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Press release from Marketwire

Partners REIT Announces Continued Strong Growth in Second Quarter 2012

Tuesday, August 14, 2012

Partners REIT Announces Continued Strong Growth in Second Quarter 201219:15 EDT Tuesday, August 14, 2012VICTORIA, BRITISH COLUMBIA--(Marketwire - Aug. 14, 2012) - Partners Real Estate Investment Trust, (TSX:PAR.UN) announced today continued strong growth and solid performance for the three and six months ended June 30, 2012.2012 HIGHLIGHTS:Purchase of nine retail and mixed use properties year-to-date for total acquisition costs of $143.5 million significantly expands and strengthens portfolio; Portfolio growth and solid increase in year-to-date same property Net Operating Income fuel significant and accretive increases in Funds from Operations and Adjusted Funds from Operations; Strengthened balance sheet and liquidity position with the asset acquisition from NorRock Realty Finance Corporation (the "NorRock transaction") on February 1, 2012; Successful completion of two bought deal equity offerings raise $42.8 million in net proceeds to fund growth; Balance sheet and liquidity position remain strong with conservative debt and coverage ratios;"We continued to expand the size and scale of our growing property portfolio in the second quarter, generating strong and sustainable increases in our cash flows," commented Adam Gant, Chief Executive Officer. "Looking ahead, we expect our performance will continue to improve as our recent acquisitions make a full contribution to our results, our portfolio continues to grow through targeted strategic and accretive acquisitions, and our property management activities result in enhanced occupancies and average monthly rents."Significant GrowthDuring the first six months of 2012 the REIT acquired nine well-located retail and mixed-use properties in British Columbia, Alberta, Ontario and Quebec aggregating approximately 569,000 square feet of gross leasable area ("GLA") for a total purchase price of approximately $143.5 million. The acquisitions were funded by the a new credit facility of $14.0 million bearing interest at 3.6%, the acquisition of new and the assumption of existing mortgages totaling $66.4 million bearing effective interest rates of between 3.58% and 4.3%, $56.2 million in proceeds from the acquisition of NorRock Realty Finance Corporation in the first quarter of 2012, and a portion of the net proceeds from two equity offerings completed on February 8, 2012 and June 13, 2012.With these acquisitions, the REIT's portfolio at June 30, 2012 consisted of 30 well-located retail and mixed-use properties in Ontario, Quebec, Manitoba, British Columbia and Alberta aggregating approximately 2.2 million square feet of GLA.Strong Operating PerformanceWeighted average occupancy at June 30, 2012 was 94.1% compared to 98.3% last year. The difference results from occupancies at recently acquired properties and ongoing re-positioning and redevelopment initiatives within the existing portfolio. These differences include:Acquisition of a portfolio of six properties from Bentall which were 86% occupied at the time we acquired them. We are actively marketing the vacant units at these six properties and have agreed to several new leases that will commence later this year. As part of our long term plan to reposition Mega Centre Cote Vertu, we chose not to renew two tenants who together occupied 60,000 sq.ft. We are in active negotiations with a major national tenant who we expect will occupy 90,000 sq.ft. At Place Val Est we are in the process of preparing a 9,559 sq.ft. space for Dollar Tree which had been demised into eight separate units, and in the process we have relocated and terminated several small tenants.Net Operating Income ("NOI") increased to $7.3 million and $13.1 million in the second quarter and first six months of 2012, respectively, compared to $3.7 million and $6.7 million in the prior year due primarily to the contribution from acquisitions completed over the prior twelve months. Same property NOI for the first half of 2012 rose approximately 1.1% due primarily to higher occupancies and increased base rent revenue. Same property NOI in the second quarter of 2012 declined by approximately 2.0% due primarily to reduced base rent and occupancy at one property resulting from management's proactive repositioning initiatives.Funds from Operations ("FFO") more than doubled to $3.4 million ($0.18 per unit) and $5.9 million ($0.36 per unit) for the three and six months ended June 30, 2012, respectively, compared to $1.2 million ($0.15 per unit) and $2.3 million ($0.30 per unit) for the same comparable periods last year. The increases were due primarily to the contribution from acquisitions completed over the prior twelve months. The REIT's FFO payout ratio improved to 86% and 88% in the three and six months ended June 30, 2012, respectively, compared to 99% and 103% in the same periods last year.Adjusted Funds from Operations ("AFFO") also rose significantly to $3.1 million ($0.16 per unit) and $5.4 million ($0.33 per unit) for the three and six months ended June 30, 2012, respectively, from $1.0 million ($0.13 per unit) and $2.0 million ($0.26 per unit) for the same prior-year periods. The AFFO payout ratio improved to 95% and 97% in the three and six months ended June 30, 2012, respectively, compared to 121% and 116% in the same periods last year. The REIT's growth has been accretive on a per Unit basis through the first six months of 2012 despite the 114% increase in the weighted average number of units outstanding as at June 30, 2012 compared to the same time last year.The REIT's growth has been accretive on a per Unit basis through the first six months of 2012 despite the 114% increase in the weighted average number of units outstanding as at June 30, 2012 compared to the same time last year. Active LeasingManagement remains committed to actively pursuing new leases and lease renewals with the objective of increasing occupancy and weighted average rental income per square foot of gross leasable area. One of the REIT's goals is to generate organic growth through redevelopment and lease renewal activities at its existing centres. As at August 14, 2012 the REIT had lease renewals and new leases of 77,100 square feet. The weighted average rent, including any material new and renewed leases completed by August 14, 2012, was $13.86 per square foot, an increase of $3.18 per square foot from the weighted average rent for leases that expire during the year.Solid Financial PositionAs at June 30, 2012 the REIT's ratio of debt to gross book value improved to 54.5% (60.9% including debentures) compared to 62.9% (73.0% including debentures) at December 31, 2011. Interest coverage and debt service coverage ratios improved to 1.89 times and 1.37 times, respectively, as at June 30, 2012 from 1.70 times and 1.26 times as at December 31, 2011. During the first six months of 2012 the REIT acquired, assumed and increased mortgages totaling approximately $66.4 million on properties acquired during the period. Overall, the REIT's mortgage portfolio incurred a weighted average effective interest rate of 4.63% at June 30, 2012, an improvement from the 4.95% 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 $21.0 million of debt maturing which carries an average effective interest rate of 5.91%. 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 2012 and into the following year.Recent EventsOn April 30, 2012 the REIT completed the acquisition of Grand Bend Towne Centre, a 41,605 square foot centre comprised of a Sobeys grocery store with a lease extending to April 2023 and a Shoppers Drug Mart with a lease extending to September 2017. The property will also include a 6,100 square foot LCBO scheduled for construction completion in May 2013 with a lease extending until May 2028. The REIT paid $9.3 million for the property, satisfied by the assumption of an existing mortgage of approximately $3.3 million, originally maturing July 2017, with an effective interest rate of 3.85%.The mortgage was increased by approximately $1.6 million at an interest rate of 3.6% and will mature with the original mortgage. The balance of the acquisition was satisfied by the REIT's available funds on hand.On June 15, 2012 the REIT completed the acquisition of Washington Park Shopping Centre, a two building 32,912 square foot open-air shopping centre located in Courtenay, British Columbia. The centre is anchored by a Tim Hortons and TD Bank. The centre is 100% occupied with approximately 45% of rental income derived from national and regional tenants, and is estimated to generate approximately $770,00 in annualized NOI and $480,000 in annualized FFO. The REIT paid $11.95 million for the property, funded by $7.5 million in debt with interest at 3.84% with a 5-year term and a 25-year amortization period, the balance with cash from a bought-deal equity offering discussed below.On June 13, 2012, the REIT completed a bought-deal equity offering of 3.1 million units (including an over-allotment option of 405,750 units) at $7.40 per unit for total proceeds of $23.0 million, not including issue costs of $1.3 million. The net proceeds were used to pay a loan facility entered into in connection with certain property purchases, and to partially fund the acquisition of the Washington Park Shopping Centre discussed above.Investor Conference CallA conference call to discuss the recent operating and financial results will be hosted by Adam Gant, Chief Executive Officer, Patrick Miniutti, President and Chief Operating Officer and Tony Quo Vadis, Chief Financial Officer, on Monday August 15, 2012 at 2:00 pm ET (11.00 am PT). The telephone numbers for the conference call are Local / International: (416) 849-2698 and North American Toll Free: (866) 400-2270. The telephone numbers to listen to the call after it is completed (Instant Replay) are Local / International (416) 915-1035 or North American toll free (866) 245-6755. The Passcode for the Instant Replay is 744532#. A recording of the call will also be available on the REIT's web site at www.partnersreit.com.Financial HighlightsAs at and for the three months endedAs at and for the six months endedThree months endedJun 30, 2012June 30, 2011Jun 30, 2012June 30, 2011Revenues from income producing properties$11,301,599$5,578,270$20,379,557$10,538,002Net income and comprehensive income3,582,9581,011,4257,189,4672,079,363Net income per unit - basic & diluted0.190.130.430.27NOI (1)7,349,4043,658,05513,137,3806,664,552NOI - same property (1)3,489,3213,560,0365,793,2845,729,622FFO(1)3,425,3431,196,3815,936,4582,304,213FFO per unit(1)0.180.150.360.30AFFO(1)3,099,135979,9405,382,6992,035,010AFFO per unit(1)0.160.130.320.26Distributions(2)3,091,9651,240,5535,434,7722,479,196Distributions per unit(2)0.160.160.320.32Cash distributions(3)2,939,8471,185,2795,205,1202,363,355Cash distributions per unit(3)0.160.150.310.31Cash distribution payout ratio(4)86% / 95%99% / 121%88% / 97%103% / 116%As atJun 30, 2012Dec. 31, 2011June 30, 2011Total assets$430,250,117$265,748,040$202,447,135Total debt(5)268,529,651202,592,032145,279,730Total equity149,220,28956,406,37453,571,730Weighted average units outstanding - basic16,560,10714,306,1307,735,904Debt-to-gross book value including debentures(5)60.9%73.0%67.6%Debt-to-gross book value excluding debentures(5)54.5%62.9%54.6%Interest coverage ratio(6)1.891.701.70Debt service coverage ratio(6)1.371.261.31Weighted average interest rate(7)4.63%4.95%5.24%Portfolio occupancy94.1%98.0%98.3%(1) Net operating income or "NOI", funds from operations or "FFO", and adjusted funds from operations or "AFFO" are non-IFRS financial measures widely used in the real estate industry. See "Part II - Performance Measurement" for further details and advisories.(2) Represents distributions to unitholders on an accrual basis. Distributions are payable as at the end of the period in which they are declared by the Board of Trustees, and are paid on or around the 15th day of the following month. Distributions per unit exclude the 5% bonus units given to participants in the Distribution Reinvestment and Optional Unit Purchase Plan.(3) Represents distributions on a cash basis, and as such, excludes the non-cash distributions of units issued under the Distribution Reinvestment and Optional Unit Purchase Plan.(4) Cash distributions as a percentage of funds from operations/adjusted funds from operations.(5) See calculation under "Debt-to-Gross Book Value" in "Part III - Results of Operations."(6) Calculated on a rolling four-quarter basis.(7) Represents the weighted average effective interest rate for secured debt excluding the credit facilities, which have floating rates of interest.For the complete Financial Statements and Management's Discussion and Analysis for the period, please visit www.sedar.com or www.partnersreit.com.About Partners REITPartners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 30 retail properties located in Ontario, Quebec, Manitoba, Alberta and British Columbia aggregating approximately 2.2 million square feet of leasable space. Partners REIT focuses on expanding and managing a portfolio of retail and mixed-use community and neighbourhood shopping centres located in both primary and secondary markets across Canada.Certain statements included in this press release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect," "will" and similar expressions to the extent they relate to Partners REIT. The forward-looking statements are not historical facts but reflect Partners REIT's current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the timing of the offering, success of the offering, listing of the units, use of proceeds of the Offering, access to capital, regulatory approvals, intended acquisitions and general economic and industry conditions. Although Partners REIT believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein.FOR FURTHER INFORMATION PLEASE CONTACT: Patrick MiniuttiPartners Real Estate Investment TrustPresident and Chief Operating Officer(250) 940-5500