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Press release from Marketwire

Retrocom Mid-Market REIT Announces Third Quarter 2010 Financial Results

Thursday, November 11, 2010

Retrocom Mid-Market REIT Announces Third Quarter 2010 Financial Results16:01 EST Thursday, November 11, 2010TORONTO, ONTARIO--(Marketwire - Nov. 11, 2010) - NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY NON-CANADIAN SOURCERetrocom Mid-Market Real Estate Investment Trust (TSX:RMM.UN) (the "REIT") announced today its financial results for the third quarter ended September 30, 2010.HighlightsCompleted equity offering of 4.6 million UnitsCompleted internal reorganization to be SIFT legislation compliantCommenced revitalization projects at three propertiesEnhanced liquidity positionOperational & Financial SummaryOn October 19, 2010, the REIT completed a public offering of 4,600,000 Units (inclusive of 600,000 Units issued pursuant to the exercise in full of the underwriters' over-allotment option) for gross proceeds of $23 million. This equity offering together with the $22.8 million convertible debenture issuance in July, 2010, the REIT has raised aggregate gross proceeds of $45.8 million of capital, which positions the REIT to take advantage of, and implement growth initiatives. Effective October 31, 2010, the REIT completed the planned internal reorganization (as detailed in the REIT's Management Information Circular dated May 27, 2010) to permit the REIT to better operate within the REIT conditions and not be subject to SIFT tax commencing January 1, 2011, provided that the REIT qualifies for the REIT conditions at all times. The reorganization restructured the REIT's subsidiaries by winding-up the Retrocom Mid-Market Subsidiary Trust so that the REIT now holds the interest in Retrocom Limited Partnership directly. At Wheatland Mall in Swift Current, Saskatchewan, we are proceeding with a redevelopment plan of approximately $4 million that will include a new Giant Tiger as anchor. In addition, the remainder of this enclosed shopping centre will be converted into an unenclosed community centre and will be remerchandised. At Southland Mall in Regina, Saskatchewan, we have launched a multi-year revitalization project of approximately $15 million which will include extensive upgrades to the interior and exterior of the centre. Landlord's work is also currently underway for the new 98,000 square foot full service Zellers with a target opening in April, 2011. At Lincoln Value Centre in St. Catharines, Ontario, the REIT announced on August 31, 2010 a development plan which will extend over the next three years and include the conversion of our anchor tenant Walmart into a Walmart Supercentre and upgrades to the property. The total investment is estimated to be approximately $11 million. The portfolio occupancy rate decreased during the third quarter to 84.4% as at September 30, 2010, compared to 87.0% at the end of the second quarter 2010 and 89.9% as at the 2009 year end. This decrease since 2009 year end was mainly the result of Zellers not renewing its lease at Lansdowne Plaza effective August, 2010 and Walmart leaving Southland Mall at the end of May, 2010. While the majority of the Walmart premise at Southland Mall has been leased to Zellers, we are actively marketing the Zellers space at Lansdowne Plaza as a repositioning opportunity for the property. Factoring in the committed leases that become effective in 2011, occupancy would be at 87.4%. Same Property Net Operating Income ("NOI") for the third quarter was $7.7 million, approximately $0.2 million higher than the same quarter in 2009 mainly due to the receipt of lease surrender fees and offset partially by the impact of higher vacancy. For the nine months ended September 30, 2010, same property NOI increased year over year by approximately $0.8 million primarily due to the receipt of lease surrender fees and lower bad debt provisions. Funds from Operations ("FFO") for the three months ended September 30, 2010 was $2.2 million ($0.08 per unit, adjusted for non-controlling interest), as compared to $3.2 million ($0.11 per unit, adjusted for non-controlling interest) for the same period in 2009. The decrease in FFO of $1.0 million was mainly the result of an increase of $0.3 million interest expense due to the new 6.75% convertible debenture issuance in July 2010 and an increase of $0.7 million in trust expenses mainly due to non-recurring SIFT restructuring and IFRS conversion costs and the severance cost related to executive management changes, totaling approximately $0.6 million. Same property NOI increase of $0.2 million for the quarter was offset by the impact of property dispositions in 2009. Excluding the non-recurring trust expenses, third quarter FFO would be $2.8 million ($0.10 per unit, adjusted for non-controlling interest). FFO for the nine months ended September 30, 2010 was $9.3 million ($0.34 per unit, adjusted for non-controlling interest) compared to $9.9 million ($0.36 per unit, adjusted for non-controlling interest) for the same period in 2009. FFO decreased by $0.6 million as a result of increased trust expenses of $0.8 million, increased interest expense of $0.5 million and the impact of property dispositions of $0.2 million in 2009, partially offset by a same-property NOI increase of $0.9 million related to lower bad debt provisions than in 2009. The REIT maintains its strong liquidity position. As of today's date, the REIT has cash on hand of approximately $40 million and a $20 million operating line which remains undrawn. The REIT has repaid or refinanced two out of three maturing mortgages in 2010. The remaining maturing mortgage represents a further refinancing opportunity to strengthen the REIT's liquidity position and to lower interest expenses. The average cost of mortgage debt at the third quarter end was 6.22%, slighter higher than the 6.18% at the third quarter end of 2009. The REIT's leverage ratio, including convertible dentures, was 56.3% as at September 30, 2010, well within the 70% permitted under the REIT's trust indenture. On August 20, 2010, the REIT relocated its head office to the SmartCentres' head office building in Vaughan, Ontario, further promoting strategic synergies with the development and leasing teams of SmartCentres. Richard Michaeloff, President and CEO of the REIT, said, "We remain optimistic about the recovery of the retailing environment in general and more specifically, the leasing at our properties in 2011 and anticipate improved metrics as we execute on our renovation and redevelopment plans at several of our malls. With our enhanced liquidity, we are also able to pursue opportunities to grow the REIT further through strategic and accretive acquisitions."Financial Highlights(all amounts in $000's, exceptThree months ended Sept 30Three months ended Sept 30Nine months ended Sept 30Nine months ended Sept 30 per unit amounts and ratios)2010 (1)2009 (1)2010 (1)2009 (1)Rental revenue and other income14,56014,43344,77344,772Property operating expenses6,8356,88220,80621,699Net operating income (2)7,7257,55123,96723,073Trust expenses1,4557753,2062,431Income before interest, depreciation & amortization6,2706,77620,76120,642Interest4,0523,71211,48810,952Depreciation & amortization4,2735,08513,92515,120Loss before income tax, non-controlling interest and discontinued operations(2,055)(2,021)(4,652)(5,430)Future income tax recovery-321-2,093Loss before non-controlling interest and discontinued operations(2,055)(1,700)(4,652)(3,337)Non-controlling interest6786671,5351,792Loss before discontinued operations(1,377)(1,033)(3,117)(1,545)Discontinued operations-68-1,394Net income (loss)(1,377)(965)(3,117)(151)Funds From Operations (FFO) (3)2,2183,1669,2739,906FFO per Unit (adjusted for conversion of non-controlling interest)0.080.110.340.36FFO payout ratio based on accrued distributions1.400.981.010.94Distributions -accrual basis3,1093,1089,3269,325Full Financial Results and MD&A will be available on SEDAR (www.sedar.com) as well as the Investors Relations section of the REIT's website (www.rmmreit.com).(1)Based on unaudited financial statements.(2)A non generally accepted accounting principle ("GAAP") measurement, calculated by the REIT as rental revenue (net rents, property tax and operating cost recoveries, as well as other miscellaneous income from tenants) less operating expenses from rental properties.(3)The reconciliations from Net income (loss) to Funds From Operations are included in the REIT's MD&AThe REIT's management considers Net Operating Income and Funds From Operations to be indicative measures in evaluating the REIT's performance. The table above includes non-GAAP information that should not be construed as an alternative to net earnings or cash flows from operations and may not be comparable to similar measures presented by other issuers as there is no standardized meaning prescribed by GAAP.About Retrocom Mid-Market REITRetrocom Mid-Market REIT is an Ontario unincorporated open-end real estate investment trust which focuses on owning and acquiring mid-market properties in primary and secondary cities across Canada with the objective of producing a geographically diversified portfolio of properties with stable and growing cash flows.This document may contain forward-looking statements, which although based on Management's best estimates as well as the current operating environment are subject to risks and uncertainties. As such, terms such as "anticipate", "believe", "expect", "plan" or other similar words should be taken as forward-looking statements. As a result of these potential uncertainties, any future results could differ materially from the predictions listed herein. Although Retrocom makes every effort to meet our predictions as listed in this document, we are unable to control certain circumstances such as economic, competitive or commercial real estate conditions.This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of a prospectus, nor shall there be any sale of the Units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such state, province or other jurisdiction. The Units of the Retrocom Mid-Market REIT have not been, and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered, sold or delivered in the United States absent registration or an application for exemption from the registration requirements of U.S. securities laws.FOR FURTHER INFORMATION PLEASE CONTACT: Richard MichaeloffRetrocom Mid-Market Real Estate Investment TrustChief Executive Officer(416) 741-7999(416) 741-7993 (FAX)rmichaeloff@rmmreit.com