Key Points
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Q3 performance improved: FFO per unit rose 9.2% to CAD 0.369 and AFFO per unit increased 7.7% to CAD 0.337. Total NOI grew 8.5%, though that included CAD 2.5 million in lease-surrender revenue; excluding it, FFO and AFFO per-unit growth was 6.2% and 4.2%, respectively.
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Leasing and development remained strong: Occupancy was 99.5%, and renewals in the first nine months of 2026 achieved a 9.1% blended rental increase. Nine development projects totaling about 557,000 square feet were 86.9% committed to lease.
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Financial flexibility strengthened: The AFFO payout ratio declined to 72.7%, leverage measures improved, and quarter-end liquidity exceeded CAD 304 million. Distributions per unit rose 3.5% during the quarter.
CT Real Estate Investment Trust (TSE:CRT.UN) reported higher third-quarter earnings and net operating income, helped by acquisitions, development activity and lease surrender revenue tied primarily to a Kelowna, British Columbia, property being redeveloped.
Funds from operations (FFO) per unit rose 9.2% to CAD 0.369 on a diluted basis from CAD 0.338 a year earlier. Adjusted FFO (AFFO) per unit increased 7.7% to CAD 0.337 from CAD 0.313, Chief Financial Officer Lesley Gibson said on the earnings call.
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Same-property net operating income (NOI) rose 3.8%, while total NOI increased 8.5%, or approximately CAD 10.2 million. The latter included approximately CAD 2.5 million in lease surrender revenue. Excluding that revenue, total NOI would have increased 6.5%, AFFO per unit 4.2% and FFO per unit 6.2%, management said.
President and CEO Kevin Salsberg said he would not expect more lease surrender revenue through the balance of 2026 or into 2027. The third-quarter amount primarily related to the Kelowna property, where Canadian Tire had remaining lease term after moving to a newly developed CT REIT-owned store nearby.
Kelowna and Development Pipeline
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CT REIT is repositioning the former Canadian Tire store in Kelowna to create approximately 90,000 square feet of modern retail space. Senior Vice President of Real Estate Jodi Shpigel said more than half of the building was committed to lease and the project was expected to be completed in the third quarter of 2028.
Shpigel said the committed rents were at market rates and higher than the previous Canadian Tire rents. Salsberg said the lease completed so far was with a fitness user and that the REIT was working to fill the remaining space.
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Asked whether similar relocations could create further opportunities, Salsberg said CT REIT had completed comparable projects before and that more could arise as Canadian Tire optimizes its store network. He added that none were currently in the pipeline.
Across its development portfolio, CT REIT had nine projects representing approximately 557,000 square feet and CAD 391 million in costs at quarter-end, Shpigel said. About 86.9% of the space was committed to lease. The REIT had invested approximately CAD 215 million and expected to spend a further CAD 176 million to complete the projects, including approximately CAD 76 million over the next 12 months.
The pipeline includes the Canada Square office retrofit, scheduled for completion in the fourth quarter of 2028. CT REIT’s proportionate share represents approximately 340,000 square feet, of which 310,000 square feet was committed to lease. Salsberg said the project remained on time and on budget, but the REIT had not disclosed an expected stabilized yield because of confidentiality provisions involving its partner.
About 60,000 square feet remains uncommitted across the project. Salsberg said CT REIT and co-owner Oxford intended to wait until closer to completion to lease that space actively, likely in 2028. He said the office market was improving and market rents appeared to be rising.
Leasing and Investment Activity
Portfolio occupancy was 99.5% at quarter-end, and the weighted average lease term was 6.7 years. Third-quarter renewals covered approximately 36,000 square feet, all involving third-party tenants, at a 6.9% rental increase, Shpigel said.
For the first nine months of 2026, renewals totaled approximately 994,000 square feet at a blended rental increase of 9.1%. That included approximately 658,000 square feet of Canadian Tire store renewals at a 10.8% increase.
During the quarter, the REIT completed an intensification at its Saskatoon East property, adding approximately 51,000 square feet, and acquired a Canadian Tire store in Victoria, adding approximately 32,800 square feet. Over the first nine months, five acquisitions and four intensifications represented approximately CAD 114 million of investment and added about 368,000 square feet.
Salsberg said demand for space remained robust across different locations, sizes and types of tenants, although retailers were mindful of the broader economic environment and proceeding with “cautious optimism.”
Debt and Distributions
Cash distributions paid during the quarter rose 3.5% to CAD 0.245 per unit, reflecting a higher monthly distribution rate effective in July. The AFFO payout ratio fell to 72.7% from 75.7% a year earlier as AFFO per unit grew faster than distributions, Gibson said.
Gibson said the indebtedness ratio improved to 38.7% from 39.8% at the end of 2025, while indebtedness to EBITFV declined to 6.49 times from 6.77 times. Interest coverage improved to 3.56 times from 3.37 times a year earlier.
The REIT had more than CAD 304 million in liquidity at quarter-end, including cash and availability under its committed bank facility. A further CAD 179.6 million was available under an uncommitted Canadian Tire credit facility. Gibson said CT REIT expected to continue working with Canadian Tire on the one-year facility, which historically has been renewed annually.
CT REIT has no unsecured debentures maturing during the remainder of 2026. Gibson identified CAD 175 million of debt maturing in June 2027 and another CAD 200 million in December 2027.
About CT Real Estate Investment Trust (TSE:CRT.UN)
CT REIT is an unincorporated, closed-end real estate investment trust formed to own income-producing commercial properties located primarily in Canada. Its portfolio is comprised of 380 properties totalling 32 million square feet of GLA, consisting primarily of net lease single-tenant retail properties located across Canada. Canadian Tire Corporation, Limited is CT REIT’s most significant tenant.
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The article “CT Real Estate Investment Trust Q3 Earnings Call Highlights” was originally published by MarketBeat.
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