CT REIT Reports Strong First Quarter 2017 Results

CT Real Estate Investment Trust - Management's Discussion and Analysis, First Quarter 2017 (CNW Group/CT Real Estate Investment Trust (CT REIT))

• Delivers 10.2% growth in AFFO per unit over the same period last year
• CT REIT announces four new investments, totalling $42 million

TORONTO, May 9, 2017 /CNW/ - CT Real Estate Investment Trust ("CT REIT") (TSX: CRT.UN) today reported its consolidated financial results for the first quarter ended March 31, 2017.

"CT REIT was designed to deliver growth and security and our first quarter results demonstrate the continued delivery of both," said Ken Silver, President and Chief Executive Officer, CT REIT. "We are building on a solid foundation and are optimistic about the opportunities ahead of us."

New Investment Activity

Today, CT REIT announced four additional investments, which will require an estimated total investment of $42 million. The investments are, in the aggregate, expected to earn a weighted average cap rate of 6.42% when completed and represent approximately 184,000 square feet of incremental gross leasable area ("GLA").  CT REIT is funding these investments with the issuance of Class B LP Units and Class C LP Units to Canadian Tire Corporation, Limited ("CTC"), 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
Arnprior, ON	Redundant vend-in/ development	18,000	Q2 2017 – Q4 2017	Redevelopment of redundant Canadian Tire store
Calgary, AB	Redundant vend-in/ development	47,000	Q2 2017 – Q2 2018	Redevelopment of redundant Canadian Tire store
Sudbury, ON	Redundant vend-in/ development	84,000	Q3 2017 – Q2 2018	Redevelopment of redundant Canadian Tire store
Picton, ON	Third party acquisition/ development	35,000	Q2 2017 – Q1 2018	Third party purchase and redevelopment of existing Canadian Tire store

 

Update on Previously Announced Investments

In the first quarter, CT REIT completed the development of a new freestanding building in Martensville, SK, and completed a previously announced vend-in from CTC in Dartmouth, NS.

Subsequent to quarter end, CT REIT completed two previously announced intensifications of Canadian Tire stores in Bradford, ON, and Athabasca, AB. This added approximately 22,000 square feet of GLA to the portfolio fully satisfied with cash.

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

Property	Type	GLA (sf.)	Timing	Activity
Martensville, SK	Development	11,000	Completed Q1 2017	Development of a freestanding building
Dartmouth, NS	Vend-in	63,000	Completed Q1 2017	Existing Canadian Tire store
Bradford, ON	Intensification	15,000	Completed Q2 2017	Expansion of existing Canadian Tire store
Athabasca, AB	Intensification	7,000	Completed Q2 2017	Expansion of existing Canadian Tire store

 

Reset/Redemption of Class C Units

The Series 10-15 Class C LP Units held by CTC, which have a face value of $70.4 million and a coupon rate ranging from 1.65% to 2.38%, have a rate reset date of May 31, 2017. In January 2017, CT REIT delivered a notice of redemption to CTC for the Series 10-15 Class C LP Units, which allows for the series to either be redeemed or reset at CTC's discretion. If redeemed, it is expected to be funded, subject to TSX approval, by approximately $23 million of cash and the issuance to CTC of approximately $47 million of Class B LP Units.

Financial and Operational Summary

Summary of Selected Information
(in thousands of Canadian dollars, except unit , per unit and square footage amounts)		Three Months Ended March 31,
			2017		2016	Change
Property revenue		$	111,140	$	98,496	12.8 %
Net operating income ^1		$	79,171	$	69,131	14.5 %
Net income		$	75,322	$	61,153	23.2 %
Net income per unit (basic) ^2		$	0.362	$	0.321	12.8 %
Net income per unit (diluted) ^4		$	0.300	$	0.260	15.4 %
Funds from operations^1		$	58,063	$	49,626	17.0 %
FFO per unit (diluted, non-GAAP) ^1,2,3		$	0.279	$	0.260	7.3 %
Adjusted funds from operations ^1		$	47,221	$	39,382	19.9 %
AFFO per unit (diluted, non-GAAP)^1,2,3		$	0.227	$	0.206	10.2 %
Distributions per unit - paid ^2, 6		$	0.175	$	0.170	2.9 %
AFFO payout ratio^1		77 %		83 %		(7.2)%
Adjusted cashflow from operations^7		$	44,540	$	42,008	6.0 %
Weighted average number of units outstanding ^2
	Basic	207,809,528		190,701,904		9.0 %
	Diluted ^4	308,919,062		308,422,771		0.2 %
	Diluted (non-GAAP) ^1,3	207,929,676		190,799,689		9.0 %
Indebtedness ratio		46.9 %		47.7 %		(1.7)%
Interest coverage (times)		3.43		3.20		7.2 %
Gross leasable area (square feet)^5		24,952,917		21,757,451		14.7 %
Occupancy rate ^5		99.7 %		99.9 %		(0.2)%

¹ Non-GAAP measure. Refer to section 10.0 of the MD&A for further information.

² Total units means 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 7.0 of the MD&A.

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

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

⁷ New non-GAAP measure adopted for period ending March 31, 2017, refer to section 10.0 of the MD&A for further information.  

 

Financial Highlights

Net Income – Net income was $75.3 million for the quarter, up 23.2% over the prior year, primarily due to increased NOI resulting from investment activity and an increase in the fair market value adjustment on investment properties. 

Net Operating Income (NOI)* –  In the first quarter, NOI increased $10.0 million or 14.5% over the same period last year, primarily from investment activity completed in 2017 and 2016. These acquisitions contributed a total of $8.3 million to NOI growth. Same store NOI and same property NOI for the quarter increased $1.6 million or 2.3% and $1.7 million or 2.5%, respectively, primarily due to the contractual rent escalations built into the property leases, recovery of capital expenditures, recovery of operating expenses and intensifications completed in 2017 and 2016.

Funds from Operations (FFO)* – FFO for the quarter was $58.1 million or $0.279 per unit (diluted non-GAAP), $8.4 million (7.3%) higher than the same period in 2016 due to the impact of NOI variances.

Adjusted Funds from Operations (AFFO)* – AFFO for the first quarter amounted to $47.2 million or $0.227 per unit (diluted non-GAAP), which was $7.8 million (19.9%) and $0.021 (10.2%), respectively, higher than the same period in 2016 primarily due to the impact of NOI variances.

Adjusted Cash Flow From Operations (ACFO)* – ACFO for the first quarter amounted to $44.5 million, $2.5 million or 6.0% higher than the same period in 2016, due to the impact of NOI variances partially offset by changes in operating working capital.

Distributions – Distributions per unit in the quarter amounted to $0.175, 2.9% higher than the same period in 2016 due to the increase in the annual rate of distributions effective with the first distribution paid in 2017.

*NOI, FFO, AFFO and ACFO are non-GAAP measures. Refer to Non-GAAP section 10.0 in the Q1 2017 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, 2017, CTC represented 94.0% of total GLA and 93.6% of annualized base minimum rent.

Occupancy – At March 31, 2017, CT REIT's portfolio occupancy rate remained unchanged from the prior quarter at 99.7%.

Management Discussion and Analysis (MD&A) and Condensed 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, 2017 ("the Q1 MD&A") and Condensed Consolidated Financial Statements and Notes for the period ended March 31, 2017, which are available on SEDAR at www.sedar.com and at www.ctreit.com.  

To view a PDF version of CT REIT's 2017 first quarter results, please see: http://files.newswire.ca/116/CT-Q1-2017.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 Section 4 "Risk Factors" of our Annual Information Form for fiscal 2016, and to Section 11 "Enterprise Risk Management" and all subsections thereunder of our 2016 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 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 9, 2017. The conference call will be available simultaneously and in its entirety to all interested investors and the news media by dialing 416-340-2216 or 1-866-225-0198 or through a webcast at http://www.ctreit.com/content/microsites/ctreit/en/news-events/events-webcasts.html, 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 300 properties totalling approximately 25 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)

Media: Jane Shaw, 416-480-8581, [email protected]; Investors: Andrea Orzech, 416-480-3195, [email protected]