Retirement Residences Real Estate Investment Trust
TSX : RRR.UN
TSX : RRR.DB.B
TSX : RRR.DB.C

Retirement Residences Real Estate Investment Trust

August 11, 2005 06:06 ET

Retirement Residences Real Estate Investment Trust Reports 2005 Second Quarter Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 11, 2005) - Retirement Residences Real Estate Investment Trust ("Retirement REIT") (TSX:RRR.UN)(TSX:RRR.DB.B)(TSX:RRR.DB.C) today released its financial results for the quarter ended June 30, 2005:

HIGHLIGHTS:

- Revenue grew by 4.2% to $267.1 million from $256.4 million in the second quarter of 2004;

- Distributable income decreased from second quarter 2004 by $3.4 million to $20.6 million in the second quarter of 2005;

- Distributable income per unit declined to $0.225 ($0.214 diluted) from $0.263 ($0.262 diluted) in the second quarter of 2004;

- Distribution payout relative to distributable income was 93% compared to 110% in the second quarter of 2004;

- Net income declined by $5.7 million to a net loss of $2.7 million compared to net income of $3.0 million in the second quarter of 2004; and,

- One retirement home was acquired and two long term care homes were transferred to operations from properties under development.

Derek Watchorn, Retirement REIT's President and Chief Executive Officer stated, "For the first time in a number of quarters, we achieved a distribution payout level of less than 100% of our distributable income. We saw improvement in most Ontario long term care homes, however, as expected, homes in the Greater Toronto Area will continue to be challenged into 2006. Within our Ontario retirement homes we have seen improvement in individual homes but there has not yet been a general recovery. Generally results were positive in the balance of our portfolio, apart from several of our long term care homes in Vermont which dragged down the performance of our U.S. Long Term Care Operations. We continue to focus our efforts on those homes experiencing declining occupancies and we are committed to a capital reinvestment program designed to restore occupancies with appropriate levels of return for our unitholders."

DIVISIONAL RESULTS:

Canadian Retirement Operations - Net operating income for the Canadian Retirement Operations declined to $31.9 million from $32.3 million in the second quarter of 2004. Average occupancy in areas outside of Ontario in the portfolio of same homes improved by 0.6 percentage points, moving to 96.7% from 96.1% in the second quarter of 2004. Within Ontario, average occupancy declined to 84.2% from 86.0% in the second quarter of 2004, or 1.8 percentage points.

The Lifestyle Portfolio continues to exhibit solid performance, although growth in revenue is not continuing at as rapid a pace as previously experienced.

Canadian Long Term Care Operations - Net operating income for the Canadian Long Term Care Operations increased to $21.6 million from $21.0 million in the second quarter of 2004. Average occupancy in long term care homes outside of Ontario increased to 95.3% from 95.2% in the second quarter of 2004. Within Ontario, average occupancy declined to 91.8% from 93.1% in the second quarter of 2004. Overall, the performance of Ontario Long Term Care homes was stable compared to the second quarter of 2004 after excluding funding items that were one-time in nature for both periods.

U.S. Retirement Operations - Net operating income increased to $1.8 million from $1.3 million in the second quarter of 2004 for the U.S. Retirement Operations. The acquisition of three Retirement Homes contributed $0.4 million of the increase in net operating income. Average occupancy in the portfolio of same homes increased to 92.6% from 91.1% in the second quarter of 2004.

U.S. Long Term Care Operations - Net operating income for the U.S. Long Term Care Operations of $5.6 million declined from $7.7 million in the second quarter of 2004. Average occupancy in the portfolio of same homes declined to 88.2% down from 91.0% in the second quarter of 2004. This does not represent an overall trend in the U.S. long term care market, but relates primarily to short term challenges faced by several of our homes in Vermont. Medicare residents remained constant as a percentage of our total resident census. Increased average rates contributed additional revenue from Medicare and Medicaid.

The increase in value of the Canadian dollar, compared to the second quarter of 2004, has reduced net operating income by $0.6 million in our portfolio of same U.S. Retirement and U.S. Long Term Care Homes. After adjusting for the appreciation in the Canadian dollar, net operating income from our portfolio of same U.S. Retirement Homes was ahead by $0.2 million while our same U.S. Long Term Care Homes was down $1.9 million.

Development - Our development program continues and in the second quarter of 2005 we completed and transferred to operations one long term care home in British Columbia and another in Alberta. A third long term care home, located in British Columbia, began admitting residents at the beginning of the third quarter of 2005. In Ontario, we are developing three new long term care homes that will replace three of our existing homes in 2006.

With the termination in principle of our exclusive development agreement with CPD, we are now exploring joint venture relationships with other developers offering us the capability of taking forward the many development opportunities existing within our own portfolio of homes, as well as new greenfield development opportunities.

Corporate - G&A expenses have increased above historic levels, however, some of the increase is temporary due to duplicate staffing required to integrate core information systems across all business segments which should lead to increased efficiencies and quality controls. Trust expenses are above expectations as a result of additional staff and consulting costs to satisfy proposed Canadian securities regulations relating to internal controls and the development of a strategic human resources function.

Mr. Watchorn also commented, "Although I am pleased with our progress on a number of fronts over the last six months, I am disappointed that the pace of change is not yet reflected in our results as fully as I had hoped. I remain confident, however, that we are on the right track for sustainable long term performance."

A conference call has been arranged for investors and analysts to review Retirement REIT's 2005 second quarter results with senior management on Thursday, August 11, 2005 at 11:00 am EST. The call can be accessed by dialing (416) 641-6700 or (800) 404-8949. The call is also accessible in webcast format at Retirement REIT's website. A taped rebroadcast of the teleconference call will be available until August 18, 2005 by dialing (416) 626-4100 (reservation number 21250404) or (800) 558-5253 (reservation number 21250404).

To view Retirement REIT's Management's Discussion and Analysis and Financial Statements for the quarter ended June 30, 2005, please visit our website at www.retirementreit.com.



SUMMARY OF FINANCIAL HIGHLIGHTS

OPERATING RESULTS
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For the three For the six
months ended months ended
June 30, June 30,
(Millions) 2005 2004 2005 2004
-------------------------- -------- -------- -------- --------
Revenues $267.1 $256.4 $525.4 $507.2
Direct operating expenses 206.2 194.3 408.9 389.3
Income before interest,
depreciation and
amortization,
non-controlling
interest's share of net
income and income taxes 50.8 53.0 95.8 99.3
Net income (loss) (2.7) 3.0 (7.5) 10.4
Distributable income (1) 20.6 24.0 36.8 40.4
Funds from operations (1) 19.1 22.5 33.7 37.7
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(1) These measures are not defined by Canadian generally accepted
accounting principles and there is no standardized measure for
these items.


PER UNIT AMOUNTS
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For the three For the six
months ended months ended
June 30, June 30,
2005 2004 2005 2004
-------------------------- --------- ------- --------- --------
Basic net income (loss)
per unit $(0.029) $0.033 $(0.081) $0.122
Diluted net income (loss)
per unit (0.029) 0.033 (0.081) 0.121

Distributable income per
unit(1) 0.225 0.263 0.401 0.474
Diluted distributable
income per unit(1) 0.214 0.262 0.394 0.472
Funds from operations per
unit(1) 0.208 0.247 0.367 0.441
Diluted funds from
operations per unit(1) 0.200 0.247 0.337 0.439
Distributions paid 0.2100 0.2877 0.4200 0.5754
Payout ratio(2) 93.4% 109.5% 104.7% 123.9%
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(1) These measures are not defined by Canadian generally accepted
accounting principles and there is no standardized measure for
these items.

(2) Payout ratio is defined as distributions paid as a percentage
of distributable income.


FINANCIAL POSITION
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As at As at
June 30, December 31,
(Millions) 2005 2004
-------------------------------------- ----------- --------------
Total assets $2,911.1 $2,774.1
Total debt (excluding convertible
debentures) $1,442.1 $1,406.0
Unitholders' equity (book value) $ 793.7 $ 826.7
Units outstanding at end of period 91.9 91.6
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Retirement REIT is the largest provider of accommodation and care for seniors in Canada. Retirement REIT owns 215 retirement and long term care facilities, including 32 facilities in select United States markets, and provides management services to 11 homes for other parties, with an aggregate resident capacity in excess of 25,000. Retirement REIT also provides nursing placement and in-home health care through its Central Health Services and Central Med units. For further information, see the Retirement REIT website at www.retirementreit.com.

Contact Information

  • Retirement Residences Real Estate Investment Trust
    David Beirnes
    Chief Financial Officer
    (416) 929-5430
    (416) 323-3818 (FAX)
    or
    Retirement Residences Real Estate Investment Trust
    Tim Benson
    Director, Investor Relations
    (416) 928-6473
    (416) 323-3818 (FAX)
    www.retirementreit.com