Realex Properties Corp. - Results for the three and nine months ended June 30, 2008 and declaration of dividend


    CALGARY, Aug. 14 /CNW/ - Realex Properties Corp. ("Realex" or
"Corporation") today announced its third quarter results from operations.
    Financial highlights for the three and nine months ended June 30, 2008
are as follows:

    Financial Highlights

    Income Statement Summary Data

                              Three Months Ended        Nine Months Ended
                                   June 30,                  June 30,
                          ------------------------- -------------------------
    ($000's except per                         %                         %
     share amounts)          2008     2007  change     2008     2007  change
                          -------- -------- ------- -------- -------- -------
    Revenues                8,831    6,925     28%   25,568   19,718     30%

    NOI(1)                  5,004    4,002     25%   14,514   11,131     30%

    Net Income (loss)         511       47    987%   (1,882)     651  (389)%
    Net income (loss)
     per share -
     basic/diluted          0.004    0.001    300%   (0.017)   0.006  (383)%

    FFO(2)                  2,897    1,981     46%    8,310    6,443     29%
    FFO per share -
     basic/diluted          0.025    0.017     47%    0.073    0.057     28%

    Dividends on common
     and non-voting shares    856      850            2,562    1,700

    Weighted average
     shares outstanding
     (000's) - diluted    114,093  113,302          113,764  112,729

    Balance Sheet Summary Data

                                                      June 30,  September 30,
    ($000's)                                             2008           2007
                                                 -------------  -------------
    Assets                                            276,448        250,359
    Debt                                              144,864        118,064
    Shares outstanding (000's)                        114,093        113,302

    (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
        producing 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 ability to generate cash, evaluate its
        return on projects and evaluate the performance of the enterprise as
        a whole. 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), amortization of below-market
        leases, straight-lining of rents, amortization of fair value
        mortgages payable adjustment and deferred financing costs,
        stock-based compensation expense, future income tax expense and
        Internalization costs.

        NOI and FFO 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.

    Review of Q3 Operations

    The Corporation reported its results for the third quarter of its 2008
fiscal year, ending June 30, 2008 which reflected the continuation of strong
growth in revenues, net operating income ("NOI") and funds from operations
("FFO"). FFO per share for the three months ended June 30th, 2008 increased by
47% over the same period last year.
    The results for third quarter of the Corporation's 2008 fiscal year saw
continued improvement over the previous quarter, generated in part through
leasing and releasing activities. When compared to the same period last year,
the rate of growth also reflects the strong contributions of recently acquired
properties. Revenues for the third quarter increased to $8.8 million or by
4.2% over the previous quarter ended March 31, 2008 and by 27.5% over the same
quarter last year, ended June 30, 2007. Similarly, third quarter Net Operating
Income rose to $5.0 million, an increase of 4.0% and 25.0% over the previous
quarter and the third quarter of last year, respectively. Funds From
Operations for the third quarter ended June 30, 2008, increased to
$2.9 million or by 10.8% over the second quarter of 2008, ended March 31,
2008, and by 46.2% over the same quarter last year, ended June 30, 2007.
    Revenues for the first nine months ended June 30, 2008, rose by 29.7%
over the nine months ending June 30, 2007, with Net Operating Income and Funds
From Operations increasing by 30.4% and 29.0% respectively for these same

    Southwestern Ontario Region - Pending Cora Acquisition

    During the quarter, the corporation firmed up the Cora acquisition, which
was announced in an earlier news release and is expected to be completed by
September 30, 2008. The acquisition will be transformational for Realex in
several significant ways: firstly, it doubles the net rentable area owned by
Realex to approximately 2 million square feet (3 million square feet owned and
managed); secondly, it significantly advances Realex's objective of
establishing a national platform and profile built on quality assets in high
growth geographic areas; and thirdly, the acquisition helps build scale and,
ultimately, improved liquidity for Realex's shareholders.
    The $141.8 million purchase price of the Cora office portfolio and
property manager is to be satisfied with cash consideration of approximately
$45.0 million, a vendor take-back note of $4.5 million, the assumption of
existing property level debt totaling approximately $71.7 million and the
issuance of 15.5 million common and non-voting shares of Realex to the vendor
at a price of $1.33 per share.
    Coupled with the announced acquisition was the completion of a
$27.4 million private placement equity financing by way of a subscription
receipts issue priced at $2.30 per receipt or $1.15 per share. Each
subscription receipt is exchangeable on closing of the Cora acquisition for
one common and one non-voting share of Realex. Management considers this
equity financing to be a significant accomplishment for Realex, in light of
the current capital environment.
    The acquisition includes a portfolio of six office buildings, comprised
of approximately 933,000 sq. ft. of rentable area, approximately 2,000 parking
stalls, 470,000 sq. ft. of development entitlements and also a property
management company, which manages the properties acquired and has third party
management contracts in respect of approximately 100,000 sq. ft. of rentable
    This pending transaction also includes; the engagement of Adrian Conrad
as Realex's Vice President, Southwestern Ontario Region; and the employment of
the property manager's full complement of 25 seasoned property management and
operations personnel. Manfred Conrad, the President of Cora Group Inc., will
be joining the Realex Board of Directors, subject to regulatory approval, and
brings many years of experience and insight with respect to the Southwestern
Ontario real estate market. Realex looks forward to both Manfred and Adrian
Conrad's ongoing contributions as the Corporation explores future
opportunities in the southwestern Ontario region.
    In summation, management views the Cora Acquisition and the equity
placements as pivotal achievements for Realex and looks forward to the
completion of these transactions that are expected to close not later than
September 30, 2008. The closing is subject to the consent of certain lenders
and regulatory approvals. Management is confident that the critical mass
afforded to Realex through this acquisition will set the stage for
significant, additional opportunities in the future.

    Western Region - Office/Industrial Portfolio

    Realex's western Canadian office/industrial portfolio has performed very
well, in line with management expectations, and continued to realize the
portfolio's embedded growth potential by bringing historical rental rates
under existing leases (which on average are below current market rental rates)
to market rates upon lease renewal. Currently, the western portfolio has only
0.74% vacancy (6,500 sq. ft. of Realex's owned rentable area) and, therefore,
Realex's primary leasing efforts remain focused on renewals of existing
tenancies and replacement of vacating tenants. Of the 175,000 sq. ft. (19% of
Realex's owned rentable area) available for renewal or releasing in fiscal
2008, 166,600 sq. ft. have been renewed or have had tenants exercise their
rights of renewal. In addition, of the 143,000 sq. ft. (16% of Realex's owned
rentable area) available for renewal or releasing in fiscal 2009,
66,000 sq. ft. have been renewed or have had tenants exercise their rights of
    During the first nine months of Realex's 2008 fiscal year, the weighted
average net rental rate of the expired leases subject to renewal was $14.40
per sq. ft. compared to the weighted average net rental rate of new and
renewal tenancies of $20.60 per sq. ft., an increase of 43%. Excluding the
100,500 sq. ft. National Energy Board lease renewal(1) from this analysis, the
weighted average net rental rate increase over the remaining new and renewed
tenancies was 91%. Going forward, Realex is engaged in active discussions with
the bulk of the remaining tenants having lease expiries in 2008 and 2009 in an
effort to bring these negotiations to a successful conclusion in advance of
the expiry dates. Realex is proactive in this endeavour in order to reduce
near term uncertainty for tenant and landlord alike.
    Realex currently manages approximately 1.7 million sq. ft. of
office/industrial, rentable area in western Canada of which Realex owns
approximately 900,000 sq. ft. During the first nine months of fiscal 2008,
each of the Corporation's managed and owned rentable areas grew by
approximately 17% through acquisitions in Edmonton, Alberta.

    (1) The National Energy Board original contracted renewal rate was set
        equal to its expiry rate.

    Self Storage

    Subsequent to the end of third quarter, in July, 2008, Realex completed
the acquisition of its fourth property since the formation of the Real Storage
Limited Partnership ("Real Storage") in January 2008. The acquisition of a
65,000 sq. ft., newly developed facility in Black Diamond, Alberta, brings the
partnership's total rentable area to 255,000 sq. ft. with 127,000 sq. ft. in
operation and 128,000 sq. ft. slated for completion in the fall of 2008.
Realex holds an initial 88% beneficial variable ownership interest
(224,000 sq. ft.) in the Real Storage partnership.
    Currently, Real Storage, under the guidance of its highly qualified and
experienced management team, is pursuing a number of acquisition opportunities
which include both operating properties and self storage development sites. As
management advances its acquisition and development growth strategy, Realex is
confident that it will realize the potential of becoming one of Canada's
industry leaders in the self storage business.

    Mezzanine Loan Portfolio

    Realex's mezzanine loan portfolio, included in mortgages and notes
receivable, was $6.3 million as of June 30, 2008 and is yielding an average
annual return of more than 16%. Management plans to expand this program, as
appropriate opportunities are identified and capital becomes more readily
available for this initiative.


    The Board of Directors has authorized the payment of a dividend for the
quarter ended June 30, 2008 to common and non voting shareholders at the rate
of $0.0075 per share. The dividend will be paid September 12, 2008 to
shareholders of record on August 29, 2008 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.

    Business Environment and Outlook

    "Realex is fortunate to have built a strong foundation centered on a
portfolio of high quality assets, a strong balance sheet and excellent
management. As Realex focuses its attention on bringing the Cora acquisition
to successful completion and adds this operating platform to its western
Canadian and self storage business units, we are confident that the synergies
and critical mass derived from this combination will set the stage for strong
growth in the future," stated Marc Sardachuk, Realex's president and CEO.

    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

    The TSX Venture Exchange has neither approved nor disapproved the
    contents of this news release. The TSX Venture Exchange does not accept
    responsibility for the adequacy or accuracy of this news 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: Marc Sardachuk, 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

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