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Press release from Marketwire

Partners REIT Continues Growth with Second Quarter 2013 Results

Wednesday, August 14, 2013

Partners REIT Continues Growth with Second Quarter 2013 Results

09:00 EDT Wednesday, August 14, 2013

VICTORIA, BRITISH COLUMBIA--(Marketwired - Aug. 14, 2013) - Partners Real Estate Investment Trust (TSX:PAR.UN) ("Partners", the "REIT") announced today results for the three months ended June 30, 2013 (the "second quarter").

Second Quarter Highlights

  • Increased revenues by 25% and NOI by 26%, when compared to the second quarter of 2012
  • Increased FFO by 25% and AFFO by 19%, when compared to the second quarter of 2012
  • Increased net asset value to $198 million, compared to $170 million at December 31, 2012
  • Elected new independent trustees who are committed to both internalizing management and aggressively growing the asset base
  • Closed $71.5 million of acquisitions
  • Subsequent to the quarter, announced the acquisition of Cobblestone Shopping Centre in Alberta for a purchase price of $16.6 million

"This quarter marked a major milestone in Partners' development," stated Patrick Miniutti, Partners' Chief Executive Officer. "The new trustees elected in June have a clear vision for the REIT, and are dedicated to maintaining our strategy of aggressive growth. The benefits of the REIT's acquisition strategy are clearly visible in our second quarter results. Partners' revenues, NOI, FFO, and AFFO all continue to grow, and our properties have maintained an attractive occupancy rate. Additional accretive acquisitions will further build these metrics over the latter half of 2013. Furthermore, we are pleased with the trajectory of our cash AFFO payout ratio, which, based on our current portfolio, is expected to be below 100% once a full quarter's contribution from recent acquisitions is incorporated and a large proportion of our straight line rent converts to collectible rent in the coming quarters. Over 95% of our debt is at fixed rates, and of that amount, only $57 million matures over the next two and a half years and that debt is at greater than current market rates. As a result, Partners' should not have exposure to near-term interest rate increases for the foreseeable future."

"Currently, an external management structure provides Partners with economic advantage," concluded Mr. Miniutti. "This management team is composed of real estate and financial professionals who are fully dedicated to the REIT and its success. The REIT's trustees recognize the financial and governance benefits associated with management internalization. In this regard, the independent trustees have agreed to extend the current external management agreement for a further five months and, during that period, fully evaluate the internalization process and to finalize a schedule. The timing of the internalization will be dependent on a number of factors, including the pace of acquisitions and growth of the REIT. Both internalization and further acquisition opportunities serve the same goal - the creation of the greatest possible return for Partners unitholders."

Operational and Financial Results

Partners' revenues from income producing properties for the second quarter were $14.1 million, a $2.8 million, or 25%, increase from the second quarter of 2012. This improvement was primarily due to the REIT's acquisition of eight properties subsequent to the conclusion of the second quarter of 2012, as well as the benefit of a complete quarter's contribution from two properties that were acquired during the second quarter of 2012.

Net Operating Income ("NOI") for the second quarter was $9.3 million, a $1.9 million, or 26%, increase from the second quarter of 2012. This improvement was primarily due to the impact of the REIT's acquisitions. Excluding the impact of these acquisitions, the REIT's same property NOI for the second quarter increased by 3%, when compared to the second quarter of 2012. This year over year improvement can be attributed to both improved property occupancy and increased straight-line rents.

At the conclusion of the second quarter, occupancy stood at 96.0%, a slight decrease from the 96.7% recorded at the end of 2012. This decline can be attributed to the five properties that the REIT acquired during the period, which had a weighted average occupancy of 90.9%. The impact of any vacancies at these properties is effectively offset by rental income guarantees that ensure the REIT will receive related rental revenues until any vacancies have been filled.

As at and for the three months ended As at and for the six months ended
Jun. 30, 2013 Jun. 30, 2012 Jun. 30, 2013 Jun. 30, 2012
Revenues from income producing properties $ 14,078,122 $ 11,301,599 $ 27,259,686 $ 20,379,557
Net income and comprehensive income 2,402,571 3,582,958 10,500,236 7,189,467
Net income per unit - basic 0.09 0.19 0.41 0.43
NOI(1) 9,267,740 7,349,404 17,422,751 13,137,380
NOI - same property(1) 6,991,326 6,823,437 9,848,636 9,379,230
(1) NOI, FFO and AFFO are non-IFRS financial measures widely used in the real estate industry. See "Part II - Performance Measurement" in the REIT's Management Discussion & Analysis ("MD&A") for further details and advisories.

Partners' Funds from Operations ("FFO") for the second quarter were $3.9 million, an increase of $0.8 million from the second quarter of 2012. FFO per unit decreased by $0.01 to $0.15 per unit. Adjusted Funds from Operations ("AFFO") for the second quarter were $3.6 million, an increase of $0.6 million from the second quarter of 2012. AFFO per unit decreased by $0.02 to $0.14 per unit. The improvements in both FFO and AFFO were primarily due to the impact of the REIT's acquisitions, and have been adjusted for the impact of one-time costs associated with the resolution of the recent shareholder dispute. The decreases in both FFO and AFFO per unit can be wholly attributed to a 36% increase in the weighted average number of the REIT's issued and outstanding units and the timing of equity issuances relative to the closing of the associated accretive acquisitions.

The AFFO payout ratio for the second quarter was impacted by both the timing of acquisitions and significant straight-line rent. Adjusting for full quarter's contribution from the three acquisitions that closed during the quarter (the Mariner Square Shopping Centre, Marcel-Laurin, and Repentigny Shopping Centre), the cash distribution payout ratio based on FFO and AFFO per unit would have been 95% and 102%, respectively, for the second quarter. Furthermore, management anticipates a conversion from straight-line rent to collectible rent to further reduce the REIT's AFFO payout ratio going forward. While the AFFO cash payout ratio is higher than the REIT would prefer it to be, the REIT's objective is to further reduce the AFFO cash payout ratio to approximately 90% by the end of the year in order to fully stabilize and support the current distribution. The trustees and management will continue to monitor the REIT's progress in attaining this objective.

As at and for the three months ended As at and for the six months ended
Jun. 30, 2013 Jun. 30, 2012 Jun. 30, 2013 Jun. 30, 2012
FFO(1) 3,906,056 3,127,267 7,702,665 5,390,897
FFO per unit(1) 0.15 0.16 0.30 0.32
AFFO(1) 3,628,565 3,042,452 7,011,324 5,267,027
AFFO per unit(1) 0.14 0.16 0.27 0.31
Distributions(2) 4,140,261 3,091,965 8,263,281 5,434,772
Distributions per unit(2) 0.16 0.16 0.32 0.32
Distribution payout ratio(3) 106% / 114% 99% / 102% 107% / 118% 101% / 103%
Cash distributions(4) 3,858,402 2,939,847 7,747,299 5,205,120
Cash distributions per unit(4) 0.15 0.16 0.30 0.31
Cash distribution payout ratio(5) 99% / 106% 97% / 99% 101% / 110% 97% / 99%
(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) Total distributions as a percentage of FFO/AFFO.
(4) 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.
(5) Cash distributions as a percentage of FFO/AFFO.

Financial Position

At the conclusion of the second quarter, Partners' debt to gross book value was 51.1%, or 65.9% when including convertible debentures, compared to 49.3%, or 62.4% when including convertible debentures, at the conclusion of 2012. Interest coverage and debt service coverage ratios were 2.65 times and 1.67 times, respectively, at the conclusion of the second quarter, compared to 2.30 times and 1.55 times, respectively, at the conclusion of 2012. The REIT's total debt at the conclusion of the second quarter was $378.0 million, an increase of $84.0 million, or 31%, compared to the conclusion of 2012. This increase can be attributed to a $23.0 million convertible debenture issuance that closed on March 5, 2013, draws of $18.0 million on the REIT's Credit Facility, and new mortgages of $58.0 million. These items were partially offset by $7.5 million of repayments on the Credit Facility, the repayment of a variable rate mortgage with a principal balance of $4.0 million, and monthly principal repayments made on the REIT's mortgages. Partners currently has mortgages with principal amounts of $24.9 million and $32.3 million with weighted average interest rates of 4.49% and 5.08% maturing in 2014 and 2015, respectively.

As at Jun. 30, 2013 Dec. 31, 2012 Jun. 30, 2012
Total assets $ 589,261,829 $ 479,068,788 $ 430,250,117
Total debt(6) 377,996,817 294,023,939 268,529,651
Total equity 198,001,004 170,064,524 149,220,289
Weighted average units outstanding - basic 25,564,016 19,164,337 16,560,107
Debt-to-gross book value including debentures(6) 65.9% 62.4% 60.9%
Debt-to-gross book value excluding debentures(6) 51.1% 49.3% 54.5%
Interest coverage ratio(7) 2.65 2.30 1.89
Debt service coverage ratio(7) 1.66 1.55 1.37
Weighted average interest rate(8) 4.31% 4.48% 4.63%
Portfolio occupancy 96.0% 96.7% 94.1%
(6) See calculation under "Debt-to-Gross Book Value" in "Part IV - Results of Operations" of the MD&A.
(7) Calculated on a rolling four-quarter basis. See definition under "Mortgages and Other Financing" in "Part IV - Results of Operations" of the MD&A.
(8) Represents the weighted average effective interest rate for secured debt excluding debentures and credit facilities.

Recent Acquisition Activity

During the quarter the REIT closed the acquisitions of the following shopping centres:

April 15, 2013: Mariner Square Shopping Centre, Campbell River in British Columbia, comprising 100,257 square feet, $25.9 million acquisition price

May 1, 2013: Repentigny Shopping Centre, Repentigny, Quebec, comprising 69,823 square feet, $9.7 million acquisition price

May 1, 2013: Marcel-Laurin, Saint Laurent, Quebec, comprising 120,238 square feet, $35.9 million acquisition price

Subsequent to the end of the second quarter, on July 23, 2013, Partners announced the acquisition of Cobblestone Shopping Centre, a 42,980 square-foot, three building open air retail centre in Grand Prairie, Alberta. The purchase price for the transaction will be approximately $16.6 million, which will be primarily satisfied through a combination of assumed and new mortgages totaling $11.3 million, maturing in January 2018, and bearing a combined effective interest rate of 4.03%. The balance of the purchase price will be satisfied with cash.

Conference Call Details

The Company will hold a conference call to discuss these results at 10:30 AM Pacific on August 15, 2013.

Dial In-Information

Toll Free (North America): 855-223-7309

Local: 647-788-4929

Replay Information (Passcode: 30534381)

Toll Free (North America): 855-859-2056

The replay will be available until August 29, 2013. A recording of the conference call will also be available via the REIT's website.

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 REIT

Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 38 retail properties located in Ontario, Quebec, Manitoba, Alberta and British Columbia aggregating approximately 2.7 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.

Disclaimer

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:

Contact Information:
Partners Real Estate Investment Trust
Patrick Miniutti
CEO
(250) 940-5500
www.partnersreit.com

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