Realex Properties Corp. - Results for the three and nine months ended June 30, 2009, declaration of dividend and suspension of DRIP


    CALGARY, Aug. 13 /CNW/ - Realex Properties Corp. ("Realex" or
"Corporation") today announced its fiscal 2009 third quarter results from
    Financial highlights for the three and nine months ended June 30, 2009
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)          2009     2008  change     2009     2008  change
                          -------- -------- ------- -------- -------- -------
    Revenues               14,327    8,831     62%   44,135   25,568     73%
    NOI(1)                  7,729    5,004     54%   22,778   14,516     57%
    Net Income (loss)         115      511   (77)%      447   (1,882)   (*)%
    Net income (loss) per
     share -
     basic/diluted          0.001    0.004   (75)%    0.003   (0.017)   (*)%
    FFO(2)                  4,810    3,974     21%   13,918   10,287     35%
    FFO per share -
     basic/diluted          0.031    0.035   (11)%    0.090    0.090      -%
    AFFO(3)                 3,524    2,890     22%   11,246    8,275     36%
    AFFO per share -
     basic/diluted          0.022    0.025   (12)%    0.073    0.073      -%
    Dividends on common
     and non-voting
     shares                 1,172      856     37%    3,473    2,562     36%
    Weighted average
     shares outstanding
     (000's)              156,694  114,093          154,485  113,764

    Balance Sheet Summary Data

                                                    June 30,    September 30,
    ($000's)                                           2009             2008
                                              --------------   --------------
    Income Properties                               366,423          374,632
    Assets                                          434,714          435,770
    Debt                                            251,844          252,562
    Shares outstanding (000's)                      158,951          153,364
    (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 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 operating performance. As FFO excludes,
    among other items, depreciation, leasing cost amortization, future income
    tax and gains and losses from certain property dispositions, it provides
    an operating performance measure that, when compared period over period,
    reflects the impact on operations of trends in occupancy levels, rentals
    rates, operating costs and realty taxes, acquisition activities and
    interest costs and provides a perspective of the financial performance
    that is not immediately apparent from net income determined in accordance
    with GAAP. 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), future income tax expense and extraordinary
    items. The method of calculation of FFO has been changed commencing
    October 1, 2008 so as to provide additional comparability to other real
    estate issuers, and to correspond with the definition provided by the
    Real Property Association of Canada ("REALpac").

    (3) Adjusted Funds From Operations (AFFO) - 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. AFFO as presented should not be viewed as an
    alternative to cash from operations, net income, or other measures
    calculated in accordance with GAAP. Users are cautioned that this measure
    may not be comparable to other issuers calculation of AFFO. Realex
    defines AFFO as being FFO for the period, adjusted for amortization of
    above- and below-market leases, straight-lining of rents, amortization of
    fair value mortgages payable adjustment and deferred financing costs,
    stock based compensation expense, internalization costs, amortization of
    non-recoverable maintenance capital expenditures, amortization of
    deferred leasing costs and impairment losses on mortgages receivable.
    NOI, FFO and AFFO 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.


    The third quarter saw Realex's attention focused toward the execution of
several key initiatives which the Corporation had identified as near term
priorities. These initiatives are designed to address the current environment
and to reposition the Corporation as a focused, growth vehicle, poised to take
advantage of opportunities expected to evolve over the next several years.
Highlights of these initiatives and Realex's progress to date are summarized
as follows:

    -   Leased and renewed over 140,000 square feet of office rentable area
        within its owned and managed portfolio
    -   Maintained the property portfolio occupancy rate at 95%;
    -   Renewed the Corporation's operating line of credit ($19.8 million
        available at June 30, 2009, of which $8.0 million was drawn at
        July 31, 2009);
    -   Renegotiated the $25 million Acquisition Loan, paid down $6.8 million
        in principal $18.2 million and extended the term to March 29, 2011.
        The interest rate on the loan currently in effect is approximately
    -   Completed the sale of a non-core property for $1.83 million in
        July, 2009, which resulted in a profit of $620,000;
    -   Made significant progress in advancing measures to monetize our
        mezzanine loan portfolio in spite of liquidity challenges in the
    -   Advanced the strategic planning process for Real Storage which is
        expected to be finalized next quarter;
    -   Reached substantial agreement on the terms of internalizing property
        management contracts which will result in all Realex owned assets
        (both wholly owned as well as those held in joint ventures) being
        managed and leased by Realex Properties Corp.

    Realex is pleased with the significant progress it has made on all fronts
with respect to these initiatives.

    Review of Q3 Operations

    The results for the three and nine months ended June 30, 2009 reflect the
added operations of the Kitchener/Waterloo portfolio acquired at the end of Q4
2008 and the revenue gains from Realex's portfolio in Western Canada. When
comparing the financial results for the nine months ended June 30, 2009, to
the same nine month period ending June 30, 2008, NOI rose by $8.2 million
(57%), FFO increased by $3.6 million (35%) and AFFO rose by $3.0 million
(36%). FFO per share ($0.09) and AFFO per share ($0.073) remained the same
when comparing the results for the nine months ended June 30, 2009 with the
same period last year. The per share results were impacted by the dilutive
effects of the shares issued pursuant to the Dividend Reinvestment Plan (the
"DRIP") which resulted in the reinvestment of dividends into shares of the
    A discussion of Realex's three most significant business units follows.

    Western Region

    Realex's Western region office/industrial portfolio has continued to
perform well during the third quarter and leasing efforts remain focused on
renewal of existing tenancies and acquiring new tenants as required in order
to maintain the region's strong occupancy levels which, at June 30, 2009,
stood at 98.1%.
    During the three months ended June 30, 2009, the Corporation's St. Albert
Trail building in Edmonton consisting of 96,800 square feet (50% of which is
Realex owned) was leased for a 10 year term commencing July 2009 (rent
payments to commence December 1, 2009, after tenant fit up period). The annual
base rent at $18 per square foot is over 2.5 times higher than the previous
contractual base rent and is a significant achievement for the Corporation in
the current market.
    The Corporation's forward re-leasing exposure in downtown Calgary is
limited, with only 9% (34,500 square feet) of Realex's downtown leased area
currently vacant or expiring before the end of fiscal 2012. Realex has
continued to engage these tenants in early negotiations for renewal ahead of
their scheduled expiry date. These efforts are focused on completing renewals
ahead of the anticipated new buildings coming on stream in 2010 and 2011.
    Although our western portfolio has a low vacancy rate and limited
exposure within the next three years, the significant supply of office space
expected to be completed in the 2010 to 2012 period in Calgary, along with the
continued weaknesses in the oil and gas sector, will foster an increased
likelihood that rates of default and vacancy will rise. It is also anticipated
that lease rates, when compared to those achieved in the past few years, will
be lower.
    Within the Corporation's western portfolio, one tenant occupying 29,000
square feet of rentable office space has undergone a financial and operational
restructuring. Realex has been monitoring this process and has maintained
regular communication with the tenant as well as the previous tenant who
remains obligated under an earlier lease. Up to and including the quarter
ended June 30, 2009, the present tenant has been current with respect to all
aspects of its lease obligations. Subsequent to the end of the third quarter,
the tenant has requested rent relief and discussions are being held with
tenants obligated under the leases for this space.
    Subsequent to June 30, 2009, Realex concluded the sale of its East
Village development property for net proceeds of $1.83 million. The realized
gain from this sale was approximately $620,000 and the $1.83 million was used
to pay down the Corporation's Acquisition Loan, leaving a balance owing of
approximately $18.2 million, down $6.8 million from the balance of $25 million
at the beginning of fiscal 2009.

    Southwestern Ontario Region

    The Southwestern Ontario region faced lease expiries totaling 60,513
square feet in calendar 2009. As of the quarter ended June 30, 2009, 42,524
square feet of these lease expiries have been renewed. During the quarter, the
Southwestern Ontario management team successfully concluded negotiations on
its most significant lease renewal for calendar 2009, a 36,974 square foot
tenancy expiring on October 31, 2009. This lease was renewed for a five year
term and the existing tenancy was expanded by 1,090 square feet. Overall
vacancy in the southwestern Ontario region has decreased from 8.75% at March
31, 2009 to 6.90% at June 30, 2009.

    Self Storage

    During the third quarter, the Real Storage partnership continued its
lease marketing program for its four, newly completed operating properties.
With the recent expansion of one property (noted below) the four operating
properties, now totaling 330,000 square feet of net rentable area, have been
leasing well during the spring and summer high traffic seasons and are in line
with management absorption expectations. The current occupancy of the
portfolio is 35%.
    A 50,000 square foot RV and boat storage expansion area at the
Windermere, BC facility was opened during the third quarter. This expansion
was added at a relatively low cost and is expected to significantly improve
the revenue potential of the Windermere facility. The partnership has two
additional properties in the development planning and approval stage which
will add a further 185,000 square feet of net rentable area to the portfolio
upon completion. The four operating storage facilities are state of the art
and amongst the finest in the province of Alberta and BC. The partnership's
continued focus will be on leasing and cash flow improvement until Realex
completes its strategic review of its investment in Real Storage.

    Mezzanine Loan Portfolio

    As reported previously, the Corporation continues to take steps to secure
repayment of amounts outstanding under its mortgage (mezzanine) loan
portfolio, with particular focus on the $4.7 million of loans which are in
arrears. Throughout this third quarter, measures have been taken to ensure
maximum repayment of all loan amounts outstanding through the exercise of
security rights, including enforcement of assignment of rents, guarantees,
judicial sale and other rights of enforcement. Management recorded an
impairment charge of $980,000 in the Corporation's financial results for the
second quarter ended March 31, 2009, and, after a recent review of the loan
portfolio, sees no reason to adjust this charge at the present time.
Subsequent to the end of the quarter, the manager has realized on one loan
resulting in a repayment amount of $337,000. Further repayments are expected
in calendar 2009. Realex will retain loan repayment proceeds for general
corporate purposes as they are received and has discontinued further
investment in mezzanine lending.


    The Board of Directors has authorized the payment of a dividend for the
quarter ended June 30, 2009 to common and non-voting shareholders at the rate
of $0.0075 per share (the "Dividend"). The Dividend will be paid September 15,
2009 to shareholders of record on August 31, 2009 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
enhanced dividend tax credit. The Board of Directors has also suspended the
Corporation's DRIP in light of recent favourable developments with respect to
the execution of Realex's near term capital plan.


    Realex is pleased with the significant progress made during the quarter
in meeting its leasing objectives, executing its near term capital plan and
advancing key initiatives, including the internalization of all property
management activities.  The Corporation's property portfolio is well tenanted
and debt maturities are well spaced, which, when combined, provide a solid
platform for future growth.
    We strongly believe that numerous investment opportunities will surface
across Canada in latter 2009 and throughout 2010. To this extent, we continue
to position the Corporation to be best able to take advantage of coming
opportunities. We are doing so through a very specific set of initiatives
including but not limited to; clarifying our business focus, reducing
overhead, taking full control of property management and leasing of all
properties we own (both our wholly owned properties and all properties owned
in joint venture), bolstering our leasing, property management and investment
teams and freeing up new capital by selling non-core assets, garnering
principal repayments on our mezzanine loans and refinancing properties where
we have significantly increased cash flow and underlying value. "Through these
initiatives," said Mr. Tom Heslip, Realex's President and CEO, "we will not
only have increased net cash flow and FFO without having to make material
capital investments, but we will also have positioned the Corporation to be
able to explore a variety of options to take advantage of what we believe will
be excellent acquisition opportunities in the not too distant future."
    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

    Neither TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this 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: Tom Heslip, 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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