- Announces three new investments totalling $77.2 million
- Delivers 0.4% growth in AFFO per unit for the third quarter
- 99.1% of October 1st rental obligations fulfilled
TORONTO, Nov. 2, 2020 /CNW/ – CT Real Estate Investment Trust (“CT REIT” or “the REIT”) (TSX: CRT.UN) today reported its consolidated financial results for the third quarter ended September 30, 2020.
“CT REIT’s high occupancy rate, high rent collections, conservative balance sheet and credit metrics continue to support its solid results and underscore its attractive core attributes as we navigate through the global pandemic,” said Ken Silver, President and CEO, CT REIT. “The strength of the REIT’s business model has set the stage for new investments in support of the REIT’s prudent, low risk growth strategy.”
New Investment Activity
During the third quarter, CT REIT completed the vend-in of a Canadian Tire store and Canadian Tire Gas+ gas bar in Napanee, Ontario, from Canadian Tire Corporation, Limited (“CTC”).
Subsequent to the quarter, CT REIT completed the acquisition of a property consisting of two single tenant buildings leased to Mark’s and Tim Hortons from a third party in Yellowknife, Northwest Territories.
In addition to the completed transactions, CT REIT today announced the acquisition of three Canadian Tire stores from a third party. This new investment is anticipated to close in the fourth quarter and remains subject to customary closing conditions.
These newly announced investments require an estimated total investment of $77.2 million, and in the aggregate, are expected to earn a weighted average cap rate of 6.58% when completed and represent approximately 311,000 square feet of incremental gross leasable area (“GLA”).
CT REIT has, or will be, funding these investments through the issuance of Class B LP Units and/or Class C LP Units to CTC, cash and/or draws on its credit facility or any combination thereof.
The table below summarizes the new investments and their actual or anticipated completion dates:
|
Property |
Type |
GLA (sf.) |
Timing |
Activity |
||
|
Napanee, ON |
Vend-in |
36,000 |
Q3 2020 |
Existing Canadian Tire store and Canadian Tire Gas+ gas bar |
||
|
Yellowknife, NT |
Third party acquisition |
15,000 |
Q4 2020 |
Third party acquisition of a property consisting of two freestanding buildings leased to Mark’s and Tim Hortons |
||
|
Drayton Valley, AB |
Third party acquisition |
54,000 |
Q4 2020 |
Third party acquisition of a Canadian Tire store |
||
|
Leduc, AB |
Third party acquisition |
102,000 |
Q4 2020 |
Third party acquisition of a Canadian Tire store |
||
|
St. Jean-sur-Richelieu, QC |
Third party acquisition |
104,000 |
Q4 2020 |
Third party acquisition of a Canadian Tire store |
||
Business Update Related to COVID-19
Tenants representing approximately 99.1% of annual base minimum rent fulfilled their October 1st financial obligations to the REIT, compared to 99.0% for September 1st, 99.0% for August 1st and 98.5% for July 1st. During the third quarter, the REIT continued 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 for certain qualified tenants, and providing rental abatements or deferrals to certain challenged tenants. The CECRA program provided a 75% rent abatement for qualifying small businesses for the period from April 1, 2020 to September 30, 2020, of which two-thirds was paid for by the Federal and Provincial governments and one-third was funded by the landlord. Approximately 50 of the REIT’s tenants participated in the CECRA program during the third quarter of 2020.
For the three months ended September 30, 2020, the REIT’s assistance to its tenants totalled $0.8 million, consisting of $0.1 million related to the CECRA program, $0.1 million in abatements of gross rents which were recognized as bad debt expense, and an additional $0.6 million of expected credit losses related to tenants who had been significantly impacted by the pandemic.
For the nine months ended September 30, 2020, the REIT’s assistance to its tenants totalled $2.2 million, consisting of $0.6 million related to the CECRA program, $0.3 million in abatements of gross rents which were recognized as bad debt expense, and an additional $1.3 million of expected credit losses related to tenants who had been significantly impacted by the pandemic.
On October 9, 2020 the federal government announced a new rent relief program, the Canada Emergency Rent Subsidy (CERS), to replace the CECRA program. Similar to CECRA, CERS is applicable for small and medium-sized businesses significantly impacted by the COVID-19 pandemic. CERS is effective retroactively for periods beginning September 27, 2020 and ends in June 2021. CERS will be provided directly to tenants on a sliding scale up to a maximum of 65% of eligible expenses until December 19, 2020, thereby supporting property owners with payments of rents for CERS subsidized amounts. In addition to the 65% subsidy, a top-up CERS of 25% is available to tenants who are temporarily shut down by a mandatory public health order issued by a qualifying public health authority.
Financial and Operational Summary
|
Summary of Selected Information |
|||||||||||
|
(in thousands of Canadian dollars, except unit, per unit |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||
|
2020 |
2019 |
Change |
2020 |
2019 |
Change |
||||||
|
Property revenue |
$ |
123,172 |
$ |
121,763 |
1.2 % |
$ |
375,515 |
$ |
365,321 |
2.8 % |
|
|
Net operating income 1 |
$ |
95,106 |
$ |
93,939 |
1.2 % |
$ |
284,693 |
$ |
275,351 |
3.4 % |
|
|
Net income |
$ |
64,107 |
$ |
80,138 |
(20.0) % |
$ |
169,273 |
$ |
230,303 |
(26.5) % |
|
|
Net income per unit – basic 2 |
$ |
0.280 |
$ |
0.362 |
(22.7) % |
$ |
0.740 |
$ |
1.043 |
(29.1) % |
|
|
Net income per unit – diluted 3 |
$ |
0.240 |
$ |
0.301 |
(20.3) % |
$ |
0.657 |
$ |
0.875 |
(24.9) % |
|
|
Funds from operations 1 |
$ |
68,479 |
$ |
67,345 |
1.7 % |
$ |
202,576 |
$ |
195,064 |
3.9 % |
|
|
Funds from operations per unit – diluted (non-GAAP) 1,2,4 |
$ |
0.299 |
$ |
0.303 |
(1.3) % |
$ |
0.885 |
$ |
0.882 |
0.3 % |
|
|
Adjusted funds from operations 1 |
$ |
59,997 |
$ |
57,855 |
3.7 % |
$ |
176,661 |
$ |
166,902 |
5.8 % |
|
|
Adjusted funds from operations per unit – diluted (non-GAAP) 1,2,4 |
$ |
0.262 |
$ |
0.261 |
0.4 % |
$ |
0.772 |
$ |
0.755 |
2.3 % |
|
|
Distributions per unit – paid 2 |
$ |
0.199 |
$ |
0.189 |
5.3 % |
$ |
0.593 |
$ |
0.568 |
4.4 % |
|
|
AFFO payout ratio 1 |
76.0 % |
72.4 % |
5.0 % |
76.8 % |
75.2 % |
2.1 % |
|||||
|
Cash generated from operating activities |
$ |
90,483 |
$ |
98,035 |
(7.7) % |
$ |
277,240 |
$ |
268,342 |
3.3 % |
|
|
Adjusted cashflow from operations 1 |
$ |
60,140 |
$ |
59,440 |
1.2 % |
$ |
178,849 |
$ |
167,943 |
6.5 % |
|
|
Weighted average number of units outstanding 2 |
|||||||||||
|
Basic |
228,956,289 |
221,677,555 |
3.3 % |
228,649,818 |
220,845,368 |
3.5 % |
|||||
|
Diluted 3 |
333,492,050 |
322,629,585 |
3.4 % |
333,172,867 |
321,791,812 |
3.5 % |
|||||
|
Diluted (non-GAAP) 1,4 |
229,228,980 |
221,912,113 |
3.3 % |
228,909,797 |
221,074,340 |
3.5 % |
|||||
|
Indebtedness ratio |
42.2 % |
42.8 % |
(0.9) % |
||||||||
|
Interest coverage (times) |
3.60 |
3.45 |
4.3 % |
3.51 |
3.38 |
3.8 % |
|||||
|
Gross leasable area (square feet) 5 |
28,037,918 |
27,142,110 |
3.3 % |
||||||||
|
Occupancy rate 5,6 |
98.8 % |
98.8 % |
â % |
||||||||
|
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 industrial 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 September 30, 2020 and September 30, 2019. |
Financial Highlights
Net Income – Net income was $64.1 million for the quarter, a decrease of 20.0%, 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 third quarter, NOI was $95.1 million, which was $1.2 million or 1.2% 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 $1.3 million to NOI growth. Same store NOI was $92.8 million, which was $(0.7) million or (0.8)% lower when compared to the prior year, and same property NOI was $93.5 million for the quarter which was the same as the prior year, primarily due to increased revenue derived from contractual rent escalations, offset by pandemic-related impacts. Additionally, the proceeds received in Q3 2019 from the assignment of the REIT’s interest and claim against a former tenant under the Companies’ Creditors Arrangement Act negatively impacted same store NOI and same property NOI growth in Q3 2020.
Funds from Operations (FFO)* – FFO for the quarter was $68.5 million or $0.299 per unit – diluted (non-GAAP), which was 1.3% or $0.004 per unit – diluted (non-GAAP), lower than the same period in 2019, primarily due to the impact of NOI variances and partially offset by lower interest expense.
Adjusted Funds from Operations (AFFO)* – AFFO for the quarter was $60.0 million or $0.262 per unit – diluted (non-GAAP), which was 0.4% or $0.001 per unit – diluted (non-GAAP) higher than the same period in 2019, primarily due to the impact of NOI variances and partially offset by lower straight-line rents and interest expense.
Distributions – Distributions per unit in the quarter amounted to $0.199, 5.3% higher than the same period in 2019 due to the two increases in the rate of distributions, the first of which was effective with the distribution paid in January 2020 and the second of which was effective with the distribution paid in September 2020.
*NOI, FFO and AFFO are non-GAAP measures. Refer to Non-GAAP section in the Q3 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 September 30, 2020, CTC represented 92.1% of total GLA and 91.5% of annualized base minimum rent.
Occupancy – At September 30, 2020, CT REIT’s portfolio occupancy rate, on a committed basis, was 98.8%.
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 Q3 2020 MD&A”) and interim condensed consolidated financial statements (unaudited) and notes for the period ended September 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 September 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’s business and operations 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 REIT’s ability to complete the investment in the acquisition under the heading “New Investment Activity”, the timing and terms of any such investment and/or agreements and the benefits expected to result from such investment, the effects of COVID-19 on the REIT’s business under the heading “Business Update Related to COVID-19” and 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 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 evolving circumstances surrounding the pandemic, including the uncertainty of future waves, 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 CTC; the expected benefits from the investments described under the heading “New Investment Activity”, including the timing of the acquisition; 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 Q3 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 November 3, 2020. The conference call will be available simultaneously and in its entirety to all interested investors and the news media by dialing 416-340-2217 or 1-800-898-3989 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 totalling 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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