CT Real Estate Investment Trust Q1 Earnings Call Highlights

Key Points

• CT REIT reported solid Q1 results, with occupancy holding at 99.4% and same-property NOI rising 2.3% year over year. AFFO per unit increased 2.8% and FFO per unit rose 3.5%, while the payout ratio stayed stable in the low- to mid-70% range.
• The board approved a 3.5% increase in monthly distributions starting with the July 2026 payment, marking the REIT’s 13th distribution increase since its IPO and lifting cumulative distribution growth to more than 50%.
• CT REIT announced three new acquisitions totaling about CAD 43 million, expected to add roughly 130,000 square feet of gross leasable area at a 6.28% going-in yield, while its development pipeline remains heavily pre-leased at about 95%.

CT Real Estate Investment Trust TSE: CRT.UN reported higher first-quarter operating income and per-unit cash flow, while announcing a 3.5% increase to its monthly distribution beginning with the July 2026 payment.

President and Chief Executive Officer Kevin Salsberg said the quarter reflected “the strength and stability” of the REIT’s portfolio and its “disciplined operating approach.” Occupancy remained at 99.4%, and same-property net operating income increased 2.3% year over year. Total net operating income rose 4.7%.

Adjusted funds from operations per unit increased 2.8% from the prior-year quarter, while funds from operations per unit rose 3.5%. The REIT said its payout ratio remained stable in the low- to mid-70% range.

“CT REIT’s objective has always been straightforward: to deliver dependable and growing results, supported by a high-quality portfolio and a conservatively managed balance sheet,” Salsberg said on the call.

Distribution Increase Marks 13th Since IPO

The board of trustees approved a 3.5% increase in monthly distributions, effective with the July 2026 payment. Salsberg said the increase marks the REIT’s 13th distribution increase since its initial public offering and brings cumulative distribution growth to more than 50% over that period.

Chief Financial Officer Lesley Gibson said cash distributions paid in the first quarter increased 2.5% from the first quarter of 2025 to CAD 0.237 per unit, reflecting the distribution increase that became effective in July 2025. The AFFO payout ratio was 72.5%, compared with 72.6% a year earlier.

Gibson said diluted AFFO per unit was CAD 0.327 in the quarter, while diluted FFO per unit was CAD 0.354. Growth in both measures primarily reflected higher net operating income, partially offset by higher property expenses, higher interest costs and CAD 1 million of development fee revenue earned in the first quarter of 2025.

Acquisitions Add Retail Space in Edmonton, Quebec and British Columbia

Senior Vice President of Real Estate Jodi Shpigel said CT REIT announced three new investments during the quarter, with a total expected capital commitment of approximately CAD 43 million. The transactions are expected to close in the second quarter, subject to closing conditions, and are projected to generate a 6.28% going-in yield.

The announced investments include:

• A roughly 76,000-square-foot property in eastern Edmonton anchored by a Canadian Tire store, with freestanding pads leased to Bank of Montreal and McDonald’s.
• A 54,000-square-foot CRU building anchored by Value Village adjacent to a Canadian Tire store in Rosemere, Quebec, north of Montreal.
• Approximately 3.4 acres of land adjacent to a CT REIT-owned Canadian Tire and grocery store-anchored open-air shopping center in Oliver, British Columbia.

Combined, the acquisitions are expected to add about 130,000 square feet of gross leasable area to the portfolio.

Asked by CIBC Capital Markets analyst Tal Woolley whether the Oliver land purchase was a land bank, Salsberg said CT REIT has an “active intention” to develop the parcel. He said the land could support roughly 40,000 to 50,000 square feet of gross leasable area and noted that the REIT has some tenant interest.

In response to a question from Desjardins analyst Lorne Kalmar about the acquisition outlook, Salsberg said the REIT is focused on “hitting singles and doubles” and is looking to keep investment activity near its typical run rate. He said there were no specific deals or guidance to announce but added that management is hopeful the rest of the year develops similarly to the start of 2026.

Development Pipeline Remains Pre-Leased

CT REIT said it has 11 development projects at various stages, including the Canada Square office retrofit project in Toronto. Shpigel said the developments represent a committed investment of approximately CAD 380 million, with CAD 177 million spent to date. The REIT expects to invest roughly CAD 78 million over the next 12 months to advance the projects.

Once completed, the projects are expected to add 629,000 square feet of new gross leasable area, approximately 95% of which has already been pre-leased.

Asked by RBC Capital Markets analyst Pammi Bir about higher development cost per square foot in the active pipeline, Salsberg said Canada Square was a contributing factor because an office retrofit has a different cost profile from new retail development. He also said the REIT has completed many of its larger new-store projects and that remaining retail work includes store expansions, which can be less efficient on a per-square-foot basis.

Leasing Activity and Balance Sheet

During the quarter, CT REIT completed two Canadian Tire store lease extensions and renewed nearly 200,000 square feet of third-party tenancies. Shpigel said blended renewal spreads were 5.9% on about 340,000 square feet of gross leasable area. Excluding approximately 226,000 square feet tied to fixed renewal options at flat rents, blended renewal spreads were 11%.

Shpigel said the flat-rent renewals were “in the minority of the portfolio” and “an anomaly.” Salsberg added that the leases were two anchor leases acquired after the REIT’s IPO and outside its typical Canadian Tire vend-in or development-related transactions.

CT REIT ended the quarter with a weighted average lease term of 7.0 years and occupancy of 99.4%.

Gibson said same-property NOI growth reflected contractual rent escalations of approximately 1.5% annually in many Canadian Tire leases, along with CAD 1.2 million of quarterly contributions from intensification projects completed in 2025. Total NOI increased by approximately CAD 5.6 million year over year, supported by same-property growth, seven acquisitions completed in 2025 and development activity.

The REIT reported an interest coverage ratio of 3.52 times, compared with 3.55 times in the prior-year quarter. Gibson said the change reflected higher interest costs from rate resets on certain Class C LP Units, increased use of credit facilities for acquisitions, intensification and developments, and the issuance of CAD 200 million of Series J senior unsecured debentures in June of the prior year, partially offset by higher capitalized interest on properties under development.

Salsberg said the REIT’s indebtedness ratio was 39% at quarter-end. Gibson said leverage was not expected to rise significantly in the near term, as much of the development spending can be funded through retained cash. Salsberg said CT REIT is maintaining a conservative balance sheet while preserving “dry powder” for potential opportunities.

Asked about larger retail portfolio or M&A opportunities, Salsberg said CT REIT scans the market but has not found a transformational transaction that management believes is in the REIT’s best interest. He said marketed opportunities in retail have been quiet and are largely concentrated in single-tenant assets, including grocery-anchored properties.

About CT Real Estate Investment Trust TSE: CRT.UN

CT Real Estate Investment Trust 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.

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