WINNIPEG. March 11, 2015 /CNW/ — Lanesborough Real Estate Investment Trust (LREIT) (TSX: LRT.UN) today reported its operating results for the year ended December 31, 2014. The following comments in regard to the financial position and operating results of LREIT should be read in conjunction with Management’s Discussion & Analysis and the financial statements for the year ended December 31, 2014. which may be obtained from the LREIT website at www.lreit.com or the SEDAR website at www.sedar.com.

Highlights

During 2014, LREIT continued to improve its financial and liquidity position. Key accomplishments include:

• Extension of Series G Debentures: The maturity date of the Series G debentures was extended from February 2015 to June 2018.

Income Results

During 2014, LREIT incurred a loss from investment properties of $20.9 million compared to income of $14.7 million during 2013. The variance is mainly due to a variance in fair value adjustments, including the fair value adjustments on Parsons Landing, and a decrease in the combined total of net operating income and insurance recoveries, partially offset by a decrease in interest expense.

During 2013, the fair value of the investment property portfolio increased by $15.9 million. largely as a result of the return of suites to active rental operations at Parsons Landing and favourable changes in key valuation assumptions including cap and discount rates. The fair value loss of $16.5 million that occurred in 2014 is almost entirely due to unfavourable changes in revenue and occupancy expectations for the Fort McMurray portfolio that occurred as a result of the decline in oil prices during Q4-2014.

Excluding the impact of properties sold, NOI combined with insurance recoveries on Parsons Landing decreased by $3.0 million during 2014, compared to 2013.  After accounting for the decline in net operating income related to the sale of the Purolator Building and Nova Court in 2013, the decrease in operating income is largely attributable to a weakening of market conditions in Q1-2014. Conditions improved substantially in the second and third quarters of the year, but softened again in the fourth quarter, due largely to seasonal factors.

Interest expense decreased by $2.7 million. or 10%, during 2014, largely as a result of the refinancing of debt at lower interest rates during 2013, the effect of which were fully realized in 2014. The reduction in the combined total of long‑term debt and the acquisition payable of $17 million also served to reduce interest expense.

Income from discontinued operations decreased $2.2 million primarily due to the write‑down of Elgin Lodge to its fair value based on a new appraisal prepared during 2014. Overall, LREIT completed 2014 with a comprehensive loss of $22.2 million compared to comprehensive income of $15.5 million in 2013.

Cash Flow Results

During 2014, the cash outflow from operating activities, excluding working capital adjustments, amounted to $0.6 million. compared to a cash inflow of $2.0 million during 2013. Including working capital adjustments, LREIT completed 2014 with a cash outflow from operating activities of $0.8 million. compared to a cash inflow of $1.6 million during 2013.

Outlook

The recent decline in oil prices and lower occupancies will make 2015 a challenging year for the Fort McMurray property portfolio. LREIT intends to expand its divestiture program in 2015 and will pursue upward re-financing opportunities in an effort to further improve its overall liquidity position. Despite current headwinds, the long‑term prospects for continued growth in oil sands production and development activity remain. Even during periods of price volatility, oil sands production has continued to increase steadily over time, reflecting the long‑term nature of the oil sands resource.

FINANCIAL AND OPERATING SUMMARY