
Portfolio Overview – September 30, 2020
- Residential vacancy was 1.7% for September 2020.
- Commercial vacancy was at 14.5% but dropped to 12.1% in November due to the a new long-term tenancy that commenced November 1st.
- Management closed a $4.5M CMHC financing with People’s Trust in October at a 10-year fixed rate of 1.69%.
- Our current cash balance is at $7.6M, earmarked for two acquisitions that are in advanced stages:
- $1.6M commercial building in the Comox Valley
- $7.8M 48-unit multi-family building in Campbell River
- Additional cash will be raised against these assets, allowing for further expansion through accretive purchases.
October Rent Collection
- Less than 1% of residential rents are outstanding due to late payments and/or COVID-19 related deferrals.
- Management remains positive about the continued stability of our residential tenant base.
- Rent was received for all 14 commercial tenants in October.
- A quarterly distribution of 9.975 cents per Unit was made in October.
- The next quarterly distribution is expected to be made in December, prior to year end, for unitholders on record on December 21, 2020.
(1) As of September 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.
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.