Partners REIT Announces Results for the Fourth Quarter and Full Year 2013

BARRIE, ONTARIO--(Marketwired - March 31, 2014) - Partners Real Estate Investment Trust (the "REIT," or "Partners") (TSX:PAR.UN) announced today its results for the three and twelve month periods ended December 31, 2013 (the "fourth quarter" and "full year," respectively).

FOURTH QUARTER HIGHLIGHTS

• Revenues and NOI increased by 29% and 23%, respectively when compared to the fourth quarter of 2012.
• FFO and AFFO decreased by 15% and 12%, respectively, when compared to the fourth quarter of 2012.
• On October 18, 2013, the REIT was informed that a number of entities, including the REIT's external manager, LAPP Global Asset Management Corp. (the "Former Manager"), had sought protection under the Companies' Creditors Arrangement Act (Canada).
• On November 28, 2013, the REIT was informed that an affiliate of the Former Manager had obtained a Court order under which 3,872,863 of the REIT's units had been sold by the Former Manager to McCowan and Associates Ltd. ("McCowan").
• On December 13, 2013, the REIT's Board of Trustees consented to a proposal from McCowan pursuant to which a subsidiary of McCowan agreed to spend $1.5 million to acquire the rights, duties, and obligations of the Former Manager by way of assignment of the REIT's former management agreement. The proposal also called for McCowan to develop a plan to internalize the REIT's management by no later than February 15, 2014. McCowan agreed to effectively amend the former management agreement to provide for termination of its subsidiary as manager of the REIT on February 15, 2014, upon reimbursement of the $1.5 million paid for the assumption of the management agreement, together with accrued and unpaid amounts of fees owing thereunder.
• Subsequent to the conclusion of the quarter, on February 14, 2014, the REIT announced that it had terminated the former management agreement and completed the internalization of its management effective February 15, 2014. As a result of the internalization, the REIT's head office moved to Barrie, Ontario.

"The fourth quarter and first few months of 2014 represent a period of positive transformation for Partners REIT," stated Ron McCowan, the REIT's Interim Chief Executive Officer. "The highlight of this transformation was the recent internalization of Partners' management. We are confident that an internal management structure will materially improve the REIT's corporate governance and financial performance."

"Our confidence is reinforced by the experience of our new leadership team, at both the senior executive and Trustee level. Both Derrick West, our new Chief Financial Officer, and Jane Domenico, our new Chief Operating Officer, possess a wealth of significant relevant experience. Working alongside our Trustees, they will ensure that Partners' new direction is characterized by a focus on transparency and execution."

"The new management team is committed to refining the REIT's strategic direction over the coming months. Our work to date suggests that there is unrealized potential within the existing portfolio that can be realized through the allocation of the necessary management resources. Additional, the REIT remains committed to growth through selective acquisitions."

Results Summary Table
	As at and for the three months ended					As at and for the year ended
		Dec 31, 2013		Dec 31, 2012		Dec 31, 2013		Dec 31, 2012
Revenues from income producing properties	$	14,774,322	$	11,470,356	$	56,567,180	$	43,045,555
Net income (loss)		(9,184,881)		17,108,336		4,195,221		27,823,978
Net income per unit - basic		(0.36)		0.86		0.16		1.45
NOI (1)		9,004,789		7,310,162		35,267,384		28,024,289
NOI - same property (1)		6,785,279		7,146,590		452,761		19,245,656
FFO(1)		2,979,975		3,525,638		12,546,438		11,918,184
FFO per unit(1)		0.11		0.16		0.48		0.61
AFFO(1)		3,064,378		3,464,647		12,988,348		11,892,246
AFFO per unit(1)		0.12		0.15		0.50		0.61
Distributions(2)		3,561,211		3,577,579		15,979,558		12,445,357
Distributions per unit(2)		0.14		0.16		0.62		0.64
Distribution payout ratio(3)		120% / 116%		101% / 103%		127% / 123%		104% / 105%
Cash distributions(4)		3,229,261		3,363,482		14,783,010		11,769,231
Cash distributions per unit(4)		0.12		0.15		0.57		0.61
Cash distribution payout ratio(5)		108% / 105%		95% / 97%		118% / 114%		99% / 99%
As at						Dec 31, 2013		Dec. 31, 2012
Total assets					$	595,628,037	$	479,068,788
Total debt(6)						398,612,885		294,023,939
Total equity						184,878,657		170,064,524
Weighted average units outstanding - basic						25,731,319		19,164,337
Debt-to-gross book value including debentures(6)						66.7%		62.4%
Debt-to-gross book value excluding debentures(6)						52.4%		49.3%
Interest coverage ratio(7)						2.10		2.30
Debt service coverage ratio(7)						1.43		1.55
Weighted average interest rate(8)						4.34%		4.48%
Portfolio occupancy						96.4%		96.7%

(1)	NOI, FFO and AFFO are non-IFRS financial measures widely used in the real estate industry. See "Part II - Performance Measurement" for further details and advisories.
(2)	Represents distributions to unitholders on an accrual basis. Distributions are payable as at the end of the period in which they are declared by the Board of Trustees, and are paid on or around the 15th day of the following month. Distributions per unit exclude the 5% bonus units given to participants in the Distribution Reinvestment and Optional Unit Purchase Plan.
(3)	Total distributions as a percentage of FFO/AFFO.
(4)	Represents distributions on a cash basis, and as such, excludes the non-cash distributions of units issued under the Distribution Reinvestment and Optional Unit Purchase Plan.
(5)	Cash distributions as a percentage of FFO/AFFO.
(6)	See calculation under "Debt-to-Gross Book Value" in "Part IV - Results of Operations".
(7)	Calculated on a rolling four-quarter basis. See definition under "Mortgages and Other Financing" in "Part IV - Results of Operations".
(8)	Represents the weighted average effective interest rate for secured debt excluding debentures and credit facilities.
(9)	Certain comparative figures have been reclassified to conform with the current year's presentation.

FINANCIAL RESULTS

Partners REIT's revenue from income producing properties for the fourth quarter and full year increased by $3.3 million, or 29%, and $13.5 million, or 31%, respectively, when compared to the same periods in 2012. These increases were primarily due to the acquisition of six properties across British Columbia, Alberta, and Québec during 2013, as well as a full year of operations at twelve new properties acquired in 2012.

All property NOI for the fourth quarter and full year increased by $1.7 million, or 23%, and $7.2 million, or 26%, respectively, when compared to the same periods in 2012. The increase in all property NOI was largely driven by acquisition activity. Same property NOI decreased 5% for the fourth quarter and 3% for the full year when compared to the respective prior year periods. The decreases were primarily due to year-end adjustments made to recovery accruals and allowances for bad debt.

FFO for the fourth quarter and full year decreased by $0.5 million, or 15%, and increased $0.6 million, or 5%, respectively, when compared to the same periods in 2012. AFFO for the fourth quarter and full year decreased by $0.4 million (12%) and increased by $1.1 million (9%), respectively, when compared to the same periods in 2012. The decreases were primarily due to year- end adjustments made to recovery accruals and allowances for bad debt.

The AFFO payout ratio for the fourth quarter and full year were 117% and 123%, respectively, compared to 103% and 105% for same periods in 2012. The AFFO cash payout ratio for the fourth quarter was 106%, an increase from 97% in the same period in 2012. This increase was due to a decrease in AFFO, offset partially by a decrease in cash distributions. The decrease in cash distributions from the reduction of monthly distributions that commenced in November 2013 only partially offset the impact of year-end adjustments made to recovery accruals and allowances for bad debt.

The REIT's total assets as at December 31, 2013 represent an increase of $116.6 million, or 24%, over the balance at December 31, 2012. This increase was primarily due to the acquisition of six properties during the period for $120.2 million (inclusive of closing costs), as well as $6.7 million of property developments and improvements. These increases were partially offset by both fair value losses on the REIT's property portfolio and changes in the REIT's working capital.

The REIT's total debt as at December 31, 2013 increased by $104.6 million, or 36%, over the balance at December 31, 2012. This increase is attributable to a $23.0 million convertible debenture issuance that closed on March 5, 2013, net draws of $23.5 million on the REIT's Credit Facility and new mortgages of $69.3 million. These increases were partially offset by the repayment of a variable rate mortgage with a principal balance of $4.0 million and monthly principal repayments made on the REIT's mortgages. Debt-to-gross-book value ratio at December 31, 2013 stood at 66.7% as compared to 62.4% at December 31, 2012. As at December 31, 2013, the interest coverage ratio was 2.10 times, down from 2.30 on December 31, 2012.

OPERATIONAL PERFORMANCE

Partners REIT's occupancy as at December 31, 2013 was 96.4%, a slight decline when compared to the REIT's 96.7% occupancy at December 31, 2012. This decrease was primarily a result of the six properties acquired during 2013 having an average occupancy of 91.0%. Four of these properties were newly-developed but not fully leased and their acquisition included income guarantees. Approximately one-quarter of the income guarantees expire in 2014 with the remainder expiring in the second quarter of 2015. The REIT has maintained a tenant base with approximately 95% of the square footage leased to national or regional tenants.

Of the leases that expired during the year ended December 31, 2013, 89,648 square feet have been renewed or replaced with new leases with a further 68,044 square feet currently in the process of being renewed or committed to lease. The balance of 18,540 square feet, comprising eight tenancies, will require new prospects. 2013 annual lease renewals of both anchor and commercial retail unit tenancies resulted in a total average rental rate increase of approximately 3%.

OUTLOOK

Lease expiries in fiscal 2014 and 2015 are 9.2% and 9.8%, respectively. The REIT anticipates that there will be strong demand for the majority of this space, and as a result, these expiries provide the REIT with a near-term opportunity to potentially increase revenues.

The REIT has $57.1 million, or 20.1%, in mortgages maturing over the next two years. This provides an opportunity to refinance this portion of the REIT's debt at current market rates, which management expects to result in a slight reduction to the REIT's financing costs.

As a result of the expected performance of Partners REIT's existing portfolio, as well as the reduction of the REIT's distribution per unit in November, 2013, management anticipates that the REIT's AFFO payout ratio will remain below 100% during the 2014 year.

Partners has given notice to two third party property managers that provide property management services for the majority of the REIT's Ontario properties, that the REIT intends to terminate these contracts effective April 30, 2014. On that date, the majority of the employees who service Partners' properties will become direct employees of the REIT.

Partners REIT is committed to a disciplined acquisition strategy which requires that all acquisitions be financially accretive, complementary to the existing property portfolio and aligned with the REIT's overall strategic direction.

Access to capital markets remains challenging, despite the positive underlying fundamentals of the REIT's portfolio, limiting the number of opportunities that meet the criteria of the REIT's acquisition strategy. However, the REIT continues to actively explore potential opportunities in an effort to continue to grow the property portfolio on both a strategic and accretive basis. The REIT has also been advised by McCowan that there may be future vend-in opportunities.

FOURTH QUARTER DEVELOPMENTS

League CCAA Filing

On October 18, 2013, the REIT was informed that the Former Manager and related entities filed for protection under the Companies' Creditors Arrangement Act (Canada) (the "League CCAA Filing"). The REIT was not a creditor of any of the companies involved in the League CCAA Filing.

Special Committee

On October 18, 2013, the REIT announced the appointment of a special committee (the "Special Committee") comprised of the REIT's independent trustees. The special committee's mandate was to evaluate both strategic alternatives for the enhancement of unit holder value and the impact of the League CCAA Filing.

Reduction in Monthly Distributions

In November 2013, the REIT's trustees elected to reduce the REIT's monthly cash distribution to $0.04167 per unit, representing an annualized distribution of $0.50 per unit, in order to provide the REIT with improved financial flexibility.

Senior Management Changes

On November 24, 2013, the REIT announced the departure of Edward W. Boomer, the REIT's former President and Chief Investment Officer and Heather Routly, the REIT's former Chief Financial Officer.

Sale of Units by League

On November 28, 2013, the REIT was informed of the sale of 3,872,863 of its units by IGW to McCowan at a price of $7.00 per unit. As a result of the sale of units, McCowan assumed beneficial ownership of approximately 14.95% of the REIT's then issued and outstanding units.

Appointment of New Trustees

On December 4, 2013, the REIT announced the appointment of Allen Weinberg and Joseph Feldman as new trustees, and the resignations of James Bullock, Graham Senst, and Wilbur Smith III from the Board of Trustees. Concurrently, the REIT announced that the Special Committee had completed its mandate.

Acceleration of Internalization and the Acquisition of the Asset Management Agreement

On December 13, 2013, the REIT's Board of Trustees consented to a proposal from McCowan pursuant to which a subsidiary of McCowan agreed to spend $1.5 million to acquire the rights, duties, and obligations of the Former Manager by way of assignment of the REIT's former management agreement. The proposal also called for McCowan to develop a plan to internalize the REIT's management by no later than February 15, 2014. McCowan agreed to effectively amend the former management agreement to provide for termination of its subsidiary as manager of the REIT on February 15, 2014, upon reimbursement of the $1.5 million paid for the assumption of the management agreement, together with accrued and unpaid amounts of fees owing thereunder. This negotiated termination fee was approximately $1.9 million less than the termination fee that would otherwise have been payable by the REIT to the Former Manager on voluntary internalization in 2014. On December 27, 2013, McCowan and the Former Manager completed the Court-approved assignment of the former management agreement from the Former Manager to McCowan's subsidiary.

Proposed Acquisition of Ontario Properties

On December 18, 2013, the REIT entered into an agreement (the "Ontario Purchase and Sale Agreement") to acquire four retail centers in Ontario (the "Ontario Properties") for a purchase price of approximately $109 million (the "Ontario Acquisition"). The Ontario Properties comprise a total of approximately 650,000 square feet of gross leasable area and are located in Hamilton, London,

Kemptville, and North Bay. Pursuant to the Ontario Purchase and Sale Agreement, the REIT will satisfy the purchase price through (i) the assumption of certain debt secured by the Ontario Properties, and (ii) the issuance of units of a limited partnership to be formed by the REIT for the purposes of completing the acquisition as purchaser (the "New LP"), with such units including 6,450,000 class B units of the New LP (the "Class B Units"). The Class B Units are to be exchangeable for Units on a one-for-one basis and the economic equivalent of Units and carry the right to vote at the REIT level. The Class B Units are to be issued at an effective price of $7.61 per Class B Unit. After giving effect to the issuance of the Class B Units, it was expected that the vendors would hold approximately 19.9% of the then outstanding Units, calculated on a fully-diluted basis.

SUBSEQUENT EVENTS

Amendments to the Proposed Acquisition of Ontario Properties

On February 6, 2014, the REIT amended and restated the Ontario Purchase and Sale Agreement (the "Amended Agreement"), pursuant to which the vendor thereunder, Holyrood Holdings Limited ("Holyrood"), guaranteed $7,240,000 of the Ontario Properties' annualized NOI until such time as this amount has been achieved for a full calendar quarter of operations. Additionally, Holyrood agreed to fund certain non-recoverable capital improvement projects that are expected to materially reduce the REIT's anticipated capital expenditures on the Ontario Properties in the future.

Subsequent to the entering into of the Amended Agreement, the REIT's ongoing due diligence process identified certain matters that required further review prior to completing the Ontario Acquisition. Additionally, the REIT and Holyrood are in the process of obtaining certain third party approvals and all necessary consents. The REIT and Holyrood are currently engaged in discussions which may result in further amendments to the Amended Agreement prior to completion of the acquisition.

Changes to Senior Management/Trustees

On February 11, 2014, the REIT announced the appointments of Ron McCowan as Interim Chief Executive Officer and Derrick West as Chief Financial Officer. In conjunction with these appointments, the REIT also announced the departure of Patrick Miniutti, the REIT's former Chief Executive Officer.

On February 14, 2014, the REIT announced the appointments of Jane Domenico as Chief Operating Officer and Marc Charlebois as an independent Trustee of the REIT.

Patrick Miniutti tendered his resignation as a trustee of the REIT effective March 24, 2014. The other Trustees would like to thank Mr. Miniutti for his many contributions to the development of the REIT.

Internalization

On February 14, 2014, the REIT terminated the former management agreement and completed the internalization of management effective February 15, 2014. As a result of the internalization, the REIT's head office moved to Barrie, Ontario. The REIT continues to maintain an office in Victoria, British Columbia.

Conference Call Details

Partners will also host a conference call at 2:00 PM Eastern today, at which time management will review the financial results and discuss the REIT's strategic outlook.

Dial-In Details

	Toll Free (North America): 855-223-7309
	Local: 647-788-4929

Instant Replay Details (Available until April 14, 2014)

	Toll Free (North America): 855-859-2056
	Passcode: 17467418

A recording of the conference call will also be available via Partners' website.

About Partners REIT

Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 39 retail properties, well-located in British Columbia, Alberta, Manitoba, Ontario, and Quebec, aggregating approximately 2.7 million square feet of leasable 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.

Disclaimer

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.