Lanesborough REIT Reports 2007 Second Quarter Results



    WINNIPEG, Aug. 15 /CNW/ - Lanesborough Real Estate Investment Trust
("LREIT") (TSX: LRT.UN) is pleased to report the financial results for the
quarter ended June 30, 2007. The following comments in regard to the financial
position and operating results of LREIT should be read in conjunction with the
2007 Second Quarter Report and the financial statements for the quarter ended
June 30, 2007, which may be obtained from the LREIT website at www.lreit.com
or the SEDAR website at www.sedar.com.

    
    2007 SECOND QUARTER HIGHLIGHTS

    Acquisition and Development

    -   Invested $9.65 Million in the acquisition of two additional
        properties, representing 161 additional apartment units.

    -   Invested $5.9 Million in construction, expansion and renovation
        costs.

    -   Quarter ending portfolio consisting of 38 properties, comprised of
        2,768 suites and 232,945 square feet of commercial leasable area.

    Financial

    Second quarter of 2007, compared to second quarter of 2006:

    -   Operating income increased by $2.49 Million or 62% in total and by
        $0.139 or 59% on a per unit basis.

    -   "Same property" operating income increased by $1.01 Million or 20.5%.

    -   Average occupancy rate for entire portfolio excluding properties
        under development increased from 88.6% to 96.2%.

    Capital Structure

    -   Financed $16.9 Million of mortgage debt.

    -   Weighted average interest rate on the aggregate mortgage loan balance
        of 6.2% at June 30, 2007.

    -   Mortgage loan debt to current estimated property value ratio of 56.7%
        at June 30, 2007.

    Ongoing Investment Activities

    -   Closed on a 175-unit apartment complex in Fort McMurray, effective
        July 1, 2007, at a cost of $59.9 Million.

    -   Contracted acquisitions and new properties under construction at a
        combined acquisition cost of approximately $82.9 Million,
        encompassing 72 townhouse units and 186 apartment suites. The
        acquisitions are expected to be completed during the fourth quarter
        of 2007.

    -   A 59-suite expansion to a seniors' residence in Port Elgin, Ontario
        is in process at an estimated cost of $9.5 Million.
    

    During the second quarter of 2007, the favourable impact of properties
that have completed the development stage started to be reflected in the
operating results of LREIT. Overall, the operating results for the second
quarter of 2007 were positive, with LREIT achieving an increase in operating
income of $2,493,909 or 62%, compared to the second quarter of 2006. The
improvement in operating income compared to 2006 is not surprising,
considering the growth in the property portfolio over the past year, however,
LREIT also achieved an increase in operating income of $1,635,033 or 33%,
compared to the first quarter of 2007. The growth in operating income between
the first and second quarter of 2007 is partially attributable to the
acquisition of two additional properties in May 2007, however, the main factor
in the equation is the inclusion of Woodland Park as an income-producing
property effective April 1, 2007. Woodland Park, which was acquired in March
2007 and was classified as a property under development in the first quarter
of the year, accounted for $644,684 or 39% of the increase in operating income
during the second quarter of 2007. On a per unit basis, LREIT achieved its
highest level of operating income in two years, at $0.374 per unit for the
second quarter of 2007, compared to $0.281 per unit for the first quarter of
2007 and $0.235 per unit for the second quarter of 2006.
    Cash from operations, excluding changes in non-cash operating items, also
improved significantly during the second quarter of 2007, increasing by
$885,673 or 122% compared to the first quarter of 2007. Other measures of the
cash generating abilities of LREIT also showed a marked improvement during the
second quarter of 2007, including Funds from Operations (FFO), Adjusted Funds
from Operations (AFF0) and Distributable Income. In comparison to the second
quarter of 2006, cash from operations, excluding changes in non-cash operating
items, decreased by $338,713 during the second quarter of 2007, mainly due to
an increase in interest expense on mortgage loans and convertible debenture
debt. To a large degree, the decrease in cash flow reflects the extent of the
unrealized income from non-income producing properties.
    In the upcoming months, the operating income and cash flows of LREIT are
expected to be impacted to a much greater degree as additional properties move
to the "income-producing" stage. Effective July 1, 2007, LREIT completed the
acquisition of Lakewood Manor, a 175-unit apartment complex in Fort McMurray,
Alberta at a purchase price of $59.9 Million. All of the units at the property
are leased and occupied under a three-year lease agreement which will generate
net operating income in excess of $4.7 Million per annum. After providing for
debt service costs, the property is expected to result in an increase in cash
flow of $366,000 per quarter. Other properties which are in various stages of
development include the Clarington Seniors Residence, Millennium Village, Park
View Apartments and the 59-suite expansion of Elgin Lodge.
    In terms of bottom-line results, LREIT realized net income of $688,355
during the second quarter of 2007, compared to a net loss of $773,043 during
the second quarter of 2006. The $688,355 of net income realized during the
second quarter of 2007 was also a significant improvement compared to the net
loss of $1,706,093 during the first quarter of 2007. The improvement was
largely due to a future income tax recovery recognized in the second quarter
of 2006 and to the inclusion of Woodland Park as an income-producing property,
effective April 1, 2007. A change in income tax legislation, which was enacted
in June 2007 resulted in a significant change in the estimates used in the
calculation of future tax assets and liabilities. As a result of the change, a
future income tax asset of $1,871,579 has been recognized with a corresponding
credit to income tax recovery.
    As a result of the acquisition of very large and profitable
income-producing properties, such as Woodland Park and Lakewood Manor, the
outlook for the third quarter of 2007 is positive in terms of the anticipated
growth in operating income and cash flows.



    
    RESULTS OF OPERATIONS

    Financial and Operating Summary

                      Three Months Ended June 30    Six Months Ended June 30
                      -------------------------------------------------------
                           2007          2006          2007          2006
                      ------------- ------------- ------------- -------------
                                      (restated)                  (restated)

    DISTRIBUTIONS
      Total           $  2,439,035  $  2,404,110  $  4,865,858  $  4,768,910
      Per unit        $       0.14  $       0.14  $       0.28  $       0.28

    KEY PERFORMANCE
     INDICATORS
    Operations
      Average residential
       occupancy rate         94.3%         91.7%         93.7%         90.9%
      Operating residential
       cost ratio             43.0%         45.0%         45.0%         49.0%

    Operating Results
      Total revenue   $ 11,127,584  $  6,891,004  $ 20,179,348  $ 13,333,039
      Operating
       income         $  6,519,763  $  4,025,854  $ 11,404,540  $  7,388,241
      Income (loss)
       for the period $    688,355  $   (773,043) $ (1,017,738) $ (1,745,029)

    Cash Flows
      Cash flow from
       operating
       activities     $  1,044,668  $  1,993,186  $  2,181,114  $  2,524,324
      Funds from
       Operations
       (FFO)          $    504,160  $    944,357  $    409,396  $  1,497,167
      Adjusted Funds
       from Operations
       (AFFO)         $    814,043  $    998,840  $  1,162,068  $  1,587,433
      Distributable
       income         $  1,553,966  $  1,389,807  $  2,436,579  $  2,239,981

    Financing
      Mortgage loans
       to current
       value ratio                                        56.7%         63.2%
      Weighted average
       interest rate of
       mortgage loans                                      6.2%          5.6%
    Per Unit Amounts
      Operating income
      - basic         $      0.374  $      0.235  $      0.654  $      0.434
      - diluted       $      0.295  $      0.222  $      0.516  $      0.410
      Income (loss)
       for the period
      - basic         $      0.039  $     (0.045) $     (0.058) $     (0.103)
      - diluted       $      0.039  $     (0.045) $     (0.058) $     (0.103)
      Distributable
       income
      - basic         $      0.089  $      0.081  $      0.140  $      0.132
      - diluted       $      0.087  $      0.080  $      0.137  $      0.131
      Funds from
       Operations
       (FFO)
      - basic         $      0.029  $      0.055  $      0.023  $      0.088
      - diluted       $      0.028  $      0.055  $      0.023  $      0.088
      Adjusted Funds
       from Operations
       (AFFO)
      - basic         $      0.047  $      0.058  $      0.067  $      0.093
      - diluted       $      0.046  $      0.058  $      0.065  $      0.093



    Comparison to Preceding Quarter

    Comparison to 2007 First Quarter
    -------------------------------------------------------------------------
                                        Three Months Ended
                                    ---------------------------
                                       June 30,     March 31,      Increase
                                         2007          2007       (Decrease)
                                    ------------- ------------- -------------
                                                    (restated)

    Operating income - rental
     properties                     $  6,230,562  $  4,570,037  $  1,660,525
    Interest income - Trust              289,201       314,693       (25,492)
                                    ------------- ------------- -------------
    Operating income                   6,519,763     4,884,730     1,635,033
                                    ------------- ------------- -------------
    Financing expense
      Mortgage loans                   3,496,451     2,551,404       945,047
      Debentures                       1,610,378     1,592,003        18,375
      Transaction costs                  375,038       377,727        (2,689)
                                    ------------- ------------- -------------
                                       5,481,867     4,521,134       960,733
                                    ------------- ------------- -------------
    Operating income, net of
     financing expense                 1,037,896       363,596       674,300
    Trust expense                        533,736       458,323        75,413
                                    ------------- ------------- -------------
    Income (loss), before
     amortization, future income
     tax recovery and non-controlling
     interest                            504,160       (94,727)      598,887
    Amortization                       1,936,304     1,715,167       221,137
    Future income tax recovery        (2,105,478)      (79,874)   (2,025,604)
    Non-controlling interest              15,021        23,927        (8,906)
                                    ------------- ------------- -------------
    Income (loss) for the period    $    688,355  $ (1,706,093) $  2,394,448
                                    ------------- ------------- -------------
                                    ------------- ------------- -------------


    During the second quarter of 2007, LREIT realized an income of $688,355,
compared to a loss of $1,706,093 during the first quarter of 2007. The
improvement mainly reflects the following factors:

    -   an increase in operating income of $1,635,033, mainly reflecting the
        inclusion of Woodland Park as an income-producing property, effective
        April 1, 2007, as well as the contribution of a full quarter of
        operating income for first quarter acquisitions, along with the
        contribution of two additional properties acquired in May 2007.

    -   an increase in mortgage loan financing expense of $945,047 or 37%.
        The increase reflects the additional mortgage financing which was
        obtained for the four properties which were added to the portfolio of
        income-producing during the second quarter of 2007, as well the
        incremental interest on the interim mortgage loan financing and
        upward refinanced loans that were arranged during the second quarter
        of 2007.

    -   a increase in trust expense of $75,413.

    -   an increase in amortization expense of $221,137 due to the increase
        in the portfolio of income-producing properties in the second quarter
        of 2007.

    -   a increase in income tax recovery of $2,025,604 as a result of new
        legislation relating to the taxation of publicly traded income
        trusts.
    

    LREIT is a real estate investment trust, which is listed on the Toronto
Stock Exchange under the symbol "LRT.UN". The objective of LREIT is to provide
Unitholders with stable cash distributions from investment in a geographically
diversified Canadian portfolio of quality real estate properties. There are
currently 17,470,947 trust units outstanding. For further information on
LREIT, please visit our website at www.lreit.com.

    This press release contains certain statements that could be considered
as forward-looking information. The forward-looking information is subject to
certain risks and uncertainties, which could result in actual results
differing materially from the forward-looking statements.

    The Toronto Stock Exchange has not reviewed or approved the contents of
    this press release and does not accept responsibility for the adequacy or
    accuracy of this press release.





For further information:

For further information: Arni Thorsteinson, Chief Executive Officer, or
Gino Romagnoli, Investor Relations, Tel: (204) 475-9090, Fax: (204) 452-5505,
Email: info@lreit.com

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Lanesborough Real Estate Investment Trust

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