Retrocom Mid-Market REIT Announces Second Quarter 2011 Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2011) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR TO ANY NON-CANADIAN SOURCE

Retrocom Mid-Market Real Estate Investment Trust (the "REIT") (TSX:RMM.UN) announced today its financial results for the second quarter ended June 30, 2011.

Highlights

• Net Operating Income increased 21% in the three month period ending June 30, 2011 versus same period last year.
  
  
• Issued $40 million 5.45% convertible debentures on June 28, 2011 and subsequently redeemed $20 million of 7.50% convertible debentures on August 2, 2011.
  
  
• Closed the acquisition of four investment properties for $42.6 million from Calloway REIT on May 6, 2011.
  
  
• During the second quarter, refinanced approximately $11 million of mortgage debt resulting in a 395 basis point decrease in the related debt's interest rate. Obtained new and assumed mortgages totalling $26.1 million bearing a weighted average interest rate of 5.45%.
  
  
• Entered into an agreement to purchase a 30% interest in a Mississauga, Ontario joint venture and the redevelopment of 1480 Dundas Street East property on July 11, 2011.
  
  

Operational & Financial Summary

• Net Operating Income ("NOI") for Q2 2011 was $10.2 million, which has increased by $1.8 million or 21% as compared to NOI for the same period of 2010. The growth is mainly attributable to the fully integrated operating results of investment properties that the REIT acquired in December 2010 and May 2011, partially offset by the decrease of same property NOI due to lower overall occupancy. For six months ended June 30, 2011 as compared to the same period in 2010, NOI increased by approximately $3.5 million. The increase in NOI is mainly due to investment properties acquired in December 2010 and May 2011.

• Funds From Operations, adjusted (after excluding $2.0 million of transaction costs related to the issuance of convertible debentures) ("FFO, adjusted") for Q2 2011 was $4.3 million ($0.10 per unit, basic and diluted), as compared to $3.9 million ($0.14 per unit, basic and diluted) for Q2 2010. FFO, adjusted remains relatively flat as the NOI growth of $3.3 million from the investment properties acquired in December 2010 and May 2011 was offset by same property NOI decrease of $1.5 million, increased interest expense of $1.2 million and increased trust expenses of $0.3 million. FFO, adjusted for the six months ended June 30, 2011 was $7.3 million ($0.17 per unit) compared to $7.0 million ($0.25 per unit) for the same period in 2010. FFO, adjusted per unit has also been impacted by the temporary dilutive effect of the equity offering in March 2011.

• The portfolio occupancy rate was 85.2% as at June 30, 2011, compared to 86.6% at 2010 year-end. This decrease was mainly due to the departure of Walmart at Chilliwack Mall effective January 1, 2011 which is partially offset by investment properties acquired in December 2010 and May 2011 that have high occupancy levels. Total portfolio committed occupancy, as at June 30, 2011, and taking effect during the remainder of 2011 and in 2012, would be 87.0%.

• The REIT's average cost of mortgage debt was 5.58% at the end of Q2 2011, as compared to 6.02% at the end of 2010 and 6.21% at the end of the prior period, Q2, 2010. The improvement is the result of the REIT's recent efforts in refinancing maturing debt at lower interest rates. The REIT's leverage ratio, including convertible debentures, was 60.6% as at June 30, 2011, within the 70% permitted under the REIT's trust indenture and the 65% permitted under the REIT's operating line.

• On May 6, 2011, the REIT closed the acquisition of four investment properties totaling 226,016 square feet of gross leasable area for approximately $42.6 million (inclusive of approximately $0.69 million of transaction costs). The portfolio is located in Ontario and Quebec and is currently 100% leased.

• On June 28, 2011, the REIT issued $40 million 5.45% convertible debentures with an $8.10 conversion price, and subsequently redeemed $20 million of 7.50% convertible debentures on August 2, 2011, for total projected interest expense savings of approximately $400 thousand over the original remaining term of the redeemed debentures.

• On July 11, 2011, the REIT acquired a 30% interest in an approximately 33.7 acre land parcel near the intersection of Dundas Street East and Dixie Road in Mississauga, Ontario and to form a new partnership with two private entities for the purposes of developing a new, approximately $100 million shopping centre anchored by a Walmart Supercentre. In addition, Retrocom entered into a purchase and sale agreement whereby Retrocom's property, located at 1480 Dundas Street East, which is adjacent to the development site, will be rolled into the new partnership. Subsequently in August 2011, the joint venture waived conditions pertaining to the purchase of the 1480 Dundas Street East property and the sale is expected to close in September 2011.

• The REIT retains a solid liquidity position. As of today's date, the REIT has approximately $17.3 million cash on hand and $19.0 million available on the operating line.

Richard Michaeloff, President and CEO of the REIT, said, "In this second quarter of 2011, the REIT's active pace continued. We completed the closing of the acquisition of four properties from Calloway REIT in early May, thereby benefiting from two months of related operating results. We improved our liquidity position with the issuance of $40 million of convertible debentures at a competitive interest rate and conversion premium. With the redemption of the $20 million 7.50% convertible debentures shortly thereafter, the REIT not only addressed the maturity of the debentures that were due in 2012 at a opportune time in the capital markets, but the REIT will also benefit from substantial interest expense savings in the next year. In addition, shortly after the quarter end, we acquired a 30% interest in a GTA joint venture development project which will include the redevelopment of the REIT's 1480 Dundas Street East property. This represents our fifth redevelopment project now underway. Going forward, we will look to build on this positive momentum."

Financial Highlights
		Three months ended		Three months ended		Six months ended		Six months ended
		June 30		June 30		June 30		June 30
(all amounts in $000's, except per unit amounts and ratios)		2011(1)		2010(1)		2011(1)		2010(1)
Rental revenue and other income		19,114		15,187		37,851		30,127
Property operating expenses		8,876		6,740		18,211		13,971
Net operating income(2)		10,238		8,447		19,640		16,156
Trust expenses		1,194		901		2,278		1,751
Transaction costs		1,957				1,957
Finance costs-operations		4,853		3,692		10,113		7,330
Finance costs-distributions on Class B Units		1,025		1,025		2,050		2,050
Income before income taxes and fair value gains (losses)		1,209		2,829		3,242		5,025
Fair value gains (losses) associated with finance costs		(1,047	)	2,174		(8,515	)	(6,331	)
Fair value gains (losses) on investment property		(3,158	)	490		(3,412	)	606
Fair value losses on participant's rights under LTIP		33		55		(23	)	(48	)
Future income tax loss		-		(4,944	)	-		(3,492	)
Income (loss) for the period		(2,963	)	604		(8,708	)	(4,240	)
Funds From Operations, adjusted (FFO)(3)		4,258		3,912		7,283		7,032
FFO, adjusted per unit
	Basic	0.10		0.14		0.17		0.25
	Diluted	0.10		0.14		0.17		0.25
FFO, adjusted payout ratio, accrual basis		1.04		0.79		1.13		0.88
FFO, adjusted payout ratio, cash basis		1.03		0.79		1.08		0.88
Distributions to unitholders-accrual basis(4)		4,421		3,109		8,228		6,217
Distributions to unitholders-cash basis(4)		4,406		3,109		7,881		6,217

Full Financial Results and MD&A will be available on SEDAR (www.sedar.com) as well as the Investors Relations section of the REIT's website (www.rmmreit.com).

(1)		Based on financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Board ("IASB"). Results of 2010 have been restated to conform to IFRS.
(2)		A non-IFRS measurement, calculated by the REIT as rental revenue (net rents, property tax and operating cost recoveries, as well as other miscellaneous income from tenant) less operating expenses from rental properties.
(3)		The reconciliations from net income (lo) to Funds From Operations, adjusted are included in the REIT's MD&A.
(4)		Distributions are net of the distribution reinvestment plan ("DRIP").

The REIT's management considers Net Operating Income, Funds From Operations and Funds From Operations, adjusted, to be indicative measures in evaluating the REIT's performance. The table above includes non-IFRS information that should not be construed as an alternative to net earnings or cash flows from operations and may not be comparable to similar measures presented by other issuers as there is no standardized meaning prescribed by IFRS.

About Retrocom Mid-Market REIT

Retrocom Mid-Market REIT is an Ontario unincorporated, open-end real estate investment trust which focuses on owning and acquiring community-based commercial properties in primary and secondary markets across Canada with the objective of producing a geographically diversified portfolio of properties with stable and growing cash flows.

This document may contain forward-looking statements, which although based on Management's best estimates as well as the current operating environment are subject to risks and uncertainties. As such, terms such as "anticipate", "believe", "expect", "plan" or other similar words should be taken as forward-looking statements. As a result of these potential uncertainties, any future results could differ materially from the predictions listed herein. Although Retrocom makes every effort to meet our predictions as listed in this document, we are unable to control certain circumstances such as economic, competitive or commercial real estate conditions.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, which may be made only by means of a prospectus, nor shall there be any sale of the Units in any state, province or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such state, province or other jurisdiction. The Units of the Retrocom Mid-Market REIT have not been, and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered, sold or delivered in the United States absent registration or an application for exemption from the registration requirements of U.S. securities laws.