Partners Real Estate Investment Trust
TSX VENTURE : PAR.UN

Partners Real Estate Investment Trust

March 10, 2011 21:02 ET

Partners REIT Announces Fourth Quarter and Year-End 2010 Results

VICTORIA, BRITISH COLUMBIA--(Marketwire - March 10, 2011) - Partners Real Estate Investment Trust (TSX VENTURE:PAR.UN) announced today results for the three months and year ended December 31, 2010. Effective November 3, 2010, the name of Charter Real Estate Investment Trust was changed to Partners Real Estate Investment Trust. All references to "Partners Real Estate Investment Trust", "Partners REIT", the "REIT" and similar references in this press release refer to Charter Real Estate Investment Trust prior to the name change.

FOURTH QUARTER HIGHLIGHTS:

  • Same property NOI up 4.2% over third quarter of 2010
  • Occupancies improve to 95.7%
  • Strong leasing activities continue during and subsequent to quarter
  • Acquisition of Wellington Southdale Plaza for $21 million strengthens portfolio
  • Successful $8 million equity issue completed on December 30, 2010
  • New $25 million 8% unsecured subordinated debentures offering, closed March 8, 2011
  • Six additional properties to be acquired in March 2011for $31 million to make solid contribution
  • Focus on growing Unitholder value through accretive acquisitions and enhanced property performance continues

Solid Operating Performance

Occupancy levels as at December 31, 2010 were higher at 95.7% compared to 95.2% at the end of the third quarter of 2010 and 95.1% at the end of last year. The movement in leasing and renewals in the fourth quarter and year ended December 31, 2010 offset lease expiries during the period. Overall occupancy was also positively impacted by the acquisition of Wellington Southdale Plaza on December 22, 2010 with occupancy of 97.2%. Management continues to focus on pursuing and closing new leases and renewals.

Net Operating Income ("NOI") increased to $2.7 million in the fourth quarter of 2010 from $2.5 million in the same prior-year period due primarily to a 31% increase at the REIT's Chateauguay property. For the year ended December 31, 2010 NOI declined to $10.0 million from $10.7 million in 2009 due to decreases at the REIT's Mega Centre, Cornwall Square and Place Val Est properties.

Funds from Operations ("FFO") in 2010 include non-recurring other transaction costs consisting of non-capital expenses resulting from a strategic review process that occurred in the second quarter of the year, as well as expenses incurred on property acquisitions no longer pursued in the fourth quarter. FFO excluding non-recurring other transaction costs were $0.9 million ($0.04 per unit) in the fourth quarter of 2010, consistent with the fourth quarter of the prior year. FFO excluding non-recurring other transaction costs in 2010 was $3.4 million ($0.16 per unit) compared to $4.2 million ($0.23 per unit) last year. The decline is due primarily to a $170,000 decrease in revenue from the property portfolio, a $528,000 increase in operating costs, and a $211,000 increase in interest expense. The change in per unit amounts is due to the significant 40% and 18% increase in the weighted average number of units outstanding in the fourth quarter and year ended December 31, 2010 respectively. 

"We were pleased with our performance in the fourth quarter as we continued to make solid progress with our leasing and renewal activities," commented Adam Gant, Chief Executive Officer. "Looking ahead, we expect to see occupancies continue to improve while our active acquisition program adds to our cash flows and strengthens our portfolio." 

Strong Leasing Activity

For the year ended December 31, 2010, the portfolio had lease expiries of 89,000 square feet, while new or renewed leases of 105,000 square feet were entered into during the year. The average annual rental rate on the new leases is slightly lower than the expired leases due primarily to new leases for short-term tenants put in place until negotiations with longer-term national tenants were completed.

The average occupancy rate for the portfolio was 95.7% at December 31, 2010 compared with 95.1% at December 31, 2009 and 95.2% at September 30, 2010. The improved occupancy over the previous quarter was mainly due to the acquisition of Wellington Southdale Plaza as well as a new short-term tenant at Chateauguay. 

Solid Financial Position

As at December 31, 2010 the REIT's ratio of debt to gross book value improved to 59.8% from 62.7% at the prior year end. Interest coverage and debt service coverage ratios remained a conservative 1.7 times and 1.4 times respectively.

In December 2010 the REIT assumed a first mortgage loan in the amount of $9.7 million on the acquisition of Wellington Southdale Plaza. The loan matures in 2016 and bears an interest at a rate of 6.0%. The amortization period of the loan from the date of acquisition was 18.9 years. The REIT also acquired a second mortgage on the property in the amount of $2.3 million maturing in 2016 bearing an interest rate of 4.57%. The amortization period of the loan from the date of acquisition (December 22, 2010) was 25 years. In addition, the REIT acquired a first mortgage loan in December 2010 in the amount of $25.5 million secured by a mortgage on the Cornwall property. The loan matures in 2015, has a 25 year amortization period, and bears an interest rate of 4.90%.

Overall, the REIT's mortgage portfolio incurs a weighted average interest rate of 5.59% with a weighted average term to maturity of 4.9 years compared to a weighted average term to maturity for existing property leases of seven years.

Key Acquisition

On December 22, 2010 the REIT completed the acquisition of the Wellington Southdale Plaza located in London, Ontario, an 87,000 square foot open format, single-storey neighbourhood retail plaza situated on 6.97 acres of land in the heart of London's Wellington Road retail node. The centre consists of five separate structures anchored by Empire Theatres and includes such strong national tenants as Dollarama, Moxie's Grill, 2001 Audio Video, Harvey's, Jones New York, Dairy Queen and Pizza Pizza. The centre has undergone extensive renovations in 2000, 2004 and 2006, and generates annual NOI of approximately $1.6 million. The purchase price of approximately $20.3 million was satisfied by cash and the assumption of an existing mortgage of approximately $9.7 million, maturing in July 2016, with an effective interest rate of 4.4%.

Subsequent Events

On February 25, 2011, the REIT filed a final short form prospectus to issue $25 million aggregate principal amount of 8.0% extendible convertible unsecured subordinated debentures at a price of $1,000 per $1,000 principal amount of debentures. The debentures mature on March 31, 2016 and bear interest at an annual rate of 8.0% payable semi-annually, in arrears, on March 31 and September 30 in each year commencing on September 30, 2011. The offering was completed on March 8, 2011.

The proceeds of the debentures will be used in part to purchase a portfolio five properties in Manitoba and one in Quebec aggregating approximately 104,000 square feet of gross leaseable area. The properties are 100% occupied primarily by Shoppers Drug Mart. The purchase price will be approximately $31.0 million to be satisfied by the assumption of existing mortgages of approximately $17.0 million with the balance in cash. The purchase is expected to close on March 15, 2011. The properties currently generate NOI of approximately $2.3 million on an annualized basis.

"We are clearly executing on our commitment to grow, strengthen and further diversify our property portfolio," Mr. Gant concluded. "We continue to seek out and evaluate strategic acquisitions that meet our strict criteria and that will be accretive to our FFO. We are confident our growth will continue, and that all our value enhancing activities will generate strong returns for our Unitholders over the long term."

Investor Conference Call

A conference call to discuss the recent operating and financial results, as well as acquisitions to be completed on or before March 15, 2011, will be hosted by Adam Gant, Chief Executive Officer and Patrick Miniutti, President and Chief Operating Officer, on Tuesday, March 15, 2011 at 4.00 pm ET. The telephone numbers for the conference call are: Local: (416) 915-8110 and North American Toll Free: (866) 838-1265.

The telephone numbers to listen to the call after it is completed (Instant Replay) are local (416) 915-1035 or North American toll free (866) 245-6755. The Passcode for the Instant Replay is 541967#. The Instant Replay will be available until midnight, March 22, 2011. The call will also be archived on the REIT's website at www.partnersreit.com.

Financial Highlights
 
 ($ and units in 000s, except per unit amounts)   Year ended
Dec. 31,
  Q4 2010   Q3 2010   Q4 2009  
2010
 
2009
 
Revenues 4,648   4,106   4,191   16,948   17,118  
Portfolio Occupancy 95.7 % 95.1 % 95.1 % 95.7 % 95.1 %
Net Operating Income (NOI) 2,672   2,512   2,544   10,043   10,740  
Funds from Operations (FFO) 752   813   801   2,328   4,186  
FFO per Unit (diluted) $0.03   $0.03   $0.04   $0.11   $0.23  
FFO, adjusted (1) 924   875   801   3,365   4,186  
FFO, adjusted (1) per Unit (diluted) $0.04   $0.04   $0.04   $0.16   $0.23  
Net Income (Loss) (681 ) (621 ) (608 ) (3,473 ) (1,772 )
Net Income (Loss) per Unit (diluted) ($0.03 ) ($0.03 ) ($0.03 ) ($0.16 ) ($0.10 )
Distributions Declared 1,100   1,030   740   3,614   2,942  
Distributions Declared per Unit (diluted) $0.04   $0.044   $0.04   $0.16   $0.16  
Cash Distributions (2) 952   868   675   3,178   2,436  
Cash Distributions per Unit (diluted) (2) $0.037   $0.037   $0.037   $0.14   $0.13  
Weighted avg units outstanding (diluted) 25,850   23,522   18,440   21,624   18,284  
                     
Debt to Gross Book Value             59.8 % 62.7 %
Interest Coverage Ratio             1.70   1.88  
Debt Service Coverage Ratio             1.38   1.57  
Weighted Average Interest Rate (3)             5.59 % 5.87 %
Weighted Average Term to Maturity             4.9 yrs   5.3 yrs  
  1. Excludes non-recurring other transaction costs.
  2. Represents distributions to unitholders net of the distribution reinvestment plan.
  3. Represents the weighted average interest rate for secured debt excluding the credit facility with a floating rate of interest.

For the complete fourth quarter 2010 financial statements and Management's Discussion and Analysis, please visit www.sedar.com or www.partnersreit.com.

About Partners REIT

Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) eleven retail properties located in Ontario and Quebec, aggregating approximately 1.2 million square feet of leaseable space. Partners REIT focuses on expanding and managing a portfolio of retail and mixed-use community and neighbourhood shopping centres located in both primary and secondary markets across Canada.

Certain statements included in this press release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect," "will" and similar expressions to the extent they relate to Partners REIT. The forward-looking statements are not historical facts but reflect Partners REIT's current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the timing of the offering, success of the offering, listing of the units, use of proceeds of the Offering, access to capital, regulatory approvals, intended acquisitions and general economic and industry conditions. Although Partners REIT believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Partners Real Estate Investment Trust
    Patrick Miniutti
    President and Chief Operating Officer
    (250) 595-9398
    www.partnersreit.com