CT Real Estate Investment Trust (CRT-UN-T) is poised to continue expanding its portfolio after experiencing growth in every significant financial metric during 2017, says president and CEO Ken Silver.
Silver told RENX that after adding 1.5 million square feet of mainly retail space last year, the REIT is also interested in adding industrial and distribution assets to its portfolio.
This is Part I of a feature based on our interview with CT REIT CEO Ken Silver. Watch for Part II next week.
“Really we look to Canadian Tire Corporation (CTC-T). They’re our anchor tenant. They’re certainly evolving their business practices and multi-channel retail to compete in the retail environment and have been posting extremely good results,” said Silver.
“So they are navigating well the changing retail environment.
“From the REIT’s perspective . . . whenever there’s a changing environment, typically in those changes you’ll see opportunities and given our financial strength we’re well-positioned to realize those opportunities in the marketplace.”
Canadian Tire Corporation occupies 95.3 per cent of the portfolio’s overall gross leasing area of 25.8 million square feet.
CT REIT had an outstanding 2017
Silver said the REIT had an outstanding 2017. Its property revenue of $443.3 million was up 8.9 per cent from the previous year; net operating income grew by 12.2 per cent to $322.2 million; and net income rose by 22.5 per cent to $317.3 million.
Adjusted funds from operations jumped by 12.5 per cent to $194.4 million and AFFO per unit was up 6.6 per cent to $0.919.
The distribution per unit paid was $0.70 which was a 2.9 per cent increase from 2016. It was the fourth distribution increase in four years.
CT REIT’s stock has been trading in the $13 range in recent weeks. It peaked at just above $15.70 during mid-2016.
CT REIT added 1.5 million square feet to portfolio
Silver said the REIT’s investment program was very successful, adding just over 1.5 million square feet of gross leasing area.
“It was a record year for us in terms of third-party acquisitions and by that I mean acquisitions with parties other than Canadian Tire, because Canadian Tire is a great source of growth for us, but we are doing transactions with others,” said Silver.
“One of the highlights in that category was the transaction we did with RioCan to acquire seven assets from them for a total of about 1.3 million square feet.”
The properties are all anchored by existing Canadian Tire stores and are located in Collingwood, Hamilton, Orillia, St. Catharines and Sudbury, Ont.; Yorkton, Sask.; and Oliver, B.C. CT REIT paid about $200 million for the properties, which also house a wide cross-section of other retail tenants.
CT REIT was the first buyer to snap up properties as part of a major selloff by RioCan REIT (REI-UN-T), which is disposing of about 100 non-core properties, valued at up to $2 billion, as it follows up on a new strategic initiative to focus on Canada’s six major urban markets.
Seven properties under development
CT REIT entered 2018 with seven properties under development, after completing seven intensifications and six new retail developments — four of them stand-alone restaurant sites — during 2017.
“We continue to see great opportunities in the marketplace,” Silver said, “and we continue to be selective and opportunistic about our investments. We maintain a very conservative approach to our balance sheet and financial metrics.”
He said the REIT is particularly interested in investing in real estate which involves distributing product to customers, either via brick-and-mortar locations, or the expanding distribution centre sector.
“As we continue to grow the portfolio, we’re continuing to grow our internal resources. So we are increasingly managing the portfolio with our own resources,” said Silver, adding Canadian Tire Corporation has helped with the management side of things, giving the REIT a very cost-effective operating structure.
“We’ve been adding resources internally to help manage the growth in areas where we need to expand our expertise, particularly in development and leasing.”