Canadian Real Estate Investment Trust

Canadian Real Estate Investment Trust

May 06, 2011 13:14 ET

Canadian Real Estate Investment Trust Announces First Quarter 2011 Results and an Increase in Distributions

TORONTO, ONTARIO--(Marketwire - May 6, 2011) -Canadian Real Estate Investment Trust ("CREIT")(TSX:REF.UN) today announced results for the first quarter ended March 31, 2011.

Stephen Johnson, President and Chief Executive Officer, said, "Our financial performance for the quarter was in line with our expectations. Our real estate portfolio is performing well, and the development projects that we previously announced are progressing very well. I am also pleased to announce that, based on the solid performance of our business, we will again increase the distribution paid to our Unitholders. The increase to $1.44 per Unit per annum (from $1.41 currently) will be effective for Unitholders of record on May 31, 2011."

For the three months ended March 31, 2011, CREIT reported Funds from Operations (FFO) of $0.56 per Unit compared to $0.61 per Unit for the three months ended March 31, 2010. The results incorporate changes required pursuant to International Financial Reporting Standards ("IFRS").

There is a negative impact to FFO as a result of transitioning from Canadian GAAP to IFRS. This impact results from the requirement to treat the amortization of the value of above- and below-market rents as an amortization expense under IFRS, compared to an amortization against revenue under Canadian GAAP. The result is a lower FFO under IFRS than that reported under Canadian GAAP.

The amortization of the value of above- and below-market rents contributed a positive 4.0 cents per Unit (annualized) to CREIT's Canadian GAAP FFO in the fourth quarter of 2010. The elimination of this contribution to FFO under IFRS is an accounting and reporting change, with no impact on cash flow.

For the three months ended March 31, 2011 and March 31, 2010, FFO prepared under IFRS were as follows:

Three months ended March 31
($ millions, except per Unit amounts)20112010($)(%)
FFO$ 37.3$ 40.6($ 3.3)(8%)
FFO per Unit$ 0.56$ 0.61($ 0.05)(8%)

As the comparative period shown in the chart above is prepared pursuant to IFRS, the indicated numbers for 2011 and 2010 both capture the negative impact to FFO resulting from the transition from GAAP to IFRS. On an adjusted comparative basis, FFO was lower quarter-over-quarter due to a variety of factors, including the decline in income resulting from the divestiture of a number of non-core real estate assets, lower income from our mortgage investments and somewhat higher vacancy in our industrial portfolio.

The chart below provides a summary of the first quarter net income results under IFRS. The transition to IFRS results in some abnormal period-over-period comparisons. The technical reasons for these variances are explained below the chart.

Three months ended March 31
Income before gain on disposition, distribution expense, unrealized fair value loss on future distribution liability, foreign currency translation and income tax$11,537$12,554($1,017)
Net income$13,165($49,098)$62,263
Net Income per Unit$0.20N/AN/A

Under Canadian GAAP, CREIT's Trust Units are presented as equity. Under IFRS, a component of a Trust Unit is considered a financial instrument, where a liability arises due to a contractual obligation to deliver cash or another financial asset to another entity. Prior to May 20, 2010, the mandatory requirement to distribute taxable income under CREIT's Declaration of Trust constituted a contractual obligation.

The components of the Trust's Units representing the future distribution obligation are presented as a financial liability under IFRS. This component is measured at fair value with the related gains and losses recognized on the income statement as unrealized fair value gain or loss on the future distribution liability. In addition, cash distributions paid to Unitholders are reflected as distribution expense.

At the Annual and Special Meeting of Unitholders held on May 20, 2010, Unitholders voted to eliminate the mandatory distribution and leave distributions to the discretion of the Board of Trustees.

After May 20, 2010, for IFRS reporting the Trust's Units are reflected as equity and CREIT ceases to record unrealized fair value gain or loss on future distributions and distribution expense.

FFO is a generally accepted supplemental measure of operating performance for real estate entities; however, it is not a measure defined by IFRS. Readers are directed to Management's Discussion and Analysis of Results of Operations and Financial Condition (MD&A) for a description of the measure and its reconciliation to Net Income.

CREIT's Consolidated Financial Statements and MD&A for the three months ended March 31, 2011 are posted on CREIT's website at Readers are directed to these documents for financial details and a fulsome discussion on CREIT's results.

CREIT is a real estate investment trust focused on accumulating a portfolio of high-quality real estate assets and delivering the benefits of real estate ownership to Unitholders. The primary benefit is a reliable and, over time, increasing cash distribution.

Cautionary Statements Regarding Forward-looking Statements

This news release contains forward-looking statements relating to our operations and the environment in which we operate, which are based on our expectations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. We undertake no obligation to publicly update any such statement, to reflect new information or the occurrence of future events or circumstances, except as required by law.

Contact Information

  • Canadian Real Estate Investment Trust
    Stephen Johnson
    President & Chief Executive Officer

    Canadian Real Estate Investment Trust
    Tim McSorley
    Vice President & Chief Financial Officer