- Delivers 2.8% growth in AFFO per unit for the second quarter
- Announces 2.0% distribution increase
- 98.5% of July 1st rental obligations fulfilled
- Completes $36 million of previously announced investments
TORONTO, Aug. 4, 2020 /CNW/ – CT Real Estate Investment Trust (“CT REIT” or “the REIT”) (TSX: CRT.UN) today reported its consolidated financial results for the second quarter ending June 30, 2020.
“CT REIT’s business model has proven to be extraordinarily resilient in the face of ongoing challenges presented by the global pandemic,” said Ken Silver, President and CEO, CT REIT. “Thanks to the REIT’s solid operating results that continue to be supported by our high occupancy rate and rent collections, as well as the strength of our balance sheet, credit metrics and liquidity, we are pleased to announce a 2% increase in our distribution, effective with the September distribution.”
Business Update Related to COVID-19
Notwithstanding temporary closures in some jurisdictions in the second quarter, all Canadian Tire Retail stores resumed full operations as of May 9, 2020. There have been no rental interruptions, abatements or deferrals regarding the REIT’s tenancies at these stores.
Tenants representing approximately 98.5% of annual base minimum rent fulfilled their July 1st financial obligations to the REIT, compared to 97.7% for June 1st, 96.5% for May 1st and 97.8% for April 1st. The REIT continues to work with tenants facing financial challenges as a result of the pandemic, including by participating in the Canada Emergency Commercial Rent Assistance (CECRA) program and providing rental abatements or deferrals to certain challenged tenants. The CECRA program provides a 75% rent abatement for qualifying small businesses for the period from April 1, 2020 to August 31, 2020, of which two-thirds is paid for by the Federal and Provincial governments and one-third is funded by the landlord. The REIT estimates that approximately 100 of its tenants will qualify for the CECRA program. Assistance provided to the REIT’s tenants totaled $1.4 million in the quarter and consisted of $0.5 million related to the CECRA program, $0.2 million in abatements of gross rents which were recognized as bad debt expense, and an additional $0.7 million of expected credit loss related to tenants who have been significantly impacted by the pandemic.
The REIT is in a strong liquidity position with a debt-to-gross book value of 42.4%, and $320 million of undrawn committed credit facilities and cash on hand. The REIT’s assets, with an IFRS value of approximately $6 billion, are 97% unencumbered.
Distribution Increase
The REIT has announced a 2.0% distribution increase that will be effective with the September 2020 payment to unitholders. Monthly distributions will increase to $0.06693 per unit, or $0.80316 per unit on an annualized basis.
Update on Previously Announced Investments
CT REIT invested $36 million in previously disclosed investments that were completed in the second quarter. CT REIT completed the intensification of three existing Canadian Tire stores in Kincardine, ON, Rouyn-Noranda, QC, and Yarmouth, NS and the redevelopment of the Niagara Falls multi-tenant property.
The table below provides activity updates on the previously announced investments.
|
Property |
Type |
GLA (sf.) |
Timing |
Activity |
|
Kincardine, ON |
Intensification |
28,600 |
Q2 2020 |
Expansion of an existing Canadian Tire store |
|
Rouyn-Noranda, QC |
Intensification |
12,076 |
Q2 2020 |
Expansion of an existing Canadian Tire store |
|
Yarmouth, NS |
Intensification |
23,135 |
Q2 2020 |
Expansion of an existing Canadian Tire store |
|
Niagara Falls, ON |
Redevelopment |
224,121 |
Q2 2020 |
Redevelopment of a multi-tenant property to include a new Canadian Tire store |
Financial and Operational Summary
|
Summary of Selected Information |
||||||||||||||||||||
|
(in thousands of Canadian dollars, except unit, per unit |
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||
|
2020 |
2019 |
Change 7 |
2020 |
2019 |
Change |
|||||||||||||||
|
Property revenue |
$ |
125,498 |
$ |
121,994 |
2.9 |
% |
$ |
252,343 |
$ |
243,558 |
3.6 |
% |
||||||||
|
Net operating income 1 |
$ |
94,272 |
$ |
91,473 |
3.1 |
% |
$ |
189,591 |
$ |
181,412 |
4.5 |
% |
||||||||
|
Net income |
$ |
61,970 |
$ |
78,720 |
(21.3) |
% |
$ |
105,166 |
$ |
150,165 |
(30.0) |
% |
||||||||
|
Net income per unit – basic 2 |
$ |
0.271 |
$ |
0.357 |
(24.1) |
% |
$ |
0.460 |
$ |
0.681 |
(32.5) |
% |
||||||||
|
Net income per unit – diluted 3 |
$ |
0.235 |
$ |
0.297 |
(20.9) |
% |
$ |
0.415 |
$ |
0.572 |
(27.4) |
% |
||||||||
|
Funds from operations 1 |
$ |
67,212 |
$ |
64,284 |
4.6 |
% |
$ |
134,097 |
$ |
127,719 |
5.0 |
% |
||||||||
|
Funds from operations per unit – diluted (non-GAAP) 1,2,4 |
$ |
0.294 |
$ |
0.291 |
1.0 |
% |
$ |
0.586 |
$ |
0.579 |
1.2 |
% |
||||||||
|
Adjusted funds from operations 1 |
$ |
58,490 |
$ |
55,023 |
6.3 |
% |
$ |
116,664 |
$ |
109,047 |
7.0 |
% |
||||||||
|
Adjusted funds from operations per unit – diluted (non-GAAP) 1,2,4 |
$ |
0.256 |
$ |
0.249 |
2.8 |
% |
$ |
0.510 |
$ |
0.494 |
3.2 |
% |
||||||||
|
Distributions per unit – paid 2 |
$ |
0.197 |
$ |
0.189 |
4.0 |
% |
$ |
0.394 |
$ |
0.379 |
4.0 |
% |
||||||||
|
AFFO payout ratio 1 |
77.0 |
% |
75.9 |
% |
1.4 |
% |
77.3 |
% |
76.7 |
% |
0.8 |
% |
||||||||
|
Cash generated from operating activities |
$ |
87,940 |
$ |
80,647 |
9.0 |
% |
$ |
186,757 |
$ |
170,307 |
9.7 |
% |
||||||||
|
Adjusted cashflow from operations 1 |
$ |
63,591 |
$ |
56,784 |
12.0 |
% |
$ |
118,709 |
$ |
108,503 |
9.4 |
% |
||||||||
|
Weighted average number of units outstanding 2 |
||||||||||||||||||||
|
Basic |
228,639,153 |
220,522,443 |
3.7 |
% |
228,494,899 |
220,422,379 |
3.7 |
% |
||||||||||||
|
Diluted 3 |
334,814,938 |
322,289,800 |
3.9 |
% |
334,663,659 |
322,189,766 |
3.9 |
% |
||||||||||||
|
Diluted (non-GAAP) 1,4 |
228,899,731 |
220,748,545 |
3.7 |
% |
228,748,453 |
220,648,511 |
3.7 |
% |
||||||||||||
|
Indebtedness ratio |
42.4 |
% |
44.0 |
% |
(3.6) |
% |
||||||||||||||
|
Interest coverage (times) |
3.50 |
3.35 |
4.5 |
3.46 |
3.35 |
3.3 |
% |
|||||||||||||
|
Gross leasable area (square feet) 5 |
27,995,410 |
27,136,124 |
3.2 |
% |
||||||||||||||||
|
Occupancy rate 5,6 |
99.3 |
% |
98.7 |
% |
0.6 |
% |
||||||||||||||
|
1 |
Non-GAAP measure. Refer to section 11.0 of the MD&A for further information. |
|||||||||||||||||||
|
2 |
Total units means Units and Class B LP Units outstanding. |
|||||||||||||||||||
|
3 |
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 8.0 of the MD&A. |
|||||||||||||||||||
|
4 |
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. Refer to section 8.0 of the MD&A. |
|||||||||||||||||||
|
5 |
Refers to retail, mixed-use commercial and distribution centre properties and excludes Properties Under Development. |
|||||||||||||||||||
|
6 |
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 June 30, 2020 and June 30, 2019. |
|||||||||||||||||||
Financial Highlights
Net Income – Net income was $62.0 million for the quarter, a decrease of 21.3%, compared to the same period in the prior year, primarily due to a decrease in the fair value adjustment on investment properties, partially offset by an increase in NOI.
Net Operating Income (NOI)* – In the second quarter, NOI was $94.3 million, which was $2.8 million or 3.1% higher compared to the same period in the prior year, primarily due to the acquisition of income-producing properties completed in 2020 and 2019, which contributed to $1.3 million to NOI growth. Same store NOI was $91.3 million and same property NOI was $92.2 million for the quarter, which were $0.6 million or 0.7% and $1.5 million or 1.6%, respectively, higher when compared to the prior year, primarily due to contractual rent escalations, intensifications completed in 2020 and 2019 and a reduction in property management expenses pursuant to the Property Management Agreement, partially offset by expected credit losses for tenants significantly impacted by the pandemic and bad debt expenses related to rental abatements and rent relief under the CECRA program.
Funds from Operations (FFO)* – FFO for the quarter was $67.2 million or $0.294 per unit – diluted (non-GAAP), which was 1.0% or $0.003 per unit – diluted (non-GAAP), higher than the same period in 2019, primarily due to the impact of NOI variances and lower interest expense.
Adjusted Funds from Operations (AFFO)* – AFFO for the quarter was $58.5 million or $0.256 per unit – diluted (non-GAAP), which was 2.8% or $0.007 per unit – diluted (non-GAAP) higher than the same period in 2019, primarily due to the impact of NOI variances and lower interest expense.
Distributions – Distributions per unit in the quarter amounted to $0.197, 4.0% higher than the same period in 2019 due to the increase in the annual rate of distributions effective with the first distribution paid in 2020.
*NOI, FFO and AFFO are non-GAAP measures. Refer to Non-GAAP section in the Q2 2020 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 June 30, 2020, CTC represented 92.1% of total GLA and 91.6% of annualized base minimum rent.
Occupancy – At June 30, 2020, CT REIT’s portfolio occupancy rate, on a committed basis, was 99.3%.
Management’s Discussion and Analysis (MD&A) and Interim Condensed Consolidated Financial Statements (Unaudited) 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 management’s discussion and analysis (“the Q2 2020 MD&A”) and interim condensed consolidated financial statements (unaudited) and notes for the period ended June 30, 2020, which are available on SEDAR at http://www.sedar.com and at www.ctreit.com.
Note: Unless otherwise indicated, all figures in this press release are as of June 30, 2020 and are presented in Canadian dollars.
Forward-Looking Statements
This press release contains forward-looking statements and information that reflects management’s current expectations related to matters such as future financial performance, operating results and the effect of the COVID-19 pandemic on CT REIT and the REIT’s tenants’ respective businesses and operations, including the operations of Canadian Tire stores, and discussions between the REIT and its tenants with respect to future rent obligations. Forward-looking statements are provided for the purposes of providing information about management’s current expectations and plans and allowing investors and others to get a better understanding of our future outlook, anticipated events or results and our operating environment. Readers are cautioned that such information may not be appropriate for other purposes.
Certain statements other than statements of historical facts included in this document may constitute forward-looking information, including, but not limited to, statements concerning the effects of COVID-19 on the REIT’s business under the heading “Business Update Related to COVID-19” and payment of the increased distribution effective with the September 2020 payment to unitholders under the heading “Distribution Increase”.
By its very nature forward-looking information, requires the use of estimates and assumptions and is subject to inherent risks and uncertainties. It is possible that the REIT’s assumptions, estimates, analyses, beliefs and opinions are not 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 in the opinion of management 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. Without limiting the generality of the foregoing, given the uncertainty surrounding the duration and severity of the pandemic, it is difficult to predict with certainty the nature, duration and extent of the adverse impact of COVID-19 on, among others: the global and domestic economy; the business, operations and financial position of the REIT’s tenants, including Canadian Tire; the benefits expected to result from such investments and property intensifications described under the heading “Update on Previously Announced Investments”, including the timing of any such developments; and the business, operations, financial position, results, prospects or opportunities of CT REIT.
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 2019, and to Section 11 “Enterprise Risk Management” and all subsections thereunder of our fiscal 2019 Management’s Discussion and Analysis as well as the REIT’s other public filings available at www.sedar.com and at www.ctreit.com.
In addition, for further factors related to COVID-19 impacting the REIT, refer to Section 2.0 “Factors Affecting the REIT as a Result of the COVID-19 Pandemic”, Section 12.0, “Enterprise Risk Management” and Section 14.0 “Forward-looking Information” of our Q2 2020 MDA&A, 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 does not form part of this press release and is not incorporated by reference into this press release.
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 August 5, 2020. 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 1-800-377-0758 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 350 properties totaling approximately 28 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)
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