Killam Properties Inc. announces strong first quarter results highlighting a 27.3% increase in FFO per share



    HALIFAX, May 5 /CNW/ - Killam Properties Inc. (TSX:KMP/KMP:DB) today
announced its financial results for the first quarter ended March 31, 2009.

    
    Highlights of Killam's First Quarter Financial Results

    - Increased funds from operations ("FFO") per share by 27.3% to $0.14,
      from $0.11 generated during the first quarter of 2008.

    - Achieved same store rental revenue increase of 5.8% during the first
      quarter.

    - Increased same store net operating income ("NOI") by 10.5% during the
      first quarter.

    - Refinanced three mortgages totalling $19.8 million that matured in the
      first quarter for net proceeds of $7.4 million.

    Financial Highlights (in thousands, except per share information)

                                           March 31,   March 31,          %
    For the three months ended,                2009        2008      Change

    Net Operating Income                    $13,684     $12,150        12.6%
    Net Income Before Tax and Depreciation   $3,922      $3,080        27.3%
    Net Loss                                ($1,912)    ($2,393)       20.1%
    Funds from Operations                    $4,685      $3,599        30.2%
    Funds from Operations per Share           $0.14       $0.11        27.3%
    Shares Outstanding (weighted average)    34,046      33,405         1.9%

                                           March 31,   December           %
    Balance Sheet as at,                       2009    31, 2008      Change

    Total Assets                           $739,540    $738,668         0.1%
    Total Liabilities                      $572,486    $565,475         1.2%
    Total Shareholders' Equity             $167,054    $173,193        (3.5%)
    Gross Debt as a % of Gross Book Value      67.7%       67.7%        0.0%


    FFO Per Share Increased by 27.3% in the First Quarter

    Management considers FFO per share to be a key measure of operating
performance. FFO per share for the first quarter of 2009 increased by 27.3% to
$0.14, from $0.11 in the same period of 2008. The increase is primarily
attributable to the Company's same store NOI growth of 10.5%.

    Consolidated Same Store NOI Growth of 10.5%

    Killam achieved same store NOI growth of 10.5% during the first quarter of
2009, which accounts for 96% of the Company's portfolio. Consolidated rental
revenue increased 5.8% quarter-over-quarter due to increased rents and
improved occupancy, representing approximately 55% and 45% of the increase,
respectively. Consolidated operating expenses increased only 0.7% in the
quarter.
    Improvements in NOI were realized in both the apartment and MHC
portfolios, with increases of 11.3% and 8.1%, respectively. Killam's apartment
portfolio benefited from a 5.9% increase in rental revenue and stable
operating costs, which increased 0.6% from the first quarter of 2008. The
revenue growth was attributable to increased average rents of 2.4% and
occupancy improvements, including a 270 basis point improvement at March 31,
2009 compared to March 31, 2008.
    The Manufactured Home Community ("MHC") portfolio continued to benefit
from the 5.2% rental increases achieved during 2008, as rental revenues
increased 5.6% over the first quarter of 2008. Also contributing positively to
rental revenue was the addition of new sites following Killam's expansion
activity, representing a 1.1% increase in rental revenue. MHC operating costs
increased 1.2% over the same quarter of 2008.

    Vacancy at 1.8% at March 31, 2009

    Killam has been successful in maintaining its trend of strong occupancy in
the first quarter of 2009, achieving consolidated vacancy of 1.8% at March 31,
2009, compared to 3.3% at March 31, 2008 and 1.5% at December 31, 2008.
    The apartment portfolio had a vacancy rate of 2.8% with an average monthly
rent of $741. The apartment vacancy was 270 basis points better than the
vacancy of 5.5% at March 31, 2008, with improvements realized in all
provinces. The MHC portfolio had a vacancy rate of 0.8%, with an average
monthly rent of $217. Not included in the MHC vacancy numbers are 57 MHC sites
that had not been previously rented, including some recently expanded sites,
and 376 transient sites in Killam's seasonal resort portfolio. These units are
excluded from vacancy statistics in the table below.

                                                                    Average
                                              Units     Vacancy        Rent
                                          ----------  ----------  ----------
    Apartments

    Nova Scotia                               4,196         3.2%       $791
    New Brunswick                             3,310         3.0%       $703
    Newfoundland                                732         1.5%       $592
    Prince Edward Island                        686         1.0%       $772
                                          ----------------------------------
                                          ----------------------------------
    Total Apartment Portfolio                 8,924         2.8%       $741
                                          ----------------------------------
                                          ----------------------------------
    Total MHC Portfolio                       8,796         0.8%       $217
                                          ----------------------------------
                                          ----------------------------------
    

    New Home Sales Continue in 2009

    Killam's expansion of new sites in its MHC portfolio, including the
current development of 60 to 80 new sites at three communities, allows for
enhanced earnings as the Company acts as a retailer for new manufactured
homes. During the first quarter of 2009 Killam completed 4 home sales and 1
partnership sale, or home placement. In addition, Killam has commitments for 9
home sales and 5 partnership sales, the majority of which are scheduled to
close during the second quarter. During the first quarter of 2008 Killam
completed 12 home sales and 2 partnership sales. Home sale activity levels are
dependent on the time of completion of site expansions, as well as the demand
for homes in each of the expanded communities. Killam anticipates selling
between 40 and 60 homes in 2009, of which approximately 70% will be new home
sales and 30% will be partnership sales.

    Debt Financing

    Killam is pleased to report that financing for its properties remains
strong. At the beginning of the year the Company had $71.4 million in
mortgages due for refinancing, including $54.8 million in apartment mortgages
and $16.6 million in MHC mortgages. During the first quarter of 2009 Killam
refinanced $19.8 million of maturing apartment mortgages for net proceeds of
$7.4 million. The weighted average interest rate for these refinancings was
4.01%, 88 basis points better than the 4.89% weighted average interest rate
being replaced.
    Subsequent to March 31, 2009, Killam has refinanced $4.6 million of
maturing apartment debt for net proceeds of $2.9 million. The previous
weighted average interest rate was 5.0% and the interest rate on the new debt
is 4.1% (half of which is 10 year term). In addition, the Company has
refinanced $2.3 million of maturing MHC debt at a weighted average rate of
5.82% for net proceeds of $1.3 million. The previous weighted average interest
rate on the MHC debt was 5.34%. In addition, the Company has received
commitments to refinance one apartment and two MHC mortgages totalling $6.1
million.
    Net of the above refinancings and commitments Killam has $38 million of
mortgages to refinance during the remainder of 2009. Management does not
anticipate difficulty in refinancing this debt, benefiting from strong
relationships with its lenders and Canada Mortgage and Housing Corporation
("CMHC"). As at March 31, 2009, approximately 47% of Killam's apartment
mortgages were CMHC insured.

    Debt Levels Maintained at 67.7%

    Killam has maintained its defensive balance sheet with total gross debt
as a percentage of the gross book value of assets at 67.7%, consistent with
67.7% at December 31, 2008, and in-line with the Company's stated target of
65% to 70%. Killam's interest coverage ratio improved slightly during the
first quarter to 1.76 times, from 1.73 times as at December 31, 2008. As at
March 31, 2009 the balance outstanding on the Company's credit facility was
$0.9 million.

    Continued Stability in the Atlantic Canadian Economy

    Killam believes that its strong operating performance is supported by the
economic stability of Atlantic Canada's urban centres. Atlantic Canada is
primarily a service based economy, with a focus on public administration,
education, health and military, and with relatively limited exposure to
manufacturing when compared to other areas of Canada.
    The economy in Atlantic Canada has remained relatively stable in the
current economic environment, with employment figures rising in many Atlantic
Canadian cities. Based on information released by Statistics Canada on April
9, 2009, St. John's, Halifax and Saint John reported employment increases of
5.1%, 3.9% and 2.5%, respectively, for March 2009 compared to March 2008. By
contrast, the overall Canadian employment number showed a 1.5% decrease for
the same period.
    Housing prices also remained strong in Atlantic Canada during the first
quarter of 2009, as highlighted by Royal LePage Real Estate Services in its
April 8, 2009 report, with markets in Atlantic Canada outperforming other
areas of the country. St. John's and Halifax showed strong annual price growth
of 15.6% and 5.7%, respectively, for a standard two-storey home, when compared
to the first quarter of 2008. Killam's other core markets showed stable
housing prices, while the national average price declined 6.5% in the period.

    Management's Comments

    "We are pleased to report strong results for the first quarter of 2009",
noted Philip Fraser, Killam's President and Chief Executive Officer. "We
continue to be focused on improving our operational performance and have seen
the result of these efforts in this quarter; everything came together,
including strong occupancy, the benefit of rental increases and overall flat
operating costs year-over-year."
    "I believe that the stability of Killam's portfolio, including ownership
of both apartments and MHCs, and a geographic focus in Atlantic Canada, makes
Killam a very attractive and defensive investment. Additionally, access to
CMHC insured financing for apartments is a benefit as it enables Killam to
finance its mortgages at attractive rates."

    Financial Statements

    Killam's March 31, 2009 Financial Statements and Notes and Management's
    Discussion and Analysis can be found at www.killamproperties.com

    First Quarter Conference Call

    Management will host a conference call to discuss these results on
Wednesday, May 6, 2009 at 11:00 AM Atlantic time (10:00 AM Eastern). The
dial-in numbers for the conference call are 416-644-3421 (in Toronto) or
800-594-3790 (toll free, within North America).
    A live audio webcast of the conference call will be accessible on the
Company's website at www.killamproperties.com and at www.newswire.ca.
    A replay will be available by dialing 416-640-1917 (Toronto) or
877-289-8525 (toll-free) and using the passcode 21303585# until May 13, 2009,
or on the Company's website for 90 days after the conference call.

    Corporate Profile

    Killam Properties Inc, based in Halifax, Nova Scotia, is one of Canada's
largest residential landlords, owning and operating multi-family apartments
and manufactured home communities.
    FFO is a generally accepted measure of operating performance of real
estate companies; however, it is a non-GAAP measurement and readers are
cautioned that Killam's calculation of FFO may be different than that used by
other companies. Killam calculates FFO as net income plus depreciation and
amortization, stock compensation, non-cash debenture interest and future
income tax expenses.

    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.




For further information:

For further information: Dale Noseworthy, CA, CFA, Director, Investor
and External Relations, Killam Properties Inc., (902) 442-0388, Fax: (902)
455-4525, dnoseworthy@killamproperties.com

Organization Profile

Killam Properties Inc.

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