Retrocom Mid-Market Real Estate Investment Trust
TSX : RMM.UN

Retrocom Mid-Market Real Estate Investment Trust

May 15, 2006 19:46 ET

Retrocom Mid-Market REIT Announces Quarterly Financial Results

TORONTO, ONTARIO--(Marketwire - May 15, 2006) –

NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY NON-CANADIAN SOURCE

Attention Business/Financial Editors:

Retrocom Mid-Market Real Estate Investment Trust (TSX: RMM.UN) announced today its financial results for the three month
period ended March 31, 2006.



Highlights

- Distributions paid to Unitholders were 93% of Distributable Income.
- Net Operating Income for the quarter ended was $9.1 million, versus
$5.3 million achieved on last year's first quarter results.
- We have internalized asset management and directly subcontracted
property management, following the termination of the services of
Retrocom Investment Management Inc., and Mr. Walter Davies, an
independent Trustee, has been appointed interim Chief Executive
Officer.
- Ongoing Trust Expenses are lower this period, but overall are higher
mainly due to one time costs related to the termination of the Asset
Management Agreement and Trustee and special advisor fees relating to
the Special Committee in the amount of $1.3 million.
- The occupancy rate at quarter end is 92%.
- The average cost of debt dropped by 0.6% to 6.1% at the end of the
quarter, down from 6.7% at the end of the first quarter last year.
- The average net rent in place grew 12.2% since the end of the first
quarter last year.
- The sale of one property in Brooks, Alberta which was identified as a
non-core asset in the internal restructuring plan in the quarter.
- The sale of one property in Mississauga, Ontario which was identified
as a non-core asset in the internal restructuring plan subsequent to
the quarter.

During the quarter the REIT's continued to focus on improving
efficiencies and taking advantage of opportunities in the marketplace as well
as within the REIT portfolio. These opportunities consisted primarily of the
repositioning of certain properties and disposition of non-core holdings in
the original portfolio. Subsequent to the end of the quarter another non-core
property, the single industrial building in the portfolio located in
Mississauga, Ontario, has been sold.
Distributable income (a non-GAAP measure) for the quarter ended March 31,
2006 was $4.1 million or $.22 per unit basic ($0.17 per unit on a fully
diluted basis) compared to $2.9 million or $0.24 per unit basic ($0.23 per
unit on a fully diluted basis) for the three months ended March 31, 2005. The
REIT declared $3.8 million or $0.20 per unit in cash distributions for the
quarter.
Based on the Distributable Income of $0.22 per unit in the first quarter
and the Board's decision in November of 2005 to cut the distribution to $0.82
per unit, the Board believes that by internalizing management and streamlining
the operations of the REIT, no further distributions cuts are anticipated.
The Distribution Payout Ratio for the quarter was 93%, down from 109% in
the first quarter of 2005. The lower distribution payout ratio for the first
quarter of 2006 is primarily due to the acquisition of seven income producing
properties in Q3 of 2005, the cut in distributions discussed below and the
decrease in Trust Expenses (net of one time costs added back to income) as a
percentage of revenue.
Commencing with the December 2005 distribution to unitholders, the
distribution paid was changed to $0.82 annually or $0.683 monthly per unit
down from $1.025 per unit annually and $0.0854 per unit on a monthly basis.
"We are pleased that the payout ratio has declined to under 100% - this
is a very clear validation of the Board's decision to reduce the Distributions
in mid-November 2005 to a more sustainable level of $0.82 per unit on an
annualized basis", said Walter Davies. "This is the first time that the DI
Ratio has been under 100% since the 3rd Quarter of 2004. For the remainder of
the 2006 financial year, we anticipate that the 2006 payout ratio will
continue to decline from this 93% level, as a result of the reduced G&A
expenses and the improvements in operation of the properties described
earlier."
Net Operating Income for the quarter ended March 31, 2006 grew to
$9.1 million on gross revenues of $17.2 million, an increase from $5.3 million
on gross revenues of $10.0 million for the quarter ended March 31, 2005. This
increase is due to the purchase of the seven properties in the third quarter
of 2005.
Interest charges have increased by $1.9 million for the quarter ended
March 31, 2006 compared to the quarter ended March 31, 2005. Although the
average cost of the REIT's debt has decreased to 6.1% at this time end
compared to 6.7% at the same time last year, higher debt loads due to the
ownership of the properties acquired in the third quarter of 2005 acquisition
resulted in a higher interest charge.
General, administrative and trust expenses have increased by $1.4 million
for the quarter ended March 31, 2006 compared to the quarter ended March 31,
2005. Approximately $1.3 million of this increase relates directly to the
termination of the Asset Management Agreement and costs related to the Special
Committee and its financial advisor. The decision to internalize management
will result in savings in general, administrative and trust expenses to the
Trust of at least $750,000 in 2006.
In the first quarter the REIT generated a net loss of $3.4 million ($0.18
per unit - basic and diluted) before discontinued operations compared to a
loss of $1.5 million ($0.10 per unit - basic and diluted) for the first
quarter of 2005.
The net loss is greatly affected by the result of depreciation and
amortization charges (non cash items) that we are required to report due to
new accounting policies. These policies were adopted by all Canadian real
estate companies effective January 1, 2004 and required that for any
acquisitions after that effective date, a REIT must depreciate its assets at a
much quicker rate than acquisitions prior to that date. Because the portfolio
is much larger as a result of the acquisition in the third quarter of 2005,
the provision for depreciation and amortization is approximately 60% greater
for the current period, being $6.4 million for the current quarter versus
$3.9 million for the quarter ended March 31, 2005.
Subsequent to March 31, 2006, the REIT sold its lone industrial property,
501 Lakeshore in Mississauga, Ontario. The property was sold for $12.0 million
and although the loss on sale was $4.0 million, it reduces debt by
approximately $8.0 million and provides approximately $4.0 million in cash
proceeds that will be used to execute our comprehensive leasing strategy.
Below is a summary of the Financial Results for the three months ending
March 31, 2006 with comparative results for the three months ending March 31,
2005. Full Financial Results will be available on SEDAR (www.sedar.com) as
well as the Investor Relations section of the Retrocom Mid-Market REIT website
(http://www.rmmreit.com/investor_finance.htm).

<<
Financial Highlights:



-------------------------------------------------------------------------
in $000's in $000's
-------------------------------------------------------------------------
Actual Three Actual Three
Months Ended Months Ended
March 31, March 31,
2006(1) 2005(1)
(unaudited) (unaudited)
-------------------------------------------------------------------------

Rental Revenue and Other Income $ 17,215 $ 9,974
Expenses
Operating $ 8,152 $ 4,628
Trust Expenses $ 1,987 $ 574
----------------------------
$ 10,139 $ 5,202
Income before Interest, Depreciation
& Amortization $ 7,076 $ 4,772
Less: Interest $ (4,127) $ (2,207)
Depreciation & Amortization $ (6,386) $ (3,810)
----------------------------
Loss from Operations $ (3,437) $ (1,245)
Gain (Loss) on Disposal of Discontinued
Operations $ 69 $ 0
----------------------------
Income (Loss) before Discontinued
Operations $ (3,368) $ (1,245)
Income (Loss) from Discontinued Operations $ (49) $ (241)
----------------------------
Net Loss $ (3,417) $ (1,486)
Add Back:
Depreciation & Amortization $ 6,130 $ 4,377
Gain on Disposal of Discontinued
Operations $ (69) $ 0
Income (Loss) from Discontinued
Operations(3) $ 49 $ 0
Trust Expense Adjustment(5) $ 1,328 $ 0
Amortization of Fair Value
Adjustment of Debt(4) $ 32 $ (21)
----------------------------
Distributable Income(6) $ 4,053 $ 2,870
Distributable Income per Unit:
Basic $ 0.22 $ 0.24
Fully Diluted $ 0.17 $ 0.23

Total Payout to Unitholders $ 3,783 $ 3,119
Payout Ratio 93% 109%

Weighted Average Units Outstanding
Basic 18,446,951 12,176,000
Fully diluted 24,342,942 12,588,500

Notes
(1) Based on the unaudited financial statements for the three months
ended March 31, 2006.
(2) Based on the unaudited financial statements for the three months
ended March 31, 2005 which have been adjusted to reflect the
Discontinued Operations.
(3) An adjustment for Discontinued Operations is only made in the quarter
in which the property is determined to be discontinued. The amount
for Discontinued Operations excludes depreciation and amortization as
the amount allowable as an addback is included in the depreciation
and amortization addback.
(4) Includes Interest Rate Subsidy received from Vendor on Q3 2005
Acquisition lowering cash payments required under conventional debt.
(5) The adjustment for Trust Expenses relate to non recurring costs as a
result of the termination of the Asset Management Agreement and costs
incurred as a result of decisions made by the Special Committee.
(6) Distributable Income is not a measure recognized under GAAP and does
not have a standardized meaning prescribed by GAAP. Distributable
Income is presented to reflect the ability of the Trust to earn
income and to make distributions of cash to unitholders and therefore
is considered a measure of cash available for distribution.
Distributable Income as computed by the Trust may differ from similar
computations as reported by other real estate investment trusts and
accordingly may not be comparable to Distributable Income reported by
other such issuers. Generally, Distributable Income differs from Net
Income, a GAAP measure, in that for any period, Net Income is
adjusted for depreciation and amortization and other non-cash
operating expenses and non-recurring items.

Investor Conference Call

A conference call to discuss the results will be held Wednesday May 17,
2006, at 10:00 AM ET and will be followed by a question and answer period. The
phone numbers for those who wish to participate in the question and answer
period are as follows:

Live Conference Access information:
Local Access: 416-640-3407
Toll-Free Access: 1-866-322-8798

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. Further information can be found at
http://www.rmmreit.com
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.


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