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ResReit Press Release ResREIT announces record year-end results26% total return to investorsFebruary 21, 2002 - Residential Equities Real Estate Investment Trust ("ResREIT") (REE.UN - TSE) today announced its financial results for the year ended December 31, 2001 - another record performance with a total return to investors of 26% for the year. Since ResREIT's IPO in 1998, annual returns to investors have averaged 22%. Operating revenues for 2001 grew 10.8% to $106.4 million from $96.0 million in 2000. Property net operating income improved to $53.3 million from $48.9 million, an increase of 9% over last year. Distributable income rose to $1.17 per unit from $1.11, a 5.4% increase. Cash flow per unit increased 5.3% to $1.19. As expected, trust expenses for 2001 were $3.9 million versus $4.4 million one year ago - a direct result of the internalization of the Advisor in the second quarter. For the fourth quarter, revenue rose 8.3% to $27.4 million. Distributable income increased to 28.1 cents per unit from 26.3 cents one year ago, a 6.8% increase. On a same-store basis, operating revenues for the year improved by 5.6% over last year, while net operating income increased 3.6%. "In a challenging year for investors, we were pleased to deliver another year of stable, consistent returns to our unitholders," said Dino Chiesa, ResREIT's Chief Executive Officer. "Our success reflects the attractive fundamentals of urban apartment ownership, ResREIT's high quality portfolio, and an active management team that is fully committed to the interests of our residents and our investors." Of the $1.025 per unit distributed to each unitholder in 2001, 76% is considered a return of capital, and is therefore tax deferred until the units are sold. Please visit ResREIT's website at www.resreit.com for more information regarding monthly distributions and tax deferral information. "In 2001, we reduced our payout ratio to 86% of cash flow from 89% and at the same time increased distributions from $1.00 to $1.025, one of the few REITs to have done so this year" said Maurice Kagan, ResREIT's Chief Financial Officer. "Our capital expenditure program continued throughout the year as we invested over $10 million to upgrade our buildings, improve the appearance of our properties, conduct energy retrofits and general improvements. Our loan-to-book-value ratio, which is lower than market, is conservative at 59% after re-financing $75 million of debt and our average interest rate has fallen to 6.37%. Basic net loss per unit was $0.196 due to the unusual cost of the internalization of ResREIT's Advisor during the year. Net income before internalization was $17 million or $0.713 per unit, compared to $15 million or $0.682 per unit in 2000," Kagan added. Other Activities During the YearDuring the second quarter of 2001, ResREIT completed the internalization of its Advisor, fully aligning the interests of management and unitholders, and creating fee and cost reduction opportunities that were realized throughout the remainder of the year. In early July, ResREIT completed a bought deal realizing net proceeds of $42 million, which were used to fully repay the REIT's line of credit and help finance strategic acquisitions. During the year, ResREIT acquired a total of 10 properties for approximately $32 million. In making these acquisitions, management adhered to its policy of purchasing high-quality buildings in areas with current and future positive market conditions, thereby allowing for greater potential rental increases, as evidenced by the strong revenue growth. ResREIT also implemented a Dividend Reinvestment Plan (DRIP) in 2001, allowing unitholders to reinvest their distributions at an effective discount of 3.85%. Outlook"In certain respects, 2001 was a watershed year for ResREIT with the internalization of management, significant improvements to our portfolio, and several other successful initiatives that will benefit the Trust into 2002 and beyond; however, it was also a year like every other in terms of our stable and consistent returns to unitholders. Recent leasings at higher rental rates will lead to enhanced growth over the next 12 months," added Chiesa. ResREIT is one of Canada's largest residential real estate investment trust offering investors significant returns through stable, tax-efficient monthly distributions and the inherent growth potential of Canada's urban apartment market. ResREIT has a nation-wide portfolio of properties comprised of 9,643 residential suites located in five major Canadian cities. ResREIT units trade on the Toronto Stock Exchange under the symbol REE.UN.
Financial results for the year ended December 31, 2001 are as follows:
CONSOLIDATED STATEMENT OF INCOME
(in thousands of dollars except per-unit amounts)
Oct. 1/01 Oct. 1/00 Jan. 1/01 Jan. 1/00
to to to to
Dec. 31/01 Dec. 31/00 Dec. 31/01 Dec. 31/00
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Operating revenues
Property rental income $ 27,485 $ 25,263 $106,402 $ 95,976
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Operating expenses
Realty taxes 3,985 3,934 15,758 15,034
Operating expenses 8,929 8,298 33,523 28,417
Property management fees 959 953 3,803 3,588
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13,873 13,185 53,084 47,039
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Property net
operating income 13,612 12,078 53,318 48,937
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Trust expenses
Advisory fees - 818 1,372 3,518
Other expenses 1,137 333 2,480 1,094
Fee income - (225) - (225)
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1,137 926 3,852 4,387
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Income before interest,
amortization and unusual
item 12,475 11,152 49,466 44,550
Amortization expense
Amortization 2,920 2,523 10,840 9,379
Amortization of deferred
financing and leasing costs 46 145 497 518
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Income before interest
and unusual item 9,509 8,484 38,129 34,653
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Interest expense
Mortgage interest 5,323 4,880 20,658 18,923
Interest expense 28 376 750 1,063
Interest income (145) (37) (277) (277)
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5,206 5,219 21,131 19,709
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Net income before unusual
item 4,303 3,265 16,998 14,944
Unusual item
Internalization expense 128 - 21,670 -
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Net (loss) income $ 4,175 $ 3,265 $ (4,672) $ 14,944
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Average number of units
outstanding 25,716,807 22,034,487 23,834,593 21,901,163
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Basic net (loss) income
per unit $ 0.162 $ 0.148 $ (0.196) $ 0.682
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Average number of units
outstanding assuming
dilution 26,807,214 22,239,816 24,164,378 22,018,739
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Diluted net (loss)
income per unit $ 0.160 $ 0.147 $ (0.193) $ 0.679
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CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
2001 2000
---- ----
ASSETS
Income-producing properties $401,847 $366,614
Prepaid rents 155,768 158,430
Funds held in trust 2,801 100
Cash and short-term investments - 1,684
Accounts receivable 2,275 1,990
Deferred costs 4,290 3,464
Prepaid expenses 1,887 1,866
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$568,868 $534,148
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LIABILITIES
Mortgages payable $339,631 $308,037
Bank loan payable 8,726 22,732
Accounts payable and other liabilities 6,703 7,709
Security deposits and last month's rent 8,292 7,420
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363,352 345,898
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UNITHOLDERS' EQUITY
Issued and outstanding - 25,868,458 units
(2000 - 22,045,011)
Unitholders' equity, beginning of year 188,250 192,202
Net (loss) income for the year (4,672) 14,944
Issuance of units 48,502 3,082
Public offering costs (2,124) -
Distributions to unitholders (24,440) (21,978)
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Unitholders' equity, end of year 205,516 188,250
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$568,868 $534,148
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CONSOLIDATED STATEMENT OF CASH FLOW
(in thousands of dollars)
2001 2000
---- ----
Cash flows from (used in) operating activities
Property rental income received $106,208 $ 95,510
Interest received 288 263
Cash payments to suppliers and employees (58,512) (50,801)
Interest paid (21,398) (19,674)
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Cash flows from operating activities 26,586 25,298
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Cash flows from (used in) investing activities
Income-producing property acquisitions (31,858) (40,017)
Prepaid rent acquisitions - (7,692)
Capital expenditures (11,289) (9,060)
Financing fees (1,260) (854)
Internalization expense (21,670) -
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Cash flows used in investing activities (66,077) (57,623)
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Cash flows from (used in) financing activities
Net increase in deposits from residents 872 1,055
(Decrease) increase in bank loan (13,896) 14,362
Proceeds of new mortgage financing 110,916 42,175
Mortgage principal repayments (79,322) (9,896)
Proceeds from issuance of units 48,502 988
Public offering costs (2,124) -
Distributions to unitholders (24,440) (21,978)
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Cash flows from financing activities 40,508 26,706
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Net increase (decrease) in cash 1,017 (5,619)
Cash investments, beginning of year 1,784 7,403
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Cash, end of year $ 2,801 $ 1,784
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Cash is represented by:
Funds held in trust $ 2,801 $ 100
Cash and short-term investments - 1,684
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$ 2,801 $ 1,784
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The following is an extract from the notes to the financial statements:
Distributions, Distributable Income Per Unit and Net Income Per Unit
The internalization expense which was treated as an unusual item has
been excluded from the calculation of distributable income for the
current year.
The following table reconciles net income (loss) for the year to
distributable income for the year:
2001 2000
----- ----
Net (loss) earnings $(4,672) $14,944
Add back:
Amortization expense (excluding amortization
of deferred financing) 10,840 9,379
Internalization expense 21,670 -
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Distributable income $27,838 $24,323
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Average number of units outstanding 23,834,593 21,901,163
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Distributable income per unit $ 1.168 $ 1.111
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Residential Equities distributed approximately 88% of its Distributable
Income (2000 - 90%) during the year with a view to reducing the ratio to
approximately 81% in 2002.
For the year ended December 31, 2001, Residential Equities distributed
$24,440 to its unitholders (2000 - $21,978), comprised as follows:
2001 2000
---- ----
Taxable to unitholders as other income 23.96% 20.20%
Tax deferral to be deducted from adjusted
cost base of individual unitholders 76.04% 79.80%
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100.00% 100.00%
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For the year ended December 31, 2001, Residential Equities made
distributions to its unitholders, of which 23.96% is taxable to
unitholders as other income, as follows:
Taxable Non-Taxable
Portion Portion
Distribution Per Unit Per Unit
Month Record Date Payment Date Per Unit (23.96%) (76.04%)
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January January 31 February 15 $0.08500 $0.02036 $0.06464
February February 28 March 15 $0.08500 $0.02036 $0.06464
March March 30 April 15 $0.08500 $0.02036 $0.06464
April April 30 May 15 $0.08500 $0.02036 $0.06464
May May 31 June 15 $0.08500 $0.02036 $0.06464
June June 29 July 15 $0.08500 $0.02036 $0.06464
July July 4 August 15 $0.01097 $0.00263 $0.00834
July July 31 August 15 $0.07403 $0.01773 $0.05630
August August 31 September 15 $0.08500 $0.02036 $0.06464
September September 28 October 15 $0.08500 $0.02036 $0.06464
October October 31 November 15 $0.08500 $0.02036 $0.06464
November November 30 December 15 $0.08750 $0.02096 $0.06654
December December 19 December 31 $0.08750 $0.02096 $0.06654
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Total distributions paid $1.02500 $0.24552 $0.77948
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