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ResReit Press Release

ResREIT announces record year-end results

26% total return to investors


February 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 Year

During 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
                              ----------  ----------  ----------  ----------

    Operating revenues
    Property rental income      $ 27,485    $ 25,263    $106,402    $ 95,976
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                  13,873      13,185      53,084      47,039
    -------------------------------------------------------------------------
    Property net
     operating income             13,612      12,078      53,318      48,937
    -------------------------------------------------------------------------
    Trust expenses
    Advisory fees                      -         818       1,372       3,518
    Other expenses                 1,137         333       2,480       1,094
    Fee income                         -        (225)          -        (225)
    -------------------------------------------------------------------------
                                   1,137         926       3,852       4,387
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
    Income before interest
     and unusual item              9,509       8,484      38,129      34,653
    -------------------------------------------------------------------------
    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)
    -------------------------------------------------------------------------
                                   5,206       5,219      21,131      19,709
    -------------------------------------------------------------------------

    Net income before unusual
     item                          4,303       3,265      16,998      14,944

    Unusual item
    Internalization expense          128           -      21,670           -
    -------------------------------------------------------------------------
    Net (loss) income           $  4,175    $  3,265    $ (4,672)   $ 14,944
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of units
     outstanding              25,716,807  22,034,487  23,834,593  21,901,163
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic net (loss) income
     per unit                   $  0.162    $  0.148    $ (0.196)  $   0.682
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average number of units
     outstanding assuming
     dilution                 26,807,214  22,239,816  24,164,378  22,018,739
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted net (loss)
     income per unit            $  0.160    $  0.147    $ (0.193)   $  0.679
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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
    -------------------------------------------------------------------------
                                                        $568,868    $534,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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
    -------------------------------------------------------------------------
                                                         363,352     345,898
    -------------------------------------------------------------------------
    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)
    -------------------------------------------------------------------------
    Unitholders' equity, end of year                     205,516     188,250
    -------------------------------------------------------------------------
                                                        $568,868    $534,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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)
    -------------------------------------------------------------------------

    Cash flows from operating activities                  26,586      25,298
    -------------------------------------------------------------------------

    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)          -
    -------------------------------------------------------------------------

    Cash flows used in investing activities              (66,077)    (57,623)
    -------------------------------------------------------------------------

    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)
    -------------------------------------------------------------------------

    Cash flows from financing activities                  40,508      26,706
    -------------------------------------------------------------------------

    Net increase (decrease) in cash                        1,017      (5,619)

    Cash investments, beginning of year                    1,784       7,403
    -------------------------------------------------------------------------
    Cash, end of year                                   $  2,801    $  1,784
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash is represented by:

    Funds held in trust                                 $  2,801    $    100
    Cash and short-term investments                            -       1,684
    -------------------------------------------------------------------------
                                                        $  2,801    $  1,784
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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           -
                                                      ----------  ----------
      Distributable income                               $27,838     $24,323
                                                      ----------  ----------
      Average number of units outstanding             23,834,593  21,901,163
                                                      ----------  ----------
      Distributable income per unit                      $ 1.168     $ 1.111
                                                      ----------  ----------

    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%
                                                           -------   -------
                                                           100.00%   100.00%
                                                           -------   -------

    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%)
    -------------------------------------------------------------------------
    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
                                           ----------------------------------
    Total distributions paid                $1.02500    $0.24552    $0.77948
                                           ----------------------------------
                                           ----------------------------------


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