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HUNTINGDON REIT ANNOUNCES Q3 2010 RESULTS AND SPECIAL DISTRIBUTION TO UNITHOLDERS

^{Published on 2010-11-15 17:40:23 - Market Wire}
 

RICHMOND, BC, Nov. 15 /CNW/ - Huntingdon Real Estate Investment Trust (the "Trust" or "HREIT") (TSX: HNT.UN) today announced third quarter 2010 results. In addition, HREIT declared a special distribution of $0.12 per unit.

HIGHLIGHTS:

Strong operations:

• Sequential quarterly improvement in occupancy to 84.6% from 83.4%
• 23.1% growth in net operating income ("NOI") over the same period in 2009
• Trust expenses reduced by 67.4% compared to Q3 2009, reflecting the internalization of management

Improved financial position:

• Interest coverage improves to 1.7x compared to 1.4x over the same period in 2009
• Debt as a percentage of gross book value declines to 57.9% compared to 69.5% in Q3 2009
• Cash balances at Q3 2010 of $16.4 million
• Normal course issuer bid ("NCIB") reaches approximately $4.3 million in purchases of units and debentures to date. To date, 682,050 units have been repurchased at an average cost of $5.87.

The decrease in FFO and AFFO is the result of an current income tax charge relating to taxable income within in the Trust.  This taxable income has created a tax liability within one of the entities within HREIT. Management is working with its tax advisors to implement a tax structuring solution that would mitigate this liability in its entirety.  Management has accounted for the current tax exposure consistent with the accounting guidelines.  As management implements the structuring changes, management fully anticipates the income tax charge will be reversed in full in December 2010. The pro forma FFO and AFFO that excludes the current income tax provision for the three and nine-months ended is $3.2 million and $3.0 million, respectively or $0.20 And $0.18 per unit.

The merger with IAT Air Cargo Facilities Income Fund ("IAT") at the beginning of 2010 resulted in HREIT acquiring IAT's 18 property portfolio as well as moving to an internalized management team. With the integration of the two companies completed in the third quarter, the full savings from a merged entity with an internalized management team were demonstrated.

"We have continued to reduce risk and reposition the portfolio through the de-leveraging of the balance sheet and the disposition of non-core properties.  We have now reached an inflection point in the HREIT turnaround. In addition to increasing our occupancy rates, we are focused on accretive growth opportunities," said Zachary George, Chief Executive Officer.

Operating Highlights

Portfolio occupancy improving

The overall occupancy at September 30, 2010 improved to 84.6% since the previous quarter, reflecting the positive contribution from HREIT's leasing strategies. However, occupancy is still down from the same period in 2009, when it was 89%. An isolated vacancy in the Ontario industrial segment in the fourth quarter of 2009 contributed to this decline and management has since been working aggressively to lease on leasing up this space through brokers and direct marketing. 

NOI growth

Net operating income has increased by 10.1% for the quarter ended September 30, 2010 compared to the same period in the prior year.  The driver for this growth is the merger with IAT and the acquisition of its 18 property portfolio. Net operating income decreased by 21.5% for the quarter ended September 30, 2010 compared to the previous quarter as a result of adjustments that were made to operating cost recoveries.  The decline is related to the timing of certain recoverable operating costs, lower than expected expenses and corrections to accruals made in prior quarters.

Benefits of management internalization

Following the integration of IAT and HREIT and the transition to an internalized management team, trust expense has normalized, reflecting a decrease of 67% for the quarter ended September 30, 2010 compared to the same quarter in the prior year. Trust expense reflects the quarterly operating costs of the Trust which include professional advisory fees, general and administrative expenses and senior management costs.

Financial Resources Highlights

Ongoing normal course issuer bid

In May 2010, management initiated a NCIB to purchase the Trust's outstanding units and debentures reflecting management's belief that HREIT was undervalued. To date, the Trust has purchased approximately $4.0 million of units and $0.3 million of debentures.  The average cost of the purchases of units and debentures since May is $5.87 per unit and 98.10 per debenture, respectively.  Management continues to believe that HREIT units are undervalued and continues with the NCIB.

Improving capital structure

HREIT's overall weighted average interest rate fell to 5.54% from 5.78% and its interest coverage ratio increased to 1.7 times from 1.4 times in the third quarter of 2010 compared to the same period in 2009.  Further, the Trust reduced its level of debt-to-gross book value to 57.9% from 69.5% during the same period.  Together, these ratios reflect the improving quality of the balance sheet and credit quality of HREIT.

Disposition of non-core properties

Management continues to dispose of non-core properties so that HREIT is focussed in its areas of strength. During the third quarter of 2010, the Trust sold its sole retail property in British Columbia for $4.6 million, reflecting a capitalization rate of 8.5%, and received net proceeds of $1.8 million after expenses, closing adjustments and the repayment of mortgage debt. Year to date, the sale of non-core properties has generated proceeds of $15.3 million net of costs and debt repayment.

Special distribution

The trustees of HREIT has approved a special cash distribution of $0.12 per unit payable on December 15, 2010 to Unitholders of record on November 24, 2010. The distribution is the result of taxable capital gains earned from the disposal of properties during 2010.

Information appearing in this press release is a select summary of results.  The financial statements and management's discussion and analysis for HREIT are available at [ www.hreit.ca ] and on [ www.sedar.com ]

Footnotes

1. NOI is defined as rental property revenues less operating expenses, excluding discontinued operations.
   
   
2. FFO is defined as net income, adjusted for future income tax, amortization, gain on sale and other amortization from continuing and discontinued operations.
   
   
3. AFFO is defined as funds from operations adjusted for non-cash revenue, capital expenditures, leasing expenditures and other non-cash operating expenses.
   
   
4. Debt to GBV ratio is defined as mortgage debt from continuing operations and convertible debentures divided by total assets.

NOI, FFO, AFFO and Debt to GBV ratio are not recognized as appropriate earning measures under Canadian generally accepted accounting principles ("GAAP"), and are not construed as an alternative to earnings determined in accordance with GAAP, but are considered a useful supplemental indicator of HREIT's performance. Detailed definition of NOI and FFO and explanations as to why management believes they are useful performance measures are provided in the annual and interim financial statements and management's discussion and analysis of financial position and results of operations filed by the HREIT on SEDAR at [ www.sedar.com ].

HREIT is a real estate investment trust which is listed on the Toronto Stock Exchange under the symbols HNT.UN (Trust Units) and HNT.DB.C (Series C Convertible Debentures).  HREIT owns, directly or indirectly, 75 income producing office, industrial, retail and standalone parking lot properties, including the aviation-related facilities at five of Canada's leading international airports that have a total gross leasable area of 5.5 million square feet; and two land parcels held for development, with other development and expansion opportunities within the portfolio.

Forward-Looking Information:

Certain statements contained in this press release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These risks and uncertainties include , but are not limited to, general and local economic and business conditions; the financial condition of our tenants; our ability to refinance maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and rate fluctuations. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. The forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results or events to differ materially from current expectations including, but not limited to, the risks detailed from time to time in HREIT's filings with Canadian provincial securities regulators, including its most recent annual information form and management's discussion and analysis. HREIT cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and HREIT does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change, except as required by applicable law.

The Toronto Stock Exchange has not reviewed nor approved the contents of this press release and does not accept responsibility for the adequacy or accuracy of this press release.