Retrocom Mid-Market Real Estate Investment Trust

Retrocom Mid-Market Real Estate Investment Trust

March 31, 2008 19:10 ET

Retrocom Mid-Market REIT Announces Annual Financial Results

TORONTO, ONTARIO--(Marketwire - March 31, 2008) -


Attention Business/Financial Editors

Retrocom Mid-Market Real Estate Investment Trust (the "REIT") (TSX:RMM.UN) announced today its financial results for the year ended December 31, 2007.


- The REIT's occupancy rate at year end has increased to 91.5% from 90.9% in Q3 2007. In addition, the REIT has committed lease transactions in 2008 resulting in an approximate net additional 62,000 square feet leased after lease expiries and vacancies.

- Funds From Operations ("FFO") increased 22.6% to $3.6 million from $2.9 million for the fourth quarter but were 2% lower on a year over year basis.

- The REIT's average cost of debt is 6.0%, consistent with the prior year, and its leverage ratio is a conservative 58.2% inclusive of all debentures and mortgages. At year end, the REIT had cash on hand of $9.2 million.

- Net Operating Income for the year was $27.9 million, versus $27.8 million achieved on last year's results. Increased NOI from the acquisition of the remaining 50% of two of the REIT's co-owned properties was offset by recovery slippage, vacancies and prior year recovery adjustments.

- Trust expenses were flat, other than one time transaction costs of $3.2 million in 2006 and $0.6 million in 2007 for write-offs of receivables from prior owners.

- Increased investment for leasing resulted in deferred leasing costs of approximately $3.8 million and $1.3 million in tenant related building improvements in 2007 of which $2.4 million was incurred in the fourth quarter of 2007.

- Debt refinancing plan for repayment of $30 million debenture. (See below).

Actual Actual
three three Actual Actual
months months year year
ended ended ended ended
December December December December
31, 2007 31, 2006 31, 2007 31, 2006

(unaudited) (unaudited) (unaudited) (unaudited)

($000's) ($000's) ($000's) ($000's)
Rental Revenue and Other
Income $14,481 $13,953 $55,026 $53,157
Property Operating Expenses $6,921 $6,797 $27,110 $25,333
Net Operating Income $7,560 $7,156 $27,916 $27,824
Trust Expenses $911 $1,680 $3,557 $6,047
Income before Interest,
Depreciation &
Amortization $6,649 $5,476 $24,359 $21,777
Interest $3,261 $3,374 $13,645 $13,156
Depreciation and
Amortization $4,569 $4,696 $18,673 $18,964
Loss Before Discontinued
Operations ($1,181) ($2,594) ($7,959) ($10,343)
Gain (Loss) from
Discontinued Operations $1,991 ($82) $24,694 ($4,513)
Income (Loss) after
Discontinued Operations $810 ($2,676) $16,735 ($14,856)

Loss Per Unit (Before
Discontinued Operations) $(0.06) $(0.14) $(0.43) $(0.56)

Distributable Income(xx) $3,100 $3,479 $10,795 $15,267
Distributable Income per
Basic $0.17 $0.19 $0.58 $0.83
Fully Diluted $0.13 $0.14 $0.44 $0.63
Distributable Income
Payout Ratio 90% 96% 103% 94%

Funds From Operations(xx) $3,567 $2,909 $12,276 $12,566
Funds From Operations :
Basic $0.19 $0.16 $0.66 $0.68
Fully Diluted $0.15 $0.12 $0.50 $0.52
Funds From Operations
Payout Ratio 78% 115% 91% 114%

Full Financial Results will be available on SEDAR ( as well as the Investor Relations section of the REIT's website (

(i) Previously reported results have been reclassified for discontinued operations.

(ii) The reconciliations of Distributable Income and Funds From Operations to Income (Loss) for the Year are included in the REIT's MD&A.

The REIT's management considers Distributable Income and Funds From Operations to be an indicative measure in evaluating the REIT's performance. The table above, however, includes non-GAAP information that should not be construed as an alternative to net earnings or cash flows from operations and may not be comparable to similar measures presented by other issuers as there is no standardized meaning prescribed by GAAP.

Operating Strategy Highlights

Through property sales and debt refinancings the REIT strengthened its financial position and implemented an aggressive leasing strategy. This strategy focused on improving efficiencies and taking advantage of opportunities in the marketplace. These opportunities consisted primarily of the repositioning of certain properties.

The REIT continues to see positive results from investing in its properties. The fourth quarter of 2007 occupancy has risen to 91.5% from 90.9% in Q3 2007, although the occupancy rate has declined slightly year over year. This positive trend has continued in 2008, with the REIT leasing net space of approximately 62,000 square feet to the date of this press release.

Overall in 2007 and up to the date of this press release, the REIT signed renewals and amendments to rent for approximately 209 existing tenancies representing 1,191,530 square feet of existing tenancies, at a weighted average net rent of $8.07 per square foot. Increased rents of $0.86 per square foot were realized over net rent of $7.21 paid by the same tenants under the expiring leases, an increase of 11.9%.

New anchor tenants of note signed in 2007 include The Brick at Mountainview Mall for approximately 25,000 square feet, space which the tenant is expected to occupy in Q2 2008. With this tenant and other positive leasing initiatives at the property, this centre's occupancy rate is expected to rise to 96% in Q2 2008. At Island Lakes in Winnipeg, MB, the REIT has completed a 10,500 square foot "pad" for the Investors Group, who is expected to occupy this space beginning in Q2 2008.

The weighted average net rent for new tenants (leases completed in 2007 and up to the date of this press release) was $11.85 per square foot, compared to $9.61 for vacating tenants. This difference is primarily due to the greater amount of anchor tenant space at lower lease rates becoming vacant, while a higher proportion of newly leased space was attributable to higher yielding CRU space.

With respect to committed deals in 2008, rental increases from signed renewals, amendments and new tenancies, net of ending tenancies, have resulted in a $1.97 increase in the weighted average net rent, from $7.11 per square foot (for the weighted average old base rent) to $9.08 per square foot (for the weighted average new base rent).

Subsequent Events

Grand Central Plaza, in Saskatoon, SK, has been sold to an unrelated third party for $2.7 million. Management believed that this property did not fit the long term mandate of the REIT and proceeds will be used to fund other investment initiatives.

Operating Line and $30 Million Debenture Repayment

The Trust has entered into an agreement to amend its $10 million operating line facility. The amendment is to convert the line to a demand line with a maximum availability of $5 million with the same rate of interest and subject to security requirements.

Subsequent to year end, the Trust received a term sheet (uncommitted) from a chartered Canadian bank for a $30 million bridge loan facility for a term of six months from the draw down date. It is the Trust's intention to use this short-term facility to repay the $30 million debenture which comes due on July 26, 2008. Notwithstanding, the Trust has already begun a process to refinance a number of properties, the proceeds of which will be used to either repay the debenture directly, or to repay the bridge loan facility if utilized to repay the debenture earlier.

For the Trust to be in a position to be able to refinance the properties currently securing the $30 million debenture, the Trust is required to ensure that it can deliver adequate security to a new lender(s). As such and subsequent to year end, the Trust has entered into an agreement with the debenture holder such that on repayment of the debentures and for a fee the related security and cross collateralization of the security on the majority of the properties will be released, facilitating the refinancing of these assets. The Trust also has the ability to be released from the property management agreement if the debenture is repaid and the payment occurs prior to the termination of that agreement on July 26, 2008.

About Retrocom Mid-Market REIT

Retrocom Mid-Market REIT is an Ontario unincorporated open-end real estate investment trust which focuses on owning and acquiring mid-market retail properties in primary and secondary cities across Canada with the objective of producing a geographically diversified portfolio of properties with stable and growing cash flows.

This document may contain forward-looking statements, which although based on Management's best estimates as well as the current operating environment are subject to risks and uncertainties. As such, terms such as "anticipate", "believe", "expect", "plan" or other similar words should be taken as forward-looking statements. As a result of these potential uncertainties, any future results could differ materially from the predictions listed herein. Although Retrocom makes every effort to meet our predictions as listed in this document, we are unable to control certain circumstances such as economic, competitive or commercial real estate conditions.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of a prospectus, nor shall there be any sale of the Units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such state, province or other jurisdiction. The Units of the Retrocom Mid-Market REIT have not been, and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered, sold or delivered in the United States absent registration or an application for exemption from the registration requirements of U.S. securities laws.

Contact Information

  • Retrocom Mid-Market Real Estate Investment Trust
    David Fiume
    Chief Executive Officer
    (416) 741-7999
    (416) 741-7993