CT REIT Announces Strong Fourth Quarter and Year End 2017 Results

• CT REIT adds over 1.5 million square feet of gross leasable area (GLA) in 2017
• Delivers 6.6% growth in AFFO per unit in 2017

TORONTO, Feb. 12, 2018 /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, 2017.

"In 2017, CT REIT once again delivered strong growth in AFFO per unit and improved financial metrics, leading to our fourth distribution increase in four years," said Ken Silver, President and Chief Executive Officer, CT REIT. "We are delighted with another year of solid results, adding to our track record of attractive and reliable performance."

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CT REIT Announces Strong Fourth Quarter and Year End 2017 Results (CNW Group/CT Real Estate Investment Trust (CT REIT))

Update on Previously Announced Investments

In the fourth quarter, in addition to completing the acquisition of five Canadian Tire anchored multi-tenanted properties from RioCan REIT, CT REIT completed the intensification of the Canadian Tire stores in Quesnel, British Columbia and New Liskeard, Ontario; the construction of two Canadian Tire Gas+ gas bars in Bradford and Arnprior, Ontario; and the construction of a Mark's store in Martensville, Saskatchewan. The table below provides activity updates on the previously announced investments.

Property	Type	GLA (sf.)	Timing	Activity
Quesnel, BC	Intensification	2,500	Completed in Q4 2017	Expansion of existing Canadian Tire store
New Liskeard, ON	Intensification	20,000	Completed in Q4 2017	Expansion of existing Canadian Tire store
Bradford, ON	Intensification	Ground Lease	Completed in Q4 2017	Construction of a Gas+ gas bar
Arnprior, ON	Intensification	Ground Lease	Completed in Q4 2017	Construction of a Gas+ gas bar and commercial retail unit
Martensville, SK	Intensification	8,000	Completed in Q4 2017	Construction of a Mark's store

 

As part of the previously announced RioCan transaction, the acquisition of two Canadian Tire anchored properties located in Collingwood and St. Catharines, Ontario for approximately $66 million, is expected to close in the first quarter of 2018.

Update on Full Year 2017 Investment Activity

For the full year, including properties under development, CT REIT invested $314.8 million and grew its portfolio by over 1.5 million square feet of GLA, including approximately one million 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,
		2017		2016		Change	2017		2016		Change
Property revenue		$	111,264	$	104,230	6.7 %	$	443,303	$	407,165	8.9 %
Net operating income ^1		$	81,908	$	73,675	11.2 %	$	322,253	$	287,089	12.2 %
Net income		$	97,094	$	65,455	48.3 %	$	317,277	$	259,079	22.5 %
Net income per unit (basic) ^2		$	0.454	$	0.317	43.2 %	$	1.501	$	1.293	16.1 %
Net income per unit (diluted) ^4		$	0.364	$	0.269	35.3 %	$	1.232	$	1.079	14.2 %
Funds from operations^1		$	60,441	$	56,765	6.5 %	$	237,617	$	214,877	10.6 %
Funds from operations per unit (diluted, non-GAAP) ^1,2,3		$	0.283	$	0.274	3.3 %	$	1.124	$	1.071	4.9 %
Adjusted funds from operations ^1		$	49,636	$	46,006	7.9 %	$	194,371	$	172,794	12.5 %
Adjusted funds from operations per unit (diluted, non-GAAP) ^1,2,3		$	0.232	$	0.222	4.5 %	$	0.919	$	0.862	6.6 %
Distributions per unit - paid ^2		$	0.175	$	0.170	2.9 %	$	0.700	$	0.680	2.9 %
AFFO payout ratio ^1			75 %	77 %		(2.6)%	76 %		79 %		(3.8)%
Adjusted cashflow from operations ^1,6		$	53,119	$	47,179	12.6 %	$	195,723	$	176,355	11.0 %
Weighted average number of units outstanding ^2
	Basic		213,717,596	206,829,040		3.3 %	211,310,245		200,439,916		5.4 %
	Diluted ^4		313,757,565	308,689,596		1.6 %	313,338,770		307,219,806		2.0 %
	Diluted (non-GAAP) ^1,3		213,879,775	206,949,852		3.3 %	211,456,486		200,558,552		5.4 %
Indebtedness ratio ^7							46.7 %		47.5 %		NM
Interest coverage (times) ^7			3.46	3.74		NM	3.46		3.49		NM
Gross leasable area (square feet) ^5							25,849,773		24,659,316		4.8 %
Occupancy rate ^5,7,8							98.6 %		99.7 %		NM

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 commercial and distribution centre properties and excludes properties under development.

⁶ New non-GAAP measure adopted in 2017. Refer to section 10.0 of the MD&A for further information.  

⁷ NM - not meaningful.

⁸ 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, 2017, December 31, 2016.

Financial Highlights

Net Income – Net income was $97.1 million for the quarter, up 48.3% over the prior year, primarily due to an increase in the fair market value adjustment on investment properties and increased NOI partially offset by an increase in interest and other financing charges. For the full year, net income was $317.3 million, up 22.5% over the prior year primarily due to an increase in the fair market value adjustment on investment properties and increased NOI, partially offset by an increase in interest and other financing charges.

Net Operating Income (NOI)* – In the fourth quarter, NOI increased $8.2 million or 11.2% compared to the same period last year, primarily due to the acquisition of income-producing properties and properties under development completed in 2017 and 2016, which contributed $6.6 million to NOI growth. Same store NOI and same property NOI for the quarter increased $1.5 million or 2.0% and $1.6 million or 2.2%, respectively, primarily due to the contractual rent escalations built into the property leases, recovery of capital expenditures, and intensifications completed in 2017 and 2016. NOI for the full year amounted to $322.3 million.

Funds from Operations (FFO)* – FFO for the quarter was $60.4 million or $0.283 per unit (diluted non-GAAP), which was $3.7 million and $0.009, respectively, higher than the same period in 2016 primarily due to the impact of NOI variances, partially offset by higher interest expense. FFO for the year ended was $237.6 million or $1.124 per unit (diluted non-GAAP) which was $22.7 million and $0.053, respectively, higher than the same period in 2016 primarily due to the impact of NOI variances, partially offset by higher interest expense.

Adjusted Funds from Operations (AFFO)* – AFFO for the three months ended December 31, 2017 amounted to $49.6 million or $0.232 per unit (diluted non-GAAP) which was $3.6 million and $0.010, respectively, higher than the same period in 2016, primarily due to the impact of NOI variances, partially offset by higher interest expense. AFFO for the year ended December 31, 2017 amounted to $194.4 million or $0.919 per unit (diluted non-GAAP) which was $21.6 million and $0.057, respectively, higher than the same period in 2016, primarily due to the impact of NOI variances, partially offset by higher interest expense and an increase in the normalized capital expenditure reserve.

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. For the full year, distributions per unit amounted to $0.700, 2.9% higher than the same period in 2016.

On November 6, 2017 REIT announced its fourth consecutive increase in the annual rate of distribution to $0.728 per unit, an increase of 4.0% commencing with the January 2018 payment date.

*NOI, FFO and AFFO are non-GAAP measures. Refer to Non-GAAP section in the Q4 and Year End 2017 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, 2017, CTC represented 95.3% of total GLA and 93.2% of annualized base minimum rent.

Occupancy – As previously announced, CT REIT received from Sears Canada Inc. a notice to disclaim the Sears distribution centre lease in Calgary, Alberta, effective February 3, 2018. The Sears Calgary distribution centre is comprised of two adjacent properties – a 625,000 square foot distribution centre located at 25 Dufferin Place SE and a 30,000 square foot building located at 5500 Dufferin Boulevard SE.

CT REIT entered into a 10-year lease with CTC for 25 Dufferin Place SE commencing May 1, 2018. CTC currently occupies and leases from CT REIT the 201,000 square foot building known as 11 Dufferin Place SE, which is next to 25 Dufferin Place SE. CTC will move its existing operations at 11 Dufferin Place SE to 25 Dufferin Place SE. As a condition of CTC entering into the new lease for 25 Dufferin Place SE, the lease for 11 Dufferin Place SE will be terminated.

Subsequent to December 31, 2017, the REIT entered into an offer to lease with a third party for the 30,000 square foot building located at 5500 Dufferin Boulevard SE.

At December 31, 2017, CT REIT's portfolio occupancy rate, on a committed basis, was 98.6%, a decrease from 99.7% on December 31, 2016. The occupancy rate declined primarily as a result of the above referenced changes in existing lease agreements at CT REIT's distribution centres in Calgary, Alberta.

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, 2017 ("the Q4 and Year End MD&A") and Audited Consolidated Financial Statements and Notes for the period ended December 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 fourth quarter and year end 2017 results, please see: http://files.newswire.ca/1307/Q4_2017CTREIT.pdf

Forward–Looking Statements

This press release 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 the investments in the acquisitions under the heading "Update on Previously Announced Investments", the timing and terms of any such investments, the occupancy of the properties located at 25 Dufferin Place SE, 11 Dufferin Place SE and 5500 Dufferin Boulevard SE and the effects such occupancies and/or vacancies, as the case may be, may have on cash flows 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 management believes 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 2017, and to Section 11 "Enterprise Risk Management" and all subsections thereunder of our 2017 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 13, 2018. 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 1-866-377-0758 or through a webcast at http://www.ctreit.com/en/media-centre/events-webcasts, 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 totaling 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, 416-480-3195, 416-544-6134, [email protected]