Partners REIT Announces First Quarter 2013 Results

VICTORIA, BRITISH COLUMBIA--(Marketwired - May 13, 2013) - Partners Real Estate Investment Trust, (TSX:PAR.UN) announced today results for the three months ended March 31, 2013.

Operating Results

Net income increased to $8.1 million ($0.32 per unit) for the three months ended March 31, 2013 compared to $3.6 million ($0.25 per unit) for the same comparable period last year. The increase was due to the contribution from acquisitions completed over the prior twelve months, as well as $4.2 million in increases in the fair value of prior acquisitions.

Weighted average occupancy at March 31, 2013 was 96.0% compared to 96.7% at December 31, 2012 and 95.9% at the end of the first quarter of 2012. The decline in occupancy in the first quarter of 2013 compared to the fourth quarter of 2012 is primarily due to the acquisition of two properties in the quarter having an average occupancy of 83%. Both properties acquired in the first quarter of 2013 have rental income guarantees in place which ensure the REIT will receive monthly rental revenue while leasing up the vacant space.

Net Operating Income ("NOI") increased to $8.2 million in the first quarter of 2013 compared to $5.8 million in the comparable prior year period due primarily to the contribution from acquisitions completed over the prior twelve months. Same property NOI for the three months ended March 31, 2013 increased 8.0% due primarily to increased recoveries at the REIT's Place Desormeaux property in Longueil, Quebec.

Funds from Operations ("FFO") were $3.8 million or $0.15 per unit for the three months ended March 31, 2013 compared to $3.7 million or $0.17 per unit in the fourth quarter of 2012 and $2.3 million or $0.16 per unit in the first quarter of 2012. The increase in FFO was due primarily to the contribution from acquisitions completed over the prior twelve months. Adjusted Funds from Operations ("AFFO") were $3.4 million or $0.13 per unit for the three months ended March 31, 2013 compared to $3.5 million or $0.15 per unit for the three months ended December 31, 2012 and $2.2 million or $0.15 per unit in the first quarter of 2012. Per Unit amounts in the first quarter of 2013 compared to the first quarter of 2012 were negatively impacted by the 77.2% increase in the weighted average number of units outstanding. Compared to the fourth quarter of 2012, FFO per Unit in the first quarter of 2013 were negatively impacted by the 14.6% increase in the weighted average number of units outstanding and a delay in the closing of related acquisitions.

The payout ratio of total distributions as a percentage of FFO and AFFO increased in the first quarter of 2013 to 109% and 122%, respectively, compared to 97% and 103%, respectively, in the fourth quarter of 2012 and 103% and 105%, respectively, in the first quarter of 2012. The payout ratio of cash distributions, excluding distributions of units issued under the DRIP and Option Unit Purchase Plan, as a percentage of FFO and AFFO, were 102% and 115%, respectively in the first quarter of 2013 compared to 91% and 97%, respectively, in the fourth quarter of 2012 and 100% and 102%, respectively, in the first quarter of 2012.

Acquisitions

During the first quarter of 2013 the REIT acquired two retail and mixed-use properties in Quebec aggregating approximately 93,500 square feet of gross leasable area ("GLA") for a total purchase price of approximately $26.1 million. The property purchases were funded by cash raised in recent public offerings of equity and debt.

Leasing

Leases representing approximately 159,000 square feet are scheduled to expire in 2013. As of May 13, 2013 the REIT has secured lease renewals and new leases on approximately 10,000 square feet of this space.

Financial Position

As at March 31, 2013 the REIT's ratio of debt to gross book value was 44.1% (60.9% including convertible debentures) compared to 49.3% (62.4% including convertible debentures) at December 31, 2012. Interest coverage and debt service coverage ratios were 2.49 times and 1.63 times, respectively, as at March 31, 2013 compared to 2.30 times and 1.55 times as at December 31, 2012. During the first quarter of 2013 total debt increased by $14.0 million due to a $23.0 million convertible debenture issue which closed on March 5, 2013, partially offset by $7.5 million in repayments on the REIT's Credit Facility and monthly mortgage principle repayments.

The REIT's mortgage portfolio incurred a weighted average effective interest rate of 4.48% at quarter end, consistent with the rate at December 31, 2012, with a weighted average term to maturity of approximately four years. Over the next two years, the REIT has approximately $30.3 million of debt maturing which carries an average effective interest rate of 4.91%.

Subsequent Events

Subsequent to March 31, 2013 the Centuria Urban Village property with a carrying value of $10.2 million was added as security to the REIT's Credit Facility, increasing the formula-based amount available under the facility to $34.3 million. The property was simultaneously removed from the REIT's Acquisition Facility which was subsequently closed.

On April 10, 2013 the REIT completed the financing of properties acquired during the quarter ended March 31, 2013. New seven-year mortgages with contractual interest rates of 3.7% were placed on the Sorel Shopping Centre and the Saint Remi Shopping Centre for $4.2 million and $11.5 million, respectively.

On April 15, 2013 the REIT completed the acquisition of the Mariner Square Shopping Centre, a six-building 101,000 square foot open-air retail centre. Anchored by necessity-based tenants, the centre is situated in downtown Campbell River on the east coast of Vancouver Island about 260 kilometers north of Victoria. The REIT paid approximately $25.8 million for the property, satisfied by the assumption of a $14.7 million current mortgage maturing in November 2017 bearing a mark-to-market interest rate of 3.5%, with the balance paid in cash, utilizing funds from the REIT's Credit Facility.

On May 6, 2013 the REIT completed the acquisition of Marcel-Laurin, a 120,566 newly-constructed, necessity based, open-air retail centre in Saint Laurent, Quebec. The REIT paid approximately $35.8 million for the property, satisfied by a new $22.0 million ten-year mortgage on the property with a contractual interest rate of 3.85%, with the balance paid in cash, utilizing proceeds of the Sorel and Saint Remi Shopping Centre financings.

On May 6, 2013 the REIT completed the acquisition of the Repentigny Shopping Centre, a stabilized, 49,366 square - foot open-air centre in Repentigny, Quebec. The REIT paid approximately $10.0 million for the property, satisfied by a new $5.7 million five-year mortgage on the property with a contractual interest rate of 3.34%, with the balance paid in cash, utilizing proceeds of the Sorel and Saint Remi Shopping Centre financings.

On May 1, 2013 the REIT repaid its floating-rate mortgage secured by a second charge on five Shoppers Drug Mart properties located in Manitoba. The REIT utilized funds from its Credit Facility to repay the interest-only loan, which had a contractual interest rate of 7.0% at the time of repayment.

Internalization

On May 2, 2013 the independent trustees of the REIT announced that they had provided notice to LAPP Global Asset Management Corp., the external manager of the REIT (the "Manager"), that they had decided to internalize management of the REIT, effective at the close of business on November 1, 2013. It has always been the intention of the trustees to have the management performed on a full time basis by individuals employed directly by the REIT when the size of the Trust permitted this to be done on a more economic basis than is the case under the management agreement with the Manager provided the independent trustees also concluded that internalizing management was otherwise in the best interests of unitholders. The management agreement provides for the termination of the Manager under such circumstances, provided that the Manager is given six months' notice and a stipulated termination payment.

The independent trustees believe that it is in the best interests of the unitholders to internalize management. The independent trustees have concluded, after seeking independent advice, that it would be less expensive for the REIT to employ individuals directly rather than have the REIT managed by the external Manager. The independent trustees also believe the internalization of management will remove any conflicts of interest between the external Manager and the REIT, and significantly improve corporate governance of the REIT. Additional information about this decision is available in a proxy circular mailed to unitholders in connection with the upcoming annual meeting of unitholders, which is expected to be held on June 6, 2013 at 2:30 p.m. in Toronto, available on SEDAR.

Financial Highlights
Three months ended		Mar. 31, 2013		Mar. 31, 2012
Revenues from income producing properties	$	13,181,564	$	9,077,958
Net income and comprehensive income		8,097,665		3,606,508
Net income per unit - basic		0.32		0.25
NOI(1)		8,155,011		5,787,976
NOI - same property(1)		4,973,529		4,619,582
FFO(1)		3,796,609		2,263,630
FFO per unit(1)		0.15		0.16
AFFO(1)		3,382,759		2,224,575
AFFO per unit(1)		0.13		0.15
Distributions(2)		4,123,020		2,342,807
Distributions per unit(2)		0.16		0.16
Distribution payout ratio(3)		109% / 122%		103% / 105%
Cash distributions(4)		3,888,897		2,265,273
Cash distributions per unit(4)		0.15		0.16
Cash distribution payout ratio(5)		102% / 115%		100% / 102%

As at		Mar. 31, 2013		Dec. 31, 2012		Mar. 31, 2012
Total assets	$	517,822,077	$	479,068,788	$	410,601,523
Total debt(6)		307,835,802		294,023,939		270,408,728
Total equity		198,806,723		170,064,524		126,954,979
Weighted average units outstanding - basic		25,352,436		19,164,337		14,306,130
Debt-to-gross book value including debentures(6)		60.9%		62.4%		64.1%
Debt-to-gross book value excluding debentures(6)		44.1%		49.3%		57.4%
Interest coverage ratio(7)		2.49		2.30		1.66
Debt service coverage ratio(7)		1.63		1.55		1.24
Weighted average interest rate(8)		4.48%		4.48%		4.66%
Portfolio occupancy		96.0%		96.7%		95.9%

1. NOI, FFO and AFFO are non-IFRS financial measures widely used in the real estate industry. See "Part II - Performance Measurement" for further details and advisories.

2. Represents distributions to unitholders on an accrual basis. Distributions are payable as at the end of the period in which they are declared by the Board of Trustees, and are paid on or around the 15th day of the following month. Distributions per unit exclude the 5% bonus units given to participants in the Distribution Reinvestment and Optional Unit Purchase Plan.

3. Total distributions as a percentage of FFO/AFFO.

4. Represents distributions on a cash basis, and as such, excludes the non-cash distributions of units issued under the Distribution Reinvestment and Optional Unit Purchase Plan.

5. Cash distributions as a percentage of FFO/AFFO.

6. See calculation under "Debt-to-Gross Book Value" in "Part IV - Results of Operations".

7. Calculated on a rolling four-quarter basis. See definition under "Mortgages and Other Financing" in "Part IV - Results of Operations".

8. Represents the weighted average effective interest rate for secured debt excluding debentures and credit facilities.

For the complete Financial Statements and Management's Discussion and Analysis for the period, please visit www.sedar.com or www.partnersreit.com.

About Partners REIT

Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 38 retail properties located in Ontario, Quebec, Manitoba, Alberta and British Columbia aggregating approximately 2.7 million square feet of leasable space. Partners REIT focuses on expanding and managing a portfolio of retail and mixed-use community and neighbourhood shopping centres located in both primary and secondary markets across Canada.

Certain statements included in this press release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect," "will" and similar expressions to the extent they relate to Partners REIT. The forward-looking statements are not historical facts but reflect Partners REIT's current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the timing of the offering, success of the offering, listing of the units, use of proceeds of the Offering, access to capital, regulatory approvals, intended acquisitions and general economic and industry conditions. Although Partners REIT believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein.