Primaris Retail REIT
TSX : PMZ.UN

Primaris Retail REIT

March 10, 2009 16:29 ET

Primaris Retail REIT Announces Fourth Quarter and Annual Financial Results

TORONTO, ONTARIO--(Marketwire - March 10, 2009) - Primaris Retail REIT (TSX:PMZ.UN) is pleased to report a 1.8% increase in net operating income for the fourth quarter of 2008, as compared to the fourth quarter of 2007.

President and CEO, Michael Latimer, commented "Primaris' operations remain solid and its financial position strong. FFO per unit in the fourth quarter would have been stronger except for the $0.8 million transition costs which were incurred and expensed in the quarter. We are very aware of current economic conditions and therefore we have a cautious outlook for future operating results. However, to date, occupancy rates remain solid and rents continue to grow on renewal activity."

Highlights

Liquidity

- Primaris is more liquid than at any other time in its five year history. It has $97 million cash and a $120 million unutilized credit facility. All 2008 maturities were re-financed and there is one loan maturity in 2009 of $3.7 million that needs to be re-financed and there are no loan maturities in 2010. Only $3.5 million is committed to complete existing developments, and there are no commitments to fund mezzanine loans.

Funds From Operations

- Funds from operations for the fourth quarter ended December 31, 2008 were $22.0 million or $0.351 per unit diluted, down 7.4% on a per unit basis from the $23.8 million, or $0.379 per unit diluted reported for the fourth quarter of 2007.

- Funds from operations for the year ended December 31, 2008 were $86.6 million or $1.384 per unit diluted, down 2.3% on a per unit basis from the $85.3 million, or $1.417 per unit diluted reported for 2007.

Net Operating Income

- Net operating income for the fourth quarter ended December 31, 2008, was $39.0 million, higher than the $38.3 million recorded in the fourth quarter of 2007.

- Net operating income for the year ended December 31, 2008, was $149.0 million, substantially higher than the $135.7 million recorded in 2007. The large increase was again driven principally by acquisitions.

Same Property - Net Operating Income

- Net operating income for the fourth quarter ended December 31, 2008, on a same property basis, increased 1.5% over the comparative three-month period.

- Net operating income for the year ended December 31, 2008, on a same property basis, increased 3.1% over 2007. Excluding the increase in lease termination income of $645 in 2008 and a $1,908 increased costs for the change in the property management contract, same property net operating income would have increased 4.1%.

Operations

- The REIT renewed or leased 542,351 square feet of space during the fourth quarter, which includes the renewal of four anchor stores. The weighted average new rent in these leases, on a cash basis, represented a 5.8% increase over the previous rent paid (12.1% excluding the anchor stores).

- The REIT renewed or leased 1,214,148 square feet of space during 2008, which includes the renewal of five anchor stores. The weighted average new rent in these leases, on a cash basis, represented a 7.0% increase over the previous rent paid (8.7% excluding the anchor stores).

- The portfolio occupancy rate increased during the fourth quarter and was 98.2% at December 31, 2008, compared to 98.0% at September 30, 2008, and up from 97.4% at December 31, 2007.

- Same-tenant sales, for the 13 properties owned during all of the 24 months ended December 31, 2008 remained constant at $465 per square foot as compared to the previous 12 months.

- The fourth quarter results included seasonal revenues of $4.5 million as compared to $4.1 million recorded in the fourth quarter of 2007.

Liquidity

Primaris is more liquid than at any other time in its five year history. It has $97 million cash invested in a variety of high quality Bankers Acceptances and Treasury Bills, and a $120 million unutilized credit facility not maturing until mid 2010. All 2008 maturities were re-financed and there is one loan maturity in 2009 of $3.7 million that needs to be re-financed and there are no loan maturities in 2010. The annual requirement to fund loan principal payments amounts to approximately $20 million. Only $3.5 million is committed to complete the development of the re-tenanting of the former Wal-Mart store at Lambton Mall. There are no commitments to fund mezzanine loans. The REIT completed two small acquisitions during the fourth quarter of 2008 for a total purchase price of approximately $7 million.

Financial Results

Funds from operations for the three months ended December 31, 2008 was $22.0 million or $0.353 per unit basic ($0.351 diluted). This compares to funds from operations of $23.8 million or $0.384 per unit basic ($0.379 diluted) earned during the three months ended December 31, 2007.

Funds from operations for the year ended December 31, 2008 was $86.6 million or $1.393 per unit basic ($1.384 diluted). This compares to funds from operations of $85.3 million or $1.426 per unit basic ($1.417 diluted) earned during 2007.

Net income for the three months ended December 31, 2008 was $5.1 million or $0.08 per unit (basic and diluted). This compares to net income of $7.8 million or $0.13 per unit (basic and diluted) earned during the three months ended December 31, 2007.

Net income for the year ended December 31, 2008 was $9.8 million or $0.157 per unit (basic and diluted). This compares to a net loss of $30.7 million or $0.513 per unit (basic and diluted) earned during the 2007. The net loss for 2007 includes a provision of $39.1 million for future income taxes, as a result of new tax legislation that was introduced in mid-2007.

The REIT acquired six properties at various times during 2007. These properties contributed significantly to operations throughout the three months ended December 31, 2008. These acquisitions and the related debt and equity financings explain a significant amount of the difference between the results for the current periods and the comparative periods. The REIT made one acquisition in the first quarter of 2008 which contributed to operations for the three months ended December 31, 2008. In addition, the REIT acquired two small properties in the fourth quarter of 2008, which only contributed to operations for part of the period.

The distribution payout ratio for the fourth quarter of 2008, expressed on a per unit basis as distributions paid divided by diluted funds from operations was 86.9% as compared to a 78.7% payout ratio for the fourth quarter of 2007.

The distribution payout ratio for 2008 was 88.1% as compared to an 83.5% payout ratio for 2007.

The payout ratios are sensitive to both seasonal operating results and financial leverage.

At December 31, 2008, the REIT's total enterprise value was approximately $1.7 billion (based on the market closing price of Primaris' units on December 31, 2008, plus total debt outstanding). At December 31, 2008 the REIT had $994.9 million of outstanding debt equating to a debt to total enterprise value ratio of 59.9%. On a net of cash basis, this ratio would be 54.0%. The REIT's debt consisted of $888.8 million of fixed-rate senior debt with a weighted average interest rate of 5.7% and a weighted average term to maturity of 7.7 years, $6.1 million of 6.75% fixed-rate convertible debentures and $100.0 million of 5.85% fixed-rate convertible debentures. The REIT had a debt to gross book value ratio, as defined under the Declaration of Trust, of 49.2%. During the three months ended December 31, 2008, the REIT had an interest coverage ratio of 2.5 times as expressed by EBITDA divided by net interest expensed. The REIT defines EBITDA as net income increased by depreciation, amortization, interest expense and, if applicable, income tax expense. EBITDA is a non-GAAP measure and may not be comparable to similar measures used by other Trusts.




Operating Results
Net Operating Income - Same Properties


Three Months Three Months Variance to
Ended Ended Comparative Period
December 31, December 31, Favourable/
2008 2007 (Unfavourable)

Operating revenue $ 71,154 $ 69,387 $ 1,767
Operating expenses 32,302 31,119 (1,183)
-------------------------------------------------
Net operating income $ 38,852 $ 38,268 $ 584
-------------------------------------------------


The same property comparison includes only 26 properties that were owned throughout both the current and comparative three-month periods. Net operating income, on a same property basis, increased $584, or 1.5%, over the comparative three-month period. Net operating income, on a same-property basis, would have increased 3.5% excluding the net change in the property management fees of $752.

Tenant sales

Tenant sales per square foot, on a same-tenant basis, have remained constant at $465 for the 12 months ended December 31, 2008. Total tenant volume has increased by 2.1% when comparing sales for the same properties.



Same-Tenant
Sales per Square Foot Variance
2008 2007 $ %
-----------------------------------------
Aberdeen Mall $ 430 $ 445 $ (15) (3.3%)
Cornwall Centre 537 508 29 5.6%
Dufferin Mall 567 573 (6) (1.0)
Eglinton Square 338 344 (7) (1.9)
Grant Park Shopping Centre 479 483 (4) (0.9%)
Lambton Mall 360 374 (14) (3.6%)
Midtown Plaza 564 541 23 4.3%
Northland Village 451 448 3 0.7%
Orchard Park Shopping Centre 519 542 (23) (4.3%)
Park Place Shopping Centre 499 500 (1) (0.2%)
Place Fleur de Lys 302 301 1 0.5%
Place du Royaume 393 390 3 0.8%
Stone Road Mall 565 566 (1) (0.2%)
-----------------------------------------
$ 465 $ 465 $ - -
-----------------------------------------
-----------------------------------------


All-Tenant
Total Sales Volume Variance
2008 2007 $ %
-----------------------------------------------------
Aberdeen Mall $ 52,159,910 $ 53,569,253 $ (1,409,343) (2.6%)
Cornwall Centre 76,850,942 72,582,529 4,268,413 5.9%
Dufferin Mall 90,307,664 88,890,231 1,417,433 1.6%
Eglinton Square 35,516,731 39,716,845 (4,200,114) (10.6%)
Grant Park Shopping
Centre 29,859,764 29,459,289 400,475 1.4%
Lambton Mall 52,306,253 54,401,015 (2,094,762) (3.9%)
Midtown Plaza 134,457,332 124,510,856 9,946,476 8.0%
Northland Village 47,223,700 46,232,928 990,772 2.1%
Orchard Park Shopping
Centre 148,125,920 148,566,729 (440,809) (0.3%)
Park Place Shopping
Centre 81,819,111 80,000,222 1,818,889 2.3%
Place Fleur de Lys 72,707,739 72,718,070 (10,331) (0.0%)
Place du Royaume 107,354,314 100,635,618 6,718,696 6.7%
Stone Road Mall 118,823,596 114,636,633 4,186,963 3.7%
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$ 1,047,512,975 $1,025,920,219 $ 21,592,758 2.1%
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The REIT's unchanged sales per square foot is unfavourable compared to the 1.0% national average tenant sales increase for the same period, as reported by the International Council of Shopping Centres for the 12 months ended December 31, 2008. The REIT's sales productivity of $465 per square foot is lower than the ICSC average of $545 per square foot, largely because the ICSC includes sales from super regional malls which have the highest sales per square foot in the country.

Leasing activity

Primaris Retail REIT's property portfolio remains well leased.

The portfolio occupancy rate increased during the fourth quarter of 2008 at 98.2%, versus 98.0% at September 30, 2008. These percentages include space for which signed leases are in place but where the tenant may not yet be in occupancy.

The REIT leased 542,351 square feet of space during the fourth quarter of 2008. This represented 59 leases of generally smaller stores and the renewal of four anchor stores, totalling 442,801 square feet. Approximately 92% of the leased spaces during the fourth quarter of 2008 consisted of the renewal of existing tenants, or 65% if the anchor stores are excluded. The weighted average new rent for renewals of existing tenants in the fourth quarter, on a cash basis, represented a 5.8% increase over the previous cash rent (12.1% excluding the anchor stores).

Development Activity

At Lambton Mall in Sarnia, Ontario, Canadian Tire will lease a 139,000 square foot store, previously occupied by Wal-Mart. Canadian Tire began work on the premises in October 2008, and the REIT expects the new store to open in April 2009. The existing 106,331 square foot Canadian Tire store will remain in operation as usual until the new store opens. The REIT's budget for this first phase of the project is approximately $3.5 million, and Canadian Tire will spend additional amounts in completing their store and executing their move. The scope of work will include a small expansion as well as constructing a connection between the new store and the interior of the mall, something that did not exist with the previous tenant. Once the existing Canadian Tire store is vacated, a second phase of the project will be initiated, with Lambton Mall modifying and re-leasing the vacated space. Plans for this second phase are not yet finalized; however, discussions are underway with a number of prominent retailers to participate in this second phase.

In mid-April 2007, the REIT agreed to terminate the lease of an 86,500 square foot Bay department store at Place du Royaume located in Saguenay, Quebec. The store closed in June 2007. The first phase of the project was to reconstruct the existing space for use by other retailers. Tenants are in place for 100% of the leasable area of the first phase of the project. The second phase included a new common area of the mall, including the floor, demising walls and ceilings and the demolition of the exterior entrance. Both phases were completed on time and under budget. As at December 31, 2008, $9.4 million has been incurred and capitalized. As part of this new circulation plan, a small part of existing common area has been backfilled by retail use. The total budgeted cost of this project is approximately $14.0 million. The REIT experienced 12 months of downtime in the former department store space and six months of downtime for the backfill of existing common area. During the second quarter of 2008 almost all of the tenants in the former department store space opened, with the last tenant having opened in the first quarter of 2009. The project generated a positive return for the property.



Comparison to Prior Period Financial Results

Three Months Three Months Variance to
Ended Ended Comparative Period
December 31, December 31, Favourable/
2008 2007 (Unfavourable)

Revenue
Minimum rent $ 41,992 $ 40,942 $ 1,050
Recoveries from tenants 25,750 25,252 498
Percentage rent 1,331 1,081 250
Parking 1,935 1,755 180
Interest and other income 775 566 209
------------- ----------- -------------
$ 71,783 $ 69,596 $ 2,187
Expenses
Operating 32,051 30,700 (1,351)
Interest 14,667 12,935 (1,732)
Depreciation and
amortization 17,951 21,376 3,425
Ground rent 292 419 127
------------- ----------- -------------
$ 64,961 $ 65,430 $ 469
------------- ----------- -------------
Income from operations 6,822 4,166 2,656
General and administrative (3,053) (2,333) (720)
Future income taxes 1,380 6,000 (4,620)
------------- ----------- -------------
Net income $ 5,149 $ 7,833 $ (2,684)

Depreciation of
income-producing properties 16,194 19,922 (3,728)
Amortization of leasing costs 1,708 1,454 254
Amortization of acquired
deferred recoverable costs 50 296 (246)
Accretion of convertible
debentures 270 249 21
Future income taxes (1,380) (6,000) 4,620
------------- ----------- -------------
Funds from operations $ 21,991 $ 23,754 $ (1,763)
------------- ----------- -------------

Funds from operations
per unit - basic $ 0.353 $ 0.384 $ (0.031)
Funds from operations
per unit - diluted $ 0.351 $ 0.379 $ (0.028)
Funds from operations -
payout ratio 86.9% 78.7% 8.2%
Distributions per unit $ 0.305 $ 0.298 $ 0.007
Weighted average units
outstanding - basic 62,255,812 61,883,305 372,507
Weighted average units
outstanding - diluted 67,186,648 66,890,934 295,714
Units outstanding, end
of period 62,269,712 61,937,650 332,062

Notes:
Funds from Operations, which is not a defined term within Canadian generally
accepted accounting principles, has been calculated by management, using
Canadian generally accepted accounting principles, in accordance with
REALPac's White Paper on Funds from Operations. The White Paper defines
Funds from Operations as net income adjusted for depreciation and
amortization of assets purchased, including the net impact of above and
below market leases, amortization of leasing costs and accretion of
convertible debentures. Funds from Operations may not be comparable to
similar measures used by other entities.


Funds from operations for the quarter ended December 31, 2008 was $1.8 million ($0.028 less per unit, diluted) less than the comparative period.

Supplemental Information

The REIT's audited consolidated financial statements for the years ended December 31, 2008 and 2007 and Management's Discussion and Analysis for the three-month and twelve-month periods ended December 31, 2008 are available on the REIT's website at www.primarisreit.com.

Forward-Looking Information

The MD&A contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, the REIT's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.

Examples of such information include, but are not limited to, factors relating to the business, financial position of the REIT, operations and redevelopments including volatility of capital markets, legislative changes, consumer spending, retail leasing demand, strength of the retail sector, price volatility of construction costs, availability of construction labour and timing of regulatory and contractual approvals for developments.

Although the forward-looking statements contained in this document are based on what management of the REIT believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, economic, competitive and commercial real estate conditions, unplanned compliance-related expenses, uninsured property losses and tenant-related risks.

Non-GAAP Measures

Funds from operations ("FFO"), net operating income ("NOI") and earnings before interest, taxes, depreciation and amortization ("EBITDA") are widely used supplemental measures of a Canadian real estate investment trust's performance and are not defined under Canadian generally accepted accounting principles ("GAAP"). Management uses these measures when comparing itself to industry data or others in the marketplace. The MD&A describes FFO, NOI and EBITDA and provides a reconciliation to net income as defined under GAAP. FFO and EBITDA should not be considered alternatives to net income or other measures that have been calculated in accordance with GAAP and may not be comparable to measures presented by other issuers.

Conference Call

Primaris invites you to participate in the conference call that will be held on Wednesday, March 11, 2009 at 9am EST to discuss these results. Senior management will speak to the results and provide a brief corporate update. The telephone numbers for the conference are: 416-641-6136 (within Toronto), and 1-866-223-7781 (within North America).

Audio replays of the conference call will be available immediately following the completion of the conference call, and will remain active until Wednesday, March 18, 2009. The replay will be accessible by dialing 416-695-5800 or 1-800-408-3053 and using the pass code 3280435#.

The REIT is a TSX listed real estate investment trust (TSX:PMZ.UN). The REIT owns 26 income-producing properties comprising approximately 9.3 million square feet located in Canada. As of February 28, 2009, the REIT had 62,316,803 units issued and outstanding.



PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Balance Sheets
December 31, 2008 and 2007

----------------------------------------------------------------------------
----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------

Assets

Income-producing properties $ 1,426,197 $ 1,471,637
Deferred costs 55,961 46,242
Rents receivable 4,812 6,366
Other assets and receivables 24,438 24,588
Cash and cash equivalents 97,424 94,202

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$ 1,608,832 $ 1,643,035
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Liabilities and Unitholders' Equity

Liabilities:
Mortgages payable $ 890,258 $ 861,623
Convertible debentures 95,438 94,543
Accounts payable and other liabilities 45,782 49,678
Distribution payable 6,334 6,299
Future income taxes 40,800 40,000
---------------------------------------------------------------------------
1,078,612 1,052,143

Unitholders' equity 530,220 590,892

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$ 1,608,832 $ 1,643,035
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PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Income
(In thousands of dollars, except per unit amounts)

Three months ended December 31 2008 and 2007

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
2008 2007 2008 2007
----------------------------------------------------------------------------
(Unaudited)

Revenue:
Minimum rent $ 41,992 $ 40,942 $ 160,934 $ 145,745
Recoveries from tenants 25,750 25,252 94,562 85,089
Percentage rent 1,331 1,081 3,687 2,948
Parking 1,935 1,755 6,384 5,771
Interest and other 775 566 4,166 3,592
---------------------------------------------------------------------------
71,783 69,596 269,733 243,145

Expenses:
Property operating 19,853 19,144 68,153 59,667
Property taxes 12,198 11,557 48,617 43,770
Depreciation 16,243 19,922 69,094 71,328
Amortization 1,708 1,454 5,710 4,294
Interest 14,667 12,935 57,497 46,118
Ground rent 292 418 1,313 1,301
General and administrative 3,053 2,333 9,070 8,222
---------------------------------------------------------------------------
68,014 67,763 259,454 234,700
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Income before gain on sale
of land and income taxes 3,769 1,833 10,279 8,445

Gain on sale of land - - 298 -
----------------------------------------------------------------------------
3,769 1,833 10,577 8,445

Future income taxes 1,380 (6,000) 800 39,100

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Net income/(loss) $ 5,149 $ 7,833 $ 9,777 $ (30,655)
----------------------------------------------------------------------------
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Basic and fully-diluted net
income/(loss) per unit $ 0.083 $ 0.127 $ 0.157 $ (0.513)

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PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Interim Consolidated Statements of Cash Flows
(In thousands of dollars)

Years ended December 31, 2008 and 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2008 2007
----------------------------------------------------------------------------

Cash provided by (used in):

Operations:
Net income (loss) $ 9,777 $ (30,655)
Items not involving cash:
Depreciation of income producing properties 69,045 71,328
Amortization of leasing commissions
and tenant improvements 5,710 4,294
Accretion of convertible debt 1,027 424
Amortization of acquired recoverable costs 512 797
Gain on sale of land (298) -
Future income taxes 800 39,100
---------------------------------------------------------------------------
86,573 85,288

Change in non-cash operating items:
Depreciation of fixtures and equipment 49 -
Amortization of above- and below-market leases (1,758) (1,646)
Amortization of tenant inducements 124 130
Amortization of recoverable operating costs 3,378 3,219
Amortization of financing costs 1,522 1,207
Other (323) 22,252
Leasing commissions (1,649) (1,592)
Tenant inducements (282) (1,441)
Recoverable operating costs (5,469) (7,833)
---------------------------------------------------------------------------
82,165 99,584

Financing:
Mortgage principal repayments (17,087) (14,144)
Proceeds of new financing 110,000 289,000
Repayment of financing (62,454) (143,399)
Financing costs (1,258) (5,649)
Settlement of hedging contracts - (4,652)
Distributions to Unitholders (75,817) (70,387)
Issuance of units, net of costs 2,895 60,011
Issuance of convertible debentures, net of costs - 99,673
Purchase of units under normal course issuer bid (338) -
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(44,059) 210,453

Investments:
Acquisition of income-producing properties (14,597) (286,591)
Additions to buildings and building improvements (8,669) (18,991)
Additions to tenant improvements (12,043) (9,581)
Proceeds on sale of land 425 -
---------------------------------------------------------------------------
(34,884) (315,163)
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Increase (decrease) in cash and cash equivalents 3,222 (5,126)

Cash and cash equivalents, beginning of year 94,202 99,328

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Cash and cash equivalents, end of year $ 97,424 $ 94,202
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Supplemental cash flow information:
Interest paid $ 53,921 $ 46,432
Supplemental disclosure of non-cash operating
and financing activities:
Value of units issued under asset management
agreement 1,881 2,731
Value of units issued from conversion of
convertible debentures 758 2,330
Financing costs transferred to equity upon
conversion of convertible debentures 33 97
Financing accumulated amortization transferred
to equity upon conversion of convertible
debentures (12) (27)
Mortgages assumed on acquisitions - 18,374
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PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST
Consolidated Statements of Cash Flows
(In thousands of dollars)


Three months ended December 31, 2008 and 2007
(Unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2008 2007
---------------------------------------------------------------------------

Cash provided by (used in):

Operations:
Net income (loss) $ 5,149 $ 7,833
Items not involving cash:
Depreciation of income producing properties 16,194 19,922
Amortization of leasing commissions
and tenant improvements 1,708 1,454
Accretion of convertible debt 270 249
Amortization of acquired recoverable costs 50 296
Future income taxes (1,380) (6,000)
---------------------------------------------------------------------------
21,991 23,754
Change in non-cash operating items:
Depreciation of fixtures and equipment 49 -
Amortization of above- and below-market leases (405) (701)
Amortization of tenant inducements 37 24
Amortization of recoverable operating costs 1,326 1,619
Amortization of financing costs 374 351
Other 14,573 12,559
Leasing commissions (443) (460)
Tenant inducements - (200)
Recoverable operating costs (653) (3,941)
---------------------------------------------------------------------------
36,849 33,005

Financing:
Mortgage principal repayments (4,490) (3,642)
Proceeds of new financing - 103,000
Repayment of financing - (9,212)
Financing costs (396) (1,180)
Settlement of hedging contracts - (4,652)
Distributions to Unitholders (18,995) (18,263)
Issuance of units, net of costs 739 927
Issuance of convertible debentures, net of costs - (327)
Purchase of units under normal course issuer bid (338) -
---------------------------------------------------------------------------
(23,480) 66,651

Investments:
Acquisition of income-producing properties (7,523) (1,385)
Additions to buildings and building improvements (1,676) (2,954)
Additions to tenant improvements (3,404) (2,928)
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(12,603) (7,267)
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Increase (decrease) in cash and cash equivalents 766 92,389

Cash and cash equivalents, beginning of period 96,658 1,813

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Cash and cash equivalents, end of period $ 97,424 $ 94,202
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Supplemental cash flow information:
Interest paid $ 13,867 $ 12,996
Supplemental disclosure of non-cash operating
and financing activities:
Value of units issued under asset management
agreement - 1,133
Value of units issued from conversion of convertible
debentures - 251
Financing costs transferred to equity upon
conversion of convertible debentures - 10
Financing accumulated amortization transferred
to equity upon conversion of convertible debentures - (2)

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PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST

Reconciliation of Net Income to Funds from Operations
(In thousands of dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Three Months
Ended Ended
December 31, December 31,
2008 2007
----------------------------------------------------------------------------

Net income $ 5,149 $ 7,833
Depreciation of income producing properties 16,194 19,922
Amortization of leasing costs 1,708 1,454
Accretion of convertible debentures 270 249
Amortization of acquired recoverable costs 50 296
Future income taxes (1,380) (6,000)
------------ ------------
Funds from operations $ 21,991 $ 23,754
------------ ------------

Funds from Operations, which is not a defined term within Canadian generally
accepted accounting principles, has been calculated by management, using
Canadian generally accepted accounting principles, in accordance with
REALPac's White Paper on Funds from Operations. The White Paper defines
Funds from Operations as net income adjusted for depreciation and
amortization of assets purchased, including the net impact of above and
below market leases, amortization of leasing costs and accretion of
convertible debentures. Funds from Operations may not be comparable to
similar measures used by other entities.



Calculation of Net Operating Income
(In thousands of dollars)

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Three Months Three Months
Ended Ended
December 31, December 31,
2008 2007
----------------------------------------------------------------------------

Revenue $71,783 $69,596
Less: Corporate interest and other income (472) (209)
Property operating expenses (19,853) (19,144)
Property tax expense (12,198) (11,557)
Ground rent (292) (418)
------------ ------------
Net operating income $ 38,968 $ 38,268
------------ ------------


Contact Information

  • Primaris Retail REIT
    R. Michael Latimer
    Chief Executive Officer
    (416) 865-5353
    or
    Primaris Retail REIT
    Louis M. Forbes
    Senior Vice President, Chief Financial Officer
    (416) 865-5360
    Website: www.primarisreit.com