Primaris Retail REIT Announces Cataraqui Town Centre Purchase

Published on: 2010/07/15 - in Releases

Excerpt from Primaris Retail REIT Press Release.

Associated article: “Cataraqui Town Centre Purchased for $168 Million

Primaris Retail REIT (TSX:PMZ.UN) has announced an agreement to purchase the Cataraqui Town Centre…

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Cataraqui Town Centre

Cataraqui is a two-level enclosed regional shopping centre containing a gross leaseable area of approximately 595,000 square feet, was built in 1982 and underwent extensive renovations in 1999, 2000 and 2005/2006. The site comprises approximately 43 acres. Cataraqui is the dominant enclosed shopping centre in an area extending from Belleville, Ontario to the west, Ottawa to the north and Montreal, Quebec to the east.

Appendices to this press release provide additional information about the asset and pro forma data about the inclusion of the asset in the Primaris portfolio.

The Market

Kingston is located approximately midway between Canada’s two largest cities, Toronto and Montreal, on the north shore of Lake Ontario. It is the 25th largest metropolitan area in Canada with an estimated population of 160,000 as of July, 2009. It has one of the lowest unemployment rates in the country as a result of a very large public sector employment base. Public sectors well represented in Kingston include health care, education, department of defense and correctional services.

Funding In Place

The purchase price of $168 million plus approximately $3.8 million acquisition costs, is expected to be funded as follows (000s):

Cash on hand             $     50,000,000
Draw on line of credit         16,756,000
New mortgage                  105,000,000
                          ---------------
Total                    $    171,756,000

The new mortgage will be for a ten year term and bear interest at a rate to be set at 215 basis points over a benchmark bond yield.

Liquidity Remains Solid

The draw on the line of credit will leave approximately $48 million dollars of unused credit capacity. Primaris has no maturing debt before March 2011 and therefore remains in a very liquid financial position after completing this acquisition.

After this investment, Primaris’ pro forma cash position will be $17 million dollars owing on its line of credit. The pro forma Debt to Gross Book Value ratio will be 53.5%, excluding convertible debentures from “debt”, and will be 60.9% including convertible debentures as debt. Management believes that this cash position and amount of debt are at levels that allow the REIT to continue to comfortably meet current obligations and will continue to allow the REIT to pursue future growth opportunities as they become available.

Forward-Looking Information

The press release contains forward-looking information based on management’s best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, the REIT’s operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “expect”, “plan”, or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.

In particular, certain statements in this document discuss Primaris’ anticipated outlook of future events. These statements include, but are not limited to:

(i)  the estimated net operating income and resultant
     capitalization rate;
(ii) expected funding of acquisition;
(iii)indebtedness levels and liquidity, which could be impacted by
     the level of acquisition activity Primaris is able to achieve
     and future financing opportunities;
(iv) anticipated replacement of expiring tenancies, which could be
     impacted by the effects of general economic conditions and
     the supply of competitive locations; and

Although the forward-looking statements contained in this press release are based on what management of the REIT believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking statements. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include: a less robust retail environment than has been seen for the last several years; relatively stable interest costs; access to debt capital markets to fund, at acceptable costs, the future acquisitions.

Except as required by applicable law, Primaris undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Upon completion of this acquisition, Primaris Retail REIT will own 29 income-producing properties comprising approximately 11.1 million square feet located in Canada. As of June 30, 2010, the REIT had 68,430,386 units issued and outstanding.

Schedule A

Property Description:

Cataraqui Town Centre

Cataraqui is a two-level enclosed regional shopping centre containing a gross leaseable area of approximately 595,000 square feet. It was built in 1982 and underwent extensive renovations in 1999, 2000, and 2005/2006. The site comprises approximately 43 acres. Cataraqui is located in Kingston’s major retail node and is the dominant enclosed shopping centre in eastern Ontario.

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  PROFILE OF TENANTS WITH AREA greater than  15,000 SQ FT
Tenant Name                                         Area SF
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Anchor Tenants
   SEARS                                            124,933
   THE BAY                                          113,054
   ZELLERS                                          115,307
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Total Anchor Tenants                                353,294
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Major Tenants
   SPORT CHEK                                        19,126
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Total Major Tenants                                  19,126
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Total GLA (Excl. Storage area)                      595,128
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Cataraqui is currently 96.5% occupied. Local tenants represent less than 5% of total occupancy. The weighted average lease expiry of tenants is 6.0 years. Sales figures for commercial retail units (which exclude non anchor-and-major tenants, exterior access tenants and free-standing pads) averaged $443 per square foot for the 12 months ended December 31, 2009.

To view Graph 1, please visit the following link: http://media3.marketwire.com/docs/graph_1.pdf.

Primaris' top ten tenants
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                            As of March 31, 2010
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                       Percentage of                        Weighted Average
                        Total Annual                          Lease Term to
    Tenant Groups       Minimum Rent    Area (Sq. ft.)      Maturity (Years)
1   HBC                         7.0%         2,278,188                   7.4
2   YM                          3.1%           218,588                   4.4
3   Sears                       2.7%         1,104,369                   7.5
4   Forzani                     2.6%           376,963                   4.1
5   Reitmans                    2.4%           152,592                   3.7
6   Shoppers Drug Mart          2.4%           166,225                   6.1
7   Loblaws                     1.8%           323,764                   5.6
8   Best Buy                    1.6%           180,353                   4.0
9   Canadian Tire               1.5%           220,194                  10.6
10  Dynamite                    1.4%            74,538                   3.1
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                               26.5%
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The data shown here represents the pro forma combination of Primaris Retail REIT’s existing assets and Cataraqui Town Centre as at March 31 2010.

To view Graphs 2 and 3, please visit the following link: http://media3.marketwire.com/docs/graph_2.pdf.

Primaris' property list sales performance
(for the 12 months ended February 28, 2010)(1)
                                                                 Same Tenant
                                                            Sales per Square
                                                                Foot ($ psf)
                                                           -----------------
                                                           -----------------
Midtown Plaza                                                            562
Cornwall Centre                                                          527
Sunridge Mall                                                            522
Dufferin Mall                                                            517
Stone Road Mall                                                          510
Woodgrove Centre                                                         507
Park Place Mall                                                          502
Orchard Park                                                             473
Grant Park                                                               465
Place d'Orleans                                                          450
Cataraqui Town Centre                                                    443
Northland Village                                                        440
Place Du Royaume                                                         407
Aberdeen Mall                                                            369
Lambton Mall                                                             353
Heritage Place                                                           316
Place Fleur De Lys                                                       311
Eglinton Square                                                          298
(1) Except Cataraqui Town Centre which is as at December 31, 2009.
Contacts:
Primaris Retail REIT
John R. Morrison
President and Chief Executive Officer
(416) 642-7860

Primaris Retail REIT
Louis M. Forbes
Executive Vice President & Chief Financial Officer
(416) 642-7810