Artis Real Estate Investment Trust has decided if it can't buy as many commercial properties as it would like this year, it will build them instead.
CEO Armin Martens told industry analysts Friday the Winnipeg-based trust expects to spend only between $100 million and $200 million on new acquisitions in 2014. That compares to the usual $400 million to $600 million.
He said not only is there a dearth of quality properties to choose from in Canada, but capitalization rates -- the ratio between the net operating income produced by an asset and the original price paid to acquire it -- on commercial properties are also at an all-time low.
So instead of relying mainly on acquisitions to grow its property portfolio, the trust is developing more properties on its own, Martens said.
For example, Artis recently completed a $21.7-million, 87,000-square-foot retail complex at its Linden Ridge Shopping Centre in southwest Winnipeg and built a US$13-million, 185,407-square-foot industrial building in the Minneapolis-St. Paul area.
It has another $100 million worth of projects under construction and another $100 million worth in the works.
The projects already underway include a five-storey office building in downtown Winnipeg as part of Artis's and Longboat Development Corp.'s 311 Portage Avenue at Centrepoint project.
Projects in the works include a 600,000-square-foot industrial complex planned for a 19.4-hectare property Artis recently acquired in Phoenix. Martens said work on the first phase of that development should be underway by summer.
Although good investment properties are hard to come by now, he said Artis officials are keeping their eyes peeled for opportunities, especially in the U.S., where cap rates are more favourable.
Friday's conference call with analysts was held to discuss Artis's first-quarter financial results, released Thursday. The trust reported a 13.7 per cent increase in overall revenue for the quarter and an 8.1 per cent increase in net operating income from its properties. It said overall revenue climbed to $123.7 million from $108.8 million in the first quarter of 2013, and property net operating income rose to $77.3 million from $71.5 million.
Funds from operations, the term trusts use to indicate their financial performance, grew 6.4 per cent to $47.6 million from $44.8 million. However, diluted funds from operations per unit declined 5.3 per cent to 36 cents from 38 cents.
"We're very pleased with the results," Martens said.