CT REIT Announces a Distribution Increase and Strong Third Quarter Results

  • CT REIT increases annual distribution by 2.56% beginning January 2016
  • Announces seven new investments totaling $88 million

TORONTO, Nov. 9, 2015 /CNW/ - CT Real Estate Investment Trust (CT REIT), (TSX: CRT.UN) today reported its consolidated financial results for the third quarter ended September 30, 2015.

"Our growth strategy continues to contribute to our strong operating results, generating solid growth in AFFO per unit," said Ken Silver, President and Chief Executive Officer, CT REIT. "We are also pleased to announce that, for the second time since going public, CT REIT will increase its annual distributions, and at a higher rate, beginning in January 2016."

Increase in Distributions

The trustees of CT REIT have approved an increase in the annualized distributions to $0.68 per unit, an increase of 2.56% from the previous distribution of $0.663 per unit on an annualized basis, commencing with the January 15, 2016 payment date.

"CT REIT's portfolio will deliver the predicted increase in rents on January 1, 2016, on well over 95% of its gross leasable area due to the long term leases at its properties," continued Silver. "We are pleased to have reduced our AFFO payout ratio to 82% from close to 90% in the prior year. We remain committed to a conservative payout ratio and expect a further, but smaller, reduction in 2016."

New Investment Activity

Today, CT REIT announces a further seven investments in acquisitions and property intensifications, all of which are properties which include Canadian Tire stores and will require an estimated total investment of $88 million. The investments are, in the aggregate, expected to earn a 6.24% weighted average cap rate when all are completed and represent approximately 438,000 square feet of incremental GLA. CT REIT is funding these investments by a combination of Class B LP Units, Class C LP Units, cash, and draws on its credit facility. The table below summarizes the new investments and anticipated completion dates:

Property

Type

GLA (sf.)

Timing

Activity

Vaughan, ON

Vend-in

92,602

Q4 2015

Existing Canadian Tire store and Gas Bar

Hanover, ON

Vend-in

34,518

Q1 2016

Existing Canadian Tire store and Gas Bar

Kitchener, ON

Vend-in

128,872

Q1 2016

Existing Canadian Tire store and 3rd party CRUs

Sault Ste. Marie, ON

Vend-in

92,998

Q1 2016

Existing Canadian Tire store and Gas Bar

Delson, QC

Vend-in

81,530

Q1 2016

Existing Canadian Tire store

La Sarre, QC

Intensification

3,821

Q1 2016

Expansion of existing Canadian Tire store

Sherwood Park, AB

Intensification

4,075

Q1 2016

Expansion of existing Canadian Tire store

Update on Previously Announced Investments

In the third quarter, CT REIT completed a development investment in Swift Current, SK, and one intensification project in Saskatoon, SK, at a total cost of $6.1 million.

The table below provides activity updates on previously announced properties. These investments have been funded through a combination of issuances of Class B LP Units, Class C LP Units, cash and draws on CT REIT's credit facility.

Property

Type

GLA (sf.)

Timing

Activity

Swift Current, SK

Development

22,504

Completed

Development of new Mark's and Sport Chek stores

Saskatoon East, SK

Intensification

5,953

Completed

Expansion of existing Canadian Tire store

Developments

The following table indicates the status of CT REIT's development pipeline. All previously announced investments are proceeding on time and on budget.

In the third quarter, eight investment properties were under development representing a total GLA of 356,000 square feet and a total investment of $72.7 million once complete. Commitments are in place and construction commenced on 317,700 square feet, and a total of $28.8 million has been expended to date with a balance of $43.9 million required to complete this space. The remaining space represents pad locations which are currently being pre-leased.

Property

Type

GLA (sf.)

Status

Kelowna, BC

Intensification

01

Improvement of existing Canadian Tire store completed in October 2015

Selkirk, MB

Intensification –  pad

16,000

Construction of Sport Chek store and expansion of existing Mark's store to be completed Q4 2015

Waterdown, ON

Intensification – pad

22,000

Construction of Mark's and Sport Chek stores to be completed  Q4 2015


Repentigny, QC

Intensification – Expansion

4,400

To be completed in Q4 2015 (expansion of existing Canadian Tire store)

High River, AB

Development

64,200

Construction of Canadian Tire and Mark's stores completed in October 2015. Pad leasing underway

Martensville, SK

Development

67,800

Construction of Canadian Tire store completed in October 2015. Pad leasing underway

Innisfil, ON

Development

48,900

Development of a new Canadian Tire store to be completed Q2 2016

Arnprior, ON

Acquisition/Development

132,7002

Redevelopment of an enclosed mall to include a replacement Canadian Tire store to be completed Q4 2016

TOTAL


356,000


¹Land acquisition and improvements to Canadian Tire Garden Centre
²Once redeveloped

 

Financial and Operational Summary


Summary of Selected Quarterly Information

(in thousands of Canadian dollars, except per Unit, Unit and square footage amounts)

Three Months Ended

Nine Months Ended

For the periods ended September 30,

2015

2014

Change

2015

2014

Change

Property revenue

$

95,916


$

89,535


7.1

%

$

281,581


$

255,579


10.2

%

Net operating income 1

$

67,478


$

60,803


11.0

%

$

197,220


$

177,533


11.1

%

Net income

$

58,885


$

49,197


19.7

%

$

171,656


$

264,550


(35.1)

%

Net income/Unit (basic) 2

$

0.311


$

0.271


14.8

%

$

0.919


$

1.467


(37.4)

%

Net income/Unit (diluted) 4

$

0.242


$

0.202


19.8

%

$

0.709


$

0.951


(25.4)

%

Funds from operations1

$

49,369


$

44,736


10.4

%

$

144,684


$

130,270


11.1

%

Funds from operations/Unit (diluted, non-GAAP) 1,2,3

$

0.260


$

0.247


5.3

%

$

0.774


$

0.722


7.2

%

Adjusted funds from operations 1

$

38,548


$

33,664


14.5

%

$

112,665


$

98,210


14.7

%

Adjusted funds from operations/Unit (diluted, non-GAAP)1,2,3

$

0.203


$

0.185


9.7

%

$

0.603


$

0.545


10.6

%

Distributions/Unit - paid 2, 7

$

0.166


$

0.162


2.0

%

$

0.497


$

0.487


2.0

%

AFFO payout ratio1


82

%


87

%

(5.7)

%


82

%


89

%

(7.9)

%

Weighted average number of Units outstanding 2


















Basic


189,543,754



181,431,586


4.5

%


186,814,195



180,306,206


3.6

%


Diluted 4


320,882,645



345,446,555


(7.1)

%


325,905,939



342,307,814


(4.8)

%


Diluted (non-GAAP) 1,3


189,630,969



181,479,601


4.5

%


186,891,378



180,346,826


3.6

%

Indebtedness ratio 1


48.1

%


49.1

%

(2.0)

%









Interest coverage (times) 1


3.22



3.15


2.2

%









Debt / enterprise value ratio 1


46.0

%


49.4

%

(6.9)

%









Gross leaseable area 5


21,295,013



20,122,113


5.8

%









Occupancy rate 6


99.9

%


99.9

%

%









1Non-GAAP key performance indicators. Refer to section 9.0 of the MD&A for further information.

2Total Units consists of REIT Units and Class B LP Units outstanding.

3Diluted Units used in calculating non-GAAP measures include restricted and deferred units issued under various plans and exclude the effect of assuming that all of the Class C LP Units will be settled with Class B LP Units.

4Diluted Units determined in accordance with IFRS includes restricted and deferred units issued under various plans and the effect of assuming that all of the Class C LP Units will be settled with Class B LP Units. Refer to section 6.0 of the MD&A.

5Gross leaseable area refers to retail, mixed-use and distribution properties and excludes properties under development.

6Refers to retail, mixed-use and distribution properties and excludes property under development.

7Period-over-period percentage change is calculated based on exact fractional amounts rather than rounded fractional amounts.

Financial Highlights

Net Operating Income (NOI)* –  In the third quarter, NOI increased $6.7 million or 11.0% over the same period last year primarily due to acquisitions completed in 2015 and 2014, including property additions of 28,457 square feet completed in the third quarter. These acquisitions contributed a total of $4.3 million to NOI growth. Same store NOI and same property NOI increased $1.9 million or 3.2% and $2.4 million or 4.1%, respectively, primarily due to the contractual rent escalations built into the property leases, intensifications completed in 2015 and 2014, recovery of capital expenditures and increase in the recovery of operating expenses.  

Net Income – Net income was $58.9 million for the quarter, up 19.7% primarily due to the impact of NOI variances discussed earlier and an increase in the fair value adjustment of $5.3 million over the same period last year.

Funds from Operations (FFO)* – FFO for the third quarter was $49.4 million or $0.260 per unit as compared to $44.7 million or $0.247 per unit for the third quarter of 2014. This is $4.7 million (10.4%) or $0.013 per unit (5.3%) higher than the same period last year. This is largely due to the impact of NOI variances discussed earlier.

Adjusted Funds From Operations (AFFO)* – In the third quarter, AFFO increased $4.9 million or 14.5% to $38.5 million. AFFO per unit increased to $0.203 per unit (diluted non-GAAP), 9.7% or $0.018 per unit over the same period last year. This is largely due to the impact of NOI variances discussed earlier.

Distributions – Distributions per unit in the quarter amounted to $0.166, 2% higher than the same period in 2014 due to the increase in the annual rate of distributions effective with the first distribution paid in 2015. 

*AFFO, FFO and NOI are non-GAAP measures. Refer to Non-GAAP section in the Q3 2015 Management's Discussion & Analysis which is available on SEDAR and at newswire.ca.

Operating Results

Leasing – CTC is CT REIT's largest tenant. At September 30, 2015, CTC represented 98% of total GLA and 96.5% of annualized base minimum rent.

Occupancy – At September 30, 2015, CT REIT's portfolio occupancy rate was unchanged from the prior quarter at 99.9%.

Management Discussion and Analysis (MD&A) and Unaudited Consolidated Financial Statements and Notes
Information in this press release is a select summary of results. This press release should be read in conjunction with CT REIT's MD&A for the period ended September 30, 2015 ("the Q3  MD&A") and Condensed Consolidated Financial Statements and Notes for the period ended September 30, 2015, which are available on SEDAR at www.sedar.com and at www.ctreit.com.   

To view a PDF version of CT REIT's 2015 third quarter results, please see: http://files.newswire.ca/1307/Q32015FSMDA.PDF

Forward–Looking Statements

This document contains forward-looking information that reflects management's current expectations related to matters such as increases in distribution, future financial performance and operating results of CT REIT. Forward-looking statements are provided for the purposes of providing information about CT REIT's future outlook and anticipated events or results. Readers are cautioned that such information may not be appropriate for other purposes.

All statements other than statements of historical facts included in this document may constitute forward–looking information, including but not limited to, statements concerning reduction in AFFO payout ratio under the heading "Increase in Distributions", future acquisitions under the heading, "New Investment Activity" and other statements concerning developments, intensifications, results, performance, achievements, prospects or opportunities for CT REIT. Forward-looking information is based on reasonable assumptions, estimates, analyses, beliefs and opinions of management made in light of its experience and perception of prospects and opportunities, current conditions and expected trends, as well as other factors that management believes to be relevant and reasonable at the date such information is provided.

By its very nature forward-looking information requires us to make assumptions and is subject to inherent risks and uncertainties, which give rise to the possibility that the REIT's assumptions, estimates, analyses, beliefs and opinions may not be correct and that the REIT's expectations and plans will not be achieved. Although the forward looking information contained in this press release is based on information, assumptions and beliefs which are reasonable and complete, this information is necessarily subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking information.

For more information on the risks, uncertainties and assumptions that could cause the REIT's actual results to differ from current expectations, refer to the "Risk Factors" section of our Annual Information Form for fiscal 2014, and to Part X (Enterprise Risk Management) and all subsections thereunder of our 2014 Management's Discussion and Analysis, as well as the REIT's other public filings, available at www.sedar.com and at www.ctreit.com.  

The forward-looking statements and information contained herein are based on certain factors and assumptions as of the date hereof. CT REIT does not undertake to update any forward-looking information, whether written or oral, that may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, except as is required by applicable securities laws.

Information contained in or otherwise accessible through the websites referenced in this press release (other than CT REIT's profile on SEDAR at www.sedar.com) does not form part of this press release and is not incorporated by reference into this press release. All references to such websites are inactive textual references and are for information only.

Additional information about CT REIT has been filed electronically with various securities regulators in Canada through SEDAR and is available online at www.sedar.com and at www.ctreit.com.

Conference Call

CT REIT will conduct a conference call to discuss information included in this news release and related matters at 8:00 a.m. ET on November 10, 2015. The conference call will be available simultaneously and in its entirety to all interested investors and the news media through a webcast at http://ctreit.com/en/investors/financial-reporting, and will be available through replay for 12 months.

About CT Real Estate Investment Trust

CT Real Estate Investment Trust (TSX:CRT.UN) is an unincorporated, closed end real estate investment trust formed to own income producing commercial properties primarily located in Canada. Its portfolio is comprised of more than 275 properties totaling over 20 million square feet of GLA, consisting primarily of retail properties located across Canada. Canadian Tire Corporation, Limited is CT REIT's most significant tenant. For more information, visit www.ctreit.com.

SOURCE CT Real Estate Investment Trust (CT REIT)

For further information: Media: Jane Shaw, 416-480-8581, jane.shaw@cantire.com; Investors: Andrea Orzech, 416-480-3195, andrea.orzech@cantire.com


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