TORONTO, ONTARIO -- (Marketwire) -- 08/12/10 -- Charter Real Estate Investment Trust ("Charter REIT")(TSX VENTURE: CRH.UN) is pleased to announce its financial results for the three and six months ended June 30, 2010.
Highlights
-- A year ago, the Board of Trustees of Charter REIT began to consider the
various strategic alternatives available to Charter REIT, given the lack
of growth in the business as a result of the challenging economic and
stock market environment that it faced. As a result of this strategic
review and the strategic process that followed, Charter REIT entered
into a transaction with League Assets Corp. that has resulted in a
transformational change in the ownership structure. This transaction
closed on June 4, 2010. An affiliate of League Assets Corp. bought C.A.
Bancorp's 33% ownership position in Charter REIT and entered into a new
asset management agreement, thereby becoming Charter REIT's major
unitholder and new sponsor. League Assets Corp. is a Victoria, B.C.-
based real estate company that indirectly owns and manages in excess of
$400,000,000 in commercial and residential properties. As part of the
transaction and change in ownership, League also agreed to invest
additional money in Charter REIT through supporting a rights offering
that closed on July 23, 2010. An additional $9,404,413 has been invested
in Charter REIT by an affiliate of League, so that affiliates of League
currently own approximately 49.9% of the units of Charter REIT.
-- Charter REIT continues its goal of trying to generate organic growth
through redevelopment and re-leasing activities at its existing centres.
The redevelopment of its Chateauguay property, through the replacement
of a 15,000 square foot cinema tenant with an 18,138 square foot
Pharmaprix (Shoppers Drug Mart) store for a 15 year term, was completed
in the first quarter of 2010 with Pharmaprix commencing operations in
early March. Another retail tenant at the property was also secured for
the majority of the 12,012 square feet that expired on March 31, 2010.
The new tenant will occupy 10,100 square feet of this space and is
expected to initiate rental payments in the fourth quarter of 2010.
-- Charter REIT is also pleased to report that Michael Rossy Ltd.
("Rossy"), a junior department store operator based in Montreal, has
leased the 23,000 square feet of vacant former SAAN space at the Place
Val Est property in Sudbury, Ontario during the second quarter. Rossy
has commenced operating at the end of July and will begin rental
payments at the end of the third quarter.
-- Overall occupancy for Charter REIT at the end of the quarter was 95.1%,
marginally below the second quarter 2009 occupancy of 95.9% but up
significantly from 92.0% at the end of the first quarter 2010. The
initial impact of these leasing improvements on net operating income
will begin in the third quarter of 2010 with the Rossy deal described
above, while it is expected that the full impact will not be reflected
until the first quarter of 2011.
Financial highlights
-- Charter REIT recorded funds from operations ("FFO") (before one-time
corporate transaction costs) of $751,893 or $0.04 per unit basic and
diluted for the quarter ended June 30, 2010, a decrease of 31.0% from
the quarter ended June 30, 2009. The decrease mainly relates to a
decrease in net operating income and an increase in interest expense.
FFO for the quarter was consistent with that recorded for the first
quarter of 2010 of $813,559 or $0.04 per unit basic and diluted (before
one-time corporate transaction costs).
-- For the six months ended June 30, 2010, FFO (before one-time corporate
transaction costs) was $1,565,452 or $0.09 per unit basic and diluted
compared to $2,307,105 or $0.13 per unit basic and diluted for the prior
year. The decrease was mainly due to a decrease in net operating income
and an increase in interest expense.
-- Charter REIT recorded net operating income ("NOI") and same-property NOI
of $2,440,859 for the quarter ended June 30, 2010, an 8.6% decrease from
the $2,671,111 recorded for the quarter ended June 30, 2009. NOI was
negatively impacted by the high vacancy rate at Place Val Est, as well
as the recent vacancy and a tenant underperformance at the Mega Centre
property. At Cornwall Square, NOI decreased compared to the prior year
as a result of some small in-line tenant vacancies as well as a decrease
in recoveries. The decreases were partly offset by a contractual rate
increase of 10% at the Rona properties.
-- NOI and same-property NOI for the second quarter was 1.0% better than
that recorded for the first quarter of 2010, as a result of the
contractual rate increase at the Rona properties as well as an
improvement in NOI at the Chateauguay property from the full quarter
impact of the centre's redevelopment and re-leasing initiatives.
-- Charter REIT recorded NOI and same-property NOI of $4,858,809 for the
six months ended June 30, 2010 compared to $5,465,917 for the prior
year. NOI was negatively impacted by the high vacancy rate at Place Val
Est, as well as the recent vacancy and a tenant underperformance at the
Mega Centre property. At Cornwall Square, NOI decreased compared to the
prior year as a result of some small in-line tenant vacancies, a
decrease in recoveries and a prior year accounting adjustment to
recoveries resulting from new accounting standards. At the Chateauguay
property, NOI was negatively impacted by the redevelopment and re-
leasing initiatives that took place at the centre, as Pharmaprix did not
commence rental payments until March 2010.
-- Charter REIT had a net loss of $1,374,164 or $0.07 per unit basic and
diluted for the quarter ended June 30, 2010 and a net loss of $2,172,070
or $0.12 per unit basic and diluted for the six months ended June 30,
2010 (for the quarter ended June 30, 2009 - net loss of $664,561 or
$0.04 per unit basic and diluted and for the six months ended June 30,
2009 - net loss of $859,276 or $0.05 per unit basic and diluted).
Outlook
There has been an improvement in the real estate investment trust market and the equity markets in general. This coupled with Charter REIT successfully entering into a new sponsorship arrangement with League after completion of a strategic review process, should allow for its stabilization and future growth. Charter REIT's trustees in conjunction with League will undertake a detailed review of the operations of Charter REIT and of the opportunities available to it in the short and mid-term. With new capital generated from the rights offering, Charter REIT will look to deploy those funds in an appropriate manner to generate growth for unitholders.
Charter REIT has made progress on its leasing and redevelopment initiatives at its Chateauguay property and for 2010, this focus will continue at its other properties as well. In particular, Charter REIT has leased the vacant SAAN space at its Place Val Est property to Rossy. Leasing interest in Place Val Est has increased with the improvement of the Sudbury economy and the addition of Rossy will be a positive factor in Charter REIT's leasing efforts. At Cornwall Square, Shoppers Drug Mart has exercised its option to renew its lease and Charter REIT has generally seen renewed leasing interest in the centre from mall-based retailers after a very quiet 2009. Finally, Charter REIT believes that Mega Centre's location, transportation access, visibility and the surrounding community's demographics are going to allow for the stabilization of this centre, as Charter REIT continues to have positive conversations with national large format tenants to lease a significant portion of the centre's vacant area.
2010 Q2 financial results
For the complete second quarter 2010 Management's Discussion and Analysis and Financial Statements, please visit www.sedar.com or www.charterreit.com.
Charter REIT
Charter Real Estate Investment Trust is an open-ended real estate investment trust established under the laws of the Province of Ontario. Charter REIT is focused on acquiring and managing a portfolio of retail and mixed-use retail community and neighbourhood centres, generally in the mid-market deal size range of $10 to $40 million, from both primary and secondary markets throughout Canada. Charter REIT currently owns ten retail properties located in Ontario and Quebec.
This press release contains forward-looking statements. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, local real estate conditions, including the development of properties in close proximity to Charter REIT's properties, competition, changes in government regulation, dependence on tenants, financial conditions, interest rates, the availability of equity and debt financing, environmental and tax-related matters, reliance on the Manager, potential conflicts of interest and reliance on key personnel. The cautionary statements qualify all forward-looking statements attributable to Charter REIT and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release.
Charter Real Estate Investment Trust The Exchange Tower 130 King Street West Suite 2810, P.O. Box 433 Toronto, Ontario M5X 1A4 Telephone: (416) 364-5705 Fax: (416) 861-8166
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Contacts:
Charter Real Estate Investment Trust
Floriana Cipollone
Acting Chief Financial Officer
(416) 364-5705
(416) 861-8166 (FAX)
Charter Real Estate Investment Trust
Patrick Miniutti
Chief Executive Officer
(416) 364-5705
(416) 861-8166 (FAX)
www.charterreit.com
