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.

Good morning. Before we hear from our Chair 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 Q1 2025 and Annual 2024 Management's Discussion and Analysis as well as the 2024 Annual Information Form, all of which can be found 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 Chair of the Board of Trustees. John?

Good morning. My name is John O'Bryan, and I am Chair of the Board of Trustees of CT REIT. It is my pleasure to welcome you to CT REIT's 12th Annual Meeting of Unitholders. Thank you for joining us today. For CT REIT, 2024 was another year of strong performance and a period marked by difficult economic conditions. The REIT once again demonstrated its resilience and delivered reliable, durable and growing results. This consistency underscores the REIT's inherent strengths and the effectiveness of its strategy. As I reflect on the past year and the broader macroeconomic environment, I'm proud of the REIT's accomplishments. In 2024, CT REIT successfully expanded its portfolio through strategic investments, announced its 11th consecutive distribution increase and continue to leverage its strong relationship with Canadian Tire. It also refined its ESG strategy with an emphasis on climate resilience. These achievements not only highlight the REIT's successes, but also reaffirm the commitment to creating value for you, our unitholders. We take great pride in CT REIT's track record. Your Board remains resolute in our commitment to providing proper oversight and strategic guidance for the long term. We are dedicated to working with management to ensure that the REIT's strategy remains focused on achieving consistency and excellence while delivering strong financial results and fostering sustainable business growth. At this time, I would like to take a moment to acknowledge Gregory Craig for his significant contributions to the REIT as one of our trustees over the past 4 years. As you may have read, Gregory will soon be retiring from Canadian Tire Corporation and is not seeking reelection to CT REIT's Board of Trustees. It is fitting to recognize his remarkable 31-year career with CTC and his time of dedicated service on the REIT's Board. His lasting impact on both entities has been profound. Gregory, I extend my best wishes for your retirement and simply thank you for your unwavering support. I'd also like to introduce trustee nominee TJ Flood who is the Chief Operating Officer of CTC and who has been nominated for election as a trustee, which will be a matter for the business of the meeting in a few moments. TJ, welcome. We all look forward to working with you and are excited about all that you bring to the REIT. In closing, I wish to express my appreciation to my fellow trustees and management for their tireless dedication and efforts. To you, our valued unitholders, thank you for your continued support of CT REIT. We remain committed to being responsible stewards of your capital, ensuring the stability of our platform and driving growth over time. Looking ahead, we will continue to work hard to surface family for you by focusing on our core strategy and continuing to be Canada's premier net lease REIT. It is now my pleasure to invite the President and Chief Executive Officer of CT REIT; Kevin Salsberg to say a few words. Kevin, over to you.

Thank you, John. I would also like to extend a very warm welcome to our unitholders and thank them for joining us online. Today, I would like to take a moment to reflect on 2024 and the first quarter of 2025. Despite facing the challenging external environment that John referenced in his remarks, I am very proud of what we have achieved at CT REIT. Our success has always been built upon a solid foundation that includes our strong relationship with Canadian Tire, our most significant tenant and largest unitholder. It is further strengthened by a near fully occupied portfolio of properties that has a long weighted average lease term and embedded rent growth as well as by our strong balance sheet. And the capabilities of our team and our laser-focused strategy further augment these attributes and provide a foundation that has been the cornerstone of the durability, reliability and growth that we have provided to our unitholders, not just through the course of 2024, but that also continues to drive value today and as we look towards the future. For CT REIT, 2024 was marked by many great achievements. Through our development and acquisition program, we invested just over $156 million last year and added approximately 500,000 square feet of new gross leasable area to our portfolio. In terms of new opportunities, we launched 6 new development projects and as of year-end, had a development pipeline that was anticipated to add approximately 600,000 square feet of GLA to the portfolio in 2025 alone. Our operating results remain solid, having ended the year with an occupancy rate of 99.4% and weighted average lease term of 7.7 years. We also delivered strong growth across our key metrics on a year-over-year basis with same property net operating income growing by 2.4%, net operating income growing by 4.3%, adjusted funds from operations per unit growing by 3% on a diluted basis and net asset value per unit growing by 5.9%. During the year, we also bought back 875,000 units under our normal course issuer bid program at an average price of $13.50 per unit, delivering value for the REIT's unitholders. Last night, we released our results for the first quarter of 2025. And earlier this morning, we held our quarterly analyst conference call to discuss the same. I will not go into much more detail but want to highlight that we delivered increases in net operating income of 4.6% and adjusted funds from operations per unit of 3.9%, a testament to our ability to continue to deliver great results in the face of continued macroeconomic uncertainties. We also announced that the REIT's Board of Trustees approved a 2.5% increase to our distributions payable to unitholders. This increase represents the 12th time that CT REIT has raised its distributions since our IPO in 2013. This again reflects the rentability and consistent performance over this time. I am also proud of the progress that we have made on our ESG journey in 2024. We reframed our ESG strategy to focus on creating sustainable outcomes for stakeholders by striving to operate a business that is climate-resilient, socially responsible and of course, well governed. Our prioritization of resilience reflects our commitment to adapting the REIT's business to a change in climate and the need to minimize our impact. One example of this is our newly announced development of CTC's first net-zero ready store in Kelowna, British Columbia. This store is based on CTC's net-zero ready prototype, which has an energy-efficient design, and is expected to open in late 2025. We also continue to work to operate our existing assets more sustainably. I am proud to note that in 2024, CT REIT's open air multi-tenant retail property at Lake Shore Boulevard East in Toronto, Ontario, won BOMA's 2024 TOBY Award in the Open Air Retail category for excellence in building management at both the regional and national levels. This work is important, and we will continue to advance our ESG priorities as they will lead to ever-improving sustainable results as we navigate our path in the future. I look forward to the release of our 2024 ESG report in Q2, which will serve to further highlight the progress we have made over the course of this past year. As I have noted in past AGM remarks, our unique relationship with Canadian Tire continues to drive our ability to balance growth along with conservative management. We are proud of what we have accomplished together with our peers at CTC and look forward to continuing to support their core business, which will no doubt create further value for all of our unitholders. I am optimistic about CT REIT's prospects and our ability to maintain a strong track record as we chart our path going forward and believe in our ability to continue to deliver reliable, durable and growing results over time. I would like to conclude my remarks today by thanking our Board of Trustees for their ongoing leadership, guidance and commitment to CT REIT. I would also like to thank the entire CT REIT team for their ongoing hard work. We have an incredible team of leaders and dedicated employees who work hard every day to drive strong results for the business and for you, our unitholders. Lastly, on behalf of the Board of Trustees and management team, I would like to echo John's earlier sentiment and also thank Gregory Craig, our retiring trustee for his many contributions and ongoing advice and counsel. We wish him all the best as he embarks on this next chapter in his life. Before I hand it back to John, I want to extend one last thank you to you, our unitholders, for your continued support of CT REIT. 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 will act as Secretary. I appoint Anup Das of Computershare Trust Company of Canada, who is joining us remotely to act as 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 13, 2025. 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'll ask the Secretary to prepare a final report on attendance as soon as practicable following the meeting and keep a copy of the 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. Chair. To facilitate the introduction of motions and the conduct of the meeting, the Chair 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 motions through the online platform prior to the motions being voted upon. 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 resolutions 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 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 chair 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 has 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. To submit a question, click on the messaging icon on the navigation bar at the top left of your screen, type your question in the messaging text box and then click the second button. Your question will be read aloud at the appropriate time. When submitting your question, 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. 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 1 week after posting. I will now pass it back to our Chair of the Board. 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, 2024, and the auditor's report thereon, which can be found in our 2024 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 backgrounds of the 8 nominees standing for election. I invite Kim to nominate the 3 Canadian Tire Corporation nominees named in the circular.

Mr. Chair, I nominate TJ Flood, Dean McCann, and Kevin Salsberg for election as trustees of 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. Chair, I nominate Pauline Alimchandani, Heather Briant, Anna Martini, John O'Bryan and Kelly Smith for election as trustees of 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 will ask Bruce Detlor, Vice President, Finance, to make a motion to elect the persons nominated.

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

Thank you. May I have a seconder?

Mr. Chair, I second the motion. .

Thank you, Bruce and Kim. I declare that nominations are closed. Voting will now be opened on this matter, and the ballot will appear momentarily on your screen. Unitholders have been provided with the opportunity to vote for or withhold their vote in respect of each individual trustee nominee. Please vote now by selecting For or Withhold. I remind you that the Board of Trustees and management recommend voting for all of the trustees set out in the circular. Also, may I remind you that if you have already voted or sent in your proxy, there is no need to do anything unless you wish to change your vote. We will pause for a moment to allow for voting to be completed. [Voting]

The next item of business is the appointment of the REIT's auditor for the ensuing year and to authorize the trustees to set the auditor's compensation. The trustees of the REIT recommend the reappointment of Deloitte LLP, Chartered Professional Accountants as the REIT's auditor for the ensuing year. Have we received any questions on this motion?

Mr. Chair, we have not received any questions on this motion.

Thank you, Kim. I will now ask Lesley Gibson, Chief Financial Officer, to make the motion appointing Deloitte LLP as the auditor of the REIT and authorizing the Board of Trustees to set the auditor's compensation.

Mr. Chair, I move that Deloitte LLP, Chartered Professional Accountants, be appointed as the auditor of the REIT to hold office until the next annual meeting of unitholders and to authorize the Board of Trustees to set the auditor's compensation.

Thank you. May I have a seconder?

I second the motion.

Voting can continue and the ballot will remain open. Please see the options on your screen. Unitholders have been provided with the opportunity to vote for the motion or to withhold their vote. Please vote now by selecting For or Withhold. I remind you that the Board of Trustees and management recommend voting for the reappointment of the REIT's auditor. Also, may I remind you that if you have already voted or sent in your proxy, there is no need to do anything unless you wish to change your vote. We will pause for a moment to allow for voting to be completed. [Voting]

As this concludes the formal items of business to be considered at today's meeting, voting will now be closed. We will proceed to answer general questions from our unitholders momentarily. If you have not yet submitted a question and wish to do so, please submit your question now. Before we proceed to questions, I will ask Kim to report on the preliminary voting results.

Based on the preliminary scrutineers' report, approximately 81% of the REIT's outstanding units were voted by proxy in advance of the meeting. As such, sufficient votes were cast prior to the meeting in favor of the election of each trustee nominee and the motion approving the appointment of the auditor to carry both motions.

Thank you, Kim. I, therefore, declare each of the nominated trustees has been elected and the auditors have been reappointed. The final voting results will be included in the records of this meeting and available after the meeting, which we will announce by way of press release. We will also file the final voting results on SEDAR+. Before proceeding with the question period as there is no further business, I hereby declare the formal part of this meeting terminated. I will now ask Kim if there are any questions from unitholders.

Thank you, Mr. Chair. As a reminder, unit holders and proxy holders who are accessing the meeting online with a control number or an alpha code may submit questions. To submit a question, click on the messaging icon on the navigation bar at the top left of your screen, type your question within the messaging text box and then click the send button. We will pause for a few minutes to allow for questions to be submitted. Mr. Chair, we have not received any questions.

Thank you, Kim. Thank you, everybody, for joining us today, and we look forward to the upcoming financial year. Have a wonderful day.

This concludes CT REIT's Annual Meeting of Unitholders. The lines are now closed.