InterRent Real Estate Investment Trust
TSX : IIP.UN

InterRent Real Estate Investment Trust

May 12, 2008 07:00 ET

InterRent Real Estate Investment Trust Releases First Quarter Results, Announces Reduction In Distributions And Normal Course Issuer Bid

TORONTO, ONTARIO--(Marketwire - May 12, 2008) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

InterRent Real Estate Investment Trust (TSX:IIP.UN) ("InterRent") today released record financial results for the First Quarter of 2008.

Highlights:

Operating Results Continue Positive Trends

- Suites owned at March 31, 2008 increased by 52% to 4,007 as compared with 2,639 at March 31, 2007.

- Income producing assets increased to $276 million as at March 31, 2008 as compared with $188 million at March 31, 2007 representing an increase of 46.8%.

- Operating Revenues increased to $8.42 million as at March 31, 2008 as compared with $4.27 million as at March 31, 2007. representing an increase of 97%.

- Net Operating Income (NOI)(i) increased to $3.6 million as at March 31, 2008, as compared with $1.6 million as at March 31, 2007, and NOI as a percentage of revenue increased to 42.1%, as compared with 38.7% as at March 31, 2007.

- Vacancies declined to 2.65% at March 31, 2008 from 5.8% at March 31, 2007, representing a 54% decrease.

- "Same store" property revenues increased by 4.3% as at March 31, 2008 as compared to March 31, 2007, while net Operating Income (NOI) increased by 25.1% as at March 31, 2008 compared to March 31, 2007.

- Funds From Operations (FFO)(i) increased to $0.022 per trust unit as at March 31, 2008 as compared with $0.005 as at March 31, 2007, representing a 340% improvement.

Successful Financings in Challenging Capital Markets

- Raised $25 million in 7% convertible debentures in a "bought deal" public offering.

- Raised an additional $3.56 million in a private placement to an existing institutional unit holder at a unit price of $4.40.

Reduction in Distributions & NCIB

- Reducing distributions to unit holders by 32%, from an annual $0.38/unit to $0.26/unit commencing with the June 15, 2008 distribution, to realign distribution ratio, resulting in a yield of 8.7% at the closing price of $3.00/unit on May 9, 2008.

- Filed an application with the TSX to initiate a Normal Course Issuer Bid for its trust units.

Financial Results



Results Of Operations For;
--------------------------------------------------------------------------
Quarter Ending Quarter Ending
March 31, 2008 March 31, 2007
--------------------------------------------------------------------------
Operating Revenues $ 8,423,000 $ 4,264,000
--------------------------------------------------------------------------
Operating Expenses 4,873,000 2,614,000
--------- ---------
--------------------------------------------------------------------------
Net Operating
Income (NOI)(i) 3,550,000 1,650,000
--------------------------------------------------------------------------
G&A and
Financing Costs 3,900,000 1,626,000
--------------------------------------------------------------------------
Amortization 2,251,000 985,000
--------- -------
--------------------------------------------------------------------------
Net (Loss) (2,601,000) (961,000)
--------------------------------------------------------------------------
Net (Loss) per
Unit (0.14) (0.088)
--------------------------------------------------------------------------
Funds From
Operations (FFO)(i) 387,000 56,000
--------------------------------------------------------------------------
FFO per Unit 0.022 0.005
--------------------------------------------------------------------------
Distributable
Income (DI)(i) 27,000 (58,000)
--------------------------------------------------------------------------
DI per Unit 0.002 (0.005)
--------------------------------------------------------------------------
Weighted
Average Units O/S 17,936,816 10,971,672
--------------------------------------------------------------------------

(i)See "Non-GAAP Measures" below.


Operating revenues for the three months ended March 31, 2008 were $8,423,000, an increase of 97.5% over operating revenues of $4,265,000 for the three months ended march 31, 2007. This significant increase was due primarily to the acquisition of income-producing properties made during 2007. On a sequential basis, operating revenues increased by .04%, in the first quarter of 2008 over the fourth quarter of 2007, solely due to rental rate increases implemented in the first quarter of 2008.

Operating costs amounted to $1,552,000 for the three month period ended March 31, 2008 or 18.4% of revenue, compared to $776,000 or 18.2% of revenue for the three month period ended March 31, 2007.

Utility costs amounted to $1,953,000, or 23% of revenue for the three month period ended March 31, 2008, compared to $1,073,000 or 25% of revenue for the three month period ended March 31, 2007. The first quarter typically has the highest utility expenses.

Property taxes amounted to $1,368,000, or 16.2% of revenue for the three month period ended March 31, 2008, compared to $765,000 or 18% of revenue for the three month period ended March 31, 2007. The decline in property taxes was due to lower property tax rates at the newly acquired properties in northern Ontario.

Net Operating Income (NOI) amounted to $3,550,000 or 42.1% of revenue for the three month period ended March 31, 2008 compared to $1,650,000 or 38.7% of revenue for the three month period ended March 31, 2007. The increase in "year over year" NOI was a result of the increase in the number of buildings owned and operating efficiencies achieved throughout 2007.

General and administrative (G&A) costs amounted to $729,000 or 8.7% of revenue for the three month period ended March 31, 2008 compared to $515,000 or 12.1% of revenue for the three month period ended March 31, 2007. The significant decrease in G&A as a percentage of revenue was a result of the addition of income producing properties over the past twelve months.

Financing costs amounted to $3,172,000 or 37.6% of revenue for the three month period ended March 31, 2008 compared to $1,107,000 or 25.4% of revenue for the three month period ended March 31, 2007. The 48% increase in financing costs was due to interest payments on InterRent's convertible debentures issued in the first quarter of 2008, the associated accretion portion of debenture interest, and the higher interest payments on the Trust's acquisition facility. A significant portion of the outstanding debt on the acquisition facility was replaced by lower cost CMHC insured first mortgages throughout the first quarter, which will result in lower mortgage interest payments in future quarters.

Proposed Reduction in Distributions

InterRent also announced today that its distributions will be reduced by 32% from $0.0317 per trust unit per month to $0.217 per trust unit per month commencing with the June 15, 2008 distributions equal to $0.26 per trust unit on an annualized basis, representing an annual yield of approximately 8.67% based on the May 9, 2008 trust unit closing price of $3.00/unit. Payment will be made on or about June 15, 2008 to unitholders of record on May 31, 2008. At the close of business on May 9, 2008, InterRent REIT had 18,119,454 trust units issued and outstanding, including class B units of InterRent Holdings Limited Partnership. The reduction in distributions will not affect any interest payments due on InterRent's issued and outstanding convertible debentures.

Michael Newman, InterRent's CEO stated "The current uncertainty in global capital markets, has severely limited our ability to raise accretive equity in the short term. Therefore, InterRent's board of trustees, as part of its continuous review of the Trust's existing distribution policies has made the decision to reduce InterRent's monthly and annual distributions to unit holders commencing with the June 15, 2008 distribution. As the Trusts's cash distributions have exceeded its Distributable Income (DI) since its inception, the trustees believe that it is in the best interests of the Trust and of its unitholders to realign distributions to more closely reflect sustainable, long term distributable income levels based on the Trust's existing portfolio, and to retain sufficient amounts of cash to fund currently anticipated growth and operations. At an annual yield of 8.7% InterRent's trust units continue to represent one of the most attractive and tax effective yields available to long term investors in the multi residential sector of the Canadian real estate industry. We expect to achieve continuing improvements in our operating and financial results by focusing on internal growth, expense reduction and the prudent deployment of available cash resources and credit facilities."

Normal Course Issuer Bid (NCIB)

InterRent also announced today that it has filed with the Toronto Stock Exchange (the "TSX") a notice of its intention to make a normal course issuer bid (the "NCIB") for its trust units (the "Units") through the facilities of the TSX (the "Notice").

The Notice provides that InterRent intends, during a twelve-month period after TSX approval, to purchase on the TSX, Units of InterRent for cancellation in accordance with the rules of the TSX.

Conference Call and Webcast

Management will hold a conference call and live audio webcast on May 12, 2008 at 10:30 a.m. ET to discuss InterRent REIT's first quarter performance. The call can be accessed by dialling 416-644-3418 or 1-800-733-7571. The webcast will be accessible at www.interrentreit.com.

A replay of the call will be available until midnight on May 19, 2008. It can be accessed by dialling 416-640-1917 or 1-877-289-8525 and entering the pass code 21270010#.

About InterRent REIT

InterRent REIT is a rapidly expanding, growth oriented real estate investment trust engaged in building unitholder value through the accretive acquisition, ownership and operation of strategically located income producing multi-residential real estate, with 4,038 apartment suites under ownership and 233 suites under contract, for a total of 4,271 apartment suites.

(i)Non-GAAP Measures

InterRent REIT assesses and measures segmented operating results based on performance measures referred to as Net Operating Income (NOI), "Funds From Operations" ("FFO") and Distributable Income ("DI"). Both FFO and DI are widely accepted supplemental measures on the performance of a Canadian real estate investment trust; however, they are not measures defined by Canadian generally accepted accounting principles ("GAAP"). The GAAP measurement most comparable to NOI is Gross Profit, and to FFO and DI is total cash flow from operating activities and net earnings. FFO and DI. However, NOI, FFO and DI should not be construed as an alternative to gross profit, net earnings or cash flow from operating activities determined in accordance with GAAP as indicators of InterRent REIT's performance. In addition, InterRent REIT's calculation methodology for NOI, FFO and DI may differ from that of other real estate companies and trusts and therefore readers should not place reliance on these measures.

Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "anticipated", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". InterRent is subject to significant risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements contained in this release. A full description of these risk factors can be found in InterRent's publicly filed information which may be located at www.sedar.com. InterRent cannot assure investors that actual results will be consistent with these forward looking statements and InterRent assumes no obligation to update or revise the forward looking statements contained in this release to reflect actual events or new circumstances.

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information