Canadian Real Estate Investment Trust
TSX : REF.UN

Canadian Real Estate Investment Trust

August 05, 2011 07:33 ET

Canadian Real Estate Investment Trust Announces Second Quarter 2011 Results and Notice of Intention to Make A Normal Course Issuer Bid

TORONTO, ONTARIO--(Marketwire - Aug. 5, 2011) - Canadian Real Estate Investment Trust ("CREIT") (TSX:REF.UN) today announced results for the three and six months ended June 30, 2011.

Stephen Johnson, President and Chief Executive Officer, said, "Our financial performance for the quarter was in line with our expectations. Our existing real estate portfolio of high-quality assets continues to produce solid results, and our development projects are progressing very well."

For the three months ended June 30, 2011, CREIT reported Funds from Operations (FFO) of $0.58 per Unit compared to $0.57 per Unit for the same period in 2010. For the six months ended June 30, 2011, CREIT reported FFO of $1.14 per Unit compared to $1.19 per Unit for the same period in 2010.

For the three and six months ended June 30, 2011 and June 30, 2010, FFO was as follows:

Three months ended June 30
Change
($ thousands, except per Unit amounts) 2011 2010 ($) (%)
FFO $ 39,119 $ 6,893 $ 32,226 %
Distribution expense 15,282 (15,282 )
Unrealized fair value loss on future distribution liability 15,939 (15,939 )
FFO adjusted $ 39,119 $ 38,114 $ 1,005 3 %
FFO adjusted per Unit $ 0.58 $ 0.57 $ 0.01 2 %

The increase in FFO adjusted for the three months ended June 30, 2011 over the three months ended June 30, 2010 is a result of transaction activities and capitalizing the indirect or general borrowing costs of development activities.

Six months ended June 30
Change
($ thousands, except per Unit amounts) 2011 2010 ($) (%)
FFO $ 76,424 ($ 13,321 ) $ 89,745 %
Distribution expense 38,175 (38,175 )
Unrealized fair value loss on future distribution liability 53,875 (53,875 )
FFO adjusted $ 76,424 $ 78,729 ($ 2,305 ) (3 %)
FFO adjusted per Unit $1.14 $1.19 ($ 0.05 ) (4 %)

The decline in FFO adjusted for the six months ended June 30, 2011 from the six months ended June 30, 2010 is due to lower interest income from mezzanine loans during 2011, negative same-asset operating performance, higher costs in 2011 associated with IFRS convergence and costs for income tax compliance relating to qualifying as a REIT under the Federal SIFT legislation.

The charts below provide a summary of the three and six months ended June 30, 2011 and 2010 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 June 30
Change
($ thousands, except per Unit amounts) 2011 2010 ($)
Income before gain on disposition, distribution expense, unrealized fair value loss on future distribution liability, foreign currency translation and income tax $ 10,142 $ 9,248 $ 894
Net income $ 9,333 ($ 213,980 ) $ 223,313
Net Income per Unit $ 0.14 ($ 6.97 ) $ 7.11
Six months ended June 30
Change
($ thousands, except per Unit amounts) 2011 2010 ($)
Income before gain on disposition, distribution expense, unrealized fair value loss on future distribution liability, foreign currency translation and income tax $ 21,676 $ 21,804 ($ 128 )
Net income $ 22,499 ($ 263,078 ) $ 285,577
Net Income per Unit $ 0.34 ($ 17.06 ) $ 17.40

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, under IFRS reporting the Trust's Units are reflected as equity and CREIT ceases recording 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 and six months ended June 30, 2011 are posted on CREIT's website at www.creit.ca. Readers are directed to these documents for financial details and a fulsome discussion on CREIT's results.

Normal Course Issuer Bid

CREIT today also announced that it has received approval from the Toronto Stock Exchange ("TSX") to commence a normal course issuer bid ("NCIB") which will enable it to purchase for cancellation up to 3,359,892 of its outstanding Trust Units ("Units"), representing 5% of its issued and outstanding Units of 67,197,852 as at July 29, 2011.

CREIT intends to commence the NCIB on August 10, 2011. The NCIB will expire on August 9, 2012 or such earlier date as CREIT completes its purchases pursuant to the NCIB. All purchases under the NCIB will be made on the open market through the facilities of the TSX or alternate trading systems in Canada at market prices prevailing at the time of purchase. In accordance with TSX rules, any daily repurchases will be limited to a maximum of 18,663 Units, which represents 25% of the average daily trading volume of the Units on the TSX for the six months ended July 29, 2011.

The Trustees of CREIT believe that the ongoing purchase by CREIT of certain of its Units will afford additional liquidity for the issued and outstanding Units. It will also benefit all remaining Unitholders by increasing their proportionate equity and voting interests in CREIT.

From time to time, when CREIT does not possess material nonpublic information about itself or its securities, it may enter into a pre-defined plan with its broker to allow for the repurchase of Units at times when CREIT ordinarily would not be active in the market due to its own internal trading blackout periods, insider trading rules or otherwise. Any such plans entered into with CREIT's broker will be adopted in accordance with applicable Canadian securities laws.

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
    416-628-7878
    sjohnson@creit.ca

    Canadian Real Estate Investment Trust
    Tim McSorley
    Vice President & Chief Financial Officer
    416-628-7790
    tmcsorley@creit.ca
    www.creit.ca