CT REIT Announces Solid 2014 First Quarter Results
Canada NewsWire
TORONTO, May 6, 2014
Announces $60 million investment in four additional acquisitions and two
intensification projects
TORONTO, May 6, 2014 /CNW/ – CT Real Estate Investment Trust (CT REIT),
(TSX: CRT.UN) today reported its unaudited consolidated financial
results for the period from January 1, 2014 to March 31, 2014.
“I am very pleased with CT REIT’s performance over its first six months
and in particular, the work that has been done to add to the growth
embedded in our existing leases with Canadian Tire” said Ken Silver,
Chief Executive Officer, CT REIT. “Our focus for the balance of 2014
will be to continue to execute on our growth strategy.”
CT REIT has completed the first investment in its previously announced
growth plan with the closing of a third-party acquisition during the
first quarter of 2014 and remains committed to seven additional
projects that are expected to be completed over the course of 2014.
New Acquisitions
Today, CT REIT also announced its intention to make a further four
acquisitions in 2014, including three Canadian Tire stores and one
redeveloped former Canadian Tire store in Yorkton, SK, which will be
vended in from Canadian Tire Corporation (CTC). In addition, CT REIT
announced two smaller intensification projects in Oshawa, ON and
Sturgeon Falls, ON.
These six projects will require an estimated investment of $60 million,
and are expected to earn a 6.8% weighted average going in cap rate and
represent 324,000 square feet of gross leasable area. CT REIT expects
to fund these investments from a combination of cash on hand, Class B
LP and Class C LP units and the use of its credit facility.
The table below provides a view to these new investments and anticipated
completion dates.
| Property | Anticipated Completion |
| Sherbrooke, QC | Mid-year, 2014 |
| Vaudreuil, QC | Mid-year, 2014 |
| Stratford, ON | Mid-year 2014 |
| Yorkton, SK | Mid-year, 2014 |
|
Oshawa, ON Pad development (Mark’s) |
Fourth quarter, 2014 |
|
Sturgeon Falls, ON Canadian Tire store expansion |
Second quarter, 2015 |
All previously announced projects are progressing on schedule. Due to
the seasonal nature of construction, the majority of the construction
costs are anticipated in the second half of 2014.
In total, CT REIT has announced investments, both today and previously,
totaling $150 million, earning a weighted average going-in cap rate of
6.8%, once completed.
Financial and Operational Summary
|
(in thousands of Canadian dollars, except per Unit, Unit and square footage amounts) |
Q1 2014 | Financial Forecast | Variance | |||||
| Property revenue | $ | 82,680 | $ | 83,165 | $ | (485) | ||
| Net operating income 1 | $ | 58,049 | $ | 57,403 | $ | 646 | ||
| Net income | $ | 169,664 | $ | 42,218 | $ | 127,446 | ||
| Net income/Unit (basic) 2 | $ | 0.944 | $ | 0.240 | $ | 0.704 | ||
| Net income/Unit (diluted) 4 | $ | 0.550 | $ | 0.175 | $ | 0.375 | ||
| Funds from operations 1 | $ | 42,705 | $ | 42,218 | $ | 487 | ||
| Funds from operations/Unit (diluted) 1, 2, 3 | $ | 0.238 | $ | 0.240 | $ | (0.002) | ||
| Adjusted funds from operations 1 | $ | 32,318 | $ | 31,563 | $ | 755 | ||
| Adjusted funds from operations/Unit (diluted) 1, 2, 3 | $ | 0.180 | $ | 0.180 | $ | – | ||
| YTD distribution/Unit 2 | $ | 0.162 | $ | 0.162 | $ | – | ||
| AFFO payout ratio | 90% | 90% | – | |||||
| Weighted average number of Units outstanding 2 | ||||||||
| Basic | 179,603,487 | 175,620,865 | 3,982,622 | |||||
| Diluted4 | 345,033,553 | 355,620,865 | (10,587,312) | |||||
| Diluted (non-GAAP)3 | 179,636,238 | 175,620,865 | 4,015,373 | |||||
| Indebtedness ratio 1 | 48.1% | 50.6% | (2.5%) | |||||
| Interest coverage (times) 1 | 3.10 | 3.10 | – | |||||
| Debt / enterprise value ratio1 | 47.4% | 50.6% | (3.2%) | |||||
| Rentable square footage5 | 18,951,057 | 18,887,158 | 63,899 | |||||
| Occupancy rate 6 | 99.9% | 99.9% | – | |||||
| 1 Non-GAAP Key Performance Indicators. | |||||
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2 Total Units consists of both REIT Units and Class B LP Units outstanding. |
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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. |
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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. |
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5 Rentable square footage refers to retail and distribution properties and excludes development lands. |
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6 Refers to retail and distribution properties and excludes development lands. |
Financial Highlights
Net Operating Income – For the first quarter, NOI including straight line rent and land lease
expenses amounted to $58.0 million which is $0.6 million higher than
the Financial Forecast (“the Forecast”). The variance from the
Forecast reflects a different timing of recording property tax expense
than is reflected in the actual results. This difference contributed
approximately $275 thousand to the variance, and is expected to reverse
during the year. Approximately $150 thousand of the variance relates to
an improved rate of recovery of operating expenses as compared to the
Forecast, and this variance is expected to be ongoing for the balance
of the year. In addition, the acquisition of Burlington North occurred
in late February and it contributed $85 thousand of Net Operating
Income in the quarter. The Forecast did not assume any acquisitions.
Net Income – Net income of $169.7 million was $127.4 million higher than the Forecast
due to fair market value adjustments of $127.0 million recorded on
investment properties during the quarter. The majority of the fair
market value adjustment is related to management’s determination of
fair value as at March 31, 2014 which incorporated valuation parameters
used by the external appraisers; Management had previously placed
greater weight on the valuation parameters implied by the REIT’s IPO.
This generated $123.1 million of the fair value adjustment. The
remaining $3.9 million adjustment is the resulting impact of annual
rent growth in Canadian Tire leases.
Funds from Operations – FFO for the period was $42.7 million or $0.238 per unit which is in line
with the Forecast of $42.2 million or $0.240 per unit. The positive
variance on an absolute basis was more than offset on a per unit basis
by the exercise of the over-allotment option and resulting issuance of
3,952,500 units. The Forecast did not anticipate additional units
related to the exercise of the over-allotment.
Adjusted Funds From Operations – AFFO for the first quarter ended March 31, 2014 amounted to $32.3
million or $0.180 per unit compared to the Forecast of $31.6 million or
$0.180 per unit. AFFO per unit was also negatively impacted by the
dilution resulting from the exercise of the over-allotment option
granted in connection with the IPO.
Distributions – Distributions declared during the quarter totalled $0.162501 per unit for an AFFO
payout ratio of 90% which is in line with CT REIT’s Forecast of 90%.
AFFO, FFO and NOI are non-GAAP measures. Refer to Non-GAAP section on
page 5 of this document.
Operating Results
|
Leasing – CTC is CT REIT’s largest tenant. At March 31, 2014, CTC represented 97.7% of total GLA and 97.4% of annual base minimum rent. |
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Occupancy – At March 31, 2014, CT REIT’s portfolio occupancy rate was 99.9%, essentially unchanged from the close of the IPO. |
Non-GAAP Financial Key Performance Indicators
CT REIT uses non-GAAP key performance indicators including: NOI, FFO,
FFO per Unit AFFO and AFFO per Unit. Management believes these
non-GAAP measures provide useful supplemental information to both
management and investors in measuring the financial performance and
financial condition of CT REIT for the reasons outlined below. When
calculating diluted FFO and AFFO per Unit, management excludes the
effect of settling the Class C LP Units with Class B LP Units, which is
required when calculating diluted Units in accordance with IFRS.
These measures and ratios do not have a standardized meaning prescribed
by GAAP and therefore they may not be comparable to similarly titled
measures and ratios presented by other publicly traded REITs, and
should not be construed as an alternative to other financial measures
determined in accordance with GAAP.
Net Operating Income
CT REIT defines NOI as property revenue less property expense, adjusted
for straight-line rent and land lease adjustments. Management believes
that calculating the NOI measure on a cash basis provides a more useful
presentation of performance over which management has control.
Funds From Operations
FFO is not a term defined under IFRS and may not be comparable to
similar measures used by other real estate entities. CT REIT calculates
its FFO in accordance with the Real Property Association of Canada
White Paper on FFO for IFRS issued in March 2014. The purpose of the
White Paper was to provide reporting issuers and investors with greater
guidance on the definition of FFO and to help promote more consistent
disclosure amongst reporting issuers.
Management believes that FFO provides an operating performance measure
that, when compared period-over-period, reflects the impact on
operations of trends in occupancy levels, rental rates, operating costs
and realty taxes, acquisition activities and interest costs, and
provides a perspective of the financial performance that is not
immediately apparent from net income determined in accordance with
IFRS. FFO adds back to net income items that do not arise from
operating activities, such as fair value adjustments.
FFO, however, still includes non-cash revenues related to accounting for
straight-line rent and makes no deduction for the recurring capital
expenditures necessary to sustain the existing earnings stream.
Adjusted Funds From Operations
AFFO is a supplemental measure of operating performance widely used in
the real estate industry. Management believes that AFFO is an
effective measure of the cash generated from operations, after
providing for operating capital requirements which are referred to as
‘productive capacity maintenance expenditures.’
CT REIT calculates AFFO by adjusting FFO for non-cash income and expense
items such as amortization of straight-line rents and finance charges.
FFO is also adjusted for a reserve for maintaining productive capacity
required for sustaining property infrastructure and revenue from real
estate properties and direct leasing costs. Property capital
expenditures do not occur evenly during the fiscal year or from year to
year. The property capital reserve in the AFFO calculation is intended
to reflect an average annual spending level.
There is currently no standard industry-defined measure of AFFO. As
such, CT REIT’s method of calculating AFFO may differ from that of
other real estate entities and, accordingly, may not be comparable to
such amounts reported by other issuers.
The following table reconciles FFO and AFFO to GAAP net income and
comprehensive income:
| (in thousands of Canadian dollars, except per unit amounts) | Q1 2014 |
Financial Forecast |
Variance | ||||
| Property revenue | $ | 82,680 | $ | 83,165 | $ | (485) | |
| Property expense | (17,905) | (18,763) | 858 | ||||
| General and administrative expense | (1,858) | (2,046) | 188 | ||||
| Interest income | 158 | – | 158 | ||||
| Interest and other financing charges | (20,370) | (20,138) | (232) | ||||
| Fair value adjustment on investment properties | 126,959 | – | 126,959 | ||||
| Net Income and comprehensive income | 169,664 | 42,218 | 127,446 | ||||
| Fair value adjustment of investment property | (126,959) | – | (126,959) | ||||
| Funds from operations | 42,705 | 42,218 | 487 | ||||
| Properties straight-line rent adjustment | (6,778) | (7,031) | 253 | ||||
| Land lease straight-line expense adjustment | 52 | 32 | 20 | ||||
| Capital expenditure reserve1 | (3,661) | (3,656) | (5) | ||||
| Adjusted funds from operations | $ | 32,318 | $ | 31,563 | $ | 755 | |
| FFO per Unit – basic | $ | 0.238 | $ | 0.240 | $ | (0.002) | |
| FFO per Unit – diluted 2 | $ | 0.238 | $ | 0.240 | $ | (0.002) | |
| AFFO per Unit – basic | $ | 0.180 | $ | 0.180 | – | ||
| AFFO per Unit – diluted 2 | $ | 0.180 | $ | 0.180 | – | ||
| AFFO payout ratio | 90% | 90% | – | ||||
| YTD distribution per Unit | $ | 0.162 | $ | 0.162 | $ | – | |
|
1 Normalized Q1 2014 maintenance capital expenditure is approximately $3,661. In Q1 2014, $110 of actual sustaining capital expenditures were incurred. |
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2 For the purposes of calculating diluted FFO and AFFO per Unit, diluted Units includes restricted and deferred Units issued under various plans and excludes the effects of settling the Class C LP Units with Class B LP Units. |
Net income includes a fair value adjustment of $127.0 million, which is
removed for purposes of calculating NOI, FFO and AFFO. The majority of
the fair market value adjustment relates to management’s determination
of fair value as at March 31, 2014 which incorporated valuation
parameters used by the external appraisers; Management had previously
placed greater weight on the valuation parameters implied by the REIT’s
IPO. In addition, there was an additional $3.9 million fair market
value adjustment due to increased cash flows during the time frame of
the valuation models.
FFO was $487 thousand higher than Forecast largely due to the positive
variance in NOI, differing assumptions in the Forecast for general and
administrative expenses and due to interest income earned on investing
the REIT’s existing cash balances which are higher than Forecast, all
partially offset by higher interest expense.
AFFO for the first quarter was $755 thousand higher than Forecast
largely due to the reasons noted above as well as lower than
anticipated straight-line rent adjustments.
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, 2014 and Unaudited Consolidated Financial
Statements and Notes for the period ended March 31, 2014, which are
available on CT REIT’s website at: www.ctreit.com and on SEDAR at www.sedar.com.
To view a PDF version of CT REIT’s 2014 first quarter results please
see: http://files.newswire.ca/1307/CTREITQ12014-MDA-FS.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 and may
include statements regarding known and unknown risks and uncertainties
and other factors that may cause the actual results to differ
materially from those indicated. Such factors include, but are not
limited to, general economic conditions, financial position, business
strategy, budgets, capital expenditures, financial results, taxes,
plans and objectives of or involving CT REIT. Particularly, statements
regarding future acquisitions, results, performance, achievements,
prospects or opportunities for CT REIT or the real estate industry are
forward-looking statements. In some cases, forward-looking information
can be identified by such terms such as “may”, “might”, “will”,
“could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”,
“believe”, “intend”, “estimate”, “predict”, “potential”, “continue”,
“likely”, “schedule”, or the negative thereof or other similar
expressions concerning matters that are not historical facts.
Forward-looking information is based on the reasonable assumptions,
estimates, analysis and opinions of management made in light of its
experience and perception of trends, current conditions and expected
developments, as well as other factors that management believes to be
relevant and reasonable at the date that such statements are made.
CT REIT has based these forward-looking statements on factors and
assumptions about future events and financial trends that it believes
may affect its financial condition, results of operations, business
strategy and financial needs, including that the Canadian economy will
remain stable over the next 12 months, that inflation will remain
relatively low, that tax laws remain unchanged, that conditions within
the real estate market, including competition for acquisitions, will be
consistent with the current climate, that the Canadian capital markets
will provide CT REIT with access to equity and/or debt at reasonable
rates when required and that CTC will continue its involvement with CT
REIT on the basis described in its 2013 Annual Information Form
(“AIF”).
Although the forward-looking statements contained in this press release
are based upon assumptions that management believes are reasonable
based on information currently available to management, there can be no
assurance that actual results will be consistent with these
forward-looking statements. Forward-looking statements necessarily
involve known and unknown risks and uncertainties, many of which are
beyond CT REIT’s control, that may cause CT REIT’s or the industry’s
actual results, performance, achievements, prospects and opportunities
in future periods to differ materially from those expressed or implied
by such forward-looking statements. These risks and uncertainties
include, among other things, the factors discussed under “Risk Factors”
section of the 2013 AIF and also in the MD&A.
For more information on the risks, uncertainties and assumptions that
could cause CT REIT’s actual results to differ from current
expectations, please also refer to CT REIT’s public filings available
on SEDAR at www.sedar.com and at www.ctreit.com.
CT REIT cautions that the foregoing list of important factors and
assumptions is not exhaustive and other factors could also adversely
affect its results. Investors and other readers are urged to consider
the foregoing risks, uncertainties, factors and assumptions carefully
in evaluating the forward-looking information and are cautioned not to
place undue reliance on such forward-looking information. Statements
that include forward-looking information do not take into account the
effect that transactions or non-recurring or other special items
announced or occurring after the statements are made have on CT REIT’s
business. For example, they do not include the effect of any
dispositions, acquisitions, asset write-downs or other charges
announced or occurring after such statements are made. The
forward-looking information contained herein is based on certain
factors and assumptions made as of the date hereof. CT REIT does not
undertake to update the 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 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 the Company has been filed electronically
with various securities regulators in Canada through SEDAR and is
available online at www.sedar.com.
Conference Call
CT REIT will conduct a conference call to discuss information included
in this news release and related matters at 4:00 p.m. ET on May 6,
2014. 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 at this website 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 250 properties totaling approximately 19 million
square feet of GLA, consisting of retail properties located across
Canada and one distribution centre. Canadian Tire Corporation, Limited
is CT REIT’s most significant tenant.
Selected Financial Information
Condensed Consolidated Balance Sheets (Unaudited)
| As at | ||||||
| (C$ in thousands) | March 31, 2014 | December 31, 2013 | ||||
| Assets | (Note 19) | |||||
| Non-current assets | ||||||
| Investment properties | $ | 3,695,916 | $ | 3,547,864 | ||
| Other assets | 2,435 | 638 | ||||
| 3,698,351 | 3,548,502 | |||||
| Current assets | ||||||
| Tenant and other receivables | 6,704 | 696 | ||||
| Deposits and other assets | 6,031 | 7,055 | ||||
| Cash and cash equivalents | 46,596 | 46,999 | ||||
| 59,331 | 54,750 | |||||
| Total assets | $ | 3,757,682 | $ | 3,603,252 | ||
| Liabilities | ||||||
| Non-current liabilities | ||||||
| Class C LP Units | $ | 1,807,130 | $ | 1,800,000 | ||
| Other liabilities | 294 | 275 | ||||
| 1,807,424 | 1,800,275 | |||||
| Current liabilities | ||||||
| Accounts payable and other liabilities | 19,310 | 12,864 | ||||
| Distributions payable | 9,729 | 9,727 | ||||
| 29,039 | 22,591 | |||||
| Total liabilities | 1,836,463 | 1,822,866 | ||||
| Equity | ||||||
| Unitholders’ equity | 951,192 | 880,199 | ||||
| Non-controlling interests | 970,027 | 900,187 | ||||
| Total equity | 1,921,219 | 1,780,386 | ||||
| Total liabilities and equity | $ | 3,757,682 | $ | 3,603,252 | ||
Condensed Consolidated Statement of Income and Comprehensive Income
(Unaudited)
| (C$ in thousands) |
For the three months ended March 31, 2014 |
||
| Property revenue | $ | 82,680 | |
| Property expense | (17,905) | ||
| General and administrative expense | (1,858) | ||
| Interest income | 158 | ||
| Interest and other financing charges | (20,370) | ||
| Fair value adjustment on investment properties | 126,959 | ||
| Net income and comprehensive income | $ | 169,664 |
Condensed Consolidated Statement of Cash Flows (Unaudited)
| (C$ in thousands) |
For the three months ended March 31, 2014 |
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| Cash generated from (used for): | |||||
| Operating activities | |||||
| Net income | $ | 169,664 | |||
| Add (deduct): | |||||
| Fair value adjustment on investment properties | (126,959) | ||||
| Straight-line rental income | (6,778) | ||||
| Straight-line land lease expense | 52 | ||||
| Interest and other financing charges | 20,370 | ||||
| Changes in working capital and other | (525) | ||||
| Cash generated from operating activities | 55,824 | ||||
| Investing activities | |||||
| Acquisition of investment properties | (7,037) | ||||
| Capital expenditures recoverable from tenants | (110) | ||||
| Cash used for investing activities | (7,147) | ||||
| Financing activities | |||||
| Unit distributions | (14,277) | ||||
| Class B LP Unit distributions | (14,553) | ||||
| Class C LP Unit distributions paid or loaned | (20,250) | ||||
| Cash used for financing activities | (49,080) | ||||
| Cash used in the period | (403) | ||||
| Cash and cash equivalents, beginning of period | 46,999 | ||||
| Cash and cash equivalents, end of period | $ | 46,596 | |||
SOURCE CT REIT
PDF available at: http://stream1.newswire.ca/media/2014/05/06/20140506_C6799_DOC_EN_40033.pdf
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