Whiterock REIT Announces Strong Second Quarter 2011 Results; AFFO Per Unit Increases 25% over Q2 2010

TORONTO, Aug. 9, 2011 /CNW/ - Whiterock Real Estate Investment Trust ("Whiterock") (TSX: WRK.UN) today announced strong financial results for the quarter ended June 30, 2011.

Whiterock's annualized FFO per unit and AFFO per unit increased to $0.33 and $0.30, respectively, representing an FFO payout ratio of 85.6% and an AFFO payout ratio of 93.9%. Whiterock also achieved same-property NOI growth of 2.7% (4.0% on a cash basis), along with an overall occupancy rate that increased to 97.3%.

"We are very pleased with our results in the second quarter," said Jason Underwood, CEO of Whiterock. "Our accretive acquisition program and internal growth continues to drive increasing FFO and AFFO per unit, exceeding our distributions to unitholders and further improving our payout ratios. We look forward to reporting further progress throughout 2011, as we continue to execute on our disciplined and strategic growth plan."

The following highlights should be read in conjunction with the consolidated financial statements and management's discussion and analysis for the quarter ended June 30, 2011. These will be available on Whiterock's website at [ http://www.whiterockreit.ca/financial-reports.php ].

HIGHLIGHTS - June 30, 2011

Increasing FFO - FFO per unit was $0.33 for the second quarter of 2011, up 18% year-over-year, representing an FFO payout ratio of 85.6%.
Increasing AFFO - AFFO per unit was $0.30 for the second quarter of 2011, up 25% year-over-year, representing an AFFO payout ratio of 93.9%.
Strong Same-Property NOI Growth - Same-property NOI growth of 2.7% (4.0% on a cash NOI basis) in the second quarter of 2011 as compared to the second quarter of 2010.
Increasing Occupancy - Occupancy rate increased to 97.3% at June 30, 2011, up 60bps from March 31, 2011 and up 140bps year-over-year.
Strong Leasing Performance - Over 62% of the 2011 leasing program has been completed at June 30, 2011, with rental rates increasing by an average of 22% on renewals and re-leases.
Improving Leverage - Debt to gross book value leverage ratio at June 30, 2011 was 54.1%, an improvement of 190bps from the leverage ratio of 56.0% at June 30, 2010.
Improving Interest Coverage - Interest coverage ratio for the second quarter of 2011 improved to 2.5x, a 19% increase over the 2.1x coverage ratio for the second quarter of 2010.
Successful Equity Offering - In the second quarter of 2011, Whiterock launched a $75 million public offering of units, to fund its equity share of identified and accretive property acquisitions amounting to $295 million (before closing costs). The equity offering was completed subsequent to June 30, 2011 and thereafter the underwriters' exercised their over-allotment option for additional proceeds to Whiterock of $10.8 million, bringing the total raised to $85.8 million.
Successful Issue of Unsecured Debentures - In the second quarter of 2011, Whiterock issued its first series of senior unsecured non-convertible debentures for $35 million in principal amount with a 5-year term and a coupon of 5.95%. The use of proceeds was to fund the early repayment of an outstanding series of convertible debentures, to fund identified and accretive property acquisitions, and to pay down acquisition and operating facilities.
Growing Portfolio of Properties - In the second quarter of 2011, Whiterock completed the acquisition of $73 million (before closing costs) of properties in British Columbia, consisting of a Class A office building and a grocery-anchored retail centre. Subsequent to June 30, 2011, Whiterock completed the acquisition of $218 million (before closing costs) of Class A office properties in Ontario and announced the acquisition of $77 million of Class A office and industrial properties in the United States.
New Deferred Compensation Plan - Subsequent to June 30, 2011, the Board of Trustees approved a new deferred compensation plan for the CEO, to promote greater alignment of interests between the CEO and unitholders. The plan will be structured as an equity performance unit plan, whereby 33% of the CEO's bonus compensation will be awarded in the form of equity that will be deferred over 3 years. The value of this deferred equity will be directly based on the unit price and settlement will be in cash. Management anticipates that the plan will be implemented in the third quarter of 2011.

Whiterock enjoyed the same strong pace of acquisitions and growth in the second quarter of 2011 that it experienced in the first quarter of 2011 and throughout 2010. In the second quarter of 2011, and subsequent thereto, we further improved the quality, stability, and diversity of our cash flows through the completed acquisitions of the British Columbia and Ontario properties. We continue to maintain strong occupancies, increase our in-place rents, and position ourselves to take advantage of higher market rents.

OUTLOOK

In the second quarter of 2011, Whiterock increased its annualized AFFO per unit to $1.19 as a result of a full quarter's impact from the office and industrial acquisitions in Toronto and Montreal completed in the first quarter of 2011, the partial impact from the office and retail acquisitions in British Columbia completed in the second quarter of 2011, and increased overall occupancy. The British Columbia assets were purchased in co-ownership with ROI Capital Ltd., with Whiterock providing exclusive property management services. The average capitalization rate on these assets was 7.5% and the average interest rate on the first mortgages was approximately 4.7%.

Subsequent to June 30, 2011, Whiterock completed the purchase of Sussex Centre, a Class A two-tower office complex in Mississauga, Ontario, with 657,503 square feet of rentable area, for approximately $157 million (before closing costs) and London City Centre, a Class A two-tower office complex in London, Ontario, with 539,472 square feet of rentable area, for approximately $61 million (before closing costs). These assets were purchased in co-ownership with ROI Capital Ltd., with Whiterock providing exclusive property management services. The average capitalization rate on these assets was approximately 7.6% and the average interest rate on the first mortgages was approximately 4.6%.

In addition, subsequent to June 30, 2011, Whiterock announced that it entered into binding agreements to purchase a Class A newly built, long-term leased, single-tenant office building in the greater Kansas City area for approximately US$38 million (before closing costs) and a Class A newly built, long-term leased, single-tenant industrial building in the greater Nashville area for approximately US$39 million (before closing costs). These properties are 100% leased to investment grade tenants, with a total rentable area of approximately 902,000 square feet and a weighted average remaining lease term of approximately 15 years. The assets will be purchased by Whiterock on a wholly-owned basis, with Whiterock assuming property management services. The average capitalization rate on the assets is approximately 7.5% and the average interest rate on the long-term fixed rate first mortgages is approximately 5.5%. Management anticipates that the acquisitions will close in the third quarter of 2011, subject to standard closing conditions.

Subsequent to the completion of the new U.S. acquisitions, and along with the recently completed acquisitions of Sussex Centre and London City Centre, Whiterock's wholly-owned, co-owned, and long-term leased aggregate real estate portfolio will total approximately 10 million square feet across 77 properties, geographically diversified across 8 Canadian provinces and 2 U.S. states.

FINANCIAL HIGHLIGHTS

KEY PERFORMANCE MEASURES
(For the three months ended)	June 30, 2011		June 30, 2010 ⁽¹⁾
FFO per unit (basic) ⁽²⁾	$	0.33	$	0.28
AFFO per unit (basic) ⁽³⁾	$	0.30	$	0.24
NOI	$	11,367,133	$	9,187,133
NOI - same property (cash basis) ⁽⁴⁾	$	8,961,435	$	8,616,549
FFO payout ratio ⁽⁵⁾		85.6%		104.5%
AFFO payout ratio ⁽⁶⁾		93.9%		120.3%
Interest coverage ratio ⁽⁷⁾		2.5x		2.1x
Interest coverage ratio (proportionate consolidation) ⁽⁸⁾		2.1x		1.8x

As at	June 30, 2011		December 31, 2010 ⁽¹⁾
Investment in real estate assets - wholly owned ⁽⁹⁾	$	582,380,000	$	557,680,000
Investment in real estate assets - equity accounted ⁽¹⁰⁾	$	126,626,081	$	96,665,488
Investment in real estate assets - long-term leased ⁽¹¹⁾	$	17,783,333	$	20,783,333
Weighted average mortgage rate		5.4%		5.5%
Weighted average convertible debenture rate		6.3%		6.6%
Debt to gross book value ratio ⁽¹²⁾		54.1%		53.2%
Debt to gross book value ratio (proportionate consolidation) ⁽¹²⁾		62.1%		59.4%
Equity market capitalization (basic) ⁽¹³⁾	$	358,799,578	$	352,624,971
Average lease term (in years)		6.2		6.2
Occupancy level		97.3%		96.5%


(1)	2010 restated in accordance with IFRS.
(2)	Based on FFO of $8,896,173 and $5,897,908 in the three months ended June 30, 2011 and June 30, 2010.
(3)	Based on AFFO of $8,108,638 and $5,122,212 in the three months ended June 30, 2011 and June 30, 2010.
(4)	See "NOI - three months" for the calculation of NOI - same property (cash basis) in the MD&A.
(5)	FFO payout ratio is calculated as distributions declared divided by FFO for the three months ended June 30, 2011 and 2010. FFO cash payout ratio, calculated as net cash distributions paid (net of the reinvestment of distributions in new units issued under Whiterock's Distribution Reinvestment Plan) divided by FFO per unit for the three months ended June 30, 2011 and 2010 is 77.6% and 93.0% respectively.
(6)	AFFO payout ratio is calculated as distributions declared divided by AFFO for the three months ended June 30, 2011 and 2010. AFFO cash payout ratio, calculated as net cash distributions paid (net of the reinvestment of distributions in new units issued under Whiterock's Distribution Reinvestment Plan) divided by AFFO per unit for the three months ended June 30, 2011 and 2010 is 85.2% and 112.5% respectively.
(7)	Interest coverage is calculated based on net operating income plus income from equity accounted investments plus fee income, less G&A, divided by interest expense (including debentures and financing fee amortization), net of interest and other income.
(8)	Interest coverage (proportionate consolidation) is calculated based on net operating income plus fee income, less G&A, divided by interest expense (including debentures and financing fee amortization), net of interest and other income, calculated on the basis that equity accounted investments are proportionately consolidated.
(9)	The fair values of investment properties do not include Airway Centre 2-4 under a 30-year ground lease, which has a fair value of $131 million as at June 30, 2011 (December 31, 2010 - $131 million), for which the purchase price would be $118.3 million if the put option were to be exercised.
(10)	June 30, 2011 includes Whiterock's co-ownership share of $713 million of real estate assets accounted for using the equity method (Dec 31, 2010 - $516 million).
(11)	June 30, 2011 includes prepaid rent related to Airway Centre 2-4 under a 30-year ground lease (excludes security deposits).
(12)	See "Total Indebtedness and Gross Book Value" for the calculation in the MD&A.
(13)	Equity market capitalization is calculated as period end Units outstanding times the period end Unit closing price.

FFO and AFFO are supplemental non-IFRS financial measures used by the real estate industry to measure and compare the operating performance of real estate organizations. Whiterock's method of calculating FFO and AFFO may be different from methods used by other REITs or corporations. A description of Whiterock's calculation of FFO and AFFO is included in Whiterock's Management's Discussion and Analysis ("MD&A") for the quarter ended June 30, 2011.

Whiterock's Consolidated Financial Statements and MD&A for the quarter ended June 30, 2011 are posted on Whiterock's website. Readers are directed to these documents for a more detailed discussion of Whiterock's results.

CONFERENCE CALL

Whiterock invites you to participate in its conference call with senior management on Wednesday, August 9, 2011 at 1:00 p.m. E.D.T., to discuss the REIT's second quarter 2011 results and achievements. Investors can click on the link [ http://www.whiterockreit.ca/financial-reports.php ] to access the first quarter financial statements and MD&A. A presentation to accompany management's comments during the call will be available on Whiterock's website. To view it, please go to [ http://www.whiterockreit.ca/presentations.php ].

To participate in the live conference call, please dial 1-866-212-4491. To ensure your participation, please call five minutes prior to the scheduled start of the call. The call will be recorded and archived on Whiterock's website.

Whiterock's conference call will also be broadcast through a live, listen-only audio webcast, which can be accessed by clicking on the following link: [ http://www.meetview.com/whiterock20110809/ ]. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 90 days. Listeners who wish to participate in the Q&A session will not be able to do so through the webcast and must join the live conference call.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect" "estimate", "anticipate", "intend", "believe" or "continue", the negative forms thereof and similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future events or performance and, by their nature, are based on Whiterock's estimates and assumptions, which are subject to known and unknown risks, uncertainties and other factors that may cause the actual events, results or prospects to be materially different from those expressed or implied herein. Readers are cautioned that a number of factors, including those discussed in the section entitled "Risk Factors" in Whiterock's Annual Information Form which can be obtained at [ www.sedar.com ], could cause actual events, results or prospects to differ materially from those stated or implied. These factors should be considered carefully, and a reader should not place undue reliance on forward-looking statements, as there can be no assurance that actual events, results or prospects will be consistent with such statements. In particular, but without limitation, there can be no assurance that Whiterock will be to able to increase its FFO or AFFO. Except as required by law, Whiterock does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

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

Contributing Sources

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Whiterock REIT Announces Strong Second Quarter 2011 Results; AFFO Per Unit Increases 25% over Q2 2010