Dundee REIT December 31, 2005 Financial Results.TORONTO Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing -- DUNDEE Dundee, city (1991 pop. 172,294) and council area, E central Scotland, on the Firth of Tay. It is a port and manufacturing city. Dundee is historically known for its manufacture and processing of jute. Its marmalade is also famous. REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :D.UN) : This news release contains forward looking information that is based upon assumptions and is subject to risks and uncertainties as indicated in the cautionary note contained within this press release. DUNDEE REIT (TSX:D.UN) today reported strong financial results for the year ended December December: see month. 31, 2005. - Q4 rental property revenues up 22% to $60.6 million over prior year fourth quarter - Q4 net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. up 28% to $33.4 million over prior year fourth quarter - Q4 funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. up 26% to $17.8 million over prior year fourth quarter - Year end occupancy rises to 96.2%, the eighth consecutive quarterly increase - Year end debt-to-gross book value 59.3% (48.4% excluding convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. ) - Year end weighted average interest rate reduced to 6.16% (December 31, 2004 - 6.62%) - $350.6 million in acquisitions completed in 2005 at an average cap rate of approximately 8.4% Management of Dundee REIT will be holding a conference call to discuss the results tomorrow, Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , February February: see month. 24, 2006 at 8:00 a.m. (EST EST electroshock therapy. EST abbr. electroshock therapy ). To access the conference call, please dial 416-695-7848 in Toronto and Overseas or 1-877-888-4483 elsewhere in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . A taped replay of the call will be available from February 24, 2006 at 10:00 a.m. (EST) to March 3, 2006 at 11:59 p.m. (EST). To access the replay, please dial 416-695-5275 or 1-888-509-0081 and use reservation number T612162D.
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SELECTED FINANCIAL INFORMATION
($000's except unit and per unit amounts)
Three Months Ended
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December 31, September 30, December 31,
2005 2005 2004
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Rental property revenues $ 60,630 $ 57,619 $ 49,643
Net operating income
("NOI")(1) 33,351 32,310 26,080
Funds from operations
("FFO")(2) 17,839 17,181 14,202
Net income (loss) (5,015) 2,223 3,027
Distributable income
("DI")(3) 16,546 15,990 13,291
Book value of rental
properties 1,328,395 1,282,168 1,057,231
Debt 943,621 936,236 693,155
Debt-to-gross book value 59.3% 61.7% 55.2%
Per unit data (basic)
FFO 0.68 0.68 0.58
Net income (loss) (0.28) 0.13 0.18
Distributable income 0.63 0.63 0.54
Distributions 0.55 0.55 0.55
Units (period end)
REIT Units, Series A
outstanding 20,449,209 17,204,683 16,819,963
LP Class B Units, Series 1
outstanding 8,337,365 8,337,365 7,924,084
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Total number of units
outstanding 28,786,574 25,542,048 24,744,047
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Occupied and committed
space 96.2% 96.1% 94.5%
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SELECTED FINANCIAL INFORMATION
($000's except per unit amounts)
Twelve Months Ended
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December 31, 2005 December 31, 2004
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Rental property revenues $ 221,576 $ 185,483
Net operating income
("NOI")(1) 122,035 101,183
Funds from operations
("FFO")(2) 66,330 59,141
Net income (loss) 4,309 4,353
Distributable income
("DI")(3) 60,428 53,431
Per unit data (basic)
FFO 2.61 2.50
Net income (loss) 0.25 0.27
Distributable income 2.38 2.26
Distributions 2.20 2.20
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"Our business has improved dramatically over the last twelve months," said Michael Cooper See: Funds from operations increased by 4% from a year earlier. These improvements, together with numerous acquisitions completed and currently in our pipeline, have positioned us as a more competitive investment vehicle." ANNOUNCEMENT BY THE BOARD OF TRUSTEES board of trustees Politics The posse of thugs who oversee an institution's administration. See Board of directors. The Board of Trustees of Dundee REIT is pleased to announce the appointment of J. Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. Knowlton Knowlton may refer to Places
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of the Trust. In his new role Mr. Knowlton will be responsible for the daily operation of the business and will also focus on acquisitions and external relationships. Since 1999, Mr. Knowlton has served as Executive Vice-President and Chief Operating Officer of Dundee REIT or its predecessor, responsible for Dundee's property management operations. In September 2004, Mr. Knowlton assumed the position of Chief Financial Officer, responsible for all financial accounting and reporting, treasury and finance functions. Mr. Knowlton has 19 years of experience in the real estate industry. In addition, the Board is pleased to announce the appointment of Mario Barrafato as Chief Financial Officer of the Trust. In his new role Mr. Barrafato will be responsible for all financial accounting and reporting, as well as finance functions. Mr. Barrafato first joined Dundee in 2001 as Vice President, Taxation, responsible for all taxation matters and played a key role in the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of the Dundee Realty realty n. a short form of "real estate." (See: real estate) REALTY. An abstract of real, as distinguished from personalty. Realty relates to lands and tenements, rents or other hereditaments. Vide Real Property. commercial revenue property business into Dundee REIT. Since July 2003 Mr. Barrafato has served as Senior Vice President and Controller in which capacity he implemented fundamental aspects of the investment trust structure and lead the financial planning Financial planning Evaluating the investing and financing options available to a firm. Planning includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in the form of a financial plan, and then comparing future performance against , financing reporting, accounting and compliance functions for the Trust. Michael Cooper will continue as the Chief Executive Office of Dundee REIT and will remain focused on strategy, acquisitions, capital markets and investor relationships. In addition, the Board of Trustees has appointed Mr. Cooper as Vice Chairman of the Trust. "I am very excited about these appointments, " said Mr. Cooper. "The positions that Michael and Mario have accepted today actually recognize the roles that they have been fulfilling for some time," added Mr. Cooper. FINANCIAL HIGHLIGHTS - $350.6 million of acquisitions completed in 2005 - Dundee REIT acquired $350.6 million of high quality office, industrial and flex space Flex space is a term used for lightly zoned buildings. It is mainly used when referring to industrial or office space. History Flex space evolved from light industrial warehouses being converted to office space. properties comprising approximately 3.0 million square feet. The impact of these acquisitions contributed to the approximate 22% quarterly increase in rental property revenues year over year and a 19% increase for the twelve-month period. - Rental properties NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics up 28% to $33.4 million - rental properties NOI increased by 28% over the prior year fourth quarter and by 21% for the twelve-month period. Acquisitions were the primary driver behind this growth, contributing $11.6 million and $36.6 million to the NOI for the three- and twelve-month periods. - Comparative properties NOI up 8% to $20.5 million - growth in comparative NOI of 8% and 3% for the three- and twelve-month periods, respectively, is mainly reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of increased occupancy in the Ontario and Alberta office portfolios and the Alberta industrial portfolio. - Funds from operations grew by 26% to $17.8 million - funds from operations grew by 26% to $17.8 million compared to the fourth quarter 2004, largely as a result of acquisitions as well as improved occupancy rates Noun 1. occupancy rate - the percentage of all rental units (as in hotels) are occupied or rented at a given time pct, per centum, percent, percentage - a proportion in relation to a whole (which is usually the amount per hundred) . On a per unit basis, FFO in the fourth quarter was $0.68, a substantial increase over the $0.58 recorded in the fourth quarter 2004. - Distribution Reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. and Unit Purchase Plan ("DRIP") enrolment is high - at December 31, 2005, approximately 43% of the total units outstanding were enrolled in the DRIP, including 19% of REIT Units, Series A and 100% of LP Class B Units, Series 1. As a result of this high level of participation in the DRIP, the Trust's cash payout ratio Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. for distributions was 57.0% for 2005. - Taxation of distributions - 65.8% of distributions paid to Unitholders in respect of the tax year ending December 31, 2005 are tax deferred. Management estimates that approximately 65% of the distributions to be made by the Trust in 2006 will be tax deferred. OPERATIONAL HIGHLIGHTS Portfolio occupancy rises to 96.2% - the overall weighted average percentage of occupied and committed space increased to 96.2%, Dundee REIT's eighth consecutive quarterly increase, and average in-place net rents grew by 3% to $9.33 per square foot compared to rates at the end of 2004.
Average In-place
Occupancy Net Rent (per sq. ft.)
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
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Office 95.8% 93.6% $14.14 $14.35
Industrial 96.5% 95.2% 5.94 5.78
Retail 94.8% 93.3% 8.89 9.10
Total 96.2% 94.5% 9.33 9.06
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ACQUISITION HIGHLIGHTS 2005 Acquisition Activity During the year, Dundee REIT completed $350.6 million of acquisitions comprising approximately 3.0 million square feet. These properties are all of very high quality and have low normalized leasing and maintenance capital expenditure requirements. The acquisitions are consistent with the REIT's strategy of acquiring high quality office and industrial properties in Canada's largest markets, as well as increasing the average rent and lease term, while reducing the overall average cost and increasing the average term to maturity of the REIT's debt. Due to an increasingly competitive acquisition market, Dundee REIT has also started to look beyond its existing markets for accretive investments. The table below highlights the acquisitions completed in the fourth quarter 2005: Acquisitions during the fourth quarter Property Interest Acquired GLA 2005 Location Type Acquired (sq.ft.) --------------------------------------------------------------------- ACC Centre Calgary industrial 100% 65,000 35 Fitzgerald Road Ottawa office 100% 63,000 2695 Avenue Dollard Montreal industrial 100% 71,000 Palladium Phase Ottawa held for 100% - III Land development 3820 Commerce Road London & industrial 100% 81,000 and 147 Massey Road Guelph 3915 Commerce Road London industrial 100% 83,000 Entrust Tower Ottawa office 100% 146,000 --------------------------------------------------------------------- Total 509,000 --------------------------------------------------------------------- --------------------------------------------------------------------- Acquisitions during Occupancy Purchase the fourth on Price quarter 2005 Acquisition ($000's) Date Acquired --------------------------------------------------------------------- ACC Centre 95% $ 6,884 November 8, 2005 35 Fitzgerald Road 100% 11,927 November 9, 2005 2695 Avenue Dollard 100% 4,601 November 17, 2005 Palladium Phase III Land - 833 December 16, 2005 3820 Commerce Road 100% 8,134 December 20, 2005 and 147 Massey Road 3915 Commerce Road 100% 6,586 December 23, 2005 Entrust Tower 100% 32,590 December 23, 2005 --------------------------------------------------------------------- Total $ 71,555 --------------------------------------------------------------------- --------------------------------------------------------------------- 2006 Acquisition Activity So far in 2006, Dundee REIT has completed $31.4 million of acquisitions with an average lease term of 6.4 years. Dundee REIT also has approximately $158.2 million of office and industrial properties comprising 1.0 million square feet under contract and subject to various conditions. In addition, the Trust expects to close the purchase of properties developed with the Paul's Group at the Airport Corporate Centre near Toronto's Pearson International Airport. "These acquisitions should add additional $55.0 million of high quality assets to our portfolio in the second half of 2006. We are very pleased with our opportunities to grow this year. With three acquisitions already completed, and several more under contract, we are confident that the quality and volume of our acquisition activity in 2006 will match that of last year" said Mr. Cooper.
Acquisitions
completed in Property Interest
2006 Location Type Acquired GLA (sq.ft.)
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1919 84th Avenue Edmonton industrial 100% 48,000
(Park 19)
70 Disco Road Toronto industrial 100% 99,000
SEC Portfolio(i) Quebec office and 100% 265,000
industrial
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Total 412,000
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(i) A 12 property portfolio mainly located in the greater
metropolitan areas of Montreal and Quebec City
Acquisitions Purchase
completed in Price
2006 Occupancy ($000's) Date Acquired
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1919 84th Avenue (Park 19) 99% $ 2,730 January 10, 2006
70 Disco Road 100% 7,598 January 12, 2006
SEC Portfolio(i) 99% 21,063 January 27, 2006
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Total $ 31,391
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(i) A 12 property portfolio mainly located in the greater
metropolitan areas of Montreal and Quebec City
Disposition Activity Consistent with the Trust's strategy to reduce its retail segment, the sale of Simcoe Town Centre, a 128,000 square foot retail property located in Norfolk, Ontario, was completed on November 15, 2005. Dundee REIT received gross proceeds of approximately $6.2 million, of which $5.4 million was used to retire outstanding debt. The Trust is also presently negotiating the sale of 50% of Greenbriar Mall Greenbriar Mall is a shopping mall in Atlanta, southwest of downtown Atlanta along Interstate 285 and Georgia State Route 166. Opening Greenbriar Mall opened in 1965 as Atlanta's second totally enclosed mall having being beaten by Columbia Mall by one year. in Atlanta, Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. , the larger of two remaining retail properties. As a result of this pending sale, the Trust recorded an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $11.5 million in the fourth quarter of 2005. With the completion of the sale of the 50% interest in Greenbriar Mall, Dundee REIT will have reduced its retail segment to about 2% from approximately 29% of the total book value of retail assets owned by its predecessor company in 1998. CAPITAL INITIATIVES - New equity issue - On December 14, 2005, the Trust completed a public offering for gross cash proceeds of $65.0 million through the issuance of 2,600,000 REIT Units, Series A at a price of $25.00 per unit. On December 22, 2005, Dundee REIT issued an additional 390,000 REIT Units, Series A for gross proceeds of approximately $9.8 million, increasing the total gross proceeds of the offering to approximately $74.8 million - Debt - Dundee REIT's debt renewals and new debt placed to finance property acquisitions in 2005 resulted in a reduction of the weighted average interest rate to 6.16% as at December 31, 2005 (December 31, 2004 - 6.62%) and a longer weighted average term to maturity of 5.9 years (2004 - 5.4 years). "Due to the high level of convertible debt, Dundee REIT has made the conscious decision to increase its target debt range from 55% - 60% to 57% - 63%," said Mr. Knowlton. At December 31, 2005, Dundee REIT's debt-to-gross book value was 59.3% (December 31, 2004 - 55.2%). The assumed conversion of all the 6.5% and 5.7% Debentures would decrease the debt-to-gross book value to 48.4%. - Convertible Unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. Debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. Issue - On April 1, 2005, the Trust completed a public offering of $100.0 million principal amount of convertible unsecured subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before (the "5.7% Debentures"). The 5.7% Debentures bear interest at 5.7% per annum Per annum Yearly. , payable semi-annually on March 31st and December 31st each year, and mature on March 31, 2015. Each 5.7% Debenture is convertible into 33.33 REIT Units, Series A per $1,000 of face value, representing a conversion price of $30.00 per unit. The 5.7% Debentures may not be redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. prior to March 31, 2009. On or after March 31, 2009, but prior to March 31, 2011, the 5.7% Debenture may be redeemed by the Trust in whole or in part at a price equal to the principal amount plus accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and unpaid interest. Information appearing in this news release is a select summary of results. The financial statements and management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial for the Trust, as well as its Supplementary Information Package are available at www.dundeereit.com and on www.sedar.com. Dundee REIT is an unincorporated Adj. 1. unincorporated - not organized and maintained as a legal corporation unorganised, unorganized - not having or belonging to a structured whole; "unorganized territories lack a formal government" , open-ended real estate investment trust. We are a provider of high quality, affordable business premises. We focus on owning, acquiring, leasing and managing mid-sized urban and suburban office and industrial properties in Canada. Our diversified diversified (di·verˑ·s portfolio consists of approximately 16.0 million square feet of gross leasable area Gross leasable area (GLA) in the retail development industry is a term applied to shopping malls, lifestyle centers, outlet malls and other retail centers to indicate the amount of floor space available to be rented. , located primarily in our target markets of Toronto, Ottawa, Montreal, Calgary and Edmonton. Our portfolio is well diversified by asset type, geographic location and tenant mix. For more information, please visit www.dundeereit.com. FOOTNOTES (1) NOI - rental property operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. less rental property operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . (2) FFO - net income, adjusted for future income tax, depreciation and amortization, gain (loss) on sale, provision for impairment in value of rental property, non-controlling interest, dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. gain and other amortization. (3) DI is defined in our Declaration of Trust and has been restated for 2004 using the new definition for distributable income as outlined in Appendix A of the Trust's Management Information Circular Information Circular A document sent to shareholders outlining important matters to be discussed at the annual shareholders' meeting. Notes: Sent along with a proxy, the information circular may cover matters such as the election of the Board of Directors, possible dated March 14, 2005. NOI and FFO are key measures of performance used by real estate operating companies operating company A business that engages in transactions with outsiders. ; NOI, FFO and DI are not defined by generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), do not have standard meanings and may not be comparable with other industries and companies. This press release may contain forward looking information within the meaning of applicable securities legislation. Forward looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dundee REIT's control, that could cause actual results to differ materially from those that are disclosed in or implied by such forward looking information. These risks and uncertainties include, but are not limited to, general and local economic and business conditions; the financial condition of tenants; our ability to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. maturing debt; leasing risks, including those associated with the ability to lease vacant space; and interest and currency rate functions. Our objectives and forward looking statements are based on certain assumptions, including that the general economy remains stable, interest rates remain stable, conditions within the real estate market remain consistent, competition for acquisitions remains consistent with the current climate and that the capital markets continue to provide ready access to equity and/or debt. All forward looking information in this press release speaks as of the date of this press release. Dundee REIT does not undertake to update any such forward looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in Dundee REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available at Dundee REIT's website at www.dundeereit.com. Dundee REIT (TSX:D.UN) |
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