Huntingdon REIT reports 2008 second quarter results



    WINNIPEG, Aug. 14 /CNW/ - Huntingdon Real Estate Investment Trust
("HREIT") (TSX: HNT.UN) is pleased to report the operating results for the
quarter ended June 30, 2008. The following comments in regard to the financial
position and operating results of HREIT should be read in conjunction with the
2008 Second Quarter Report and the financial statements for the quarter ended
June 30, 2008, which may be obtained from the HREIT website at www.hreit.ca or
the SEDAR website at www.sedar.com.

    
    2008 SECOND QUARTER HIGHLIGHTS

    Acquisition and Development

    -   $3.8 Million was invested during the first six months of 2008 in
        property improvements and leasing costs and $5.9 Million in
        construction costs were incurred for the new police station in
        Winnipeg.

    -   HREIT has agreed to sell, effective September 1, 2008, the light
        industrial property located at 4080 - 77 Street in Red Deer, Alberta
        for a price of $8.4 Million, plus a lease termination fee of
        $560,000. The property was acquired in March 2007 at a price of
        $8,213,000.

    Financial

    Second quarter of 2008, compared to second quarter of 2007:
    -   Total revenue increased by $1.0 Million or 5.6%.

    -   Net operating income decreased by $0.2 Million or 2% ($0.004 per
        unit).

    -   "Same property" net operating income (NOI), for the 56 properties
        which have been in the HREIT portfolio since April 1, 2007, decreased
        by $1,059,490 or 10.2% primarily as a result of vacant space at
        Cityplace, which has since been released.

    -   Adjusted funds from operations (AFFO) decreased by $2.4 Million or
        50% ($0.034 or 54% per unit).

    -   Operating margin for the property portfolio decreased to 53%,
        compared to 59% in the second quarter of 2007 and 59% for the year
        ended December 31, 2007 largely reflecting space which is temporarily
        vacant.

    Leasing

    -   Quarter ending occupancy rate for entire portfolio has remained
        relatively constant at 93%, compared to 93% at June 30, 2007 and
        December 31, 2007 and 92% at March 31, 2008.

    -   Leases were signed for 83,000 square feet of vacant space, which will
        increase occupancy by 1.5% and contribute $1.8 Million per annum to
        revenue and NOI.

    -   70% of 2008 lease expiries have been successfully renewed to date and
        a further 15% are anticipated to be renewed by year-end resulting in
        an 85% tenant retention rate.

    Capital Structure

    -   Weighted average interest rate on the aggregate mortgage loan balance
        of 6.41% at June 30, 2008, compared to 6.43% at June 30, 2007 and
        6.44% at December 31, 2007.

    -   Mortgage loan debt to gross book value ratio of 59% at June 30, 2008,
        compared to 56% at June 30, 2007 and 59% at December 31, 2007.

    FINANCIAL AND OPERATING SUMMARY


                                Three Months Ended          Six Months Ended
                          ------------------------- -------------------------
                              June 30,     June 30,     June 30,     June 30,
                             ---------    ---------    ---------    ---------
                                 2008         2007         2008         2007
                                ------       ------       ------       ------
    KEY PERFORMANCE INICATORS

    Operating results
      Total revenue        19,163,236   18,140,299   39,344,172   35,607,337
      Net operating income 10,502,211   10,702,591   21,223,047   20,335,229
      Income (loss) from
       continuing
       operations before
       income tax recovery
       (expense)           (4,640,339)    (452,626)  (7,830,970)  (1,439,806)
      Income (loss) from
       continuing
       operations          (3,003,614)   2,201,537   (5,463,681)   1,267,759
      Income (loss) for
       the period          (2,883,813)   2,438,785   (5,256,145)   1,604,091

    Cash flows
      Cash inflow
       (outflow) from
       operating activities   925,767    3,401,720    2,317,584    5,085,623
      Funds from operations
       (FFO)                2,157,738    4,317,740    4,672,858    8,229,309
      Adjusted funds from
       operations (AFFO)    2,114,295    4,536,181    3,257,049    8,247,997
      Distributable income  2,704,491    5,076,318    5,657,578    8,910,813

    Operations
      Quarter end
       occupancy rate                                        93%          93%
      Increase (decrease)
       in same property
       operating income    (1,059,490)     191,985

    Capital reinvestment
      Additions to building
       and equipment          244,173    1,520,326      621,547    2,862,493
      Additions to
       properties under
       development          3,332,893                 5,911,765
      Lease acquisition
       costs                  871,153      736,561    2,374,499    2,574,964
      Long term maintenance
       costs
        Recoverable           566,717      305,799      756,663      439,210
        Non recoverable        24,591        7,052       24,591      133,913
                             ---------    ---------    ---------    ---------
        Total                 591,308      312,851      781,254      573,123
                             ---------    ---------    ---------    ---------

    DISTRIBUTIONS
      Amount - total        5,067,476    5,020,700   10,128,516   10,051,091
             - per unit          0.07         0.07         0.14         0.14

    Financing
      Mortgage loan debt
       to gross book
       value ratio                                         59.0%        56.0%
      Weighted average
       interest rate of
       long-term debt                                      6.41%        6.43%



    PER UNIT AMOUNTS

                                        Three Months Ended June 30
                               ----------------------------------------------
                                      2008                      2007
                               -----------------          ----------------
                                Basic      Diluted        Basic      Diluted
                               -------     -------       -------     -------
    Operating income            0.145        0.145        0.149        0.149
    Income (loss) from
     continuing operations
     before income tax
     recovery expense          (0.064)      (0.064)      (0.006)      (0.006)
    Income (loss) from
     continuing operations     (0.042)      (0.042)       0.031        0.031
    Income (loss) for the
     period                    (0.040)      (0.040)       0.034        0.034
    Distributable income        0.037        0.037        0.071        0.071
    FFO                         0.030        0.030        0.060        0.060
    AFFO                        0.029        0.029        0.063        0.063


                                         Six Months Ended June 30
                               ----------------------------------------------
                                      2008                      2007
                               -----------------          ----------------
                                Basic      Diluted        Basic      Diluted
                               -------     -------       -------     -------
    Operating income            0.293        0.293        0.284        0.284
    Income (loss) from
     continuing operations
     before income tax
     recovery expense          (0.108)      (0.108)      (0.020)      (0.020)
    Income (loss) from
     continuing operations     (0.076)      (0.076)       0.018        0.018
    Income (loss) for the
     period                    (0.073)      (0.073)       0.022        0.022
    Distributable income        0.078        0.078        0.125        0.124
    FFO                         0.065        0.065        0.115        0.115
    AFFO                        0.045        0.045        0.115        0.115
    


    The first half of 2008 was a transition period for HREIT in the sense
that the revenue impact of the lease-up of large amounts of vacant space will
not be reflected in operating results until future quarters. Leasing in the
second quarter has improved the occupancy rate to 2007 levels and leases were
signed for 83,000 square feet of vacant space which will improve the occupancy
rate by an additional 1.5%. In regard to lease renewals, 70% of 2008 lease
expiries have been successfully renewed to date and indications are that a
further 15% will be leased by year-end resulting in an 85% tenant retention
rate for the year.
    The vacant space, which has been leased-up will contribute annualized
revenue of $1.8 Million in future quarters. For the second quarter of 2008,
however, the space was vacant and caused a reduction in revenue for the
quarter. In addition, operating results for the first half of 2008 reflect
reductions in escrow funding for leasehold improvements and NOI/rent
supplements; the cost of carrying non income-producing properties under
development (i.e., the new Police Station in Winnipeg); the incurrence of
special one-time costs associated with the strategic review of Trust's assets;
and an increase in unit compensation expense as a result of the implementation
of the Deferred Unit Plan.
    During the second quarter of 2008, there was also a very significant
reduction to the book value of CRESI, the property management company owned by
HREIT, resulting in a non-recurring amortization charge of approximately
$1.3 million. The reduction to the book value was the result of the sale of a
property portfolio, which was managed by CRESI for a third party and the
resulting loss by CRESI of the management contracts. After accounting for the
non-recurring amortization charge as well as an adjustment of approximately
$310,000 to reverse accrued revenue related to the recovery of property
operating costs, HREIT experienced a decline in operating results during the
second quarter of 2008, as summarized in the following chart.


    
                                      Per Unit - Basic
                       ------------------------------------------------------
                        2008 Q2    2008 Q1 Comparison    2007 Q2 Comparison
                       ---------  --------------------- ---------------------
                                              Increase              Increase
                         Amount    Amount    (Decrease)    Amount  (Decrease)
                       ---------  ---------  ----------  ---------  ---------
    NOI                   0.145     0.153       (0.008)     0.149     (0.004)
    Cash from operating
     activities           0.013     0.019       (0.006)     0.047     (0.034)
    FFO                   0.030     0.039       (0.009)     0.060     (0.030)
    AFFO                  0.029     0.019        0.010      0.063     (0.034)
    Distributable Income  0.037     0.043       (0.006)     0.071     (0.034)
    


    Outlook

    The outlook for the second half of 2008 will reflect the positive leasing
results noted above, as well as other factors, and should effectively
contribute to an improvement in operating results during the third quarter of
the year, as follows:

    
    -   An additional 35,880 square feet of space will become income-
        producing space during the third quarter of 2008 as new tenancies
        begin occupying the leased-up space contributing annual revenue of
        $655,000 and NOI of $390,000;

    -   Commencing September 1, 2008, the new Police Station in Winnipeg will
        contribute annual revenue of $891,000 and NOI of $861,000. The
        carrying cost of the Police Station is $9,119,147 as of June 30,
        2008; and

    -   Given the non-recurring nature of the adjustment to the book value of
        the property management company, amortization charges are expected to
        return to "normal" levels during the third quarter of 2008.


    Comparison to Preceding Quarter
    -------------------------------------------------------------------------
                                   Three Months Ended
                            --------------------------------
                             June 30, 2008   March 31, 2008           Change
                            -------------------------------------------------
    Total revenues            $ 19,163,236     $ 20,180,936     $ (1,017,700)
    Total operating and
     property management
     costs                       8,661,025        9,121,869          460,844
                             --------------   --------------   --------------
    Net operating income        10,502,211       11,059,067         (556,856)
    Trust expenses                 832,264          640,425         (191,839)
    Strategic review expense       321,019          170,616         (150,403)
                             --------------   --------------   --------------
    Income before financing
     expense, amortization,
     discontinued operations
     and taxes                   9,348,928       10,248,026         (899,098)
    Financing expense            7,382,073        7,628,629          246,556
                             --------------   --------------   --------------
    Income before amortization,
     discontinued operations
     and taxes                   1,966,855        2,619,397         (652,542)
    Amortization                 6,607,194        5,471,797       (1,135,397)
                             --------------   --------------   --------------
    Income (loss) from
     continuing operations
     before income tax
     recoveries/expense         (4,640,339)      (2,852,400)      (1,787,939)
    Income tax recoveries
     (expense)                   1,636,725          730,564          906,161
                             --------------   --------------   --------------
    Income (loss) from
     continuing operations      (3,003,614)      (2,121,836)        (881,778)
    Income from discontinued
     operations                    119,801           87,779           32,022
                             --------------   --------------   --------------
    Income (loss) for the
     period                   $ (2,883,813)    $ (2,034,057)      $ (849,712)
                             --------------   --------------   --------------
                             --------------   --------------   --------------
    


    Excluding income tax recoveries/expense and discontinued operations,
HREIT incurred a loss of $4,640,339 during the second quarter of 2008,
compared to a loss of $2,852,400 in the first quarter of 2008 representing an
increase of $1,787,939. The increase in the loss reflects the following:

    
    -   A $1,346,107 charge to amortization expense to adjust the carrying
        cost of CRESI

    -   A $308,246 charge to revenue to adjust accrued revenue for the
        recovery of operating costs.
    

    After including income tax recoveries/expense and discontinued
operations, HREIT completed the three month period ended June 30, 2008 with a
loss of $2,883,813 compared to a loss of $2,034,057 during the first quarter
of 2008. The increase in the future income tax recoveries is mainly
attributable to the effect of the adjustment to the carrying cost of CRESI.
    In summary, there are a number of special or non-recurring factors which
contributed to a decline in operating results in the second quarter of 2008.
During the second half of 2008, it is anticipated that the operating results
will begin to more closely reflect the underlying value and income potential
of the entire real estate portfolio.
    In March 2008, HREIT initiated a strategic review of its investment
holdings and operations with the objective of enhancing the market trading
value of the units. As a result of the strategic review, HREIT recently began
the process of soliciting sale/merger proposals. Although HREIT is pursuing
sale/merger opportunities, the day-to-day operation of HREIT is proceeding as
normal and every effort continues to be made to maximize the return on the
overall real estate portfolio.

    HREIT is a real estate investment trust, which is listed on the Toronto
Stock Exchange under the symbols HNT.UN (trust units) and HNT.DB.C
(convertible debentures). HREIT owns 79 income producing properties (including
one property classified under "discontinued operations") that have a total
gross leaseable owned area of 5.4 million square feet, one property under
development, two land parcels held for development and other development and
expansion opportunities within the existing portfolio. The properties are
located in Manitoba, Ontario, Saskatchewan, Alberta, British Columbia and
Northwest Territories. HREIT also owns a third party property management
business. There are currently 72,432,569 trust units outstanding. For further
information on HREIT, please visit our website at www.hreit.ca.

    This press release contains certain statements that could be considered
as forward-looking information. The forward-looking information is subject to
certain risks and uncertainties, which could result in actual results
differing materially from the forward-looking statements.

    
    The Toronto Stock Exchange has not reviewed or approved the contents of
    this press release and does not accept responsibility for the adequacy or
    accuracy of this press release.
    





For further information:

For further information: Arni Thorsteinson, President & Chief Executive
Officer, or Gino Romagnoli, Investor Relations, Tel: (204) 475-9090, Fax:
(204) 452-5505, Email: info@hreit.ca

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HUNTINGDON REAL ESTATE INVESTMENT TRUST

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