CT REIT Announces Strong Second Quarter Results

  • CT REIT announces five new investments totalling $24 million

  • 5.5% increase in AFFO per unit

TORONTO, Aug. 2, 2016 /CNW/ - CT Real Estate Investment Trust ("CT REIT") (TSX: CRT.UN) today reported its consolidated financial results for the second quarter ended June 30, 2016.

"In the second quarter, we closed on properties adding 1.1 million square feet of GLA to our income producing properties and raised $350 million of public unsecured debt at record low interest rates," said Ken Silver, President and Chief Executive Officer, CT REIT. "We continue to execute on our growth strategy and delivered growth in AFFO per unit of 5.5% year over year."

New Investment Activity

Today, CT REIT announces five additional investments, including two developments and three property intensifications. All of these investments are properties that include a Canadian Tire store and will require an estimated total investment of $24 million. The investments are, in the aggregate, expected to earn a weighted average 6.76% cap rate when completed and represent approximately 133,000 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

 

Elmira, ON

Development

35,000

Q2 2017

Development of a new
Canadian Tire store

Edmundston, NB

 

Intensification

3,000

Q2 2017

Expansion of existing
Canadian Tire store

Athabasca, AB

 

Intensification

7,000

Q2 2017

Expansion of existing
Canadian Tire store

Bradford, ON

Intensification

15,000

Q3 2017

Expansion of existing
Canadian Tire store

Amos, QC

Development

73,000

Q1 2018

Canadian Tire anchored
development

 

Update on Previously Announced Investments

In the second quarter, CT REIT completed the acquisition of an enclosed mall anchored by a Canadian Tire store in Winkler, MB, the vend-in of an existing Canadian Tire store in Edson, AB, the development of a Canadian Tire store in Innisfil, ON, and the intensification (expansion) of a Canadian Tire store in Sherwood Park, AB.

The table below provides activity updates on the previously announced investments which were completed subsequent to CT REIT's last update.

Property

Type

GLA (sf.)

Timing

Activity

 

Southland Mall,
Winkler, MB

Acquisition

181,567

Completed in Q2
2016

Acquisition of
enclosed mall
anchored by
Canadian Tire

Edson, AB

Vend-in

39,481

Completed in Q2
2016

Vend-in of
existing Canadian
Tire store and
Gas Bar

Innisfil, ON

Development

48,618

Completed in Q2
2016

Development of a
new Canadian
Tire store

Sherwood Park,
AB

Intensification

4,075

Completed in Q2
2016

Expansion of an
existing Canadian
Tire store

 

Update on Previously Announced Development Activity

The following table provides updates on CT REIT's previously announced development activity. In the second quarter of 2016, 17 investment properties were under development representing a total GLA of 1.9 million square feet and a total investment of $397.7 million once complete. Commitments are in place and construction commenced on 1.8 million square feet, and a total of $315.0 million has been expended to date with a balance of $76.1 million required to complete this space.

Property

Type

GLA (sf.)

Timing

La Sarre, QC

Intensification

4,000

To be completed in Q3 2016
(expansion of existing Canadian
Tire store)

Martensville, SK

Development

19,000

Committed to lease 11,000
square feet with pad leasing
underway for 8,000 square feet

Bolton, ON

Vend-in/Development

1,400,000

Vend-in of the development
project completed in Q2

 

Construction to be completed in
Q4 2016

Antigonish Mall,
Antigonish, NS

Acquisition/Development

179,000

Enclosed mall acquisition
completed in Q2 2016

 

Redevelopment of enclosed mall
to include expanded Canadian
Tire and Mark's stores to be
completed in Q4 2017

 

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 June 30,

Six Months Ended June 30,

For the periods ended June 30,

2016

2015

Change

2016

2015

Change

Property revenue

$

101,507

$

93,217

8.9 %

$

200,003

$

185,665

7.7 %

Net operating income 1

$

71,471

$

65,258

9.5 %

$

140,602

$

129,742

8.4 %

Net income

$

60,347

$

57,205

5.5 %

$

121,500

$

112,771

7.7 %

Net income/Unit (basic) 2

$

0.306

$

0.306

—%

$

0.626

$

0.608

3.0 %

Net income/Unit (diluted) 4

$

0.256

$

0.233

9.9 %

$

0.519

$

0.464

11.9 %

Funds from operations1

$

52,000

$

47,867

8.6 %

$

101,626

$

95,315

6.6 %

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

$

0.263

$

0.256

2.7 %

$

0.524

$

0.514

1.9 %

Adjusted funds from operations 1

$

41,517

$

37,241

11.5 %

$

80,899

$

74,117

9.2 %

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

$

0.210

$

0.199

5.5 %

$

0.417

$

0.400

4.3 %

Distributions/Unit - paid 2, 6

$

0.170

$

0.166

2.6 %

$

0.340

$

0.332

2.6 %

AFFO payout ratio1


81 %


83 %

(2.4)%


82 %


83 %

(1.2)%

Weighted average number of Units outstanding 2












Basic


197,295,136


186,826,727

5.6 %


193,998,520


185,426,795

4.6 %


Diluted 4


308,094,139


334,434,146

(7.9)%


306,611,027


335,491,246

(8.6)%


Diluted (non-GAAP) 1,3


197,418,458


186,907,810

5.6 %


194,109,074


185,498,850

4.6 %

Indebtedness ratio 1







46.9 %


48.3 %

(2.9)%

Interest coverage (times) 1


3.29


3.23

1.9 %


3.24


3.21

0.9 %

Debt / enterprise value ratio 1







42.8 %


47.5 %

(9.9)%

Gross leaseable area 5







22,864,841


21,266,437

7.5 %

Occupancy rate 5







99.7 %


99.9 %

(0.2)%

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

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

3 Diluted 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.

4 Diluted 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.

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

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

 

Financial Highlights

Net Operating Income (NOI)* – In the second quarter, NOI increased $6.2 million or 9.5% over the same period last year primarily due to acquisitions completed in 2016 and 2015. These acquisitions contributed a total of $4.6 million to NOI growth. Same store NOI and same property NOI increased $1.3 million or 2.0% and $1.7 million or 2.5%, respectively, primarily due to the contractual rent escalations built into the property leases, intensifications completed in 2016 and 2015, the recovery of capital expenditures, and the increase in the recovery of operating expenses. 

Net Income – Net income was $60.3 million for the quarter, up 5.5% primarily due to the impact of NOI variances discussed earlier, partially offset by an increase in interest and other financing charges of $1.3 million and a decrease in the fair value adjustment of $1.0 million over the same period last year.

Funds from Operations (FFO)* – FFO for the second quarter was $52.0 million or $0.263 per unit (diluted non-GAAP) as compared to $47.9 million or $0.256 per unit for the second quarter of 2015. This is $4.1 million (8.6%) or $0.007 per unit (2.7%) 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 second quarter, AFFO increased $4.3 million or 11.5% to $41.5 million. AFFO per unit increased to $0.210 per unit (diluted non-GAAP), 5.5% or $0.011 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 Q2 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 June 30, 2016, CTC represented 94.7% of total GLA and 94.5% of annualized base minimum rent.

Occupancy – At June 30, 2016, CT REIT's portfolio occupancy rate decreased 0.2% to 99.7% from the prior quarter due to a higher than average vacancy rate in properties acquired during the second quarter of 2016.

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 June 30, 2016 ("the Q2 MD&A") and Condensed Consolidated Financial Statements and Notes for the period ended June 30, 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 second quarter results please see: http://files.newswire.ca/1307/CT_REIT_FS_and_MDA.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 11:00 a.m. ET on August 3, 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 301 properties totalling over 22.9 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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