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Partners REIT Announces Strong Growth and Solid Operating Performance in 2012

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VICTORIA, BRITISH COLUMBIA -- (Marketwire) -- 03/19/13 -- Partners Real Estate Investment Trust, (TSX: PAR.UN) announced today continued strong portfolio growth and solid operating performance for the three months and year ended December 31, 2012.

2012 HIGHLIGHTS:

-- Purchase of twelve properties in 2012 for $175.1 million further expands, strengthens and diversifies portfolio-- Net income increased 284% to $27.8 million, up 54% per unit to $1.45-- FFO and AFFO up on contribution from acquisitions, strong operating performance-- Same property NOI up 4% on reduced operating costs-- FFO and AFFO per unit up 16.9% and 7.0% respectively despite the 151% increase in the weighted average number of units outstanding-- FFO and AFFO cash payout ratios improve significantly-- Completion of two bought deal equity offerings and convertible unsecured debenture issue raise $75.5 million in net proceeds to fund growth-- Leverage, debt service ratios improve despite substantial growth-- Total assets increased to $479.1 million-- Net asset value rises $113.7 million to $170.1 million



"We made real progress in expanding and strengthening our property portfolio in 2012, initiatives that generated significant and accretive growth in our key performance benchmarks," commented Adam Gant, Chief Executive Officer. "We were also very pleased that our successful property management programs resulted in very solid 4% same property NOI growth for the year."

"Looking ahead, we believe 2013 will be another strong year for Partners REIT as we continue to grow and strengthen our portfolio through strategic acquisitions, the properties purchased in 2012 make a full year's contribution to our results, and our proven asset and property management programs generate incremental increases in operating cash flows," Mr. Gant concluded.

Significant Growth

During 2012 the REIT acquired twelve well-located retail and mixed-use properties in British Columbia, Alberta, Ontario and Quebec aggregating approximately 721,000 square feet of gross leasable area ("GLA") for a total purchase price of approximately $175.1 million. The acquisitions were funded by an advance of $7.5 million on the REIT's credit facility, the acquisition of new and the assumption of existing mortgages totaling $71.3 million bearing effective interest rates between 3.58% and 5.12%, $56.2 million in proceeds from the NorRock Transaction completed in the first quarter of 2012, and a portion of the proceeds from the REIT's two bought-deal equity offerings and convertible debenture issuance completed during the year.

With these acquisitions, the REIT's portfolio at December 31, 2012 consisted of 33 well-located retail and mixed-use properties in Ontario, Quebec, Manitoba, Alberta and British Columbia aggregating approximately 2.3 million square feet of GLA.

Strong Operating Performance

Net income increased to $17.1 million ($0.86 per unit) and $27.8 million ($01.45 per unit) for the three months and year ended December 31, 2012, respectively, compared to $3.1 million ($0.39 per unit) and $7.3 million ($0.94 per unit) for the same comparable periods last year. The increases were due to the contribution from acquisitions completed over the prior twelve months, as well as increases of $18.5 million in the fair value of prior years' acquisitions.

Weighted average occupancy at December 31, 2012 was 96.7%, up from 96.4% at the end of the third quarter and 94.1% at the end of the second quarter of 2012, and compared to 98.0% at the end of 2011. The increase from the third and second quarters of 2012 is due to improved leasing across the portfolio, offset by lower occupancies at certain recently acquired properties and vacancies at certain other properties due to ongoing re-positioning and redevelopment initiatives.

Net Operating Income ("NOI") increased to $7.3 million and $28.0 million in the fourth quarter and year ended December 31, 2012, respectively, compared to $4.7 million and $15.5 million in the comparable prior year periods due primarily to the contribution from acquisitions completed over the prior twelve months. Same property NOI in 2012 increased a strong 4.0% due primarily to higher percent rents from tenants at the REIT's Cornwall Square and increased straight-line rent at Mega Centre, partially offset by lower base rents and recoveries at Mega Centre while preparing a space at the centre for Wal-Mart. For the three months ended December 31, 2012 same property NOI declined by 1.0% due primarily to lower recovery revenues at one property.

Funds from Operations ("FFO") increased to $3.7 million ($0.17 per unit) and $12.5 million ($0.64 per unit) for the three months and year ended December 31, 2012, respectively, compared to $1.1 million ($0.15 per unit) and $4.2 million ($0.55 per unit) for the same comparable periods last year. The increases were due primarily to the contribution from acquisitions completed over the prior twelve months. The REIT's FFO cash payout ratio(excluding DRIP distributions) improved to 91% and 95% in the three months and year ended December 31, 2012, respectively.

Adjusted Funds from Operations ("AFFO") also rose significantly to $3.5 million ($0.15 per unit) and $11.9 million ($0.61 per unit) for the three months and year ended December 31, 2012, respectively, from $1.3 million ($0.16 per unit) and $4.4 million ($0.57 per unit) for the same prior-year periods. The AFFO cash payout ratio (excluding DRIP distributions) improved to 97% and 99% for the three months and year ended December 31, 2012, respectively.

During the fourth quarter of 2012, the REIT revised its calculations to include amortization of deferred financing costs in FFO and exclude it from AFFO. The calculations for prior periods have been amended to reflect this change.

The REIT's growth has been accretive on a per unit basis through 2012 despite the 151% increase in the weighted average number of units outstanding as at December 31, 2012 compared to the end of 2011. The net asset value per unit of the REIT increased to $7.62 at December 31, 2012 from $7.26 at December 31, 2011 due to the acquisition of accretive properties and significant increase in the fair value of the portfolio. Total net assets increased $113.7 million during the year to $170.1 million at December 31, 2012.

Active Leasing

Management remains committed to actively pursuing new leases and lease renewals with the objective of increasing occupancy and weighted average rental income per square foot of gross leasable area. One of the REIT's goals is to generate organic growth through redevelopment and lease renewal activities at its existing centres. As at March 19, 2013 the REIT had lease renewals and new leases of approximately 258,000 square feet. The weighted average rent, including any material new and renewed leases completed by March 19, 2013 was $10.29 per square foot, a decrease of $0.34 per square foot from the weighted average rent for leases that expire during the year due to management's initiatives to replace rents from temporary tenants that have vacated space with long-term, stable and sustainable rents from national, more credit-worthy tenants.

Solid Financial Position

As at December 31, 2012 the REIT's ratio of debt to gross book value improved to 49.3% (62.4% including convertible debentures) compared to 62.9% (73.0% including convertible debentures) at December 31, 2011. Interest coverage and debt service coverage ratios improved to 2.30 times and 1.55 times, respectively, as at December 31, 2012 from 1.70 times and 1.26 times as at December 31, 2011. During 2012 the REIT acquired, assumed and increased mortgages totaling approximately $71.3 million on properties acquired during the period. Overall, the REIT's mortgage portfolio incurred a weighted average effective interest rate of 4.48% at December 31, 2012, an improvement from4.95% as at December 31, 2011, with a weighted average term to maturity of approximately 3 years. Over the next two years, the REIT has approximately $28.9 million of debt maturing which carries an average effective interest rate of 4.83%. Management expects to refinance this debt at lower interest rates, positively impacting the REIT's future cash flows. Interest expense savings from refinancing at current market rates are anticipated to continue through 2013 and into the following year.

Recent Events

On March 12, 2013 the REIT completed a bought-deal offering of $20.0 million of convertible unsecured subordinated debentures. On March 19, 2013, the REIT issued an additional $3.0 million of the convertible debentures on the exercise of the over-allotment option. The debentures have a maturity date of March 31, 2018, a coupon of 5.5% per annum, and will pay interest semi-annually in arrears on March 31 and September 30 each year commencing on September 30, 2013. Each $1,000 principal amount of debentures is convertible into approximately 97.561 units of the REIT at any time, at the option of the holder, representing a conversion price of $10.25 per unit. The net proceeds will be used to fund future acquisitions, repay existing debt, and for general trust purposes.

On February 19, 2013 the REIT announced that it would be acquiring the Mariner Square Shopping Centre, a 97.8% occupied six-building open-air retail centre aggregating approximately 101,000 square foot of GLA situated in downtown Campbell River on the east coast of Vancouver Island. The REIT will pay approximately $25.8 million for the property, satisfied by the assumption of a $14.7 million current mortgage maturing in November 2017 bearing a mark-to-market interest rate of 3.5%, with the balance in cash. The centre is estimated to generate current in-place annualized Net Operating Income of approximately $1.7 million and $0.8 million in annualized Funds from Operations. The transaction is expected to close on or before April 15th, 2013.

On January 10, 2013 the REIT completed a bought-deal offering of 3,363,750 units, including an over-allotment option, at $7.70 per unit representing gross proceeds of approximately $25.9 million. Net proceeds from the offering were used to repay approximately $6.9 million of debt drawn on the REIT's credit facility used to complete the Nun's Island acquisition (see below), to fund future acquisitions, and for general trust purposes.

On January 17, 2013 the REIT announced it had entered into agreements to acquire four newly-constructed, necessity-based, open-air retail centres and one stabilized retail centre in the Greater Montreal region totaling approximately 286,500 square feet of GLA. The Portfolio has an economic occupancy of 93.3% with nearly 50% of the floor space and income generated by national and regional tenants on long-term leases. The five properties are estimated to generate annualized Net Operating Income of approximately $4.85 million and $2.70 million in annualized Funds from Operations. On March 18, 2013, the REIT announced the completion of two of the properties totaling approximately $26.2 million, funded by cash.

On December 20, 2012 the REIT announced that it had completed the acquisition of a 100% leased 43,774 square foot open-air retail centre in Timmons, Ontario. The REIT paid approximately $9.95 million for the property, funded by the assumption of a first mortgage for $4.94 million with an effective interest rate of approximately 4.0%, with the balance in cash. The in-place annualized Net Operating Income of approximately $800,000 will produce annualized Funds from Operations of approximately $600,000.

On December 20, 2012 the REIT also announced it would complete the acquisition of two well-located retail centres situated in close proximity on Nun's Island in Montreal, Quebec aggregating 105,000 square feet of GLA. The REIT will pay approximately $21.9 million for the two properties utilizing $6.9 million of the REIT's credit facility. The two centres are estimated to generate current in-place annualized Net Operating Income of approximately $1.4 million and $1.2 million in annualized Funds from Operations.

On October 9, 2012 the REIT announced it had entered into a new fifteen-year lease agreement with Wal-Mart Canada Corp. for approximately 90,000 square feet (plus basement storage space) at the REIT's Mega Centre retail property in St. Laurent, (Montreal) Quebec. It is anticipated the new Wal-Mart store will open by the second quarter of 2013.

Investor Conference Call

A conference call to discuss the recent operating and financial results will be hosted by Adam Gant, Chief Executive Officer, Patrick Miniutti, President, and Heather Routly, Chief Financial Officer, on Thursday, March 21, 2013 at 2:00 pm ET (11:00 am PT). The telephone numbers for the conference call are Local / International: (416) 849-2698 and North American Toll Free: (866) 400-2270. The telephone numbers to listen to the call after it is completed (Instant Replay) are Local / International (416) 915-1035 or North American toll free (866) 245-6755. The Passcode for the Instant Replay is 425565#. A recording of the call will also be available on the REIT's web site at www.partnersreit.com.

Financial Highlights---------------------------------------------------------------------------- As at and for the As at and for the three months ended year ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2012 2011 2012 2011----------------------------------------------------------------------------Revenues from income producing properties $11,470,356 $ 7,468,818 $ 43,045,555 $ 24,164,527Net income and comprehensive income 17,108,336 3,060,830 27,823,978 7,253,430Net income per unit - basic 0.86 0.39 1.45 0.94NOI (1) 7,310,162 4,736,361 28,024,289 15,538,857NOI - same property (1) 4,667,167 4,717,916 12,116,081 11,700,974FFO(1) 3,700,909 1,135,206 12,452,406 4,248,477FFO per unit(1) 0.17 0.15 0.64 0.55AFFO(1) 3,464,647 1,261,116 11,892,246 4,430,094AFFO per unit(1) 0.15 0.16 0.61 0.57Distributions(2) 3,577,579 1,244,844 12,445,357 4,967,664Distributions per unit(2) 0.16 0.16 0.64 0.64Distribution payout ratio(3) 97% / 103% 110% / 99% 100% / 105% 117% / 112%Cash distributions(4) 3,363,482 1,161,756 11,769,231 4,687,812Cash distributions per unit(4) 0.15 0.15 0.61 0.60Cash distribution payout ratio(5) 91% / 97% 102% / 92% 95% / 99% 110% / 106%---------------------------------------------------------------------------- Dec. 31, Dec. 31,As at 2012 2011----------------------------------------------------------------------------Total assets $479,068,788 $265,748,040Total debt(6) 294,023,939 202,592,032Total equity 170,064,524 56,406,374Weighted average units outstanding - basic 19,164,337 14,306,130Debt-to-gross book value including debentures(6) 62.4% 73.0%Debt-to-gross book value excluding debentures(6) 49.3% 62.9%Interest coverage ratio(7) 2.30 1.70Debt service coverage ratio(7) 1.55 1.26Weighted average interest rate(8) 4.48% 4.95%Portfolio occupancy 96.7% 98.0%----------------------------------------------------------------------------1. Net operating income or "NOI", funds from operations or "FFO", and adjusted funds from operations or "AFFO" are non-IFRS financial measures widely used in the real estate industry.2. Represents distributions to unitholders on an accrual basis. Distributions are payable as at the end of the period in which they are declared by the Board of Trustees, and are paid on or around the 15thday of the following month. Distributions per unit exclude the 5% bonus units given to participants in the Distribution Reinvestment and Optional Unit Purchase Plan.3. Total distributions as a percentage of funds from operations/adjusted funds from operations.4. Represents distributions on a cash basis, and as such, excludes the non- cash distributions of units issued under the Distribution Reinvestment and Optional Unit Purchase Plan.5. Cash distributions as a percentage of funds from operations/adjusted funds from operations.6. See calculation under "Debt-to-Gross Book Value" in MD&A under "Part III - Results of Operations."7. Calculated on a rolling four-quarter basis. See definition in MD&A under "Mortgages and Other Financing" in "Part III - Results of Operations".8. Represents the weighted average effective interest rate for secured debt excluding debentures and credit facilities.



For the complete Financial Statements and Management's Discussion and Analysis for the period, please visit www.sedar.com or www.partnersreit.com.

About Partners REIT

Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 38 retail properties located in Ontario, Quebec, Manitoba, Alberta and British Columbia aggregating approximately 2.7 million square feet of leasable space. Partners REIT focuses on expanding and managing a portfolio of retail and mixed-use community and neighbourhood shopping centres located in both primary and secondary markets across Canada.

Certain statements included in this press release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect," "will" and similar expressions to the extent they relate to Partners REIT. The forward-looking statements are not historical facts but reflect Partners REIT's current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the timing of the offering, success of the offering, listing of the units, use of proceeds of the Offering, access to capital, regulatory approvals, intended acquisitions and general economic and industry conditions. Although Partners REIT believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein.



Contacts:
Partners Real Estate Investment Trust
Patrick Miniutti
President
(250) 940-5500
www.partnersreit.com



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