CT Real Estate Investment Trust Q3 2024 Earnings Report

CT Real Estate Investment Trust EPS Results

• Actual EPS: C$0.34
• Consensus EPS: C$0.33
• Beat/Miss: Beat by +C$0.01
• One Year Ago EPS: C$0.33

CT Real Estate Investment Trust Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

CT Real Estate Investment Trust Announcement Details

• Quarter: Q3 2024
• Date: 11/5/2024
• Time: After Market Closes
• Conference Call Date: Wednesday, November 6, 2024
• Conference Call Time: 9:00AM ET

CT Real Estate Investment Trust (TSE:CRT.UN) is an unincorporated real estate investment trust that invests in retail properties across Canada. The most significant portion of properties are located in Ontario, followed by Quebec and Western Canada. The trust generates the vast majority of revenue from leasing its properties to Canadian Tire Corporation, which operates the Canadian Tire retail stores. The trust's portfolio primarily consists of properties anchored by a Canadian Tire retail store, in addition to retail properties not anchored by Canadian Tire, distribution centres, and mixed-use commercial property.

CT Real Estate Investment Trust Q3 2024 Earnings Call Transcript

Key Takeaways

• Occupancy remained high at 99.4%, contributing to a 3.4% increase in net operating income (NOI) and a 2.3% rise in AFFO per unit year-over-year.
• The REIT deployed CAD 85 million in three new investments (vend-ins) this quarter, adding 283,000 square feet to the portfolio and reinforcing its pipeline to deliver over 500,000 square feet by the end of 2025.
• A strategic CAD 47 million acquisition of a Canadian Tire and Mark’s property in Nanaimo, BC, and a CAD 4 million sale of an Orillia outparcel (at double its cost) highlight value creation via targeted asset rotations.
• The development pipeline now includes 20 projects with a CAD 319 million committed investment, 95.2% of 769,000 square feet pre-leased, and phased completions through 2026.
• CT REIT’s interest coverage ratio stood at 3.5×, indebtedness was 40.7% of asset value, and CAD 291 million remained available on its committed credit facility, underscoring liquidity and financial flexibility.

Presentation

[Operator]

Good morning. My name is Gigi, and I'll be your conference operator today. At this time, I would like to welcome everyone to CT REIT's Q3 2024 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star one one on your telephone keypad. To withdraw your question, please press star one one. The speakers on the call today are Kevin Salsberg, President and Chief Executive Officer of CT REIT; Jodi Shpigel, Senior Vice President, Real Estate; and Lesley Gibson, Chief Financial Officer. Today's discussions may include forward-looking statements. Such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.

[Operator]

Please see CT REIT's public filings for a discussion of these risk factors, which are included in their 2023 Management's Discussion and Analysis and 2023 Annual Information Form, which can be found on CT REIT's website and on SEDAR+. I will now turn the call over to Kevin Salsberg, President and Chief Executive Officer of CT REIT. Kevin?

[Kevin Salsberg, President and CEO at CT REIT]

Thank you, Gigi. Good morning, everyone, and welcome to CT REIT's Third Quarter Investor Conference Call. I am pleased to report that Q3 was once again a healthy and stable quarter for CT REIT. Lesley and Jodi will provide the details, but at a high level, our occupancy, renewal spreads, payout ratio, and credit metrics were all relatively in line with our results from the past few quarters. Growth, once again, was strong, with NOI increasing by 3.4% and AFFO per unit increasing by 2.3% in the quarter. In the external environment, the recent rally in REIT equities has helped to narrow the gap in terms of discounts to net asset value.

[Kevin Salsberg, President and CEO at CT REIT]

In addition, the pace of rate cuts by the Bank of Canada, including the most recent outsized reduction, continues to drive interest back to the real estate sector as the benefits of alternative yield opportunities for investors narrow on a risk-adjusted basis. Although transaction volumes remain low by historic standards, it is hoped that these recent moves will provide a catalyst for market participants to begin to reengage and seek out new investments. For CT REIT, we were pleased to announce CAD 85 million of new investments this quarter, which will help bolster our strong pipeline of projects. Between now and the end of 2025, we intend to deliver over 500,000 sq ft of new development projects.

[Kevin Salsberg, President and CEO at CT REIT]

And as mentioned on previous conference calls, we continue to monitor the market and seek out differentiated and strategic opportunities for CT REIT, such as the CAD 47 million acquisition of a Canadian Tire and Mark's store property in Nanaimo, BC that closed in the quarter. We also sold an outparcel to a multi-tenant property in Orillia, Ontario, post-quarter end for CAD 4 million. To remind listeners, we bought the Orillia Square property from a third-party in Q4 2017. At the time of acquisition, this roughly 320,000 sq ft asset was only 61% occupied and anchored by a No Frills and a 62,000 sq ft Canadian Tire store.

[Kevin Salsberg, President and CEO at CT REIT]

Over the last several years, we have relocated and expanded the Canadian Tire store, which now occupies over 125,000 sq ft of GLA, backfilled the old Canadian Tire store with Mark's, SportChek, and Dollarama stores, as well as a new Shoppers Drug Mart that will be opening by the end of Q1 2025. We have also extended the lease with No Frills, and occupancy for this center now sits at approximately 90%. By selling the outparcel for double what we paid for this portion of the site, we have sold a non-strategic part of this asset and reduced our cost base in the process. This project is a great success story for the REIT and shows how we can leverage our relationship with Canadian Tire to create value in our real estate.

[Kevin Salsberg, President and CEO at CT REIT]

We are fortunate to continue to benefit from our strong and stable portfolio of assets, our unique relationship with Canadian Tire, and the development pipeline that comes alongside this privileged association, and continue to seek out new acquisition opportunities that fit our strategy when market conditions allow for it. I will now turn it over to Jodi and Lesley to provide some additional details on the quarter, our results, and our investment, leasing, and development activities. Jodi?

[Jodi Shpigel, Senior VP of Real Estate at CT REIT]

Thanks, Kevin, and good morning, everyone. As highlighted in our press release yesterday, we were pleased to announce three new investments this quarter. These new investments relate to the vend-in of a newly built property containing Canadian Tire, Mark's, and Dollarama stores in Mont-Tremblant, Quebec, and a vend-in of a Canadian Tire store in Winnipeg, Manitoba, as well as an expansion of a Canadian Tire store located in Penticton, British Columbia. These new investments, totaling CAD 85 million, are expected to earn a going-in yield of 6.2% and will add approximately 283,000 sq ft of incremental GLA to our pipeline of projects and our high-quality asset portfolio.

[Jodi Shpigel, Senior VP of Real Estate at CT REIT]

As Kevin previously noted in Q3, CT REIT completed the previously announced third-party acquisition of a property containing Canadian Tire and Mark's stores in Nanaimo, British Columbia, for an investment of CAD 47 million, adding 141,000 sq ft of incremental GLA to the portfolio.

[Jodi Shpigel, Senior VP of Real Estate at CT REIT]

Our development activities remain strong, with 20 projects at various stages of development, two of which are expected to be completed this year, and the remaining projects expected to be completed in 2025 and 2026. These developments represent a total committed investment of approximately CAD 319 million upon completion, CAD 102 million of which has already been spent, and CAD 114 million of which we anticipate will be spent in the next 12 months. Once built, these projects will add a total incremental GLA of approximately 769,000 sq ft to the portfolio, nearly 95.2% of which has been pre-leased at quarter end. At the end of the quarter, CT REIT maintained its 99.4% occupancy rate, representing a portfolio that is substantially fully leased, a true indication of the quality and strength of our assets.

[Jodi Shpigel, Senior VP of Real Estate at CT REIT]

Year-to-date, we have completed four Canadian Tire store lease extensions, and as at the end of Q3, the weighted average lease term for our portfolio was 7.8 years, which remains one of the longest in the sector. With that, I will turn it over to Lesley to discuss our financial results. Lesley.

[Lesley Gibson, CFO at CT REIT]

Thanks, Jodi, and good morning, everyone. As Kevin highlighted, we were pleased with the results delivered by the REIT again this quarter. Same-store NOI grew 1.2%, or CAD 1.3 million. Drivers of the same-store NOI increase were contractual rent escalations of CAD 1.6 million, primarily being the 1.5% average annual rent escalations included in the Canadian Tire leases, partially offset by a decrease in the property operating recoveries, which reduced NOI by CAD 378,000 in the quarter.

[Lesley Gibson, CFO at CT REIT]

Same-property NOI grew 1.8%, or CAD 2 million, compared to the prior year. This increase was primarily due to the increase in same-store NOI noted, as well as an increase of CAD 666,000 from the intensifications completed in 2023 and 2024. Overall, in the third quarter, NOI grew by a healthy 3.4%, or CAD 3.7 million, driven by the increase in same-property NOI, as well as the acquisitions and completion of development projects in 2023 and 2024.

[Lesley Gibson, CFO at CT REIT]

In the third quarter, excluding fair value adjustments, G&A expense as a percentage of property revenue was 2.2%, which was lower than the same period in the prior year of 2.9%. This decrease was primarily due to the timing of the deferred income tax provision amounting to CAD 417,000, which is expected to reverse over the balance of the year. The fair value adjustment of CAD 17.7 million in the quarter was driven by a combination of contractual rent increases within the property portfolio, as well as a modest gain recognized from the portion of a property sold subsequent to quarter end. Investment metrics for the portfolio remained unchanged relative to Q2 of 2024. In the quarter, diluted FFO per unit was up 1.2% to CAD 0.331, compared to CAD 0.327 in the third quarter of 2023.

[Lesley Gibson, CFO at CT REIT]

This growth can be primarily attributed to the acquisition, intensifications, and developments completed during 2023 and 2024, as well as the contractual rent escalations in our Canadian Tire leases, partially offset by higher interest costs related to the debentures issued in Q4 of 2023 and the impact of higher rates on our line of credit. In addition, the straightlining of the base rents included in FFO related to the Canadian Tire store leases from IPO reached their inflection point at the beginning of 2023. Prior to this period, the straightlining had served to contribute to FFO growth. However, more recently, this has detracted from FFO growth and is expected to continue to do so through the end of the initial lease terms for the next many years.

[Lesley Gibson, CFO at CT REIT]

Growth in FFO per unit on a diluted basis was strong for the same reasons, though it excludes the impact of straight-line rents, which is not included in FFO, and came in at CAD 0.38, up 2.3% compared to Q3 of 2023. Cash distributions paid in the quarter increased by 3.0% compared to the same period in the previous year due to the increase in monthly cash distributions paid in July 2024. FFO payout ratio for Q3 was 75.0%, which is in line with the same period last year of 74.8%. During the third quarter, our unit price rallied, and as a result, we slowed the repurchasing of units through our NCIB facility, buying back approximately 486,000 of units at an average price of CAD 13.20 per unit.

[Lesley Gibson, CFO at CT REIT]

Turning now to the balance sheet, our interest coverage ratio was 3.52x for the current quarter, compared to 3.71x for the comparable quarter in 2023, with the decrease mainly driven by an increase in interest expense and other financing charges outpacing the growth in EBIT fair value again this quarter. The indebtedness to EBIT fair value ratio improved to 6.61x , down from 6.83x in Q2 of 2023, primarily because the growth in EBIT fair value outpaced the slight increase in indebtedness. Our indebtedness ratio was down slightly to 40.7% from 41.1% in the same quarter of last year due to the increase in fair value on investment properties, partially offset by the issuance of the series J senior unsecured debentures.

[Lesley Gibson, CFO at CT REIT]

Our indebtedness ratio continues to be within our target range, and considering the current macroeconomic backdrop and interest rate environment, we're pleased with the strength of our balance sheet. Lastly, with respect to liquidity, we ended Q3 with CAD 5 million of cash on hand, CAD 291 million remains available through our committed credit facility, and a further CAD 300 million is available on our uncommitted facility with Canadian Tire Corporation. And with that, I will turn the call back to the operator for any questions.

[Operator]

Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then one one on your telephone keypad. To withdraw your question, press star, then one one again. We ask that you please limit yourselves to one question and one follow-up question. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Lorne Kalmar from Desjardins Capital Markets.

[Lorne Kalmar, VP of Equity Research at Desjardins]

Thanks. Good morning, everybody. I wanted to focus in on the pickup in the investment activity in the quarter, and more specifically on the vend-ins. I was just wondering if you could give a little bit more precise timing on the closing and the value of those two assets and how you expect to fund them?

[Kevin Salsberg, President and CEO at CT REIT]

Hi, Lorne. Just a little color, and then I can pass it over to Jodi for some specifics. We are fortunate to have a number of different growth levers that we can pull at different times. Obviously, for a couple of years there, we were adding quite significantly to our development pipeline, which we continue to work through and deliver. Last quarter, we announced and closed this quarter the third-party acquisition, and this quarter, leading into the vend-ins a little bit more fulsomely, which I believe is the first time we've picked up a vend-in in about three or so years, so fortunate to have those growth options. Jodi can give the specifics on the properties.

[Jodi Shpigel, Senior VP of Real Estate at CT REIT]

Yeah, good morning, Lorne. So the Winnipeg is a stand-alone Canadian Tire store, and it's been on the list of the development pipeline for some time, and so the opportunity arose. So that's why that one has worked out. And Mont Tremblant is a newly built shopping center in Tremblant, built by Canadian Tire. They have built the Canadian Tire, the Mark's, and the Dollarama. And so now that it's fully built, we are vend-in that into us. Both of these are expected to close in the fourth quarter, and the combined value of these is approximately CAD 70 million.

[Lorne Kalmar, VP of Equity Research at Desjardins]

Okay, perfect. And then maybe just as a follow-up, how are you going to see the investment activity evolving maybe over the next four quarters? Do you expect it to lean more vend-in or kind of stick to building out the development pipeline?

[Kevin Salsberg, President and CEO at CT REIT]

I mean, 2025 will be a big year for us in development completions. As Jodi mentioned, there's probably over CAD 100 million to be spent on our previously announced activity. I think the acquisition activity you've seen last quarter or this quarter is us sort of feeling better about the more constructive backdrop. Obviously, cost of financing seems to have settled a little bit more fulsomely. Our unit price had a nice run-up over the last three or four months. So obviously, acquisitions will be opportunistic for us, especially third-party acquisitions. But we're going to be busy over the next 12 to 18 months just with our existing pipeline and what we've announced.

[Lorne Kalmar, VP of Equity Research at Desjardins]

Okay, great. And then sorry, I just realized I forgot to get one answer on the first part of my question. How do you guys fund the vend-ins?

[Lesley Gibson, CFO at CT REIT]

Lorne, the vend-ins are the ones that Jodi spoke about, largely cash. There'll be a small amount of Class B units that are also issued in connection with those, but the majority of those will be cash.

[Lorne Kalmar, VP of Equity Research at Desjardins]

Okay, fantastic. Thank you very much.

[Kevin Salsberg, President and CEO at CT REIT]

Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Gaurav Mathur from Green Street.

[Fred Blondeau, Manging Director and Head of Canadian Research at Green Street]

Hey, good morning, guys. It's Fred. Just one question for me. You have these debentures coming due. I was wondering if you could give us a bit more color on what you're seeing for the CAD 200 million coming due next year.

[Lesley Gibson, CFO at CT REIT]

Sure, thanks, Fred. Yeah, we have CAD 200 million of public debentures that come due in June of 2025. Obviously, those are on our radar screen, but it's still a fair ways away for us. We're obviously looking at rates given where the interest rates are going and political things are moving. We do have a bit of time to decide what we're going to do. I think our still primary desire would be to refinance those into the public markets. We're happy to have the size of program that we have for our debentures, but we'll be making sort of some of those calls over the next quarter or two as we get a bit closer to the maturity.

[Fred Blondeau, Manging Director and Head of Canadian Research at Green Street]

That's great. Thanks. Maybe one more, if I may. As you know, I mean, the Canadian Tire store count has reduced over the last two years. So when we look specifically at your external growth, your views on external growth, how do you think this will impact your acquisition pipeline going forward? I know your focus will be on development next year, but just purely looking at your acquisition pipeline.

[Kevin Salsberg, President and CEO at CT REIT]

Yeah, I mean, just my take on Canadian Tire is the number of stores they have out there has pretty much remained flat for some time. Having said that, though, they've been expanding stores or relocating to bigger locations. So their total footprint has actually grown, and we've certainly been a beneficiary of that. And that's what's led to the development activities we've undertaken over the last few years in our current development pipeline. So I think there's still opportunity there. It's a big fleet that they have that they modernize and update over time, which, again, provides us with that access to pipeline. And we complement that with the vend-ins we pull off the shelf as we deem appropriate.

[Kevin Salsberg, President and CEO at CT REIT]

As I said in my comments, we are hopeful that transaction activity in the third-party space will also pick up as market participants sort of try to get back to what is the new normal. Hopefully that answers your question, but I think there's lots of opportunity working with Canadian Tire and hopefully some new things we can do externally as well.

[Fred Blondeau, Manging Director and Head of Canadian Research at Green Street]

No, that's great. Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Himanshu Gupta from Scotia Capital.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets]

Thank you and good morning. So just looking at same-store NOI growth, same-store NOI growth was tracking 2.5% in the last two years. And obviously, this year tracking less than 2%. So how should we think about same-store NOI next year and in general the growth outlook?

[Lesley Gibson, CFO at CT REIT]

Hi, Himanshu. A couple of things, I guess, on the same-store NOI growth for the current quarter. We did have a few higher non-recoverable property costs, particularly our enclosed mall properties, where we do have some gross leases and some caps in some of the leases there. But probably the other factor that is impacting the same-store NOI growth is the contribution that we recover from our maintenance capital. So the amortization and also the related interest carry in a flat interest rate environment, like quarter-over-quarter, that had typically provided us about 50-60 basis points of NOI growth. And obviously now that we're in an interest rate environment that's going on a decreasing, the interest carry is much less. And the combination of that really is now providing us less than 10 basis points when the prime rate is decreasing.

[Lesley Gibson, CFO at CT REIT]

I would expect sort of that to sort of continue really until we get to a point where sort of the prime rate stabilizes, and then that growth would then typically resume after that point. So that's obviously impacting things a bit more negatively as we've had sort of swings in the interest rate and will probably for a few more quarters when we go quarter-over-quarter comparisons.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets]

Okay. So, fair to say that next year likely to track less than 2%, kind of similar to what we have seen in the recent quarters?

[Lesley Gibson, CFO at CT REIT]

Himanshu, we don't typically provide guidance on the future, but mathematically, when the interest rates are going to be less this year than they were in the comparative, that number will be less than it is. So lower growth for us for a couple of quarters really until sort of that quarter-over-quarter stabilizes.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets]

Okay. Fair enough. Yeah. Thanks for that. And then on Canada Square, should we expect any more incremental NOI erosion next year? I'm talking 2025 versus 2024.

[Lesley Gibson, CFO at CT REIT]

Himanshu, I'd say the amount is going to be really small. There are few tenancies left at our 2200 Yonge Street property, which is probably at the very north end of our property, which is part of the first phase that will be redeveloped. So I would say there'd be nothing significant, no material change in that for the next few quarters.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets]

Okay. Thank you. Okay, fantastic. Last question. I think Fred asked about the debentures? I'm asking about the Class C units. I think there's some Class C units expiring next year? Any thoughts on the interest rate there?

[Lesley Gibson, CFO at CT REIT]

Sure. Yeah, we do have CAD 252 million of Class C units that roll over at the end of next May in 2025. They do follow a slightly different process. As Canadian Tire who holds those debentures, they do have the opportunity to redeem them or can decide whether they'd like to roll them over. Typically, in the past, they have rolled those units over, but there is a process and a timeline sort of laid out in those Class C, in the agreements, that have sort of a timeline as to when they have to provide us notice as to what they'd like to do, and it will flow from there. So we'd have some more information on that probably at our year-end call as to what Canadian Tire would like to do or what the process will be for those Class C units.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets]

Got it. And is there an option or a provision in the agreement where they can convert Class C into Class B?

[Lesley Gibson, CFO at CT REIT]

There is, Himanshu. So Canadian Tire does have the opportunity that they could ask to redeem those units, and they could redeem them for cash, or they could redeem them for Class B units. So they do have some options for that.

[Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets]

Got it. Okay. Thank you, guys. I'll turn back.

[Kevin Salsberg, President and CEO at CT REIT]

Thank you.

[Operator]

Thank you. One moment for our next question. Our next question comes from the line of Sam Damiani from TD Cowen.

[Sam Damiani, Equity Research Analyst at TD Securities]

Thank you. Good morning. Don't have a lot of questions left, but maybe I'll just chime in on Canada Square. Just wondering if you have some visibility on commencing active redevelopment there. And related to that, just with all the changes in rental development in Toronto, would you say a clearer path to sort of economic justification of building rental on that site, or is the residential component going to be mostly condos?

[Kevin Salsberg, President and CEO at CT REIT]

Hey, Sam. So the residential was always contemplated to be apartment or rental. If you'll recall, we have a very long-term ground lease that we sit on here at Canada Square. So there is a small portion of the site that we can convert to freehold and potentially do condominiums, but that would be a much later phase of the project. So the new policies that are coming into play federally, provincially, municipally, certainly are providing a little bit of help and support for the development of new residential. As we've talked about in the past, we can't really get out that density until Metrolinx departs a portion of the site where we are contemplating building the first towers. And there's still no timeline in sight. Unfortunately, I feel like I say this every quarter, but for them to complete the project and ultimately depart the lands that we need.

[Kevin Salsberg, President and CEO at CT REIT]

Having said that, we are still working with the city, Oxford, as our development partner to advance the master plan and the zoning and related entitlements. That process is going well, but obviously takes time and continues to follow a wholesome process where we engage with stakeholders and city staff to try to do all the things that are required to affect the changes. So everything's going fine. It's just obviously slow, and certainly we anxiously await being able to travel east and west along Eglinton on a new subway line.

[Sam Damiani, Equity Research Analyst at TD Securities]

Yeah, 100% there. Okay, that's helpful. Thank you. And I did forget about the rental focus of that proposal, so thank you for reminding me. So just on retail leasing spreads, I jumped on the call a little late, so I may have missed it, but if you have any leasing spreads to update us with in the third quarter, that would be of interest.

[Jodi Shpigel, Senior VP of Real Estate at CT REIT]

Good morning, Sam. It's Jodi. You didn't miss the answer to that, so you were asking for the first time. This quarter, the leasing renewal volume was pretty low. As you know, each quarter is a bit different. This one happened to be a lower volume than typical. However, we did achieve mid-teen spreads in the renewal, so we're quite pleased with that result.

[Sam Damiani, Equity Research Analyst at TD Securities]

I guess how many square feet would that be, Jodi? That sounds like a great number, but if it's on 22,000 sq ft, I don't know if it's still a decent sort of sample, or is it really much bigger?

[Kevin Salsberg, President and CEO at CT REIT]

I would say it would not be a statistically significant sample. So yes, it is a smaller GLA.

[Sam Damiani, Equity Research Analyst at TD Securities]

Okay. Thank you for that and just back to, I believe, maybe Lorne's question, just on the vend-ins, a small bit of Class B issuance to come there. How would those units be priced?

[Lesley Gibson, CFO at CT REIT]

They're priced at a VWAP at the closing date.

[Sam Damiani, Equity Research Analyst at TD Securities]

Got it.

[Lesley Gibson, CFO at CT REIT]

For the public units.

[Sam Damiani, Equity Research Analyst at TD Securities]

Good. Okay. Thank you. I'll turn it back. Thank you.

[Operator]

Thank you. As a reminder, please press star, then one one on your telephone keypad. To withdraw your question, simply press star, then one one again. Our next question comes from the line of Pammi Bir from RBC Capital Markets.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Thanks. Good morning. Just maybe one question for me. On the development pipeline, it looks like costs went up a little bit on a per square foot basis. Can you just remind us what sort of range you're expecting on these projects, either maybe the deliveries for next year or on an overall basis? And just curious how that compares to the acquisition yield that you quoted in the release. Thanks.

[Kevin Salsberg, President and CEO at CT REIT]

Sure, Pammi. So I assume you're talking about kind of return metrics for those projects that will be delivered in 2025. If you recall, the way we fund our development with Canadian Tire is they actually undertake the construction activities, take the construction risk, and at the culmination of the project, we reimburse them those funds through a tenant allowance, and then rent begins. So we definitely take the development and construction risk off the table, but obviously the returns are commensurate with the acquisition of a stabilized asset as a result. So I don't have the number offhand specifically for what the, call it, next 12 months deliveries would yield, but I would suggest they would approximate what our average has been or what an acquisition of a Canadian Tire store or a vend-in would look like for us.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Okay. So somewhere in the, call it, 6%-6.5% range?

[Kevin Salsberg, President and CEO at CT REIT]

I was thinking somewhere ±6.5. Yeah. Mid-6.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Great. Thanks very much. I'll turn it back.

[Kevin Salsberg, President and CEO at CT REIT]

Thank you.

[Operator]

Thank you. As there are no further questions at this time, I will turn the call over to Kevin Salsberg, President and CEO, for closing remarks.

[Kevin Salsberg, President and CEO at CT REIT]

Thank you, Gigi, and thank you all for joining us today. We look forward to speaking with you again in the new year in February after we release our Q4 results. Have a good day.

[Operator]

This concludes today's call. You may now disconnect.

Participants

Analysts

• Lesley Gibson, CFO at CT REIT
• Lorne Kalmar, VP of Equity Research at Desjardins
• Himanshu Gupta, Director and Equity Research Analyst at Scotiabank Global Banking and Markets
• Kevin Salsberg, President and CEO at CT REIT
• Sam Damiani, Equity Research Analyst at TD Securities
• Jodi Shpigel, Senior VP of Real Estate at CT REIT
• Fred Blondeau, Manging Director and Head of Canadian Research at Green Street
• Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets