IPC US REIT Announces Second Quarter Financial Results



    All amounts are expressed in U.S. dollars.

    /NOT FOR DISSEMINATION OVER UNITED STATES NEWSWIRE SERVICES/

    TORONTO, Aug. 14 /CNW/ - IPC US Real Estate Investment Trust ("IPC" or
the "REIT") (TSX: US$:IUR.U, C$:IUR.UN), the only Canadian REIT investing
exclusively in U.S. office properties, announced today its financial results
for the three months and six months ended June 30, 2007.
    IPC reported that rental revenues rose 10.9% to $46.2 million over the
same quarter in 2006 due mainly to recent acquisitions. On a same store basis,
rental revenues were up 1.9% over the same quarter in 2006.
    Net operating income ("NOI") rose 7.4% to $24.8 million over the same
quarter in 2006. NOI from the REIT's same store portfolio (defined as all
buildings owned since January 1, 2006) decreased 2.2% to $21.7 million
compared with the same quarter in 2006. This was due to increased operating
expenses resulting from higher utilities costs and general inflationary
increases in other operating costs.
    Occupancy for the REIT's portfolio (excluding discontinued operations)
was at 91.0% as at June 30, 2007, a slight decrease from 91.6% at the end of
the first quarter of 2007. Leasing activity remained strong with over 240,000
square feet ("sq. ft.") of space leased, of which 62,000 sq. ft. was renewal
leasing.
    In April 2007, the REIT completed the $73.5 million acquisition of 500
East Pratt Street in Baltimore, a 280,000 sq. ft., 12-storey, Class A office
building located on the Inner Harbor in downtown Baltimore. The property was
91.0% leased at acquisition to a roster of high-quality tenants and is
currently 96.0% leased. There are no lease expiries until 2012 and only 27,000
sq. ft. of space is expiring in the next 10 years. The acquisition was
financed through an interest only 10-year mortgage of $58.8 million bearing
interest at a fixed rate of 5.55%.
    In April, the REIT also completed the disposition of its 85% ownership
interest in 2100 Ross Avenue in Dallas for proceeds of $73 million (100%).
This sale generated a gain of approximately $4.5 million net of mortgage
defeasance costs.
    Distributable income ("DI") decreased 28.9% to $7.8 million in the second
quarter of 2007 compared to the same period last year. The decrease was due to
a decline in investment and fee income resulting from the sale of three large
structured investments in 2006 and higher general and administrative expenses.
The REIT has not re-deployed the proceeds due to the on-going process to sell
the REIT, a process that has culminated in the entering into of a definitive
purchase agreement as discussed below under "Sales Process". On a per unit
basis, DI dropped 8.1 cents to 17.5 cents due to the aforementioned decline in
DI as well as a greater number of units outstanding.
    The REIT recorded net income of $2.0 million for the second quarter of
2007, up from net income of $1.9 million in the same period of 2006.

    
                                      Three months ended    Six months ended
                                                 June 30,            June 30,
                                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    Operating revenues (*)             $46,196   $41,667   $92,477   $80,929
    Net Operating Income (NOI) (*)      24,808    23,109    49,934    43,475
    Net income                           2,042     1,869     1,252    30,129
    Net income per unit - Basic        $  0.05   $  0.04   $  0.03   $  0.70
    Net income per unit - Diluted      $  0.05   $  0.04   $  0.03   $  0.62
    -------------------------------------------------------------------------
    Distributable Income (DI) (xx)     $ 7,800   $10,983   $18,147   $22,221
    Distributable Income per unit
     - Basic (cents)                      17.5      25.6      41.2      52.0
    Distributable Income per unit
     - Diluted (cents)                    16.5      22.9      37.9      46.5
    Distributions declared per
     unit (cents)                         20.0      20.0      40.0      40.0
    Funds from Operations (FFO)        $ 9,059   $12,147   $27,272   $21,152
    -------------------------------------------------------------------------
    Weighted-Average Units
     - Basic (000s)                     44,501    42,878    44,017    42,765
      Add:  Unit Option Plan               372       299       402       311
      Add:  Deferred Units                 749       601       792       593
      Add:  Convertible
             Debentures (xxx)            8,196     9,331     8,546     9,425
    -------------------------------------------------------------------------
    Weighted-Average Units
     - Diluted (000s)                   53,818    53,109    53,757    53,094
    

    (*) Continuing operations
    (xx) Determined in accordance with the REIT's Declaration of Trust
    (xxx) Convertible debentures were anti-dilutive for purposes of
    calculating net income per unit for the three and six months ended
    June 30, 2007 and the three months ended June 30, 2006.

    Sale Process

    As separately announced today, IPC has entered into a definitive purchase
agreement (the "Purchase Agreement") to be acquired by a wholly owned
subsidiary of Behringer Harvard REIT I, Inc. ("Behringer Harvard"), a
Dallas-based real estate investment group investing in assets domestically and
internationally.
    Behringer Harvard has offered to acquire the assets and assume the
liabilities of IPC in an all cash transaction valued at approximately
US$1.4 billion. Following the closing of the transaction (the "Closing"), all
of the issued and outstanding Units of the REIT will be redeemed at a
redemption price of US$9.75 per Unit in cash plus (i) any declared and unpaid
monthly distributions on a Unit, and (ii) $0.0667 per Unit, pro-rated on the
basis of the number of days that have passed in the month in which closing
occurs. IPC will thereafter be wound up. Further details can be found in the
press release issued by IPC earlier today.
    Financial statements and management's discussion and analysis ("MD&A")
for the three and six months ended June 30, 2007 have been filed on SEDAR at
www.sedar.com and are available through our website at www.ipcreit.com. In
addition, IPC has published an updated Supplemental Information Package that
provides additional data on our portfolio. This package can be accessed
through our website at www.ipcreit.com, by e-mailing us at
investorrelations@ipcreit.com or by calling us at (416) 929-0514.

    About IPC US REIT

    IPC US REIT is the only real estate investment trust in Canada that
invests exclusively in U.S. commercial real estate. The REIT beneficially owns
an 87.0% interest in IPC (US), Inc. ("IPC US") which has ownership interests
in a portfolio of 35 office buildings comprising a total of 9.6 million square
feet of rentable space. The units of the REIT are listed on the Toronto Stock
Exchange under the symbol "IUR.UN" for Canadian dollar quoted units and
"IUR.U" for US dollar quoted units. For more information on IPC US REIT,
please visit the REIT's website at www.ipcreit.com.

    Net Operating Income

    Net operating income is defined as rental revenues less operating costs.
Management considers net operating income to be a meaningful indicator of
operations and uses it as their primary measurement of operating performance.
Readers are cautioned that net operating income is not a defined measure of
operating performance under Generally Accepted Accounting Principles ("GAAP")
and that the REIT's calculation of net operating income may differ from that
of other entities.

    Distributable Income

    Distributable income is not a defined measure of operating performance
under GAAP and it is likely that the REIT's calculation of distributable
income is not comparable to similar measures used by other entities.
Distributable income is determined in accordance with the REIT's Declaration
of Trust and represents net income of the REIT and its consolidated
subsidiaries, as determined in accordance with GAAP before amortization
(excluding amortization of deferred leasing costs), goodwill, non-cash future
income taxes, gains and losses on the disposition of assets, certain mortgage
defeasance costs, certain lease termination income and any other adjustments
which are determined at the discretion of the Board of Trustees not to be of
an operational nature, such as corporate transaction costs.

    Funds from Operations

    Funds from operations ("FFO") is a generally accepted supplemental
measure of operating performance for real estate entities; however, it is not
a measure defined by GAAP. IPC calculates FFO as net income after adding back
non-cash items such as amortization (except for amortization of deferred
financing fees), equity loss in other real estate investments, deferred unit
plan expenses, future income tax expense and non-controlling interest expense.
    A reconciliation of net income to distributable income is as follows:

    
                                      Three months ended    Six months ended
                                                 June 30,            June 30,
                                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    Net income                         $ 2,042   $ 1,869   $ 1,252   $30,129
    Reconciling items:
      Amortization                       9,505     9,171    18,332    18,440
      Amortization included in
       equity loss                           -     1,535         -     3,070
      Future income tax recovery          (737)   (2,431)     (488)   (3,291)
      Current income tax                   (26)   (1,022)      259       436
      Corporate transaction costs          495       875     1,163       875
      Gain on disposition               (4,461)        -    (4,461)  (29,389)
      Other
        Deferred unit expense              498       751     1,066     1,395
        In-place lease adjustments         196       132       443       323
        Option expense                       9        15        18        32
        Accretion of convertible
         debenture                         279        88       563       201
    -------------------------------------------------------------------------
    Distributable income               $ 7,800   $10,983   $18,147   $22,221
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    A reconciliation of net cash provided by operating activities to
distributable income follows:

    
                                      Three months ended    Six months ended
                                                 June 30,            June 30,
                                                    2007                2006
    -------------------------------------------------------------------------
    Net cash provided by operating
     activities                        $12,013   $14,621   $13,399   $16,333
    Reconciling items:
      Amortization included in
       equity loss                           -     1,535         -     3,070
      Leasing costs - commissions        1,921       708     2,731     1,893
      Corporate transaction costs          495       875     1,163       875
      Equity loss                            -       (51)        -      (127)
      Receipts from other real estate
       investments                           -      (609)        -      (864)
      Current income tax expense           (26)   (1,022)      259       436
      Amortization of deferred
       leasing costs                    (1,755)   (1,213)   (3,292)   (2,123)
      Non-controlling interest          (1,826)   (1,809)   (3,501)   (3,630)
      Changes in non-cash working
       capital items                    (3,268)   (2,261)    6,992     4,634
      Bank of America deferred fee
       write off                             -         -         -     1,619
      Other                                246       209       396       105
    -------------------------------------------------------------------------
    Distributable income               $ 7,800   $10,983   $18,147   $22,221
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    A reconciliation of net income to FFO is as follows:

    
                                      Three months ended    Six months ended
                                                 June 30,            June 30,
                                          2007      2006      2007      2006
    -------------------------------------------------------------------------
    Net income                         $ 2,042   $ 1,869   $ 1,252   $30,129
    Reconciling items:
      Amortization                      11,093     9,265    21,286    18,305
      Amortization included in
       discontinued operations               -       694         -     1,384
      Amortization included in
       equity loss                           -     1,535         -     3,070
      Bank of America deferred
       fee write off                         -         -         -    (1,619)
      Gain on disposition               (4,461)        -    (4,461)  (29,389)
      Future income tax recovery          (737)   (2,431)     (488)   (3,291)
      Non-controlling interest           1,826     1,809     3,502     3,628
      Distribution paid to
       non-controlling interest         (1,680)   (1,450)   (3,182)   (2,877)
    Other                                  976       857     2,079     1,812
    -------------------------------------------------------------------------
    Funds from operations              $ 9,059   $12,147   $19,988   $21,152
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Forward-Looking Statements

    From time to time, IPC REIT makes written or oral forward-looking
statements. Statements of this type are included in this press release, and
may be included in other filings with Canadian securities regulators and other
communications. All such statements are made pursuant to the 'safe harbour'
provisions of, and are intended to be "forward-looking statements", within the
meaning of the United States Private Securities Litigation Reform Act of 1995
and forward looking information under the provisions of Canadian provincial
securities laws. Forward-looking statements may involve, but are not limited
to, comments with respect to our objectives and priorities for 2007 and
beyond, our strategies or future actions, our targets, expectations for our
financial condition or Unit price, and the results of or outlook for our
operations or for the Canadian or U.S. economies. The words "may", "could",
"should", "would", "suspect", "outlook", "believe", "plan", "anticipate",
"estimate", "expect", "intend", "forecast", "objective", and words and
expressions of similar import are intended to identify forward-looking
statements.
    By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties. There is
significant risk that predictions, forecasts, conclusions or projections will
not prove to be accurate, that our assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts,
conclusions or projections. We caution readers of this press release not to
place undue reliance on our forward-looking statements as a number of factors
could cause actual future results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions expressed
in the forward-looking statements. These factors include industry risk, risks
inherent in the ownership of real property, competition, financial leverage,
additional funding requirements, capital requirements for growth, interest
rates, tenant bankruptcies, labour disruptions, geographic concentration,
foreign exchange risk, environmental liability risk, credit risk, availability
of cash flow for distributions and liquidity risk. We caution that the
foregoing list of important factors that may affect future results is not
exhaustive. When relying on our forward-looking statements to make decisions
with respect to us, investors and others should carefully consider the
foregoing factors and other uncertainties and potential events. We do not
undertake to update any forward-looking statement, whether oral or written,
that may be made from time to time by us or on our behalf.

    %SEDAR: 00017112E




For further information:

For further information: Gary M. Goodman, President and Chief Executive
Officer, IPC US REIT, Tel: (416) 929-0514, Fax: (416) 929-5314,
investorrelations@ipcreit.com

Organization Profile

IPC US REAL ESTATE INVESTMENT TRUST

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