Huntingdon REIT announces Q2 2010 results

RICHMOND, BC, Aug. 16 /CNW/ - Huntingdon Real Estate Investment Trust (the "Trust" or "HREIT") (TSX: HNT.UN) today announced second quarter 2010 results.

HIGHLIGHTS:

    

    Strong operations:

    -   Occupancy rate remains stable at 83.4%
    -   22.4% growth in net operating income ("NOI")
    -   Benefits of management internalization reducing relative property
        operating costs

    Improved financial position:

    -   Repaid $10.6 million in convertible debentures
    -   $13.3 million cash on hand
    -   1.9x times interest coverage ratio
    -   Reduction of debt-to-gross book value to 60.9%

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    SELECTED FINANCIAL INFORMATION
    (unaudited)                                  For the             For the
    (stated in '000s                  three months ended    six months ended
    except per unit          June 30,   Mar 31,  June 30,  June 30,  June 30,
    amounts)                    2010      2010      2009      2010      2009
    -------------------------------------------------------------------------
    Operations
    Occupancy rate
     (period-end)              83.4%     84.3%       92%     83.4%       92%
    Operating results
    Rental property revenue  $18,963   $18,382   $13,770   $36,951   $27,307
    Net operating income
     ("NOI")(1)               11,752     9,445     9,638    21,740    19,420
    Funds from operations
     ("FFO")(2)                4,323     2,625     1,927     7,211     2,834
    Adjusted funds from
     operations ("AFFO")(3)    3,924     2,597       924     6,639     2,152
    Financing
    Debt (mortgage debt &
     conv. debt)               280.8     286.9     300.7
    Debt to GBV ratio(4)       60.9%     61.7%     70.3%
    Weighted average
     interest rate
     (period-end)              5.58%     5.61%     5.64%
    Interest coverage
     ratio                      1.9x      1.5x      1.3x      1.7x      1.2x
    Per unit amounts
    NOI (basic and diluted) $   0.74   $  0.60   $  1.18   $  1.37  $   2.38
    FFO (basic and diluted) $   0.27   $  0.17   $  0.24   $  0.45  $   0.35

    AFFO (basic and
     diluted)               $   0.25   $  0.16   $  0.06   $  0.42  $   0.14
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        The three months ended June 30, 2010 represented the first quarter in
        HREIT's history that it has operated with an internalized management
        team. 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 obtaining an internalized management team.
    

"We continue to execute on our strategy of de-leveraging the balance sheet and disposing of non-core properties. Looking forward we expect to be in a position to pursue acquisitions that offer superior returns and are accretive to unitholder value. Our ongoing normal course issuer bid reflects our belief that our units are undervalued," said Zachary George, Chief Executive Officer.

Operating Highlights

Portfolio occupancy holds steady

The overall occupancy at June 30, 2010 has held steady at 83.4% since the beginning of 2010. However, occupancy is still down from the same period in 2009, when it was 92%. There was an isolated vacancy in the Ontario industrial segment in the fourth quarter of 2009 that contributed 4% to this decline. Management is actively working on leasing up this space. Across the balance of the portfolio, occupancy remains resilient and lease renewals look favourable.

NOI growth

Net operating income has increased significantly by 24% and 22% over sequential quarters as well as over the same period in the prior year. The driver for this growth is the merger with IAT. This is the first quarter that HREIT has operated with an internalized management and the results reflect the benefits of an internalized management team which is why the quarter has improved over the first quarter when a third party manager was still involved in operations. Property operating costs as a percent of rental revenues have decreased from 44% in the second quarter of 2009 to 40% in the second quarter of 2010.

Benefits of management internalization

The benefits of the management internalization are taking shape as property operating costs have declined on a relative basis. Under the current structure, HREIT is reallocating capital that was being paid to a third party manager to portfolio improvements, the retirement of debt and equity, and other accretive areas. HREIT estimates that the benefits of the management internalization have been approximately $1.5 million for the six months ended June 30, 2010 after accounting for one-time costs of $751,000 which are included in Trust expense. This level of savings exceeds the original estimates released by HREIT in 2009.

Financial Resources Highlights

Repayment of convertible debentures

During the second quarter, HREIT repaid the series B convertible debentures of $5.3 million. This repayment is in addition to the repayment of $5.3 million of series A convertible debentures in the first quarter of 2010. By completing these repayments, HREIT has completed a significant milestone in improving its credit profile and reducing expensive subordinated debt.

Improving debt ratios

HREIT's overall weighted average interest rate fell to 5.58% from 5.64% and its interest coverage ratio increased to 1.9 times from 1.3 times in the second quarter of 2010 compared to the same period in 2009. Further, the Trust reduced its level of debt-to-gross book value to 60.9% from 70.3% during the same period. Together, these ratios reflect the improving quality of the balance sheet of HREIT.

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.
    

NOI, FFO and AFFO is not recognized as an appropriate earning measure under Canadian generally accepted accounting principles ("GAAP"), and is not construed as an alternative to earnings determined in accordance with GAAP, but is considered a useful supplemental indicator of HREIT's performance. Detailed definition of NOI and FFO and explanations as to why management believes it is a useful performance measure are provided in the 2009 financial statements and management discussion and analysis 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, 76 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 5.4 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. 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.

For further information: Zachary R. George, Trustee, President and Chief Executive Officer, Tel: [phone], Fax: [phone], Email: [email protected]