RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

August 04, 2005 13:09 ET

RioCan Real Estate Investment Trust Announces Record Second Quarter 2005 Recurring Distributable Income and Distribution Increase

TORONTO, ONTARIO--(CCNMatthews - Aug. 4, 2005) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced its financial results for the three and six months ended June 30, 2005.

FINANCIAL HIGHLIGHTS

RioCan has today reported record recurring distributable income ("RDI") of $140,314,000 ($0.727 per unit) for the six months ended June 30, 2005, an increase of 15% over $121,813,000 ($0.678 per unit) for the comparable period in 2004. For the quarter ended June 30, 2005 RDI increased by 13% to $71,405,000 ($0.369 per unit) from $63,093,000 ($0.350 per unit) for the three months ended June 30, 2004.

Total rental revenue for the six months ended June 30, 2005 increased by 6% to $290,593,000 from $274,511,000 for the comparable period in 2004. For the quarter ended June 30, 2005 total rental revenue increased by 4% to $142,554,000 from $136,478,000 for the three months ended June 30, 2004.

During the first quarter of 2005, RioCan redeemed certain of its unsecured debentures so as to enable it to ultimately increase its leverage limit closer to its unitholder approved 60% of aggregate assets. The total cost of this initiative was $20,549,000 and has been fully expensed in the six months ended June 30, 2005 as required by Canadian generally accepted accounting principles ("GAAP"), resulting in a reduction of both net earnings and funds from operations ("FFO"). Primarily as a result of this unusual item, RioCan reported net earnings of $55,124,000 ($0.28 per unit basic and diluted) for the six months ended June 30, 2005 as compared with net earnings of $81,970,000 ($0.46 per unit basic and diluted) for the comparative period in 2004. FFO for the six months ended June 30, 2005 decreased by 2% (again primarily as a result of this unusual item) to $121,929,000 from $124,486,000 for the comparable period in 2004.

For the second quarter of 2005, FFO increased by 12% to $72,458,000 ($0.38 per unit) from $64,439,000 ($0.36 per unit) for the comparable period in 2004. RioCan reported net earnings of $33,537,000 ($0.17 per unit basic and diluted) as compared with net earnings of $43,476,000 ($0.24 per unit basic and diluted) for the comparable period in 2004.

INCREASE IN MONTHLY DISTRIBUTION

RioCan has today also announced that it intends to increase its monthly distribution to 10.75 cents per unit from 10.50 cents per unit commencing with the August 2005 distribution.

Edward Sonshine, Q.C. President and Chief Executive Officer of RioCan, said, "The strength, reliability and growth of our RDI gives us the ability to make this increase in our monthly distribution, while still working towards lowering the percentage of RDI which we actually distribute."

OPERATING HIGHLIGHTS

As described above, during the first quarter of 2005 RioCan succeeded in redeeming those unsecured debentures which have, until now, limited RioCan's leverage limits. The early redemption of these debentures coupled with the repayment on maturity of the April 25, 2005 Series B debentures will now enable RioCan to increase its leverage limit closer to 60% of the historic book cost of its total assets. These debenture refinancing initiatives have enabled RioCan to lock in long term financing at lower interest rates and reduced its refinancing requirements through 2008. They have provided the Trust with the ability to finance future acquisitions with lower cost debt capital and be more competitively positioned in an active acquisition market. At June 30, 2005, the Trust is permitted to borrow up to $676 million prior to requiring further equity.

At the end of the second quarter, RioCan's portfolio occupancy was 96.5%. For the six months ended June 30, 2005, 91% of leases expiring were renewed. For the quarter ended June 30, 2005, RioCan signed 125 new leases totaling 395,000 square feet. Through June 30, 2005, RioCan has signed 266 new leases totaling 878,000 square feet of gross leaseable area, including partners' interests.

RioCan has an extensive in-house development program through which it expects to complete the development of approximately 7.3 million square feet of retail space over the next few years. Currently, eight development projects are under construction. One such development is RioCan Beacon Hill, an unenclosed regional shopping centre in northwest Calgary, Alberta, of which RioCan owns 62.5% with the remainder being owned by its long-standing partner, Trinity Development Group. RioCan and Trinity have been working on this project for 3 years but just completed its acquisition in June. Upon expected completion in the fall of 2007, this new format retail centre will ultimately comprise 774,000 square feet anchored by (user-owned) retailers Home Depot and Costco. National tenants will include Canadian Tire, The Brick, Linens N Things, Winners, HomeSense, Staples/Business Depot, Michaels, Best Buy and Sport Chek.

On July 26, 2005 RioCan completed a portfolio disposition to Retrocom Mid-Market REIT ("Retrocom") comprising seven enclosed mid-market shopping centres with a square footage of approximately 1,769,000 for $182,000,000. As part of the transaction, Retrocom assumed the existing mortgages payable of $89,900,000 and RioCan took back a secured convertible debenture receivable of $30,000,000 with a three year term bearing interest at 4.5% per annum. The balance of the purchase price of $62,000,000 was paid in cash. RioCan will perform all property management functions for this portfolio for a period of three years from closing.

Both RDI and FFO are widely accepted supplemental measures of a Canadian real estate investment trust's performance. The GAAP measurement most directly comparable to RDI and FFO is net earnings (to which a reconciliation is provided in Management's Discussion and Analysis for the three and six months ended June 30, 2005). RDI and FFO should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with GAAP as an indicator of RioCan's performance. RioCan's method of calculating RDI and FFO may differ from certain other issuers' methods and accordingly may not be comparable to measures reported by other issuers.

About RioCan

RioCan's purpose is to deliver to its unitholders stable and reliable cash distributions, which continuously increase over time. RioCan is Canada's largest real estate investment trust with total assets of approximately $4.2 billion. It has ownership interests in a portfolio of 195 retail properties, including eight under development, across Canada containing an aggregate of 47 million square feet, including partners' and shadow anchors' interests.

Contact Information

  • RioCan Real Estate Investment Trust
    Edward Sonshine, Q.C.
    President & CEO
    (416) 866-3018
    www.riocan.com