Retrocom Mid-Market REIT Announces Third Quarter 2011 Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 9, 2011) -

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

Retrocom Mid-Market Real Estate Investment Trust (the "REIT")(TSX:RMM.UN) announced today its financial results for the third quarter ended September 30, 2011.

Highlights

• Net Operating Income increased 42% in the three month period ending September 30, 2011 versus the same period last year.
  
  
• Debt to Gross Book Value ratio decreased to 57.4%.
  
  
• The Zellers lease at Lancaster Mall was assigned to Walmart on September 23, 2011, resulting in Walmart becoming the REIT's highest contributor to rental revenue.
  
  
• On October 6, 2011, closed on the sale of its 1480 Dundas Street East property to a Joint Venture which will develop a 430,000 square foot Walmart Supercentre anchored shopping centre on the integrated site.
  
  
• At Kindersley Mall, Home Hardware signed a 20 year lease for 40,300 square feet starting February, 2012.
  
  
• On August 2, 2011, the Trust redeemed $20.0 million of 7.5% convertible debentures which were originally due July 31, 2012 and which were refinanced by a new convertible debenture issue with a coupon of 5.45%.
  
  
• Year to date, refinanced and renewed approximately $52 million of mortgage debt resulting in a 161 basis point decrease in the related debt's weighted average interest rate. Also, year to date, new and assumed mortgages were added totalling $32.3 million bearing a weighted average interest rate of 4.67%.
  

Operational & Financial Summary

• Net Operating Income ("NOI") for Q3 2011 was $10.9 million, an increase of $3.2 million or 42% as compared to NOI for the same period of 2010. The growth is mainly attributable to the fully integrated operating results of investment properties that the REIT acquired in December 2010 and May 2011. For the nine months ended September 30, 2011, NOI increased by approximately $6.7 million over the comparative period in 2010. The net increase in NOI is due to additional contribution of $9.5 million from investment properties acquired offset by a decrease in the same property NOI of $2.8 million due to lower occupancy.

• Funds from Operations, adjusted (after excluding transaction costs related to the issuance of convertible debentures) ("FFO, adjusted") for Q3 2011 totaled $5.1 million ($0.114 per unit, basic and diluted), as compared to $2.2 million ($0.078 per unit, basic and diluted) for Q3 2010. FFO, adjusted reflected an increase in NOI of $3.4 million, an increase in interest expense of $1.1 million due to additional mortgages on acquired properties and a decrease in trust expenses of $0.3 million. FFO, adjusted for the nine months ended September 30, 2011 was $12.3 million ($0.303 per unit, basic and diluted) compared to $9.2 million ($0.333 per unit, basic and diluted) for the same period in 2010.

• The portfolio occupancy rate was 85.1% as at September 30, 2011. Total pro-forma portfolio committed occupancy, as at September 30, 2011, and reflecting leases to take effect during the remainder of 2011 and in 2012, would be 87.8%.

• The REIT's average cost of mortgage debt was 5.58% at the end of Q3 2011, as compared to 6.02% at the end of 2010 and 6.22% at the end of the prior period, Q3 2010. The improvement is the result of the REIT's recent efforts in refinancing maturing debt at lower interest rates. The REIT's leverage ratio, including convertible debentures, was 57.4% as at September 30, 2011.

• On October 6, 2011, Retrocom closed on the sale of its property, located at 1480 Dundas Street East, which is adjacent to and will form part of its Mississauga joint venture development site.

• On September 23, 2011, the Zellers lease at Lancaster Mall was assigned to Walmart. At the end of the quarter, there are six other Zellers stores within the REIT's portfolio. The leases have expires ranging from 2 to 4 years. The REIT is currently reviewing its future opportunities relating to these premises.

• In the third quarter of 2011, the REIT executed a lease for a new 40,300 sq ft Home Hardware to anchor Kindersley Mall, starting February, 2012. With this committed lease, the occupancy will increase from 52.4% to 83.1% and provide further opportunity to lease additional commercial retail unit space.

• The REIT retains a solid liquidity position. As of today's date, the REIT has approximately $12.9 million cash on hand and $19.0 million available on the operating line.

Richard Michaeloff, President and CEO of the REIT, said, "In this third quarter of 2011, the REIT's active pace continued. We completed the closing of the sale of 1480 Dundas Street East, redeemed $20 million of 7.5% convertible debentures and continued to focus on driving our occupancy higher."

Financial Highlights
		Three months ended		Three months ended		Nine months ended		Nine months ended
		Sept 30		Sept 30		Sept 30		Sept 30
(all amounts in $000's, except per unit amounts and ratios)		2011 (1)		2010 (1)		2011 (1)		2010 (1)
Rental revenue and other income		19,791		14,503		57,642		44,630
Property operating expenses		8,889		6,835		27,100		20,806
Net operating income (2)		10,902		7,668		30,542		23,824
Trust expenses		1,141		1,455		3,419		3,206
Transaction costs		16		1,357		1,973
Finance costs-operations		5,003		3,875		15,116		11,205
Finance costs-distributions on Class B Units		1,025		1,025		3,075		3,075
Income (loss) before income taxes and fair value gains (losses)		3,717		(44	)	6,959		4,981
Fair value gains (losses) associated with finance costs		17,685		(13,197	)	9,170		(19,528	)
Fair value gains (losses) on investment property		(26	)	936		(3,438	)	1,542
Fair value losses on participant's rights under LTIP		252		(197	)	229		(245	)
Loss from joint venture		(135	)	-		(135	)	-
Future income tax loss		-		(1,024	)	-		(4,516	)
Income (loss) for the period		21,493		(13,526	)	12,785		(17,766	)
FFO, adjusted (3)		5,060		2,163		12,343		9,195
FFO, adjusted per unit
	Basic	0.114		0.078		0.303		0.333
	Diluted	0.114		0.078		0.303		0.333
FFO, adjusted payout ratio		98.4	%	143.7	%	113.0	%	101.4	%
Distributions (4)		4,979		3,109		13,943		9,326

Full Financial Results and MD&A will be available on SEDAR (www.sedar.com) as well as the Investors Relations section of the REIT's website(www.rmmreit.com).

(1)	Based on financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Board ("IASB"). Results of 2010 have been restated to conform to IFRS.
(2)	A non-IFRS measurement, calculated by the REIT as rental revenue (net rents, property tax and operating cost recoveries, as well as other miscellaneous income from tenants) less operating expenses from rental properties.
(3)	The reconciliations from net income (loss) to Funds from Operations, adjusted are included in the REIT's MD&A.
(4)	Distributions include distributions on Class B Units of Retrocom LP.

The REIT's management considers Net Operating Income, Funds from Operations, Funds from Operations, adjusted, and Debt to Gross Book Value ratio to be indicative measures in evaluating the REIT's performance. The table above includes non-IFRS 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 IFRS.

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 community-based commercial properties in primary and secondary markets 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.