HOMBURG CANADA REAL ESTATE INVESTMENT TRUST RELEASES FOURTH-QUARTER AND YEAR-END RESULTS AND ANNOUNCES $96 MILLION ACQUISITION OF RETAIL PROPERTIES

MONTREAL, Feb. 17 /CNW Telbec/ - Homburg Canada Real Estate Investment Trust (TSX: HCR.UN) (the "REIT") today reported its financial results for the fourth quarter ended December 31, 2010, and for the period from May 25, 2010, to December 31, 2010. The REIT also announced that it has entered into a binding agreement to acquire three properties in the retail segment of the market for a gross purchase price of $96 million excluding closing and transaction costs.

"Our financial and operating results for the fourth quarter and 2010 fiscal year are generally in line with management's expectations as well as our IPO forecast," said Jim Beckerleg, President and Chief Executive Officer. "During the fourth quarter, we began delivering on our growth objectives with the acquisition of Complex Papineau-Levesque and the Place Bathurst Mall. We are continuing along this path in 2011. Today, we are announcing three pending acquisitions that are expected to be accretive to our adjusted funds from operations results and that fit perfectly within our strategy of expanding our holdings of office and retail properties. Upon closing of these acquisitions, we will have substantially invested the proceeds of the REIT's recent $85.5 million bought-deal transaction," Mr. Beckerleg added.

The pending acquisitions announced today include two shopping centres in the Greater Montreal area and one shopping centre in Quebec City. The $96 million gross purchase price represents a weighted average going-in capitalization rate of approximately 7.7%. Together, the three acquisitions add approximately 8.27%, or 573,388 square feet, of new assets to the REIT's portfolio, bringing the total portfolio to approximately 7.5 million square feet. The REIT will assume the debt in place on these assets of $52.55 million. These purchases will be accretive to the REIT's current adjusted funds from operations.

FOURTH-QUARTER AND YEAR-END RESULTS


Financial Results
     Fourth quarter ended December 31, 2010, and period from May 25, 2010, to December 31, 2010
(versus initial public offering forecast)

  Three-months
ended
December 31,
2010
Three-months
ended
      December 31,
2010, forecast
Period from
May 25, 2010, to
December 31,
2010
May 25, 2010, to
December 31,
2010, forecast
  (in thousands, except per unit items)
Property revenue $39,931 $38,426 $92,759 $91,768
Net operating income $20,140 $20,268 $48,237 $48,129
Adjusted funds from operations ("AFFO") $8,435 $9,272 $20,712 $21,567
AFFO per unit - basic and fully diluted $0.21 $0.23 $0.56 $0.58
Net earnings $6,208 $6,442 $15,112 $14,815
Earnings per unit - basic and fully diluted $0.17 $0.17 $0.44 $0.43
Total distributions per unit declared
during the quarter
$0.238 $0.238 $0.572 $0.572
AFFO payout ratio     114.3% 104.3% 101.8% 98.3%

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 three-month period ended December 31, 2010, and abbreviated fiscal year consisting of the 221 days from May 25, 2010, to December 31, 2010, resulted in property revenues, net operating income and net earnings that generally met management's expectations and were largely in line with its initial public offering ("IPO") forecast. Variances are attributable to higher general and administrative expenses than forecasted, mainly due to the occurrence of certain annual costs expensed during the 221-day period ended December 31, 2010, to one-time set up costs and executive performance-based compensation expenses which were not included in the IPO forecast as well as to property management fees and interest and financing costs, which were higher than forecasted. AFFO per unit, both basic and fully diluted, was affected by the temporary, dilutive impact of the second public offering (the "Second Offering") closed on October 27, 2010.
  • Occupancy rates for the REIT's 77 commercial income properties stood at 95.1% at December 31, 2010, consistent with forecast. The residential portfolio occupancy rate decreased from 98.2% at September 30, 2010, to 96.5% at December 31, 2010, which remains 3.2% above forecast.
  • Average lease term to maturity on the REIT's commercial properties was 9.5 years at December 31, 2010.
  • On October 27, 2010, the REIT closed its Second Offering of 7,772,100 units at $11.00 per unit, which was 10% above its IPO issue price. The Second Offering was completed on a bought-deal basis, raising approximately $85.5 million in gross proceeds.
  • During the fourth quarter ended December 31, 2010, the REIT used part of the proceeds from the Second Offering to repay certain long-term debt, including the second mortgage demand loan on Centre Laval and other debt, thereby reducing its total debt by approximately $23 million. As a result, long-term debt as a percentage of gross book value stood at 52.68% at December 31, 2010, below the REIT's target range of 55% to 60%.
  • On December 14, 2010, the REIT announced that it had acquired the remaining 94.37% equity interest in the limited partnership that owns Place Bathurst Mall, a 216,923-square-foot retail shopping centre in which the REIT already held a 5.63% interest. The transaction was effective October 1, 2010. The gross purchase price of the additional 94.37% interest was approximately $14 million, which was satisfied through the payment of approximately $6.7 million of cash on hand, the assumption of a $6.7 million 5.83% first mortgage maturing in August 2012 and miscellaneous working capital adjustments of $0.6 million.
  • On December 20, 2010, the REIT completed the acquisition of the Complex Papineau-Levesque, a 168,947-square-foot office building in downtown Montreal, for a purchase price of $30 million, satisfied using cash on hand.

Subsequent Events

  • On January 21, 2011, subsequent to the end of the fourth quarter, the REIT obtained a signed commitment letter with respect to a first mortgage loan in respect of the Complex Papineau-Levesque acquisition. The maximum principal amount to be advanced under the loan will be the lesser of $18 million, 60% of the purchase price of the property or 60% of the appraised value of the property.
  • On February 17, 2011, subsequent to the end of the fourth quarter and simultaneously with the release of its fourth quarter and year-end results, the REIT announced the pending acquisition of three properties located in the Greater Montreal area and Quebec City, for an aggregate purchase price of $96 million, excluding closing and transaction costs. These three acquisitions are further detailed in this news release.

TERMS OF THE ACQUISITIONS AND PROPERTY DESCRIPTIONS

The REIT has entered into a binding agreement to acquire three retail properties located in the province of Quebec for a total consideration of $96 million, excluding closing and transaction costs. These properties are:

Place Longueuil

Place Longueuil is a 397,600-square-foot regional shopping centre located in Longueuil, Quebec. The property will be acquired for a purchase price of $78.64 million, which will be satisfied through the assumption of a $43.48 million 5.28% mortgage maturing in April 2015 and the payment of approximately $35.16 million in cash.

Place Longueuil serves at a strategic high density entry point into the growing and high-density South Shore of Montreal, the second largest suburban region in the Greater Montreal area. A significant enclosed shopping centre for the immediate and surrounding population, Place Longueuil is located on 28.4 acres of land and comprises 397,600 square feet of gross leasable area, including 67,112 square feet of second floor office space, and 1,780 parking stalls. The centre is strategically located on the South Shore of the St. Lawrence River, in close proximity to the Jacques-Cartier Bridge and the Victoria Bridge, highways 10, 15, 20, 116, 132 and 134 and the Longueuil metro station, a main public transportation hub and the only metro station serving the South Shore of Montreal. The Longueuil metro station complex is also home to a University of Sherbrooke campus and an HEC Montréal campus. Place Longueuil is 98.35% leased and the five major tenants, Revenu Québec, Zellers, IGA, Sport Experts and Dollarama, account for approximately 54% of the gross leasable area. The remaining gross leasable area is occupied by 128 retail and service tenants. The acquisition of this property is subject to receipt of the formal consent of the lender under the existing mortgage registered on the property.

Les Halles de l'Île

Les Halles de l'Île is a 16,650-square-foot neighbourhood shopping centre located on Nuns' Island in Montreal. The property will be acquired for a purchase price of $5.71 million, which will be satisfied through the assumption of a $2.79 million 6.23% mortgage maturing in September 2013 and the payment of approximately $2.92 million in cash.

Located in the very affluent and growing residential neighbourhood of Nuns' Island in Montreal, Les Halles de l'Île is a Class "A" neighbourhood strip centre that services the everyday needs of the island community. The two-storey centre comprises 16,650 square feet of gross leasable area, 0.94 acres of land and 60 parking spaces. It is advantageously situated on Place du Commerce, Nuns' Island's central retail area, at the junction of the Champlain Bridge and Bonaventure Highway, which respectively connect the island with Montreal's South Shore and with downtown Montreal. It also benefits from convenient access to highways 20, 10 and 15. The centre is 100% leased, with 56% of the gross leasable area being occupied by major tenants Isola Salon & Spa, Hogg Hardware and Second Cup.

Carrefour Les Saules

Carrefour Les Saules is a 159,138-square-foot community shopping centre located in Quebec City that will be acquired for a purchase price $11.65 million. The purchase price for Carrefour Les Saules will be satisfied through the assumption of a $6.28 million 7.53% mortgage maturing in July 2012 and the payment of approximately $5.37 million in cash. The acquisition of this property is subject to receipt of the formal consent of the lender under the existing mortgage registered on the property.

The enclosed community shopping mall is located in the centre of Quebec City, in an established community designated as "Les Rivières," near the intersection of Highway 40 and Highway Henri IV. Located on 13.65 acres of land, the shopping centre comprises 159,138 square feet of gross leasable area, including 36,952 square feet of office space, and 850 parking stalls. Carrefour Les Saules is 100% leased. Major tenants include Provigo, Bell Canada, Hart Stores and Jean Coutu, and account for 77% of the centre's gross leasable area.

The cash portion of the payment for the three above-mentioned properties will be satisfied through the use of cash on hand from the proceeds of the Second Offering, long-term financing on the recently acquired Complex Papineau-Levesque in Montreal and/or a line of credit, to the extent necessary. The closing of all three transactions is expected to be completed by the end of February 2011 and is subject to standard closing conditions. 

"These three quality assets fit perfectly within our diversified portfolio of properties. With the addition of Place Longueuil, we will have a strong corridor presence comprising downtown Montreal and its two major suburban areas, Laval and the South Shore," said Mr. Beckerleg. "Two of the properties are close to our strong existing Montreal management platform, and we believe the Quebec City property, which serves as a strategic entry point into the Quebec City retail market, can also easily be absorbed by this same operating platform. These portfolio additions augur well for growth in the rest of 2011. We continue to cultivate an active pipeline of acquisitions that we hope will augment our 2011 growth even further."

Conference Call

The REIT's management team will be holding a conference call today at 11 a.m. (EST) to discuss the results and the acquisitions announced today. To access the conference call, please call 1-800-786-5706. A taped replay of the call will be available until March 19, 2011, by calling 1-402-977-9140 or 1-800-633-8284 and entering the playback code 21510496. 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 its IPO prospectus, dated May 14, 2010.

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, 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 6.9 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-GAAP Financial Measures

Funds from operations ("FFO"), adjusted funds from operations ("AFFO") and net operating income ("NOI") are not measures recognized under Canadian generally accepted accounting principles ("Canadian GAAP") and do not have standardized meanings prescribed by Canadian GAAP. 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 its unitholders. The Canadian GAAP measurements 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 Canadian GAAP, excluding gains (or losses) from sales of income-producing properties, long-term investments and extraordinary items, plus depreciation and amortization, plus impairment provisions, plus future income tax expense and after adjustments for equity accounted entities, joint ventures and non-controlling interests calculated to reflect FFO on the same basis as consolidated properties.

"AFFO" is defined as FFO subject to certain adjustments, including: (i) net amortization of above and below market leases, amortization of fair value mark-to-market adjustments on mortgages acquired, amortization of deferred financing and leasing costs, and compensation expense related to unit option plans; (ii) adjusting for any differences resulting from recognizing property revenues on a straight-line basis; and (iii) 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.

"NOI" is defined as income from properties after operating expenses have been deducted, prepared in accordance with Canadian GAAP, but before deducting income taxes, depreciation of income-producing properties and other assets, and amortization of leasehold improvement and leasing costs, interest on borrowings, the REIT's administrative expenses and adjusting for the NOI on the non-controlling interest.

FFO, AFFO and NOI should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with Canadian GAAP 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:

For further information, please contact:
James W. Beckerleg
President and Chief Executive Officer
Homburg Canada Real Estate Investment Trust
514-931-2591,ext. 358
Gordon G. Lawlor, CA
Executive Vice-President, Chief Financial
Officer and Secretary
Homburg Canada Real Estate Investment Trust
514-931-2591,ext. 313
Paul de la Plante
NATIONAL Public Relations
514-843-2332

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Homburg Canada Real Estate Investment Trust

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