Killam Properties Inc. initiates Kuwait Finance House partnership and announces the acquisition of a new luxury apartment building in London Ontario for $33.3 million

HALIFAX, Dec. 22, 2011 /CNW/ - Killam Properties Inc. (TSX: KMP) ("Killam") is pleased to announce the expansion of its Ontario apartment portfolio with the purchase of a 25% ownership interest in the newly constructed 180 Mill Road Apartments, a 127-unit complex in downtown London, Ontario.

KFH Partnership

This acquisition marks the first property held under Killam's partnership agreement with Kuwait Finance House ("KFH"). During 2010, Killam signed a partnership agreement with KFH with the objective of acquiring multi-family residential properties in Canada. Under the agreement, the partners may contribute equity up to $100 million (representing real estate acquisitions of $250 million) with 75% of the equity from KFH and 25% from Killam. Killam will manage all properties purchased through the partnership.

180 Mill Road, London, Ontario

The purchase price of 180 Mill Road was $33.3 million ($262,200 per suite), with Killam's 25% ownership interest being $8.325 million. The purchase was satisfied with cash. Mortgage debt is expected to be placed on the property during 2012. The capitalization rate (on 97% occupancy) is approximately 5.3%. Killam's expected all-cash yield, including management fees associated with the management of the building under the partnership agreement, is expected to be 6.0%.

Construction of the twelve-storey, concrete apartment building, with two levels of underground parking, and seven adjacent townhouses, was completed during the first quarter of 2011. The building is located in the Richmond Row area of downtown London, one of London's finest shopping, restaurant and entertainment districts. Still in its initial lease-up stage, the building is currently 60% occupied. The purchase agreement includes a revenue guarantee of 90% occupancy for the next twelve months.

The building's total square footage is approximately 247,000 square feet and it contains 36 one-bedroom units, 78 two-bedroom units and 6 large three-bedroom units, which include a self-contained secondary, or in-law, suite. The average unit rent of $1,640 per month includes underground parking and an average unit size of 1,060 square feet and condo-quality features, including walk-in closets, stainless steel kitchen appliances, granite countertops, in-suite washer and dryer, ensuite baths and large balconies. In addition to the 120-unit building, there are seven three-bedroom townhouses with an average rent of $2,400 per month.

The complex has an environmentally sustainable geothermal heating system with water being taken from an underground stream and pumped through a heat exchanger to individual heat pumps in each unit. This technology is expected to result in 180 Mill Road being the most energy efficient property in Killam's apartment portfolio.

Milford MHC, Saint John, New Brunswick

Killam has also acquired Milford Manufactured Home Community ("MHC"), a 156-site MHC located in Saint John, New Brunswick. The 22 acre community has an average monthly rent of $293 per site. The purchase price of $2.5 million ($16,200/site) was satisfied by cash. The capitalization rate on the acquisition, including planned water and sewer upgrades, is estimated to be approximately 7.75%.

The purchase of 180 Mill Road and Milford MHC finalizes Killam's acquisitions program for 2011. Killam completed a total of $104.4 million in acquisitions during 2011.

"We are pleased to announce 180 Mill Road as the first acquisition under Killam's partnership with KFH" noted Philip Fraser, Killam's President and CEO. "This is our second acquisition in London, and will allow for efficiencies with the management of Killam's 137-unit Richmond Hill Apartments, acquired in 2010. The high-quality construction and central location of this asset fits our acquisition criteria within the partnership. The purchase of 180 Mill Road meets Killam's strategic focus of growing the apartment portfolio with newer, more energy efficient properties."

"As well, we are working on additional acquisition opportunities with KFH and hope to be able to announce further purchases during the first half of 2012."

About Killam Properties Inc.

Killam Properties Inc., based in Halifax, Nova Scotia, is one of Canada's largest residential landlords, owning, operating and developing multi-family apartments and manufactured home communities.

About Kuwait Finance House

Incorporated in 1977, Kuwait Finance House is one of the leading Islamic banks in the world with total assets of over US$46 billion. KFH operates fully owned and independently functioning banks throughout the region including Turkey, Malaysia, Bahrain, Saudi Arabia, UAE, and Australia, in addition to establishing significant stakes in numerous Islamic banks both regional and international. Its investment activities span the US, Europe, South East Asia and the Middle East. KFH is positioned at the forefront of the Islamic Finance Industry in terms of international presence, strategic alliances, innovation and spectrum of activities. KFH has also maintained its solid ratings by international agencies which affirm its financial strength, the quality of its assets and its recognition globally. For further information on KFH visit www.kfh.com/en.

Note: The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein. Certain statements in this report may constitute forward-looking statements relating to our operations and the environment in which we operate, which are based on our expectations, estimates, forecast and projections, which we believe are reasonable as of the current date. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of Killam to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For more exhaustive information on these risks and uncertainties, you should refer to our most recently filed annual information form which is available at www.sedar.com. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made and should not be relied upon as of any other date. Other than as required by law, Killam does not undertake to update any of such forward-looking statements.

Image with caption: "Killam Properties Inc. has initiated its partnership with Kuwait Finance House with the purchase of 180 Mill Road in London, Ontario, a newly constructed 127-unit apartment complex (CNW Group/KILLAM PROPERTIES INC.)". Image available at: http://photos.newswire.ca/images/download/20111222_C8784_PHOTO_EN_8466.jpg

For further information:

Killam Properties Inc.
Dale Noseworthy, CA, CFA
Vice President, Investor Relations & Corporate Planning
[e-mail]
Phone: [phone]