Killam Properties Inc. announces third quarter results of $0.22 FFO per share
and an 8.8% increase in same store net operating income

HALIFAX, Nov. 3 /CNW/ - Killam Properties Inc. (TSX:KMP/KMP:DB) today announced its financial results for the third quarter ended September 30, 2009.

Highlights of Killam's Third Quarter Financial Results

    - Achieved an 8.8% increase in net operating income ("NOI") from same
      store properties, compared to the third quarter of 2008.
    - Maintained high occupancy rates, ending the third quarter with total
      apartment occupancy of 98.2%, consistent with the record occupancy
      level achieved in September 2008.
    - Strengthened balance sheet with the successful completion of a $24.7
      million public share offering, reducing total debt to gross book value
      of assets to 65.6%.
    - Increased funds from operations ("FFO") by 11.3% to $8.4 million from
      $7.5 million in the third quarter of 2008.
    - Notwithstanding a 14% increase in shares outstanding, maintained FFO
      per share of $0.22 per share (2008 - $0.22 per share).
    - Increased FFO per share for the 9 months ended September 30, 2009 by
      12% to $0.56 per share (2008 - $0.50 per share).
    - Refinanced $12.3 million of mortgage debt that matured in the third

    Financial Highlights (in thousands, except per share information)

    For the three months ended September 30,       2009      2008  % Change

    Rental Revenue                              $26,808   $25,572       4.8%
    Net Operating Income                        $17,728   $16,302       8.7%
    Net Income Before Tax and Depreciation       $7,861    $7,015      12.1%
    Net Income                                     $597       $58       N/A
    Funds from Operations                        $8,405    $7,549      11.3%
    Funds from Operations per Share               $0.22     $0.22         -
    Shares Outstanding (weighted average)        38,344    33,624      14.0%

    For the nine months ended September 30,        2009      2008  % Change

    Rental Revenue                              $77,679   $72,264       7.5%
    Net Operating Income                        $47,520   $42,914      10.7%
    Net Income Before Tax and Depreciation      $18,096   $15,329      18.1%
    Net Loss                                    ($1,671)  ($3,315)    (49.6%)
    Funds from Operations                       $19,923   $16,865      18.1%
    Funds from Operations per Share               $0.56     $0.50      12.0%
    Shares Outstanding (weighted average)        35,493    33,509       5.9%

                                                Sept 30,   Dec 31,
    Balance Sheet as at,                           2009      2008  % Change

    Total Assets                               $752,491  $738,668       1.9%
    Total Liabilities                          $570,762  $565,475       0.9%
    Total Shareholders' Equity                 $181,729  $173,193       4.9%
    Gross Debt as a % of Gross Book Value          65.6%     67.7%     (3.1%)

FFO Per Share of $0.22 in the Third Quarter

Killam generated $8.4 million in FFO in the third quarter, an 11.3% increase from the third quarter of 2008. The increase was primarily attributable to the Company's same store NOI growth and the positive impact of acquisitions made during 2008. These improvements were partially offset by lower new manufactured home sales and higher general and administrative costs in the quarter.

Management considers FFO per share to be a key measure of operating performance. FFO per share for the third quarter of 2009 was $0.22 per share, consistent with $0.22 earned during the same period of 2008. It is noteworthy that the 11.3% increase in FFO for the quarter was not reflected in the FFO per share results due to the issuance of an additional 4.255 million shares on July 2, 2009; the $23.4 million of net proceeds from the issuance has not yet been fully deployed.

Same Store NOI Growth of 8.8% Compared to the Third Quarter of 2008

Killam achieved same store NOI growth of 8.8% during the third quarter of 2009. Same store properties account for 96% of the Company's portfolio. Consolidated operating revenue increased 3.2% quarter-over-quarter due primarily to increased monthly rental rates, which increased an average of 2.5% from the same period last year. Consolidated operating expenses decreased by 5.7% in the quarter as the Company benefited from decreased energy costs and operating efficiencies. Year-to-date, Killam has achieved same store NOI growth of 9.6%.

The apartment portfolio realized same store NOI growth of 7.1% in the quarter. An increase in rents drove a 3.0% increase in rental revenue. The apartment portfolio also benefited from a decrease in operating expenses, which fell by 3.4% during the third quarter, due primarily to a 40% decrease in natural gas and heating oil costs. Year-to-date, same store NOI for the apartment portfolio has increased 10.6%.

The manufactured home community ("MHC") portfolio realized same store NOI growth of 13.7% in the quarter. The MHCs benefited from a 3.8% increase in revenue, attributable to rent increases and higher traffic in the seasonal communities, and from a 13.2% reduction in operating expenses. The reduced expenses reflect lower water and sewer repairs in the third quarter of 2009 as well as a reduction in required general park maintenance. Year-to-date, same store NOI for the MHC portfolio has increased 6.6%.

Portfolio Vacancy at 1.3% at September 30, 2009

Killam has maintained low vacancy rates throughout 2009, achieving consolidated vacancy of 1.3% at September 30, 2009, consistent with the low vacancy achieved in September 2008.

The apartment portfolio had a vacancy rate of 1.8% with an average monthly rent of $754; the vacancy at September 30, 2009 was consistent with the same vacancy rate of 1.8% at September 30, 2008. The MHC portfolio had a vacancy rate of 0.9%, with an average monthly rent of $221. 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.

                                                  Units   Vacancy      Rent
                                               --------- --------- ---------
    Nova Scotia                                   4,196       2.0%     $805
    New Brunswick                                 3,310       2.0%     $712
    Newfoundland                                    732       0.8%     $611
    Prince Edward Island                            686       0.4%     $793
    Total Apartment Portfolio                     8,924       1.8%     $754
    Total MHC Portfolio                           8,796       0.9%     $221

New Home Sale Activity

Killam remains active in the sale of new manufactured homes; however, the Company experienced a decrease in home sales completed during the third quarter compared to the third quarter of 2008. During the third quarter of 2009 Killam completed 13 home sales and 3 partnership sales. This compares with the closing of 17 home sales and 10 partnership sales during the third quarter of 2008. During the first nine months of 2009 Killam completed a total of 28 home sales and partnership sales compared to 66 sales during the first nine months of 2008.

Home sale activity levels are largely dependent on the timing of completion of site expansions, as well as demand for new homes across the portfolio. Killam experienced a decrease in demand for new homes in Ontario and Western Canada in the first half of the year compared to the first half of 2008, but has seen increased activity the second half of the year.

Killam continues to anticipate that 2009 homes sales will be at the lower end of the original estimate of 40 to 60 homes. Killam currently has commitments for an additional 11 home sales expected to be completed during the year.

Balance Sheet Strengthened with Recent Equity Raise

Killam's balance sheet was strengthened following the July equity raise, ending the quarter with cash on hand of $25.4 million and debt as a percentage of the gross book value of assets at 65.6%, down from 67.9% at June 30, 2009 and 67.7% at December 31, 2008.

Debt Financings

Killam is pleased to report that financing for its properties remains strong. During the first nine months of 2009 Killam refinanced $50.7 million in mortgages on 19 properties, realizing net proceeds of $15.9 million, a 31% increase above the balances due on maturity. The weighted average interest rate on the new, primarily five-year CMHC insured, apartment mortgages is 4.12%, a 99 basis point improvement over the previous weighted average interest rate of 5.11%. The weighted average interest rate on the new five-year MHC mortgages is 5.98%, an 85 basis point increase over the previous weighted average interest rate on the maturing five-year mortgages of 5.13%.

Subsequent to September 30, 2009, Killam has refinanced $2.9 million of maturing mortgage debt with new mortgages totaling $3.3 million, for net proceeds of $0.4 million. The weighted average interest rate on the new mortgages is 4.5%.

The Company has $48.3 million of mortgages, representing 9.6% of total mortgage debt, due for refinancing in 2010. Management does not anticipate difficulty in refinancing this debt.

Management's Comments

"We are pleased to report continued strength in Killam's same store properties, realizing NOI growth of 8.8% during the third quarter and 9.6% for the first nine months of 2009", noted Philip Fraser, Killam's President and Chief Executive Officer. "Both our apartment and MHC portfolios have achieved exceptional results this year."

"Killam continues to benefit from access to debt, having successfully refinanced $12 million of mortgages that matured in the quarter. CMHC insured debt on the apartment properties continues to be available at very attractive rates. Killam's five apartment mortgage maturities were refinanced at a weighted average interest rate of 4.15%, a 102 basis point improvement over the previous rate of 5.17%."

"The equity offering completed during the third quarter has resulted in increased liquidity and a stronger balance sheet, positioning us to take advantage of growth opportunities. We continue to be focused on growing the business through acquisitions, and look forward to completing accretive property purchases over the next few months."

Financial Statements

    Killam's September 30, 2009 Financial Statements and Notes and
    Management's Discussion and Analysis can be found at

Third Quarter Conference Call

Management will host a conference call to discuss these results on Wednesday, November 4, 2009 at 11:00 AM Atlantic time (10:00 AM Eastern). The dial-in numbers for the conference call are 416-644-3424 (in Toronto) or 800-589-8577 (toll free, within North America).

A live audio webcast of the conference call will be accessible on the Company's website at and at

A replay will be available by dialing 416-640-1917 (Toronto) or 877-289-8525 (toll-free) and using the passcode 4169326# until November 11, 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 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.

SOURCE Killam Properties Inc.

For further information: For further information: Dale Noseworthy, CA, CFA, Director, Investor and External Relations, Killam Properties Inc., (902) 442-0388,

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