Dundee REIT
TSX : D.UN

Dundee REIT

August 04, 2005 13:21 ET

Dundee REIT June 30, 2005 Financial Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 4, 2005) - DUNDEE REIT (TSX:D.UN) today reported its financial results for the quarter ended June 30, 2005.

- Revenue up 16% to $53.4 million over prior year second quarter

- Net operating income up 15% to $29.6 million over prior year second quarter

- Funds from operations up 2% to $16.0 million over prior year second quarter

- Occupied and committed space rises to 95.8% from 94.2% at June 30, 2004

- Debt-to-gross book value 60.7% (48.8% excluding the convertible debentures)

- Decrease of average interest rate to 6.24% from 6.63% at June 30, 2004

- $170 million in acquisitions completed in the second quarter bringing total acquisitions in 2005 to $221 million

Michael Cooper, President and Chief Executive Officer and Michael Knowlton, Executive Vice-President and Chief Financial Officer will be holding a conference call to discuss the results today, Thursday, August 4, 2005 at 4:30 p.m. (ET). To access the conference call, please dial 416-641-6659 in Toronto and Overseas or 1-800-640-7112 elsewhere in Canada and the United States. A taped replay of the call will be available from August 4, 2005 at 6:00 p.m. (ET) to August 11, 2005 at 11:59 p.m. (ET). Please dial 416-626-4100 and enter passcode 21256386 to access the replay.



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SELECTED
FINANCIAL
INFORMATION Three Three Three Six Six
(unaudited) Months Months Months Months Months
($000's except Ended Ended Ended Ended Ended
unit and per June 30, March 31, June 30, June 30, June 30,
unit amounts) 2005 2005 2004 2005 2004
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Rental property
Revenues $ 53,378 $ 50,793 $ 46,191 $ 104,171 $ 89,099
Net operating
income
("NOI") (1) 29,601 27,068 25,773 56,669 48,622
Funds from
operations
("FFO") (2) 15,952 15,358 15,702 31,310 29,374
Net income 3,420 3,681 (8,206) 7,101 (4,049)
Distributable
income ("DI")
(3) 14,209 13,684 13,783 27,893 26,157
Book value
of rental
properties 1,244,097 1,095,770 1,071,212
Debt 886,733 731,183 704,433
Debt-to-gross
book value 60.7% 56.4% 56.4%

Per unit data
(basic)
FFO 0.64 0.62 0.65 1.25 1.29
Net income 0.20 0.22 (0.49) 0.42 (0.26)
Distributable
income 0.57 0.55 0.57 1.12 1.15
Distributions 0.55 0.55 0.55 1.10 1.10

Units
(period end)
REIT Units,
Series A
outstanding 16,904,915 16,855,254 16,727,655
LP Class B
Units,
Series
1 outstanding 8,278,728 8,098,025 7,564,418
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Total number
of units
outstanding 25,183,643 24,953,279 24,292,073
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Occupied and
committed
space 95.8% 95.2% 94.2%
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"We are pleased to see that actions taken to maximize our long-term value are becoming evident in our quarter-over-quarter results. Our acquisition program has added quality assets to our portfolio at reasonable prices and the favorable interest rate environment has allowed us to take advantage of record low mortgage rates," said Michael Cooper, President and CEO. He went on to add, "growth through acquisitions, coupled with the consistent performance of our comparative properties, provides us with a solid platform for predictable and sustainable results".

FINANCIAL HIGHLIGHTS

- Rental properties NOI was $29.6 million - Net operating income for the three month period grew by $3.8 million or 15% compared to the same quarter last year primarily due to contributions from acquisitions. Comparative NOI was virtually unchanged period-over-period, reflecting the stability and occupancy level of the properties. An overall increase in comparative occupancy primarily reflects increases in the Ontario office portfolio and the Quebec and Western Canada industrial portfolios.

- Funds from operations was $16.0 million - On a per unit basis, FFO was slightly lower than compared to the same quarter last year due to dilution arising from the delay in deploying the funds raised from the convertible debenture issuance and the one-time financing charges incurred in 2005.

- Distributable income was $14.2 million - In the three months ended June 30, 2005, Dundee REIT generated $14.2 million of distributable income, representing $0.57 per unit. During the quarter, the Trust declared distributions totalling $0.55 per unit.

- Distribution Reinvestment and Unit Purchase Plan ("DRIP") enrolment is high - At June 30, 2005, approximately 47% of the Trust's total units were enrolled in the DRIP, including 21% of REIT Units, Series A and 100% of LP Class B Units, Series 1. As a result of this high level of participation in the DRIP, the Trust's cash payout ratio for distributions was 55.6% during the second quarter.

OPERATIONAL HIGHLIGHTS

Portfolio occupied and committed space increased to 95.8% as of June 30, 2005 - During the first half of 2005, Dundee REIT recorded a net increase in occupied space of 87,600 square feet. Leases representing 1.1 million square feet expired or were terminated during the six months and approximately 1.2 million square feet of new leases or renewals were completed. The overall percentage of occupied and committed space across Dundee REIT's office portfolio increased to 95.1% (June 30, 2004 - 94.6%) and the industrial portfolio increased to 96.6% (June 30, 2004 - 94.1%). The average in-place rents in the office and industrial portfolios were $14.08 and $5.79 per square foot respectively (June 30, 2004 - $14.42 and $5.75 respectively). Approximately 0.8 million square feet will be expiring throughout the remainder of 2005. Dundee REIT has extensive experience in managing its lease maturities and does not anticipate any significant changes in occupancy.

ACQUISITION HIGHLIGHTS

To date in 2005, Dundee REIT has completed $221 million in acquisitions and has entered into contracts to acquire a further $70 million. The office and industrial assets acquired are primarily located in the Trust's core markets, are comparable with its existing portfolio but tend to be newer and have longer lease terms. Based on current market conditions, the initial yield on these acquisitions is approximately 8.6%. "We will continue to expand our office and industrial presence in our target markets by pursuing opportunities that will not only grow our portfolio in size but also improve the overall quality of our portfolio and contribute to our results," said Mr. Cooper. "Given the goal of growing our adjusted funds from operations on a per unit basis, we are, and will continue to be, very selective about which opportunities we will pursue. Completing acquisitions that will merely increase our size will actually make it more difficult for us to grow our distributions."



Acquisition Completed in the Second Quarter

Occupancy Purchase
Property Interest on Acquired Price Date
Type Acquired acquisition GLA ($000's) Acquired
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56 Wellesley
Street
West,
Toronto
(1) Office 50% 100% 108,000 $ 14,141 April
1, 2005
120
Valleywood
Drive,
Markham Indus-
trial 50% 100% 30,000 1,694 April
1, 2005
2280 boul.
Alfred
-Nobel,
Montreal Office 100% - 86,000 5,472 April
8, 2005
1000 boul.
Saint-Jean,
Montreal Office 100% 98% 112,000 16,133 April
14, 2005
22000
Trans
Canada Hwy.
and 115
boul.
Hymus
Montreal Indus-
trial 100% 100% 371,000 24,548 April
18, 2005
1415 - 1511
rue
Berlier,
Laval Indus-
trial 100% 100% 64,000 4,432 May
5, 2005
375 - 425
Britannia
Road,
Missis-
sauga Indus-
trial 100% 99% 121,000 10,468 May
30, 2005
Joffre
Place,
Calgary Office 100% 96% 111,000 18,310 June
2, 2005
975 boul.
Saint-
Joseph,
Gatineau Office 100% 99% 194,000 25,945 June
17, 2005
400 - 480
boul. Armand
Frappier,
Laval Office 100% 94% 198,000 35,525 June
20, 2005
2285
Speakman
Drive,
Missis-
sauga Office 100% 100% 131,000 13,161 June
27, 2005
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TOTAL 1,526,000 $ 169,829
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Average capitalization 8.6%
rate (2)
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(1) Represents purchase of the balance of the property.
(2) Excludes 2280 boul. Alfred-Nobel, Montreal, under
redevelopment


The Trust has also entered into various agreements to acquire approximately 190,000 square feet of office and 416,000 square feet of flex/industrial properties located primarily in its key markets for approximately $70 million. The average occupancy in these properties is 99%.

CAPITAL INITIATIVES

- Convertible Debentures - on April 1, 2005, the Trust completed its public offering of $100 million principle amount of convertible unsecured subordinated debentures that bear interest at 5.7% ("5.7% Debentures"). The 5.7% Debentures pay interest semi-annually on March 31st and September 30th, and mature on March 31, 2015. The 5.7% Debentures are convertible into 33.33 REIT Units, Series A per $1,000 of face value, representing a conversion price of $30.00 per unit. The proceeds were used to fund acquisitions as well as to repay existing high-rate debt.

- Debt - Dundee REIT's weighted average interest rate was reduced by 38 basis points during the first six months of 2005 to 6.24% as at June 30, 2005 (December 31, 2004 - 6.62%).

Information appearing in this news release is a select summary of results. The financial statements and management's discussion and analysis for the Trust will be available at www.sedar.com and will also be available with the Supplementary Information Package at www.dundeereit.com.

Dundee REIT is an unincorporated, open-ended real estate investment trust. We are a provider of high quality, affordable business premises. We focus on owning, acquiring, leasing and managing mid-sized urban and suburban office and industrial properties in Canada. Our diversified portfolio consists of approximately 15.2 million square feet of gross leasable area, located primarily in our target markets of Toronto, Ottawa, Montreal, Calgary and Edmonton. Our portfolio is well diversified by asset type, geographic location and tenant mix. For more information, please visit www.dundeereit.com.

FOOTNOTES

(1) NOI - revenue less operating expenses.

(2) FFO - net income, adjusted for future income tax, depreciation and amortization, and gain (loss) on sale and provision for diminution in value of assets and other amortization.

(3) DI is defined in our Declaration of Trust and has been restated for Q2 2004 using the new definition for distributable income as outlined in Appendix A of the Trust's Management Information Circular dated March 14, 2005.

NOI and FFO are key measures of performance used by real estate operating companies; NOI, FFO and DI are not defined by generally accepted accounting principles (GAAP), do not have standard meanings and may not be comparable with other industries and companies.

All statements in this press release that do not directly and exclusively relate to historical facts constitute forward-looking statements. These statements represent Dundee Real Estate Investment Trust's intentions, plans, expectations, and beliefs, and are subject to risks, uncertainties, and other factors, of which many are beyond the control of the Trust. These factors could cause actual results to differ materially from such forward-looking statements. Dundee Real Estate Investment Trust disclaims any intention or obligation to update or revise any forward-looking statements, as a result of new information, future events or otherwise.

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