Dundee REIT
TSX : D.UN

Dundee REIT

November 07, 2011 15:23 ET

Dundee REIT Reports Strong Q3 2011 Results Driven by Accretive Acquisitions

TORONTO, ONTARIO--(Marketwire - Nov. 7, 2011) -

This news release contains forward looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this press release.

DUNDEE REIT (TSX:D.UN) today posted strong financial results for the three and nine months ended September 30, 2011, evidencing the success of the Trusts acquisition strategy and the strength of its operations.

HIGHLIGHTS


-- $1.0 billion of acquisitions completed in Q3; $1.5 billion completed
   year-to-date 
-- $505 million new mortgage financing at 3.96% with an average 7-year term
-- 13% increase in per unit funds from operations ("FFO") over Q3 2010, and
   6% over Q2 2011 
-- 11.5% increase in per unit adjusted funds from operations ("AFFO") over
   Q3 2010, and 4% over Q2 2011 
-- Weighted average interest rate declined to 4.96% (5.3% - Q2 2011, 5.6% -
   Q3 2010) 
-- Improved geographic diversification: 32% of net operating income ("NOI")
   derived from Toronto and 30% from Calgary 
-- Average in-place rents approximately 7% below estimated market rents 
-- Occupancy stable at 95.8% 
-- 53% debt-to-IFRS book value; 2.6x interest coverage 
-- Increase in market cap to $2.2 billion and enterprise value of $4.4
   billion

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SELECTED FINANCIAL INFORMATION                                              
(unaudited)                                                                 
($000's except                                                              
 unit and per                                                               
 unit amounts)                      Three Months Ended     Nine Months Ended

                   September                 September   September September
                         30,     June 30,          30,         30,       30,
                        2011         2011         2010        2011      2010
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Investment                                                                  
 properties                                                                 
 revenue (1)         118,466  $    95,556  $    69,936   $ 305,027 $ 189,492
Net operating                                                               
 income ("NOI")                                                             
 (2)                  70,639       58,323       41,920     182,994   114,896
Funds from                                                                  
 operations                                                                 
 ("FFO") (3)          42,832       35,491       24,780     111,188    65,912
Adjusted funds                                                              
 from operations                                                            
 ("AFFO") (4)         36,580       31,286       21,590      96,629    58,327
Asset value of                                                              
 investment                                                                 
 properties and                                                             
 equity accounted                                                           
 investments       4,201,767    3,138,782    2,107,037                      
Debt (1)           2,273,376    1,643,753    1,105,752                      

Per unit data                                                               
 (basic)                                                                    
FFO                     0.68         0.64         0.60        1.95      1.82
AFFO                    0.58         0.56         0.52        1.69      1.61
Distributions           0.55         0.55         0.55        1.65      1.65

Units (period                                                               
 end)                                                                       
REIT Units,                                                                 
 Series A         61,574,976                                                
REIT Units,                                                                 
 Series B             16,316                                                
LP Class B Units,                                                           
 Series 1          3,499,953                                                
                 -----------------------------------------------------------
TOTAL             65,091,245                                                
                 -----------------------------------------------------------
                 -----------------------------------------------------------

Occupied and                                                                
 committed space        95.8%        96.5%        97.1%                     
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"The acquisition of the Blackstone portfolio and 700 de la Gauchetiere, the fourth largest building in Montreal, increased our asset base by over 30% and resulted in our largest single-quarter increase in AFFO attributable to acquisitions," said Michael Cooper, Chief Executive Officer. "It's been a great year. We have strengthened our geographic diversification as well as our presence in central business districts. And, we have increased our market cap by 62% while increasing per unit AFFO by over 11%." added Mr. Cooper.

Senior management will be hosting a conference call to discuss the results tomorrow, Tuesday, November 8, 2011 at 9:00 a.m. (ET). To access the call, please dial: (416) 340-8530 or toll free at 1-877-440-9795. A taped replay of the call will be available for 30 days by dialling (905) 674-9451 and using passcode 8327075. To access the conference call via webcast, please go to Dundee REIT's website at ww.dundeereit.com and click on the link for News & Events, then click on Calendar of Events. The webcast will be archived for 30 days.

FINANCIAL HIGHLIGHTS


--  Net operating income up 69% to $70.6 million - NOI increased by $28.7
    million over Q3 2010, primarily reflecting a $39.2 million contribution
    from acquisitions as well as a $0.1 million increase in contribution
    from the industrial portfolio. Comparative NOI was down by $0.4 million,
    or less than 1%, as a result of leases in Calgary rolling over from
    higher in-place rents to current market rents, offset by a $0.1 million,
    or 5% increase in the industrial portfolio as a result of a tenant
    expansion. Quarter-over-quarter, comparable NOI remained stable. 


--  Funds from operations per unit up 13% to $0.68 - FFO increased by $18.0
    million or 73% over Q3 2010, mainly reflecting the contribution from
    acquisitions. On a per unit basis, FFO was up 13% to $0.68 over Q3 2010,
    also reflecting the impact of accretive acquisitions as well as
    comparative property growth. 


--  Adjusted funds from operations per unit up 11.5% to $0.58 - AFFO
    increased by $15.0 million or 69% over Q3 2010, primarily due to
    acquisitions. On a per unit basis, AFFO increased by nearly 11.5%,
    reflecting accretive acquisitions.


ACQUISITION HIGHLIGHTS

During the quarter, Dundee REIT completed over $1.0 billion of acquisitions, including the 24-property, 2.7 million square foot Blackstone Portfolio and the 1.0 million square foot Class A office property in downtown Montreal. Year-to-date, Dundee REIT has completed $1.5 billion of acquisitions, adding more than 6.5 million square feet of properties to its portfolio. In the past two years the Trust has added $2.6 billion of properties to its portfolio, 70% of which are in very desirable locations within central business districts.


                                     Approx.      Purchase               Cap
                          Property       GLA         price              rate
Acquisitions                  type (sq. ft.)   ($000's)(1)         Date  (2)
----------------------------------------------------------------------------
Saskatoon Square,                                            January 4,     
 Saskatoon, SK              office   209,593 $      50,000         2011     
400 Cumberland Street,                                      January 17,     
 Ottawa, ON                 office   174,921        38,300         2011     
Realex Properties          office/                          February 8,     
 Corp., ON/AB/BC        industrial 1,837,277    373,430(3)         2011     
55 King Street West,                                          March 31,     
 Kitchener, ON              office   124,100        13,000         2011     
586 Argus Road,                                                             
 Oakville, ON               office    74,570        16,560  May 2, 2011     
Morgex Building,                                                            
 Edmonton, AB               office    39,750         9,900 May 19, 2011     
Multivesco Portfolio,      office/                                          
 Gatineau, QC           industrial   148,198        15,535 June 9, 2011     
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Closed in Q1 & Q2                  2,608,409       516,725              7.8%
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700 de la Gauchetiere,                                         July 11,     
 Montreal, QC               office   987,706       277,750         2011     
13888 Wireless Way,                                            July 12,     
 Richmond, BC               office   116,530        31,800         2011     
81 Wright and 170                                                           
 Joseph Zatzman,                                               July 27,     
 Halifax, NS            industrial   109,737         7,350         2011     
Blackstone Portfolio,                                        August 15,     
 ON, AB                     office 2,661,914       689,767         2011     
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Closed in Q3                       3,875,887 $   1,006,667              6.8%
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Under contract
8100 Granville Ave., 
 Richmond, BC              office    94,646        23,800

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Total closed and under contract in                                          
 2011                              6,578,942     1,547,192              7.1%
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(1) Purchase prices exclude transaction costs                               
(2) Cap rates are based on year-one NOI and exclude management income       
(3) Investment property value on Realex Properties Corp. share acquisition  

OPERATIONAL HIGHLIGHTS

Portfolio occupancy strong at 95.8% - the overall percentage of occupied and committed space remained strong at 95.8% but down from prior quarter due to acquisitions completed with a 94% average occupancy rate (June 30, 2011 - 96.5%; September 30, 2010 - 97.1%). On a comparative property basis, occupancy softened slightly quarter-over-quarter with an improvement in the comparative office portfolio being offset by a decrease in the industrial portfolio.

In-place rents increased on a total portfolio basis as well as on a comparative property basis. In addition, average in-place rents remain approximately 7% below estimated market rents, providing an opportunity to capture increases through leasing activity. Average in-place rents were $14.96 per square foot up from $14.37 at June 30, 2011 (December 31, 2010 - $14.29, September 30, 2010 - $14.49). The Calgary market continues to strengthen as demonstrated by increasing market rental rates. Throughout the remainder of 2011, approximately 573,347 square feet of space will expire, of which 244,542 square feet or 43% has already been committed.


                                   Total portfolio    Comparative properties
                                         occupancy              occupancy(2)
--------------------------------------------------  ------------------------
                             September    June 30,     September    June 30,
                              30, 2011        2011      30, 2011        2011
                                   (%)         (%)           (%)         (%)
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Office                                                                      
 Western Canada                   97.0        95.4          96.9        95.4
 Calgary                          95.4        96.4          96.0        96.4
 Toronto                          95.0        96.1          95.5        96.1
 Eastern Canada                   96.5        97.5          98.4        97.5
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Total office                      95.7        96.1          96.2        96.1
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Industrial                                                                  
 Western Canada                   95.1        99.5          95.1        99.5
 Calgary                          94.7        94.9          94.7        94.9
 Toronto                          93.6       100.0          93.6       100.0
 Eastern Canada                   98.8        99.4          98.8        99.4
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Total industrial                  96.1        97.9          96.0        97.9
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Overall(1)                        95.8        96.5          96.2        96.5
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(1) Excludes redevelopment properties and discontinued properties.          
(2) Comparative properties include all properties owned by the Trust as of  
    June 30, 2011.                                                          

CAPITAL INITIATIVES


--  New equity issues - On August 15, 2011, Dundee REIT completed a public
    offering and issued 5,037,000 REIT A Units at a price of $32.40 per unit
    for gross proceeds of $163.2 million. 


--  Debt - During the third quarter, the Trust secured $317 million of new
    mortgage financing with an 8.8-year average term to maturity and a
    weighted average interest rate of 4.40%, and $134.5 million in assumed
    mortgages on property acquisitions at an average rate of 3.67% and with
    an average term to maturity of 3.5 years. In addition, the Trust entered
    into a $188 million 5-year term loan facility to help finance the
    Blackstone Portfolio and has entered into two interest rate swaps to fix
    the interest payment at 3.5% for a notional value of $133 million over
    five years and 3.0% for a notional value of $55 million over three
    years. As a result, the Trust's overall weighted average interest rate
    declined to 4.96% (June 30, 2011 - 5.30%; September 30, 2010 - 5.63%)
    and extended the term to maturity to 5.5 years (June 30, 2011 - 5.3
    years; September 30, 2010 - 4.7 years). 


Information appearing in this news release is a select summary of results. The financial statements and management's discussion and analysis for the Trust, as well as its Supplementary Information Package are available at www.dundeereit.com and on www.sedar.com.

Dundee REIT is an unincorporated, open-ended real estate investment trust and provides high quality, affordable business premises. It is focused on owning, acquiring, leasing and managing mid-sized urban and suburban office and industrial properties in Canada. Dundee REIT's portfolio currently consists of approximately 18.9 million square feet of gross leasable area across Canada. Dundee REIT's portfolio is well diversified by geographic location and tenant mix. For more information, please visit www.dundeereit.com.

FOOTNOTES


(1) Investment properties revenue includes revenue from equity accounted    
    investments and debt includes debt related to equity accounted          
    investments.                                                            
(2) NOI - investment property revenues less operating expenses, excluding   
    redevelopment and income from disposed properties.                      
(3) FFO - net income, adjusted for fair value adjustments on investment     
    property and financial instruments, gain on sale, and amortization of   
    equipment.                                                              
(4) AFFO - FFO adjusted for amortization of debt costs, deferred unit       
    compensation expense, straight line rent and the Trust's estimates of   
    normalized leasing costs and normalized non-recoverable recurring       
    capital expenditures.                                                   

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

This press release may contain forward-looking information within the meaning of applicable securities legislation. Forward looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dundee REIT's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate functions. Our objectives and forward-looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward-looking information in this press release speaks as of the date of this press release. Dundee REIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in Dundee REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dundee REIT's website at www.dundeereit.com.

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