Whiterock Real Estate Investment Trust T.WRK.DB.K

Property appraisals,1:3 rollback

[carswell]

Whiterock receives property appraisals, 1:3 rollback

2008-12-08 15:05 ET - News Release

Mr. Jason Underwood reports

WHITEROCK REIT HIGHLIGHTS APPRAISED VALUES, PROVIDES UPDATE, ANNOUNCES DECEMBER DISTRIBUTION AND UNIT CONSOLIDATION

Whiterock Real Estate Investment Trust has provided an update regarding the value of recent property appraisals and other matters.

$8.13 per unit of embedded equity in only four properties

Whiterock has approximately $96.4-million or $8.13 per unit of embedded equity in four of its top properties as determined by recent independent third party appraisals and as outlined in the table. The additional embedded equity in Whiterock's 39 other properties along with the $8.13 per unit in the four properties outlined in the table support management's continued belief its units are trading at a significant discount to fair value. Details with respect to the four appraised properties are in the table.

                                               Independent    Current                              Date of           appraised       debtProperty and location         appraisal            value      outstanding655 Bay St.,Toronto, Ont.              May 20, 2008         $94,800,000   $47,163,4652450 Girouard,Saint-Hyacinthe, Que.      July 3, 2008          38,300,000    19,665,354277 Pleasant St.,Halifax, N.S.              Oct. 27, 2008         15,600,000     4,473,297200 Chemin Ste-Foy,Quebec City, Que.          Dec. 1, 2008          56,500,000    37,500,000                                               ------------  ------------                                               $205,200,000  $108,802,116    

655 Bay St.

This asset is a 295,000-square-foot Class A office building in downtown Toronto. It is 100 per cent occupied with over 50 per cent of the tenants being the federal and provincial government. The property is best in class within its business node and has proven to be a solid cash-flowing asset. Whiterock has increased the net operating income at this property by $1.5-million over the last two years. The recent appraisal is $27.4-million above Whiterock's purchase price, representing an implied 133-per-cent return on equity invested.

2450 Girouard

This three-building 232,000-square-foot office complex is 100 per cent leased to ING Canada Inc. (rated A (low) by DBRS) until 2026 and matched with first mortgage financing maturing in 2026. The buildings were newly constructed or completely refurbished at the time of Whiterock's purchase in 2006. The lease is structured as triple net, including any structural repairs, providing a carefree lease to Whiterock with rental rate growth based upon CPI. The recent appraisal is $7.4-million above Whiterock's purchase price, representing an implied 54-per-cent return on equity invested.

277 Pleasant

This 76,000-square-foot property houses the provincial courts of Nova Scotia, which recently agreed to a lease extension through 2017. The property is 86 per cent leased to the government and Whiterock has increased its net operating income by approximately $150,000 since acquisition, giving credit to the recent lease deal with the provincial government. The recent appraisal is $4.0-million above Whiterock's purchase price, representing an implied 42-per-cent return on equity invested.

200 Ste-Foy

This 398,000-square-foot office building located in Quebec City is master leased to the Province of Quebec until 2030 with rent contractually increasing over that period by 78 per cent. The property has received approximately $12-million of improvements over the last three years at the expense of the previous owner or tenant. Upon acquisition of this property, Whiterock extended the lease by 15 years. The recent appraisal is $8.6-million above Whiterock's purchase price, representing an implied 42-per-cent return on equity invested.

Leasing update

Approximately 39 per cent of 2009 expiries have already been renewed at an average rate increase of 19 per cent. Nearly 50 per cent of Whiterock's remaining lease expirations are in Saskatchewan, where Whiterock continues to experience considerable rental rate increases over and above expiring rents. Whiterock continues to maintain a high occupancy percentage at 98.3 per cent.

Portfolio highlights

Approximately 59 per cent of Whiterock's revenue is from leases with government and other investment-grade institutions. The average remaining lease term of the portfolio is eight years and it is geographically balanced. Approximately 17 per cent of the portfolio is in Alberta, 17 per cent in Saskatchewan, 24 per cent in Ontario, 29 per cent in Quebec and 13 per cent in Atlantic Canada. Whiterock's funds from operations and adjusted funds from operations per unit have consistently grown. Third quarter 2008's annualized FFO was $1.39 per unit, representing an FFO payout ratio of 81 per cent.

Financing update

Whiterock has no debt maturities remaining in 2008, one $4.5-million financing to be completed in 2009, which is currently in process, and no other mortgage debt maturities until the fourth quarter of 2010.

Distribution

In addition, Whiterock announced today that, consistent with prior periods, its distribution declared for the month of December, 2008, is 9.35 cents per preconsolidation unit, which represents 28.05 cents per unit after giving effect to the one-for-three consolidation. This is an annualized yield of approximately 24.4 per cent based on the Dec. 5, 2008, unit closing price of $4.60. Payment will be made on or about Dec. 31, 2008, to unitholders of record on Dec. 29, 2008.

Consolidation

Whiterock also announced today that, pursuant to the terms of the REIT's declaration of trust, which permits a subdivision or consolidation of the units from time to time by the trustees, all of its issued and outstanding units will be consolidated on the basis of one postconsolidation unit for every three preconsolidation units held. The postconsolidation units will continue to trade on the Toronto Stock Exchange under the trading symbol WRK.UN. Subject to completing applicable filings, it is currently anticipated that the consolidation will become effective on or about Dec. 22, 2008.

The December distribution per unit, annualized, has been proportionately increased from $1.12 to $3.37 to reflect the effect of the one-for-three consolidation, resulting in no change in the yield received by unitholders. Any fractional units will be adjusted downward to the next whole postconsolidation unit and a cash payment in lieu of any fractional units will be made to unitholders as applicable. As at Dec. 5, 2008, there were 11,851,725 units issued and outstanding that will be consolidated into a maximum of 3,950,575 units upon completion of the unit consolidation.

Whiterock will send a letter of transmittal to registered unitholders for use in delivering their preconsolidation unit certificates to CIBC Mellon Trust Company, Whiterock's transfer agent. These unit certificates will be exchanged for new postconsolidation unit certificates. No action is required for units held through brokers or other financial intermediaries. Notice of the adjustment to the applicable conversion price will also be given to holders of the REIT's securities that are convertible into units.

We seek Safe Harbor.

[canadafan]

The appraisals show that the properties and underlying book value is more than twice what WRK is trading at .To those who questioned the reason behind the reverse split , it was to bring the trading value in-line with what institutions could buy at.Most institutions can not buy stocks which trade less than $10.Now that the roll back is complete, I suspect that common sense will prevail and bring

[TheHandOfDante]

"200 Ste-Foy This 398,000-square-foot office building located in Quebec City is master leased to the Province of Quebec until 2030 with rent contractually increasing over that period by 78 per cent. The property has received approximately $12-million of improvements over the last three years at the expense of the previous owner or tenant. Upon acquisition of this property, Whiterock extended

[grleader]

For $8.6 million to be a 42% return on equity invested, the amount of equity invested would be roughly $20.5 million.Dante, are you saying that WRK has invested more than $20.5 million?  I don't see where they have invested more, even including the expenses you discuss.

[grleader]

Dante: WRK bought the property AFTER the $8 million in improvements were made, so at most $4 million in improvements came after the purchase and thus could have increased  the appraised value subsequent to the purchase..  Anyhow WRK says that they did not pay any of the total of $12 million.You seem to feel that WRK management should not  be trusted;  can you elaborate further?

[canadafan]

I have some experience with realestate as a previous property owner/renter myself.Andheld Riocan for 15 years.I studied the quarterly statements and became knowledgable on the REIT business.What I do not do or attempt to do is micromanage the business.That is the job or management.You either trust them or you do not.I have held White Rock REIT for 3 years now, and just like Riacan I measure the

[TheHandOfDante]

 “Dante: WRK bought the property AFTER the $8 million in improvements were made, so at most $4 million in improvements came after the purchase and thus could have increased  the appraised value subsequent to the purchase..  Anyhow WRK says that they did not pay any of the total of $12 million.”According to the wording of the 2005 Q3 report and Nov. 9, 2005 news release, the $8

[WallyStreet]

Dante - Do you think there is a possibility that another REIT may be interested in acquiring WRK?

[Jimpossible]

If I may attempt humor, I wish they would merge with Btb Reit, then I'd have only one problem instead of two!  ;-)

[TheHandOfDante]

Of course there's a possibility;  at a low enough price, just about anything will sell.  Though ISTM that REITs would like to hold on to cash and not tap the equity market in the current environment, so I'd be surprised to see WRK taken out.  Your guess is as good as mine as to the probability of WRK being acquired.