Partners Real Estate Investment Trust (TSX-V: CRH.UN) announces second quarter 2010 financial results

 

TORONTO, ONTARIO( August 12, 2010) - Partners Real Estate Investment Trust (“Partners REIT”) is pleased to announce its financial results for the three and six months ended June 30, 2010.

Highlights

  • A year ago, the Board of Trustees of Partners REIT began to consider the various strategic alternatives available to Partners REIT, given the lack of growth in the business as a result of the challenging economic and stock market environment that it faced. As a result of this strategic review and the strategic process that followed, Partners REIT entered into a transaction with League Assets Corp. that has resulted in a transformational change in the ownership structure. This transaction closed on June 4, 2010. An affiliate of League Assets Corp. bought C.A. Bancorp’s 33% ownership position in Partners REIT and entered into a new asset management agreement, thereby becoming Partners REIT’s major unitholder and new sponsor. League Assets Corp. is a Victoria, B.C.-based real estate company that indirectly owns and manages in excess of $400,000,000 in commercial and residential properties. As part of the transaction and change in ownership, League also agreed to invest additional money in Partners REIT through supporting a rights offering that closed on July 23, 2010. An additional $9,404,413 has been invested in Partners REIT by an affiliate of League, so that affiliates of League currently own approximately 49.9% of the units of Partners REIT.
  • Partners REIT continues its goal of trying to generate organic growth through redevelopment and re-leasing activities at its existing centres. The redevelopment of its Châteauguay property, through the replacement of a 15,000 square foot cinema tenant with an 18,138 square foot Pharmaprix (Shoppers Drug Mart) store for a 15 year term, was completed in the first quarter of 2010 with Pharmaprix commencing operations in early March. Another retail tenant at the property was also secured for the majority of the 12,012 square feet that expired on March 31, 2010. The new tenant will occupy 10,100 square feet of this space and is expected to initiate rental payments in the fourth quarter of 2010.
  • Partners REIT is also pleased to report that Michael Rossy Ltd. (“Rossy”), a junior department store operator based in Montreal, has leased the 23,000 square feet of vacant former SAAN space at the Place Val Est property in Sudbury, Ontario during the second quarter. Rossy has commenced operating at the end of July and will begin rental payments at the end of the third quarter.
  • Overall occupancy for Partners REIT at the end of the quarter was 95.1%, marginally below the second quarter 2009 occupancy of 95.9% but up significantly from 92.0% at the end of the first quarter 2010. The initial impact of these leasing improvements on net operating income will begin in the third quarter of 2010 with the Rossy deal described above, while it is expected that the full impact will not be reflected until the first quarter of 2011.

Financial Highlights

  • Partners REIT recorded funds from operations (“FFO”) (before one-time corporate transaction costs) of $751,893 or $0.04 per unit basic and diluted for the quarter ended June 30, 2010, a decrease of 31.0% from the quarter ended June 30, 2009. The decrease mainly relates to a decrease in net operating income and an increase in interest expense. FFO for the quarter was consistent with that recorded for the first quarter of 2010 of $813,559 or $0.04 per unit basic and diluted (before one-time corporate transaction costs).
  • For the six months ended June 30, 2010, FFO (before one-time corporate transaction costs) was $1,565,452 or $0.09 per unit basic and diluted compared to $2,307,105 or $0.13 per unit basic and diluted for the prior year. The decrease was mainly due to a decrease in net operating income and an increase in interest expense.
  • Partners REIT recorded net operating income (“NOI”) and same-property NOI of $2,440,859 for the quarter ended June 30, 2010, an 8.6% decrease from the $2,671,111 recorded for the quarter ended June 30, 2009. NOI was negatively impacted by the high vacancy rate at Place Val Est, as well as the recent vacancy and a tenant underperformance at the Méga Centre property. At Cornwall Square, NOI decreased compared to the prior year as a result of some small in-line tenant vacancies as well as a decrease in recoveries. The decreases were partly offset by a contractual rate increase of 10% at the Rona properties.
  • NOI and same-property NOI for the second quarter was 1.0% better than that recorded for the first quarter of 2010, as a result of the contractual rate increase at the Rona properties as well as an improvement in NOI at the Châteauguay property from the full quarter impact of the centre’s redevelopment and re-leasing initiatives.
  • Partners REIT recorded NOI and same-property NOI of $4,858,809 for the six months ended June 30, 2010 compared to $5,465,917 for the prior year. NOI was negatively impacted by the high vacancy rate at Place Val Est, as well as the recent vacancy and a tenant underperformance at the Méga Centre property. At Cornwall Square, NOI decreased compared to the prior year as a result of some small in-line tenant vacancies, a decrease in recoveries and a prior year accounting adjustment to recoveries resulting from new accounting standards. At the Châteauguay property, NOI was negatively impacted by the redevelopment and re-leasing initiatives that took place at the centre, as Pharmaprix did not commence rental payments until March 2010.
  • Partners REIT had a net loss of $1,374,164 or $0.07 per unit basic and diluted for the quarter ended June 30, 2010 and a net loss of $2,172,070 or $0.12 per unit basic and diluted for the six months ended June 30, 2010 (for the quarter ended June 30, 2009 – net loss of $664,561 or $0.04 per unit basic and diluted and for the six months ended June 30, 2009 – net loss of $859,276 or $0.05 per unit basic and diluted).

Outlook

There has been an improvement in the real estate investment trust market and the equity markets in general. This coupled with Partners REIT successfully entering into a new sponsorship arrangement with League after completion of a strategic review process, should allow for its stabilization and future growth. Partners REIT’s trustees in conjunction with League will undertake a detailed review of the operations of Partners REIT and of the opportunities available to it in the short and mid-term. With new capital generated from the rights offering, Partners REIT will look to deploy those funds in an appropriate manner to generate growth for unitholders.

Partners REIT has made progress on its leasing and redevelopment initiatives at its Châteauguay property and for 2010, this focus will continue at its other properties as well. In particular, Partners REIT has leased the vacant SAAN space at its Place Val Est property to Rossy. Leasing interest in Place Val Est has increased with the improvement of the Sudbury economy and the addition of Rossy will be a positive factor in Partners REIT’s leasing efforts. At Cornwall Square, Shoppers Drug Mart has exercised its option to renew its lease and Partners REIT has generally seen renewed leasing interest in the centre from mall-based retailers after a very quiet 2009. Finally, Partners REIT believes that Méga Centre’s location, transportation access, visibility and the surrounding community’s demographics are going to allow for the stabilization of this centre, as Partners REIT continues to have positive conversations with national large format tenants to lease a significant portion of the centre’s vacant area.

2010 Q2 financial results

For the complete second quarter 2010 Management’s Discussion and Analysis and Financial Statements, please visit www.sedar.com or www.partnersreit.com.

Partners REIT

Partners Real Estate Investment Trust is an open-end real estate investment trust established under the laws of the Province of Ontario. Partners REIT is focused on acquiring and managing a portfolio of retail and mixed-use retail community and neighbourhood centres, generally in the mid-market deal size range of $10 to $40 million, from both primary and secondary markets throughout Canada. Partners REIT currently owns 10 retail properties located in Ontario and Quebec.

More information

Floriana Cipollone, Acting Chief Financial Officer
or Patrick Miniutti, Chief Executive Officer
Telephone: (416) 364-5705, Facsimile: (416) 861-8166

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

This press release contains forward-looking statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, local real estate conditions, including the development of properties in close proximity to Partners REIT’s properties, competition, changes in government regulation, dependence on tenants, financial conditions, interest rates, the availability of equity and debt financing, environmental and tax-related matters, reliance on the Manager, potential conflicts of interest and reliance on key personnel. The cautionary statements qualify all forward-looking statements attributable to Partners REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release.

Partners Real Estate Investment Trust The Exchange Tower 130 King Street West Suite 2810, P.O. Box 104 Toronto, Ontario M5X 1A4