Partners Real Estate Investment Trust
TSX VENTURE : CRH.UN

Partners Real Estate Investment Trust

November 11, 2010 18:13 ET

Partners REIT Announces Third Quarter 2010 Results

VICTORIA, BRITISH COLUMBIA--(Marketwire - Nov. 11, 2010) - Partners Real Estate Investment Trust (TSX VENTURE:CRH.UN) announced today results for the three and nine months ended September 30, 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.

THIRD QUARTER HIGHLIGHTS:

  • Same property NOI up over second quarter of 2010
  • Occupancies improve to 95.2%
  • Active leasing and redevelopment activities continue during and subsequent to quarter
  • Shoppers Drug Mart extends lease at Cornwall Square for 15 years with 5,500 square foot expansion
  • New strategic plan to focus on growing Unitholder value through accretive acquisitions, enhanced property performance and development activities

Operating Performance
Occupancy levels as at September 30, 2010 were marginally higher at 95.2% compared to 95.1% at the end of the second quarter of 2010, but lower than the 95.9% at the end of the prior year's third quarter. The movement in leasing and renewals in the third quarter of 2010 was virtually offset by lease expiries during the period. Management continues to focus on pursuing and closing new leases and renewals.

Funds from Operations ("FFO") in 2010 include significant one-time corporate transaction costs related to the REIT's change in ownership structure occurring in the second quarter of the year. Not including these one-time costs, adjusted Funds from Operations was $875,147 ($0.04 per unit) in the third quarter compared to $751,893 ($0.04 per unit) in the second quarter of 2010 and $1,088,052 ($0.06 per unit) in the third quarter of the prior year. The year-over-year decline is due primarily to a decrease in revenues from income producing properties of $626,000, an increase of $199,000 in operating costs at income producing properties, an increase of $175,000 in interest expense, partially offset by a decrease in general and administration and other costs of $56,000. The $123,000 increase in the adjusted FFO in the third quarter compared to the second quarter of the year is due to an increase in revenues from income producing properties of $65,000, a decrease in interest expense by $32,000, and a decrease in general and administration and other costs of $26,000. Excluding the impact of the one-time corporate transaction costs, adjusted FFO for the first nine months of 2010 was $2,440,600 ($0.12 per unit) compared to $3,384,657 ($0.19 per unit) in the same period last year.

Revenue from income producing properties was lower in 2010 compared to the prior year primarily due to the high vacancy rate at Place Val Est related to the space vacated by SAAN. During the fourth quarter of 2010, 23,000 square feet of this space was leased to a new tenant, Michael Rossy Ltd. The positive impact to revenues from this new lease will be primarily reflected in the fourth quarter results. The Méga Centre performance remained flat during the period, although there were some temporary leases executed. At Cornwall Square, net operating income declined as a result of some small in-line tenant vacancies as well as a decrease in common area maintenance recoveries from certain tenants.

Operating costs increased during the current year due to management's decision to write-off additional receivables to bad debt and expenses related to vacant space that was unrecoverable.

Interest expense was negatively impacted during the current year due to an increase in interest rates and the interest rate spread that the bank has continued to charge on the REIT's credit facility.

"While our results in the third quarter were on par with our second quarter, we continue to develop our strategic plan focused on expanding our portfolio through accretive acquisitions, enhancing returns at our current properties, as well as development and re-development activities aimed at increasing the size and scope of our operations." commented Adam Gant, Chief Executive Officer. "Our focus remains primarily on properties in the $10 to $50 million value range located in strong secondary markets where we can differentiate ourselves from both small and large participants and where we have the best opportunity to build true value for our unitholders."

Leasing and Redevelopment Activity
For the nine months ended September 30, 2010, the portfolio had lease expiries of 61,397 square feet, and new or renewed leases of 77,281 square feet have been entered into during this period. It is projected for the year ending December 31, 2010, that the portfolio will have lease expiries of 141,624 square feet. Of these, new or renewed leases of 125,004 square feet (or approximately 88% of expiries) are expected to be entered into during this same period.

The average occupancy rate for the portfolio was 95.2%, compared with 95.9% at September 30, 2009 and 95.1% at June 30, 2010. The marginally improved occupancy over the previous quarter was mainly due to a new short term lease entered into at Méga Centre and a new ten-year lease at Cornwall Square. Lease payments have already commenced with the tenant at Méga Centre. The new tenant at Cornwall is expected to begin operations in the second quarter of 2011.

At the REIT's Châteauguay property in Montreal, the lease for a retail tenant occupying 12,012 square feet expired on March 31, 2010. The REIT entered into a binding offer with a new tenant to take 9,676 square feet of this space. It was originally anticipated that the tenant would begin operations in the fourth quarter. The tenant will take occupancy of the space in early 2011.

At the Méga Centre property in Montreal, a local dollar store operator occupying 18,573 square feet vacated its premise in February 2010. The REIT currently has a short term tenant in this space for the remainder of the year. The net impact to net operating income as a consequence of the original vacancy and subsequent short term lease arrangement is $167,500 for the current year. Management believes that Méga Centre's location, transportation access, visibility and the surrounding community's demographics are positive in terms of being able to redevelop, renew leases, and stabilize the centre.

At Place Val Est in Montreal, Michael Rossy Ltd., a regional junior department store, has leased approximately 23,000 square feet of space that was vacated by SAAN. Rossy commenced operations at the end of July and began making rental payment in the fourth quarter. The lease contains both a fixed base rent and percentage rent component that could impact net operating income from between $160,000 to $220,000 annually.

At Cornwall Square, 24,758 square feet expired during the first six months of the year. All of the square footage was occupied by small in-line tenants, and all of it has been renewed. Shoppers Drug Mart Inc. is leasing approximately 7,600 square feet at Cornwall Square and was the most significant expiry at the centre in the second half of 2010. However, Shoppers has exercised its three year option to renew the lease on the current space. Shoppers also executed a lease amending agreement with a planned expansion to 13,152 square feet. The lease would be extended for 15 years.

"We are pleased to have signed a new and extended lease with Shoppers Drug Mart, in keeping with our strategy to build strong and long-term relationships with key national, investment grade anchor tenants," Mr. Gant commented.

Net Asset Value
On September 23, 2010 the REIT announced that, pursuant to its preparations to begin reporting under International Financial Reporting Standards (IFRS) beginning January 1, 2011, it had received independent appraisals for each of the properties in its portfolio. As at September 30, 2010, the REIT calculates that the Net Asset Value (NAV), defined as the fair market value of the real estate assets plus the book value of all other assets less liabilities, is approximately $46.7 million, or $1.82 per unit. The NAV per unit is calculated as the NAV divided by the total number of units outstanding at the end of the period. NAV and NAV per unit are non-GAAP financial statistics.

Name Change
Effective November 3, 2010 Charter Real Estate Investment Trust changed its name to Partners Real Estate Investment Trust. The name change reflects the REIT's new ownership structure, new Board of Trustees, and a new focus on achieving aggressive growth in assets under management, distributable cash, and Unitholder value. The new name also reflects the REIT's partnership with its new asset manager, LAPP Global Asset Management Corp., an affiliate of League Asset Corp., and its proven and highly successful operating philosophy. An application for a new trading symbol will be submitted for approval in the near term.

Financial Highlights

($000s, except per unit amounts)     Nine months ended Sept. 30,  
  Q3 2010   Q2 2010   Q3 2009   2010   2009  
Revenues   4,106     4,042     4,186     12,300     12,927  
Portfolio Occupancy   95.2 %   95.1 %   95.9 %   95.2 %   95.9 %
Net Operating Income (NOI)   2,512     2,441     2,731     7,370     8,196  
Funds from Operations (FFO)   813     56     1,088     1,575     3,385  
FFO per Unit (diluted) $ 0.03   $ 0.003   $ 0.06   $ 0.08   $ 0.19  
Funds from Operations, adjusted (1)   875     752     1,088     2,441     3,385  
FFO, adjusted (1) per Unit (diluted) $ 0.04   $ 0.04   $ 0.06   $ 0.12   $ 0.19  
Net Income (Loss)   (621 )   (1,374 )   (305 )   (2,793 )   (1,165 )
Net Income (Loss) per Unit (diluted) $ (0.03 ) $ (0.07 ) $ (0.02 ) $ (0.14 ) $ (0.06 )
Distributions Declared   1,030     743     737     2,514     2,203  
Distributions Declared per Unit (diluted) $ 0.040   $ 0.040   $ 0.040   $ 0.12   $ 0.12  
Cash Distributions (2)   868     679     677     2,226     1,761  
Cash Distributions per Unit (diluted) (2) $ 0.037   $ 0.037   $ 0.037   $ 0.11   $ 0.097  
Weighted avg units outstanding (diluted)   23,522     18,530     18,388     20,199     18,232  
                               
Debt to Gross Book Value                     57.4 %   62.8 %
Interest Coverage Ratio                     1.65     1.95  
Debt Service Coverage Ratio                     1.35     1.64  
Weighted Average Interest Rate (3)                     5.88 %   5.87 %
Weighted Average Term to Maturity                     5 yrs     6 yrs  
(1)   Excludes one-time corporate transaction costs related to the REIT's new ownership structure.
(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 third 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, currently comprised of ten retail properties well located in Ontario and Quebec aggregating approximately 1.1 million square feet of leaseable space. It 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.

This press release contains forward-looking statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, local real estate conditions, including the development of properties in close proximity to Partners REIT's properties, competition, changes in government regulation, dependence on tenants, financial conditions, interest rates, the availability of equity and debt financing, environmental and tax-related matters, reliance on the Manager, potential conflicts of interest and reliance on key personnel. The cautionary statements qualify all forward-looking statements attributable to Partners REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release.

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

Contact Information

  • Partners REIT
    Patrick Miniutti
    President and Chief Operating Officer
    (250) 595-9328
    www.partnersreit.com