HOMBURG CANADA REAL ESTATE INVESTMENT TRUST RELEASES FIRST-QUARTER RESULTS

MONTREAL, May 10 /CNW Telbec/ - Homburg Canada Real Estate Investment Trust (TSX: HCR.UN) (the "REIT") today reported its financial results for the first quarter, being the period from January 1, 2011 to March 31, 2011. These financial results were prepared in accordance with International Financial Reporting Standards ("IFRS"). As the quarter ended March 31, 2011 is the first quarter that the REIT is reporting in accordance with IFRS, and due to the fact that the REIT was not an independent, publicly-traded real estate investment trust last year at this time, there is no meaningful comparison of financial results for the quarter.

"The acquisitions made in the last few months had a positive impact on our net operating income and our operating results for the first quarter are generally in line with our initial public offering forecast," said Jim Beckerleg, President and Chief Executive Officer. "Subsequent to the end of the quarter, we acquired a 50-percent interest in the Scotia Centre, a class "A" office tower with a retail concourse prominently located in the heart of Calgary's financial and retail district. With this acquisition, the REIT's total growth in gross leasable area over the past 11 months is over 18 percent. The real estate investment market is currently quite active, as are the debt and equity capital markets. The REIT intends to take advantage of these favourable conditions and continues to look for growth opportunities through its acquisition pipeline," added Mr. Beckerleg.

Financial Results

First quarter ended March 31, 2011

  Three-months ended March 31, 2011
  (in thousands, except per unit
items)
Property income $42,319
Net operating income ("NOI") $20,222
Adjusted funds from operations ("AFFO") $8,938
Basic AFFO per unit $0.2029
Diluted AFFO per unit $0.2022
Net income $5,393
Earnings per unit - basic and diluted $0.13
Total distributions per unit declared during the quarter $0.23751
AFFO payout ratio 117.5%

Full financial statements and management's discussion and analysis of results will be posted on SEDAR at www.sedar.com and on the REIT's website at www.homburgcanadareit.com.

Highlights

  • The REIT adopted IFRS on January 1, 2011, as required by the Canadian Accounting Standards Board. As a result, unitholders' equity increased by $144 million, primarily attributable to an initial uplift of $141 million on re-measurement of the REIT's investment property portfolio at fair value. Additionally, the REIT's Class B LP Units, which are economically equivalent to publicly traded REIT units and were previously treated as non-controlling interest, were also re-measured at fair value and are now carried as liabilities in the statement of financial position. Changes in the fair value of the Class B LP Units are now recorded through net income, as are distributions declared on these units. Non-GAAP measures, now known as non-IFRS measures, were largely unaffected by the adoption of IFRS, except for the absence of above and below market lease amortization which is no longer included in the calculation of funds from operations, resulting in a slightly negative impact on this measure.

  • The results for the three-month period ended March 31, 2011, were generally in line with management expectations, except for diluted AFFO per unit and AFFO payout ratio.

  • NOI was generally in line with management's expectations, increasing mainly as a result of the acquisition of Papineau Levesque Complex, completed on December 20, 2010, and by the acquisitions of Place Longueuil and Les Halles de l'Île, completed on February 24, 2011. The acquisition of Carrefour Les Saules, completed marginally prior to the end of the first quarter on March 21, 2011, did not significantly impact NOI. These positive contributions were slightly offset by additional, seasonal, non-recoverable costs incurred on the multi-family residential portfolio, higher costs associated with parking revenues at CN Central Station Complex and some higher than forecasted vacancies at certain smaller retail locations, including the St. Jerome Mega Centre. NOI was also negatively impacted by the absence of above and below market lease amortization, which does not occur in accordance with IFRS.

  • Diluted AFFO per unit and AFFO payout ratio were significantly impacted by the following factors: a significant portion of new equity raised by the REIT in October 2010 was not fully deployed for the entire quarter under review; the new REIT units issued on March 15, 2011 did not contribute towards any incremental AFFO during the first quarter, and was only partially utilized to acquire a 50-percent interest in the Scotia Centre on April 14, 2011; and approximately $220 thousand of additional, incremental general and administrative costs were incurred during the first quarter of 2011 related to the establishment of the REIT in its first year of operations.

  • Occupancy rates for the REIT's 79 commercial income properties were stable during the first quarter, standing at 95.4% at March 31, 2011, increasing 0.3% from 95.1% as at December 31, 2010. The multi-family residential portfolio occupancy rate remained strong at 96.3% at March 31, 2011, which represents a slight decline of 0.2% from the December 31, 2010 occupancy rate.

  • Average lease term to maturity on the REIT's commercial properties was 8.8 years at March 31, 2011.

  • Long-term debt as a percentage of gross book value is at 47.68%, well below the REIT's target range of 55% to 60%. This ratio has been significantly reduced as a result of recording the investment property portfolio at fair value.

  • On February 24, 2011, the REIT announced that it had completed the acquisition of two properties in the retail segment of the market, Place Longueuil, a 397,600-square-foot regional shopping centre located in Longueuil, Quebec, and Les Halles de l'Île, a 16,650-square-foot neighbourhood shopping centre located on Nuns' Island in Montreal. The $84.35 million gross purchase price was satisfied through the assumption of debt in place on the two properties totalling $46.27 million and the use of cash on hand from the proceeds of the REIT's second public offering in October 2010.

  • On March 15, 2011, the REIT closed a bought deal financing of units of the REIT at a price of $11.40 per unit. The REIT issued a total of 8,597,500 units, for gross proceeds to the REIT of $98,011,500. Concurrent with the issuance and sale of units by the REIT, Homburg Invest Inc. ("HII"), participating as a selling unitholder in the bought deal financing of the REIT, completed the sale of 2,500,000 units at the same price per unit for gross proceeds to HII of $28,500,000. HII now owns a 23.1% interest in the REIT at March 31, 2011.

  • On March 21, 2011, the REIT announced that it had completed the acquisition of Carrefour Les Saules, a 159,138-square-foot community shopping centre located in Quebec City. The $11.65 million gross purchase price was satisfied through the assumption of the $6.28 million debt in place on the property and the use of cash on hand.

Subsequent Event

  • On April 14, 2011, subsequent to the end of the first quarter, the REIT announced that it had completed the acquisition of a 50-percent interest in the Scotia Centre, a 607,360-square-foot office and retail complex in downtown Calgary, Alberta. Scotiabank maintained a 50-percent interest in the property, which is managed by the REIT. The $116 million purchase price was funded by a 7-year, 4.60 percent, $69.6 million first mortgage financing provided by Scotiabank and the use of $46.4 million of cash-on-hand from the proceeds of the REIT's bought deal financing completed in March, 2011.

Conference Call

The REIT's management team will be holding a conference call today at 10 a.m. (ET) to discuss the results announced today. To access the conference call, please call 1-800-945-5981. A taped replay of the call will be available until June 9, 2011, by calling 1-416-626-4100 or 1-800-558-5253 and entering the playback code 21522396. An audio replay of the conference call will also be available in podcast format in the Investors section of the REIT's website at www.homburgcanadareit.com.

Forward-looking Statements

This news release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risk Factors" in the REIT's latest annual information form.

The REIT's objectives and forward-looking statements are based on certain assumptions, including that (i) the REIT will receive financing on favourable terms; (ii) the future level of indebtedness of the REIT and its future growth potential will remain consistent with the REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting the REIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on the REIT's operations, including its financing capacity and asset value, will remain consistent with the REIT's current expectations; (v) the performance of the REIT's investments in Canada will proceed on a basis consistent with the REIT's current expectations; and (vi) capital markets will provide the REIT with readily available access to equity and/or debt.

The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. The REIT, except as required by applicable securities legislation, does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in the REIT's filings with securities regulatory authorities, including its latest annual information form, which are available on SEDAR at www.sedar.com.

About Homburg Canada Real Estate Investment Trust

Homburg Canada Real Estate Investment Trust is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Quebec. Managed internally, the REIT owns a portfolio of Canadian income-producing commercial properties, consisting mainly of retail and office properties with certain industrial properties, as well as certain income-producing multi-family residential properties. The properties comprise approximately 7.8 million square feet of commercial gross leasable area and 1,725 multi-family residential units located in Quebec, Atlantic Canada, Western Canada and Ontario.

Note regarding Non-IFRS Financial Measures

Funds from operations ("FFO"), adjusted funds from operations ("AFFO") and net operating income ("NOI") are not measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. FFO, AFFO and NOI are supplemental measures of a Canadian real estate investment trust's performance and the REIT believes that FFO, AFFO and NOI are relevant measures of its ability to earn and distribute cash returns to the unitholders. The IFRS measurement most directly comparable to FFO, AFFO and NOI are cash flow from operating activities and net income.

FFO is defined as net income in accordance with IFRS, excluding distributions on Class B LP Units, fair value adjustments relating to Class B LP Units, investment property and long-term investments, bargain purchase gain, expenses associated with business combinations, sales of investment property, and extraordinary items, plus depreciation and amortization, impairment provisions and after adjustments for equity accounted entities, joint ventures and non controlling interests, if any, calculated to reflect FFO on the same basis as consolidated properties.

FFO calculated from net income in accordance with IFRS differs from FFO calculated from net income in accordance with Canadian GAAP as reported in prior MD&A's. FFO, as currently presented, no longer includes net amortization of above and below market leases. In-place leases are included in the value of investment property in accordance with IFRS and are not separately recorded and amortized. Additionally, depreciation expense associated with property, plant and equipment is now added back to calculate FFO based on IFRS, and was previously excluded from the calculation based on Canadian GAAP.

AFFO is defined as FFO subject to certain adjustments, including: (i) amortization of fair value mark-to-market adjustments on mortgages acquired, amortization of deferred financing and leasing costs, and compensation expense related to unit plans; (ii) adjusting for any differences resulting from recognizing property incomes on a straight line basis; (iii) adjusting for non-recurring costs associated with the IFRS conversion; and (iv) deducting maintenance capital expenditures and leasing costs, as determined by the REIT, net of the allocation of cash from reserves for capital expenditure programs. Other adjustments may be made to AFFO as determined by the Trustees of the REIT in their discretion. There has been no significant change in calculated AFFO after adoption of IFRS, other than the exclusion of non-recurring costs associated with the IFRS conversion, and depreciation expense associated with property, plant and equipment which is now added back to calculate AFFO based on IFRS, and was previously excluded from the calculation based on Canadian GAAP.

"NOI" is defined as property income, which includes rental income plus service charge income, less directly attributable property operating expenses. There has been no significant change in calculated NOI after adoption of IFRS, other than NOI no longer includes net amortization of above and below market leases, as these items are included in the fair value of investment property in accordance with IFRS, and are not separately recorded and amortized.

FFO, AFFO and NOI should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS as indicators of the REIT's performance. The REIT's method of calculating FFO, AFFO and NOI may differ from other issuers' methods and accordingly may not be comparable to measures used by other issuers.

 

SOURCE Homburg Canada Real Estate Investment Trust

For further information:

please contact: 

James W. Beckerleg
President and Chief Executive Officer
Homburg Canada REIT
514-931-2591, ext. 358

Paul de la Plante
NATIONAL Public Relations
514-843-2332


Gordon G. Lawlor, CA
Executive Vice President, Chief Financial
Officer and Secretary
Homburg Canada REIT
514-931-2591, ext. 313

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Homburg Canada Real Estate Investment Trust

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