IAT Air Cargo Facilities Income Fund announces third quarter 2009 results

RICHMOND , BC, Nov. 13 /CNW/ - IAT Air Cargo Facilities Income Fund (the "Fund") (TSX: ACF.UN), an open-ended, mutual fund trust that owns all of the shares of International Aviation Terminals Inc. ("IAT"), which owns and leases air cargo and aviation related buildings on ground-leased land at Canadian airports in Vancouver , Calgary , Edmonton , Saskatoon and Winnipeg , and all of the interests in IAT Management Limited Partnership ("IAT Management LP"), which provides management and operation services to IAT and administrative services to the Fund, today reported results for the third quarter of 2009 and declared a distribution to unitholders.

Consolidated Financial and Operating Results

For the three months ended September 30, 2009 , total rental revenue was $4.7 million up 4.7% from $4.4 million for the same period in 2008. The increase in total rental revenue was driven by recoveries relating to capital expenditures made in prior periods.

In terms of portfolio metrics, there was a slight decline in average occupancy by 1.0% for the third quarter of 2009 compared to the same period in 2008. Compared to September 30, 2008 , there has been a decrease in portfolio occupancy by 130 basis points to 86.1%. However, occupancy increased by 20 basis points for the quarter on a sequential basis from June 30, 2009 . Further, the average lease rate has remained steady at $9.44 per square foot from $9.47 per square foot for the same period in 2008 despite the tough economic conditions.

For the third quarter of 2009, the Fund reported earnings of $0.11 per unit as compared to a net loss of $0.02 per unit for the third quarter of 2008. The significant increase in earnings of $0.13 per unit is partially due to one-time transaction costs of $960,000 incurred in the third quarter of 2008, compared to $360,000 incurred in the same period of 2009. Adjusting for these one-time costs, the third quarter of 2009 had a $0.04 increase in earnings per unit, which is attributable to the benefits from the management internalization which took place in February 2009 and lower interest expense.

Zachary R. George, IAT's President and Chief Executive Officer commented "IAT achieved another successful quarter despite an increasingly competitive rental market. The internalization of our management structure has improved operating performance over the past two quarters and better aligns the interests of unitholders with those of management. IAT's proposed combination with Huntingdon Real Estate Investment Trust ("Huntingdon REIT") provides a great opportunity to grow and diversify the portfolio, as well as take advantage of IAT's strong balance sheet and management team. Huntingdon REIT's unitholders should expect to benefit from a reduced cost structure and improved corporate governance."

Internalization of IAT Management and Operations

On February 27, 2009 , the Fund's management was internalized whereby property management and operations were transferred from AMB Canada to an IAT management team. As part of this transition, structural changes have occurred that have affected the Fund's operations. Specifically, property management and operations and maintenance fees have been internalized within the Fund and are no longer paid to a third party. Accordingly, operating costs have decreased as a result of this change. Leasing and marketing fees, previously paid to AMB Canada , are no longer incurred by the Fund. However, general and administration expenses have increased as a result of the internalization which reflects salaries and office expenses.

The third quarter of 2009 was the second full quarter whereby the Fund operated with an internalized management. The internalization benefits consist of: (i) cost savings from reduced operating costs and leasing and marketing fees and (ii) increases in revenues from improvements in operations. For the nine months ended September 30, 2009 , the Fund has benefited from cost savings and operating improvements of approximately $711,000 as a result of an internalized management. These benefits can be attributable to cost savings of approximately $343,000 and operating improvements of approximately $368,000 .

Announcement of Proposed Merger with Huntingdon Real Estate Investment Trust

On August 18, 2009 , the Fund and Huntingdon REIT announced that they agreed to merge. The proposed combined entity would have an enterprise value of approximately $370 million based on unit trading prices as at August 18, 2009 , and would own, lease and operate 86 properties across Canada , with a total rentable area in excess of 5.8 million square feet, and would benefit from a diversified tenant base comprising approximately 670 tenants. The combined entity would have a presence in Manitoba, British Columbia, Ontario, Saskatchewan, Alberta and the Northwest Territories. Under the terms of the combination agreement, the proposed merger involves a unit-for-unit exchange through which IAT unitholders would receive 11.75 units of Huntingdon REIT for each IAT unit held. On completion of the proposed transaction, IAT's existing unitholders would own approximately 53% of the combined entity and Huntingdon REIT's existing unitholders would own approximately 47%. A presentation covering the details of the transaction can be found at www.iat-yvr.com.

Supplemental Earnings Measures

For the third quarter of 2009, earnings before interest, income taxes, amortization, accretion and non-controlling interest's share of earnings ("EBITDA") was $1,834,000 , or $0.26 per unit, as compared to $975,000 , or $0.14 per unit, for the same quarter in 2008. Normalizing for one-time transaction costs EBITDA increased by $0.04 per unit in the third quarter of 2009 compared to the same period in 2008.

For the third quarters of 2009 and 2008, funds from operations ("FFO") were $1.7 million , or $0.24 per unit and $0.8 million , or $0.11 per unit respectively. Normalizing for one-time transaction costs, FFO increased by $0.05 per unit, which was substantially due to savings from the internalization of management which took effect February 27, 2009 .

EBITDA and FFO are not recognized as appropriate earning measures under Canadian generally accepted accounting principles ("GAAP"), and are not construed as alternatives to earnings determined in accordance with GAAP, but are considered useful supplemental indicators of the Fund's performance. EBITDA is a common non-GAAP supplemental measure while FFO is a more common measure for the real estate industry. Explanations as to why management believes FFO is a useful supplemental measure of operating performance and reconciliations from net income to FFO are provided in the 2008 supplemental information package filed by the Fund on SEDAR at www.sedar.com.

Fourth Quarter 2009 Distribution

Pursuant to the combination agreement with Huntington REIT, there will be no distribution paid for the fourth quarter of 2009.

IAT AIR CARGO FACILITIES INCOME FUND

The Fund, and IAT and IAT Management LP, the Fund's wholly-owned subsidiaries, specialize in the ownership, construction, management and marketing of aviation-related facilities. IAT currently owns, leases and manages approximately 1.1 million square feet of air cargo and aviation related facilities on land leased at five of Canada's leading international airports. Approximately 65% of the Fund and IAT's holdings are located at Vancouver International Airport, Canada's second largest airport.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS: Forward-looking statements, including statements with respect to expected distributions, cash flows, revenues, earnings, capital expenditures, occupancy rates, growth rates, value of future lease extensions, ongoing business strategies or prospects. Possible future Fund and IAT action and other measures are based on information available at the time they are made, assumptions made by management, and management's good faith belief with respect to future events, and are subject to the risks and uncertainties outlined in the Fund's annual information form that could cause actual performance or results to differ materially from those reflected in the forward-looking statements, historical results or current expectations. All forward-looking statements may be affected by and are subject to the risks set out under Risk Factors in the Fund's annual information form.

For further information: IAT CONTACT, Zachary R. George, President and Chief Executive Officer, International Aviation Terminals Inc., Direct [phone], Fax [phone], Email [email protected]