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Press release from Marketwire

Dundee REIT Posts Strong Results and Transforms Company With $1.5 Billion in Acquisitions During the Last 18 Months

Thursday, February 24, 2011

Dundee REIT Posts Strong Results and Transforms Company With $1.5 Billion in Acquisitions During the Last 18 Months14:46 EST Thursday, February 24, 2011TORONTO, ONTARIO--(Marketwire - Feb. 24, 2011) -This news release contains forward-looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this press release.DUNDEE REIT (TSX:D.UN) today posted strong financial results for the quarter and year ended December 31, 2010. Dundee REIT's management team will be holding a conference call to discuss the results on Friday, February 25 at 9:00 a.m. (EST). To access the conference call, please dial 416-340-2216 in Toronto and overseas or 1-877-240-9772 elsewhere in Canada and the United States. A taped replay of the call will be available from February 25, 2011 at 11:00 a.m. (EST) to March 25, 2011 at 11:59 p.m. (EST). Please dial 905-694-9451 or 1-800-408-3053 and use passcode 7758605 to access the replay. The call will also be available via webcast at www.dundeereit.com.HIGHLIGHTS Strong operations: Occupancy rate remains high at 96.1% 57% growth in net operating income ("NOI") over the comparative quarter22ndconsecutive quarter of comparative NOI growth $922 million of acquisitions completed in 2010 across Canada and another $462 million closed subsequent to year-endSolid financial position:Enterprise value of $3.1 billion; quality of cash flows significantly improved$593 million of equity raised in 2010 and an additional $144 raised in February 20115.43% weighted average interest rate; 2.8 times interest coverage ratioOperating at target debt level of 54%Selected Financial Information (unaudited) ($000's except unit and per unit amounts)Three Months Ended Dec. 31, 2010Three Months Ended Sept. 30, 2010Three Months Ended Dec. 31, 2009Year Ended Dec. 31, 2010Year Ended Dec. 31, 2009Rental property revenues$81,162$72,806$50,156$279,352$192,083Net operating income ("NOI")(1)48,48444,79030,791172,398120,954Funds from operations ("FFO")(2)30,38127,53217,363105,07167,633Adjusted funds from operations ("AFFO")(3)25,24521,59013,03383,57249,783Book value of rental properties1,955,9801,734,1251,181,058Debt1,296,8511,105,752857,060Cash117,304109,78612,022Per unit data (basic)FFO0.660.660.702.713.04AFFO0.550.520.522.162.24Distributions0.550.550.552.202.20Units (period end)REIT Units, Series A45,896,20341,949,02421,247,397REIT Units, Series B16,31616,31616,316LP Class B Units, Series 13,481,7333,475,4963,454,188Total number of units49,394,25245,440,83624,717,901Occupied and committed space96.1%97.1%95.4%Office95.8%96.6%96.7%Industrial96.9%98.5%90.6%"The last 18 months transformed Dundee REIT. We have doubled the size of our portfolio, increased its geographic diversification and more than quadrupled our market cap," said Michael Cooper, Chief Executive Officer.FINANCIAL HIGHLIGHTS NOI up 57%to $48.5million – rental properties NOI increased by 57% and 43% for the three- and twelve-month periods, respectively, reflecting contributions from acquisitions as well as comparative property growth. Comparative properties NOI up 1% to $27.7 million – comparative NOI increased by 1% and 2% over the three- and twelve-month periods, respectively, reflecting improvements in most geographic regions. This highlights the continued strength of the Trust's portfolio and marks its 22nd consecutive quarter of comparative property growth. Adjusted funds from operations increased by 94% to $25.2 million – AFFO increased by 94% and 68% over the three- and twelve-month periods,respectively, primarily due to acquisitions. On a per unit basis, AFFO increased by 6% over the comparative quarter, mainly as a result of accretive acquisitions. For the twelve-month period, AFFO decreased by 4% on a per unit basis due to carrying excess cash on the Trust's balance sheet. "Over the last 18 months, we've made accretive acquisitions financed with long term debt at historically low rates. Our NOI comes from high quality buildings and is diversified across the country. With an enterprise value in excess of $3.1 billion and a significant number of assets with growth potential, we continue to improve the quality of our cash flows, providing our unitholders with stable and predictable distributions," said Mario Barrafato, Chief Financial Officer.ACQUISITION HIGHLIGHTSIn 2010, the Trust completed $922 million of acquisitions, followed by another $462 million to date in 2011, as highlighted in the table below.AcquisitionsProperty TypeApprox. GLA (sq. ft.)Purchase Price ($000's)DateCap rat (2)Total Closed in Q1 - Q3 2010Office / Industrial3,571,696639,550(1)7.9Q4 2010236 Brownlow Avenue, Dartmouthoffice60,7397,455October 5, 2010970 Fraser Drive, Burlingtonindustrial95,4447,090October 19, 20102200 & 2204 Walkley Road, Ottawaoffice156,55123,653November 2, 20102625 Queensview Drive, Ottawaoffice46,1568,656November 5, 201030 Simmonds Drive, Dartmouthindustrial37,2401,621November 22, 2010105 Akerley Boulevard, Dartmouthindustrial57,5243,101November 22, 20104259-4299 Canada Way, Burnabyoffice118,53626,280December 15, 20102665 Renfrew Street, Vancouveroffice81,66234,649December 21, 2010AFIAA Portfolio, Toronto, Mississauga and Calgaryoffice198,39245,348December 21, 201010250–101 Street, Edmontonoffice296,96184,619December 22, 2010100 Gough Road, Torontooffice111,84030,475December 30, 2010580 Industrial Road, Londonindustrial113,5959,674December 30, 2010Total Closed in Q4 20101,374,468$282,621(1)7.0Saskatoon Square, Saskatoon,office209,60050,000January 4, 2011400 Cumberland Street, Ottawaoffice174,92138,300January 17, 2011Realex Properties Corp.office/ industrial1,837,300373,400February 8, 2011Total Closed in 2010 and to date in 20117,167,985$1,383,8717.71. Purchase price includes transactions costs2. Cap rates are based on acquisition prices"We have been very successful in acquiring properties at attractive cap rates. Due to the unusual market conditions, we were able to add a significant number of high quality downtown office properties to our portfolio. In addition, we acquired two buildings, 10250–101 Street in Edmonton and Saskatoon Square, with notable NOI growth potential. Excluding these two properties, the cap rate for acquisitions closed in 2010 and 2011 would have been 7.9%. Going forward, we will continue to seek and find external growth opportunities that provide increased value to our business," said Michael Cooper.OPERATIONAL HIGHLIGHTSPortfolio occupancy remains strong at 96.1% – the overall percentage of occupied and committed space remains solid at 96.1%. Comparative occupancy increased marginally year-over-year to 95.9% from 95.4% in December 2009. "We are pleased with our fourth quarter results. Our portfolio continues to have a track record of stability, consistently operating at an occupancy level near 96%," said Michael Knowlton, Chief Operating Officer.OccupancyDec. 31, 2010Sept. 30, 2010Dec. 31, 2009British Columbia96.0%96.5%95.3%Alberta93.2%94.9%95.2%Saskatchewan & NWT97.4%97.5%98.7%Eastern Canada97.8%98.0%99.1%Total Office95.8%96.6%96.7%Industrial96.9%98.5%90.6%Total Portfolio96.1%97.1%95.4%CAPITAL INITIATIVESNew equity issues – On December 21, 2010, the Trust completed its fifth equity offering in 2010 and issued 3,864,000 REIT A Units at a price of $29.85 per unit for gross proceeds of $115.3 million, increasing the equity raised in 2010 to $593 million. Subsequent to year-end, the Trust completed another public offering and issued 4,749,500 REIT A Units at a price of $30.30 per unit for gross proceeds of $143.9 million. Debt – During the quarter, the Trust placed $121.8 million of new mortgages at an average interest rate of 4.27% and assumed $77.2 million of debt at an average interest rate of 4.96%, further reducing the Trust's overall weighted average interest rate to 5.43% (September 30, 2010 – 5.63%; December 31, 2009 – 5.75%) and its interest coverage ratio increased marginally to 2.8 times (September 30, 2010 – 2.7 times; December 31, 2009 – 2.3 times). The Trust's debt-to-gross book value was 51.9% as at December 31, 2010 (September 30, 2010 – 50.4%; December 31, 2009 – 59.3%). Subsequent to year-end, the Trust deployed cash on hand and assumed $210 million of debt and is now operating at a debt level of 54%. Information appearing in this news release is a select summary of results. The financial statements and management's discussion and analysis for the Trust, as well as its Supplementary Information Package are available at www.dundeereit.com and on www.sedar.com.Dundee REIT is an unincorporated, open-ended real estate investment trust and provides high quality, affordable business premises. It is focused on owning, acquiring, leasing and managing mid-sized urban and suburban office and industrial properties in Canada. Dundee REIT's portfolio currently consists of approximately 14.5 million square feet of gross leasable area across Canada. Dundee REIT's portfolio is well diversified by geographic location and tenant mix. For more information, please visit www.dundeereit.com.FOOTNOTES(1)NOI – rental property operating revenue less rental property operating expenses excluding discontinued operations.(2)FFO - net income, adjusted for future income tax, depreciation and amortization, provision for impairment in value of discontinued assets, loss on sale, and other amortization from continuing and discontinued operations.(3)AFFO – distributable income (as defined in Dundee REIT's Declaration of Trust) adjusted for the Trust's estimates of normalized leasing costs and normalized non-recoverable recurring capital expenditures.NOI, FFO and AFFO are key measures of performance used by real estate operating companies; however, they are not defined by generally accepted accounting principles (GAAP), do not have standard meanings and may not be comparable with other industries or income trusts.This press release may contain forward-looking information within the meaning of applicable securities legislation. Forward looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dundee REIT's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate functions. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward-looking information in this press release speaks as of the date of this press release. Dundee REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in Dundee REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dundee REIT's website at www.dundeereit.com.FOR FURTHER INFORMATION PLEASE CONTACT: Michael J. CooperDundee REITVice Chairman and Chief Executive Officer(416) 365-5145mcooper@dundeereit.comORJ. Michael KnowltonDundee REITPresident and Chief Operating Officer(416) 365-2325mknowlton@dundeereit.comORMario BarrafatoDundee REITSenior Vice-President and Chief Financial Officer(416) 365-4132mbarrafato@dundeereit.com