CT REIT Announces Strong Fourth Quarter and Year End 2018 Results
- Delivers 3.0% growth in AFFO per unit for the fourth quarter; normalized growth in AFFO per unit was 5.6% after adjusting for costs associated with CFO transition and property management insourcing
- Announces three new investments, totalling $45 million
- Adds over 680,000 sq. ft. of GLA to portfolio in 2018
TORONTO, Feb. 11, 2019 /CNW/ - CT Real Estate Investment Trust (CT REIT) (TSX: CRT.UN) today reported its consolidated financial results for the fourth quarter and year ended December 31, 2018.
"In the fourth quarter and for the full year, CT REIT delivered another predictably strong set of operating results and made attractive additions to its portfolio," said Ken Silver, President and Chief Executive Officer, CT REIT. "In addition to delivering attractive low-risk growth balanced with conservative financial management, the REIT also saw a number of significant milestones in 2018 including the seamless transition to our new CFO, Lesley Gibson, a 69% increase in our public float, the commencement of our property management insourcing initiative and our fifth distribution increase in five years."
New Investment Activity
Today, CT REIT announced three new investments, which will require an estimated total investment of $45 million. The investments are, in the aggregate, expected to earn a weighted average cap rate of 6.8% when completed and represent approximately 297,000 square feet of incremental gross leasable area ("GLA"). CT REIT is funding these investments through the issuance of Class B LP Units and/or 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 | Timing | Activity |
Canmore, AB | Third party acquisition | 50,000 | Q1 2019 | Third party acquisition |
Niagara Falls, ON | Third party | 224,000 | Q4 2018/Q2 2020 | Third party purchase of |
Yarmouth, NS | Third party | 23,000 | Q4 2018/Q2 2020 | Acquisition of land from |
Update on Previously Announced Investments
In the fourth quarter, CT REIT invested $29 million which included the acquisition of a Canadian Tire Gas+ gas bar from a third party in St. Hyacinthe, QC, intensifications of two Canadian Tire stores in Winkler, MB and St. Thomas, ON, and the redevelopment of a previously acquired redundant Canadian Tire store in Sudbury, ON.
The table below provides activity updates on the previously announced investments.
Property | Type | GLA | Timing | Activity |
St. Hyacinthe, QC | Third party acquisition | Land | Completed Q4 | Third party acquisition of |
Winkler, MB | Intensification | 24,000 | Completed Q4 | Expansion of existing |
St. Thomas, ON | Intensification | 3,000 | Completed Q4 | Expansion of existing |
Sudbury, ON | Redevelopment | 83,000 | Completed Q4 | Redevelopment of |
Update on Full Year 2018 Investment Activity
For the full year, CT REIT invested $142 million and grew its portfolio by over 680,000 square feet of GLA, including approximately 110,000 square feet in the fourth quarter.
Financial and Operational Summary
Summary of Selected Information | |||||||||||
(in thousands of Canadian dollars, except unit, per unit and square footage amounts) | Three Months Ended December 31, |
Year Ended December 31, | |||||||||
2018 | 2017 | Change | 2018 | 2017 | Change | ||||||
Property revenue | $ | 119,322 | $ | 111,264 | 7.2 % | $ | 472,483 | $ | 443,303 | 6.6 % | |
Net operating income 1 | $ | 87,998 | $ | 81,908 | 7.4 % | $ | 345,505 | $ | 322,253 | 7.2 % | |
Net income | $ | 74,501 | $ | 97,094 | (23.3)% | $ | 300,906 | $ | 317,277 | (5.2)% | |
Net income per unit (basic) 2 | $ | 0.343 | $ | 0.454 | (24.4)% | $ | 1.401 | $ | 1.501 | (6.7)% | |
Net income per unit (diluted) 4 | $ | 0.271 | $ | 0.364 | (25.5)% | $ | 1.098 | $ | 1.232 | (10.9)% | |
Funds from operations1 | $ | 62,037 | $ | 60,441 | 2.6 % | $ | 246,032 | $ | 237,617 | 3.5 % | |
Funds from operations per unit (diluted, non-GAAP) 1,2,3 | $ | 0.286 | $ | 0.283 | 1.1 % | $ | 1.144 | $ | 1.124 | 1.8 % | |
Adjusted funds from operations 1 | $ | 51,848 | $ | 49,636 | 4.5 % | $ | 205,173 | $ | 194,371 | 5.6 % | |
Adjusted funds from operations per unit (diluted, non-GAAP) 1,2,3 | $ | 0.239 | $ | 0.232 | 3.0 % | $ | 0.954 | $ | 0.919 | 3.8 % | |
Distributions per unit - paid 2 | $ | 0.182 | $ | 0.175 | 4.0 % | $ | 0.728 | $ | 0.700 | 4.0 % | |
AFFO payout ratio1 | 76 % | 75 % | 1.3 % | 76 % | 76 % | —% | |||||
Cash generated from operating activities | $ | 83,887 | $ | 85,472 | (1.9)% | $ | 331,722 | $ | 317,154 | 4.6 % | |
Adjusted cashflow from operations 1 | $ | 52,975 | $ | 53,119 | (0.3)% | $ | 206,056 | $ | 195,723 | 5.3 % | |
Weighted average number of units outstanding 2 | |||||||||||
Basic | 216,940,471 | 213,717,596 | 1.5 % | 214,805,646 | 211,310,245 | 1.7 % | |||||
Diluted 4 | 338,209,745 | 313,757,565 | 7.8 % | 336,142,459 | 313,338,770 | 7.3 % | |||||
Diluted (non-GAAP) 1,3 | 217,107,359 | 213,879,775 | 1.5 % | 215,040,074 | 211,456,486 | 1.7 % | |||||
Indebtedness ratio 6 | 45.1 % | 46.7 % | NM | ||||||||
Interest coverage (times)6 | 3.39 | 3.46 | NM | 3.36 | 3.46 | NM | |||||
Gross leasable area (square feet) 5 | 26,537,359 | 25,849,773 | 2.7 % | ||||||||
Occupancy rate 5,6,7 | 98.7 % | 98.6 % | NM | ||||||||
1Non-GAAP measure. Refer to section 10.0 of the MD&A for further information. | ||||||
2Total units means 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. Refer to section 7.0 of the MD&A. | ||||||
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 7.0 of the MD&A. | ||||||
5Refers to retail, mixed-use commercial and distribution centre properties and excludes Properties Under Development. | ||||||
6 NM - not meaningful. | ||||||
7 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted on or before December 31, 2018 and December 31, 2017. |
Financial Highlights
Net Income – Net income was $74.5 million for the quarter and $300.9 million for the year, down 23.3% and 5.2%, respectively, compared to the same periods in the prior year primarily due to a smaller increase in fair value adjustment on investment properties and increased net interest and other financing charges, partially offset by an increase in NOI.
Net Operating Income (NOI)* – In the fourth quarter, NOI was $88.0 million, which was $6.1 million or 7.4% higher compared to the same period in the prior year, primarily due to the acquisition of income-producing properties and properties under development completed in 2018 and 2017. Same store NOI was $83.1 million and same property NOI was $83.3 million for the quarter, which were $2.1 million or 2.5% and $2.3 million or 2.9%, respectively, higher when compared to the prior year, primarily due to contractual rent escalations, recovery of capital expenditures and interest earned on the unrecovered balance and intensifications completed in 2018 and 2017, partially offset by the impact of tenancies at 11 Dufferin Place SE and 25 Dufferin Place SE Calgary, AB. NOI for the full year amounted to $345.5 million.
Funds from Operations (FFO)* – FFO for the quarter was $62.0 million or $0.286 per unit (diluted non-GAAP), which was 1.1% or $0.003 per unit (diluted non-GAAP), higher than the same period in 2017, primarily due to the impact of NOI variances, partially offset by higher interest expense. FFO for the year ended was $246.0 million or $1.144 per unit (diluted non-GAAP), which was 1.8% or $0.020 per unit (diluted non-GAAP), higher than the same period in 2017, primarily due to the impact of NOI variances, partially offset by higher interest expense.
Adjusted Funds from Operations (AFFO)* – AFFO for the quarter was $51.8 million or $0.239 per unit (diluted non-GAAP), which was 3.0% or $0.007 per unit (diluted non-GAAP) higher than the same period in 2017, primarily due to the impact of NOI variances, partially offset by higher interest expense. AFFO for the full year was $205.2 million or $0.954 per unit (diluted non-GAAP), which was 3.8% or $0.035 per unit (diluted non-GAAP) higher than the same period in 2017, primarily due to the impact of NOI variances, partially offset by higher interest expense. After normalizing for both CFO transition and insourcing project costs, AFFO for the quarter was $53.2 million or $0.245 per unit (diluted non-GAAP), which was 5.6% or $0.013 per unit (diluted non-GAAP) higher than the same period in 2017. Normalized AFFO for the full year was $206.8 million or $0.962 per unit (diluted non-GAAP), which was 4.6% or $0.043 per unit (diluted non-GAAP) higher than the same period in 2017.
Distributions – Distributions per unit in the quarter amounted to $0.182, 4.0% higher than the same period in 2017 due to the increase in the annual rate of distributions effective with the first distribution paid in 2018. For the full year, distributions per unit amounted to $0.728, 4.0% higher than the same period in 2017.
On November 5, 2018 CT REIT announced its fifth consecutive increase in the annual rate of distribution to $0.757 per unit, an increase of 4.0% commencing with the January 2019 payment date.
*NOI, FFO and AFFO are non-GAAP measures. Refer to Non-GAAP section in the Q4 and Year End 2018 Management's Discussion & Analysis, which is available on SEDAR at www.sedar.com and at www.ctreit.com.
Operating Results
Leasing – CTC is CT REIT's most significant tenant. At December 31, 2018, CTC represented 94.4% of total GLA and 92.7% of annualized base minimum rent.
Occupancy – At December 31, 2018, CT REIT's portfolio occupancy rate, on a committed basis, was 98.7%, an increase from 98.6% on December 31, 2017.
Management Discussion and Analysis (MD&A) and Audited 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 December 31, 2018 ("the Q4 and Year End MD&A") and Audited Consolidated Financial Statements and Notes for the period ended December 31, 2018, which are available on SEDAR at www.sedar.com and at www.ctreit.com.
To view a PDF version of CT REIT's fourth quarter and year end 2018 results, please see: http://files.newswire.ca/116/CTREIT-YE-2018.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 insourcing of some of its third party property management activities and the expected timing and effects thereof, its ability to complete any of the investments in acquisitions and property intensifications and redevelopments under the headings "New Investment Activity" and "Update on Previously Announced Development Activity", the timing and terms of any such investments and the benefits expected to result from such investments and other statements concerning developments, redevelopments, 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 2018, and to Section 11 "Enterprise Risk Management" and all subsections thereunder of our 2018 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 9:00 a.m. ET on February 12, 2019. The conference call will be available simultaneously and in its entirety to all interested investors and the news media by dialing 416-340-2218 or 1-800-478-9326 or through a webcast at https://www.ctreit.com/English/news-and-events/events-and-webcasts/default.aspx, 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 325 properties totalling approximately 26 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: Marina Davies, 416-544-6134, [email protected]
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