Realex Properties Corp. - Results for the three and six months ended March 31, 2009 and declaration of dividend



    TRADING SYMBOL: RLX and RLX.A (TSXV)

    CALGARY, May 14 /CNW/ - Realex Properties Corp. ("Realex" or
"Corporation") today announced its fiscal 2009 second quarter results from
operations.
    Financial highlights for the three and six months ended March 31, 2009
are as follows:

    
    Financial Highlights

    -------------------------------------------------------------------------

    Income Statement
     Summary Data

                            Three Months Ended         Six Months Ended
                                  March 31,                 March 31,
                        -----------------------------------------------------
    ($000's except per
     share amounts)       2009     2008  % change   2009     2008    % change
                        -----------------------------------------------------

    Revenues             15,201    8,479     79%   29,808   16,737       78%
    NOI(1)                7,503    4,813     56%   15,049    9,510       58%
    Net Income (loss)       189      536   (65)%      332   (2,393)     (*)%
    Net income (loss)
     per share
     - basic/diluted      0.001    0.005   (80)%    0.002   (0.021)     (*)%
    FFO(2)                4,064    3,646     11%    9,108    6,314       44%
    FFO per share
     - basic/diluted      0.026    0.032   (19)%    0.059    0.056        5%
    AFFO(3)               3,929    2,601     51%    7,722    5,386       43%
    AFFO per share
     - basic/diluted      0.026    0.023     13%    0.050    0.047        6%
    Dividends on
     common and
     non-voting shares    1,151      856     34%    2,301    1,706       35%
    Weighted average
     shares
     outstanding
     (000's)            153,396  113,902          153,380  113,600

                                                          (*) Not meaningful


    Balance Sheet Summary Data           March 31, 2009   September 30, 2008
    ($000's)                            -------------------------------------

    Income Properties                           369,320              374,632
    Assets                                      434,869              435,770
    Debt                                        252,846              252,562
    Shares outstanding (000's)                  156,213              153,364

    -------------------------------------------------------------------------

    (1) Net Operating Income (NOI) - is a measure used to assist management
    to evaluate the Corporation's profitability from its principal business
    activities without regard to the manner in which these activities are
    financed or amortized, the allocation of general, administrative and
    stock-based compensation costs, or the manner in which the results are
    taxed. Realex defines NOI as rent from income properties, excluding
    straight lining of rents and amortization of above- and below-market
    leases, less property operating costs.

    (2) Funds From Operations (FFO) - is a measure used to assist management
    to evaluate the Corporation's operating performance. As FFO excludes,
    among other items, depreciation, leasing cost amortization, future income
    tax and gains and losses from certain property dispositions, it provides
    an operating performance measure that, when compared period over period,
    reflects the impact on operations of trends in occupancy levels, rentals
    rates, operating costs and realty taxes, acquisition activities and
    interest costs and provides a perspective of the financial performance
    that is not immediately apparent from net income determined in accordance
    with GAAP. FFO as presented should not be viewed as an alternative to
    cash from operations, net income, or other measures calculated in
    accordance with GAAP. Realex defines FFO as being net income for the
    period before amortization (which includes amortization of buildings,
    tenant improvements, in place lease values, tenant relationship values
    and deferred leasing costs), future income tax expense and extraordinary
    items.

    The method of calculation of FFO has been changed commencing October 1,
    2008 so as to provide additional comparability to other real estate
    issuers, and to correspond with the definition provided by the Real
    Property Association of Canada ("REALpac").

    (3) Adjusted Funds From Operations (AFFO) - is a measure used to assist
    management to evaluate the Corporation's ability to generate cash,
    evaluate its return on projects and evaluate the performance of the
    enterprise as a whole. AFFO as presented should not be viewed as an
    alternative to cash from operations, net income, or other measures
    calculated in accordance with GAAP. Users are cautioned that this measure
    may not be comparable to other issuers calculation of AFFO. Realex
    defines AFFO as being FFO for the period, adjusted for amortization of
    above- and below-market leases, straight-lining of rents, amortization of
    fair value mortgages payable adjustment and deferred financing costs,
    stock based compensation expense, internalization costs, amortization of
    non-recoverable maintenance capital expenditures, amortization of
    deferred leasing costs and impairment losses on mortgages receivable.

    NOI, FFO and AFFO do not have any standardized meaning prescribed by GAAP
    and users are cautioned that these measures may not be comparable to
    similar measures presented by other issuers, and should not be construed
    as an alternative or replacement to GAAP measures.
    

    Overview

    The second quarter saw several significant initiatives beginning with the
integration of the Southwest Ontario (Kitchener-Waterloo) acquisition, changes
in Realex's senior management and the initiation of a strategic review of
Realex's assets, management, markets and financial position to identify and
assess both near term and long term priorities and opportunities for the
Corporation, in the context of the current economy. While the long term
business strategy continues to evolve, near term objectives were clarified and
prioritized. These objectives included; debt repayment and renewals,
heightened attention to leasing and monitoring of tenancies throughout the
portfolio, an in-depth review of Realex's mortgage loan portfolio, assessment
of individual properties within the Realex portfolio and development of a
growth oriented business plan for the self storage business unit. Realex's
near term focus will be to strengthen its financial position and seek to
enhance its operational effectiveness within its property portfolio. The
Corporation's longer term objectives are centered on identifying avenues of
growth, with due consideration for the current economic reality.

    Review of Q2 Operations

    The results for the second quarter ended March 31, 2009 reflect the added
operating revenue of the Kitchener/Waterloo portfolio and revenue gains from
Realex's portfolio in Western Canada. When comparing the financial results for
the six months ending March 31, 2009 to the same six month period ending March
31, 2008, revenues rose by $13 million (78%), NOI increased by $5.5 million
(58%) and AFFO increased by $2.4 million (43%). The table of Income Statement
Summary Data above highlights the significant increase in Revenue, NOI and
AFFO for the first six months ended March 31, 2009, as compared to the same
period last year.

    
    A discussion of Realex's three most significant business units follows.

    Western Region

    Realex's Western region office/industrial portfolio has continued to
    perform as anticipated during the quarter. Vacancy in the Western
    portfolio has increased slightly from 1.7% to 1.9% as at March 31, 2009.
    Realex's leasing efforts remain focused on renewal of existing tenancies
    in this current difficult economic period.

    The Corporation's most significant releasing opportunity is the space
    coming available in May 2009 at the Corporation's St. Albert Trail
    building in Edmonton (96,800 square feet which is 50% Realex owned). The
    existing rental rate of the current tenant at the St. Albert Trail
    property is approximately one half of the current estimated market rate
    and Realex's marketing efforts have already produced interest from
    potential tenants as well as a potential purchaser for the building. Of
    the remaining 11,703 square feet (Realex owned) of lease renewals pending
    for calendar 2009, 2,245 square feet has been leased or is anticipated to
    be renewed in the near future.

    The Corporation's forward looking releasing exposure in downtown Calgary
    is limited, with only 9% (34,500 square feet) of Realex's owned downtown
    leased area expiring before the end of fiscal 2012. Realex has engaged
    many of these significant tenants in early negotiations for renewal ahead
    of their natural expiry date. These efforts are focused on completing
    renewals ahead of the anticipated new office buildings coming on stream
    in 2010 and 2011.

    Overall the weighted average occupancy rate of the Corporation's
    portfolio remains unchanged at 95% through March 31, 2009.

    Notwithstanding the above, it is important to note the ongoing downward
    pressure on Calgary office rents. Newly constructed office space coming
    on to the market in the next three years combined with sub lease space
    available as a result of large tenant moves has and is expected to
    continue to push rental rates down. Further, until we see improvement in
    the oil and gas sector we do not forecast a reversal in this downward
    trend of Calgary office rental rates.

    Southwestern Ontario Region

    With the completion of the acquisition and integration of the six
    building, 933,000 square foot Kitchener and Waterloo, Ontario property
    portfolio in Realex's first quarter of fiscal 2009, along with the
    acquisition of the related Southwestern Ontario management company,
    Realex effectively doubled the size of its owned rentable area and
    established a national platform. The impact of this transaction, along
    with internal growth and other acquisitions completed in fiscal 2008,
    have provided for significant growth in income property revenues, NOI and
    AFFO for the first six months of fiscal 2009, as compared to the first
    six months of fiscal 2008. While property revenue, NOI and AFFO growth
    expectations have been moderated by current economic conditions during
    the first half of fiscal 2009 the Corporation has been able to sustain
    its occupancy levels and property revenues.

    Thus far, the Kitchener/Waterloo region has not seen the volatility in
    vacancy levels experienced in other Southern Ontario office centres.
    Neither rental rates nor vacancy levels have fluctuated dramatically
    during the quarter. Realex believes this is primarily due to the region's
    strong underpinning from financial support services and technology
    oriented businesses as well as the positive impact of several
    universities within the region. Nevertheless, in these challenging
    economic times the need to remain vigilant on tenant service and
    retention even in our best markets is more important than ever.

    During the second quarter, the Southwestern Ontario management team
    continued to actively negotiate with the most significant expiry of 2009;
    a 36,974 square foot tenancy expiring on October 31, 2009. The outcome of
    these negotiations remains pending. Approximately 15,600 square feet of
    the remaining 33,149 square feet of rentable area expiring in 2009 has
    been renewed or is under active negotiation and is anticipated to renew
    in the near future.

    Self Storage

    During the second quarter, the Real Storage partnership initiated the
    lease marketing program for its two, newly completed (December 2008)
    operating properties and continued the ongoing marketing of its two other
    operating properties. The four operating properties, totaling
    approximately 280,000 of rentable area, have been leasing well, meeting
    or exceeding expectations, in spite of normal, winter season reductions
    in the traffic of potential clients. With the onset of warmer weather and
    the resultant increased traffic of potential clients, we are launching a
    spring marketing campaign and expect robust leasing activity throughout
    the spring and summer months. Additionally, a 89,000 square foot parcel
    of expansion land is being opened up at our Windermere, BC facility and
    is to be leased as RV storage which will significantly improve the
    revenue potential for this property. We have two additional properties
    under development which will add a further 200,000 square feet to the
    portfolio upon completion. Real Storage is currently updating its
    business plan to aid in sourcing the additional capital necessary to take
    advantage of the acquisition opportunities in Canada's fractured and
    underserved self storage market.
    

    Mezzanine Loan Portfolio

    We continue to take steps to obtain repayment on amounts outstanding
under our mortgage loan portfolio. As previously reported, $4.7 million of
loans went into arrears during the Corporation's first fiscal quarter, ended
December 31, 2008. Throughout this second quarter actions have been taken as
required to ensure maximum repayment of all loan amounts outstanding and that
all security rights are exercised, including enforcement of assignment of
rents, guarantees and other rights of realization. Management has also
conducted an extensive review of the underlying security for loans in default,
including third party appraisals of property security and an assessment of
timing for recovery of outstanding principle and interest owing under these
loans. As a result of this review, and in accordance with GAAP measures,
management has assessed an impairment charge of $980,000 which has been
applied in the Corporation's financial results for the second quarter ended
March 31, 2009. Realex will continue to closely monitor the progress with
respect to loan repayments and recoveries and assess the recovery process on
an ongoing basis. Realex will retain loan repayment proceeds for general
corporate purposes as they are received and has discontinued further
investment in mezzanine lending for the foreseeable future.

    Dividend

    The Board of Directors has authorized the payment of a dividend for the
quarter ended March 31, 2009 to common and non voting shareholders at the rate
of $0.0075 per share (the "Dividend"). The Dividend will be paid June 15, 2009
to shareholders of record on May 29, 2009 and is designated as an eligible
dividend pursuant to subsection 89(14) of the Income Tax Act. An eligible
dividend paid to a Canadian resident individual is entitled to the enhanced
dividend tax credit.
    Shareholders in the Corporation's Dividend Reinvestment Plan (the "DRIP")
may elect to automatically reinvest cash dividends in additional common and
non-voting shares of Realex. For the dividend paid on March 31, 2009, the
participants, which included all of the directors of the Corporation, totalled
74% of the shareholders.

    Summary

    At the end of this second quarter, Tom Heslip joined the Corporation as
President and CEO and Marc Sardachuk assumed the position of Executive Vice
President. These changes were made as a further step forward in the
Corporation's commitment to growth and expansion in what we believe will be a
period of great opportunity notwithstanding challenges in real estate markets
across North America.
    Mr. Heslip brings with him many years of real estate and capital markets
experience, holding senior management positions in prominent real estate firms
in Canada and investment banking and private equity firms headquartered in the
United States. Tom's work experience extends to the Canadian and US
marketplace, as well as in markets in Asia and Europe. His successful track
record and exceptional leadership skills will augment the Corporation's strong
management team, and will position Realex for the next stage in its growth.
    During Marc's tenure as President and CEO, he and the team at Realex
achieved success in operations, leasing, growth outside of Alberta and overall
stability. With our newly expanded leadership team we believe the company is
well positioned to capitalize on opportunities which lie ahead.
    Full reports of the financial results are outlined in the unaudited
Consolidated Financial Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are available on SEDAR
and on the Realex Properties Corp. website at www.realexproperties.ca.

    
    Neither TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this release.
    

    This news release contains forward looking statements subject to various
significant risks and uncertainties which may cause actual results,
performances and achievements of Realex to be materially different from any
future results, performances or achievements, expressed or implied by such
forward looking statements. Realex cannot assure investors that actual results
will be consistent with these forward looking statements and Realex assumes no
obligation to update or revise them to reflect new events or circumstances.





For further information:

For further information: Tom Heslip, President and Chief Executive
Officer, Realex Properties Corp., Telephone: (403) 264-5889, Facsimile: (403)
264-5892; Mark Suchan, Chief Financial Officer, Realex Properties Corp.,
Telephone: (403) 264-5889, Facsimile: (403) 264-5892

Organization Profile

REALEX PROPERTIES CORP.

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