Retrocom Mid-Market Real Estate Investment Trust
TSX : RMM.UN

Retrocom Mid-Market Real Estate Investment Trust

November 12, 2009 17:09 ET

Retrocom Mid-Market REIT Announces Third Quarter 2009 Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 12, 2009) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY NON-CANADIAN SOURCE

Retrocom Mid-Market Real Estate Investment Trust (TSX:RMM.UN) announced today the results for the third quarter ended September 30, 2009.

Highlights

- Net Operating Income ("NOI") for the third quarter was $7.6 million, compared to $8.5 million for the same quarter in 2008. The $0.9 million decrease was the result of previously announced vacancies and tenants reporting lower than expected sales which affected our percentage rent only leases and also impacted our rents under leases with "GROC Caps"(gross occupancy cost caps, in which a tenant's exposure to gross rent costs for a property are capped at a predetermined percentage of their sales). NOI for the nine months was $23.1 million, an increase of $1.1 million compared to the same period in 2008. The favourable variance reflects the impact of the acquisitions of the four Toronto area properties in 2008 (the "GTA properties") of $2.5 million, partially offset by prior quarter provisions for bad debt of $0.6 million and lower operating income from the same store properties of $0.8 million. We made adjustments for percentage rent and GROC Caps for the prior year of approximately $0.13 million for the period to date results and $0.21 million for prior quarters in 2009.

- Funds from Operations ("FFO") for the third quarter was $3.2 million ($0.11 per unit, adjusted for non-controlling interest), compared with $1.3 million ($0.05 per unit, adjusted for non-controlling interest) for the same quarter in 2008, which included a one-time acquisition transaction cost of $2.4 million (or $0.09 per unit) related to the purchase of the GTA properties. Therefore after the acquisition cost adjustment, the FFO decreased by $0.5 million, which is the result of lower NOI from the portfolio of $0.9 million, higher operating income from discontinued operations of $0.3 million and a slight decrease in trust expense and interest expense of $0.1 million. FFO for the nine months ended September 30, 2009 was $9.9 million ($0.36 per unit, adjusted for non-controlling interest) compared with $7.5 million ($0.35 per unit, adjusted for non-controlling interest) for the same period in 2008. After adjusting for the $2.4 million acquisition transaction cost in 2008, the increase in FFO from the GTA property acquisition was offset by lower operating income from the same store properties, bad debt allowance due to tenant bankruptcies, financing costs and higher interest expenses on increased mortgage amounts. On a per unit basis, after adjusting for the transaction costs, FFO for the first nine months of 2009 as compared to comparative period in 2008 was $0.08 per unit lower.

- Occupancy rate at the end of the third quarter was 90.2%, an improvement of 0.5% over the second quarter.

- The REIT maintained a conservative leverage ratio of 54.6% inclusive of all debentures and mortgages. At the end of the third quarter, the REIT had cash on hand of approximately $14.7 million and close to $10 million available under our operating line.

- The REIT has successfully refinanced all maturing mortgages in 2009. During the third quarter, the REIT refinanced Chilliwack Mall, Chilliwack, BC for $10 million at fixed interest rate of 6.22%. Subsequent to the quarter, Lincoln Value Centre, St. Catharines, ON was refinanced for $13.4 million with a one year open mortgage. The REIT's average cost of mortgage debt at the end of third quarter is 6.18%, as compared to 6.23% at the end of the second quarter.

- The REIT renewed the operating line with a maximum availability of $10 million at a floating rate of prime plus 3%, expiring September 30, 2010. Subsequent to the quarter, the REIT discharged the $4.8 million demand operating line closed earlier during the year and the property securing that line was used to further secure the $10 million operating line.

David Fiume, President and CEO said, "Although our REIT continues to feel the effects of a tepid recovery and a lack of retail sales growth, we believe that with our financial position and financing capacity, we are well positioned to capitalize on growth opportunities. We have not seen the dramatic drop that some were predicting, but the way back is proving to be long and slow. Retail spending has not rebounded, and that has had a major impact on the strategy and the financial results of retailers and retail leasing. Fortunately, we are seeing signs that the leasing freeze is thawing and we are optimistic that our leasing activity will strengthen."



Financial Highlights
(in thousands of
dollars except per
unit amounts Three months Three months Nine months Nine months
and ratios) ended Sept 30 ended Sept 30 ended Sept 30 ended Sept 30
2009 2008 (1) 2009 2008 (1)
(unaudited) (unaudited) (unaudited) (unaudited)
Rental revenue and
other income 14,433 15,061 44,772 41,740
Property operating
expenses 6,882 6,603 21,699 19,739
--------------------------------------------------------
Net operating
income (2) 7,551 8,458 23,073 22,001
Transaction-related
costs - 2,400 - 2,400
Trust expenses 775 831 2,431 2,319
--------------------------------------------------------
Income before
interest,
depreciation &
amortization 6,776 5,227 20,642 17,282
Interest 3,712 3,750 10,952 10,044
Depreciation &
amortization 5,085 5,245 15,120 14,054
--------------------------------------------------------
Loss before
income tax,
non-controlling
interest and
discontinued
operations (2,021) (3,768) (5,430) (6,816)
Future income tax
recovery 321 - 2,093 -
--------------------------------------------------------
Loss before
non-controlling
interest and
discontinued
operations (1,700) (3,768) (3,337) (6,816)
Non-controlling
interest 667 1,243 1,792 1,243
--------------------------------------------------------
Loss before
discontinued
operations (1,033) (2,525) (1,545) (5,573)
Discontinued
operations 68 (579) 1,394 (142)
--------------------------------------------------------
Loss (965) (3,104) (151) (5,715)
Funds From
Operations (3) 3,166 1,301 9,906 7,532
Funds From
Operations per
Unit (adjusted
for conversion
of
non-controlling
interest) 0.11 0.05 0.36 0.35
Transaction
related costs
expensed per
unit (4) 0.09 0.09
---- ----
0.14 0.44
Funds From
Operations
Payout Ratio
Accrual Basis 0.98 2.39 0.94 1.15
Distributions -
accrual basis 3,109 3,108 9,325 8,664


Full Financial Results will be available on SEDAR (www.sedar.com) as well as the Investors Relations section of the REIT's website (http://www.rmmreit.com/investor_finance.htm).

(1) Previously reported results have been reclassified for discontinued operations. Results of 2008 have been restated to reflect a change in accounting policy that was adopted on a retroactive basis.

(2) A non generally accepted accounting principle ("GAAP") measurement, calculated by the Trust as rental revenue (net rents, property tax and operating cost recoveries, as well as other miscellaneous income from tenants) less operating expenses from rental properties.

(3) The reconciliations from Net income (loss) to Funds From Operations are included in the REIT's MD&A

(4) In Q3 2008, the REIT recorded one-time acquisition cost of $2.4 million or $0.09 per unit related to the acquisition of the four GTA properties. Full discussion of the transaction are included in the REIT's MD&A

The REIT's management considers Net Operating Income and Funds From Operations to be indicative measures in evaluating the REIT's performance. The table above includes non-GAAP information that should not be construed as an alternative to net earnings or cash flows from operations and may not be comparable to similar measures presented by other issuers as there is no standardized meaning prescribed by GAAP.

About Retrocom Mid-Market REIT

Retrocom Mid-Market REIT is an Ontario unincorporated open-end real estate investment trust which focuses on owning and acquiring mid-market properties in primary and secondary cities across Canada with the objective of producing a geographically diversified portfolio of properties with stable and growing cash flows.

This document may contain forward-looking statements, which although based on Management's best estimates as well as the current operating environment are subject to risks and uncertainties. As such, terms such as "anticipate", "believe", "expect", "plan" or other similar words should be taken as forward-looking statements. As a result of these potential uncertainties, any future results could differ materially from the predictions listed herein. Although Retrocom makes every effort to meet our predictions as listed in this document, we are unable to control certain circumstances such as economic, competitive or commercial real estate conditions.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of a prospectus, nor shall there be any sale of the Units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such state, province or other jurisdiction. The Units of the Retrocom Mid-Market REIT have not been, and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered, sold or delivered in the United States absent registration or an application for exemption from the registration requirements of U.S. securities laws.

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