CT Real Estate Investment Trust (CRTUN) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for standing by, and welcome to CT REIT's Annual Meeting of Unitholders. Please be advised that today's meeting is being recorded. I would now like to hand the meeting over to Kimberley Graham, Senior Vice President, General Counsel and Corporate Secretary of CT REIT. Please go ahead.

Thank you, and good morning. Before we hear from our Chairman of the Board of Trustees and our President and CEO, it is important to point out that the discussions during today's meeting may include forward-looking statements. Such forward-looking statements are based on management's assumptions and beliefs and are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please refer to CT REIT's public filings for a discussion of these risk factors, which are included in the 2023 Management Discussion and Analysis and the 2023 Annual Information Form, both of which can be found out on the REIT's website and on SEDAR+. The details of our cautionary statement regarding forward-looking statements are on the webcast screen and can also be found in the REIT's first quarter report to unitholders. You may follow the agenda for this meeting on the webcast screen. I would now like to introduce John O'’Bryan, CT REIT's Chairman of the Board of Trustees. John?

Good morning. It is my privilege to speak to you today at my first annual meeting of unitholders as Chair of the Board of Trustees at CT REIT. Having served on CT REIT's Board since its inception over a decade ago, it has been my pleasure to watch this organization grow and evolve, and I'm honored to now serve as its chair. As I expressed in my letter to unitholders, the Board's top priority is to continue working towards achieving consistency and excellence. This winning combination has been CT REIT's calling card since its IPO, paving the way for the solid track record that we have established in our success over the past year. From making meaningful progress on the delivery of new projects, successfully raising $250 million in unsecured debentures, completing our first net zero development project and advancing our environmental, social and governance strategy, 2023 saw many significant milestones. One additional such milestone of note was the celebration of the 10th anniversary since the REIT's initial public offering. In the last 10 years, CT REIT's has delivered stronger returns for its unitholders, enhanced capabilities and realized significant growth in our portfolio of properties. Looking ahead, we will continue to work hard to surface value for unitholders by focusing on our core strategy, which includes leveraging our key partnership with Canadian Tire Corporation and concentrating on being one of Canada's premier net lease REITs. Your Board is committed to ensuring proper oversight and working with management to set up a strategic direction for the long term. I commend management for delivering solid financial results and growing our business, not only this past year, but since our inception. I have great confidence in our ability to continue to deliver stability and value. Thank you for your partnership as we work together towards our ongoing success. To our unitholders, thank you for joining us today and for your interest and support of CT REITs. We remain committed to being responsible stewards of your capital, ensuring the stability of our platform and growing results over time. And I look forward to all the future has in store for CT REIT. It is now my pleasure to invite the President and Chief Executive Officer of CT Real Estate Investment Trust, Kevin Salsberg to say a few words. Kevin, over to you.

Thank you, John. I would also like to welcome our unitholders and those joining us online to CT REIT's Annual Meeting of Unitholders. Today, I would like to spend a little time highlighting just some of our many accomplishments in 2023 and the first quarter of 2024 as well as reflect on how far we have come in the 10 years since our initial public offering. 2023 was a very successful year for CT REIT as we continue to provide an attractive combination of growth and stability to our unitholders. On the investment front, we invested more than $150 million in completed projects and added approximately 840,000 square feet of gross leasable area to our portfolio. One such project that was completed at the end of last year was our new marquee net zero certified distribution center in Calgary, Alberta. This state-of-the-art 350,000 square foot facility showcases the latest in solar panel, geothermal heating and cooling and [indiscernible] technologies. It serves as a demonstration of our commitment to advancing sustainability within our portfolio and furthering our venture into responsible development. From our building operations and property development, to our tenant and employee engagement activities, we continue to work towards embedding ESG considerations into all aspects of our business. I look forward to the release of our 2023 ESG report in the coming months, where we will continue to highlight our progress in this area. In terms of new opportunities, we also launched 9 new projects in 2023 and as of year-end, had a pipeline representing over 570,000 square feet of incremental gross leasable area across 18 active developments. Our operating results were also solid, having ended the year with an occupancy rate of over 99% and a weighted average lease term of 8.4 years. We also delivered strong growth across our key metrics on a year-over-year basis. Notably, same-property net operating income grew 4.3% and adjusted funds from operations per unit grew 4.9%, while our net asset value per unit was essentially flat despite a rising rate environment. All positive outcomes that have carried on the trend of upward momentum in growth since CT REIT was established over a decade ago. This momentum has carried into 2024 and we were pleased to announce our first quarter results last evening. We shared our thoughts on the quarter during our conference call earlier this morning, so I won't go into too much detail, but we were happy to report that same-property NOI in Q1 increased 4.1%, while adjusted funds from operations per unit grew 4.8% and net asset value per unit was up 1%. We were also delighted to announce that the Board approved yet another increase in our distributions payable to unitholders. This 3% increase represents the 10th consecutive year that CT REIT has raised its distribution since our IPO, which is a testament to the REIT consistent performance over this time. All in all, a good start to the year. As John noted in his remarks, we recently celebrated our 10-year anniversary. Looking back, we have much to be proud of during this time, including building an exceptional team with skills and strengths that have been instrumental to our success. As Canada's top performing retail REIT over this period, CT REIT delivered a total return to unitholders of 131%, outperforming both the S&P/TSX Composite and the S&P/TSX Capped REIT indices. With respect to our portfolio, we added 117 properties and 11.4 million square feet by investing approximately $2.6 billion across more than 250 projects. And including this latest increase, we have increased the rate of distribution by a total of 42% since our IPO, all while reducing our AFFO payout ratio from 95% to approximately 74% as at year-end. All of this makes me proud of what we have accomplished and optimistic about the REIT's prospects and our ability to maintain the strong track record going forward. As I described in my AGM speech last year, CT REIT continues to benefit from its unique relationship with Canadian Tire Corporation, our most significant tenant and largest unitholder. This relationship has provided tremendous opportunities for the REIT to source new investments, obtain unique market insights, leverage data analytics and implement best practices across our business. We are fortunate for the benefits that we derived from CTC and we'll continue to advance our strategy, which includes supporting their core business to create value for all of our unitholders. We remain confident in our unique business model and appreciate the close working relationship that we have with our colleagues at CTC. I would like to conclude my remarks by thanking our Board of Trustees for their leadership, guidance and commitment to CT REIT, which have been key contributors to our success. Thank you for the CT REIT team for your hard work over the past year and the last decade. I am proud to work with a fantastic leadership team as well as the entire CT REIT group, who continue to drive results for our business. As I turn it back to John, one final thank you from me to you, our unitholders for all of your support and interest in CT REIT. We are proud of our achievements as we continue to demonstrate our ability to deliver reliable, durable and growing results over time. John?

Thank you, Kevin. And now we will move to the formal business of the meeting. As Chair of the Board, I will act as Chair of this meeting and Kimberley Graham as Secretary. I appoint Krish Seno, Computershare Trust Company of Canada, who has joined us remotely to act as the scrutineer of the meeting. Notice calling this meeting, together with the management information circular or the notice and access notification as applicable were mailed to unitholders of record as at the close of business on March 14, 2024. Copies of the management information circular and other meeting materials are available on the REIT's website and on SEDAR+. I direct the Secretary to keep a copy of such proxy-related materials and the proof of mailing with the minutes of this meeting. The scrutineer has confirmed that a quorum of unitholders is present and represented by proxy. I therefore declare this meeting duly constituted for the transaction of business. I will ask the Secretary to prepare a final report on attendance as soon as practicable following the meeting and keep a copy of their preliminary and final scrutineers' reports on attendance with the minutes of this meeting and to provide any unitholder or proxy holder with the details on attendance at this meeting upon request. We have a few guidelines on how the formal business of this meeting will proceed, which the Secretary will now speak to. Kim?

Thank you, Mr. John. To facilitate the introduction of motions in the conduct of the meeting, the Chairman has arranged in advance for certain employee unitholders to move and second motions. Unitholders and proxy holders accessing the meeting online with a control number may submit comments or ask questions related to any motion through the online platform prior to the motions being moved. Also, there will be an opportunity to ask general questions following the formal business of the meeting. The items to be voted on today are the election of trustees and the appointment of the REIT's auditor. These items are each ordinary resolution and is requiring a simple majority of the votes cast to be approved. For unitholders that have voted in advance of the meeting, your voting instructions have been recorded, and you do not need to take any further steps. In order to vote at the meeting, registered unitholders should have logged into the webcast by entering the 15-digit control number on the proxy form as their control number. Duly appointed proxy holders, including beneficial unitholders who have appointed themselves as proxy holder, should have logged into the webcast by entering the 4-digit alpha code sent to them by Computershare as their control number. If you have logged in as a guest, you will not be able to vote at the meeting. Each item of business to be voted on at today's meeting will be conducted by way of separate resolution. Once the Chairman declares that voting for a specific motion has been opened, the ballot for such resolution will appear on your screen. You can also view the resolution by clicking on the voting icon on the navigation bar at the top left-hand side of your screen. Ballots will remain open during the entire voting period. After voting on all items have been completed, the preliminary voting results will be read. The final voting results will be available after the meeting. Unitholders and proxy holders who are accessing the meeting online with a control number may submit questions. [Operator Instructions] Your name and question will be read aloud at the appropriate time. When submitting your questions, please identify whether it relates to a motion being considered as part of the formal business of the meeting or whether it is general in nature. Questions relating to any of the formal items of business that are being voted on today will be answered once that motion has been introduced. General questions will be addressed after the formal business has been completed. All unitholders and proxy holder questions are welcome. However, we will not address those that are irrelevant to the business of today's meeting or to our business and operations. We also request that you please refrain from asking questions of a personal nature. If there are similar questions on the same topic, questions may be grouped, summarized and answered together. If you have a question, you may submit it at any point during the meeting. However, if possible, please submit your questions as early as possible during the meeting and prior to the commencement of the question period. We will do our best to respond to all questions during the meeting. However, in the interest of time, we will limit the Q&A period to 20 minutes and any pertinent questions that cannot be answered today due to time constraints will be answered and posted online at www.ctreitagm.com as soon as practicable following the meeting and will remain online for one week after posting. I will now pass it back to our Chairman of Board of Trustees. John?

Thank you, Kim. The first item of business is for the unitholders to receive the REIT's audited consolidated financial statements for the year ended December 31, 2023, and the auditor's report thereon, which can be found in our 2023 annual report. The report was sent to all registered unitholders except those who requested that these materials not be sent to them and to all beneficial unitholders who requested that these materials be sent to them. A copy of the materials was also filed on SEDAR+ and posted on our website. Unless there is an objection, I will dispense with the reading of the auditor's report. We will now move to the next point on today's agenda. The next item of business is the nomination and election of trustees of the REIT. The size of our Board has been set at 8, and our management information circular contains detailed biographies and sets out the qualifications and background of the 8 nominees standing for election. I invite Kim to nominate the 3 Canadian Tire Corporation nominees named in circular.

Mr. Chairman, I nominate Gregory Craig, Dean McCann and Kevin Salsberg for election as trustees for the REIT to serve until the next annual meeting of unitholders or until their earlier resignation or retirement.

Thank you. I will now ask Kim to nominate the remaining 5 trustees named in the circular.

Mr. Chairman, I nominate Pauline Alimchandani, Heather Briant, Anna Martini, John O'Bryan and Kelly Smith for election of trustees for the REIT to serve until the next Annual Meeting of Unitholders or until their earlier resignation or retirement.

Thank you. Kim, have we received any questions on the nominations?

We have not received any questions on this matter.

Thank you. I'll ask Kim to make a motion to elect the persons nominated.

Mr. Chairman, I move that the persons nominated for election as trustees be elected as trustees for the REIT to serve until the next annual election of trustees or until their earlier resignation or retirement.

Thank you. May have a seconder?