Revenue Properties Company Limited Announces Third Quarter Results



    TORONTO, Oct. 29 /CNW/ - Revenue Properties Company Limited (TSX: RPC)
announced financial results for the three months ended September 30, 2008.

    
    THIRD QUARTER HIGHLIGHTS

    -   Overall occupancy levels remain high as at September 30, 2008 with
        commercial properties at 95.9% and residential properties at 95.7%
        (June 30, 2008 - commercial: 96.2%, residential: 93.1%).

    -   Net operating income was $16.5 million (2007 - $17.1 million).

    -   Funds from operations were $5.6 million or $0.53 per share
        (2007 - $6.8 million, $0.63 per share).

    -   Income before non-recurring items and amortization was $6.3 million
        (2007 - $7.6 million).

    -   Net loss for the three months ended September 30, 2008 was
        $0.7 million (2007 - $4.4 million).


    FINANCIAL HIGHLIGHTS

    -------------------------------------------------------------------------
                                     Three months ended    Nine months ended
    (In thousands of Canadian           September 30          September 30
     dollars, except per            -----------------------------------------
     share amounts)                    2008       2007       2008       2007
    -------------------------------------------------------------------------
    Property revenues               $30,412    $30,537    $89,656    $93,471
    Property operating expenses      13,922     13,402     38,977     41,138
    -------------------------------------------------------------------------
    Net operating income             16,490     17,135     50,679     52,333
    Interest expense                 (8,201)    (8,156)   (24,313)   (28,076)
    General and administrative       (1,508)    (1,390)    (4,327)    (4,475)
    Hurricane expense                  (439)         -       (439)         -
    -------------------------------------------------------------------------
    Income before non-recurring
     items and amortization          $6,342     $7,589    $21,600    $19,782
    Other income (expense)              251        405        944        220
    Amortization                     (7,326)   (12,410)   (22,405)   (38,559)
    -------------------------------------------------------------------------
    Operating income (loss)           ($733)   ($4,416)       139   ($18,557)
    Costs associated new mortgages        -       (394)         -     (5,748)
    Income taxes                       (818)      (376)    (2,636)    (2,483)
    -------------------------------------------------------------------------
    Net loss                        ($1,551)   ($5,186)   ($2,497)  ($26,788)

    Net loss
      - per basic and diluted share  ($0.15)    ($0.48)    ($0.24)    ($2.48)

    Funds from operations            $5,609     $6,809    $19,697    $11,209
      - per basic and diluted
         share                        $0.53      $0.63      $1.86      $1.04
    -------------------------------------------------------------------------
    

    Net operating income is used by industry analysts, investors and
management to measure operating performance at the Company's properties. Net
operating income represents total property revenues less property operating
expenses and maintenance expenses. Accordingly, net operating income excludes
certain expenses included in the determination of net income such as property
management and other indirect operating expenses, interest expense and
amortization. Net operating income is not a recognized measure under Canadian
generally accepted accounting principles and accordingly the term does not
necessarily have a standardized meaning and may not be comparable to similarly
titled measures presented by other publicly traded entities.

    OFFER BY MORGUARD CORPORATION FOR RPC COMMON SHARES

    On April 2, 2008, the Company was advised of the intention of Morguard to
make an unsolicited take-over bid for all of the issued and outstanding common
shares of RPC that it does not already own at an offer price of CDN$12.00 cash
per share or, at the option of each tendering RPC shareholder, 0.33 common
shares of Morguard for each 1 common share of RPC. Prior to the announcement,
Morguard owned 72.6% of the Company's outstanding common shares. At the expiry
of the Morguard offer on July 16, 2008, Morguard announced that 739,821 common
shares of RPC had been validly tendered under the terms of the offer and that
Morguard had taken up and accepted for payment the same number of common
shares. Morguard extended the expiry time of its bid three times with the
final extension ending on August 27, 2008, after which Morguard announced that
an additional 325,514 common shares of RPC had been validly tendered under the
terms of the offer and that Morguard had taken up and accepted for payment the
same number of common shares. At the expiration of the offer on August 27,
2008, Morguard owned 8,921,831 of the Company's common shares representing
82.4%. Pursuant to Morguard's request a meeting of the Company's shareholders
will be held on November 19, 2008, with the intent of seeking approval of a
going-private transaction. On October 23, 2008, the Company mailed a
management information circular for the special meeting.

    REVIEW OF FINANCIAL RESULTS

    The Company incurred a net loss of $1.5 million for the three months
ended September 30, 2008, compared to a net loss of $5.1 million for the same
period in 2007. The reduced loss is primarily due to lower amortization
expense of $5.0 million. During the current quarter, some of the Company's
U.S. properties sustained damage from Hurricane Gustav. The Company incurred
costs for storm preparation, uninsured damages and loss of rents. The Company
estimates that its cash exposure for all losses to be $0.8 million.

    Net Operating Income

    Net operating income for the three months ended September 30, 2008, was
$16.5 million compared to $17.1 million for the same period in 2007. The
following table details the Company's net operating income by geographic
segment for the three months ended September 30, 2008 and 2007.

    
    -------------------------------------------------------------------------
                                                          Three months ended
                                                             September 30
                                                        ---------------------
    (000's)                                                  2008       2007
    -------------------------------------------------------------------------
    U.S. (in US$)                                          $8,272     $9,341
                                                        ---------------------
                                                        ---------------------
    U.S. (in CDN$)                                         $8,612     $9,769
    Canada                                                  7,878      7,366
    -------------------------------------------------------------------------
                                                          $16,490    $17,135
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net operating income from the Company's Canadian assets for the three
months ended September 30, 2008, increased 7.0% to $7.8 million from
$7.4 million in 2007. The increase is primarily due to strong leasing at one
of the Company's mixed-use properties located in Toronto, Ontario that
resulted in increased NOI of approximately $0.4 million.
    Reported NOI from the Company's U.S. properties for the three months
ended September 30, 2008, decreased 10.9% to $8.6 million from $9.7 million in
2007. U.S. denominated net operating income for the three months ended
September 30, 2008, was $1.1 million lower than for the same period in 2007.
    The following tables detail the Company's NOI by reportable segment for
the three months ended September 30, 2008 and 2007:

    
    -------------------------------------------------------------------------
                                          Three months ended September 30
                                    -----------------------------------------
                                                       2008
                                    -----------------------------------------
                                                           Resid-
    (000's)                          Retail     Office     ential      Total
    -------------------------------------------------------------------------
    Rental revenues                 $19,337     $2,949     $8,126    $30,412

    Operating expenses                9,154      1,004      3,764     13,922
    -------------------------------------------------------------------------
    NOI                             $10,183     $1,945     $4,362    $16,490
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                          Three months ended September 30
                                    -----------------------------------------
                                                       2007
                                    -----------------------------------------
                                                           Resid-
    (000's)                          Retail     Office     ential      Total
    -------------------------------------------------------------------------
    Rental revenues                 $19,200     $3,083     $8,254    $30,537
    Operating expenses                7,936      1,272      4,194     13,402
    -------------------------------------------------------------------------
    NOI                             $11,264     $1,811     $4,060    $17,135
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net operating income from the Company's retail portfolio decreased by
$1.1 million or 9.6% lower than levels generated in 2007. The decrease is
primarily due to lower non-cash revenue (amortization of below-market leases)
being recorded. During the three months ended September 30, 2008, the Company
recorded $0.4 million of non-cash revenue (2007 - $0.9 million). Also, rental
losses in the amount of $0.4 million due to Hurricane Gustav contributed to
the decrease in NOI during the three months ended September 30, 2008.
    Net operating income from the Company's office portfolio was up
$0.1 million over levels generated in 2007. The Company's office portfolio is
comprised primarily of single-occupant buildings under long-term leases and,
accordingly, experiences very low volatility.
    Reported NOI from the Company's residential portfolio in 2008 was up
$0.3 million compared to the same period in the prior year. The increase is
primarily due to a mixed-use property located in Toronto, Ontario, which had
higher revenues from lower vacancies, along with lower operating costs from
lower maintenance and general administration expenses.

    Funds from Operations

    Funds from operations was calculated as follows:

    
    -------------------------------------------------------------------------
                                      Three months ended   Nine months ended
                                         September 30         September 30
    (000s, except per               -----------------------------------------
     share amounts)                    2008       2007       2008       2007
    -------------------------------------------------------------------------
    Net income (loss)               ($1,551)   ($5,186)   ($2,497)  ($26,788)
    Add (deduct) non-cash items:
      Amortization - rental
       properties                     3,646      3,724     10,788     11,058
      Amortization - intangible
       assets                         2,450      7,400      6,805     23,459
      Amortization - deferred
       leasing costs                  1,230      1,286      4,822      4,042
      Future income taxes              (166)      (415)      (211)      (568)
      Other                               -          -          -          6
    -------------------------------------------------------------------------
                                     $5,609     $6,809    $19,697    $11,209
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Company uses Funds from Operations ("FFO") in addition to net income
to report operating results. FFO is an industry standard for evaluating
operating performance defined as net income plus amortization and future
income taxes, excludes gains or losses from the sale of depreciable property
and is not adjusted for gains realized on the disposition of portfolio
investments. FFO is not indicative of funds available to meet the Company's
cash requirements. The Company computes FFO in accordance with the recently
amended definitions of the Real Property Association of Canada, formerly known
as the Canadian Institute of Public and Private Real Estate Companies.
However, FFO is not a recognized measure under Canadian generally accepted
accounting principles and accordingly the term does not necessarily have a
standardized meaning and may not be comparable to similarly titled measures
presented by other publicly traded entities.
    FFO for the three months ended September 30, 2008, were $5.6 million
($0.53 per common share) compared to $6.8 million ($0.63 per common share) for
the same period in 2007. The decrease in FFO is primarily due to lower
reported net operating income.

    
    THIRD QUARTER FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND
    ANALYSIS
    

    The Company's unaudited financial statements for the three and nine
months ended September 30, 2008, along with the Management's Discussion and
Analysis are available on the Company's website at www.revprop.com and have
been filed with SEDAR at www.sedar.com.
    Revenue Properties Company Limited is a real estate company whose primary
focus is the acquisition, ownership and development of income producing
properties in Canada and the United States. The Company's diversified
portfolio includes approximately 4.5 million square feet of retail and office
space as well as 3,414 residential apartment suites.





For further information:

For further information: Revenue Properties Company Limited, K. (Rai)
Sahi, Chief Executive Officer, (905) 281-5888; Paul Miatello, Chief Financial
Officer, (905) 281-5943

Organization Profile

REVENUE PROPERTIES COMPANY LIMITED

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