RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

November 04, 2005 10:35 ET

RioCan Real Estate Investment Trust Announces Third Quarter 2005 Earnings And Recurring Distributable Income

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

FINANCIAL HIGHLIGHTS

RioCan has today reported recurring distributable income ("RDI") of $208,994,000 ($1.079 per unit) for the nine months ended September 30, 2005, an increase of 13% over $184,369,000 ($1.023 per unit) for the comparable period in 2004. For the quarter ended September 30, 2005 RDI increased by 10% to $68,680,000 ($0.352 per unit) from $62,556,000 ($0.345 per unit) for the three months ended September 30, 2004.

Total rental revenue for the nine months ended September 30, 2005 increased by 3% to $424,790,000 from $410,637,000 for the comparable period in 2004. For the quarter ended September 30, 2005 total rental revenue decreased by 1% to $134,197,000 from $136,126,000 for the three months ended September 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 was expensed in the three months ended March 31, 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 has reported a decrease in net earnings to $95,266,000 ($0.49 per unit basic and diluted) for the nine months ended September 30, 2005 as compared with net earnings of $122,343,000 ($0.68 per unit basic and $0.67 per unit diluted) for the comparative period in 2004. FFO, which was also negatively impacted by the above unusual item, for the nine months ended September 30, 2005 increased by 1% to $190,903,000 from $188,654,000 for the comparable period in 2004.

For the third quarter of 2005, FFO increased by 8% to $68,974,000 ($0.36 per unit) from $64,168,000 ($0.36 per unit) for the comparable period in 2004. Also for the third quarter of 2005, RioCan reported net earnings of $40,142,000 ($0.21 per unit basic and diluted) as compared with net earnings of $40,373,000 ($0.22 per unit basic and $0.21 per unit diluted) for the comparable period in 2004.

THIRD QUARTER OPERATING HIGHLIGHTS

At the end of the third quarter, RioCan's portfolio occupancy was 96.8%. For the nine months ended September 30, 2005, 88% of leases expiring were renewed. For the quarter ended September 30, 2005, RioCan signed 103 new leases totaling 685,000 square feet. For the nine months ended September 30, 2005, RioCan has signed 369 new leases totaling 1,563,000 square feet of gross leasable area, including partners' interests.

On August 30, 2005 RioCan completed the acquisition of 2290 Cambie Street, in Vancouver, British Columbia, a newly constructed 149,000 square foot 4-storey retail facility for a purchase price of $44,500,000. The complex recently opened for business and is fully tenanted by Canadian Tire and Best Buy, with long term leases of twenty and fifteen years, respectively. With city land densification projects on the rise, this multi-level concept allows large format retailers to open locations in urban sites, which until recently have been difficult to obtain due to planning restrictions and the lack of available land.

During the quarter, RioCan created a joint venture with Tribute Communities, a regional residential developer. The objective of the joint venture is to develop a mixed-use building (retail and residential) at the corner of Avenue Road and St. Germain Avenue, in Toronto, Ontario, encompassing its existing RioCan owned retail facility. The joint venture described above is conditional upon completion of final zoning approvals being achieved to the satisfaction of both parties.

RioCan has an extensive in-house development program through which it expects to complete the development of approximately 7.7 million square feet of retail space over the next few years. Development projects for which construction has commenced or is imminent include:

- RioCan completed the acquisition of a Staples/Business Depot tenanted site and 12.5 acres of land adjacent to its existing Rona Centre (totaling 180,200 square feet) thereby assembling a 28.8 acre development and redevelopment site in Toronto, Ontario. Planning is currently underway for the additional development, with actual construction of the expansion expected in 2007. This site is complementary with its existing Wal-Mart anchored centre, RioCan Warden a 232,000 square foot new format retail centre which is tenanted by national retailers such as Winners, Future Shop, Mark's Work Wearhouse, Reitmans and The Shoe Company. On completion of this development RioCan's ownership in this node will be 598,000 square feet.

- RioCan commenced development of RioCan Centre Milton in Milton, Ontario. This centre comprises 31 acres and is over 80% pre-leased and upon completion, will total approximately 293,000 square feet of leasable area anchored by Home Depot and a national supermarket chain (both retailer owned), and Cineplex. The centre will also feature a strong mix of national and regional tenants including The Beer Store, Boston Pizza, Casey's, Super Cuts and two Canadian chartered banks. Construction is underway and store openings will be phased-in beginning spring 2006.

- RioCan announced five greenfield development joint ventures with Trinity Development Group Inc. which will be developed into approximately 2.1 million square feet of retail space (including retailer owned anchors totaling 807,000 square feet) at an estimated total cost of $253,000,000. The five developments, four in Ontario and one in Alberta, are as follows:

1. The largest development, RioCan Beacon Hill, located in northwest Calgary, Alberta will be developed into approximately 774,000 square feet of new format retail and will be constructed in two phases. Phase one, which will consist of about 441,000 square feet, is 100% sold or leased. The first phase will be anchored by Costco and Home Depot (both retailer owned), and will be tenanted by, amongst others, Winners, Linens N Things, Michaels, Golf Town, Petsmart, Royal Bank and TD Canada Trust. Construction of phase one has commenced and will be completed by the summer of 2006. Phase two will be anchored by Canadian Tire and tenanted by, amongst others, Staples/Business Depot and Mark's Work Wearhouse. Phase two construction will commence in 2006 and is expected to be completed in 2007.

2. Also currently under construction at Innes Road and Lanthier Drive in Ottawa, Ontario, is about 376,000 square feet of new format retail space anchored by a retailer owned Loblaws (180,000 square feet). This 90% pre-leased centre will be tenanted by retailers including Winners, Linens N Things, LCBO, Michaels, Montana's Cookhouse and Swiss Chalet. Construction is expected to be completed by the summer of 2006.

3. Site work has commenced on a development in Hamilton, Ontario. Upon completion, this unenclosed shopping centre will comprise approximately 260,000 square feet and will be anchored by Loblaws (112,000 square feet retailer owned) and Rona, along with 35,000 - 40,000 square feet of ancillary retail space. Rona is expected to be completed by the end of 2006 and construction of the remaining buildings is expected to be completed by the spring of 2007.

4. A site in Milton, Ontario will be developed into a 246,000 square foot unenclosed shopping centre. The 85% pre-leased centre will be anchored by retailer owned Loblaws (150,000 square feet) and will include other national tenants such as LCBO, Blockbuster, Bulk Barn, Wendy's and TD Canada Trust. Closing of the purchase and commencement of construction will take place in spring 2006, and is expected to be completed later that year.

5. Over 80% pre-leased, a site in Richmond Hill, Ontario will be developed into a 495,000 square foot new format retail centre. This centre will be anchored by a retailer owned Home Depot (145,000 square feet) and will be tenanted by, amongst others, Winners, HomeSense, Linens N Things, Staples/Business Depot and Michaels. Closing on the site is expected to take place by the end of this year. Construction is expected to begin in 2006 and to be completed by the spring of 2007.

On July 26, 2005 RioCan completed a portfolio disposition to Retrocom Mid-Market REIT ("Retrocom") comprising seven enclosed mid-market malls for $182,000,000. As part of the transaction, Retrocom assumed existing mortgages payable of approximately $89,700,000 (of which $72,500,000 continues to be guaranteed by the Trust) and RioCan took back a secured convertible debenture of $30,000,000 with a three year term bearing interest at 4.5% per annum. The balance of the purchase price was paid in cash. RioCan will perform all property management functions for this portfolio for a period of three years from the close of the transaction.

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 reconciliation is provided in Management's Discussion and Analysis for the three and nine months ended September 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 a total market capitalization of approximately $6.4 billion. It has ownership interests in a portfolio of 199 retail properties, including eleven under development, across Canada containing an aggregate of 46.5 million square feet, including partners' and shadow anchors' interests.

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