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Press release from CNW Group


Tuesday, November 02, 2010

KILLAM PROPERTIES INC. ANNOUNCES THIRD QUARTER RESULTS, INCLUDING FFO OF $0.22 PER SHARE AND 5.6% SAME STORE NOI GROWTH FOR THE NINE MONTHS ENDED SEPTEMBER 30, 201017:26 EDT Tuesday, November 02, 2010HALIFAX, Nov. 2 /CNW/ - Killam Properties Inc. ("Killam" or the "Company") (TSX:KMP/KMP:DB) today announced its financial results for the third quarter ended September 30, 2010.Highlights of Killam's Third Quarter Financial ResultsGenerated funds from operations ("FFO") of $0.22 per share, consistent with $0.22 per share earned during the third quarter of 2009. The weighted average shares outstanding were 17.0% higher in the third quarter of 2010, compared to the third quarter of 2009.Increased FFO by 17.9% to $9.9 million.Increased same store net operating income ("NOI") by 1.8% during the third quarter. Same store NOI increased 5.6% for the nine months ended September 30, 2010.Achieved same store revenue growth of 2.4%.Maintained high occupancy rates, ending the third quarter with occupancy at 98.5%.Maintained a stable balance sheet with $17.3 million of cash-on-hand at September 30, 2010 and debt as a percentage of the gross book value of assets of 63.8% at September 30, 2010, compared to 65.6% at September 30, 2009 and 65.2% at December 31, 2009.Financial Highlights (in thousands, except FFO per share) For the three months ended,Sept 30, 2010Sept 30, 2009ChangeRental Revenue$29,744$26,80811.0%Income from Property Operations$19,424$17,54410.7%Net Income Before Tax and Depreciation$9,425$7,86119.9%Net Income$1,344$597125.1%Funds from Operations$9,911$8,40517.9%Funds from Operations per Share$0.22$0.22-Shares Outstanding (weighted average)44,84738,34417.0%    For the nine months ended,Sept 30, 2010Sept 30, 2009ChangeRental Revenue$83,595$77,6797.6%Income from Property Operations$52,428$47,28810.9%Net Income Before Tax and Depreciation$23,277$18,09628.6%Net Income (Loss)$1,128($1,671)n/aFunds from Operations$24,856$19,92324.8%Funds from Operations per Share$0.58$0.563.6%Shares Outstanding (weighted average)42,87735,49320.8%    Balance Sheet as at,Sept 30, 2010Dec 31, 2009ChangeTotal Assets$842,109$739,37313.9%Total Liabilities$631,535$562,17112.3%Total Shareholders' Equity$210,574$177,20218.8%Debt as a % of Gross Book Value of Assets63.8%65.2%(140 bsp)FFO of $0.22 Per Share in the Third QuarterKillam generated $9.9 million in FFO, equivalent to $0.22 in FFO per share, during the third quarter, compared to $8.4 million in FFO, and $0.22 in FFO per share, during the third quarter of 2009. The increase in FFO was primarily attributable to earnings from the $102.3 million in acquisitions completed during the first nine months of 2010, the positive NOI growth from Killam's same store portfolio and lower interest costs associated with the same store portfolio and the subordinated debentures. The per-share result of this growth was negatively affected by the 17% increase in shares outstanding, following the $50.6 million equity raise in March 2010.Management considers FFO per share to be a key measure of operating performance and believes that many industry analysts and shareholders also find this measure of value. The Company provides the components of FFO and reconciliation between FFO and net income in its Management's Discussion and Analysis. FFO is a generally accepted measure of operating performance for real estate companies; however, it is a non-GAAP measurement and readers are cautioned that Killam's calculation of FFO may be different than that used by other companies. Killam calculates FFO as net income plus depreciation and amortization, stock compensation and non-cash debenture interest, less gains on debt retirement and future income tax recovery.NOI Growth of 1.8% From Same Store PropertiesKillam's same store portfolio, representing 96% of the total portfolio on a unit count basis, achieved 1.8% NOI growth during the third quarter, comprised of 2.1% growth for the apartment portfolio and 1.0% for the manufactured home community ("MHC") portfolio.The same store apartment portfolio generated a 2.1% increase in operating revenue due primarily to increased rents, up an average of 2.4%, compared to the third quarter of 2009. Total property expenses increased 2.1% during the third quarter. A modest 1.5% increase in operating expenses and a 0.7% savings in utility costs moderated the 5.4% increase in property taxes. Property tax expense in the third quarter reflects the finalized annual increases in property tax assessments for the 2010/2011 municipal tax year.The MHC portfolio realized a 1.0% increase in same store NOI in the third quarter. Revenues increased by 3.2%, due primarily to growth in average rental rates. MHC property expenses were up 8.0% in the quarter, including a 3.6% increase in operating expenses, an 18.6% increase in utility costs and an 8.2% increase in property taxes. Higher utility costs reflect the impact of credits for electricity billings included in the third quarter of 2009, and increased water and electricity costs.Consolidated same store NOI increased by 5.6% for the nine months ended September 30, 2010, including 6.0% for the apartment portfolio and 4.4% for the MHC portfolio. On a consolidated basis, revenues increased by 3.0%, due primarily to higher rental rates, and expenses decreased by 1.1% as higher property taxes were more than offset by a reduction in fuel costs. Management maintains its same store NOI growth target of 4% to 6% for the year.Low Vacancy RatesKillam continues to maintain low vacancy at its properties. Consolidated vacancy was 1.5% at September 30, 2010, compared to 1.3% at September 30, 2009.As at the end of the third quarter, the apartment portfolio had a vacancy rate of 1.9% with an average monthly rent of $802 and the MHC portfolio had a vacancy rate of 1.0% and an average monthly rent of $230. The apartment vacancy was 10 basis points higher than the vacancy of 1.8% at September 30, 2009. Included in the vacancy statistics that follow are Killam's three new Ontario properties. Historically, after Killam acquires a property, there is increased tenant turnover as the building converts to Killam's management and operating platform. Leasing activity has been strong at the newly acquired properties and the vacancy rate is expected to normalize over the next few quarters.Not included in the MHC vacancy percentage on the following chart are 161 MHC sites that had not been previously rented, including some expanded sites, and 376 transient sites in Killam's seasonal resort portfolio.Units Vacancy AverageRentApartments     Nova Scotia4,400 1.6% $823New Brunswick3,360 2.4% $730Newfoundland732 1.2% $646Prince Edward Island686 0.9% $816Ontario362 6.1% $1,493Total Apartment Portfolio   9,540 1.9% $802Total MHC Portfolio9,290 1.0% $230Stable Earnings from Home Sales Earnings attributable to Killam's new home sales business were relatively flat compared to the third quarter of 2009. Killam completed 7 home sales and earned 7 home placement fees during the third quarter, compared to 13 home sales and 3 home placement fees during the same period last year. Home sales and home placements in the quarter included sales in Ontario, Nova Scotia and Western Canada.For the nine months ended September 30, 2010, Killam completed 22 home sales and earned home placement fees on 15 other new homes. This compares with 20 home sales and 8 home placement fees earned during the first nine months of 2009. The average sale price and margin on the home sales, year-to-date, are $108,800 and $17,000, respectively. The average fee earned on home placements, year-to-date, is $4,500.Balance SheetAt the end of the third quarter the Company's debt as a percentage of the gross book value of assets was 63.8% compared to 65.2% as at December 31, 2009.  Management's target debt ratio is between 65% and 70%. Killam's annualized interest coverage ratio was 2.0 at the end of the quarter, compared to 1.8 as at December 31, 2009. Killam's September 30, 2010 weighted average interest rate on mortgages improved to 5.0%, compared to 5.2% as at December 31, 2009. The weighted average years to maturity on mortgage debt was 4.1 years as at September 30, 2010, consistent with the weighted average years to maturity as at December 31, 2009.Acquisitions UpdateKillam increased its ownership in Garden Park Apartments in Halifax, Nova Scotia, to 46% during the third quarter with a $1.6 million investment for an additional 6.6% of the 246-unit building. During the first nine months of the year Killam completed $102.3 million in apartment acquisitions, with a focus on new, high-quality construction.Killam is pleased to announce today's purchase of 19 Plateau Crescent Apartments, a 5-storey, 81-unit concrete building located adjacent to three other Killam apartment properties in Halifax. This acquisition completes Killam's ownership of the 4-property, 314-unit, cluster of apartments in the Clayton Park area of Halifax. The building includes 28 one-bedroom units, 27 two-bedroom units, 25 three-bedroom units and 1 bachelor unit, and has an average monthly rent of $720 per unit. The purchase price of $5.6 million ($69,100 per unit), reflecting a capitalization rate of approximately 6.75%, was satisfied with a new ten-year CMHC insured mortgage for $4.2 million at 3.76% and the balance in cash. Year-to-date, Killam has completed $107.9 million of acquisitions.New Apartment Construction UnderwayOn September 28, 2010 Killam announced the start of construction of Charlotte Court, a 98-unit apartment complex in Charlottetown, Prince Edward Island. Phase 1 of the project, a 49-unit building, is currently underway and is expected to be ready for occupancy in July 2011.Killam has made progress in the planning of two other proposed multi-residential development projects on excess land in its apartment portfolio, including one location in Halifax and one in Fredericton, New Brunswick, with development expected to start in 2011.Management's Comments"We are pleased to report strong operating results with high occupancy levels and the ability to grow rents, leading to same store property NOI growth" noted Philip Fraser, Killam's President and Chief Executive Officer. "Both our apartments and MHCs have performed well during the first nine months of 2010 with same store NOI growth. Demand remains strong for quality rental accommodations across our portfolio.""A priority during the third quarter was the incorporation of the $100 million of new acquisitions into our portfolio, and developing our Ontario apartment operations team. We continue to explore additional acquisition opportunities with an active acquisition pipeline and look forward to growing both Killam's Atlantic Canadian and Ontario apartment portfolio.""We are enthusiastic to have started the development of Charlotte Court in Charlottetown, Prince Edward Island, expected to be the first of a number of new developments over the next few years. We believe that our focus on new, quality properties, both through acquisition and development, will enhance the long-term strength and stability of Killam."Financial StatementsKillam's September 30, 2010 Financial Statements and Notes and Management's Discussion and Analysis can be found at Quarter Conference CallManagement will host a conference call to discuss Killam's third quarter results on Wednesday, November 3, 2010 at 11:00 AM Atlantic time(10:00 AM Eastern). The dial-in numbers for the conference call are 647-427-7450 (in Toronto) or 888-231-8191 (toll free, within North America).A live audio webcast of the conference call will be accessible on the Company's website at and at replay will be available by dialing 416-849-0833 (Toronto) or 800-642-1687 (toll-free) and using the passcode 15642954 until November 11, 2010, and on the Company's website for 90 days after the conference call.Corporate ProfileKillam Properties Inc, based in Halifax, Nova Scotia, is one of Canada's largest residential landlords, owning and operating multi-family apartments and manufactured home communities.Note: The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.  Certain statements in this report may constitute forward-looking statements relating to our operations and the environment in which we operate, which are based on our expectations, estimates, forecast and projections, which we believe are reasonable as of the current date.  Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of Killam to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For more exhaustive information on these risks and uncertainties, you should refer to our most recently filed annual information form which is available at Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made and should not be relied upon as of any other date.  Other than as required by law, Killam does not undertake to update any of such forward-looking statements.%SEDAR: 00014891EFor further information: Killam Properties Inc. Dale Noseworthy, CA, CFA   Vice President, Investor Relations and Corporate Planning Phone: (902) 442-0388