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

Retirement Residences Real Estate Investment Trust

November 10, 2005 06:00 ET

Retirement Residences Real Estate Investment Trust Reports 2005 Third Quarter Results

MISSISSAUGA, ONTARIO--(CCNMatthews - Nov. 10, 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 September 30, 2005:

HIGHLIGHTS:

For the third quarter of 2005 compared to the third quarter of 2004:

- Revenue grew to $268.8 million from $253.2 million, an increase of 6.2%;

- Distributable income per unit declined to $0.237 ($0.224 diluted) from $0.247 ($0.247 diluted). On a consolidated basis, the decrease is primarily due to higher general, administrative and interest costs and, on a diluted basis, the effect of the 5.5% convertible debentures;

- Distribution payout as a percentage of distributable income was 88.5% compared to 116.6%;

- Funds from operations per unit declined to $0.214 ($0.205 diluted) from $0.232 ($0.232 diluted). In addition to the factors affecting distributable income, funds from operations were affected by a reduction in imputed interest, an increase in amortization of deferred financing costs and an increase in depreciation of computer equipment;

- Net loss of $15.3 million compared to net income of $2.6 million. The decrease is primarily attributed to a provision of $13.4 million recorded in respect of properties held for sale; and,

- Four Ontario properties were put up for sale and one long term care home in British Columbia was transferred to operations from properties under development.

Derek Watchorn, Retirement REIT's President and Chief Executive Officer stated, "For many quarters, we have talked about the negative impact of the addition of 20,000 new long term care beds in Ontario. For the second quarter of 2005, we began to see this trend change. In the third quarter, our Ontario long term care homes continued to build on the improvement we achieved during the second quarter while our Ontario retirement homes had only a slight decline. We are expecting a recovery in our Ontario retirement home business similar to the recovery being experienced by our Ontario long term care homes. As a result, we believe that our distributions continue to be at a level which is sustainable and prudent given the improvement we are experiencing in our Ontario long term care homes and expecting in our Ontario retirement homes." He also said, "For the 2005 year, we set a target that our distributions would be less than our distributable income. This is now achievable. For 2006, we will strive for continuing improvement which results in narrowing the gap between our distributions and AFFO."

DIVISIONAL RESULTS:

Canadian Long Term Care Operations - Net operating income for the Canadian Long Term Care Operations increased to $23.0 million from $18.7 million in the third quarter of 2004. Average occupancy in the portfolio of same long term care homes outside of Ontario increased by 0.9 percentage points to 96.1% from 95.2% in the third quarter of 2004. Within Ontario, average occupancy declined by 0.9 percentage points to 92.9% from 93.8% in the third quarter of 2004. Overall, the performance of Ontario Long Term Care homes was better than the third quarter of 2004 by $0.7 million after excluding funding items that were one-time in nature for both periods.

Canadian Retirement Operations - Net operating income for the Canadian Retirement Operations declined to $31.6 million from $32.8 million in the third quarter of 2004. Average occupancy in areas outside of Ontario in the portfolio of same homes increased to 96.2% from 96.0% in the third quarter of 2004 and declined modestly from 96.7% in the second quarter of 2005. Within Ontario, average occupancy declined to 83.9% from 86.8% in the third quarter of 2004 and declined modestly from 84.2% in the second quarter of 2005.

U.S. Long Term Care Operations - Net operating income for the U.S. Long Term Care Operations of US$5.4 million remained equivalent to the third quarter of 2004. Average occupancy in the portfolio of same homes declined to 89.9% down from 90.7% in the third quarter of 2004. During the quarter, a number of steps were taken to address the previously disclosed challenges in several Vermont homes and it appears that operating performance at these homes has stabilized. Medicare residents increased as a percentage of our total resident census compared to the third quarter of 2004. Increased average rates contributed additional revenue from Medicare and Medicaid.

U.S. Retirement Operations - Net operating income increased to US$1.4 million from US$1.0 million in the third quarter of 2004 for the U.S. Retirement Operations. The acquisition of three Retirement Homes contributed US$0.3 million of the increase in net operating income. Average occupancy in the portfolio of same homes increased to 94.6% from 92.7% in the third quarter of 2004.

The increase in value of the Canadian dollar, compared to the third quarter of 2004, has reduced net operating income by $0.7 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 $0.1 million while our same U.S. Long Term Care Homes was down $0.2 million.

Development - At the beginning of the third quarter of 2005, we transferred to operations one redeveloped long term care home in British Columbia. Currently our development program includes the redevelopment of three new long term care homes in Ontario that will replace three existing properties when brought into operations during 2006 and 2007.

With the termination 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. This is a long term initiative that should benefit unitholders in the coming years.

General, administrative and trust expenses continue to be about 4.0% of revenue which is above historic levels. Significant progress has been made towards satisfying the Bill 198 requirements for publicly listed entities, the development of an overall strategic human resources function and the integration of core corporate systems to achieve greater efficiencies and quality controls.

A conference call has been arranged for investors and analysts to review Retirement REIT's 2005 third quarter results with senior management on Thursday, November 10, 2005 at 2:00 pm EST. The call can be accessed by dialing (416) 641-6667 or (800) 298-3006. The call is also accessible in webcast format at Retirement REIT's website. A taped rebroadcast of the teleconference call will be available until November 17, 2005 by dialing (416) 626-4100 (reservation number 21264884) or (800) 558-5253 (reservation number 21264884).

To view Retirement REIT's Management's Discussion and Analysis and Financial Statements for the quarter ended September 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 nine
months ended months ended
September 30, September 30,
(Millions) 2005 2004 2005 2004
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Revenues $268.8 $253.2 $789.9 $755.9
Direct operating expenses 205.9 193.4 610.9 578.8
Income before interest,
depreciation and
amortization,
non-controlling interest's
share of net income
and income taxes 52.2 51.3 147.5 150.0
Net income (loss) (15.3) 2.6 (22.8) 13.0
Distributable income(1) 21.8 22.5 58.7 62.9
Funds from operations(1) 19.6 21.2 53.5 58.7
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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 nine
months ended months ended
September 30, September 30,
(Millions) 2005 2004 2005 2004
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Basic net income (loss)
per unit $(0.166) $0.028 $(0.248) $0.149
Diluted net income (loss)
per unit (0.166) 0.028 (0.248) 0.148

Distributable income
per unit(1) 0.237 0.247 0.639 0.721
Diluted distributable income
per unit(1) 0.224 0.247 0.620 0.719
Funds from operations
per unit(1) 0.214 0.232 0.583 0.673
Diluted funds from operations
per unit(1) 0.205 0.232 0.570 0.671
Distributions paid 0.2100 0.2877 0.6300 0.8631
Payout ratio(2) 88.5% 116.6% 98.7% 121.3%
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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
(Millions) September 30, 2005 December 31, 2004
--------------------- ------------------- ------------------
Total assets $2,870.1 $2,774.1
Total debt (excluding
convertible debentures) $1,440.8 $1,406.0
Unitholders' equity
(book value) $ 755.4 $ 826.7
Units outstanding at end
of period 92.1 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 10 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 unit. 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
    (289) 360-1222
    (289) 360-1228 (FAX)
    or
    Retirement Residences Real Estate Investment Trust
    Tim Benson
    Director, Investor Relations
    (289) 360-1224
    (289) 360-1228 (FAX)