CT REIT Announces Strong First Quarter Results

  • CT REIT announces seven new investments totalling $43.1 million
  • AFFO per unit grows by 3%

TORONTO, May 10, 2016 /CNW/ - CT Real Estate Investment Trust ("CT REIT") (TSX: CRT.UN) today reported its consolidated financial results for the first quarter ended March 31, 2016.

"In the first quarter, we continued to execute on our growth strategy," said Ken Silver, President and Chief Executive Officer, CT REIT. "We are pleased to see a wide range of value creation opportunities that are strong additions to our portfolio."

New Investment Activity

Today, CT REIT announces seven additional investments, including the acquisition of one property from Canadian Tire Corporation ("CTC"), two third party purchases and four property intensifications. All of these investments are properties that include a Canadian Tire store and will require an estimated total investment of $43.1 million. The investments are, in the aggregate, expected to earn an 8.3% weighted average cap rate when completed and represent approximately 410,000 square feet of incremental GLA. CT REIT is funding these investments with Class B LP Units, Class C LP Units, cash, and/or draws on its credit facility or any combination thereof. The table below summarizes the new investments and anticipated completion dates:

Property

Type

GLA (sf.)

Timing

Activity

 

Edson, AB

Vend-in

39,000

Q2 2016

Existing Canadian Tire store and gas bar

Southland Mall, Winkler, MB

Acquisition

181,000

Q2 2016

Acquisition of enclosed mall anchored by Canadian Tire

Antigonish Mall, Antigonish, NS

Acquisition/Development

179,000¹

Q2 2016/Q4 2017

Acquisition and redevelopment of enclosed mall

to include expanded Canadian Tire and Mark's stores

Smithers, BC

Intensification

4,000

Q4 2016

Expansion of existing Canadian Tire store

Blenheim, ON

 

Intensification

2,000

Q4 2016

Expansion of existing Canadian Tire store

Exeter, ON

 

Intensification

2,000

Q4 2016

Expansion of existing Canadian Tire store

Wallaceburg, ON

 

Intensification

3,000

Q4 2016

Expansion of existing Canadian Tire store

 ¹Once redeveloped

Update on Previously Announced Investments

In the first quarter, CT REIT completed the previously announced vend-ins of existing Canadian Tire stores in Hanover, ON, Delson, QC, and a Canadian Tire anchored plaza in Kitchener, ON, and an intensification project in Repentigny, QC, adding 247,000 square feet of GLA for a total investment of $46.1 million

Subsequent to quarter end, CT REIT completed the previously announced sale and leaseback transaction with Sears Canada Inc. CT REIT also completed the previously announced acquisition of land for the development of a Canadian Tire store and four vend-ins from CTC. All together, these investments will add 893,000 square feet of GLA to the portfolio once complete, totalling $123.3 million. The investments will be fully satisfied with the issuance of Class B LP Units, Class C LP Units, cash and/or draws on its credit facility or a combination thereof. 

The table below provides activity updates on the previously announced investments.

Property

Type

GLA (sf.)

Timing

Activity

 

Calgary, AB

Acquisition

660,000¹

Completed in Q2 2016

Sale and leaseback of Sears Canada Inc. distribution centre

Hamilton, ON

Development

61,000²

Land purchase

completed in Q2 2016, construction

to be completed in Q4 2016

Development of new Canadian Tire store

Squamish, BC

Vend-in

35,000

Completed in Q2 2016

Vend-in of existing Canadian Tire store

Leamington, ON

Vend-in

54,000

Completed in Q2 2016

Vend-in of existing Canadian Tire store

Alma, QC

Vend-in

44,000

Completed in Q2 2016

Vend-in of existing Canadian Tire store

Rothesay, NB

Vend-in

39,000

Completed in Q2 2016

Vend-in of existing Canadian Tire store and Gas Bar

¹Acquisition includes seven acres of vacant land for development
²Once development is complete

CT REIT continues to be on track to close on a recently announced sale and leaseback transaction with CTC for its Distribution Centre under construction in Bolton, ON.  At an investment of $325 million, this transaction is expected to close in the second quarter of 2016, with a rent commencement in January 2017, and add an additional 1,400,000 square feet of GLA to the portfolio once complete.

Update on Previously Announced Development Activity

The following table indicates the status of CT REIT's development pipeline. In the first quarter of 2016, ten investment properties were under development representing a total GLA of 266,000 square feet and a total investment of $49.6 million once complete. Commitments are in place and construction commenced on 225,000 square feet, and a total of $15.1 million has been expended to date with a balance of $25.8 million required to complete this space. The remaining space represents pad locations which are currently being pre-leased.

Property

Type

GLA (sf.)

Timing

High River, AB

Development

10,000

Pad leasing underway

Martensville, SK

Development

19,000

Pad leasing underway

Innisfil, ON

Development

49,000

To be completed Q2 2016 (development of a new Canadian Tire store)

Arnprior Mall, Arnprior, ON

Acquisition/Development

133,000¹

To be completed Q4 2016 (redevelopment of an enclosed mall to include a replacement Canadian Tire store)

La Sarre, QC

Intensification – Expansion

4,000

To be completed Q2 2016 (expansion of existing Canadian Tire store)

Sherwood Park, AB

Intensification – Expansion

4,000

To be completed Q2 2016 (expansion of existing Canadian Tire store)

Vaudreuil, QC

Intensification – Pad Development

12,000

To be completed Q4 2016 (construction of a new Mark's pad)

Hanover, ON

Intensification – Expansion

8,000

To be completed Q4 2016 (expansion of existing Canadian Tire store)

Toronto, ON

Intensification – Pad Development

21,000

To be completed Q2 2017 (construction of a new Sport Chek pad)

Elliot Lake, ON

Intensification – Expansion

6,000

To be completed Q3 2017 (expansion of existing Canadian Tire store)

¹Once developed

 

Reset/Redemption of Class C Units

Series 2 of the Class C LP Units of CT REIT are set to be redeemed/rate reset on May 31, 2016. Both CT REIT and CTC have recently agreed that the redemption will be funded, subject to TSX approval, by the issuance to CTC of $200 million of Class B LP Units.

Financial and Operational Summary


Summary of Selected Quarterly Information




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




For the three months ended March 31,

2016

2015

Change

Property revenue

$

98,496

$

92,448

6.5 %

Net operating income 1

$

69,131

$

64,484

7.2 %

Net income

$

61,153

$

55,566

10.1 %

Net income/Unit (basic) 2

$

0.321

$

0.302

6.3 %

Net income/Unit (diluted) 4

$

0.260

$

0.226

15.0 %

Funds from operations1

$

49,626

$

47,448

4.6 %

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

$

0.260

$

0.258

0.8 %

Adjusted funds from operations 1

$

39,382

$

36,876

6.8 %

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

$

0.206

$

0.200

3.0 %

Distributions/Unit - paid 2, 6

$

0.170

$

0.166

2.6 %

AFFO payout ratio1

83 %

83 %

—%

Weighted average number of Units outstanding 2





Basic

190,701,904

184,011,307

3.6 %


Diluted 4

308,422,771

325,275,973

(5.2)%


Diluted (non-GAAP) 1,3

190,799,689

184,074,235

3.7 %

Indebtedness ratio 1

47.7 %

48.2 %

(1.0)%

Interest coverage (times) 1

3.20

3.19

0.3 %

Debt / enterprise value ratio 1

43.3 %

45.2 %

(4.2)%

Gross leaseable area 5

21,757,451

20,735,950

4.9 %

Occupancy rate 5

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.

5Refers to retail, mixed-use and distribution properties and excludes properties under development.

6Period-over-period percentage change is calculated based on exact fractional amounts rather than rounded fractional amounts.

 

Financial Highlights

Net Operating Income (NOI)* – In the first quarter, NOI increased $4.6 million or 7.2% over the same period last year primarily due to acquisitions completed in 2016 and 2015. These acquisitions contributed a total of $3.2 million to NOI growth. Same store NOI and same property NOI increased $0.9 million or 1.3% and $1.4 million or 2.2%, respectively, primarily due to the contractual rent escalations built into the property leases, intensifications completed in 2016 and 2015, and the recovery of capital expenditures, all partially offset by a decrease in the recovery of operating expenses. 

Net Income – Net income was $61.2 million for the quarter, up 10.1% primarily due to the impact of NOI variances discussed earlier and an increase in the fair value adjustment of $3.4 million over the same period last year.

Funds from Operations (FFO)* – FFO for the first quarter was $49.6 million or $0.26 per unit as compared to $47.4 million or $0.258 per unit for the first quarter of 2015. This is $2.2 million (4.6%) or $0.002 per unit (0.8%) 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 first quarter, AFFO increased $2.5 million or 6.8% to $39.4 million. AFFO per unit increased to $0.206 per unit (diluted non-GAAP), 3.0% or $0.006 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 $0.170, 2.6% higher than the same period in 2015 due to the increase in the annual rate of distributions effective with the first distribution paid in 2016. 

*AFFO, FFO and NOI are non-GAAP measures. Refer to Non-GAAP section in the Q1 2016 Management's Discussion & Analysis which is available on SEDAR and at newswire.ca.

Operating Results

Leasing – CTC is CT REIT's largest tenant. At March 31, 2016, CTC represented 97.9% of total GLA and 96.3% of annualized base minimum rent.

Occupancy – At March 31, 2016, 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 March 31, 2016 ("the Q1 MD&A") and Condensed Consolidated Financial Statements and Notes for the period ended March 31, 2016, which are available on SEDAR at www.sedar.com and at www.ctreit.com.  

To view a PDF version of CT REIT's 2016 first quarter results please see: http://files.newswire.ca/1307/CTREITQ12016.PDF

Forward–Looking Statements

This document contains forward-looking information that reflects management's current expectations related to matters such as 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 the REIT's ability to complete any of the investments in acquisitions and property intensifications under the heading "New Investment Activity," the timing and terms of any such investments and the benefits expected to result from such investments  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 2015, and to Section 10 (Enterprise Risk Management) and all subsections thereunder of our 2015 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 3:00 p.m. ET on May 10, 2016. 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 over 290 properties totaling over 21.8 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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