Primaris Retail REIT
TSX : PMZ.UN

Primaris Retail REIT

March 09, 2010 16:45 ET

Primaris Retail REIT Announces Fourth Quarter and Annual Financial Results

TORONTO, ONTARIO--(Marketwire - March 9, 2010) - Primaris Retail REIT (TSX:PMZ.UN) is pleased to report solid financial results.

President and CEO, John Morrison, commented "2009 was a milestone year for Primaris. We successfully completed the transition to the internalized management model and are well positioned for a bright future. Late in the year we completed the most significant investment ever made by Primaris, and indeed, it was the largest real estate transaction of the year in Canada. Operationally 2009 will be remembered as a year that challenged consumers, retailers and landlords alike. It was demonstrated in lower tenant sales and fewer new store openings by tenants. However, occupancy rates remained strong in our properties and we continued to achieve rent increases on lease renewals, thereby underscoring the strength of our assets."

Highlights

Funds from Operations

  • Funds from operations for the fourth quarter ended December 31, 2009 were $19.6 million or $0.310 per unit diluted, down $3.7 million from the $23.3 million, or $0.371 per unit diluted reported for the fourth quarter of 2008. The principal reasons for the change are 1) increases in general and administrative expenses which includes $2.5 million of non-recurring internalization costs, 2) an increase in interest expense primarily due to the issuance of a third series of convertible debentures, and 3) a decrease in same property net operating income.

  • Funds from operations for the year ended December 31, 2009 were $81.4 million or $1.297 per unit diluted, down $8.5 million from the $89.9 million, or $1.435 per unit diluted reported for 2008. The decline includes $6.0 million spending towards non-recurring internalization costs. 

Net Operating Income

  • Net operating income for the fourth quarter ended December 31, 2009 was $40.8 million, an increase from the $40.3 million recorded in the fourth quarter of 2008.

  • Net operating income for the year ended December 31, 2009 was $153.2 million, an increase from the $152.9 million recorded in 2008.

Same Property – Net Operating Income

  • Net operating income for the fourth quarter ended December 31, 2009, on a same property basis, decreased 1.4% from the comparative three-month period. After adjusting for a decrease in the lease surrender revenue during 2009, same property net operating income would have only decreased 1.0%. The decline is due to an increase in non-recoverable costs incurred in the fourthquarter of 2009 that are one-time and non-recurring. These costs include a lease termination payment to a tenant and the results of a sales tax audit covering the years 2005 -2009.

  • Net operating income for the year ended December 31, 2009, on a same property basis, decreased 0.6% from 2008. Excluding the $1,787 increase in new property management fee structure and $1,002 for the decrease in lease surrender revenue, same property net operating income would have increased 1.2%.

Operations

  • Primaris renewed or leased 202,847 square feet of space during the fourth quarter. The weighted average new rent in these leases, on a cash basis, represented a 10.3% increase over the previous rent paid.

  • Primaris renewed or leased 1,109,980 square feet of space during 2009, which includes the renewal of two anchor stores. The weighted average new rent in these leases, on a cash basis, represented a 6.2% increase over the previous rent paid.

  • The portfolio occupancy rate increased during the fourth quarter and was 97.2% at December 31, 2009, compared to 96.4% at September 30, 2009 and down from 98.2% at December 31, 2008.

  • Same tenant sales, for the 15 properties owned during all of the 24 months ended December 31, 2009 was $442 as compared to $457 for the previous 12 months.

  • During the fourth quarter, Primaris incurred and expensed $2.5 million of transitions costs, included in general and administrative expenses. The total for the year is $6.0 million.

Liquidity

  • Prior to the fourth quarter, Primaris was extremely liquid with significant cash balances and a $120 million unutilized credit facility. During the fourth quarter of 2009, Primaris completed the issue of convertible debentures raising a net additional $82 million dollars of cash. These resources were used to fund two acquisitions completed in mid December. At the end of the year, Primaris had $15 million of cash on hand and $15 million drawn on its credit facility, leaving $105 million remaining on the credit facility. With the exception of a small $3.7 mortgage maturing in the first quarter of 2010, there are no loan maturities until 2011 and no commitments to fund mezzanine loans.

Financial Results

Funds from operations for the three months ended December 31, 2009 were $19.6 million or $0.314 per unit basic ($0.310 diluted). This compares to funds from operations of $23.3 million or $0.375 per unit basic ($0.371 diluted) earned during the three months ended December 31, 2008. The principal reasons for the change are 1) increases in general and administrative expenses which includes one-off internalization costs, 2) an increase in interest expense primarily due to the issuance of a third series of convertible debentures and 3) a decrease in same property net operating income.

Funds from operations for the year ended December 31, 2009 were $81.4 million or $1.304 per unit basic ($1.297 diluted). This compares to funds from operations of $89.9 million or $1.448 per unit basic ($1.435 diluted) earned during 2008.

Net income for the three months ended December 31, 2009 was $6.4 million or $0.103 per unit (basic and diluted). This compares to $5.1 million or $0.083 per unit (basic and diluted) earned during the three months ended December 31, 2008.

Net income for the year ended December 31, 2009 was $6.7 million or $0.107 per unit (basic and diluted). This compares to net income of $9.8 million or $0.157 per unit (basic and diluted) earned during 2008.

Primaris made one small acquisition in the second quarter of 2009 and made two larger investments late in the fourth quarter of 2009 which contributed to the operations for the three months ended December 31, 2009. The total purchase price for the 2009 acquisitions was $366.9 million. In addition, three acquisitions were made at various times during 2008 (purchase price $14.5 million). These acquisitions and the related debt financings explain part of the difference between the years ended December 31, 2009 and 2008.

General and administrative expenses in the fourth quarter include $2.5 million of transition costs. $6.0 million of transition costs are expensed for the 2009 year.

The distribution payout ratio for the fourth quarter of 2009, expressed on a per unit basis as distributions paid divided by diluted funds from operations was 98.2% as compared to an 82.2% payout ratio for the fourth quarter of 2008.

The distribution payout ratio for 2009 year was 94.0% as compared to an 85.0% payout ratio for 2008.

The payout ratios are sensitive to both seasonal operating results and financial leverage.

At December 31, 2009 Primaris' total enterprise value was approximately $2.3 billion (based on the market closing price of Primaris' units on December 31, 2009 plus total debt outstanding). At December 31, 2009 Primaris had $1,282.4 million of outstanding debt, equating to a debt to total enterprise value ratio of 56.0%. On a net of cash basis, this ratio would be 55.7%. Primaris' debt consisted of $1,095.1 million of fixed- rate senior debt with a weighted average interest rate of 5.7% and a weighted average term to maturity of 6.6 years, $5.7 million of 6.75% fixed-rate convertible debentures, $87.7 million of 5.85% fixed-rate convertible debentures, $78.9 million of 6.30% fixed- rate convertible debentures, and a $15 million draw on the operating line. Primaris had a debt to gross book value ratio, as defined under the Declaration of Trust, of 53.4%. During the three months ended December 31, 2009, Primaris had an interest coverage ratio of 2.2 times as expressed by EBITDA divided by net interest expensed. Primaris defines EBITDA as net income increased by depreciation, amortization, interest expense and, if applicable, income tax expense. EBITDA is a non-GAAP measure and may not be comparable to similar measures used by other Trusts.

Operating Results  
Net Operating Income – Same Properties  
    Three months ended
December 31, 2009
  Three months ended
December 31, 2008
  Variance to Comparative Period
Favourable/

(Unfavourable)
 
Operating revenue $ 70,780 $ 71,154 $ (374 )
Operating expenses   31,126   30,925   (201 )
Net operating income $ 39,654 $ 40,229 $ (575 )
               

The same-property comparison consists of the 26 principal properties that were owned throughout both the current and comparative three-month periods. Net operating income, on a same-property basis, decreased $575, or 1.4%, in relation to the comparable three month period. Net operating income would have decreased only 1.0% adding back the change in lease surrender revenue. The decline is due to an increase in non-recoverable costs incurred in the fourth quarter of 2009 that are one- offs and non-recurring. These costs include a lease termination payment to a tenant and the results of a sales tax audit covering the years 2005 -2009.

Liquidity

Prior to the fourth quarter, Primaris was extremely liquid with significant cash balances and a $120 million unutilized credit facility. During the fourth quarter of 2009, Primaris completed the issue of convertible debentures raising a net additional $82 million dollars of cash. These resources were used to fund two acquisitions completed in mid December. At the end of the year, Primaris had $15 million of cash on hand and $15 million drawn on its credit facility, leaving $105 million remaining on the credit facility. With the exception of a small $3.7 mortgage maturing in the first quarter of 2010, there are no loan maturities until 2011 and no commitments to fund mezzanine loans.

The annual requirement to fund loan principal payments amounts to approximately $22 million. The $120 million credit facility is scheduled to mature in July 2010. Management is confident that it will be able to extend the term of this facility.

Tenant Sales

For the 15 reporting properties owned throughout both the years ended December 31, 2009 and 2008 (same properties), sales per square foot, on a same-tenant basis, have decreased to $449 from $465 per square foot. For the same 15 properties the total tenant sales volume has decreased 3.4%.

  Same Tenant           All Tenant        
  Sales per Square Foot Variance     Total Sales Volume Variance  
  2009 2008 $   %     2009   2008 $   %  
Dufferin Mall 531 565 (34 ) -6.1 %   85,187,698   90,172,219 (4,984,521 ) -5.5 %
Eglinton Square 358 373 (15 ) -3.9 %   28,436,990   35,516,731 (7,079,741 ) -19.9 %
Heritage Place 305 317 (12 ) -3.8 %   26,067,435   29,013,041 (2,945,606 ) -10.2 %
Lambton Mall 352 367 (15 ) -4.1 %   48,556,289   52,296,581 (3,740,292 ) -7.2 %
Place d'Orleans 459 464 (5 ) -1.0 %   107,595,206   105,170,770 2,424,436   2.3 %
Place Du Royaume 385 389 (4 ) -1.1 %   107,171,410   104,713,073 2,458,337   2.3 %
Place Fleur De Lys 318 322 (4 ) -1.4 %   72,228,388   73,256,840 (1,028,452 ) -1.4 %
Stone Road Mall 513 534 (21 ) -4.0 %   113,351,590   118,594,448 (5,242,858 ) -4.4 %
Aberdeen Mall 380 413 (33 ) -8.1 %   47,720,749   52,077,777 (4,357,028 ) -8.4 %
Cornwall Centre 532 537 (5 ) -0.9 %   78,574,269   76,966,196 1,608,073   2.1 %
Grant Park 504 502 2   0.3 %   28,505,331   29,868,605 (1,363,274 ) -4.6 %
Midtown Plaza 570 579 (9 ) -1.6 %   134,751,523   134,286,195 465,328   0.3 %
Northland Village 461 470 (9 ) -1.9 %   46,664,172   47,260,709 (596,537 ) -1.3 %
Orchard Park Shopping Centre 467 495 (28 ) -5.6 %   137,851,045   148,037,425 (10,186,380 ) -6.9 %
Park Place Mall 492 523 (31 ) -5.9 %   76,177,354   81,474,358 (5,297,004 ) -6.5 %
  449 465 (16 ) -3.4 %   1,138,841,459   1,178,706,978 (39,865,519 ) -3.4 %
                             

The tenants' sales decreased 3.4% per square foot, while the national average tenant sales as reported by the International Council of Shopping Centers ("ICSC") for the 12- month period ended December 31, 2009, decreased 1.7%. Primaris' sales productivity of $449 is lower than the ICSC average of $539, largely because the ICSC includes sales from super regional malls that have the highest sales per square foot in the country.

Leasing Activity

Primaris Retail REIT's property portfolio remains well leased.

The portfolio occupancy rate increased during the fourth quarter of 2009 and was 97.2% at December 31, 2009, compared to 96.4% at September 30, 2009 and down from 98.2% at December 31, 2008. These percentages include space for which signed leases are in place but where the tenant may not yet be in occupancy.

Primaris renewed or leased 202,847 square feet of space during the fourth quarter of 2009. Approximately 75% of the leased spaces during the fourth quarter of 2009 consisted of the renewal of existing tenants. The weighted average new rent in these leases, on a cash basis, represented a 10.3% increase over the previous rent paid.

Primaris renewed or leased 1,109,980 square feet of space during 2009, which includes the renewal of two anchor stores. Approximately 80% of the leased spaces during the fourth quarter of 2009 consisted of the renewal of existing tenants, or 74% if the anchor stores are excluded. The weighted average new rent in these leases, on a cash basis, represented a 6.2% increase over the previous rent paid.

Development Activity

At Lambton Mall in Sarnia, Ontario, Canadian Tire leased a 139,000 square foot store, previously occupied by Wal-Mart. Canadian Tire began work on the premises in October 2008, and opened on April 15, 2009. The former 106,331 square foot Canadian Tire store remained in operation until the new store opened. Primaris' budget for this phase of the project was approximately $3,500, and Canadian Tire spent additional funds in completing their store and executing their move. The scope of work included a small expansion as well as constructing a connection between the new store and the interior of the mall, something that did not exist with the previous tenant. Now that the former Canadian Tire store has been vacated, a second phase of the project will be planned, with Lambton Mall modifying and re-leasing the vacated space. Plans for this second phase are not yet finalized; however, discussions are underway with a number of retailers to participate in this second phase.

Comparison to Prior Period Financial Results                  
                       
  Three Months Ended December 31, 2009     Three Months Ended December 31, 2008     Comparative Period Favourable/ (Unfavourable)  
Revenue                      
  Minimum rent $ 43,838     $ 41,992     $ 1,846  
  Recoveries from tenants   25,650       25,750       (100 )
  Percent rent   1,038       1,331       (293 )
  Parking   1,873       1,935       (62 )
  Interest & other income   157       775       (618 )
  Total revenue   72,556       71,783       773  
                         
Expenses                      
  Property operating   18,846       18,477       (369 )
  Property tax   12,603       12,198       (405 )
  Depreciation & Amortization   15,337       19,327       3,990  
  Interest   16,529       14,667       (1,862 )
  Ground rent   312       292       (20 )
    63,627       64,961       1,334  
Income from operations   8,929       6,822       2,107  
General & administrative   (4,892 )     (3,053 )     (1,839 )
Future income taxes   2,400       1,380       1,020  
Gain on Sale of Land   -       -       -  
Net income $ 6,437     $ 5,149     $ 1,288  
                         
Depreciation of income producing properties   13,301       17,570       (4,269 )
Amortization of leasing costs   1,712       1,708       4  
Accretion of convertible debentures   555       270       285  
Future income taxes   (2,400 )     (1,380 )     (1,020 )
Gain on sale of land   -       -       -  
Funds from operations $ 19,605     $ 23,317     $ (3,712 )
   
Funds from operations per unit - basic $ 0.314     $ 0.375     $ (0.061 )
Funds from operations per unit - diluted $ 0.310     $ 0.371     $ (0.061 )
Funds from operations - payout ratio   98.2 %     82.2 %     16.0 %
Distributions per unit $ 0.305     $ 0.305     $ -  
Weighted average units outstanding - basic   62,507,282       62,255,812       251,470  
Weighted average units outstanding - diluted   72,042,469       67,186,648       4,855,821  
Units outstanding, end of period   62,534,594       62,269,712       264,882  
                       

Funds from Operations, which is not a defined term within Canadian generally accepted accounting principles, has been calculated by management, using Canadian generally accepted accounting principles, in accordance with REALPac's White Paper on Funds from Operations. The White Paper defines Funds from Operations as net income adjusted for depreciation and amortization of assets purchased, including the net impact of above and below market leases, amortization of leasing costs and accretion of convertible debentures. Funds from Operations may not be comparable to similar measures used by other entities.

Funds from operations for the quarter ended December 31, 2009 were $3.7 million ($0.061 per unit diluted) less than the comparative period.

Transition Update

As previously announced, Primaris fully internalized its management on January 1, 2010. There is a fuller discussion of this in the Management's Discussion and Analysis. During the three months ended December 31, 2009 Primaris incurred $2,675 of transition costs, of which $2,459 was expensed to General and Administration, $1,542 was capitalized, and $1,326 was received as a tenant allowance. The following chart summarizes the total anticipated spending for the transition project:

  Expense Capital Tenant Allowance Total Spend   
2008 827 513 - 1,340  
2009 5,965 6,436 (1,326) 11,075  
2010 250 - - 250  estimated
Total 7,042 6,949 (1,326) 12,665  

Reclassification of Prior Year's Amounts

Primaris has reclassified prior periods' results to reflect the reclassification of recoverable improvements (previously called recoverable operating costs) to a component of income-producing properties. This is discussed more fully in Management's Discussion and Analysis and the reclassification of the previous quarters is contained therein.

Supplemental Information

Primaris' audited consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2009 and 2008 are available on Primaris' website at www.primarisreit.com.

Forward-Looking Information

The MD&A contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, Primaris' operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "anticipate," "believe," "expect," "plan" or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.

Examples of such information include, but are not limited to, factors relating to the business, taxation, financial position of Primaris, operations and redevelopments including volatility of capital markets, legislative change, consumer spending, retail leasing demand, strength of the retail sector, price volatility of construction costs, availability of construction labour and timing of regulatory and contractual approvals for developments.

Although the forward-looking statements contained in this document are based on what management of Primaris believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, economic, competitive and commercial real estate conditions, unplanned compliance-related expenses, uninsured property losses and tenant-related risks.

Non-GAAP Measures

Funds from operations ("FFO"), net operating income ("NOI") and earnings before interest, taxes, depreciation and amortization ("EBITDA") are widely used supplemental measures of a Canadian real estate investment trust's performance and are not defined under Canadian generally accepted accounting principles ("GAAP"). Management uses these measures when comparing itself to industry data or others in the marketplace. The MD&A describes FFO, NOI and EBITDA and provides a reconciliation to net income as defined under GAAP. FFO and EBITDA should not be considered alternatives to net income or other measures that have been calculated in accordance with GAAP and may not be comparable to measures presented by other issuers.

Conference Call

Primaris invites you to participate in the conference call that will be held on Wednesday, March 10, 2010 at 9am EST to discuss these results. Senior management will speak to the results and provide a brief corporate update. The telephone numbers for the conference call are: 416-340-2216 (within Toronto), and 1-866-226-1792 (within North America).

Audio replays of the conference call will be available immediately following the completion of the conference call, and will remain active until March 17, 2010. The replay will be accessible by dialing 416-695-5800 or 1-800-408-3053 and using the pass code 7234364.

Primaris is a TSX listed real estate investment trust (TSX:PMZ.UN). Primaris owns 28 income-producing properties comprising approximately 10.5 million square feet located in Canada. As of February 28, 2010, Primaris had 62,596,174 units issued and outstanding.

PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Balance Sheets
December 31, 2009 and 2008
    2009   2008
Assets        
 
Income-producing properties $ 1,763,426 $ 1,443,958
Leasing costs   41,209   38,200
Rents receivable   4,907   4,812
Other assets and receivables   31,023   24,438
Cash and cash equivalents   15,452   97,424
 
  $ 1,856,017 $ 1,608,832
Liabilities and Unitholders' Equity        
 
Liabilities:        
  Mortgages payable $ 1,089,966 $ 890,258
  Convertible debentures   166,461   95,438
  Bank indebtedness   15,000  
  Accounts payable and other liabilities   63,815   45,782
  Distribution payable   6,358   6,334
  Future income taxes   43,000   40,800
    1,384,600   1,078,612
 
Unitholders' equity   471,417   530,220
 
  $ 1,856,017 1,608,832
 
PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST  
Consolidated Statements of Income  
(In thousands of dollars, except per unit amounts)  
Three months and years ended December 31, 2009 and 2008  
   
    Three months ended       Year ended  
    December 31,   December 31,  
    2009   2008   2009     2008  
    (Unaudited)            
   
Revenue:                    
  Minimum rent $ 43,838 $ 41,992 $ 166,284   $ 160,934  
  Recoveries from tenants   25,650   25,750   97,083     94,562  
  Percentage rent   1,038   1,331   2,966     3,687  
  Parking   1,873   1,935   6,267     6,384  
  Interest and other   157   775   1,798     4,166  
    72,556   71,783   274,398     269,733  
   
Expenses:                    
  Property operating   18,846   18,477   68,647     64,263  
  Property taxes   12,603   12,198   50,046     48,617  
  Depreciation   13,625   17,619   64,897     72,984  
  Amortization   1,712   1,708   6,898     5,710  
  Interest   16,529   14,667   60,244     57,497  
  Ground rent   312   292   1,241     1,313  
  General and administrative   4,892   3,053   13,559     9,070  
    68,519   68,014   265,532     259,454  
                     
Income before gain on sale of land and income taxes   4,037   3,769   8,866     10,279  
   
Gain on sale of land           298  
    4,037   3,769   8,866     10,577  
                     
Future income taxes   2,400   1,380   (2,200 )   (800 )
   
Net income $ 6,437 $ 5,149 $ 6,666   $ 9,777  
   
Basic and fully-diluted net income per unit $ 0.103 $ 0.083 $ 0.107   $ 0.157  
                     
 
PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST  
Interim Consolidated Statements of Cash Flows  
(In thousands of dollars)  
Years ended December 31, 2009 and 2008  
    2009     2008  
Cash provided by (used in):            
             
Operations:            
  Net income $ 6,666   $ 9,777  
  Items not involving cash:            
    Depreciation of income producing properties   60,827     69,045  
    Amortization of recoverable improvements   3,432     3,890  
    Amortization of leasing commissions and tenant improvements   6,898     5,710  
    Accretion of convertible debt   1,376     1,027  
    Gain on sale of land       (298 )
    Future income taxes   2,200     800  
    81,399     89,951  
  Change in non-cash operating items:            
    Gain on purchase of convertible debentures under normal course issuer bid   (727 )    
    Depreciation of fixtures and equipment   638     49  
    Amortization of above- and below-market leases   (1,918 )   (1,758 )
    Amortization of tenant inducements   146     124  
    Amortization of financing costs   1,665     1,522  
    Other   12,914     191  
  Leasing commissions   (978 )   (1,649 )
  Tenant inducements   (53 )   (282 )
    93,086     88,148  
Financing:            
  Mortgage principal repayments   (18,622 )   (17,087 )
  Proceeds of new financing   153,000     110,000  
  Repayment of financing       (62,454 )
  Bank indebtedness   15,000      
  Financing costs   (1,011 )   (1,258 )
  Distributions to Unitholders   (76,158 )   (75,817 )
  Issuance of units, net of costs   2,739     2,895  
  Issuance of convertible debentures, net of costs   82,451      
  Purchase of convertible debentures under normal course issuer bid   (5,127 )    
  Purchase of units under normal course issuer bid       (338 )
    152,272     (44,059 )
Investments:            
  Acquisition of income-producing properties   (300,135 )   (14,597 )
  Additions to buildings and building improvements   (6,117 )   (8,669 )
  Additions to tenant improvements   (9,022 )   (12,043 )
  Additions to recoverable improvements   (5,620 )   (5,469 )
  Additions to fixtures and equipment   (6,436 )   (514 )
  Proceeds on sale of land       425  
    (327,330 )   (40,867 )
Increase (decrease) in cash and cash equivalents   (81,972 )   3,222  
Cash and cash equivalents, beginning of year   97,424     94,202  
Cash and cash equivalents, end of year $ 15,452   $ 97,424  
   
  Supplemental cash flow information:            
    Interest paid $ 58,470   $ 53,921  
  Supplemental disclosure of non-cash operating, financing and investing activities:            
    Value of units issued under asset management agreement   57     1,881  
    Value of units issued under equity incentive plan   75      
    Value of units issued from conversion of convertible debentures   353     758  
  Financing costs transferred to equity upon conversion of convertible debentures   15     33  
  Financing accumulated amortization transferred to equity upon conversion of convertible debentures   (7 )   (12 )
  Mortgages payable, issued on acquisition of income producing properties   66,800      
   
PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST  
Consolidated Statements of Cash Flows  
(In thousands of dollars)  
Three months ended December 31, 2009 and 2008  
(Unaudited)  
    2009     2008  
Cash provided by (used in):            
             
Operations:            
  Net income $ 6,437   $ 5,149  
  Items not involving cash:            
    Depreciation of income producing properties   12,386     16,194  
    Amortization of recoverable improvements   915     1,376  
    Amortization of leasing commissions and tenant improvements   1,712     1,708  
    Accretion of convertible debt   555     270  
    Future income taxes   (2,400 )   (1,380 )
    19,605     23,317  
  Change in non-cash operating items:            
    Depreciation of fixtures and equipment   329     49  
    Amortization of above- and below-market leases   (435 )   (405 )
    Amortization of tenant inducements   37     37  
    Amortization of financing costs   541     374  
    Other   23,233     14,850  
  Leasing commissions   (247 )   (443 )
    43,063     37,779  
Financing:            
  Mortgage principal repayments   (4,757 )   (4,490 )
  Proceeds of new financing   153,000      
  Bank indebtedness   15,000      
  Financing costs   (997 )   (396 )
  Distributions to Unitholders   (19,069 )   (18,995 )
  Issuance of units, net of costs   646     739  
  Issuance of convertible debentures, net of costs   82,451      
  Purchase of units under normal course issuer bid       (338 )
    226,274     (23,480 )
Investments:            
  Acquisition of income-producing properties   (296,541 )   (7,523 )
  Additions to buildings and building improvements   (1,145 )   (1,676 )
  Additions to tenant improvements   (1,325 )   (3,404 )
  Additions to recoverable improvements   (1,299 )   (653 )
  Additions to fixtures and equipment   (1,543 )   (277 )
    (301,853 )   (13,533 )
Increase (decrease) in cash and cash equivalents   (32,516 )   766  
Cash and cash equivalents, beginning of year   47,968     96,658  
Cash and cash equivalents, end of year $ 15,452   $ 97,424  
   
  Supplemental cash flow information:            
    Interest paid $ 14,920   $ 13,867  
  Supplemental disclosure of non-cash operating, financing and investing activities:            
    Value of units issued under asset management agreement        
    Value of units issued under equity incentive plan   21      
    Value of units issued from conversion of convertible debentures   191      
  Financing costs transferred to equity upon conversion of convertible debentures   8      
  Financing accumulated amortization transferred to equity upon conversion of convertible debentures   (4 )    
  Mortgages payable; issued on acquisition of income producing properties   66,800      
 
PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Reconciliation of Net Income to Funds from Operations
(In thousands of dollars)
  Three Months Ended     Three Months Ended  
  December 31, 2009     December 31, 2008  
               
Net income $ 6,437     $ 5,149  
Depreciation of income producing properties   13,301       17,570  
Amortization of leasing costs   1,712       1,708  
Accretion of convertible debentures   555       270  
Future income taxes   (2,400 )     (1,380 )
Funds from operations $ 19,605     $ 23,317  
               

Funds from Operations, which is not a defined term within Canadian generally accepted accounting principles, has been calculated by management, using Canadian generally accepted accounting principles, in accordance with REALPac's White Paper on Funds from Operations. The White Paper defines Funds from Operations as net income adjusted for depreciation and amortization of assets purchased, including the net impact of above and below market leases, amortization of leasing costs and accretion of convertible debentures. Funds from Operations may not be comparable to similar measures used by other entities.

Calculation of Net Operating Income
(In thousands of dollars)
    Three Months Ended     Three Months Ended  
    December 31, 2009     December 31, 2008  
               
Revenue $ 72,556     $ 71,783  
Less: Corporate interest and other income   47       (472 )
  Property operating expenses   (18,846 )     (18,477 )
  Property tax expense   (12,603 )     (12,198 )
  Ground rent   (312 )     (292 )
Net operating income $ 40,842     $ 40,344  

Contact Information

  • Primaris Retail REIT
    John R. Morrison
    President & Chief Executive Officer
    (416) 642-7860
    or
    Primaris Retail REIT
    Louis M. Forbes
    Executive Vice President & Chief Financial Officer
    (416) 642-7810