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Citing rising energy costs as the reason for weaker performance than forecast, Killam Properties Inc. (TSX:KMP/KMP:DB) announced its financial results for the second quarter Thursday.

Total operating revenue increased by 17.7 per cent to $23.8-million, up from $20.2-million in the second quarter of 2007.

The company generated a net operating income of $14.5-million, a 16.3 per cent increase $12.4-million generated during the second quarter of 2007.

Funds from operations came to $5.7-million, a 17.1 per cent increase from $4.9-million generated during the second quarter of 2007. Funds generated from operations came to $0.17 per share, compared to $0.18 during the second quarter of 2007, reflecting the spike in energy costs.

During the second quarter Killam completed 25 manufactured home sales and home sale placements, for a total of 39 home sales and home sale placements year-to-date. That is a significant increase from the sale of 3 homes for the six months ended June 30, 2007.

Subsequent to June 30, 2008 Killam acquired two additional properties, including one in Saint John, New Brunswick. Located at 37 Somerset Street, the newly constructed 21-unit three-storey apartment building was built in 2007 and includes 16 one-bedroom units and 5 two-bedroom units, with an average monthly rent of $1,109 per unit. The purchase price of $2.25 million ($107,000 per unit) was satisfied by cash.

The second property is the previously announced $3.5 million purchase of Holiday Park, a 289-site seasonal community in Southampton, Ontario.

Killam will acquire Blue Rock Estates, a new 60-unit, concrete construction apartment building in Saint John, New Brunswick.

The building was built in 2007 and includes 30 one-bedroom units and 30 two-bedroom units with existing average rents of $760 per unit. The purchase price of $5.6 million ($93,600 per unit) and is expected to close in the middle of August.

- With files from Michelle Porter