KEYreit announces early financial highlights for the fourth quarter and year ended December 31, 2012 AND 2013 - 2014 Guidance

Fourth Quarter Adjusted AFFO payout ratio of 82.1 per cent
Record Revenue of $6.9 million for the quarter
Record Net Operating Income of $5.9 million for the quarter

TORONTO, Feb. 27, 2013 /CNW/ - KEYreit (TSX: KRE.UN) ("KEYreit" or "the REIT") today provided the following early financial highlights for the fourth quarter and year ended December 31, 2012:

Early Fourth Quarter 2012 Financial Highlights
Three months ended December 31, 2012

• Record Revenues of $6.9 million, an 11.2 percent increase versus same quarter last year (excluding one-time item⁽¹⁾, revenues of $6.8 million, an 8.5 percent increase)
• Record Net operating income⁽²⁾ of $5.9 million, a 14.8 percent increase versus same quarter last year (excluding one-time item⁽¹⁾, net operating income of $5.7 million, an 11.6 percent increase)
• Adjusted Funds From Operations ("AFFO")⁽²⁾ per Unit of $0.174
• AFFO per Unit excluding non-recurring major tenant default-related legal fees of $0.183
• AFFO payout ratio⁽²⁾ of 82.1 percent, adjusted for non-recurring major tenant default-related legal fees

Early Fiscal 2012 Financial Highlights
Twelve months ended December 31, 2012

• Record Revenues of $26.4 million, a 13.3 percent increase versus same period last year (excluding one-time item⁽¹⁾, revenues of $25.7 million, a 10.5 percent increase)
• Record Net operating income⁽²⁾ of $21.9 million, a 12.9 percent increase versus same period last year (excluding one-time item⁽¹⁾, net operating income of $21.2 million, a 9.5% increase)
• AFFO⁽²⁾ per Unit of $0.501
• AFFO per Unit excluding non-recurring major tenant default-related legal fees of $0.581
• AFFO payout ratio⁽²⁾ of 121.2 percent, adjusted for non-recurring major tenant default-related legal fees

^(1)	Other revenue of $0.165 million and $0.651 million recognized in the fourth quarter and fiscal year 2012, respectively, relating to insurance proceeds received.
^(2)	See section entitled Non-IFRS measures.

"KEYreit has now turned the corner and we are well poised for growth and creating unitholder value going forward," said John Bitove, Chief Executive Officer of the REIT.  "We had our best recorded revenue and NOI since we went public.  We are back to over 97% committed occupancy, have paid off our original IPO loans and have a strong balance sheet with debt at approximately 62% of our book value.  As we look forward, we have over $50 million of acquisitions lined up for the next two quarters and we are excited about 2013 and beyond".

"Driving the improvement in AFFO for the fourth quarter are the lower interest costs realized from the refinancing of our Ontario IPO property portfolio in the third quarter, the accretive impact of the acquisition of three retail properties in Eastern Canada at the beginning of the fourth quarter, increased occupancy of 120 basis points relative to the third quarter as re-leasing of the previously disclaimed vacant sites take effect, and lower operating and general administrative costs," said Teresa Neto, Chief Financial Officer of the REIT.

The REIT expects to issue final results for its fourth quarter and year ended December 31, 2012 on March 6, 2013 when the REIT's audited consolidated financial statements for the years ended December 31, 2012 and December 31, 2011, as well as the REIT's Management's Discussion and Analysis report for the fourth quarter of 2012 are expected to be filed on SEDAR and posted to the REIT's website at www.keyreit.com.

Leasing and Property Dispositions Update

KEYreit's committed occupancy is now approximately 97.2 per cent due to re-leasing efforts on both its disclaimed sites and other previously vacant units at its multi-tenant plazas. Committed occupancy at the REIT's multi-tenant plazas and single-tenant properties is 97.3 per cent and 97.1 percent, respectively.

On February 4, 2013, KEYreit completed the sale of one property that was currently vacant located in Quebec City, Quebec for gross proceeds of $270 thousand. There were no liabilities associated with this property.

2013 - 2014 Guidance

The purpose of the REIT's guidance described herein is to provide Management's view as to the expected financial performance of the REIT using factors that are commonly accepted, and viewed as meaningful indicators of financial performance, in the real estate industry.

Metric^(1)	2013 Forecast Range	2014 Forecast Range
Net Operating Income (in $000's)	$23,000 - $23,100	$23,700 - $23,900
FFO, Adjusted per Unit (basic)^(2)	$0.47 - $0.49	$0.53 - $0.55
AFFO per Unit (basic)	$0.52 - $0.54	$0.60 - $0.62
AFFO payout ratio	111% - 115%	97% - 100%
Leverage Ratio^(3)	62% - 66%	62%-65%

Notes:
(1)	Please refer to the Non-IFRS Measures section of this press release.
(2)	A non-IFRS measure adjusted for transaction costs incurred on the issuance of convertible debentures and the costs associated with the Huntingdon Partial Offer (defined herein).
(3)	A non-IFRS measurement commonly used in the real estate industry to measure total debt relative to total assets. Total debt is defined as mortgages payable, term debt, land lease liability and convertible debentures.

Projections involve numerous assumptions such as rental income (including assumptions on the timing of lease-up of vacant properties and lease renewals), financing, interest rates, corporate expenses, the level and timing of acquisitions of investment properties, the REIT's capital structure, the number of units outstanding and numerous other factors. Not all factors which affect our range of projected net operating income, funds from operations, adjusted ("FFO, Adjusted") and adjusted funds from operations ("AFFO") are determinable at this time; actual results may vary from the projected results in a material respect, and may be above or below the range presented in a material respect.

2013 and 2014 guidance is based on the following operating assumptions:

• Achieving occupancy rates of 98% by year-end 2013 and 99% by year-end 2014;
• Acquisitions of approximately $10 million effective Q2 2013;
• New mortgage debt of approximately $15 million secured against a portion of the REIT's IPO property portfolio;
• No additional unit offerings;
• FFO, Adjusted and AFFO exclude any non-recurring costs associated with the partial offer for KEYreit Units announced by Huntingdon Capital Corp. on January 29, 2013 (the "Huntingdon Partial Offer")

In 2013, Management expects net operating income to be positively impacted by committed leasing taking effect throughout the first and second quarters, and further expects to re-lease most of the remaining vacant sites throughout the remainder of the year. As a result, the REIT's payout ratio is forecasted to be at 100% by the fourth quarter of 2013 and at or slightly below 100% throughout 2014.

"In the first three quarters of 2013, KEYreit projects that the payout ratio will be above 100% due to the impact of the equity offering completed in January 2013 of which net proceeds were used to de-lever our balance sheet; and increased interest expenses relating to new debt financing required to support planned acquisitions", said Teresa Neto. "As the remaining re-leasing of vacant sites is completed and incremental net operating income from new acquisitions takes effect, we expect our payout ratio to fall at or below 100% by the fourth quarter of 2013".

Readers should refer to the section below titled "Forward-Looking Statements" for important information on risk factors.

Acquisition Pipeline

KEYreit is currently in negotiations regarding property acquisitions in Canada and the U.S. that, if completed, represent approximately $50.1 million of additional acquisitions. These transactions are in various stages of negotiations and while efforts will be made to complete these negotiations, no assurances can be given.

Non-IFRS Measures

Funds From Operations ("FFO") and FFO, Adjusted
FFO is not a measure recognized under International Financial Reporting Standards ("IFRS") and does not have a standardized meaning prescribed by IFRS. FFO is presented because management of KEYreit believes this non-IFRS measure is a relevant measure of KEYreit's operating performance. KEYreit calculates FFO according to the industry standard definition stated in the REALpac Whitepaper on FFO dated November 2012. FFO as computed by KEYreit may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable. FFO represents net income of KEYreit, plus depreciation, amortization of intangible assets, amortization expense relating to tenant allowances, interest expense on the Class B Exchangeable Units; and fair value adjustments on investment properties, convertible debentures and the Class B Exchangeable Units. FFO, Adjusted represents FFO, as computed by KEYreit, plus transaction costs incurred on the issuance of convertible debentures and costs associated with the Huntingdon Partial Bid, both recognized in general and administrative expenses.

Adjusted Funds From Operations ("AFFO") and AFFO, Adjusted
AFFO is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. AFFO is presented because management of KEYreit believes this non-IFRS measure is a relevant measure of the ability of KEYreit to earn and distribute cash returns to Unitholders. AFFO as computed by KEYreit may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable. AFFO, as defined by the REIT represents net income of KEYreit, plus depreciation, amortization of intangible assets, amortization expense relating to tenant allowances, amortization of financing fees, stock-based compensation, interest expense on the Class B Exchangeable Units, acquisition write-offs and non-recurring write-offs of prepaid transaction costs, less, the straight-line rent revenue accrual and non-recurring other income, and, fair value adjustments on investment properties, convertible debentures and the Class B Exchangeable Units. The amount of distributions paid in a period relative to the AFFO generated in the same period is referred to as the "payout ratio". AFFO, Adjusted represents AFFO, as computed by KEYreit, less legal costs expensed relating to the REIT's claim on Priszm's sales proceeds.

Net Operating Income ("NOI")
NOI is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. NOI is presented because management of KEYreit believes that this non-IFRS measure is a relevant measure of the ability of KEYreit to earn and distribute cash to Unitholders. NOI as computed by KEYreit may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable. NOI computed by KEYreit represents total revenue from investment properties less property operating expenses.

Forward-Looking Statements

This press release contains certain information or statements that may constitute forward-looking information within the meaning of securities laws, which reflect the current view of KEYreit with respect to the REIT's objectives, plans, goals, strategies, future growth, results of financial and operating performance and business prospects and opportunities. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "forecast", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. In particular, forward-looking information included in this press release includes, but is not limited to, statements with respect to the REIT's ability to lease vacant property units, execute planned acquisitions, collect minimum rents, diversify its tenant base, undertake land intensification projects, refinance loans and mortgages at their maturity, complete accretive acquisitions, and maintain or grow monthly cash distribution levels, and also with respect to the timing of such events. Forward-looking information should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the statements and information in this press release containing forward-looking information are qualified by these cautionary statements.

Forward-looking statements are based on information available at the time they are made, underlying estimates and assumptions made by management and management's good faith belief with respect to future events, performance and results, and are subject to inherent risks and uncertainties surrounding future expectations generally which could cause actual results to differ materially from what is currently expected. Such risks and uncertainties include, but are not limited to the REIT's reliance on key tenants, risks associated with investment in real property, competition, reliance on key personnel, financing and refinancing risks, distributions, environmental matters, tenant risks, risks related to current economic conditions and other risk factors more particularly described in the REIT's most recent Annual Information Form available on SEDAR at www.sedar.com. Additional risks and uncertainties not presently known to the REIT or that the REIT currently believes to be less significant may also adversely affect the REIT.

KEYreit cautions readers that the list of factors is not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual events, performance and results may vary significantly from those expected. There can be no assurance that the actual results, performance, events or activities anticipated by the REIT will be realized or, even if substantially realized, that they will have the expected consequences to, or effect on, the REIT. The reader should not place undue importance on forward-looking information and should not rely upon this information as of any other date.

The REIT disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required under applicable securities laws.

About KEYreit
KEYreit is Canada's premier small-box retail property owner with 226 properties in nine provinces across Canada. KEYreit's properties are well-located and geographically diverse across Canada with the majority of all properties containing long-term quadruple net leases.

To find out more about KEYreit (TSX: KRE.UN), visit our website at www.KEYreit.com.

 

 

SOURCE: KEYreit

Teresa Neto
Chief Financial Officer
[email protected]
416-361-9953

KEYreit unitholders, please contact:
Kingsdale Shareholder Services Inc.
1-888-518-1562 toll-free in North America
1-416-867-2272 outside of North America (collect calls accepted)
[email protected]

Media, please contact:
Longview Communications Inc.
Alan Bayless 604-694-6035, [email protected]
Olena Lobach 416-649-8009, [email protected]