Partners Real Estate Investment Trust (TSX VENTURE:PAR.UN)
announced today solid growth for the three and nine months ended
September 30, 2011. Effective November 3, 2010, the name of Charter
Real Estate Investment Trust was changed to Partners Real Estate
Investment Trust. All references to "Partners Real Estate
Investment Trust", "Partners REIT", the "REIT" and similar
references in this press release refer to Charter Real Estate
Investment Trust prior to the name change. In addition, effective
January 1, 2011 the REIT adopted International Financial Reporting
Standards ("IFRS"). Please refer to the REIT's Management
Discussion and Analysis and the condensed consolidated financial
statements for the three and nine months ended September 30, 2011
for a comprehensive description of the changes arising from the
transition.
THIRD QUARTER HIGHLIGHTS:
-- Occupancies up significantly to 98.2% as at September 30, 2011 from
95.2% for the same period last year
-- NOI rises 62% and FFO up 34% on contribution from acquisitions and
improved same property performance
-- Net Asset Value ("NAV") at September 30, 2011 is $1.76 per unit
-- Acquisition of properties in Quebec and British Columbia strengthen and
further diversify portfolio
-- New debt reduces average effective interest rate to 5.42% as at
September 30, 2011from 5.88% for the same period last year
-- Focus on growing Unitholder value through accretive acquisitions and
enhanced property performance continues
-- Proposed acquisition of assets of NorRock Realty Finance Corporation to
enhance liquidity position
"Our strong operating and financial performance in the third
quarter of 2011 clearly demonstrates that our growth strategies are
working," commented Adam Gant, Chief Executive Officer. "The ten
properties acquired over the last year are making a solid and
accretive contribution to our results, while our proven leasing and
property management programs are generating solid same property
growth. We look for these trends to continue in the quarters
ahead."
Strong Operating Performance Continues
Weighted average occupancy at September 30, 2011 increased
significantly to 98.2% from 95.2% at the same time last year. The
increase is due to strong occupancies at recently acquired
properties, with seven of the ten properties acquired over the
prior twelve months having occupancy of 100%, and solid leasing
activity through the balance of the REIT's portfolio.
Net Operating Income ("NOI") increased 62% to $4.1 million in
the third quarter of 2011 from $2.5 million in the same prior-year
period. For the nine months ended September 30, 2011 NOI increased
48% to $10.8 million from $7.3 million in the same period last
year. The increases were due primarily to the contribution from
recent acquisitions and growth in same property NOI, which
increased 5.3% and 2.5% for the three and nine months ended
September 30, 2011, respectively, compared to the same prior-year
periods.
Funds from Operations ("FFO") rose to $1.3 million ($0.04 per
unit) in the third quarter of 2011 from $0.9 million ($0.04 per
unit) in the third quarter of the prior year. For the first nine
months of 2011, FFO increased to $3.6 million ($0.12 per unit) from
$2.6 million ($0.13 per unit) in the same period last year. The
increases were due primarily to the contribution from acquisitions
in the period and increases in same property NOI. Per unit amounts
were impacted by the 31.8% and 53.3% increase in the weighted
average number of units outstanding for the three and nine months
ended September 30, 2011, respectively, compared to the same
prior-year periods, due to equity offerings completed in July 2010
and December 2010. Management believes per unit amounts will
improve over time as recent acquisitions make a full contribution
to FFO.
Active Leasing Across Portfolio
Management 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 of November 10, 2011 The REIT had lease renewals of
approximately 44,000 square feet, and new signed leases of
approximately 33,000 square feet; which is 13,000 square feet in
excess of the anticipated lease expiries for the year. Management
expects the portfolio's occupancy rate to improve over the
remainder of 2011 from property acquisitions as well as new and
renewed leases.
Debt Coverage Highlights
As at September 30, 2011 the REIT's ratio of debt to gross book
value was 73.3% compared to 55.0% at December 31, 2010. Subsequent
to the completion of the arrangement with NorRock, the gross book
value of the assets is anticipated to increase from $270,652,755 to
$323,370,323 (the original cost of income producing properties plus
book value of all other assets as at September 30, 2011). The
debt-to-gross book value ratio is anticipated to decrease from
73.3% to 61.3% based on the combination of the mortgages payable,
bank credit facility and debentures which aggregate to $198,264,829
excluding deferred financing costs, the fair value of the
debentures' convertible feature, the fair value of the embedded
derivatives, and unamortized above market interest rate
adjustments.
Interest coverage and debt service coverage ratios remained a
conservative 1.65 times and 1.26 times, respectively. During the
first nine months of 2011 the REIT acquired and assumed mortgages
totaling $58.1 million on the nine properties acquired during the
year. Overall, the REIT's mortgage portfolio incurs a weighted
average effective interest rate of 5.42% at September 30, 2011,
down from 5.88% as at September 30, 2010, with a weighted average
term to maturity of approximately four years.
Recent Events
On July 14, 2011, the REIT acquired a second mortgage from
Mortgage Fund Three in the amount of $4.0 million. This mortgage is
secured by the REIT's Shoppers Drug Mart properties in Manitoba. It
is an interest only loan maturing April 30, 2013 and bears interest
at a floating rate equal to prime rate plus 4%.
On August 31, 2011, the REIT completed the acquisition of Place
Desormeaux, a 250,000 square foot enclosed shopping centre in
Longueuil, Quebec on the south shore of the Greater Montreal
Region. The REIT paid approximately $32.2 million for the property
with approximately $3.6 million in additional acquisition and
capital improvement costs to be incurred in the future. The
purchase was funded by a $23.0 million loan from OMERS
Administration Corporation, secured by the property, with a three
year term and bearing contractual interest at a rate of 4.05%. The
balance of the purchase price was funded by a portion of the $13.5
million, three year revolving loan facility from Firm Capital
Corporation, secured against the REIT's portfolio of properties.
The revolving loan facility bears a floating interest rate that is
the greater of 9.00% or the TD Canada Trust Posted Bank Prime Rate
of Interest plus 4.00%.
On September 1, 2011, the REIT completed the acquisition of the
Evergreen Shopping Centre, a five building 88,200 square foot
open-air shopping centre located in Sooke, British Columbia
approximately 37 kilometers west of Victoria. The shopping centre
was acquired for $15.9 million and was funded by a new $10.5
million five-year mortgage on the property with a contractual
interest rate of 3.8%. The balance of the purchase price was paid
in cash from the REIT's bank credit facility.
On October 12, 2011, the REIT refinanced its property located in
Chateauguay, Quebec. The loan is secured by a first mortgage on the
property. The loan amount is for $11 million, bears interest at a
rate equal to 3.4%, with a term to maturity of 5 years. The REIT
used $8.6 million of the loan proceeds to pay down the previous
first mortgage.
On October 17, 2011, the REIT announced that an acquisition
agreement was entered with NorRock Realty Finance Corporation
("NorRock"), whereby Partners REIT will acquire all the assets of
NorRock in exchange for the issuance of Partners REIT units,
certain rights to acquire Partners REIT units and cash. On the
closing of the proposed transaction, Partners REIT will pay for the
cash and cash equivalents held by NorRock, currently valued at
approximately $38.3 million. In addition, Partners REIT will pay
for the non-cash assets of NorRock through an initial payment of
$12.6 million, subject to any required adjustments. To the extent
that the assets are sold prior to closing, the amount of the net
proceeds will be deducted from the assets at closing and added to
the cash at closing. After closing, Partners REIT may retain or may
sell the non-cash assets acquired from NorRock. The acquisition is
expected to be completed in December, 2011.
The REIT has had discussions with the Toronto Stock Exchange
about obtaining a TSX listing for the REIT units. Any listing on
the TSX would be subject to fulfilling the conditions of the TSX
and there can be no assurance that the REIT will be able to do so.
Subject to the satisfaction of several conditions that are expected
to be imposed upon such listing, if approved, it is anticipated
that this change in listing will occur in the first half of
2012.
"The proposed NorRock acquisition will provide Partners REIT
with the financial resources and flexibility to continue acquiring
accretive retail real estate assets while at the same time
substantially expanding our investor base," Mr. Gant concluded.
Investor Conference Call
A conference call to discuss the recent operating and financial
results will be hosted by Adam Gant, Chief Executive Officer and
Patrick Miniutti, President and Chief Operating Officer, on Monday
November 14, 2011 at 3:00 pm ET. The telephone numbers for the
conference call are Local: (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 (416) 915-1035 or
North American toll free (866) 245-6755. The Passcode for the
Instant Replay is 426392#. A recording of the call will also be
archived on the REIT's website at www.partnersreit.com.
Financial Highlights
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As at and for the three As at and for the nine
months ended months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2011 2010 2011 2010
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NOI(1) $ 4,137,945 $ 2,498,519 $ 10,802,497 $ 7,325,831
NOI - same property(1) 2,630,849 2,498,519 7,509,907 7,325,831
FFO(1) 1,262,428 940,313 3,602,159 2,602,438
FFO per unit(1) 0.04 0.04 0.12 0.13
Net income 2,113,239 2,522,061 4,192,601 2,122,821
Net income (loss) per
unit 0.07 0.13 0.14 0.13
Distributions(2) 1,243,624 1,029,665 3,722,820 2,513,965
Distributions per
unit(2) 0.04 0.04 0.12 0.12
Cash distributions(3) 1,162,701 867,554 3,526,056 2,225,963
Cash distributions per
unit(3) 0.04 0.04 0.11 0.11
Total assets 256,486,723 134,894,045 256,486,723 134,894,045
Total debt(4) 197,559,240 85,207,938 197,559,240 85,207,938
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Debt-to-gross book
value(5) 73.3% 57.5% 73.3% 57.5%
Interest coverage
ratio(6) 1.65 1.67 1.65 1.67
Debt service coverage
ratio(6) 1.26 1.36 1.26 1.36
Weighted average
interest rate(7) 5.42% 5.88% 5.42% 5.88%
Portfolio occupancy 98.2% 95.2% 98.2% 95.2%
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(1) Net operating income or "NOI" and funds from operations or "FFO" are
non-IFRS financial measures widely used in the real estate industry.
See "Part III - Performance Measurement" of the MD&A 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) Includes secured debt, unsecured debt and bank credit facility.
(5) See calculation under "Debt-to-Gross Book Value" in "Part V - Results
of Operations."
(6) Calculated on a rolling four quarter basis.
(7) Represents the weighted average effective interest rate for secured
debt excluding the bank credit facility, which has a floating rate of
interest.
For the complete third quarter 2011 financial statements and
Management's Discussion and Analysis, 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) 20 retail properties
located in Ontario, Quebec, Manitoba and British Columbia
aggregating approximately 1.6 million square feet of leaseable
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.
Non-IFRS Measures
This press release makes reference to certain financial measures
other than those prescribed by International Financial Reporting
Standards ("IFRS"). These non-IFRS measures are not recognized
under IFRS, do not have a standardized meaning prescribed by IFRS
and are therefore unlikely to be comparable to similar measures
presented by other entities. These non-IFRS measures, which include
NOI and FFO, are provided to the reader as additional information
to complement IFRS measures and to further understand the REIT's
results of operations from management's perspective and as a
supplemental measure of performance that highlights trends in the
business that may not otherwise be apparent when relying solely on
IFRS financial measures. Such non-IFRS measures should not be
considered in isolation or as a substitute for analysis of
financial information reported under IFRS. Readers should refer to
the REIT's annual information form and MD&A, which are
available on our website and on SEDAR at www.sedar.com, for
additional details regarding the determination of these non-IFRS
measures and reconciliation to financial information reported under
IFRS.
Forward-looking Statements
Certain statements included in this press release constitute
forward-looking statements, including, but not limited to, those
identified by the expressions "believe", "expect", "will", "offers
the opportunity", "intend", "look forward", "look for" 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
continuing our growth; increases in per unit amounts over time;
increasing occupancy through pursuing new leases and lease
renewals; generating organic growth through redevelopment and lease
renewal; any approval to list our units on the Toronto Stock
Exchange; our ability to obtain court, regulatory, securityholder
and other approvals for the NorRock transaction; the fulfillment of
conditions precedent to closing the NorRock transaction and the
successful completion of the transaction; our expectations
regarding an increase in funds available to Partners REIT as a
result of the acquisition, our expectations regarding the retention
or sale of the mortgages and other assets acquired by Partners REIT
in connection with the transaction with NorRock; the anticipated
value to be received by holders of NorRock Class A shares and stock
appreciation rights; our expectations regarding an additional
payment to the holders of NorRock Class A shares and stock
appreciation rights after the closing of the transaction; Partners
REIT's intention to continue to grow and diversify its portfolio;
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.
The forward-looking statements contained in this press release
reflect our current views with respect to future events and are
also subject to certain other risks and uncertainties and other
risks detailed from time-to-time in the REIT's ongoing filings with
the securities regulatory authorities, which filings can be found
at www.sedar.com. Actual results, events, and performance may
differ materially from those contemplated in the REIT's
forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements. The REIT
undertakes no obligation to publicly update or revise any
forward-looking statements either as a result of new information,
future events or otherwise, except as required by applicable
securities laws.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Contacts: Partners Real Estate Investment Trust Patrick Miniutti
President and Chief Operating Officer (250)
940-5500www.partnersreit.com
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