Solid Financial Position
As at December 31, 2012 the REIT's ratio of debt to gross book value improved to 49.3% (62.4% including convertible debentures) compared to 62.9% (73.0% including convertible debentures) at December 31, 2011. Interest coverage and debt service coverage ratios improved to 2.30 times and 1.55 times, respectively, as at December 31, 2012 from 1.70 times and 1.26 times as at December 31, 2011. During 2012 the REIT acquired, assumed and increased mortgages totaling approximately $71.3 million on properties acquired during the period. Overall, the REIT's mortgage portfolio incurred a weighted average effective interest rate of 4.48% at December 31, 2012, an improvement from4.95% as at December 31, 2011, with a weighted average term to maturity of approximately 3 years. Over the next two years, the REIT has approximately $28.9 million of debt maturing which carries an average effective interest rate of 4.83%. Management expects to refinance this debt at lower interest rates, positively impacting the REIT's future cash flows. Interest expense savings from refinancing at current market rates are anticipated to continue through 2013 and into the following year.
On March 12, 2013 the REIT completed a bought-deal offering of $20.0 million of convertible unsecured subordinated debentures. On March 19, 2013, the REIT issued an additional $3.0 million of the convertible debentures on the exercise of the over-allotment option. The debentures have a maturity date of March 31, 2018, a coupon of 5.5% per annum, and will pay interest semi-annually in arrears on March 31 and September 30 each year commencing on September 30, 2013. Each $1,000 principal amount of debentures is convertible into approximately 97.561 units of the REIT at any time, at the option of the holder, representing a conversion price of $10.25 per unit. The net proceeds will be used to fund future acquisitions, repay existing debt, and for general trust purposes.
On February 19, 2013 the REIT announced that it would be acquiring the Mariner Square Shopping Centre, a 97.8% occupied six-building open-air retail centre aggregating approximately 101,000 square foot of GLA situated in downtown Campbell River on the east coast of Vancouver Island. The REIT will pay approximately $25.8 million for the property, satisfied by the assumption of a $14.7 million current mortgage maturing in November 2017 bearing a mark-to-market interest rate of 3.5%, with the balance in cash. The centre is estimated to generate current in-place annualized Net Operating Income of approximately $1.7 million and $0.8 million in annualized Funds from Operations. The transaction is expected to close on or before April 15th, 2013.
On January 10, 2013 the REIT completed a bought-deal offering of 3,363,750 units, including an over-allotment option, at $7.70 per unit representing gross proceeds of approximately $25.9 million. Net proceeds from the offering were used to repay approximately $6.9 million of debt drawn on the REIT's credit facility used to complete the Nun's Island acquisition (see below), to fund future acquisitions, and for general trust purposes.
On January 17, 2013 the REIT announced it had entered into agreements to acquire four newly-constructed, necessity-based, open-air retail centres and one stabilized retail centre in the Greater Montreal region totaling approximately 286,500 square feet of GLA. The Portfolio has an economic occupancy of 93.3% with nearly 50% of the floor space and income generated by national and regional tenants on long-term leases. The five properties are estimated to generate annualized Net Operating Income of approximately $4.85 million and $2.70 million in annualized Funds from Operations. On March 18, 2013, the REIT announced the completion of two of the properties totaling approximately $26.2 million, funded by cash.
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