RELIABLE. DURABLE. GROWING.
2020 ANNUAL REPORT
KEY STRATEGIC
ACHIEVEMENTS
SINCE IPO
2013–2020
6.1%
AFFO per unit CAGR
$2 billion
invested in property acquisitions
and development
10 million
square feet added to the portfolio
$1 billion+
public unsecured debt issued
Public float increased to
$1 billion+
and included in several
market indices
7
distribution increases in 7 years
AFFO payout ratio reduced to
76.8%
~46%
increase in net asset value
per unit
Leverage reduced to
~43%
A Resilient 2020
CT REIT successfully navigated the
challenging business environment
in 2020, highlighting the resiliency
of our portfolio and strength of our
balance sheet. We ended the year
with over 99% in both occupancy
and rent collections, and paid
two distribution increases to our
Unitholders.
Financial Performance since IPO:
$1.10
AFFO/unit and Distributions Growth
$1.00
$0.90
$0.80
$0.70
$0.60
$0.50
$0.40
1.032
1.007
0.954
0.919
0.862
0.808
0.736
2.0%
0
5
6
.
0
4
1
0
2
3
6
6
.
0
5
1
0
2
2.6%
3.0%
0
8
6
.
0
6
1
0
2
0
0
7
.
0
7
1
0
2
4.7%
2
9
7
0
.
4.0%
7
5
7
0
.
4.0%
8
2
7
.
0
8
1
0
2
9
1
0
2
0
2
0
2
Annual distribution
AFFO/unit
COVER PHOTOS: Leslie and Lakeshore, Toronto, Ontario. CT REIT acquired this Canadian Tire anchored property at the time of its initial
public offering in 2013. Since then, CT REIT has continued to invest in the tenant mix in order to maximize the value of this asset, most recently
through the development of new Farm Boy and LCBO locations at the property.
Canadian Tire’s Bolton Distribution Centre (DC) in Caledon, Ontario. CT REIT acquired the 1.4 million square foot DC from Canadian Tire
Corporation in 2016. It was awarded a LEED Gold certification by the Canada Green Building Council for exceptional sustainability efforts in
2018 and is one of the first buildings of this size to be recognized with such an achievement.
Management's Discussion and Analysis
CT REIT
Fourth Quarter and Full Year 2020
TABLE OF CONTENTS
Forward-looking Disclaimer
1.0
Preface
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
2.0
3.0
4.0
5.0
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
Basis of Presentation
Definitions
Accounting Estimates and Assumptions
Quarterly and Annual Comparisons in this MD&A
Currency and Rounding
Key Operating Performance Measures and Additional Non-GAAP Measures
Review and Approval by the Board of Trustees
Nature and Formation
Factors Affecting the REIT as a Result of the COVID-19 Pandemic
Growth Strategy and Objectives
Summary of Selected Financial and Operational Information
Overview of the Property Portfolio
Property Profile
Revenue by Region
Six Largest Urban Markets
Fair Value of Property Portfolio
2020 Investment Activities
Development Activities
Investment and Development Funding
Lease Maturities
Top 10 Tenants Excluding CTC Related Tenancies
Leasing Activities
Recoverable Capital Costs
6.0
Results of Operations
6.1
6.2
Financial Results for the Three Months and Year Ended December 31, 2020
Non-GAAP Measures
7.0
Liquidity and Financial Condition
7.1
7.2
7.3
7.4
Liquidity
Discussion of Cash Flows
Credit Ratings
Debt and Capital Structure
3
4
4
4
4
4
5
5
5
5
6
8
9
10
10
12
12
13
15
15
17
18
19
19
19
20
20
24
27
27
27
27
28
CT REIT 2020 ANNUAL REPORT 1
TABLE OF CONTENTS (continued)
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
Interest Coverage Ratio
Indebtedness Ratio
Class C LP Units
Debentures
Mortgages Payable
Credit Facilities
Capital Strategy
Commitments and Contingencies
Base Shelf Prospectus
8.0
Equity
8.1
8.2
8.3
8.4
Authorized Capital and Outstanding Units
Equity
Distributions
Book Value Per Unit
9.0
Related Party Transactions
10.0
Accounting Policies and Estimates
10.1
10.2
Significant Areas of Estimation
Standards, Amendments and Interpretations Issued but Not Yet Adopted
11.0
Non-GAAP Measures
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
Net Operating Income
Funds From Operations and Adjusted Funds From Operations
AFFO Payout Ratio
Diluted Non-GAAP per Unit Calculations
Adjusted Cash Flow From Operations
Earnings Before Interest and Other Financing Costs, Taxes and Fair Value Adjustments
Non-GAAP Measures Referenced in Other Sections of the MD&A
Selected Quarterly Consolidated Information
12.0
Enterprise Risk Management
13.0
Internal Controls and Procedures
13.1
13.2
13.3
Disclosure Controls and Procedures
Internal Control Over Financial Reporting
Changes in Internal Control Over Financial Reporting
14.0
Forward-looking Information
2 CT REIT 2020 ANNUAL REPORT
31
31
31
33
33
34
34
35
35
36
36
37
37
39
39
41
41
42
43
43
44
47
47
47
48
49
49
50
55
55
56
56
56
MANAGEMENT'S DISCUSSION AND ANALYSIS
CT REAL ESTATE INVESTMENT TRUST
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED DECEMBER 31, 2020
Forward-looking Disclaimer
This Management’s Discussion and Analysis (“MD&A”) contains statements that are forward-looking. Actual results or events
may differ materially from those forecasted in this disclosure because of the risks and uncertainties associated with the
business of CT Real Estate Investment Trust® and its subsidiaries, (referred to herein as “CT REIT”, “Trust” or “REIT”, unless
the context requires otherwise), and the general economic environment. CT REIT cannot provide any assurance that any
forecasted financial or operational performance will actually be achieved or, if achieved, that it will result in an increase in the
price of CT REIT’s Units. See section 14.0 in this MD&A for a more detailed discussion of the REIT’s use of forward-looking
statements.
CT REIT 2020 ANNUAL REPORT 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
1.0 Preface
1.1 Basis of Presentation
The following MD&A is intended to provide readers with an assessment of the performance of CT REIT® for the year ended
December 31, 2020 and should be read in conjunction with the REIT’s audited consolidated financial statements
(“consolidated financial statements”) and accompanying notes for the year ended December 31, 2020 which have been
prepared in accordance with International Financial Reporting Standards (“IFRS”). In addition, the following MD&A should be
read in conjunction with CT REIT’s forward-looking information found in section 14.0 of this MD&A. Information about CT
REIT, including the Annual Information Form for the year ended December 31, 2020 (“AIF”), the consolidated financial
statements as at and for the period ending December 31, 2020 and all other continuous disclosure documents required by the
Canadian securities regulators, can be found on the System for Electronic Document Analysis and Retrieval (“SEDAR”)
website at www.sedar.com and on CT REIT’s website at www.ctreit.com under the tab "Investors" in the Financial Reporting
section.
1.2 Definitions
In this document, the terms “CT REIT”, “REIT” and “Trust” refer to CT Real Estate Investment Trust® and its subsidiaries
unless the context requires otherwise. In addition, “Company”, “CTC” and “Corporation” refer to Canadian Tire Corporation,
Limited, entities that it controls and their collective businesses unless the context requires otherwise.
This document contains certain trade-marks and trade names of CTC and is the property of CTC. Solely for convenience, the
trade-marks and trade names referred to herein may appear without the ® or ™ symbol.
Any term not defined in this MD&A can be found in the Glossary of Terms in the AIF filed on SEDAR at www.sedar.com and
on CT REIT’s website at www.ctreit.com under the tab Investors in the Financial Reporting section.
1.3 Accounting Estimates and Assumptions
The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgments
and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Refer to section 10.0 in this MD&A for further information.
Financial data included in this MD&A includes material information as of February 8, 2021. Disclosure contained in this
document is current to that date, unless otherwise indicated.
1.4 Quarterly and Annual Comparisons in this MD&A
Unless otherwise indicated, all comparisons of results for three months ended December 31, 2020 (“Q4 2020”) are against
results for three months ended December 31, 2019 (“Q4 2019”) and comparisons of results for the year ended December 31,
2020 are against results for the year ended December 31, 2019.
4 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
1.5 Currency and Rounding
All amounts in this MD&A are in thousands of Canadian dollars, except per unit, unit, square foot amounts or unless otherwise
indicated. Rounded numbers are used in this MD&A and, as such, totals may not add up to 100 percent.
1.6 Key Operating Performance Measures and Additional Non-GAAP Measures
The key operating performance measures used by management may not be comparable to similar measures presented by
other real estate investment trusts or enterprises. Net income prepared in accordance with IFRS is also subject to varying
degrees of judgment, and some meaningful differences in accounting policies exist between publicly traded entities in Canada.
Accordingly, net income as presented by CT REIT may not be comparable to net income presented by other real estate
investment trusts or enterprises.
Net operating income (“NOI”), same store NOI, same property NOI, funds from operations (“FFO”), FFO per unit - basic, FFO
per unit - diluted, adjusted funds from operations (“AFFO”), AFFO per unit - basic, AFFO per unit - diluted, AFFO payout ratio,
adjusted cashflow from operations (“ACFO”) and earnings before interest and other financing costs, taxes and fair value
adjustments (“EBITFV”) are measures used by management to track and assess CT REIT’s performance in meeting its
principle objective of creating Unitholder value (collectively referred to as “non-GAAP measures”). These non-GAAP measures
are not defined by IFRS, also referred to as generally accepted accounting principles (“GAAP”) and therefore should not be
construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS.
For further information on the non-GAAP measures used by management and for reconciliations to the nearest GAAP
measures, refer to section 11.0 of this MD&A.
1.7 Review and Approval by the Board of Trustees
The Board of Trustees (the “Board”), on the recommendation of its Audit Committee, approved this MD&A for issuance on
February 8, 2021.
1.8 Nature and Formation
CT REIT is an unincorporated, closed-end real estate investment trust established on July 15, 2013 pursuant to a declaration
of trust as amended and restated as of October 22, 2013 and as further amended and restated as of April 5, 2020
(“Declaration of Trust”). CT REIT commenced operations on October 23, 2013. The principal, registered and head office of
CT REIT is located at 2180 Yonge Street, Toronto, Ontario, M4P 2V8. CTC owned a 69.2% effective interest in CT REIT as
of December 31, 2020, consisting of 33,989,508 of the issued and outstanding units of CT REIT (“Units”) and all of the issued
and outstanding Class B limited partnership units (“Class B LP Units”) of CT REIT Limited Partnership (the “Partnership”),
which are economically equivalent to and exchangeable for Units. The holders of Units and Class B LP Units are collectively
referred to as “Unitholders”. CTC also owns all of the issued and outstanding Class C limited partnership units (“Class C LP
Units”) of the Partnership. The Units are listed on the Toronto Stock Exchange (“TSX”) under the symbol CRT.UN.
CT REIT has one segment for financial reporting purposes which comprises the ownership and management of primarily net
leased single-tenant retail investment properties located across Canada.
CT REIT 2020 ANNUAL REPORT 5
MANAGEMENT'S DISCUSSION AND ANALYSIS
2.0 FACTORS AFFECTING THE REIT AS A RESULT OF THE COVID-19 PANDEMIC
The following section contains forward-looking information and readers are cautioned that actual results may vary.
During 2020, the global spread of the coronavirus disease ("COVID-19") had an impact on the Canadian and global
economies and on the business and operations of the REIT. During this time, the REIT remained committed to the health and
safety of its employees and tenants, as well as its tenants’ customers and employees. Many of the measures that were
introduced at the outset of the pandemic to reduce the spread of the virus, continue to remain in place, including REIT
employees continuing to work from home. The REIT continues to prepare for any future waves of the pandemic and/or viral
strains and continues to manage and mitigate, if possible, the implications and impact of the COVID-19 pandemic on its
operations. The REIT may be required to take further actions in response to directives of government and public health
authorities or that are in the best interests of its employees and tenants, as well as its tenants’ customers and employees.
Since the onset of the COVID-19 pandemic, certain operating restrictions have been imposed on many of the REIT’s tenants,
including CTC. Canadian Tire stores remained open until late in the fourth quarter when temporary closures in certain
jurisdictions were announced, some of which have continued into the first quarter of 2021. The Canadian Tire stores which
remain open continue to operate with various combinations of restrictions on products being sold, restricted operating hours,
enhanced cleaning protocols and measures to support physical distancing. Those Canadian Tire stores which are now
temporarily closed, remain open to curbside pickup in support of online sales and delivery to home as required by current
government guidelines and restrictions. Regardless of operating status, there have been no rental interruptions, abatements or
deferrals impacting these stores.
Impact on Property Revenue
Tenants representing approximately 99.4% of annual base minimum rent fulfilled their January 1, 2021 financial obligations to
the REIT, consistent with the 99.2% for December 1, 2020, 99.2% for November 1, 2020 and 99.1% for October 1, 2020. From
the onset of the pandemic, the REIT has been supporting tenants facing financial hardships including by participating in the
Canada Emergency Commercial Rent Assistance (“CECRA”) program for certain qualified tenants and providing rental
abatements or deferrals to other qualifying tenants. The CECRA program provided a 75% rent abatement for qualifying small
businesses for the period from April 1, 2020 to September 30, 2020, two-thirds of which was paid for by the Federal and
Provincial governments and one-third of which was funded by the landlord.
On October 9, 2020, the federal government announced a new rent relief program, the Canada Emergency Rent Subsidy
(“CERS”), to replace the CECRA program. Similar to CECRA, CERS is available to small and medium-sized businesses
significantly impacted by the COVID-19 pandemic. CERS is effective retroactively for periods beginning September 27, 2020
and ending in June 2021. CERS is provided directly to tenants on a sliding scale up to a maximum of 65% of eligible
expenses, thereby supporting property owners with payments of rents for CERS subsidized amounts. In addition to the 65%
subsidy, a 25% CERS top-up is available to tenants who are temporarily shut down by a mandatory public health order issued
by a qualifying public health authority.
6 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three months ended December 31, 2020, the REIT’s assistance to its tenants totalled $0.6 million, consisting of $0.4
million in abatements of gross rents, which were recognized as bad debt expense, and an additional $0.2 million of expected
credit losses related to tenants who had been significantly impacted by the pandemic.
For the year ended December 31, 2020, the REIT’s assistance to its tenants totalled $2.8 million, consisting of $0.6 million
related to the CECRA program, $0.7 million in abatements of gross rents which were recognized as bad debt expense, and an
additional $1.5 million of expected credit losses related to tenants who had been significantly impacted by the pandemic.
Impact on Valuation of Investment Properties
The REIT’s valuation assessment of its investment properties, as at December 31, 2020, was reflected in the fair value
adjustment of investment properties.
In determining the fair value of investment properties for these financial statements, management considered, among other
factors, the impact of the pandemic on its tenant base. Management has reviewed the cash flow assumptions and made
certain adjustments to the investment metrics used in determining the fair value of investment properties as at December 31,
2020. The impact of these changes is reflected in the fair value adjustment on investment properties and should be
considered together with the sensitivity analysis included in Note 5 of the financial statements.
Impact to Liquidity
Management continues to believe the REIT is well positioned to manage through the pandemic based on its strong balance
sheet, a portfolio that is 99.3% occupied, its conservative 76.8% payout ratio, a low debt-to-gross book value of
approximately 42.9%, a high proportion of unencumbered assets (97.3%) and a strong liquidity position of approximately
$299 million of committed undrawn Credit Facilities (as defined below) and cash on hand, coupled with no debt maturities for
the balance of 2021.
As at December 31, 2020 the REIT was in compliance with the financial covenants contained in the Declaration of Trust, the
Credit Facilities and the trust indenture dated June 9, 2015, as supplemented by supplemental indentures thereto
(collectively, the “Trust Indenture”).
Key Risks and Risk Management
While vaccination programs have begun to be implemented throughout Canada, industries, including retail and commercial
real estate, continue to be affected in varying degrees by COVID-19. It continues to be difficult to predict the duration and
extent of the impact of COVID-19 on the REIT’s business and operations, both in the short and long-term. The REIT has
instituted comprehensive and evolving risk management strategies to support its business and operations in a manner that
aims to address impacts on its key risks. The impact of COVID-19 on liquidity, cash flows, property operations and head office
facilities has been considered while ensuring the maintenance of controls that aim to protect the integrity of the REIT’s
reported financial information and safeguard systems and information. These strategies allow the REIT to maintain a
financially strong business and to continue to support employees, tenants and their customers and employees. Refer to
section 12.0, “Enterprise Risk Management” for a further discussion of key risks and COVID-19 impacts to the REIT’s
operations, its tenants and financial performance.
CT REIT 2020 ANNUAL REPORT 7
MANAGEMENT'S DISCUSSION AND ANALYSIS
3.0 GROWTH STRATEGY AND OBJECTIVES
The following section contains forward-looking information and readers are cautioned that actual results may vary.
The principal objective of CT REIT, as a real estate investment trust investing primarily in net lease assets, is to create
Unitholder value over the long-term by generating reliable, durable and growing monthly distributions on a tax-efficient basis.
To achieve this objective, management is focused on expanding the REIT’s asset base while also increasing its AFFO per unit
1.
Future growth is expected to continue to be achieved from a number of sources including:
1.
the portfolio of Canadian Tire store leases, which generally contain contractual rent escalations of approximately
1.5% per year, on average, over their initial term and have a weighted average remaining lease term of 9.0 years;
2.
contractual arrangements with CTC whereby CT REIT has a right of first offer (“ROFO”) 2 on all CTC properties which
meet the REIT’s investment criteria and through preferential rights, subject to certain exceptions, to participate in the
development of, and to acquire, certain new retail properties; and
3.
its relationship with CTC, which CT REIT will continue to leverage in order to obtain insights into potential real estate
acquisitions and development opportunities in markets across Canada.
1 Non-GAAP measure. Refer to section 11.0 for further information.
2 The ROFO Agreement shall continue in effect until the later of October 2023 and such time as CTC ceases to hold a majority of the voting units, being the Units and Special Voting Units
(as defined in section 8.0).
8 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
4.0 SUMMARY OF SELECTED FINANCIAL AND OPERATIONAL INFORMATION
Readers are reminded that certain key performance measures may not have standardized meanings under GAAP. For further
information on the REIT’s operating measures and non-GAAP measures, refer to section 1.0 and section 11.0.
(in thousands of Canadian dollars, except unit, per unit and square footage amounts)
Year Ended
For the periods ended December 31,
2020
2019
2018
Property revenue
EBITFV 1
Net operating income 1
Net income
Net income per Unit - basic 2
Net income per Unit - diluted 3
Funds from operations 1
FFO per Unit - diluted (non-GAAP) 1,2,4
Adjusted funds from operations 1
AFFO per Unit - diluted (non-GAAP) 1,2,4
Distributions per Unit - paid 2
AFFO payout ratio 1
Excess of AFFO 1 over distributions:
Cash retained from operations before distribution reinvestment 5
Per Unit - diluted (non-GAAP) 2,4,5
Cash generated from operating activities
Adjusted cashflow from operations 1
Weighted average number of Units outstanding 2
Basic
Diluted 3
Diluted (non-GAAP) 1,4
Period-end Units outstanding 2
Total assets
Total indebtedness
Book value per Unit 2
Market price per Unit - Close (end of period)
OTHER DATA
Weighted average interest rate 6
Indebtedness ratio
Interest coverage (times)
Weighted average term to debt maturity (in years) 6
Gross leasable area (square feet) 7
Occupancy rate 7,8
1 Non-GAAP measure. Refer to section 11.0 for further information.
2 Total units means Units and Class B LP Units outstanding.
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
502,348
378,814
381,566
183,305
0.801
0.772
270,725
1.181
236,457
1.032
0.793
76.8 %
55,063
0.240
370,766
238,954
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
489,013
370,693
368,795
307,193
1.380
1.193
261,861
1.175
224,300
1.007
0.757
75.2 %
55,982
0.251
362,328
228,366
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
472,483
350,637
349,283
300,906
1.401
1.098
246,032
1.144
205,173
0.954
0.728
76.3 %
48,845
0.227
331,722
206,056
228,934,001
222,559,681
214,805,646
322,574,451
314,615,032
336,142,459
229,199,901
222,791,571
215,040,074
230,969,594
228,216,876
220,249,239
6,176,142
2,652,341
14.62
15.67
$
$
$
$
6,024,511
2,572,294
14.61
16.14
$
$
$
$
5,708,692
2,573,489
14.01
11.53
3.87 %
42.9 %
3.51
7.5
4.08 %
42.7 %
3.40
8.0
4.08 %
45.1 %
3.35
9.0
28,738,736
27,556,341
26,537,359
99.3 %
99.1 %
98.7 %
3 Diluted units determined in accordance with IFRS includes restricted and deferred units issued under various plans and the effect of assuming that all of the
Class C LP Units will be settled with Class B LP Units. Refer to section 8.0.
4 Diluted units used in calculating non-GAAP measures include restricted and deferred units issued under various plans and exclude the effect of assuming that all
of the Class C LP Units will be settled with Class B LP Units. Refer to section 8.0.
5 Refer to section 8.0 for further information.
6 Excludes the Credit Facilities. Refer to section 7.10 for definition. Adjusted for the early redemption of Series C unsecured debentures and the issuance of Series G unsecured
debentures, the weighted average interest rate is 3.89% and the weighted average term to debt maturity (in years) is 8.1.
7 Refers to retail, mixed-use commercial and Industrial Properties and excludes Properties Under Development. Refer to the Glossary of Terms in the 2020 Annual Report for definition.
8 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted
on or before December 31, 2020 and December 31, 2019.
CT REIT 2020 ANNUAL REPORT 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.0 OVERVIEW OF THE PROPERTY PORTFOLIO
5.1 Property Profile
The property portfolio, as at December 31, 2020, consisted of 357 retail properties, four Industrial Properties, one mixed-use
commercial property and one Development Property (collectively, “Properties”). The Properties are located in each of the
provinces and in two territories across Canada. The retail properties, Industrial Properties and mixed-use commercial property
contain approximately 28.7 million square feet of gross leasable area (“GLA”).
CT REIT’s consolidated financial position, results of operations and property portfolio metrics include the REIT’s one-half
interest in Canada Square, a mixed-use commercial property in Toronto, Ontario (“Toronto (Canada Square), Ontario”). CTC
is CT REIT’s most significant tenant. As at December 31, 2020, CTC represented 92.2% of total GLA (December 31, 2019 -
92.5%) and 91.6% of annualized base minimum rent (December 31, 2019 - 91.7%).
CT REIT’s Property portfolio’s occupancy, excluding Properties Under Development, is as follows:
(in square feet)
Property Type
Retail
Canadian Tire stores
Other CTC Banners 1
Third party retail tenants
Industrial Properties
Mixed-use property
Total
As at December 31, 2020
GLA
Occupied
GLA Occupancy rate 2
21,993,621
21,993,621
617,669
1,935,392
3,914,026
278,028
617,669
1,744,924
3,914,026
256,613
28,738,736
28,526,853
100.0 %
100.0 %
90.2 %
100.0 %
92.3 %
99.3 %
1 Includes Mark’s and L’Équipeur, SportChek, Sports Experts, and Canadian Tire Bank (referred to herein as “Other CTC Banners”).
2 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted on or before
December 31, 2020.
(in square feet)
Property Type
Retail
Canadian Tire stores
Other CTC Banners
Third party retail tenants
Industrial Properties
Mixed-use property
Total
As at December 31, 2019
GLA
Occupied
GLA
Occupancy rate 1
21,094,518
21,094,518
567,301
1,699,265
3,914,871
280,386
567,301
1,558,838
3,812,248
264,895
27,556,341
27,297,800
100.0 %
100.0 %
91.7 %
97.4 %
94.5 %
99.1 %
1 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted on or before
December 31, 2019.
10 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
The REIT’s Property portfolio consists of:
As at
Canadian Tire single tenant properties
Other single tenant properties
Multi-tenant properties anchored by Canadian Tire store
Multi-tenant properties not anchored by Canadian Tire store
Industrial Properties
Mixed-use property
Total operating properties
Development Properties
Total properties
As at
Gas bars at retail properties
December 31, 2020
December 31, 2019
261
25
64
7
4
1
362
1
363
257
25
60
6
4
1
353
4
357
December 31, 2020
December 31, 2019
111
109
CT REIT’s Properties by region, as a percentage of total GLA, as at December 31, 2020 are as follows:
1 Excluding Properties Under Development.
2 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted
on or before December 31, 2020.
CT REIT 2020 ANNUAL REPORT 11
Properties by Region ¹ ²(% of Total GLA)Atlantic Canada8.4%Ontario42.0%Quebec23.1%Western Canada26.4%
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.2 Revenue by Region
CT REIT’s Properties by region, as a percentage of annualized base minimum rent, as at December 31, 2020 are as follows:
1 Excluding Properties Under Development.
2 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted
on or before December 31, 2020.
5.3 Six Largest Urban Markets
A significant portion of CT REIT’s Properties are located in the following six largest urban markets:
As at
Vancouver
Edmonton
Calgary
Toronto
Ottawa
Montreal
Percentage of Annualized Base Minimum Rent 1, 2
1 Excluding Properties Under Development.
December 31, 2020
December 31, 2019
3.1 %
4.9 %
2.7 %
20.2 %
3.8 %
10.8 %
45.5 %
3.2 %
4.2 %
2.6 %
21.0 %
4.0 %
11.3 %
46.3 %
2 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted on or before
December 31, 2020.
12 CT REIT 2020 ANNUAL REPORT
Properties by Region ¹ ²(% of Annualized Base Minimum Rent)Atlantic Canada7.2%Ontario44.1%Quebec20.1%Western Canada28.6% MANAGEMENT'S DISCUSSION AND ANALYSIS
5.4 Fair Value of Property Portfolio
The fair value of the Properties represents 99.4% of the total assets of CT REIT as at December 31, 2020.
(in thousands of Canadian dollars)
Balance, beginning of period
Property acquisitions (including transaction
costs)
Intensifications
Developments
Development land
Capitalized interest and property taxes
Transfers from PUD
Transfers to PUD 1
Transfer to asset held for sale
Right-of-use assets 2
Fair value adjustment on investment
properties
Straight-line rent
Recoverable capital expenditures
Dispositions
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Income-
producing
properties
Properties
Under
Development
Total
investment
properties
Income-
producing
properties
Properties
Under
Development
Total
investment
properties
5,932,864
74,118
6,006,982
5,635,550
127,233
5,762,783
131,762
—
131,762
75,669
—
—
—
—
—
23,047
23,047
53,197
53,197
—
—
1,283
1,283
—
—
—
—
39,448
48,222
1,918
2,080
144,783
(144,783)
111,224
(111,224)
(17,434)
(20,600)
5,403
(87,359)
10,014
18,091
(820)
17,434
—
—
—
—
—
—
—
—
(20,600)
—
—
5,403
(2,343)
(87,359)
47,306
10,014
14,130
18,091
20,549
(820)
(2,780)
—
—
—
—
—
—
—
75,669
39,448
48,222
1,918
2,080
—
—
—
(2,343)
47,306
14,130
20,549
(2,780)
Balance, end of period
$ 6,083,145 $
57,855 $ 6,141,000 $ 5,932,864 $
74,118 $ 6,006,982
1 Relates to Toronto (Canada Square), Ontario
2Reflects impact of Toronto (Canada Square), Ontario increase in ownership to 50% interest from 33% interest.
Included in CT REIT’s Property portfolio are 10 properties which are situated on ground leases with remaining initial terms up
to 35 years, and an average remaining initial term of 15 years. Assuming all extensions are exercised, the ground leases have
remaining terms between 3 and 50 years with an average remaining lease term of up to 31 years.
As at December 31, 2020, management’s assessment includes performing a sensitivity analysis on the investment metrics.
On a periodic basis, CT REIT obtains independent appraisals such that approximately 80% of its Properties, by value, are
externally appraised over a four-year period.
In January 2021, CT REIT sold its Arnprior Mall property in Arnprior, Ontario for approximately $21,000.
Valuations determined by the overall capitalization rate (“OCR”) method are most sensitive to changes in capitalization rates.
Valuations determined by the discounted cash flow (“DCF”) method are most sensitive to changes in discount rates.
In Q4 2020, there was a change in methodology for the valuation of the Property portfolio from a combination of the DCF and
the OCR, to a single DCF model approach for all Properties. Management believes the change in methodology provides a
more consistent approach to valuing the REIT’s Property portfolio and better allows for assumption changes with respect to
CT REIT 2020 ANNUAL REPORT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
future rental rates, lease renewals, lease expiries and other inputs in response to changing market conditions. See section
10.1
The significant inputs used to determine the fair value of CT REIT’s income-producing properties are as follows:
Number of properties
Value at the period end
Discount rate1
Terminal capitalization rate1
Overall capitalization rate1
Hold period (years)
1 Weighted average rate based on the fair value as at the period end date
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Properties valued by
the DCF method
Properties valued by
the OCR method
Properties valued by
the DCF method
363
287
70
$
6,141,000
$
4,240,942
$
1,766,040
7.15 %
6.67 %
— %
12
— %
— %
6.17 %
—
7.01 %
6.56 %
— %
10
The following table summarizes the sensitivity of the fair value of income-producing properties to changes in the capitalization
rate and discount rate:
Year Ended
December 31, 2020
DCF Sensitivity
Fair value
Change in fair
value
$
5,545,000 $
(596,000)
5,742,000
5,967,000
$
6,141,000 $
6,371,000
6,623,000
$
6,898,000 $
(399,000)
(174,000)
—
230,000
482,000
757,000
Year Ended
December 31, 2019
OCR Sensitivity
DCF Sensitivity
Fair value
Change in fair
value
Fair value
Change in fair
value
$
3,795,258 $
(445,684) $
1,585,694 $
(180,346)
3,932,504
(308,438)
1,640,800
(125,240)
4,080,638
(160,304)
1,699,732
(66,308)
$
4,240,942 $
— $
1,766,040 $
4,415,156
4,605,102
174,214
1,830,296
364,160
1,903,008
$
4,813,073 $
572,131 $
1,982,280 $
—
64,256
136,968
216,240
Rate sensitivity
+ 75 basis points
+ 50 basis points
+ 25 basis points
December 31, 2020
- 25 basis points
- 50 basis points
- 75 basis points
Rate sensitivity
+ 75 basis points
+ 50 basis points
+ 25 basis points
December 31, 2019
- 25 basis points
- 50 basis points
- 75 basis points
14 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.5 2020 Investment Activities
The following table presents income-producing properties acquired, intensified, developed, or redeveloped during the year
ended December 31, 2020.
(in thousands of Canadian dollars, except for GLA amounts)
Property Location
Toronto (Canada Square), ON 1,3
Bradford, ON 2
Niagara Falls, ON 1
Yarmouth, NS 2
Rouyn-Noranda, QC 2
Kincardine, ON 2
Napanee, ON 3
Yellowknife, NT 3
St.Jean-sur-Richelieu, QC 3
Drayton Valley, AB 3
Leduc, AB 3
Fort St. John, BC 4
Orillia, ON 1
Buckingham, QC 2
Quebec City (Vanier), QC 3
Pad Developments 5
Total
1 Redevelopment property.
2 Intensification of an existing income-producing property.
3 Acquisition of income-producing properties.
4 Development Property.
5 Relates to third party pad development projects.
Transaction date
GLA
Total
investment cost
January 2020
March 2020
June 2020
June 2020
June 2020
June 2020
September 2020
October 2020
November 2020
November 2020
November 2020
November 2020
November 2020
November 2020
December 2020
Various
140,193
10,000
224,121
23,135
12,076
28,600
35,951
15,395
103,766
54,263
101,464
145,983
266,189
20,005
125,127
5,295
1,311,563 $
245,072
The following section contains forward-looking information and readers are cautioned that actual results may vary.
5.6 Development Activities
The following table provides details of the REIT’s development activities as at December 31, 2020. The total building area
represents the maximum anticipated area of the developments. The “Not committed to lease” column includes areas which
may be under construction but not committed to lease. The “Committed additional investment” column represents the
approximate financial commitment required to complete the “Committed to lease” areas and related site works.
CT REIT 2020 ANNUAL REPORT 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
Property 1
Anticipated date
of completion
Committed
to lease
Not
committed
to lease
Total 10
Incurred
to-date 10
Committed
additional
investment
Total
Gross leasable area
(in square feet)
Total investment
(in thousands of Canadian dollars)
Fort St John, BC - Phase 2 2
Q4 2021
—
Pad Developments 3
2021
10,000
Brampton Trinity Commons, ON 4
Q2 2022
16,000
7,000
5,000
—
—
Q2 2022
41,000
Q2 2022
28,000
34,000
Q4 2022
26,000
Q4 2022
18,000
Q4 2022
28,000
Q4 2022
43,000
Q4 2022
79,000
Q1 2023
322,000
Q2 2023
26,000
Q2 2023
7,000
TBD
TBD
TBD
TBD
—
—
—
—
—
—
—
—
TBD
TBD
7,000
15,000
16,000
41,000
62,000
26,000
18,000
28,000
43,000
79,000
322,000
26,000
7,000
TBD
TBD
Midland, ON 4
Orillia, ON - Phase 2 5
La Plaine, QC 4
Sept-Iles, QC 4
Brampton McLaughlin, ON 4
Dryden, ON 4
Welland, ON 6
Coteau-du-Lac, QC 4
Fenelon Falls, ON 4
Mission, BC 4
Calgary, AB 7
Toronto (Canada Square), ON 8,9
TOTAL
644,000
46,000
690,000 $ 57,855 $
132,715 $ 190,570
1 Properties Under Development under 5,000 square feet that are not anticipated to be completed within the next 12 months have not been included.
2 Development Property.
3 Relates to third party pad development projects that are estimated to be completed in the next 12 months.
4 Intensification of an existing income-producing property.
5 Redevelopment property.
6 Acquired development land for the intensification of an existing income-producing property.
7 Development land. Potential building area and investment costs to be determined (“TBD”).
8 Redevelopment property. Potential building area and investment costs to be determined (“TBD”).
9 Land lease.
10 Includes amounts related to projects in early stages of development.
As at December 31, 2020, CT REIT had committed lease agreements for approximately 644,000 square feet, representing
93.3% of total GLA under development, of which 98.4% has been leased to CTC. A total of $57,855 has been expended to
date on these developments, and CT REIT anticipates investing an additional $132,715 to complete the developments, of
which $106,375 is due to CTC. In the next 12 months, the REIT expects to spend $32,000 on these development activities.
These commitments exclude the development activities at the Calgary, Alberta and Toronto (Canada Square), Ontario
properties.
16 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.7 Investment and Development Funding
Funding of investment and development activities for the three months and year ended December 31, 2020 was as follows:
(in thousands of Canadian dollars)
Funded with working capital to CTC
Funded with working capital to third parties1
Funded with CTC Credit Facilities
Capitalized interest and property taxes
Issuance of Class B LP Units to CTC
Total costs
$
1 Includes $498 for the construction of Other CTC Banner stores.
Q4 2020 Investment and Development Activity
Property
investments
Developments
Intensifications
1,700 $
7,868
63,200
—
19,560
92,328 $
29,991 $
2,972
—
177
—
5,200 $
616
—
—
—
33,140 $
5,816 $
Total
36,891
11,456
63,200
177
19,560
131,284
2020 Investment and Development Activity
(in thousands of Canadian dollars)
Property
investments
Developments
Intensifications
Funded with working capital to CTC
$
3,050 $
22,825
63,200
—
24,120
18,567
38,091 $
15,106
—
1,283
—
—
20,765 $
2,282
—
—
—
—
Total
61,906
40,213
63,200
1,283
24,120
18,567
$
131,762 $
54,480 $
23,047 $
209,289
Funded with working capital to third parties1
Funded with CTC Credit Facilities
Capitalized interest and property taxes
Issuance of Class B LP Units to CTC
Mortgages Payable
Total costs
1 Includes $5,918 for the construction of Other CTC Banner stores.
Funding of investment and development activities for the three months and year ended December 31, 2019 was as follows:
Q4 2019 Investment and Development Activity
Property
investments
Development
land
Developments
Intensifications
Funded with working capital to CTC
$
4,200 $
1,900 $
— $
15,285 $
Funded with working capital to third parties1
Capitalized interest and property taxes
Issuance of Class B LP Units to CTC
23,404
—
10,545
18
—
—
1,691
6,277 $
371
—
—
—
Total Costs
$
38,149 $
1,918 $
2,062 $
21,562 $
1Includes $3,025 for the construction of Other CTC Banner stores.
Total
21,385
31,390
371
10,545
63,691
2019 Investment and Development Activity
Funded with working capital to CTC
$
15,945 $
1,900 $
41,276 $
22,382 $
Property
investments
Development
land
Developments
Intensifications
Funded with working capital to third parties1
Capitalized interest and property taxes
Issuance of Class B LP Units to CTC
Mortgages Payable
Total costs
35,109
—
13,285
11,330
18
—
—
—
6,946
2,080
—
—
17,066
—
—
—
$
75,669 $
1,918 $
50,302 $
39,448 $
167,337
1Includes $10,735 for the construction of Other CTC Banner stores.
CT REIT 2020 ANNUAL REPORT 17
Total
81,503
59,139
2,080
13,285
11,330
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.8 Lease Maturities
CTC is CT REIT’s most significant tenant. As at December 31, 2020, CTC, including Canadian Tire stores and Other CTC
Banners, had leased 26.5 million square feet of GLA, with approximately 86.1% and 13.9% of the GLA attributable to retail and
office, and Industrial Properties, respectively. The weighted average term of the retail leases with CTC, including Canadian
Tire stores and Other CTC Banners, was 8.8 years, excluding the exercise of any renewal options. The weighted average term
of the Canadian Tire store leases was 9.0 years, with a weighted average rental rate of $13.98 per square foot. The weighted
average lease term for the CTC Industrial Properties was 12.8 years. The weighted average lease term of all leases in the
REIT’s portfolio, excluding Properties Under Development, was 8.9 years.
The following graph presents the lease maturity profile from 2021 to 2040 (assuming tenants do not exercise renewal options
or termination rights, if any) as a percentage of annualized base minimum rent and GLA as of the time of the lease expiry.
1 Excludes Properties Under Development.
2 Total base minimum rent excludes future contractual escalations.
3 Toronto (Canada Square), Ontario is included at the REIT’s one-half interest. Refer to section 5.5 for further information.
4 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted on or before
December 31, 2020.
18 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
5.9 Top 10 Tenants Excluding CTC Related Tenancies
CT REIT’s 10 largest tenants, excluding all CTC related tenancies, as represented by the percentage of total annualized base
minimum rent, are:
Rank Tenant Name
1
2
3
4
5
6
7
8
9
Save-On-Foods/Buy-Low Foods
Loblaws/Shoppers Drug Mart/No Frills
Bank of Montreal
Sobeys/FreshCo/Farm Boy
Canadian Imperial Bank of Commerce
Winners/Marshalls
Metro
Dollarama
Best Buy
10
Tim Hortons
Total
Percentage of total
annualized base
minimum rent 1
0.68 %
0.51 %
0.51 %
0.45 %
0.42 %
0.40 %
0.25 %
0.23 %
0.22 %
0.21 %
3.88 %
1 Occupancy and other leasing key performance measures have been prepared on a committed basis which includes the impact of existing lease agreements contracted on or before
December 31, 2020.
5.10 Leasing Activities
The future financial performance of CT REIT will be impacted by occupancy rates, trends in rental rates achieved on leasing or
renewing currently leased space, and contractual increases in rent. As at December 31, 2020, the REIT’s occupancy rate,
excluding Properties Under Development, increased to 99.3% (Q4 2019 - 99.1%). Refer to section 5.1 for further details.
5.11 Recoverable Capital Costs
Many of the capital costs that will be incurred by CT REIT are recoverable from tenants pursuant to the terms of their leases.
The recoveries will occur either in the year in which such expenditures are incurred or, in the case of a major item of
replacement or betterment, on a straight-line basis over the expected useful life thereof, together with an imputed rate of
interest on the unrecovered balance at any point in time. Capital expenditures of $7,945 and $18,091 (Q4 2019 - $4,728 and
YTD 2019- $20,549) were incurred during the three months and year ended December 31, 2020. Most of the REIT’s
recoverable capital expenditures relate to parking lots, roofs and heating, ventilation and air conditioning equipment, the
incurrence of which are typically seasonal in nature. As a result, the actual recoverable capital costs may vary widely from
period to period.
CT REIT 2020 ANNUAL REPORT 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
6.0 RESULTS OF OPERATIONS
6.1 Financial Results for the Three Months and Year Ended December 31, 2020
CT REIT’s financial results for the three months and year ended December 31, 2020 and December 31, 2019 are summarized
below:
(in thousands of Canadian dollars, except per unit
amounts)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019 Change
2020
2019 Change
Property revenue
Property expense
$
126,833 $
123,692
2.5 % $
502,348 $
489,013
2.7 %
(27,748)
(26,763)
3.7 %
(110,768)
(106,088)
4.4 %
General and administrative expense
(3,949)
(3,647)
8.3 %
(13,018)
(14,285)
(8.9) %
Net interest and other financing charges
(27,235)
(27,033)
0.7 %
(107,898)
(108,753)
(0.8) %
Fair value adjustment on investment properties
(53,869)
10,641
(606.2) %
(87,359)
47,306
(284.7) %
Net income and comprehensive income
Net income per unit - basic
Net income per unit - diluted
$
$
$
14,032 $
76,890
(81.8) % $
183,305 $
307,193
(40.3) %
0.061 $
0.338
(82.0) % $
0.801 $
1.380
(42.0) %
0.093 $
0.294
(68.4) % $
0.772 $
1.193
(35.3) %
Property Revenue
Property revenue includes all amounts earned from tenants pursuant to lease agreements including property taxes, operating
costs and other recoveries. Many of CT REIT’s expenses are recoverable from tenants pursuant to the terms of their leases,
with the REIT absorbing these expenses to the extent that vacancies exist.
Total revenue for the three months ended December 31, 2020 was $126,833 which was $3,141 (2.5%) higher compared to the
same period in the prior year, primarily due to contractual rent escalations, additional base rent related to properties acquired,
and developments and intensifications completed during 2020 and 2019. Total revenue for the three months ended
December 31, 2020 also included property operating expense recoveries in the amount of $25,738 (Q4 2019 - $25,288).
Total revenue for the year ended December 31, 2020 was $502,348 which was $13,335 (2.7%) higher compared to the same
period in the prior year, primarily due to contractual rent escalations, additional base rent related to properties acquired, and
developments and intensification completed during 2020 and 2019. Total revenue for the year ended December 31, 2020 also
included property operating expense recoveries in the amount of $102,257 (2019 - $100,378).
The total amount of base rent to be received from operating leases is recognized on a straight-line basis over the term of the
lease. For the three months ended December 31, 2020, straight-line rent of $2,212 (Q4 2019 - $3,485) was included in total
property revenue. For the year ended December 31, 2020, straight-line rent of $10,014 (2019 - $14,130) was included in total
property revenue.
20 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Property Expense
The components of property expense consist primarily of property taxes, operating costs, property management costs
(including any outsourcing of property management services) and other recoveries. The majority of property expenses are
recoverable from tenants with the REIT absorbing these expenses to the extent that vacancies exist.
Property expense for the three months ended December 31, 2020 increased by $985 (3.7%) compared to the same period in
the prior year primarily due to the REIT's assistance to its tenants which totalled $0.6 million, consisting of $0.4 million in
abatements of gross rents which were recognized as bad debt expense, $0.2 million of expected credit losses and increased
operating expenses related to property acquisitions completed during 2020 and 2019.
Property expenses for the year ended December 31, 2020 increased by $4,680 (4.4%) compared to the same period in the
prior year primarily due to the REIT's assistance to its tenants which totalled $2.8 million, consisting of $0.6 million related to
the CECRA program, $0.7 million in abatements of gross rents which were recognized as bad debt expense, $1.5 million of
expected credit losses and increased operating expenses related to property acquisitions completed during 2020 and 2019.
General and Administrative Expense
CT REIT has a number of broad categories of general and administrative expenses: (i) personnel; (ii) public entity and other
costs, including external audit fees, trustee compensation expense, legal and professional fees, travel, income tax expense
(recovery) related to CT REIT GP Corp.’s (“GP”) activities; and (iii) outsourced costs, which may fluctuate depending on when
such costs are incurred. The personnel, public entity and other costs reflect the expenses related to ongoing operations of CT
REIT. The outsourced costs are largely related to certain administrative, information technology, internal audit and other
support services provided by CTC to the REIT pursuant to the Services Agreement, as further described in section 9.0 of this
MD&A.
(in thousands of Canadian dollars)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
Change
2020
2019
Change
Personnel expense 1
Services Agreement with CTC
Public entity and other 1
$
2,910
$
2,524
15.3 % $
8,515
$
228
943
543
702
(58.0) %
34.3 %
1,112
3,918
7,953
2,500
4,156
$
4,081
$
3,769
8.3 % $
13,545
$
14,609
Less: Allocated to property operating costs
General and administrative expense
As a percent of property revenue
Adjusted general and administrative expense
as a percent of property revenue 2
(132)
3,949
3.1 %
2.5 %
(122)
3,647
2.9 %
2.4 %
8.2 %
(527)
(324)
8.3 %
13,018
14,285
2.6 %
2.6 %
2.9 %
2.5 %
7.1 %
(55.5) %
(5.7) %
(7.3) %
62.7 %
(8.9) %
1 Includes unit-based awards including loss adjustments as a result of the change in the fair market value of the Units of $832 (Q4 2019 - $659) and $134 (YTD 2019 - $2,029) for the three
months and year ended December 31, 2020.
2 Adjusted for fair value adjustments on unit-based awards.
General and administrative expenses amounted to $3,949 or 3.1% of property revenue for the three months ended
December 31, 2020 which is $302 (8.3%) higher compared to the same period in the prior year primarily due to:
•
•
increased personnel compensation and headcount; partially offset by
decreased Service Agreement costs as a result of insourcing some support services during 2019;
CT REIT 2020 ANNUAL REPORT 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
General and administrative expenses amounted to $13,018 or 2.6% of property revenue for the year ended December 31,
2020 which is $1,267 (8.9%) lower compared to the same period in the prior year primarily due to:
•
•
•
•
decreased Service Agreement costs as a result of insourcing some support services during 2019; and
fair value adjustment on unit-based awards resulting in decreased personnel compensation and trustee fees;
partially offset by
increased personnel compensation and headcount; and
higher income tax expense recorded in connection with GP’s activities.
Net Interest and Other Financing Charges
As at December 31, 2020 the Partnership had 1,451,550 Class C LP Units outstanding with a face value of $1,451,550 and
bearing a weighted average distribution rate of 4.41% per annum. The Class C LP Units are subject to redemption rights.
Accordingly, the Class C LP Units are classified as financial liabilities and distributions on the Class C LP Units are presented
in the net interest and other financing charges in the consolidated statements of income and comprehensive income.
Net interest and other financing charges are comprised of the following:
(in thousands of Canadian dollars)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
Change
2020
2019
Change
Interest on Class C LP Units 1
$
15,991 $
17,055
(6.2) % $
65,736 $
68,219
(3.6) %
Interest and financing costs - debentures
9,772
8,890
9.9 %
36,615
35,723
2.5 %
Interest and financing costs - Credit Facilities 2
Interest on mortgages payable
Interest on lease liabilities
Interest and financing costs - CTC Credit Facility 2
315
354
903
72
278
440
851
—
13.3 %
(19.5) %
6.1 %
— %
1,175
1,665
3,624
72
1,466
(19.8) %
1,763
3,317
—
(5.6) %
9.3 %
— %
$
27,407 $
27,514
(0.4) % $
108,887 $
110,488
(1.4) %
Less: capitalized interest
(156)
(269)
(42.0) %
(844)
(1,351)
(37.5) %
Interest expense and other financing charges
$
27,251 $
27,245
— % $
108,043 $
109,137
(1.0) %
Less: interest income
(16)
(212)
(92.5) %
(145)
(384)
(62.2) %
Net interest and other financing charges
$
27,235 $
27,033
0.7 % $
107,898 $
108,753
(0.8) %
1 CTC elected to defer receipt of distributions on Series 3-9 and Series 16 and 19 of the Class C LP Units for the three months and year ended December 31, 2020 in the amount of
$15,852 (Q4 2019 -$16,916) and $59,898 (YTD 2019 - $62,027), respectively, until the first business day following the end of the fiscal year. The deferred distributions have been netted
against interest payable on Class C LP Units and are included under the heading “other liabilities” on the consolidated balance sheets.
2 See section 7.10 for details on Credit Facilities.
Net interest and other financing charges for the three months ended December 31, 2020 was $202 (0.7%) higher compared to
the same period in the prior year largely due to a prepayment cost related to the redemption of the Series C senior unsecured
debentures, partially offset by decreased interest on Class C LP Units from resetting the interest rates as of June 1, 2020 on
the Series 3, 16, 17, 18 and 19 Class C LP Units with CTC.
Net interest and other financing charges for the year ended December 31, 2020 was $855 (0.8%) lower compared to the same
period in the prior year largely due to decreased interest on the Class C LP Units from resetting the interest rates as of June 1,
22 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
2020 on the Series 3, 16, 17, 18 and 19 Class C LP Units with CTC, decreased interest capitalization on development projects
in 2020 and decreased utilization on the Credit Facilities, partially offset by a prepayment cost related to the redemption of the
Series C senior unsecured debentures and increased interest expense on lease liabilities.
Fair Value Adjustment on Investment Properties
The fair value adjustment on Investment Properties for the three months ended December 31, 2020 was $(53,869), a
decrease of $64,510 compared to the adjustment in the same period in the prior year. The decrease in the fair value
adjustment on Investment Properties is primarily due to updated inputs and assumptions in the property appraisal models
reflecting the changing market conditions and their impact on the REIT’s portfolio. Refer to section 2.0.
The fair value adjustment on Investment Properties for the year ended December 31, 2020 was $(87,359), a decrease of
$134,665 compared to the adjustment in the same period in the prior year. The decrease in the fair value adjustment on
Investment Properties is primarily due to updated inputs and assumptions in the property appraisal models reflecting the
changing market conditions and their impact on the REIT’s portfolio. Refer to section 2.0.
Income Tax Expense
Management operates CT REIT in a manner that enables the REIT to continue to qualify as a real estate investment trust
pursuant to the Income Tax Act (Canada) (“ITA”). CT REIT distributes 100% of its taxable income to Unitholders and therefore
does not incur income tax expense in relation to its activities. The REIT only records income tax expense or recovery in
relation to the GP activities.
If CT REIT fails to distribute the required amount of taxable income to Unitholders, or if CT REIT fails to qualify as a “real
estate investment trust” under the ITA, substantial adverse tax consequences may occur. Refer to section 12.0 for further
information.
Net Income
(in thousands of Canadian dollars, except per unit amounts)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019 Change
2020
2019 Change
Net income and comprehensive income
Net income per unit - basic
Net income per unit - diluted
$
$
$
14,032 $
76,890
(81.8) % $ 183,305 $ 307,193
(40.3) %
0.061 $
0.338
(82.0) % $
0.801 $
1.380
(42.0) %
0.093 $
0.294
(68.4) % $
0.772 $
1.193
(35.3) %
Net income decreased by $62,858 (81.8%) for the three months ended December 31, 2020 compared to the same period in
the prior year for the reasons discussed above.
Net income decreased by $123,888 (40.3%) for the year ended December 31, 2020 compared to the same period in the prior
year for the reasons discussed above.
Net income per unit - basic decreased by $0.277 (82.0%) for the three months ended December 31, 2020 compared to the
same period in the prior year primarily due to decreased net income, as discussed above, as well as by an increase in the
weighted average number of units outstanding - basic.
CT REIT 2020 ANNUAL REPORT 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the year ended December 31, 2020 the net income per unit - basic decreased by $0.579 (42.0%) compared to the same
period in the prior year primarily due to decreased net income, as discussed above, as well as by an increase in the weighted
average number of units outstanding - basic.
Net income per unit - diluted decreased by $0.201 (68.4%) for the three months ended December 31, 2020 compared to the
same period in the prior year primarily due to decreased net income, as discussed above, as well as by an increase in the
weighted average number of units outstanding - diluted.
For the year ended December 31, 2020 net income per unit - diluted decreased by $0.421 (35.3%) compared to the same
period in the prior year primarily due to decreased net income, as discussed above, as well as by an increase in the weighted
average number of units outstanding - diluted.
6.2 Non-GAAP Measures
In addition to the GAAP measures previously described, management uses non-GAAP measures in assessing the financial
performance of CT REIT. Refer to section 1.0 and section 11.0 in this MD&A for further information.
(in thousands of Canadian dollars, except
per unit amounts)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
Change
2020
2019
Change
Net operating income
Same store NOI
Same property NOI
Funds from operations
FFO per unit - basic
FFO per unit - diluted (non-GAAP)
Adjusted funds from operations
AFFO per unit - basic
AFFO per unit - diluted (non-GAAP)
AFFO payout ratio
ACFO
EBITFV
Net Operating Income
$
$
$
$
$
$
$
$
$
$
$
96,873
93,558
94,286
68,149
0.297
0.296
59,796
0.260
0.260
77.3 %
60,105
95,416
$
$
$
$
$
$
$
$
$
$
$
93,444
92,493
92,663
66,797
0.293
0.293
3.7 % $
381,566
1.2 % $
364,122
1.8 % $
367,848
2.0 % $
270,725
1.4 % $
1.0 % $
1.183
1.181
57,397
4.2 % $
236,457
0.252
0.252
3.2 % $
3.2 % $
1.033
1.032
75.0 %
3.1 %
76.8 %
60,422
93,686
(0.5) % $
238,954
1.8 % $
378,814
$
$
$
$
$
$
$
$
$
$
$
368,795
360,733
361,904
261,861
1.177
1.175
224,300
1.008
1.007
75.2 %
228,366
370,693
3.5 %
0.9 %
1.6 %
3.4 %
0.5 %
0.5 %
5.4 %
2.5 %
2.5 %
2.1 %
4.6 %
2.2 %
Net Operating Income for the three months ended December 31, 2020 increased by $3,429 (3.7%) compared to the same
period in the prior year primarily due to the acquisition of income-producing properties and Properties Under Development
completed in 2020 and 2019, which contributed $1,465 to NOI growth.
Same store NOI for the three months ended December 31, 2020 increased by $1,065 (1.2%), when compared to the prior year
primarily for the following reasons:
•
contractual rent escalations of approximately 1.5% per year, on average, contained within the Canadian Tire store,
Canadian Tire Gas+ gas bar and CTC industrial leases, contributed $1,830 to NOI growth; partially offset by
24 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
•
•
expected credit losses for tenants significantly impacted by the pandemic and bad debt expenses related to rental
abatements reduced NOI by $488; and
vacancies and parking revenue reduced NOI by $283.
Same property NOI for the three months ended December 31, 2020 increased by $1,623 (1.8%), when compared to the prior
year primarily for the following reasons:
•
•
increase in same store NOI by $1,065 per above; and
Intensifications completed in 2020 and 2019 which contributed $558 to NOI growth.
NOI for the year ended December 31, 2020 increased $12,771 (3.5%) compared to the same period in the prior year primarily
due to the acquisition of income-producing properties and Properties Under Development completed in 2020 and 2019, which
contributed $6,239 to NOI growth and Properties Under Development which contributed $661.
Same store NOI for the year ended December 31, 2020 increased $3,389 (0.9%), when compared to the prior year for the
following reasons:
•
•
•
•
contractual rent escalations of 1.5% per year, on average, contained within the Canadian Tire store and CTC’s
industrial leases, which are generally effective January 1st, contributed $6,488 to NOI growth; and
recovery of capital expenditures and interest earned on the unrecovered balance contributed $576 to NOI growth;
partially offset by
expected credit losses for tenants significantly impacted by the pandemic and bad debt expenses related to rental
abatements and rent relief under the CECRA program reduced NOI by $2,744; and
the proceeds received in Q3 2019 from the assignment of REIT’s interest and claim against a former tenant under the
Companies Creditors Arrangement Act decreased the comparison of NOI by $838.
Same property NOI for the year ended December 31, 2020 increased $5,944 (1.6%), respectively, when compared to the prior
year for the following reasons:
•
•
increase in same store NOI by $3,389 per above; and
Intensifications completed in 2020 and 2019 which contributed $2,555 to NOI growth.
Funds From Operations
FFO for the three months ended December 31, 2020 amounted to $68,149 or $0.296 per unit - diluted (non-GAAP) which was
$1,352 (2.0%) higher or $0.003 per unit - diluted (non-GAAP) (1.0%) higher than the same period in 2019 primarily due to the
impact of NOI variances, partially offset by higher interest expense, discussed earlier.
FFO for the year ended December 31, 2020 amounted to $270,725 or $1.181 per unit (diluted non-GAAP) which was $8,864
(3.4%) and $0.006 (0.5%) per unit (diluted non-GAAP) higher than the same period in 2019 primarily due to the impact of NOI
variances and lower interest expense, discussed earlier.
CT REIT 2020 ANNUAL REPORT 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
Adjusted Funds From Operations
AFFO for the three months ended December 31, 2020 amounted to $59,796 or $0.260 per unit - diluted (non-GAAP) which
was $2,399 (4.2%) or $0.008 per unit - diluted (non-GAAP) (3.2%) higher than the same period in 2019 primarily due to the
impact of NOI variances, partially offset by higher interest expense discussed earlier.
AFFO for the year ended December 31, 2020 amounted to $236,457 or $1.032 per unit (diluted non-GAAP) which was
$12,157 (5.4%) and $0.025 (2.5%), respectively, higher than the same period in 2019 primarily due to the impact of NOI
variances and lower interest expense, discussed earlier.
Adjusted Funds From Operations Payout Ratio
The AFFO payout ratio for the three months ended December 31, 2020 was 77.3%, an increase of 3.1% from the same period
in 2019 due to the rate of increase in the monthly distribution rate, which commenced January 1, 2020 and again on
September 1, 2020, exceeding the increase in AFFO per unit.
The AFFO payout ratio for the year ended December 31, 2020 was 76.8%, an increase of 2.1% from the same period in 2019
due to the rate of increase in the monthly distribution rate, which commenced January 1, 2020 and again on September 1,
2020, exceeding the increase in AFFO per unit.
Adjusted Cashflow From Operations
ACFO for the three months ended December 31, 2020 decreased by $317 (0.5%) over the same period in 2019 primarily due
to a decrease in the changes in working capital and other, partially offset by the impact of NOI variances, discussed earlier,
and an increase in the non-operating adjustments to changes in working capital related to the timing of payment of property
taxes and of commodity taxes payable.
ACFO for the year ended December 31, 2020 increased by $10,588 or 4.6% over the same period in 2019 primarily due to the
impact of NOI variances, discussed earlier and an increase in the non-operating adjustments to changes in working capital
related to the timing of commodity taxes payable.
Earnings Before Interest and Other Financing Costs, Taxes and Fair Value Adjustments
EBITFV for the three months ended December 31, 2020 increased by $1,730 (1.8%) over the same period in 2019, primarily
due to the impact of NOI variances discussed earlier.
EBITFV for the year ended December 31, 2020 increased by $8,121 (2.2%) over the same period in 2019, primarily due to the
impact of NOI variances discussed earlier.
26 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
7.0 LIQUIDITY AND FINANCIAL CONDITION
The following section contains forward-looking information and readers are cautioned that actual results may vary.
7.1 Liquidity
CT REIT intends to fund capital expenditures for acquisitions and development activities through a combination of (i) cash on
hand, (ii) issuances of Class B LP Units and/or Class C LP Units, (iii) draws on Credit Facilities, (iv) assumption of existing
debt, and/or (v) new public or private issuance of debt or equity.
(in thousands of Canadian dollars)
As at
Cash and cash equivalents
Unused portion of available Credit Facilities 1
Liquidity
1 See section 7.10 for details on Credit Facilities.
December 31, 2020
December 31, 2019
$
$
4,531 $
294,436
298,967 $
9,734
294,442
304,176
Cash flow generated from operating the Property portfolio represents the primary source of liquidity to service debt and to fund
planned maintenance expenditures, leasing costs, general and administrative expenses and distributions (other sources being
interest income as well as cash on hand).
(in thousands of Canadian dollars)
For the periods ended December 31,
Cash generated from operating activities
Cash used for investing activities
Cash used for financing activities
Cash (used)/generated in the period
7.2 Discussion of Cash Flows
Year Ended
2020
370,766 $
(162,683)
(213,286)
(5,203) $
2019
362,328
(161,867)
(195,718)
4,743
$
$
Cash used for the year ended December 31, 2020 of $(5,203) was primarily the result of cash used for investing activities and
distribution payments, partially offset by operating activities and amounts drawn on the CTC Credit Facility.
7.3 Credit Ratings
The senior unsecured debt of CT REIT is rated by S&P Global Ratings acting through Standard and Poor’s Rating Services
(Canada), a business unit of S&P Global Canada Corp. (“S&P”) and by DBRS Morningstar (“DBRS Morningstar”), two
independent credit rating agencies which provide credit ratings of debt securities for commercial entities. A credit rating
generally provides an indication of the risk that the borrower will not fulfill its full obligations in a timely manner with respect to
both interest and principal commitments. Rating categories range from highest credit quality (generally “AAA”) to default in
payment (generally “D”).
These ratings are related to and currently equivalent to those of CTC, as CTC holds a significant ownership position in CT
REIT and CTC is CT REIT’s most significant tenant.
CT REIT 2020 ANNUAL REPORT 27
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table sets out the credit ratings of CT REIT’s senior unsecured debt:
Credit Ratings (Canadian Standards)
7.4 Debt and Capital Structure
CT REIT’s debt and capital structure is as follows:
(in thousands of Canadian dollars)
As at
Class C LP Units
Mortgages payable
Debentures
Credit Facilities 1
Total indebtedness
Unitholders’ equity
Non-controlling interests
Total capital under management
1 See section 7.10 for details on Credit Facilities.
DBRS Morningstar
S&P
Credit Rating
BBB
Trend
Stable
Credit Rating
BBB
Outlook
NEG
December 31, 2020
December 31, 2019
$
1,451,550 $
1,451,550
65,956
1,071,635
63,200
2,652,341 $
1,481,849
1,894,021
6,028,211 $
48,049
1,070,695
2,000
2,572,294
1,464,939
1,869,166
5,906,399
$
$
CT REIT’s total indebtedness at December 31, 2020 was higher than at December 31, 2019 primarily due to higher amounts
drawn on the Credit Facilities and an increase in mortgages payable. Refer to section 7.6 of this MD&A for further details.
CT REIT’s Unitholders’ equity and non-controlling interests at December 31, 2020 increased as compared to December 31,
2019 primarily as a result of net income exceeding distributions.
Future payments in respect of CT REIT’s indebtedness as at December 31, 2020 are as follows:
(in thousands of Canadian dollars)
Principal
amortization
Maturities
Class C LP
Units Debentures 1
Total
Mortgages payable
2021 2
2022
2023
2024
2025 and thereafter
Total contractual obligation
420
255
—
—
—
9,460
55,700
—
—
—
—
—
200,000
150,000
213,620
150,000
159,715
—
—
55,700
200,000
1,251,550
775,000
2,026,550
$
675 $
65,160 $
1,451,550 $
1,075,000 $
2,655,585
Unamortized portion of mark to market on mortgages
payable assumed on the acquisition of properties
Unamortized transaction costs
—
—
219
(98)
—
—
—
219
(3,365)
(3,463)
$
675 $
65,281 $
1,451,550 $
1,071,635 $
2,652,341
1 Refer to section 7.8.
2 Refer to section 7.8. for details on Series C senior unsecured debenture early redemption which occurred on January 10, 2021.
28 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest rates on CT REIT’s indebtedness range from 1.87% to 5.00%. The maturity dates on the indebtedness range from
June 2021 to May 2038. On January 10, 2021, CT REIT redeemed all outstanding Series C senior unsecured debentures due
June 1, 2021. No other indebtedness matures in 2021.
Total indebtedness at December 31, 2020 had a weighted average interest rate of 3.87% and a weighted average term to
maturity of 7.5 years, excluding the Credit Facilities.
As at December 31, 2020, variable rate and fixed rate indebtedness were $118,900 and $2,533,441, respectively.
As at
Variable rate debt
Total indebtedness
Variable rate debt / total indebtedness
December 31, 2020
December 31, 2019
$
118,900
$
39,133
2,652,341
2,572,294
4.48 %
1.52 %
CT REIT’s variable rate debt-to-total indebtedness ratio as at December 31, 2020 increased as compared to December 31,
2019 primarily due to increased draws on the CTC Credit Facility and an increased proportionate interest in the mortgage
secured by the Toronto (Canada Square), Ontario property as result of the REIT’s increased ownership interest in the property
in Q1 2020.
The following table presents the contractual obligations of CT REIT:
Total
2021
2022
2023
2024
2025
2026 and
thereafter
Class C LP Units 1
Debentures 2
$ 1,451,550 $
— $
— $
— $
200,000
251,550 $ 1,000,000
1,075,000
150,000
150,000
—
—
200,000
200,000
Payments on Class C LP Units 1
680,499
63,962
63,962
63,962
58,712
51,484
378,417
Interest on debentures
169,529
33,330
29,572
27,433
27,433
23,906
27,855
Credit Facilities
63,200
63,200
—
—
—
—
—
Undiscounted lease liabilities
152,810
4,512
4,143
4,127
4,076
3,776
132,176
Mortgages payable
65,835
420
9,715
55,700
118,561
13,585
63,056
41,920
Obligations for the completion of
developments
Other liabilities
Distributions payable 3
57,947
52,671
5,276
15,459
15,459
—
—
Payable on Class C LP Units, net of
loans receivable
5,330
5,330
Interest on mortgages payable
3,099
1,560
1,328
Interest on CTC Credit Facility
72
72
—
—
—
—
211
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
$ 3,858,891 $
404,101 $
327,052 $
193,353 $
290,221 $
530,716 $ 1,738,448
1 Assumes redemption on Initial Fixed Rate Period for each series.
2 Refer to section 7.8.
3 On Units and Class B LP Units.
CT REIT 2020 ANNUAL REPORT 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
The table below presents CT REIT’s interest in Investment Properties at fair value that are available to it to finance and/or
refinance its debt as at December 31, 2020:
(in thousands of Canadian dollars)
Unencumbered investment properties
Encumbered investment properties
Total
Number of
properties
Fair value of
investment
properties
Percentage of
total assets
Mortgages
payable
Loan to value
ratio
361 $
6,006,857
2
138,143
363 $
6,145,000
97.3 % $
2.2 %
99.4 % $
—
65,956
65,956
—
47.7 %
1.1 %
The table below presents CT REIT’s secured debt as a percentage of total indebtedness:
(in thousands of Canadian dollars)
As at
Secured debt
Total indebtedness
Secured debt / total indebtedness
December 31, 2020
December 31, 2019
$
65,956
$
2,652,341
2.49 %
48,049
2,572,294
1.87 %
CT REIT’s secured debt to total indebtedness ratio at December 31, 2020 increased as compared to December 31, 2019,
primarily due to an increased proportionate interest in the mortgage secured by the Toronto (Canada Square), Ontario
property in Q1 2020.
Indebtedness to EBITFV ratios are used to measure an entity's ability to meet its debt obligations. Generally, the lower the
ratio, the less the entity is leveraged which might increase their ability to pay off its debts.
The table below presents CT REIT’s indebtedness to EBITFV ratio:
(in thousands of Canadian dollars)
As at
Total indebtedness
EBITFV 1
Total indebtedness / EBITFV
1 Non-GAAP measure. Refer to section 11.0 for further information.
December 31, 2020
December 31, 2019
$
$
2,652,341 $
378,814
7.00
2,572,294
370,693
6.94
CT REIT’s indebtedness to EBITFV ratio at December 31, 2020 increased as compared to the indebtedness to EBITFV ratio at
December 31, 2019 primarily due to the growth of total indebtedness exceeding the growth of EBITFV.
30 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
7.5 Interest Coverage Ratio
Interest coverage ratios are used to measure an entity’s ability to service its debt. Generally, the higher the ratio is, the lower
the risk of default on debt. The ratio is calculated as follows:
(in thousands of Canadian dollars)
For the periods ended December 31,
EBITFV 1 (A)
Interest expense and other financing charges (B)
Interest coverage ratio 1 (A)/(B)
Three Months Ended
Year Ended
$
$
2020
95,416 $
27,251 $
3.50
2019
2020
93,686 $
378,814 $
27,245 $
108,043 $
3.44
3.51
2019
370,693
109,137
3.40
1 Non-GAAP measure. Refer to section 11.0 for further information.
The increase in interest coverage ratio for the three months ended December 31, 2020, as compared to the same period in
2019 is primarily due to the growth of EBITFV exceeding the growth of interest and other financing charges.
The increase in interest coverage ratio for the year ended December 31, 2020, as compared to the same period in 2019 is
primarily due to the growth of EBITFV exceeding the growth of interest and other financing charges.
7.6 Indebtedness Ratio
CT REIT has adopted an indebtedness ratio guideline which management uses as a measure to evaluate its leverage and the
strength of its equity position, expressed as a percentage of assets provided by debt. This ratio can help investors determine
the REIT’s risk levels. CT REIT’s Declaration of Trust limits its indebtedness (plus the aggregate par value of the Class C LP
Units) to a maximum of 60% of the gross book value, excluding convertible debentures, and 65% including convertible
debentures. Gross book value is defined as total assets as reported on the latest consolidated balance sheets.
CT REIT calculates its indebtedness ratio as follows:
(in thousands of Canadian dollars)
As at
Total indebtedness 1 (A)
Total assets (B)
Indebtedness ratio (A)/(B)
December 31, 2020
December 31, 2019
$
$
2,652,341
6,176,142
$
$
2,572,294
6,024,512
42.9 %
42.7 %
1 Total indebtedness reflects the value of the Class C LP Units, mortgages payable, debentures and draws on the Credit Facilities.
The indebtedness ratio as at December 31, 2020 increased compared to the indebtedness ratio as at December 31, 2019
primarily due to the growth of total indebtedness exceeding the growth of CT REIT’s 2020 acquisition, intensification and
development activities and fair value adjustments made to its Investment Property portfolio.
7.7 Class C LP Units
As at December 31, 2020, there were 1,451,550 Class C LP Units outstanding, all of which were held by CTC. The Class C
LP Units are designed to provide CTC with an interest in the Partnership that entitles holders to a fixed cumulative monthly
payment, during the fixed rate period for each series of Class C LP Units (the “Current Fixed Rate Period”). Such payments
are made in priority to distributions made to holders of Class B LP Units and units representing an interest in the GP (subject
to certain exceptions) if, as and when declared by the Board of Directors of the GP and are payable monthly at an annual
CT REIT 2020 ANNUAL REPORT 31
MANAGEMENT'S DISCUSSION AND ANALYSIS
distribution rate for each series as set out in the table below. In addition, the Class C LP Units are entitled to receive Special
Voting Units, in certain limited circumstances. Refer to section 8.0 for further details.
On expiry of the Current Fixed Rate Period applicable to each series of Class C LP Units, and each five-year period
thereafter, each such series of Class C LP Units is redeemable at par (together with all accrued and unpaid payments
thereon) at the option of the Partnership or the holder, upon giving at least 120 days’ prior notice. The Partnership also has
the ability to settle any of the Class C LP Units at any time at a price equal to the greater of par and a price to provide a yield
equal to the then equivalent Government of Canada bond yield plus a spread, so long as such redemption is in connection
with a sale of properties.
During the five-year period beginning immediately following the completion of the initial fixed rate period, and each five-year
period thereafter, if not redeemed, the fixed payment rate for Class C LP Units will be reset, and the holders of Class C LP
Units will be entitled, subject to certain conditions, to elect either a fixed rate or variable rate option.
Such redemptions of Class C LP Units (other than upon a change of control of CT REIT) can be settled at the option of the
Partnership, in cash or Class B LP Units of equal value.
The Partnership did not settle any Class C LP Units in 2020.
In Q2 2020, the REIT reset the interest rates on its Series 3, 16, 17, 18 and 19 Class C LP Units with CTC to 2.37%, for a five-
year term ending on May 31, 2025.
The following table presents the details of the Class C LP Units:
Series of Class C LP Units
Subscription
price
Annual
distribution rate
during Current
Fixed Rate Period
Expiry of Current Fixed Rate
Period
% of Total Class C
LP Units
Series 3
Series 4
Series 5
Series 6
Series 7
Series 8
Series 9
Series 16
Series 17
Series 18
Series 19
Total / weighted average
Current
Non-current
Total
$
$
$
$
200,000
200,000
200,000
200,000
200,000
200,000
200,000
16,550
18,500
4,900
11,600
1,451,550
—
1,451,550
1,451,550
2.37 %
4.50 %
4.50 %
5.00 %
5.00 %
5.00 %
5.00 %
2.37 %
2.37 %
2.37 %
2.37 %
May 31, 2025 (4.4 years)
May 31, 2024 (3.4 years)
May 31, 2028 (7.4 years)
May 31, 2031 (10.4 years)
May 31, 2034 (13.4 years)
May 31, 2035 (14.4 years)
May 31, 2038 (17.4 years)
May 31, 2025 (4.4 years)
May 31, 2025 (4.4 years)
May 31, 2025 (4.4 years)
May 31, 2025 (4.4 years)
4.41 %
9.9 years
13.78 %
13.78 %
13.78 %
13.78 %
13.78 %
13.78 %
13.78 %
1.14 %
1.27 %
0.34 %
0.79 %
100.0 %
The weighted average rate of the aggregate capital amount ascribed to the Class C LP Units was 4.41% as at December 31,
2020.
32 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
7.8 Debentures
Series
A, 2.85%, June 9, 2022
B, 3.53%, June 9, 2025
C, 2.16%, June 1, 2021 1
D, 3.29%, June 1, 2026
E, 3.47%, June 16, 2027
F, 3.87%, December 7, 2027
Total
Current
Non-current
Total
December 31, 2020
December 31, 2019
Face value
Carrying
amount
Face value
Carrying
amount
$
150,000 $
149,777 $
150,000 $
149,625
200,000
199,255
200,000
150,000
150,000
150,000
200,000
199,266
200,000
175,000
174,257
175,000
200,000
199,080
200,000
199,101
149,751
199,130
174,142
198,946
$
$
$
$
1,075,000 $
1,071,635 $
1,075,000 $
1,070,695
150,000 $
150,000 $
— $
—
925,000 $
921,635 $
1,075,000 $
1,070,695
1,075,000 $
1,071,635 $
1,075,000 $
1,070,695
1 Refer below for additional information on Series C senior unsecured debentures early redemption.
Debentures as at December 31, 2020 had a weighted average interest rate of 3.25% (December 31, 2019 - 3.25%).
On January 6, 2021, CT REIT completed the issuance of $150,000 of Series G unsecured debentures with a ten-year term
and a coupon of 2.371% per annum. On January 10, 2021, the net proceeds, along with cash on hand, were used to redeem
the Series C senior unsecured debentures in the aggregate principal amount of $150,000 with a coupon of 2.159% due June
1, 2021.
For the three months and year ended December 31, 2020, amortization of the transaction costs of $291 (Q4 2019 - $229) and
$940 (YTD 2019 - $850) is included in net interest and other financing charges on the consolidated statement of income and
comprehensive income. Refer to Note 16 of the consolidated financial statements.
The debentures are rated “BBB” by S&P and “BBB” by DBRS Morningstar. The debentures are direct senior unsecured
obligations of CT REIT. Refer to section 7.3 for further details.
7.9 Mortgages Payable
Mortgages payable, secured by certain CT REIT investment properties, include the following:
(in thousands of Canadian dollars)
As at
Current
Non-current
Total
December 31, 2020
December 31, 2019
Face value
Carrying
amount
Face value
$
$
420 $
514 $
37,533 $
65,415
65,442
10,134
65,835 $
65,956 $
47,667 $
Carrying
amount
37,696
10,353
48,049
Mortgages payable at December 31, 2020 had a weighted average interest rate of 2.27% (December 31, 2019 – 3.82%).
CT REIT 2020 ANNUAL REPORT 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
7.10 Credit Facilities
Bank Credit Facility
CT REIT has a committed, unsecured $300,000 revolving credit facility with a syndicate of major Canadian third-party banks
(“Bank Credit Facility”) expiring in December 2024. The Bank Credit Facility bears interest at a rate based on the bank’s prime
rate of interest or bankers’ acceptances plus a margin. A standby fee is charged on the Bank Credit Facility.
As at December 31, 2020 the Bank Credit Facility had no amounts drawn under the revolving credit facility, and $5,564
(December 31, 2019 – $5,558) of outstanding letters of credit.
CTC Credit Facility
CT REIT has an uncommitted, unsecured $300,000 revolving credit facility with CTC (“CTC Credit Facility”) expiring in
December 2021, unless otherwise renewed. The CTC Credit Facility bears interest at a rate based on the bank’s prime rate of
interest or bankers’ acceptances plus a margin.
As at December 31, 2020, $63,200 of borrowings were drawn on the CTC Credit Facility. At December 31, 2020, borrowings
under the CTC Credit Facility had an ending average interest rate of 2.45% (December 31, 2019 – 3.95%).
The Bank Credit Facility and the CTC Credit Facility are collectively referred to herein as the “Credit Facilities”.
The table below summarizes the details of the Credit Facilities as at December 31, 2020:
(in thousands of Canadian dollars)
Bank Credit Facility
CTC Credit Facility
1Uncommitted facility subject to CTC discretion.
Maximum draw
amount Cash advances
Letters of
credit
Available to be
drawn
$
$
300,000 $
— $
5,564 $
294,436
300,000 $
63,200 $
— $
— 1
The following section contains forward-looking information and readers are cautioned that actual results may vary.
7.11 Capital Strategy
Management expects the REIT’s future debt will be in the form of:
•
•
•
•
Class C LP Units (treated as debt for accounting purposes);
funds drawn on the Credit Facilities;
unsecured public debt; and
secured debt.
Management’s objectives are to access an optimal cost of capital with the most flexible terms, to have a maturity/redemption
schedule (for fixed term obligations) spread over a time horizon so as to manage refinancing risk and to be in a position to
finance acquisition and development opportunities when they become available. The Declaration of Trust and the Trust
34 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Indenture limit the REIT’s overall indebtedness ratio to 60% of total aggregate assets, excluding convertible debentures, and
65% including convertible debentures.
As at December 31, 2020, CT REIT’s indebtedness ratio was 42.9%. Refer to section 7.6 of this MD&A for the definition and
calculation of CT REIT’s indebtedness ratio.
At December 31, 2020, CT REIT was in compliance with the financial covenants contained in the Declaration of Trust, the
Trust Indenture and the Credit Facilities.
CT REIT has also adopted interest coverage guidelines which provide an indication of the REIT’s ability to service or pay the
interest charges relating to the underlying debt.
For the three months ended December 31, 2020, CT REIT’s interest coverage ratio was 3.5 times. Refer to section 7.5 of this
MD&A for the definition and calculation of CT REIT’s interest coverage ratio.
Assuming a future economic environment that is stable, management does not foresee any material impediments to
refinancing future debt maturities. Refer to section 2.0.
The following section contains forward-looking information and readers are cautioned that actual results may vary.
7.12 Commitments and Contingencies
As at December 31, 2020, CT REIT had obligations of $132,715 (December 31, 2019 - $145,667) in future payments for the
completion of developments, as described in section 5.6 of this MD&A. Included in the commitment is $106,375 due to CTC.
CT REIT has sufficient liquidity to fund these future commitments as a result of (i) its conservative use of leverage on the
balance sheet; (ii) liquidity on hand; (iii) its Credit Facilities; (iv) an investment grade credit rating; (v) unencumbered assets;
and (vi) sufficient operating cash flow retained in the business.
7.13 Base Shelf Prospectus
CT REIT has a short form base shelf prospectus under which it can raise up to $2.0 billion of debt and/or equity (including the
sale of Units by CTC) expiring May 24, 2021.
CT REIT 2020 ANNUAL REPORT 35
MANAGEMENT'S DISCUSSION AND ANALYSIS
8.0 EQUITY
8.1 Authorized Capital and Outstanding Units
CT REIT is authorized to issue an unlimited number of Units. As of December 31, 2020, CT REIT had a total of 105,103,391
Units outstanding, 33,989,508 of which were held by CTC, and 125,866,203 Class B LP Units outstanding (together with a
corresponding number of Special Voting Units, as hereinafter defined), all of which were held by CTC.
Class B LP Units are economically equivalent to Units, are accompanied by a special voting unit (“Special Voting Unit”) and
are exchangeable at the option of the holder for Units (subject to certain conditions). Holders of the Class B LP Units are
entitled to receive distributions when declared by the Partnership equal to the per Unit amount of distributions payable on the
Units. However, Class B LP Units have limited voting rights over the Partnership.
The following tables summarize the total number of Units issued:
Total outstanding at beginning of year
Units issued 1
Total outstanding at end of period
1 1,176,006 issued pursuant to the REIT’s distribution reinvestment plan.
Total outstanding at beginning of year
Units issued 1
2019 REIT Offering 2
Total outstanding at end of year
As at December 31, 2020
Units
Class B LP
Units
Total
103,927,385
124,289,491
228,216,876
1,176,006
1,576,712
2,752,718
105,103,391
125,866,203
230,969,594
As at December 31, 2019
Units Class B LP Units
Total
96,848,606
123,400,633
220,249,239
762,779
888,858
1,651,637
6,316,000
—
6,316,000
103,927,385
124,289,491
228,216,876
1 742,946 issued pursuant to the REIT’s distribution reinvestment plan.
2 On September 19, 2019, CT REIT completed a joint equity offering of an aggregate of 16,846,000 Units comprised of the issuance of 6,316,000 Units from treasury for net proceeds of
$86,140 after deducting issuance costs of $3,863 (the “2019 REIT Offering”) and the sale of 10,530,000 Units by CTC.
Each Unit is transferable and represents an equal, undivided beneficial interest in the REIT and in any distributions from the
REIT. Each Unit entitles the holder to one vote at all meetings of Unitholders.
Special Voting Units are only issued in tandem with Class B LP Units or in limited circumstances to holders of the Class C LP
Units and are not transferable separately from the Class B LP Units or Class C LP Units to which they relate. Each Special
Voting Unit entitles the holder thereof to one vote at all meetings of Unitholders or with respect to any written resolution of
Unitholders. Except for the right to attend meetings and vote on resolutions, Special Voting Units do not confer upon the
holders thereof any other rights.
Net income attributable to Unitholders and weighted average units outstanding used in determining basic and diluted net
income per unit are calculated as follows:
36 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
(in thousands of Canadian dollars, except unit amounts)
For the Year ended December 31, 2020
Units
Class B LP
Units
Total
Net income attributable to Unitholders - basic
$
83,694 $
99,611 $
183,305
Income effect of settling Class C LP Units with Class B LP Units
Net income attributable to Unitholders - diluted
Weighted average units outstanding - basic
Dilutive effect of other Unit plans
Dilutive effect of settling Class C LP Units with Class B LP Units
Weighted average units outstanding - diluted
65,736
$
249,041
104,524,871
124,409,130
228,934,001
265,900
93,374,550
322,574,451
For the Year ended December 31, 2019
(in thousands of Canadian dollars, except unit amounts)
Units Class B LP Units
Total
Net income attributable to Unitholders - basic
$
136,667 $
170,526 $
307,193
Income effect of settling Class C LP Units with Class B LP Units
Net income attributable to Unitholders - diluted
Weighted average units outstanding - basic
Dilutive effect of other Unit plans
Dilutive effect of settling Class C LP Units with Class B LP Units
Weighted average units outstanding - diluted
68,219
$
375,412
98,990,726
123,568,955
222,559,681
231,890
91,823,461
314,615,032
8.2 Equity
(in thousands of Canadian dollars)
As at
Equity - beginning of period
Net income and comprehensive income for the period
Issuance of Units from 2019 REIT Offering, net of issue costs
Issuance of Class B LP Units, net of issue costs
Distributions to non-controlling interests
Distributions to Unitholders
Issuance of Units under Distribution Reinvestment Plan and other
December 31, 2020
December 31, 2019
3,334,105
183,305
—
24,101
(98,857)
(83,022)
16,238
3,086,223
307,193
86,140
13,275
(93,925)
(75,469)
10,668
Equity - end of the period
$
3,375,870 $
3,334,105
The following section contains forward-looking information and readers are cautioned that actual results may vary.
8.3 Distributions
CT REIT’s primary business goal is to accumulate a portfolio of high-quality real estate assets and deliver the benefits of such
real estate ownership to Unitholders. The primary benefit to Unitholders is expected to be reliable, durable and growing
distributions over time.
CT REIT 2020 ANNUAL REPORT 37
MANAGEMENT'S DISCUSSION AND ANALYSIS
In determining the amount of the monthly distributions paid to Unitholders, the Board applies discretionary judgment to
forward-looking cash flow information, such as forecasts and budgets, and many other factors including provisions in the
Declaration of Trust, the macro-economic and industry-specific environment, debt maturities, covenants and taxable income.
The Board regularly reviews CT REIT’s rate of distributions to ensure an appropriate level of distributions. The Board has
discretion over the determination of monthly and annual distributions.
On August 4, 2020, the REIT announced a 2.0% distribution increase effective with the September 15, 2020 payment to
Unitholders. Monthly distributions increased to $0.06693 per unit or $0.80316 per unit on an annualized basis.
On December 15, 2020, CT REIT’s Board declared a distribution of $0.06693 per unit payable on January 15, 2021 to holders
of Units and Class B LP Units of record as of December 31, 2020.
On January 15, 2021, CT REIT’s Board declared a distribution of $0.06693 per unit payable on February 16, 2021 to holders
of Units and Class B LP Units of record as of January 29, 2021.
One of CT REIT’s objectives is to grow monthly distributions. The distribution payments and increases since December 31,
2014 are as follows:
2020 (September onward)
2020 (January - August)
2019
2018
2017
2016
2015
2014
Monthly
distribution per
Unit1
% increase
Annualized
distribution
per Unit
Annualized
increase
per Unit
$
$
$
$
$
$
$
$
0.06693
0.06562
0.06310
0.06067
0.05833
0.05667
0.05525
0.05417
2.0 % $
4.0 % $
4.0 % $
4.0 % $
2.9 % $
2.6 % $
2.0 % $
—
$
0.803 $
0.787 $
0.757 $
0.728 $
0.700 $
0.680 $
0.663 $
0.650 $
0.0160
0.0300
0.0290
0.0280
0.0200
0.0170
0.0130
—
1 The Board has discretion over the determination of monthly and annual distributions.
Net income prepared in accordance with IFRS recognizes certain revenues and expenses at time intervals that do not match
the receipt or payment of cash. Therefore, in applying judgment, consideration is given to AFFO (a non-GAAP measure of
recurring economic earnings used to assess distribution capacity, refer to section 11.0) and other factors when establishing
distributions to unitholders.
(in thousands of Canadian dollars, except per unit amounts)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
2020
2019
Distributions before distribution reinvestment - paid
Distribution reinvestment
Distributions net of distribution reinvestment - paid
Distributions per unit - paid
$
$
$
46,089 $
43,080 $
181,394 $
168,318
4,203
3,728
16,245
10,395
41,886 $
39,352 $
165,151 $
157,923
0.201 $
0.189 $
0.793 $
0.757
38 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Distributions for the three months and year ended December 31, 2020 are higher than the same period in the prior year due to
higher weighted average number of Units outstanding and the increase in the annual rate of distributions effective with the first
distribution paid in 2020 and a subsequent increase in the monthly rate effective September 2020.
CT REIT’s distributions for the three months and year ended December 31, 2020 are less than the REIT’s cash generated
from operating activities, cash generated from operating activities reduced by net interest and other financing charges, and
AFFO, a non-GAAP measure, which is an indicator of CT REIT’s distribution capacity.
(in thousands of Canadian dollars, except per unit amounts)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
2020
2019
AFFO 1
Distributions before distribution reinvestment - paid
Excess of AFFO over distributions paid (A)
$
$
59,796 $
57,397 $
236,457 $
224,300
46,089
43,080
181,394
168,318
13,707 $
14,317 $
55,063 $
55,982
Weighted average units outstanding - diluted (non-GAAP)1(B)
229,996,707 227,887,268 229,199,901 222,791,571
Excess of AFFO over distributions paid per unit (A)/(B) 1
$
0.060 $
0.063 $
0.240 $
0.251
1 Non-GAAP measure. Refer to section 11.0 for further information.
8.4 Book Value Per Unit
Book value per Unit represents total equity from the consolidated balance sheets divided by the sum of the period end Units
and Class B LP Units outstanding. It is an indication of the residual book value available to Unitholders. As well, book value
per Unit is compared to the REIT’s Unit trading price in order to measure a premium or discount.
(in thousands of Canadian dollars, except for per unit amounts)
As at
Total equity (A)
Period-end Units and Class B LP Units outstanding (B)
Book value per Unit (A)/(B)
December 31, 2020
December 31, 2019
$
$
3,375,870 $
3,334,105
230,969,594
228,216,876
14.62 $
14.61
CT REIT’s book value per Unit as at December 31, 2020 increased from the book value per Unit as at December 31, 2019
primarily due to net income exceeding distributions.
9.0 RELATED PARTY TRANSACTIONS
On December 31, 2020, CT REIT’s controlling Unitholder, CTC, held a 69.2% effective interest in the REIT, through the
ownership of 33,989,508 Units and all of the issued and outstanding Class B LP Units. Refer to section 7.7 of this MD&A for
additional information on Class C LP Units.
In addition to its ownership interest, CTC is CT REIT’s most significant tenant representing approximately 91.6% of the
annualized base minimum rent earned by CT REIT and 92.2% of total GLA as at December 31, 2020.
In the normal course of its operations, CT REIT enters into various transactions with related parties that have been valued at
amounts agreed to between the parties and recognized in the consolidated financial statements. Investment Property
CT REIT 2020 ANNUAL REPORT 39
MANAGEMENT'S DISCUSSION AND ANALYSIS
transactions with CTC amounted to $149,226 (2019 - $94,788) for the year ended December 31, 2020. Refer to Note 5 to the
consolidated financial statements for additional information.
In Q2 2020, the REIT reset the interest rates on its Series 3, 16, 17, 18 and 19 Class C LP Units with CTC to 2.37%, for a
five-year term ending on May 31, 2025.
CT REIT entered into the CTC Credit Facility in December 2019. Refer to section 7.10 of this MD&A for additional information.
CT REIT’s policy is to conduct all transactions and settle all balances, with related parties, on market terms and conditions.
Pursuant to the Declaration of Trust, all related party transactions are subject to the approval of the independent trustees of CT
REIT.
CT REIT and CTC are parties to a number of commercial agreements which govern the relationships among such parties,
including the Services Agreement and the Property Management Agreement described below.
Services Agreement
Under the Services Agreement, CTC provides the REIT with certain administrative, information technology, internal audit and
other support services as may be reasonably required from time to time (the “Services”). CTC provides these Services to the
REIT on a cost recovery basis pursuant to which CT REIT reimburses CTC for all costs and expenses incurred by CTC in
connection with providing the Services, plus applicable taxes. The Services Agreement is automatically renewable for one
year terms, unless otherwise terminated in accordance with its terms. The Services Agreement was automatically renewed
for 2021 and CTC will continue to provide such Services on a cost recovery basis.
Property Management Agreement
Under the Property Management Agreement, CTC provides the REIT with certain property management services (the
‘‘Property Management Services’’). CTC provides these Property Management Services to the REIT on a cost recovery basis
pursuant to which the REIT reimburses CTC for all costs and expenses incurred by CTC in connection with providing the
Property Management Services, plus applicable taxes. The Property Management Agreement is automatically renewable for
one year terms, unless otherwise terminated in accordance with its terms. The Property Management Agreement was
automatically renewed for 2021 and CTC will continue to provide such Property Management Services on a cost recovery
basis.
Refer to CT REIT’s 2020 AIF available on SEDAR at www.sedar.com and on CT REIT’s website at www.ctreit.com under the
tab “Investors” in the Financial Reporting section for additional information on related party agreements and arrangements with
CTC.
40 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table summarizes CT REIT’s related party transactions as at December 31, 2020, excluding acquisition,
intensification and development activities which are contained in section 5.0:
(in thousands of Canadian dollars)
For the periods ended December 31,
Rental revenue
Property Management and Services Agreements expense 1
Distributions on Units
Distributions on Class B LP Units 2
Interest expense on Class C LP Units
Interest expense on the CTC Credit Facility
Year Ended
2020
2019
448,629 $
437,391
1,755 $
26,988 $
98,857 $
65,736 $
72 $
4,253
31,139
93,925
68,219
—
$
$
$
$
$
$
1The Service Agreement and Property Management Agreement decreased as a result of insourcing some property management and support services during 2020.
2 Includes distributions deferred at the election of the holders of the Class B LP Units.
The net balance due to CTC is comprised of the following:
(in thousands of Canadian dollars)
As at
Tenant and other receivables
Class C LP Units
Amounts payable on Class C LP Units
Loans receivable in respect of payments on Class C LP Units
Other liabilities
Distributions payable on Units and Class B LP Units 1
Loans receivable in respect of distributions on Class B LP Units
CTC Credit Facility 2
Net balance due to CTC
1Includes distributions deferred at the election of the holders of the Class B LP Units.
2 See section 7.10 for details on the Credit Facilities.
December 31, 2020
December 31, 2019
$
(1,549) $
(1,890)
1,451,550
1,451,550
65,228
(59,898)
29,467
31,343
(20,643)
63,200
67,712
(62,027)
6,695
29,589
(19,202)
2,000
$
1,558,698 $
1,474,427
10.0 ACCOUNTING POLICIES AND ESTIMATES
10.1 Significant Areas of Estimation
The preparation of the consolidated financial statements requires management to apply judgments, and to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Estimates are based upon
historical experience and on various other assumptions that are reasonable under the circumstances. The result of ongoing
evaluation of these estimates forms the basis for applying judgment with regards to the carrying values of assets and liabilities
and the reported amounts of revenues and expenses. Actual results may differ from estimates. CT REIT’s critical judgments
and estimates in applying significant accounting policies are described in Note 2 of the consolidated financial statements, the
most significant of which is the fair value of investment properties.
Fair Value of Investment Properties
To determine fair value, CT REIT uses the income approach. Fair value is estimated by capitalizing the cash flows that the
property can reasonably be expected to produce over its remaining economic life. In Q4 2020, there was a change in
methodology for the valuation of the property portfolio from a combination of the discounted cash flow and the overall
CT REIT 2020 ANNUAL REPORT 41
MANAGEMENT'S DISCUSSION AND ANALYSIS
capitalization approach (“OCR”), to a single model approach for all Properties. All Properties were valued using the DCF
method, in which the cash flows are projected over the anticipated term of the investment plus a terminal value discounted
using an appropriate discount rate. Management believes the change in methodology provides a more consistent approach to
valuing the REIT’s portfolio and better allows for assumption changes with respect to future rental rates, lease renewals, lease
expires and other inputs in response to changing market conditions. Properties Under Development are recorded at cost and
are adjusted to fair value at each balance sheet date with the fair value adjustment recognized in earnings.
10.2 Standards, Amendments and Interpretations Issued but Not Yet Adopted
The following new standards, amendments and interpretations have been issued but are not effective until the fiscal years
ending on or after December 2021 and, accordingly, have not been applied in preparing these financial statements.
(i) Amendment to IFRS 16 Leases - COVID-19 Related Rent Concessions
In May 2020, the IASB issued an amendment to IFRS 16 - Leases ("IFRS 16") to make it easier for lessees to
account for COVID-19-related rent concessions such as rent holidays and temporary rent reductions. The
amendment exempts lessees from having to consider individual lease contracts to determine whether rent
concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows
lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-related
rent concessions that reduce lease payments due on or before June 30, 2021. The amendment is effective for annual
reporting periods beginning on or after June 1, 2020. Earlier application is permitted. The implementation of this
amendment did not have a significant impact on CT REIT.
(ii) Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, IASB issued Classification of Liabilities as Current or Non-current, which amends IAS 1 -
Presentation of Financial Statements. The narrow scope amendments affect only the presentation of liabilities in the
statement of financial position and not the amount or timing of their recognition. It clarifies that the classification of
liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and
specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer
settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer
to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual
reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The implementation of these
amendments is not expected to have a significant impact on CT REIT.
(iii) Annual Improvements 2018-2020 and package of narrow-scope amendments
In May 2020, the IASB issued a package of narrow-scope amendments to three standards (IFRS 3 - Business
Combinations, IAS 16 - Property, Plant and Equipment, and IAS 37 - Provisions, Contingent Liabilities and
Contingent Assets) as well as the IASB’s Annual Improvements 2018-2020, which are changes that clarify the
wording or correct minor consequences, oversights or conflicts between requirements in the standards. These
amendments will be effective for annual periods beginning on or after January 1, 2022. The implementation of these
narrow-scope amendments is not expected to have a significant impact on CT REIT.
42 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
11.0 NON-GAAP MEASURES
CT REIT uses non-GAAP measures including NOI, same store NOI, same property NOI, FFO, FFO per unit - basic, FFO per
unit - diluted (non-GAAP), AFFO, AFFO per unit - basic, AFFO per unit - diluted (non-GAAP), AFFO payout ratio, ACFO and
EBITFV. CT REIT believes these non-GAAP measures and ratios provide useful supplemental information to both
management and investors in measuring the financial performance of CT REIT and its ability to meet its principle objective of
the creation of Unitholder value, by generating reliable, durable and growing monthly distributions. When calculating diluted
FFO and AFFO per unit, management excludes the effect of settling the Class C LP Units with Class B LP Units, which is
required when calculating diluted units in accordance with IFRS.
These measures and ratios do not have a standardized meaning prescribed by GAAP and therefore they may not be
comparable to similarly titled measures and ratios presented by other publicly traded entities and should not be construed as
an alternative to other financial measures determined in accordance with GAAP.
11.1 Net Operating Income
CT REIT defines NOI as property revenue less property expense adjusted further for straight-line rent. Management believes
that NOI is a useful key indicator of performance as it represents a measure of property operations over which management
has control. NOI is also a key input in determining the value of the portfolio.
(in thousands of Canadian dollars)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
Change
2020
2019
Change
Property revenue
Less:
Property expense
$
126,833 $
123,692
2.5 % $
502,348 $
489,013
2.7 %
(27,748)
(26,763)
3.7 %
(110,768)
(106,088)
4.4 %
Property straight-line rent revenue
(2,212)
(3,485)
(36.5) %
(10,014)
(14,130)
(29.1) %
Net operating income
$
96,873 $
93,444
3.7 % $
381,566 $
368,795
3.5 %
Same Store NOI
Same store NOI is a non-GAAP financial measure which reports the period-over-period performance of the same asset base
having consistent GLA in both periods. CT REIT management uses this measure to gauge the change in asset productivity
and asset value.
Same Property NOI
Same property NOI is a non-GAAP financial measure that is consistent with the definition of same store NOI above, except
that same property includes the NOI impact of Intensifications. CT REIT management uses this measure to gauge the change
in asset productivity and asset value, as well as measure the additional return earned by incremental capital investments in
existing assets.
CT REIT 2020 ANNUAL REPORT 43
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table summarizes the same store and same property components of NOI:
(in thousands of Canadian dollars)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019 Change 1
2020
2019 Change 1
Same store
Intensifications
2020
2019
$
93,558 $
92,493
1.2 % $
364,122 $
360,733
0.9 %
415
313
—
— %
170
84.1 %
1,037
2,689
—
1,171
— %
NM
Same property
$
94,286 $
92,663
1.8 % $
367,848 $
361,904
1.6 %
Acquisitions, developments and dispositions
2020
2019
Net operating income
1 NM - not meaningful.
1,605
979
—
— %
3,537
—
— %
782
25.2 %
10,177
6,891
47.7 %
96,870 $
93,445
3.7 %
381,562 $
368,795
3.5 %
11.2 Funds From Operations and Adjusted Funds From Operations
The following table reconciles GAAP net income and comprehensive income to FFO and further reconciles FFO to AFFO:
(in thousands of Canadian dollars, except per unit amounts)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019 Change 1
2020
2019 Change 1
Net Income and comprehensive income
$
14,032 $
76,890
(81.8) % $ 183,305 $ 307,193
(40.3) %
Fair value adjustment on investment property
53,869
(10,641)
(606.2) %
87,359
(47,306)
(284.7) %
GP income tax expense
Lease principal payments on right-of-use assets
Fair value adjustment of unit-based compensation
Internal leasing expense
Funds from operations
(568)
(270)
832
254
(467)
21.6 %
171
659
185
NM
26.3 %
37.3 %
(27)
(822)
134
776
(360)
(92.5) %
(201)
NM
2,029
(93.4) %
506
53.4 %
$
68,149 $
66,797
2.0 % $ 270,725 $ 261,861
3.4 %
Property straight-line rent revenue
(2,212)
(3,485)
(36.5) %
(10,014)
(14,130)
(29.1) %
Normalized capital expenditure reserve
(6,141)
(5,915)
3.8 %
(24,254)
(23,431)
3.5 %
Adjusted funds from operations
FFO per unit - basic
FFO per unit - diluted (non-GAAP) 2
AFFO per unit - basic
AFFO per unit - diluted (non-GAAP) 2
$
$
$
$
$
59,796 $
57,397
4.2 % $ 236,457 $ 224,300
5.4 %
0.297 $
0.296 $
0.260 $
0.260 $
0.293
0.293
0.252
0.252
1.4 % $
1.183 $
1.0 % $
1.181 $
3.2 % $
1.033 $
3.2 % $
1.032 $
1.177
1.175
1.008
1.007
Weighted average units outstanding - basic
229,712,658 227,646,716
0.9 % 228,934,001 222,559,681
Weighted average units outstanding - diluted (non-GAAP)
229,996,707 227,887,268
0.9 % 229,199,901 222,791,571
Number of units outstanding, end of period
230,969,594 228,216,876
1.2 % 230,969,594 228,216,876
1 NM - not meaningful.
2 For the purposes of calculating diluted per unit amounts, diluted units includes restricted and deferred units issued under various plans and excludes the effects of settling
the Class C LP Units with Class B LP Units.
Funds From Operations
0.5 %
0.5 %
2.5 %
2.5 %
2.9 %
2.9 %
1.2 %
FFO is a non-GAAP financial measure of operating performance used by the real estate industry, particularly by those publicly
traded entities that own and operate income-producing properties. FFO should not be considered as an alternative to net
income or cash flows provided by operating activities determined in accordance with IFRS. CT REIT calculates its FFO in
44 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
accordance with Real Property Association of Canada’s (“REALPAC”) “White Paper on Funds From Operations & Adjusted
Funds From Operations for IFRS” (“White Paper on FFO & AFFO”) issued in February 2019. The use of FFO, together with
the required IFRS presentations, has been included for the purpose of improving the understanding of the operating results of
CT REIT.
Management believes that FFO provides an operating performance measure that, when compared period-over-period, reflects
the impact on operations of trends in occupancy levels, rental rates, operating costs and property taxes, acquisition activities
and interest costs, and provides a perspective of the financial performance that is not immediately apparent from net income
determined in accordance with IFRS.
FFO adds back to net income items that do not arise from operating activities, such as fair value adjustments. FFO, however,
still includes non-cash revenues related to accounting for straight-line rent and makes no deduction for the recurring capital
expenditures necessary to sustain the existing earnings stream.
Adjusted Funds From Operations
AFFO is a non-GAAP measure of recurring economic earnings used in the real estate industry to assess an entity’s distribution
capacity. AFFO should not be considered as an alternative to net income or cash flows provided by operating activities
determined in accordance with IFRS. CT REIT calculates its AFFO in accordance with REALPAC’s White Paper on FFO &
AFFO.
CT REIT calculates AFFO by adjusting FFO for non-cash income and expense items such as amortization of straight-line
rents. FFO is also adjusted for a reserve for maintaining productive capacity required for sustaining property infrastructure and
revenue from real estate properties and direct leasing costs. As property capital expenditures do not occur evenly during the
fiscal year or from year to year, the normalized capital expenditure reserve in the AFFO calculation, which is used as an input
in assessing the REIT’s distribution payout ratio, is intended to reflect an average annual spending level. The reserve is
primarily based on average expenditures as determined by building condition reports prepared by independent consultants.
CT REIT 2020 ANNUAL REPORT 45
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following table compares capital expenditures during the 2016-2020 period to the normalized capital expenditure reserve
used in the calculation of AFFO:
(in thousands of Canadian dollars)
For the periods indicated
2016
Q1
Q2
Q3
Q4
Year ended December 31, 2016
2017
Q1
Q2
Q3
Q4
Year ended December 31, 2017
2018
Q1
Q2
Q3
Q4
Year ended December 31, 2018
2019
Q1
Q2
Q3
Q4
Year ended December 31, 2019
2020
Q1
Q2
Q3
Q4
Year ended December 31, 2020
Normalized
capital
expenditure
reserve
Capital
expenditures
Variance
$
4,407 $
259 $
4,581
4,666
4,741
4,898
8,551
1,862
18,395 $
15,570 $
5,065 $
348 $
5,109
5,139
5,173
5,445
8,307
4,862
20,486 $
18,962 $
5,598 $
(371) $
5,618
5,632
5,669
2,425
9,867
5,778
22,517 $
17,699 $
5,779 $
257 $
5,854
5,883
5,915
5,253
10,311
4,728
23,431 $
20,549 $
6,122 $
5,922 $
6,069 $
6,141 $
2,366 $
1,904 $
5,876 $
7,945 $
24,254 $
18,091 $
$
$
$
$
$
$
$
$
$
$
$
$
4,148
(317)
(3,885)
2,879
2,825
4,717
(336)
(3,168)
311
1,524
5,969
3,193
(4,235)
(109)
4,818
5,522
601
(4,428)
1,187
2,882
3,756
4,018
193
(1,804)
6,163
The normalized capital expenditure reserve exceeded actual capital expenditures by $18,212 during the five-year period from
2016 through 2020. The normalized capital expenditure reserve per square foot has increased since 2016, which reflects
changes in asset mix (primarily due to an increase in multi-tenanted retail investment properties) and inflation in expected
costs. Management expects there will be periods in the future where actual capital expenditures will exceed the normalized
capital expenditure reserve. The current period reserve is based upon unit costs that are anticipated to be realized in work to
be completed in the current period.
46 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
The normalized capital expenditure reserve varies from the capital expenditures incurred due to the seasonal nature of the
expenditures. As such, CT REIT views the normalized capital expenditure reserve as a more meaningful measure. Refer to
section 5.11 for additional information.
11.3 AFFO Payout Ratio
The AFFO payout ratio is a non-GAAP measure of the sustainability of the REIT’s distribution payout. CT REIT uses this
metric to provide transparency on performance and the overall management of the existing portfolio of assets. Management
considers the AFFO payout ratio to be the best measure of the REIT’s distribution capacity.
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
Change
2020
2019
Change
Distribution per unit - paid (A)
AFFO per unit - diluted (non-GAAP) 1 (B)
$
$
0.201
0.260
$
$
0.189
0.252
6.2 % $
0.793
3.2 % $
1.032
$
$
0.757
1.007
AFFO payout ratio (A)/(B)
77.3 %
75.0 %
3.1 %
76.8 %
75.2 %
1 For the purposes of calculating diluted per unit amounts, diluted units include restricted and deferred units issued under various plans and excludes the effects of settling
4.8 %
2.5 %
2.1 %
the Class C LP Units with Class B LP Units.
11.4 Diluted Non-GAAP per Unit Calculations
Management calculates the weighted average units outstanding - diluted (non-GAAP) by excluding the full conversion of the
Class C LP Units with Class B LP Units which is not considered a likely scenario. As such, the REIT’s fully diluted per unit
FFO and AFFO amounts are calculated excluding the effects of settling the Class C LP Units with Class B LP Units, which
management considers as a more meaningful measure.
The following table reconciles the calculation of the weighted average units outstanding - diluted (non-GAAP) to weighted
average units outstanding - diluted:
For the periods ended December 31,
2020
2019
2020
2019
Weighted average units outstanding - diluted (non-GAAP)
229,996,707
227,887,268
229,199,901
222,791,571
Dilutive effect of settling Class C LP Units with Class B LP Units
93,374,550
91,823,461
93,374,550
91,823,461
Weighted average units outstanding - diluted
323,371,257
319,710,729
322,574,451
314,615,032
Three Months Ended
Year Ended
11.5 Adjusted Cash Flow From Operations
ACFO is a non-GAAP financial measure developed by REALPAC for use by the real estate industry as a sustainable
economic cash flow metric. ACFO should not be considered as an alternative to cash flows provided by operating activities
determined in accordance with IFRS. CT REIT calculates its ACFO in accordance with REALPAC’s “White Paper on Adjusted
Cashflow from Operations for IFRS” (“White Paper on ACFO”) issued in February 2019. The purpose of the White Paper on
ACFO is to provide guidance on the definition of ACFO to promote consistent disclosure amongst reporting issuers.
Management believes that the use of ACFO, combined with the required IFRS presentations, improves the understanding of
the operating cash flow of CT REIT.
CT REIT calculates ACFO from cash flow generated from operating activities by adjusting for non-operating adjustments to
changes in working capital and other, net interest and other financing charges and normalized capital expenditure reserve.
CT REIT 2020 ANNUAL REPORT 47
MANAGEMENT'S DISCUSSION AND ANALYSIS
A reconciliation from the IFRS term “Cash Generated from Operating Activities” (refer to the Consolidated Statements of Cash
Flows for the three months and year ended December 31, 2020 and December 31, 2019) to ACFO is as follows:
(in thousands of Canadian dollars)
For the periods ended December 31,
Three Months Ended
Year Ended
2020
2019 Change 1
2020
2019 Change 1
Cash generated from operating activities
93,526 $ 93,986
(0.5) % 370,766 $ 362,328
2.3 %
Non-operating adjustments to changes in working capital and other
225
(787)
NM
1,162
(1,577)
NM
Net interest and other financing charges
(27,235)
(27,033)
0.7 % (107,898) (108,753)
(0.8) %
Normalized capital expenditure reserve
(6,141)
(5,915)
3.8 %
(24,254)
(23,431)
3.5 %
Lease principal payments on right-of-use assets
(270)
171
NM
(822)
(201)
NM
Adjusted cashflow from operations
60,105 $ 60,422
(0.5) % 238,954 $ 228,366
4.6 %
1 NM - not meaningful.
The non-operating adjustments to changes in working capital and other for three months ended December 31, 2020 is
primarily due to the payment and timing of property taxes and timing of commodity taxes payable. The non-operating
adjustments to changes in working capital and other for year ended December 31, 2020 is primarily due to timing of
commodity taxes and other taxes payable.
11.6 Earnings Before Interest and Other Financing Costs, Taxes and Fair Value Adjustments
EBITFV is a non-GAAP measure of a REIT’s operating cash flow and it is used in addition to IFRS net income because it
excludes major non-cash items (including fair value adjustments), interest expense and other financing costs, income tax
expense, losses or gains on disposition of property, and other non-recurring items that may occur under IFRS that
management considers non-operating in nature. EBITFV should not be considered as an alternative to net income or cash
flows provided by operating activities determined in accordance with IFRS.
EBITFV is used as an input in some of CT REIT’s debt metrics, providing information with respect to certain financial ratios
that CT REIT uses in measuring its debt profile and assessing its ability to satisfy its obligations, including servicing its debt.
For the three months and year ended December 31, 2020, EBITFV was calculated as follows:
(in thousands of Canadian dollars)
Three Months Ended
Year Ended
For the periods ended December 31,
2020
2019
Change 1
2020
2019
Change 1
Net income and comprehensive income
$
14,032 $
76,890
(81.8) % $
183,305 $
307,193
(40.3) %
Fair value adjustment on investment properties
53,869
(10,641)
NM
87,359
(47,306)
NM
Fair value adjustment on unit-based awards
832
659
26.3
134
2,029
(93.4)
Interest expense and other financing charges
27,251
27,245
— %
108,043
109,137
(1.0) %
GP income tax expense
(568)
(467)
21.6 %
(27)
(360)
(92.5) %
EBITFV
1 NM - not meaningful.
$
95,416 $
93,686
1.8 % $
378,814 $
370,693
2.2 %
48 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
11.7 Non-GAAP Measures Referenced in Other Sections of the MD&A
The interest coverage ratio under section 7.5 is calculated using EBITVF, a non-GAAP measure.
11.8 Selected Quarterly Consolidated Information
(in thousands of Canadian dollars,
except per unit amounts)
As at and for the quarter ended
Q4
2020
Q3
Q2
Q1
Q4
Q3
Q2
Q1
2019
Property revenue
Net income
Net income per unit
- basic
- diluted
FFO per unit - diluted (non-GAAP) 1
AFFO per unit - diluted (non-GAAP) 1
$ 126,833 $ 123,172 $ 125,498 $ 126,845 $ 123,692 $ 121,763 $ 121,994 $ 121,564
$ 14,032 $ 64,107 $ 61,970 $ 43,196 $ 76,890 $ 80,138 $
78,720 $
71,445
$
$
$
$
0.061 $
0.280 $
0.271 $
0.189 $
0.338 $
0.362 $
0.357 $
0.093 $
0.240 $
0.235 $
0.173 $
0.294 $
0.301 $
0.297 $
0.296 $
0.299 $
0.294 $
0.293 $
0.293 $
0.303 $
0.291 $
0.260 $
0.262 $
0.256 $
0.254 $
0.252 $
0.261 $
0.249 $
0.324
0.273
0.288
0.245
Total assets
Total indebtedness
$ 6,176,142 $ 6,139,575 $ 6,112,837 $ 6,069,044 $ 6,024,512 $ 6,001,912 $ 5,928,005 $ 5,853,296
$ 2,652,341 $ 2,588,976 $ 2,588,889 $ 2,588,789 $ 2,572,294 $ 2,570,162 $ 2,609,049 $ 2,580,000
Total distributions, net of distribution
reinvestment, to Unitholders - paid
Total distributions per unit - paid
Book value per unit
Market price per unit
- high
- low
- close (end of period)
$ 41,886 $ 41,282 $ 41,326 $ 40,657 $ 39,352 $ 39,337 $
39,337 $
39,877
$
$
$
$
$
0.201 $
0.199 $
0.197 $
0.197 $
0.189 $
0.189 $
0.189 $
14.62 $
14.75 $
14.67 $
14.60 $
14.61 $
14.46 $
14.31 $
15.90 $
14.50 $
14.30 $
17.22 $
16.30 $
15.05 $
14.77 $
15.04 $
13.28 $
11.02 $
9.14 $
14.51 $
13.97 $
13.54 $
15.67 $
13.97 $
13.58 $
11.70 $
16.14 $
15.03 $
14.22 $
0.189
14.15
14.45
11.47
14.36
1 Non-GAAP measure. Refer to section 11.0 for further information.
Property revenue, distributions and other financial and operational results noted above have grown at a steady rate. However,
macroeconomic and market trends may have an influence on the demand for space, occupancy levels, and consequently, the
REIT’s operating performance. See section 2.0.
Refer to CT REIT’s respective annual and interim MD&A’s issued for a discussion and analysis relating to those periods.
CT REIT 2020 ANNUAL REPORT 49
MANAGEMENT'S DISCUSSION AND ANALYSIS
12.0 ENTERPRISE RISK MANAGEMENT
Enterprise Risk Management Framework
To preserve and enhance Unitholder value over the long term, CT REIT takes a balanced approach to risk taking together
with effective risk management. The effective management of risk within CT REIT is a key priority for the Board of Trustees
and senior management, as such the REIT has adopted an Enterprise Risk Management Framework (“ERM Framework”) for
identifying, assessing, monitoring, mitigating and reporting key risks. See section 2.0
The ERM Framework is designed to provide an integrated approach to the management of risks, through a disciplined
manner that:
•
•
•
•
Safeguards the REIT’s reputation;
Supports the achievement of the REIT’s growth strategy and objectives;
Preserves and enhances Unitholder value; and
Supports business planning and operations by providing a cross-functional perspective to risk management,
integrated with strategic planning and reporting processes.
Risk Governance
Through the ERM Framework, there is oversight over key risks and emerging risks. The foundation of the REIT’s ERM
Framework is a governance approach that includes a set of policies approved by the Board of Trustees together with the
following key elements; the Board of Trustees and Chief Executive Officer (“CEO”), supported by the senior leadership team
and a three-lines of defence operating model. Clearly defined roles and responsibilities, coupled with timely monitoring and
reporting, assist in supporting a strong risk culture and effective governance of risk.
The CEO is supported in discharging his responsibilities with respect to managing strategies in alignment with the REIT’s risk
appetite, identifying various risk related policies for the Board’s approval and evaluating the effectiveness of the REIT’s
processes and controls that aim to mitigate risk and support strategic objectives. The REIT monitors its risk exposures to
assess if it is operating within approved limits, strategies and risk appetite.
Key Risks
CT REIT monitors its business to identify and assess key risks that alone, or in combination with other interrelated risks,
could have a significant adverse impact on the REIT’s financial position, and/or ability to achieve its strategic objectives. The
key risks are enterprise-wide in scope and represent strategic, financial and operational risks. The mitigation and
management of key risks is approached holistically with a view to ensuring all risk exposures are considered. Although the
REIT believes the measures taken to mitigate risks are reasonable, there can be no assurance that they will effectively
control all risks that may have a negative impact. In addition, there are numerous other risk factors that are difficult to predict
and could adversely affect the REIT’s financial results, operations and strategic objectives.
During the quarter, the COVID-19 pandemic continued to have a significant impact on the Canadian and global economies.
The duration and severity of the pandemic remain uncertain and difficult to predict, as does its adverse short and long term
50 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
impacts on CT REIT. The REIT has implemented a number of comprehensive and evolving risk management strategies to
support its business and operations and to protect the health and safety of its employees, tenants, tenants’ employees and
customers.
The following table provides an overview of each of the REIT’s key risks and related risk management strategies. Further
information on the REIT’s key risks is presented in the REIT’s 2020 AIF. CT REIT cautions that the discussion of risks,
including those risks described in the REIT’s 2020 AIF, is not exhaustive. When considering whether to purchase or sell Units
of the REIT, investors and others should carefully consider these factors as well as other uncertainties, potential events and
industry specific factors that may adversely impact the REIT’s future results.
CT REIT 2020 ANNUAL REPORT 51
MANAGEMENT'S DISCUSSION AND ANALYSIS
Key Risks
External Economic Environment
Risk Management Strategy
The REIT
is subject
to risks resulting
from
fluctuations or
The REIT regularly monitors and analyzes external economic,
fundamental changes
in
the external business environment,
demographic, consumer behaviour and competitive developments in
including those driven or compounded by the COVID-19 pandemic.
Canada related to its business. Results are shared with the REIT
These fluctuations or fundamental shifts in the macroeconomic
executives, who are accountable for any necessary amendments to
environment as well as the regions and local marketplaces where the
the strategic and operational plans and for on-going investment
REIT conducts its business could include:
decisions in order to respond to evolving market and economic
• changes in the current economic environment and uncertainty with
trends.
respect to potential future economic disruption including recession,
In response to the COVID-19 pandemic, government authorities
depression, or high inflation impacting business and consumer
have implemented, and are continuing to implement, significant
confidence and spending;
• changes in the economic stability of local markets such as business
layoffs, industry slow-downs, changing demographics and other
factors impacting tenants’ revenues and their ability to pay rent, and
the REIT’s ability to lease space, renew leases and derive income
from the properties in the affected market;
assistance programs to provide economic support to financially
challenged businesses. While in the short term these measures
have mitigated some effects of the pandemic, over the long term
they may not be sufficient to fully offset its negative impact or advert
recessionary conditions. Upon cessation of these measures, the
• changes in the economic condition and regulatory environment of
REIT may expect to see an increase in rental payment delinquencies
the regions in which the REIT’s properties are concentrated, which
or defaults.
may have a material adverse effect on the REIT’s business, cash
The REIT has continued to support certain tenants facing financial
flows, financial condition, results of operations and ability to make
challenges, either by participating in government rent assistance
distributions to Unitholders;
programs with qualified tenants or providing rent abatement or
• changes in retail shopping behaviours and habits of consumers and
deferral options.
the introduction of new “technologies” and competitors impacting the
relevance of the products, sales channels, or services offered by the
REIT’s key tenant, which may result in a negative impact on their
financial position culminating in a decrease in the demand for
physical space, which could adversely affect the REIT’s financial
performance; and
• increased competition amongst investors, developers, owners and
operators of properties similar to those of the REIT could negatively
impact the availability of suitable acquisition opportunities thereby
increasing the REIT’s cost of acquisition as well as its’ ability to lease
properties, renew leases and achieve rental increases, which may
adversely impact the REIT’s financial condition and results of
operations.
52 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Key Risks
Key Business Relationship
Risk Management Strategy
The REIT’s relationship with its majority Unitholder, CTC, is integral
The REIT benefits from the stability offered by CTC businesses
to its business strategy and could affect the REIT’s cash flows,
including Canadian Tire Retail, one of Canada’s most shopped
operating results, overall financial performance and its ability to
general merchandise retailers with high recognition and a strong
make distributions. Key factors inherent to this relationship include:
reputation
throughout
the communities
it serves. Appropriate
• situations where the interests of CTC and the REIT are in conflict,
governance structures, including policies, processes and other
CTC may utilize its ownership interest in, and contractual rights with
management activities and practices are in place to maintain and
the REIT, to further CTC’s own interest which may not be the same
monitor the relationship between the REIT and CTC. In addition,
as the REIT’s interest in all cases, causing the REIT not to be able to
Management regularly monitors the operating results and credit
operate in a manner that is to its favour, which could adversely affect
ratings of CTC. From the onset of the COVID-19 pandemic, the REIT
the REIT’s cash flows, operating results, valuation, and overall
has worked closely with CTC and its other tenants to help maintain
financial condition;
safe facilities and business operations for their employees and
• the dependence of the REIT’s revenues on the ability of its key
customers, following guidance from public health authorities.
tenant, CTC, to meet its rent obligations and renew its tenancies.
While CTC has held investment grade credit ratings for over 20
years, there is no assurance that it will maintain such ratings or that
its financial position will not change over time. The future financial
performance and operating results of CTC’s business are subject to
inherent risks, perceptions and uncertainties, including the uncertain
long term impact of the COVID-19 pandemic on its operations and
customer behaviours. A downturn in CTC’s business resulting in an
inability to meet their obligations under their leases or if a significant
amount of available space in the properties was not able to be
leased on economically favourable lease terms could have a material
effect on the financial performance of the REIT, its cash flows, and
the REIT’s ability to make distributions to Unitholders; and
• the REIT’s dependency on the services of key personnel including
certain CTC personnel who supply necessary services to operate the
REIT for its effective management and governance. Failure to
receive these services or the need to replace the service provider in
a short period of time could have a material adverse effect on the
REIT.
CT REIT 2020 ANNUAL REPORT 53
MANAGEMENT'S DISCUSSION AND ANALYSIS
Key Risks
Financial
Risk Management Strategy
Risks associated with macroeconomic conditions which are highly
The REIT has a Board-approved financial risk management policy in
cyclical and volatile could have a material effect on the REIT’s
place that governs the management of capital, funding, and other
financial position and its ability to achieve its strategic goals and
financial risks. The indebtedness and Class C LP Units of the REIT
aspirations. Such risks include:
are predominantly at fixed rates and its variable interest rate
• fundamental changes in the economic environment, significant
exposure is minimal. The weighted average term to redemption/
events such as the COVID-19 pandemic, or volatility in the financial
maturity of the REIT’s debt portfolio is managed to generally align
markets resulting in changes in interest rates that affect the value of
with the weighted average term to maturity of the REIT’s assets. The
real estate, the value of the REIT’s Units, the economics of
REIT manages refinancing risk by maintaining a diversified debt
acquisition activity and the availability of capital impacting the
redeeming/ maturity schedule to limit the amount of debt maturing in
financial position of the REIT and its ability to make distributions to
any one year. The REIT may use interest rate hedges from time to
its Unitholders; and
time to manage interest rate risk and to provide more certainty
• the REIT’s ability to manage fluctuations in interest rates, access to
regarding the FFO available to Unitholders, subject to the REIT’s
capital and liquidity, the price of the REIT’s Units and the REIT’s
investment and guidelines and operating policies. In response to the
degree of leverage. Failure to develop, implement, and execute
COVID-19 pandemic, the REIT increased its focus on maintaining
effective strategies to manage these risks may result in insufficient
liquidity and a strong balance sheet and ensuring continued access
capital to absorb unexpected losses and/or changes in asset value
to capital.
negatively affecting the REIT’s financial performance and increasing
the REIT’s vulnerability to a downturn in business or the economy.
Legal and Regulatory Compliance
Failure to adhere to laws and regulations by the REIT may result in
The REIT has appropriate governance structures, including policies,
regulatory related issues or decrease investor confidence and a
processes and controls in place to comply with legal and regulatory
decline in the REIT’s Unit price. Changes to laws and regulations
requirements, including but not limited to the REIT’s ability to
applicable to the REIT may adversely affect the REIT’s financial
continue to satisfy the conditions to qualify as a closed end mutual
condition, results of operation, and distributions to Unitholders,
fund trust and to comply with environmental laws and address any
including:
material environmental issues, including climate change. Processes
• changes in income tax laws such that the REIT would not qualify as
are also in place to monitor any legal and regulatory changes that
a mutual fund trust for purposes of the Income Tax Act (“ITA”),
may impact the REIT.
including the treatment of real estate investment trusts and mutual
fund trusts, or the exclusion from the definition of “SIFT TRUST” for a
trust qualifying as a “real estate investment trust” for a taxation year
under the ITA, which could have a material and adverse impact on
the value of the Units, and on distributions to Unitholders;
• changes
in
legislation, regulations, regulatory
initiatives or
proceedings adopted or instituted in response to the COVID-19
pandemic, which may impose additional constraints on the REIT’s
operations or the operations of its tenants; and
• changes in various federal, provincial, territorial and municipal laws
relating to environmental matters, including climate change, which
may result in the REIT bearing the risk of cost-intensive assessment,
technologies, and the removal of contamination, hazardous or other
regulated substances causing an adverse effect on the REIT’s
financial condition, results of operation, cash available for distribution
to Unitholders.
54 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Key Risks
Operations
Risk Management Strategy
The REIT is subject to the risk that a direct or indirect loss of
The REIT has appropriate governance structures, including policies,
operating capabilities may occur due to:
processes, contracts, service agreements and other management
• inadequate or failed operations processes (property management,
activities in place to maintain the operational performance of the
development,
redevelopment and
renovation
risks such as
REIT and to support the REIT’s business and strategic objectives.
substantial unanticipated delays and expenses or the inability to
Since the onset of COVID-19, the health and safety of the REIT’s
initiate or complete activities) that could have an adverse effect on
employees,
tenants,
tenants’ employees and customers have
the REIT’s reputation, financial condition, results of operations, cash
remained a top priority and the REIT has continued to take
flow, trading price of the Units, distributions to Unitholders and the
necessary measures and precautions to help protect and support
ability of the REIT to satisfy its principal and interest obligations;
them, all reflecting guidance from public health authorities.
• internal or outsourced business activities and business disruptions
(such as disasters, health crises such as the COVID-19 pandemic,
cyber incidents, and climate change) and ineffective business
continuity and contingency planning, which could adversely affect the
reputation, operations and financial performance of the REIT;
• Government issued guidelines and restrictions in response to
COVID-19 that have resulted in the implementation of operational
measures that impact REIT properties, including the temporary
closure of
tenants’ businesses, reduced hours and capacity,
enhanced cleaning protocols and actions to promote physical
distancing; and
• talent shortages due to external pressure or the inability to
effectively attract and retain talented and experienced employees,
which may negatively impact the REIT’s ability to operate its
business and execute its strategy.
13.0 INTERNAL CONTROLS AND PROCEDURES
13.1 Disclosure Controls and Procedures
Management is responsible for establishing and maintaining a system of controls and procedures over the public disclosure of
financial and non-financial information regarding CT REIT. Such controls and procedures are designed to provide reasonable
assurance that all relevant information is gathered and reported, on a timely basis, to senior management, including the CEO
and the Chief Financial Officer (“CFO”), so that they can make appropriate decisions regarding public disclosure.
CT REIT’s system of disclosure controls and procedures include, but are not limited to, its Disclosure Policy, its Code of
Conduct, the effective functioning of its Disclosure Committee, procedures in place to systematically identify matters
warranting consideration of disclosure by the Disclosure Committee, verification processes for individual financial and non-
financial metrics, and information contained in annual and interim filings, including the consolidated financial statements,
MD&A, AIF and other documents and external communications.
As required by CSA National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”),
an evaluation of the adequacy of the design (quarterly) and effective operation (annually) of CT REIT’s disclosure controls and
CT REIT 2020 ANNUAL REPORT 55
MANAGEMENT'S DISCUSSION AND ANALYSIS
procedures was conducted, under the supervision of management, including the CEO and CFO, as at December 31, 2020.
The evaluation included documentation review, enquiries and other procedures considered by management to be appropriate
in the circumstances. Based on that evaluation, the CEO and the CFO have concluded that the design and operation of the
system of disclosure controls and procedures were effective as at December 31, 2020.
13.2 Internal Control Over Financial Reporting
Management is also responsible for establishing and maintaining appropriate internal controls over financial reporting. CT
REIT’s internal controls over financial reporting include, but are not limited to, detailed policies and procedures related to
financial accounting, reporting and controls over systems that process and summarize transactions. CT REIT’s procedures for
financial reporting also include the active involvement of qualified financial professionals, senior management and its Audit
Committee.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
As also required by NI 52-109, management, including the CEO and CFO, evaluated the adequacy of the design (quarterly)
and effective operation (annually) of CT REIT’s internal controls over financial reporting as defined in NI 52-109, as at
December 31, 2020. In making this assessment, management, including the CEO and CFO, used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). This
evaluation included review of the documentation of controls, evaluation of the design and testing the operating effectiveness of
controls, and a conclusion about this evaluation. Based on that evaluation, the CEO and the CFO have concluded that the
design and operation of CT REIT’s internal controls over financial reporting were effective as at December 31, 2020, in
providing reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with IFRS.
13.3 Changes in Internal Control Over Financial Reporting
During the quarter and year ended December 31, 2020, there have been no changes in CT REIT’s internal controls over
financial reporting that have materially affected, or are reasonably likely to materially affect, CT REIT’s internal controls over
financial reporting.
14.0 FORWARD-LOOKING INFORMATION
This MD&A, and the documents incorporated by reference herein, contain forward-looking statements that involve a number of
risks and uncertainties, including statements regarding the outlook for CT REIT’s business and results of operations and the
effect of the COVID-19 pandemic on the REIT’s business and operations. Forward-looking statements are provided for the
purposes of providing information about CT REIT’s future outlook and anticipated events or results and may include
statements regarding known and unknown risks, uncertainties and other factors that may cause the actual results to differ
materially from those indicated. Such factors include but are not limited to: general economic conditions; financial position;
business strategy; availability of acquisition opportunities; budgets; capital expenditures; financial results, including fair value
adjustments and cash flow assumptions upon which they are based; cash and liquidity; taxes; and plans and objectives of or
56 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
involving CT REIT. In addition, the effects of COVID-19, including the spread and severity of the pandemic and its impact on
the business, operations and financial condition of the REIT, create additional uncertainties. In particular, the impact of the
virus and government authorities’ and public health officials’ responses thereto may effect: our tenants’ ability to pay rent in full
or at all; domestic and global credit and capital markets, and our ability to access capital on favourable terms, or at all; the
health and safety of our employees and our tenants’ customers and employees; and domestic and global supply chains. Given
the evolving circumstances surrounding the COVID-19 pandemic, such as the duration of the current wave and any future
waves and the availability and distribution of vaccines, the spread and severity of its impact on the REIT’s business and
financial results cannot be estimated with certainty as the extent of the impact will largely depend on future developments,
including any additional actions taken to contain COVID-19. Statements regarding future acquisitions, developments,
distributions, results, performance, achievements, prospects or opportunities for CT REIT or the real estate industry and the
impact of COVID-19 are forward-looking statements. In some cases, forward-looking information can be identified by such
terms such as “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”,
“estimate”, “predict”, “potential”, “continue”, “likely”, “schedule”, or the negative thereof or other similar expressions concerning
matters that are not historical facts.
Some of the specific forward-looking statements in this document include, but are not limited to, statements with respect to CT
REIT's:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
assessment of factors affecting the REIT as a result of COVID-19 under section 2.0;
growth strategy and objectives under section 3.0;
fair value of property portfolio under section 5.4;
development activities under section 5.6;
leasing activities under section 5.10;
recoverable capital costs under section 5.11;
capital expenditures to fund acquisitions and development activities under section 7.1;
capital strategy under section 7.11;
commitments as at December 31, 2020 under section 7.12;
distributions under section 8.3;
capital expenditures under section 11.2;
access to available sources of debt and/or equity financing;
expected tax treatment and its distributions to Unitholders;
ability to expand its asset base, make accretive acquisitions, develop or intensify its Properties and participate with
CTC in the development or intensification of the Properties; and
ability to continue to qualify as a “real estate investment trust”, as defined pursuant to the ITA.
CT REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that
it believes may affect its financial condition, results of operations, business strategy and financial needs. Such factors and
assumptions include but are not limited to: that the Canadian economy will stabilize over the next 12 months and inflation will
remain relatively low, despite government stimulus; that tax laws will remain unchanged; that the REIT will continue to manage
its liquidity and debt covenants; that conditions within the real estate market, including competition for acquisitions, will
normalize to historical levels in the near- to medium-term; that Canadian capital markets will provide CT REIT with access to
CT REIT 2020 ANNUAL REPORT 57
MANAGEMENT'S DISCUSSION AND ANALYSIS
equity and/or debt at reasonable rates when required; that CTC will continue its involvement with CT REIT on the basis
described in its 2020 AIF and that for the near- to medium-term, Canadian Tire stores will remain open, either fully, for
curbside pick-up or for delivery to home, or other available manner as stipulated by government officials. However, given the
evolving circumstances surrounding COVID-19, including those described above, it is difficult to predict how significant the
adverse impact of the pandemic will be on the global and domestic economy, interest or tax rates, the general business
environments and the operations and financial position of the REIT’s tenants, including Canadian Tire, the fair value ascribed
to CTC tenanted properties and the business, operations and future financial position of the REIT.
Although the forward-looking statements contained in this MD&A are based upon assumptions that management of CT REIT
believes are reasonable, based on information currently available to management, there can be no assurance that actual
results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and
unknown risks and uncertainties, many of which are beyond the REIT’s control, that may cause CT REIT’s, or the industry’s,
actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those
expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the
factors discussed in section 12 of this MD&A and under the “Risk Factors” section of the 2020 AIF.
For more information on the risks, uncertainties and assumptions that could cause CT REIT’s actual results to differ from
current expectations, please also refer to CT REIT’s public filings available on SEDAR at www.sedar.com and by a link at
www.ctreit.com.
CT REIT cautions that the foregoing list of important factors and assumptions is not exhaustive and other factors could also
materially and adversely affect its results. Investors and other readers are urged to consider the foregoing risks, uncertainties,
factors and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance
on such forward-looking information. Statements that include forward-looking information do not take into account the effect
that transactions or non-recurring or other special items announced or occurring after the statements are made have on CT
REIT’s business. For example, they do not include the effect of any dispositions, acquisitions, asset write-downs or other
charges announced or occurring after such statements are made. The forward-looking information in this MD&A is based on
certain factors and assumptions made as of the date hereof or the date of the relevant document incorporated herein by
reference, as applicable. CT REIT does not undertake to update the forward-looking information, whether written or oral, that
may be made from time to time by it or on its behalf, to reflect new information, future events or otherwise, except as required
by applicable securities laws.
Information contained in or otherwise accessible through the websites referenced in this MD&A does not form part of this
MD&A and is not incorporated by reference into this MD&A. All references to such websites are inactive textual references and
are for information only.
58 CT REIT 2020 ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Commitment to disclosure and investor communication
The Investors section of the REIT’s website by a link at www.ctreit.com includes the following documents and information of
interest to investors:
•
•
Annual Information Form;
Consolidated financial statements and accompanying notes for the year ended December 31, 2020;
• Management Information Circular;
•
•
•
the Base Shelf Prospectus and related prospectus supplements;
quarterly financial statements and related MD&As; and
conference call webcasts (archived for one year).
Additional information about the REIT has been filed electronically with various securities regulators in Canada through
SEDAR and is available online at www.sedar.com.
If you would like to contact the Investor Relations department directly, call Marina Davies (416) 544-6134 or email
investor.relations@ctreit.com.
February 8, 2021
CT REIT 2020 ANNUAL REPORT 59
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
61
62
65
66
67
68
69
69
73
79
81
84
86
87
87
89
90
92
93
93
94
95
95
95
95
96
98
100
101
102
Management’s Responsibility for Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Note 1
Nature of CT Real Estate Investment Trust
Note 2
Basis of Presentation
Note 3
Significant Accounting Policies
Note 4
COVID-19
Note 5
Investment Properties
Note 6
Class C LP Units
Note 7 Mortgages payable
Note 8
Debentures
Note 9
Leases
Note 10 Credit Facilities
Note 11 Equity
Note 12 Unit-Based Compensation Plans
Note 13 Non-controlling interests
Note 14 Revenues and Expenses
Note 15 General and Administrative Expense
Note 16 Net Interest and Other Financing Charges
Note 17 Changes in Working Capital and Other
Note 18 Segmented Information
Note 19 Commitments and Contingencies
Note 20 Related-Party Transactions
Note 21 Financial Instruments and Risk management
Note 22 Capital Management and Liquidity
Note 23 Subsequent Events
Glossary of Terms
60 CT REIT 2020 ANNUAL REPORT
Management’s Responsibility for Financial Statements
The management of CT Real Estate Investment Trust (“CT REIT”) is responsible for the integrity and reliability of the
accompanying consolidated financial statements. These consolidated financial statements have been prepared by
management in accordance with International Financial Reporting Standards, and include amounts based on judgments and
estimates. All financial information in our Management’s Discussion and Analysis is consistent with these consolidated
financial statements.
Management is responsible for establishing and maintaining adequate systems of internal control over financial reporting.
These systems are designed to provide reasonable assurance that the financial records are reliable and form a proper basis
for the timely and accurate preparation of financial statements. Management has assessed the effectiveness of CT REIT’s
internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that CT REIT’s internal
control over financial reporting was effective as at the date of these consolidated statements.
The Board of Trustees oversees management’s responsibilities for the consolidated financial statements primarily through the
activities of its Audit Committee, which is comprised solely of trustees who are neither officers nor employees of CT REIT.
This Committee meets with management and CT REIT’s independent auditors, Deloitte LLP, to review the consolidated
financial statements and recommend approval to the Board of Trustees. The Audit Committee is responsible for making
recommendations to the Board of Trustees with respect to the appointment of and, subject to the approval of the Unitholders
authorizing the Board of Trustees to do so, approving the remuneration and terms of engagement of CT REIT’s auditors. The
Audit Committee also meets with the auditors, without the presence of management, to discuss the results of their audit.
The consolidated financial statements have been audited by Deloitte LLP, in accordance with Canadian generally accepted
auditing standards. Their report is presented below.
<< Kenneth Silver >>
<< Lesley Gibson >>
Kenneth Silver
Chief Executive Officer
February 8, 2021
Lesley Gibson
Chief Financial Officer
CT REIT 2020 ANNUAL REPORT 61
Independent Auditor’s Report
To the Unitholders of
CT Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of CT Real Estate Investment Trust (the “REIT”),
which comprise the consolidated balance sheets as at December 31, 2020 and 2019, and the consolidated
statements of income and comprehensive income, changes in equity and cash flows for the years then
ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the REIT as at December 31, 2020 and 2019, and its financial performance and its cash flows
for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian
GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of our report. We are independent of the REIT in
accordance with the ethical requirements that are relevant to our audit of the financial statements in
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of
the consolidated financial statements for the year ended December 31, 2020. This matter was addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on this matter.
Fair Value of Investment Properties — Refer to Note 5 to the financial statements
Key Audit Matter Description
The REIT measures investment properties at fair value subsequent to acquisition. The fair value of each
investment property is estimated using the discounted cash flow (“DCF”) method. This method requires
management to make estimates and assumptions.
The assumptions with the highest degree of subjectivity and impact on fair values are the discount rates
and terminal capitalization rates. Auditing these assumptions required a high degree of auditor judgment
and this resulted in an increased extent of audit effort, including the need to involve fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the discount rates and terminal capitalization rates used to determine the
fair value of the investment properties included the following, among others:
•
Evaluated the effectiveness of controls over determining investment properties’ fair value,
including those over the determination of the discount rates and terminal capitalization rates.
62 CT REIT 2020 ANNUAL REPORT
• With the assistance of fair value specialists, evaluated the reasonableness of management’s
discount rates and terminal capitalization rates by considering recent market transactions and
industry surveys.
Other Information
Management is responsible for the other information. The other information comprises:
● Management’s Discussion and Analysis
●
The information, other than the financial statements and our auditor’s report thereon, in the CT REIT
2020 Annual Report (the “Annual Report”).
Our opinion on the financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon. In connection with our audit of the financial
statements, our responsibility is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on
the work we have performed on this other information, we conclude that there is a material misstatement
of this other information, we are required to report that fact in this auditor’s report. We have nothing to
report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based
on the work we will perform on this other information, we conclude that there is a material misstatement
of this other information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the REIT’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the REIT or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the REIT’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
CT REIT 2020 ANNUAL REPORT 63
●
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
● Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the REIT’s internal control.
●
●
●
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the REIT’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the REIT to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Timothy Wilson.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Ontario
February 8, 2021
64 CT REIT 2020 ANNUAL REPORT
Consolidated Balance Sheets
(Canadian dollars, in thousands)
As at
Assets
Non-current assets
Investment properties
Other assets
Current assets
Tenant and other receivables
Other assets
Cash and cash equivalents
Asset classified as held for sale
5, 23
Total assets
Liabilities
Non-current liabilities
Class C LP Units
Mortgages payable
Debentures
Lease liabilities
Other liabilities
Current liabilities
Class C LP Units
Mortgages payable
Credit facilities
Debentures
Lease liabilities
Other liabilities
Distributions payable
Total liabilities
Equity
Unitholders’ equity
Non-controlling interests
Total equity
Total liabilities and equity
Note
December 31, 2020
December 31, 2019
5
$
6,141,000 $
6,006,982
1,486
6,142,486
1,674
6,008,656
4,911
3,614
4,531
13,056
20,600
2,882
3,240
9,734
15,856
—
6,176,142 $
6,024,512
1,451,550 $
65,442
921,635
65,830
5,276
1,200,000
10,353
1,070,695
61,374
4,975
2,509,733
2,347,397
—
514
63,200
150,000
1,052
60,314
15,459
290,539
2,800,272
1,481,849
1,894,021
3,375,870
251,550
37,696
2,000
—
884
35,904
14,976
343,010
2,690,407
1,464,939
1,869,166
3,334,105
6,024,512
$
$
6
7
8
9
6
7
10
8
9
11
11
11, 13
$
6,176,142 $
The related notes form an integral part of these consolidated financial statements.
<< David Laidley >>
<< Anna Martini >>
David Laidley
Trustee
Anna Martini
Trustee
CT REIT 2020 ANNUAL REPORT 65
Consolidated Statements of Income and Comprehensive Income
(Canadian dollars, in thousands, except per unit amounts)
For the year ended December 31,
Note
2020
2019
Property revenue
Property expense
General and administrative expense
Net interest and other financing charges
Fair value adjustment on investment properties
Net income and comprehensive income
Net income and comprehensive income attributable to:
Unitholders
Non-controlling interests
Net income per unit - basic
Net income per unit - diluted
14
14
15
16
5
13
11
11
$
$
$
$
$
$
502,348 $
(110,768)
(13,018)
(107,898)
(87,359)
183,305 $
83,694 $
99,611
183,305 $
0.801 $
0.772 $
489,013
(106,088)
(14,285)
(108,753)
47,306
307,193
136,667
170,526
307,193
1.380
1.193
The related notes form an integral part of these consolidated financial statements.
66 CT REIT 2020 ANNUAL REPORT
Consolidated Statements of Changes in Equity
(Canadian dollars, in thousands)
Note
Units
Retained
Earnings
Unitholders’
Equity
Non-
controlling
interests Total Equity
Balance at December 31, 2019
$ 1,057,496 $
407,443 $
1,464,939 $ 1,869,166 $ 3,334,105
Net income and comprehensive income for the period
Issuance of Class B LP Units, net of issue costs
Distributions
Issuance of Units under Distribution Reinvestment Plan
and other
11
11
11
—
—
—
83,694
83,694
99,611
183,305
—
—
24,101
24,101
(83,022)
(83,022)
(98,857)
(181,879)
16,238
—
16,238
—
16,238
Balance at December 31, 2020
$ 1,073,734 $
408,115 $
1,481,849 $ 1,894,021 $ 3,375,870
Note
Units
Retained
Earnings
Unitholders’
Equity
Non-
controlling
interests Total Equity
Balance at December 31, 2018
Transition adjustments - IFRS 16
$
960,688 $
345,667 $
1,306,355 $ 1,778,554 $ 3,084,909
—
578
578
736
1,314
Restated balance at January 1, 2019
960,688
346,245
1,306,933
1,779,290
3,086,223
Net income and comprehensive income for the period
Issuance of Class B LP Units, net of issue costs
Distributions
Issuance of Units from 2019 REIT Offering, net of issue
costs
Issuance of Units under Distribution Reinvestment Plan
and other
11
11
11
11
—
—
—
136,667
136,667
170,526
307,193
—
—
13,275
13,275
(75,469)
(75,469)
(93,925)
(169,394)
86,140
—
86,140
—
86,140
10,668
—
10,668
—
10,668
Balance at December 31, 2019
$ 1,057,496 $
407,443 $
1,464,939 $ 1,869,166 $ 3,334,105
The related notes form an integral part of these consolidated financial statements.
CT REIT 2020 ANNUAL REPORT 67
Consolidated Statements of Cash Flows
(Canadian dollars, in thousands)
For the year ended December 31,
Cash generated from (used for):
Operating activities
Net income
Add/(deduct):
Fair value adjustment on investment properties
Property straight-line rent revenue
Deferred income tax
Net interest and other financing charges
Changes in working capital and other
Cash generated from operating activities
Investing activities
Income-producing property
Development activities and land investments
Capital expenditures recoverable from tenants
Proceeds of disposition
Cash used for investing activities
Financing activities
Proceeds from 2019 REIT Offering, net
Unit distributions
Class B LP Unit distributions paid or loaned
Payments on Class C LP Units paid or loaned
Credit facilities draws (repayments), net
Lease principal payments on right-of-use assets
Mortgage principal repayments
Net interest paid
Class B LP Unit issuance costs
Cash used for financing activities
Cash (used)/generated in the period
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Note
2020
2019
$
183,305 $
307,193
5
14
17
11
6
10
7
87,359
(10,014)
(27)
107,898
2,245
$
370,766 $
(89,547)
(56,398)
(17,558)
820
(47,306)
(14,130)
(360)
108,753
8,178
362,328
(52,002)
(90,197)
(22,448)
2,780
$
(162,683) $
(161,867)
—
(66,563)
(98,588)
(65,736)
61,200
(991)
(400)
(42,189)
(19)
(213,286) $
(5,203) $
9,734
4,531 $
86,255
(64,368)
(93,555)
(68,219)
(12,995)
(778)
(323)
(41,735)
—
(195,718)
4,743
4,991
9,734
$
$
$
The related notes form an integral part of these consolidated financial statements.
68 CT REIT 2020 ANNUAL REPORT
Notes to the Consolidated Financial Statements
For the year ended December 31, 2020 and 2019
(All dollar amounts are in thousands, except unit and per unit amounts)
1. NATURE OF CT REAL ESTATE INVESTMENT TRUST
CT Real Estate Investment Trust is an unincorporated, closed-end real estate investment trust. CT Real Estate Investment
Trust and its subsidiaries, unless the context requires otherwise, are together referred to in these consolidated financial
statements as “CT REIT” or the “REIT”. CT REIT commenced operations on October 23, 2013, and was formed to own
income-producing commercial properties located primarily in Canada. The principal and registered head office of CT REIT is
located at 2180 Yonge Street, Toronto, Ontario M4P 2V8.
Canadian Tire Corporation, Limited (“CTC”) owned a 69.2% effective interest in CT REIT as of December 31, 2020,
consisting of 33,989,508 of the issued and outstanding units of CT REIT (“Units”) and all of the issued and outstanding Class
B limited partnership units (“Class B LP Units”) of CT REIT Limited Partnership (the “Partnership”), which are economically
equivalent to and exchangeable for Units. CTC also owns all of the issued and outstanding Class C limited partnership units
(“Class C LP Units”) of the Partnership (see Note 6). The Units are listed on the Toronto Stock Exchange (the “TSX”) under
the symbol CRT.UN.
2. BASIS OF PRESENTATION
(a) Fiscal year
The fiscal years for the consolidated financial statements and the notes presented for 2020 are for the years ended
December 31, 2020 and 2019.
(b) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”) using the accounting policies that are described
herein.
These consolidated financial statements were approved for issuance by CT REIT’s Board of Trustees (the “Board”), on the
recommendation of its Audit Committee, on February 8, 2021.
(c) Basis of presentation
These consolidated financial statements have been prepared on the historical cost basis except for investment properties and
liabilities for unit-based compensation plans, which are measured at fair value.
These financial statements are presented in Canadian dollars (“C$”), which is CT REIT’s functional currency, rounded to the
nearest thousand, except per unit amounts.
CT REIT 2020 ANNUAL REPORT 69
(d) Critical judgments in applying significant accounting policies
The following are the critical judgments that have been made in applying CT REIT’s accounting policies and that have the
most significant effect on the amounts in the consolidated financial statements:
(i) Leases
CT REIT as a lessor
The REIT’s policy for revenue recognition as a lessor is described in Note 3(e). In applying this policy, judgments are
made with respect to whether tenant improvements provided in connection with a lease enhance the value of the
leased property, which determines whether such amounts are treated as additions to investment property as well as
the point in time at which revenue recognition under the lease commences, or constitutes a tenant incentive that is
amortized as a reduction of lease revenue over the initial term of the lease.
The REIT also makes judgments in assessing the classification of its leases with tenants as operating leases, in
particular long-term leases in single tenant properties. The REIT has determined that all of its leases are operating
leases.
CT REIT as a lessee
For the measurement of lease liabilities with respect to the ground leases with third party landlords, the REIT
considers all factors that create an economic incentive to exercise extension options, or not exercise termination
options available in its leasing arrangements. Extension options, or periods subject to termination options, are only
included in the lease term if the REIT determines it is reasonably certain to be extended or not terminated. The
assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this
assessment and that is within the control of the lessee.
The REIT uses its incremental borrowing rate to account for the ground leases with third party landlords. The implicit
rates in the ground leases, fair value of the underlying value and the initial direct costs incurred by the lessor related
to the leased assets are not readily available information from the lessor. The REIT determines the incremental
borrowing rate as the rate of interest that it would pay to borrow over a similar term and with a similar security the
funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
(ii)
Investment properties
CT REIT applies judgment in determining whether the properties it acquires are considered to be asset acquisitions
or business combinations. CT REIT considers all properties acquired to date to be asset acquisitions.
Judgment is applied in determining whether certain costs are additions to the carrying amount of the investment
property. For properties under development, the CT REIT exercises judgment in determining when development
activities have commenced, when and how much borrowing costs are to be capitalized to the development project,
and the point of practical completion.
On a periodic basis, CT REIT obtains independent appraisals such that approximately 80% of its Properties, by value,
are externally appraised over a four-year period.
70 CT REIT 2020 ANNUAL REPORT
(iii) Income taxes
CT REIT makes judgments that, with the exception of transactions involving CT REIT GP Corp. (the “GP”), deferred
income taxes are not recognized in CT REIT’s financial statements on the basis that CT REIT can deduct
distributions paid such that its liability for income taxes is substantially reduced or eliminated for the period, CT REIT
intends to continue to distribute its taxable income and therefore continue to qualify as a real estate investment trust
for the foreseeable future.
(iv) Consolidation
CT REIT makes judgments in the application of IFRS 10 - Consolidated Financial Statements in its assessment of
control over the Partnership and its subsidiaries collectively the "Consolidated Partnership", including the purpose for
which the Consolidated Partnership was created, the power to direct the relevant activities of the Consolidated
Partnership, its exposure or rights to the variable returns of the Consolidated Partnership and its ability to use its
power to affect its returns.
(v) Proportionate consolidation of interest in Canada Square
CT REIT makes judgments in the application of IFRS 11 - Joint Arrangements in its assessment of joint control over
the one-half interest it holds in Canada Square, a mixed-use commercial property in Toronto, Ontario (the “Co-
Ownership”), and its rights to the assets and obligations for the liabilities related to the Co-Ownership.
(e) Critical accounting estimates and assumptions
CT REIT makes estimates and assumptions that affect the carrying amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amount of earnings for the period. Actual results may differ from estimates.
The estimates and assumptions underlying the valuation of investment properties are set out in Note 5, are considered critical.
(f) Standards, amendments and interpretations issued but not yet adopted
The following new standards, amendments and interpretations have been issued but are not effective until the fiscal years
ending on or after December 2021 and, accordingly, have not been applied in preparing these financial statements. The
implementation of these amendments is not expected to have a significant impact on CT REIT.
(i) Amendment to IFRS 16 Leases - COVID-19 Related Rent Concessions
In May 2020, the IASB issued an amendment to IFRS 16 - Leases ("IFRS 16") to make it easier for lessees to
account for COVID-19-related rent concessions such as rent holidays and temporary rent reductions. The
amendment exempts lessees from having to consider individual lease contracts to determine whether rent
concessions occurring as a direct consequence of the COVID-19 pandemic are lease modifications and allows
lessees to account for such rent concessions as if they were not lease modifications. It applies to COVID-19-related
rent concessions that reduce lease payments due on or before June 30, 2021. The amendment is effective for annual
reporting periods beginning on or after June 1, 2020. Earlier application is permitted. The implementation of this
amendment did not have a significant impact on CT REIT.
CT REIT 2020 ANNUAL REPORT 71
(ii) Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
In January 2020, IASB issued Classification of Liabilities as Current or Non-current, which amends IAS 1 -
Presentation of Financial Statements. The narrow scope amendments affect only the presentation of liabilities in the
statement of financial position and not the amount or timing of their recognition. It clarifies that the classification of
liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and
specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer
settlement of a liability. It also introduces a definition of ‘settlement’ to make clear that settlement refers to the transfer
to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual
reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The implementation of these
amendments is not expected to have a significant impact on CT REIT.
(i) Annual Improvements 2018-2020 and package of narrow-scope amendments
In May 2020, the IASB issued a package of narrow-scope amendments to three standards (IFRS 3 - Business
Combinations, IAS 16 - Property, Plant and Equipment, and IAS 37 - Provisions, Contingent Liabilities and
Contingent Assets) as well as the IASB’s Annual Improvements 2018-2020, which are changes that clarify the
wording or correct minor consequences, oversights or conflicts between requirements in the standards. These
amendments will be effective for annual periods beginning on or after January 1, 2022. The implementation of these
narrow-scope amendments is not expected to have a significant impact on CT REIT.
72 CT REIT 2020 ANNUAL REPORT
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements, except as noted below.
(a) Basis of consolidation
These consolidated financial statements include the accounts of CT REIT and its consolidated subsidiaries consisting of the
Consolidated Partnership and the GP and their subsidiaries, which are the entities over which CT REIT has control. Control
exists when CT REIT has the ability to direct the relevant activities of an entity, has exposure or rights to variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity. CT REIT reassesses
whether or not it controls an entity if facts and circumstances indicate that there are changes to one or more of the three
elements of control.
Consolidation of a subsidiary begins when CT REIT obtains control over the subsidiary and ceases when CT REIT loses
control of the subsidiary. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between CT REIT and its subsidiaries, and among subsidiaries of CT REIT, are eliminated on consolidation.
Net income and comprehensive income are attributed to the Unitholders of CT REIT and to the non-controlling interest even if
this results in the non-controlling interest having a deficit balance.
CT REIT holds all of the issued and outstanding Class A limited partnership units (“Class A LP Units”) of the Partnership,
which are the sole class of Partnership units that carry voting rights. In addition, CT REIT holds all of the issued and
outstanding shares of the GP, the general partner of the Partnership, which has the power to direct the relevant activities of the
Partnership. Accordingly, CT REIT is exposed to variable returns from its interest in the Partnership and has the ability to direct
the relevant activities thereof to affect its returns. Therefore CT REIT consolidates the Partnership and their subsidiaries.
Non-controlling interests in the equity of the Partnership, which consists of Class B LP Units held by a wholly owned subsidiary
of CTC, are shown separately in equity on the Consolidated Balance Sheets.
(b) Joint arrangements
A joint arrangement is an arrangement in which two or more parties have joint control. Joint control is the contractually agreed
sharing of control whereby decisions about relevant activities require unanimous consent of the parties sharing control. A joint
arrangement is classified as a joint operation when the parties that have joint control of the arrangement have rights to the
assets and obligations for the liabilities related to the arrangement. A joint arrangement is classified as a joint venture when
the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A party to a joint
operation records its interest in the assets, liabilities, revenue and expenses of the joint operation.
CT REIT has a one-half interest in the Co-Ownership, pursuant to a co-ownership arrangement. The Co-Ownership is a joint
arrangement as the material decisions about relevant activities require unanimous consent of the co-owners. This joint
arrangement is a joint operation as each co-owner has rights to the assets and obligations for the liabilities related to the Co-
CT REIT 2020 ANNUAL REPORT 73
Ownership. Accordingly, CT REIT recognizes its proportionate share of the assets, liabilities, revenue and expenses of the Co-
Ownership in its financial statements.
(c)
Investment properties
Investment properties include income-producing properties and properties under development that are held by CT REIT to
earn rental income. CT REIT accounts for its investment properties in accordance with IAS 40 - Investment Property (‘‘IAS
40’’). For acquired investment properties that meet the definition of a business, the acquisition is accounted for as a business
combination in accordance with IFRS 3 - Business Combinations (‘‘IFRS 3’’), otherwise they are initially measured at cost
including directly attributable acquisition costs. Subsequent to acquisition, investment properties are carried at fair value, which
is determined based on available market evidence at the balance sheet date including, among other things, rental revenue
from current leases and reasonable and supportable assumptions that represent what knowledgeable, willing parties would
assume about rental revenue from future leases less future cash outflows in respect of capital expenditures. Gains and losses
arising from changes in fair value are recognized in net income in the period of change.
The initial cost of properties under development includes the acquisition cost of the properties, direct development costs, realty
taxes and borrowing costs attributable to properties under development. Borrowing costs associated with direct expenditures
on properties under development are capitalized. The amount of capitalized borrowing costs is determined first by reference to
property-specific borrowings, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible
expenditures after adjusting for borrowings associated with other specific developments. Where borrowings are associated
with specific developments, the amount capitalized is the gross cost incurred on those borrowings less any investment income
arising on their temporary investment. Borrowing costs are capitalized from the commencement of the development until the
date of practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods when
development activity is interrupted. Practical completion is when the property is capable of operating in the manner intended
by management. Generally, this occurs on completion of construction and receipt of all necessary occupancy and other
material permits.
If considered reliably measurable, properties under development are carried at fair value. Properties under development are
measured at cost if fair value is not reliably measurable. In determining the fair value of properties under development,
management considers, among other things, the development risk of the property, the provisions of the construction contract,
the stage of completion and the level of reliability of cash inflows after completion.
Leasing costs incurred by CT REIT in negotiating and arranging tenant leases are added to the carrying amount of investment
properties. Payments to tenants under lease contracts are characterized as either capital expenditures in the form of tenant
improvements that enhance the value of the property or as lease inducements. Tenant improvements are capitalized as part of
investment properties. Lease inducements are capitalized as a component of investment properties and are amortized over
the term of the lease as a reduction of lease revenue.
When an investment property is sold, the gain or loss is determined as the difference between the net disposal proceeds and
the carrying amount of the property and is recognized in net income in the period of disposal.
74 CT REIT 2020 ANNUAL REPORT
(d) Leases
Lessee
The REIT assesses whether a contract is or contains a lease, at inception of the contract. Leases are recognized as a right-of-
use asset and corresponding liability at the commencement date. Each lease payment included in the lease liability is
apportioned between the repayment of the liability and a finance cost. The finance cost is recognized in net interest and other
financing charges in the Consolidated Statements of Income and Comprehensive Income over the lease period, so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period. Lease liabilities include the
net present value of fixed payments (including in-substance fixed payments), variable lease payments that are based on an
index or a rate or subject to a fair market value renewal, amounts expected to be payable by the lessee under residual value
guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and payments of
penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The REIT allocates the
consideration in the contract to each lease component on the basis of the relative standalone price of the lease component
and the aggregate stand-alone price of the non-lease components. The lease liability is net of lease incentives receivable. The
lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be determined, the lessee’s
incremental borrowing rate. The period over which the lease payments are discounted is the reasonably certain lease term,
including renewal options that the REIT is reasonably certain to exercise. Renewal options are included in a number of leases
across the REIT.
Payments associated with short-term leases and leases of low-value assets are recognized as an expense on a straight-line
basis in General and Administrative Expenses or Property Expenses in the Consolidated Statements of Income and
Comprehensive Income. Short-term leases are leases with a lease term of 12 months or less. Variable lease payments that do
not depend on an index or a rate or subject to a fair market value renewal are expensed as incurred and recognized in General
and Administrative Expenses in the Consolidated Statements of Income and Comprehensive Income.
Right-of-use assets are measured at fair value and are included in Investment Properties in the Consolidated Balance Sheets;
and corresponding fair value adjustments are reflected in Fair Value Adjustment on Investment Properties in the Consolidated
Statements of Income and Comprehensive Income.
Sale and Leaseback
The accounting treatment of a sale and leaseback transaction is assessed based upon the substance of the transaction and
whether the transfer of an asset is considered as a sale when the control of the asset has been transferred to the purchaser.
If the transfer of the asset to the REIT as buyer-lessor is considered a sale, the REIT assesses the classification of the lease
as a finance or operating lease; and follows IFRS 16 accordingly. If the transfer is not considered a sale, the REIT does not
recognize the underlying asset and records a financial asset under IFRS 9 for amounts paid to the seller-lessee.
CT REIT 2020 ANNUAL REPORT 75
(e) Revenue recognition
CT REIT has retained substantially all of the risks and benefits of ownership of its investment properties and therefore
accounts for leases with its tenants as operating leases. Revenue recognition under a lease commences when the tenant has
a right to use the leased asset. Generally, this occurs on the lease inception date or, where CT REIT is required to make
additions to the property in the form of tenant improvements that enhance the value of the property, upon substantial
completion of those improvements. Property revenue includes all amounts earned from tenants related to lease agreements
including property tax, operating cost and other recoveries.
The total amount of lease payments to be received from operating leases is recognized on a straight-line basis over the term
of the lease. A straight-line rent receivable, which is included in the carrying amount of investment properties, is recorded for
the difference between the rental revenue recorded and the contractual amount of minimum base rent received or receivable.
(f)
Income taxes
CT REIT is a “mutual fund trust” under the Income Tax Act (Canada). The Trustees intend to distribute or designate all taxable
income directly earned by CT REIT to Unitholders and to deduct such distributions for income tax purposes.
Legislation relating to the federal income taxation of Specified Investment Flow Through (“SIFT”) trusts or partnerships provide
that certain distributions from a SIFT will not be deductible in computing the SIFT’s taxable income and that the SIFT will be
subject to tax on such distributions at a rate that is substantially equivalent to the general tax rate applicable to Canadian
corporations. However, distributions paid by a SIFT as a return of capital should generally not be subject to tax.
Under the SIFT rules, the taxation regime will not apply to a real estate investment trust that meets prescribed conditions
relating to the nature of its assets and revenue (the “REIT Exception”). CT REIT has reviewed the SIFT rules and has
assessed their interpretation and application to CT REIT’s assets and revenue. While there are uncertainties in the
interpretation and application of the SIFT rules, CT REIT believes that it meets the REIT Exception. Accordingly, with the
exception of transactions with the GP, no net current income tax expense or deferred income tax assets or liabilities have been
recorded in the consolidated financial statements.
(g) Class C LP Units
Each series of the Class C LP Units are redeemable, at the option of the holder, at a specified future date and can be settled
at the option of the Partnership in cash or a variable number of Class B LP Units. Accordingly, the Class C LP Units are
classified as financial liabilities and fixed payments on the Class C LP Units are presented as interest expense in the
consolidated statement of income and comprehensive income using the effective interest method.
(h) Non-controlling interests
Class B LP Units are classified as non-controlling interests and are presented as a component of equity as they represent
equity interests in the Partnership not attributable, directly or indirectly, to CT REIT.
(i) Provisions
A provision is a liability of uncertain timing or amount. Provisions are recognized when CT REIT has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the
76 CT REIT 2020 ANNUAL REPORT
obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Provisions are
measured at the present value of the expenditures expected to be required to settle the obligation using a discount rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. Provisions are
remeasured at each balance sheet date using the then current discount rate. The increase in the provision due to the passage
of time is recognized as interest expense.
(j) Unit based compensation plans
CT REIT offers a Deferred Unit Plan (the “DU Plan”) for trustees who are not employees or officers of CT REIT or any of its
affiliates, whereby such trustees may elect to receive all or a portion of their annual compensation in deferred units (“DUs”). CT
REIT has a Restricted Unit Plan (the “RU Plan”) for executives, whereby the executives of CT REIT may be issued
discretionary grants or may elect to receive all or a portion of their annual short-term incentive plan awards in restricted units
(“RUs”), and a Performance Unit Plan (the “PU Plan”) whereby the performance units (“PUs”) are granted to certain employees
of CT REIT as part of their long-term incentive plan.
DUs, RUs and PUs are recorded as liabilities and expensed as compensation expense over the vesting period. Accrued
compensation costs under the plans are adjusted to the fair value of the vested units at each reporting date.
(k) Cash and cash equivalents
Cash and cash equivalents include cash and short-term investments with original maturities of three months or less.
(l) Financial instruments and derivatives
Financial assets and financial liabilities are recognized in the consolidated balance sheets when the REIT becomes a party to
the contractual provisions of a financial instrument or non-financial derivative contract. All financial instruments are measured
at fair value on initial recognition.
Transaction costs that are directly attributable to the acquisition or issuance of financial assets and financial liabilities, other
than financial assets and financial liabilities classified as fair value through profit & loss (“FVTPL”), are added to or deducted
from the fair value on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities classified as FVTPL are
recognized immediately in net income.
The REIT classifies financial assets, at the time of initial recognition, according to the REIT’s business model for managing the
financial assets and the contractual terms of the cash flows.
Financial assets are subsequently measured at amortized cost if both of the following conditions are met and they are not
designated as at FVTPL: a) the financial asset is held within a business model whose objective is to hold financial assets to
collect contractual cash flows; and b) the contractual terms of the financial asset give rise to cash flows on specified dates that
are solely payments of principal and interest on the principal amount outstanding. These assets are subsequently measured at
amortized cost using the effective interest rate method, less any impairment, with gains and losses recognized in net income in
the period that the asset is derecognized or impaired.
CT REIT 2020 ANNUAL REPORT 77
Financial liabilities are subsequently measured at amortized cost using the effective interest rate method with gains and losses
recognized in net income in the period that the liability is derecognized. The REIT measures all financial instruments at
amortized cost, except for liabilities for unit-based compensation plans which are included in other liabilities and carried at fair
value.
The REIT recognizes a loss allowance on a forward-looking basis at an amount equal to the lifetime expected credit losses
("ECL") on its financial assets measured at amortized cost. Lifetime ECL represents the expected credit losses that will result
from all possible default events over the expected life of a financial instrument.
(m) Assets as Held for Sale
Investment properties are classified as assets held for sale when their carrying amount is to be recovered principally through a
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable
and the asset is available for immediate sale in its present condition. Management must be committed to the sale and it should
be expected to qualify for recognition as a completed sale within one year from the date of classification.
78 CT REIT 2020 ANNUAL REPORT
4. COVID-19
During 2020, the global spread of the coronavirus disease ("COVID-19") had an impact on the Canadian and global
economies and on the business and operations of the REIT. During this time, the REIT remained committed to the health and
safety of its employees and tenants, as well as its tenants’ customers and employees. Many of the measures that were
introduced at the outset of the pandemic to reduce the spread of the virus, continue to remain in place, including REIT
employees continuing to work from home. The REIT continues to prepare for any future waves of the pandemic and/or viral
strains and continues to manage and mitigate, if possible, the implications and impact of the COVID-19 pandemic on its
operations. The REIT may be required to take further actions in response to directives of government and public health
authorities or that are in the best interests of its employees and tenants, as well as its tenants’ customers and employees.
Since the onset of the COVID-19 pandemic, certain operating restrictions have been imposed on many of the REIT’s tenants,
including CTC. Canadian Tire stores remained open until late in the fourth quarter when temporary closures in certain
jurisdictions were announced, some of which have continued into the first quarter of 2021. The Canadian Tire stores which
remain open continue to operate with various combinations of restrictions on products being sold, restricted operating hours,
enhanced cleaning protocols and measures to support physical distancing. Those Canadian Tire stores which are now
temporarily closed, remain open to curbside pickup in support of online sales and delivery to home as required by current
government guidelines and restrictions. Regardless of operating status, there have been no rental interruptions, abatements or
deferrals impacting these stores.
The following are the accounting policies that are subject to judgments and estimates that have been significantly impacted
by the COVID-19 pandemic.
Valuation of Investment Properties
Given the continuously evolving circumstances surrounding the COVID-19 pandemic, it is difficult to predict with certainty the
nature, duration, and extent of the pandemic and the extent of the impact on the operations of CT REIT’s tenants and the
REIT’s results. The impact of the pandemic is highly dependent on future developments, which include among other things,
emerging information concerning COVID-19, potential future waves of the pandemic, and the actions required to contain or
manage its impact.
The REIT’s valuation assessment of its investment properties, as at December 31, 2020, was reflected in the fair value
adjustment of investment properties.
In determining the fair value of investment properties for these financial statements, management considered, among other
factors, the impact of the pandemic on its tenant base. Management has reviewed the cash flow assumptions and made
certain adjustments to the investment metrics used in determining the fair value of investment properties as at December 31,
2020. The impact of these changes is reflected in the fair value adjustment on investment properties and should be
considered together with the sensitivity analysis included in Note 5.
CT REIT 2020 ANNUAL REPORT 79
Tenant Receivables
In assessing the adequacy of the credit losses on tenant receivables for these financial statements, management has
considered the likelihood of collection of current receivables given the impact of the pandemic on tenant operations. From
the onset of the pandemic, the REIT has been supporting tenants facing financial hardships including by participating in the
Canada Emergency Commercial Rent Assistance (“CECRA”) program for certain qualified tenants and providing rental
abatements or deferrals to other qualifying tenants. The CECRA program provided a 75% rent abatement for qualifying small
businesses for the period from April 1, 2020 to September 30, 2020, two-thirds of which was paid for by the Federal and
Provincial governments and one-third of which was funded by the landlord.
On October 9, 2020, the federal government announced a new rent relief program, the Canada Emergency Rent Subsidy
(“CERS”), to replace the CECRA program. Similar to CECRA, CERS is available to small and medium-sized businesses
significantly impacted by the COVID-19 pandemic. CERS is effective retroactively for periods beginning September 27, 2020
and ending in June 2021. CERS is provided directly to tenants on a sliding scale up to a maximum of 65% of eligible
expenses, thereby supporting property owners with payments of rents for CERS subsidized amounts. In addition to the 65%
subsidy, a 25% CERS top-up is available to tenants who are temporarily shut down by a mandatory public health order issued
by a qualifying public health authority.
For the year ended December 31, 2020, the REIT’s assistance to its tenants totalled $2.8 million, consisting of $0.6 million
related to the CECRA program, $0.7 million in abatements of gross rents which were recognized as bad debt expense, and an
additional $1.5 million of expected credit losses related to tenants who had been significantly impacted by the pandemic.
80 CT REIT 2020 ANNUAL REPORT
5.
INVESTMENT PROPERTIES
The following table summarizes CT REIT’s investment property portfolio holdings:
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Income-
producing
properties
Properties
Under
Development
Total
investment
properties
Income-
producing
properties
Properties
Under
Development
Total
investment
properties
Balance, beginning of period
5,932,864
74,118
6,006,982
5,635,550
127,233
5,762,783
Property acquisitions (including
transaction costs)
Intensifications
Developments
Development land
Capitalized interest and property taxes
Transfers from PUD
Transfers to PUD 1
Transfer to asset held for sale
Right-of-use assets 2
Fair value adjustment on investment
properties
Straight-line rent
Recoverable capital expenditures
Dispositions
131,762
—
131,762
75,669
—
—
—
—
—
23,047
23,047
53,197
53,197
—
—
1,283
1,283
—
—
—
—
39,448
48,222
1,918
2,080
144,783
(144,783)
111,224
(111,224)
(17,434)
(20,600)
5,403
(87,359)
10,014
18,091
(820)
17,434
—
—
—
—
—
—
—
—
(20,600)
—
—
5,403
(2,343)
(87,359)
47,306
10,014
14,130
18,091
20,549
(820)
(2,780)
—
—
—
—
—
—
—
75,669
39,448
48,222
1,918
2,080
—
—
—
(2,343)
47,306
14,130
20,549
(2,780)
Balance, end of period
$
6,083,145 $
57,855 $
6,141,000 $
5,932,864 $
74,118 $
6,006,982
1 Relates to Toronto (Canada Square), Ontario.
2Reflects impact of Toronto (Canada Square), Ontario increase in ownership to 50% interest from 33% interest.
Included in CT REIT’s portfolio are 10 (December 31, 2019 – 10) properties which are situated on ground leases with
remaining initial terms up to 35 years (December 31, 2019 – up to 36 years), and an average remaining initial term of 15 years
(December 31, 2019 – 14 years).
Subsequent to the year ended December 31, 2020, the REIT completed the sale of an income producing property. Refer to
Note 23.
The investment property balance includes right-of-use assets of $68,270 as of December 31, 2020 (December 31, 2019 -
$63,684).
To determine fair value, CT REIT uses the income approach. Fair value is estimated by capitalizing the cash flows that the
property can reasonably be expected to produce over its remaining economic life. In Q4 2020, there was a change in
methodology for the valuation of the property portfolio from a combination of the discounted cash flow (“DCF”) and the overall
capitalization approach (“OCR”), to a single model approach for all properties. All properties were valued using the DCF
method, in which the cash flows are projected over the anticipated term of the investment plus a terminal value discounted
CT REIT 2020 ANNUAL REPORT 81
using an appropriate discount rate. Management believes the change in methodology provides a more consistent approach to
valuing the REIT’s portfolio and better allows for assumption changes with respect to future rental rates, lease renewals, lease
expires and other inputs in response to changing market conditions.
As at December 31, 2020, management’s assessment includes performing a sensitivity analysis on the investment metrics.
On a periodic basis, CT REIT obtains independent appraisals such that approximately 80% of its Properties, by value, are
externally appraised over a four-year period.
The fair value of investment properties is based on Level 3 inputs (see Note 21(a) to the REIT’s 2020 audited annual
consolidated financial statements for definition of levels). There have been no transfers between levels during the period.
The significant inputs used to determine the fair value of CT REIT’s income-producing properties are as follows:
Number of properties
Value at the period end
Discount rate1
Terminal capitalization rate1
Overall capitalization rate1
Hold period (years)
1 Weighted average rate based on the fair value as at the period end date
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Properties valued by
the DCF method
Properties valued by
the OCR method
Properties valued by
the DCF method
363
287
70
$
6,141,000
$
4,240,942
$
1,766,040
7.15 %
6.67 %
— %
12
— %
— %
6.17 %
—
7.01 %
6.56 %
— %
10
82 CT REIT 2020 ANNUAL REPORT
Valuations determined by the DCF method are most sensitive to changes in discount rates. Valuations determined by the OCR
method are most sensitive to changes in capitalization rates. The following table summarizes the sensitivity of the fair value of
income-producing properties to changes in the capitalization rate and discount rate:
Rate sensitivity
+ 75 basis points
+ 50 basis points
+ 25 basis points
December 31, 2020
- 25 basis points
- 50 basis points
- 75 basis points
Rate sensitivity
+ 75 basis points
+ 50 basis points
+ 25 basis points
December 31, 2019
- 25 basis points
- 50 basis points
- 75 basis points
Year Ended
December 31, 2020
DCF Sensitivity
Fair value
Change in fair
value
$
5,545,000 $
(596,000)
5,742,000
(399,000)
5,967,000
(174,000)
$
6,141,000 $
—
6,371,000
6,623,000
230,000
482,000
$
6,898,000 $
757,000
Year Ended
December 31, 2019
OCR Sensitivity
DCF Sensitivity
Fair value
Change in fair
value
Fair value
Change in fair
value
$
3,795,258 $
(445,684) $
1,585,694 $
(180,346)
3,932,504
(308,438)
1,640,800
(125,240)
4,080,638
(160,304)
1,699,732
(66,308)
$
4,240,942 $
— $
1,766,040 $
4,415,156
4,605,102
174,214
1,830,296
364,160
1,903,008
$
4,813,073 $
572,131 $
1,982,280 $
—
64,256
136,968
216,240
2020 Investment and Development Activity
Funding of investment and development activities for the year ended December 31, 2020 was as follows:
2020 Investment and Development Activity
Funded with working capital to CTC
$
3,050 $
38,091 $
20,765 $
Property
investments Developments Intensifications
Funded with working capital to third parties
Funded with CTC Credit Facilities
Capitalized interest and property taxes
Issuance of Class B LP Units to CTC
Mortgages Payable
Total costs
15,106
2,282
22,825
63,200
—
—
1,283
24,120
18,567
—
—
—
—
—
—
Total
61,906
40,213
63,200
1,283
24,120
18,567
$
131,762 $
54,480 $
23,047 $
209,289
CT REIT 2020 ANNUAL REPORT 83
2019 Investment and Development Activity
Funding of investment and development activities for the year ended December 31, 2019 was as follows:
2019 Investment and Development Activity
Funded with working capital to CTC
$
15,945 $
1,900 $
41,276 $
22,382 $
Property
investments
Development
land
Developments
Intensifications
35,109
—
13,285
11,330
18
—
—
—
6,946
2,080
—
—
17,066 $
— $
— $
— $
$
75,669 $
1,918 $
50,302 $
39,448 $
167,337
Total
81,503
59,139
2,080
13,285
11,330
Funded with working capital to third parties
Capitalized interest and property taxes
Issuance of Class B LP Units to CTC
Mortgages Payable
Total Costs
6. CLASS C LP UNITS
The Class C LP Units entitle the holder to a fixed cumulative monthly payment, during the fixed rate period for each Series of
Class C LP Units (the “Current Fixed Rate Period”). Such payments are made in priority to distributions made to holders of the
Class B LP Units and units representing an interest in CT REIT GP Corp. (“GP”), subject to certain exceptions.
On expiry of the Current Fixed Rate Period applicable to each series of Class C LP Units, and each five-year period
thereafter, each such series of Class C LP Units is redeemable at par (together with all accrued and unpaid payments
thereon) at the option of the Partnership or the holder, upon giving at least 120 days’ prior notice. The Partnership also has
the ability to settle any of the Class C LP Units at any time at a price equal to the greater of par and a price to provide a yield
equal to the then equivalent Government of Canada bond yield plus a spread, so long as such redemption is in connection
with a sale of properties.
During the five-year period beginning immediately following the completion of the initial fixed rate period, and each five-year
period thereafter, if not redeemed, the fixed payment rate for Class C LP Units will be reset, and the holders of Class C LP
Units will be entitled, subject to certain conditions, to elect either a fixed rate or variable rate option.
Such redemptions of Class C LP Units (other than upon a change of control of CT REIT) can be settled at the option of the
Partnership, in cash or Class B LP Units of equal value.
The Partnership did not settle any Class C LP Units in 2020.
In Q2 2020, the REIT reset the interest rates on its Series 3, 16, 17, 18 and 19 Class C LP Units with CTC to 2.37%, for a
five-year term ending on May 31, 2025.
84 CT REIT 2020 ANNUAL REPORT
The following table presents the details of the Class C LP Units:
Series
Series 3
Series 4
Series 5
Series 6
Series 7
Series 8
Series 9
Series 16
Series 17
Series 18
Series 19
Expiry of Current
Fixed Rate Period
Annual
distribution rate
during Current
Fixed Rate Period
Carrying amount at
December 31, 2020
Carrying amount at
December 31, 2019
May 31, 2025
May 31, 2024
May 31, 2028
May 31, 2031
May 31, 2034
May 31, 2035
May 31, 2038
May 31, 2025
May 31, 2025
May 31, 2025
May 31, 2025
2.37 % $
200,000 $
4.50 %
4.50 %
5.00 %
5.00 %
5.00 %
5.00 %
2.37 %
2.37 %
2.37 %
2.37 %
200,000
200,000
200,000
200,000
200,000
200,000
16,550
18,500
4,900
11,600
200,000
200,000
200,000
200,000
200,000
200,000
200,000
16,550
18,500
4,900
11,600
Weighted average / Total
4.41 % $
1,451,550 $
1,451,550
Current
Non-current
Total
$
$
— $
251,550
1,451,550
1,200,000
1,451,550 $
1,451,550
The weighted average rate of the aggregate capital amount ascribed to the Class C LP Units was 4.41% as at December 31,
2020.
For the year ended December 31, 2020, interest expense of $65,736 (2019 - $68,219) was recognized in respect of the Class
C LP Units (see Note 16). The holders of the Class C LP Units may elect to defer receipt of all or a portion of distributions
declared by CT REIT until the first business day following the end of the fiscal year. If the holder so elects to defer receipt of
payments, CT REIT will loan the holder an amount equal to the deferred payment without interest, and the loan will be due
and payable in full on the first business day following the end of the fiscal year in which the loan was advanced, the holder
having irrevocably directed that any payment of the deferred payments be applied to repay such loans. At the election of the
holder, payments on the Class C LP Units for the year ended December 31, 2020 of $59,898 (2019 – $62,027), were
deferred until the first business day following the end of the fiscal year and non-interest bearing loans equal to the deferred
payments were advanced. The net amount of payments due in respect of the Class C LP Units at December 31, 2020 of
$5,330 (2019 – $5,685) is included in other liabilities on the consolidated balance sheets. The loans deferred as at
December 31, 2020 were settled on January 4, 2021.
CT REIT 2020 ANNUAL REPORT 85
7. MORTGAGES PAYABLE
Mortgages payable, secured by certain CT REIT investment properties, include the following:
December 31, 2020
December 31, 2019
Current
Non-current
Total
Future repayments are as follows:
2021
2022
2023
2024
2025 and thereafter
Total contractual obligation
Unamortized portion of mark to market on mortgages payable assumed on
the acquisition of properties
Unamortized transaction costs
Face
value
420 $
65,415
65,835 $
Carrying
amount
514 $
65,442
65,956 $
Face
value
37,533 $
10,134
47,667 $
$
$
Carrying
amount
37,696
10,353
48,049
Total
420
9,715
55,700
—
—
Principal
amortization
Maturities
420 $
255
—
—
— $
9,460
55,700
—
—
$
$
675 $
65,160 $
65,835
219
(98)
$
65,956
Mortgages payable have interest rates that range from 1.87% to 4.50%, and have maturity dates that range from July 2022 to
March 2023. Mortgages payable at December 31, 2020 had a weighted average interest rate of 2.27% (December 31, 2019 –
3.82%). At December 31, 2020, variable rate and fixed rate mortgages were $55,700 (December 31, 2019 – $37,133) and
$10,236 (December 31, 2019 – $10,534), respectively.
In 2020, the increase in mortgages payable of $18,567 compared to December 31, 2019 was the result of the increased
ownership in Toronto (Canada Square), Ontario from a 33% to a 50% interest. In addition, the mortgage on Toronto (Canada
Square), Ontario was renewed to 2023.
Investment properties having a fair value of $138,143 (December 31, 2019 – $99,142) have been pledged as security for
mortgages payable.
86 CT REIT 2020 ANNUAL REPORT
8. DEBENTURES
Series
A, 2.85%, June 9, 2022
B, 3.53%, June 9, 2025
C, 2.16%, June 1, 2021 1
D, 3.29%, June 1, 2026
E, 3.47%, June 16, 2027
F, 3.87%, December 7, 2027
Total
Current
Non-current
Total
December 31, 2020
December 31, 2019
Face value Carrying amount
Face value
$
150,000 $
149,777 $
150,000 $
200,000
150,000
200,000
175,000
200,000
199,255
150,000
199,266
174,257
199,080
200,000
150,000
200,000
175,000
200,000
Carrying
amount
149,625
199,101
149,751
199,130
174,142
198,946
$
$
$
$
1,075,000 $
1,071,635 $
1,075,000 $
1,070,695
150,000 $
150,000 $
— $
—
925,000 $
921,635 $
1,075,000 $
1,070,695
1,075,000 $
1,071,635 $
1,075,000 $
1,070,695
1 Refer to Note 23 for additional information on the Series C senior unsecured debenture early redemption and the issuance of Series G senior unsecured debenture which occurred on
January 10, 2021.
Debentures as at December 31, 2020, had a weighted average interest rate of 3.25% (December 31, 2019 – 3.25%).
For the year ended December 31, 2020, amortization of transaction costs of $940 (December 31, 2019 – $850) are included in
net interest and other financing charges on the Consolidated Statements of Income and Comprehensive Income (see Note
16).
9. LEASES
(a) CT REIT as lessee
CT REIT is the tenant under 10 ground leases with third party landlords. The remaining initial terms of the ground leases are
between two and 35 years, with an average remaining initial term of 15 years. The majority of the ground lease agreements
are renewable at the end of the current lease term. Assuming all extensions are exercised, the ground leases have remaining
terms between 3 and 50 years with an average remaining lease term of 31 years. For the calculation of lease liabilities, it was
determined that all lease renewal options are reasonably certain to be exercised. There are no variable lease payments or
guaranteed residual payments with respect to the ground leases.
Current
Non-current
Total
December 31, 2020
December 31, 2019
$
$
1,052 $
65,830
66,882 $
884
61,374
62,258
The increase of $4,624 from prior year is primarily due to the increase of the REIT’s ownership interest in Toronto (Canada
Square), Ontario from a 33% interest to a 50% interest.
CT REIT 2020 ANNUAL REPORT 87
The contractual undiscounted cash flows of CT REIT lease liabilities are as follows:
Less than one year
Between one and five years
More than five years
Total
December 31, 2020
December 31, 2019
$
$
4,512 $
17,051
138,772
160,335 $
4,033
16,123
132,176
152,332
CT REIT has in place a leverage and liquidity policy to manage its exposure to liquidity risk associated with the contractual
lease liabilities. Details of how CT REIT manages this risk are further discussed under Note 21.
There were no expenses in 2020 relating to leases of low-value assets or short-term leases. As well, there were no variable
lease payments included in lease liabilities at any time during 2020.
The total cash outflow for leases in 2020 was $4,615 (2019 - $4,095). There were no gains or losses arising from sale and
leaseback transactions in 2020.
(b) CT REIT as a lessor
CT REIT leases income-producing properties (investment properties) to tenants under operating leases. The leases have
staggered initial terms ranging from 1 to 20 years, with a weighted average remaining initial term of approximately 9.1 years.
Annual base minimum rent for leases have weighted average annual rent escalations of approximately 1.5% per year.
For all income-producing properties, the rental income is fixed under the contracts, but some leases require the lessee to
reimburse certain cost incurred by CT REIT, such as tax and insurance costs of CT REIT. When this is the case, these
amounts are determined annually.
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received
after the reporting date.
Minimum lease receivable
$
385,804
387,066
381,226
366,233
348,330
1,768,384 $ 3,637,043
2021
2022
2023
2024
2025
Thereafter
Total
88 CT REIT 2020 ANNUAL REPORT
10. CREDIT FACILITIES
CT REIT’s draws on its credit facilities are comprised of the following:
Bank Credit Facility
CTC Credit Facility
(a) Bank Credit Facility
December 31, 2020
December 31, 2019
$
$
— $
63,200
63,200 $
—
2,000
2,000
CT REIT has a committed, unsecured $300,000 revolving credit facility with a syndicate of major Canadian third-party banks
(“Bank Credit Facility”) expiring in December 2024. The Bank Credit Facility bears interest at a rate based on the bank’s prime
rate of interest or bankers’ acceptances plus a margin. A standby fee is charged on the Bank Credit Facility.
As at December 31, 2020 the Bank Credit Facility had no amounts drawn under the revolving credit facility, and $5,564
(December 31, 2019 – $5,558) of outstanding letters of credit.
(b) CTC Credit Facility
CT REIT has an uncommitted, unsecured $300,000 revolving credit facility with CTC (“CTC Credit Facility”) expiring in
December 2021, unless otherwise renewed. The CTC Credit Facility bears interest at a rate based on the bank’s prime rate of
interest or bankers’ acceptances plus a margin.
As at December 31, 2020, $63,200 of borrowings were drawn on the CTC Credit Facility. At December 31, 2020, borrowings
under the CTC Credit Facility had an ending average interest rate of 2.45% (December 31, 2019 – 3.95%).
The Bank Credit Facility and the CTC Credit Facility are collectively referred to herein as the “Credit Facilities”.
CT REIT 2020 ANNUAL REPORT 89
11. EQUITY
Authorized and outstanding units
CT REIT is authorized to issue an unlimited number of Units.
The following tables summarize the changes in Units and Class B LP Units:
Total outstanding at beginning of year
Units issued 1
Total outstanding at end of period
1 1,176,006 issued pursuant to the REIT’s distribution reinvestment plan.
Total outstanding at beginning of year
Units issued 1
2019 REIT Offering 2
Total outstanding at end of year
1 742,946 issued pursuant to the REIT’s distribution reinvestment plan.
As at December 31, 2020
Units Class B LP Units
Total
103,927,385
124,289,491
228,216,876
1,176,006
1,576,712
2,752,718
105,103,391
125,866,203
230,969,594
As at December 31, 2019
Units
Class B LP
Units
Total
96,848,606
123,400,633
220,249,239
762,779
6,316,000
888,858
—
1,651,637
6,316,000
103,927,385
124,289,491
228,216,876
2 On September 19, 2019, CT REIT completed a joint equity offering of an aggregate of 16,846,000 Units comprised of the issuance of 6,316,000 Units from treasury for net proceeds of
$86,140 after deducting issuance costs of $3,863 (the “2019 REIT Offering”) and the sale of 10,530,000 Units by CTC.
Net income attributable to Unitholders and weighted average units outstanding used in determining basic and diluted net
income per unit for years ended December 31, 2020 and 2019, are calculated as follows, respectively:
For the Year ended December 31, 2020
Units Class B LP Units
Total
Net income attributable to Unitholders - basic
$
83,694 $
99,611 $
183,305
Income effect of settling Class C LP Units with Class B LP Units
Net income attributable to Unitholders - diluted
Weighted average units outstanding - basic
Dilutive effect of other Unit plans
Dilutive effect of settling Class C LP Units with Class B LP Units
Weighted average units outstanding - diluted
65,736
$
249,041
104,524,871
124,409,130
228,934,001
265,900
93,374,550
322,574,451
90 CT REIT 2020 ANNUAL REPORT
Net income attributable to Unitholders - basic
$
136,667 $
170,526 $
Income effect of settling Class C LP Units with Class B LP Units
Net income attributable to Unitholders - diluted
$
Units
Class B LP
Units
Total
307,193
68,219
375,412
For the Year ended December 31, 2019
Weighted average units outstanding - basic
98,990,726
123,568,955
222,559,681
Dilutive effect of other Unit plans
Dilutive effect of settling Class C LP Units with Class B LP Units
Weighted average units outstanding - diluted
Distributions on Units and Class B LP Units
231,890
91,823,461
314,615,032
The following table presents total distributions paid on Units and Class B LP Units:
For the year ended December 31,
Units
Class B LP Unit
2020
2019
Distributions
per unit
Distributions
per unit
$
$
0.793 $
0.793 $
0.757
0.757
On December 15, 2020, CT REIT’s Board declared a distribution of $0.06693 per unit payable on January 15, 2021 to holders
of Units and Class B LP Units of record as of December 31, 2020.
On January 15, 2021, CT REIT’s Board declared a distribution of $0.06693 per unit payable on February 16, 2021 to holders
of Units and Class B LP Units of record as of January 29, 2021.
Units
Each Unit is transferable and represents an equal, undivided, beneficial interest in CT REIT and any distributions from the
REIT, whether of net income, net realized capital gains, or other amounts, and in the event of the termination or winding-up of
CT REIT, in CT REIT’s net assets remaining after satisfaction of all liabilities. All Units rank among themselves equally and
ratably without discrimination, preference or priority. Each Unit entitles the holder thereof to one vote at all meetings of
Unitholders or with respect to any written resolution of Unitholders. The Units have no conversion, retraction or redemption
rights.
Non-controlling interests
The Class B LP Units are exchangeable on a one-for-one basis (subject to customary anti-dilution provisions) for Units at the
option of the holder. Each Class B LP Unit is accompanied by a Special Voting Unit. The holders of Class B LP Units are
entitled to receive distributions when declared by the Partnership equal to the per Unit amount of distributions payable to each
holder of Units. However, the Class B LP Units have limited voting rights over the Partnership.
CT REIT 2020 ANNUAL REPORT 91
Special Voting Units
Special Voting Units are only issued (i) in tandem with Class B LP Units of the Partnership or (ii) in limited circumstances to
holders of the Class C LP Units and are not transferable separately from the Class B LP Units or Class C LP Units, as the
case may be, to which they relate. Upon any transfer of Class B LP Units or Class C LP Units, as the case may be, such
Special Voting Units will automatically be transferred to the transferee of the Class B LP Units. As Class B LP Units are
exchanged for Units or purchased for cancellation, the corresponding Special Voting Units will be cancelled for no
consideration.
Each Special Voting Unit entitles the holder thereof to one vote at all meetings of Unitholders or with respect to any resolution
in writing of Unitholders. Except for the right to attend and vote at meetings of the Unitholders or with respect to written
resolutions of the Unitholders, Special Voting Units do not confer upon the holders thereof any other rights. A Special Voting
Unit does not entitle its holder to any economic interest in CT REIT, or to any interest or share in CT REIT, or to any interest in
any distributions (whether of net income, net realized capital gains, or other amounts), or to any interest in any net assets in
the event of termination or winding-up.
CT REIT’s Board retains full discretion with respect to the timing and quantum of distributions. Declared distributions are paid
to Unitholders of record at the close of business on the last day of the month on or about the 15th day of the following month.
12. UNIT-BASED COMPENSATION PLANS
Deferred Unit Plan for Trustees
CT REIT offers a Deferred Unit (“DU”) Plan for members of its Board who are not also employees or officers of the REIT or
any of its Affiliates. Under this plan, eligible trustees may elect to receive all or a portion of their annual trustee fees in DUs.
DUs are paid out in equivalent Units of CT REIT or, at the election of the trustee, in cash, following the trustee’s departure from
the Board.
As at December 31, 2020, accrued DU compensation costs, which are included in other liabilities, totalled $3,136 (2019 –
$2,589). Compensation expense recorded related to DU’s for the year ended December 31, 2020 was $(17) (2019 - $715).
The fair value of DUs is equal to the trading price of Units, which is a Level 1 input (see Note 21(a)).
Performance Unit Plan for Employees
CT REIT offers Performance Units (“PUs”) to certain employees that generally vest after three years. Each PU entitles the
employee to receive a cash payment equal to the fair market value of Units of CT REIT, multiplied by a factor determined by
specific performance-based criteria, as set out in the PU Plan.
As at December 31, 2020, accrued PU compensation costs, which are included in other liabilities, totalled $3,865 (2019 -
$3,555). Compensation expense recorded for the year ended December 31, 2020 for PUs granted to employees was $2,029
(2019 - $2,425). The fair value of PUs is equal to the trading price of Units, which is a Level 1 input (see Note 21(a)).
92 CT REIT 2020 ANNUAL REPORT
Restricted Unit Plan for Executives
CT REIT offers a Restricted Unit (“RU”) Plan for its executives. RUs may be issued as discretionary grants or executives may
elect to receive all or a portion of their short term incentive plan in RUs. At the end of the vesting period which is generally
three years from the date of grant (in the case of discretionary grants) or five years from the short term incentive plan bonus
payment date (in the case of deferred bonus grants), the executives will receive an equivalent number of Units issued by CT
REIT or, at the executive’s election, the cash equivalent thereof.
As at December 31, 2020, accrued RU compensation costs, which are included in other liabilities, totalled $1,414 (2019 -
$1,360). Compensation expense for the year ended December 31, 2020 was $53 (2019 - $537). The fair value of RUs is
equal to the trading price of Units, which is a Level 1 input (see Note 21(a)).
13. NON-CONTROLLING INTERESTS
Details of non-wholly owned subsidiaries of CT REIT that have material non-controlling interests are as follows:
Proportion of ownership interests held
by non-controlling interests
Net income and comprehensive income
allocated to non-controlling interests
Name of Subsidiary
CT REIT Limited Partnership
54.49 %
54.46 % $
99,611 $
170,526
As at December 31,
2020
As at December 31,
2019
For the year ended
December 31, 2020
For the year ended
December 31, 2019
There are no restrictions on CT REIT’s ability to access or use the assets and settle the liabilities of its subsidiaries and there
are no contractual arrangements that could require CT REIT to provide financial support to its subsidiaries.
14. REVENUES AND EXPENSES
(a) Property revenue
The components of property revenue are as follows:
Base minimum rent
Straight-line rent
Subtotal base rent
Property operating expense recoveries
Capital expenditure and interest recovery charge
Other revenues
Property revenue
CTC
Other
For the Year ended
December 31, 2020
$
$
344,092 $
34,869 $
9,251
353,343 $
85,360
9,924
2
763
35,632 $
16,897
155
1,035
$
448,629 $
53,719 $
378,961
10,014
388,975
102,257
10,079
1,037
502,348
CT REIT 2020 ANNUAL REPORT 93
Base minimum rent
Straight-line rent
Subtotal base rent
Property operating expense recoveries
Capital expenditure and interest recovery charge
Other revenues
Property revenue
(b) Property expense
$
$
$
CTC
330,468 $
13,612
344,080 $
83,979
9,325
7
437,391 $
Other
32,190 $
518
32,708 $
16,399
131
2,384
51,622 $
The major components of property expense consist of property taxes and other recoverable operating costs:
For the year ended December 31,
Property taxes
Operating costs
Property management 1
Property expense
1 Includes $643 (2019 - $1,753) payable to CTC. See Note 20.
15. GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense is comprised of the following:
For the year ended December 31,
Personnel expense 1
Services Agreement with CTC 2
Public entity and other 1
Less: allocated to property operating costs
General and administrative expense
$
$
$
$
$
2020
89,237 $
18,393
3,138
110,768 $
2020
8,515 $
1,112
3,918
13,545 $
(527)
13,018 $
For the Year ended
December 31, 2019
362,658
14,130
376,788
100,378
9,456
2,391
489,013
2019
88,056
14,202
3,830
106,088
2019
7,953
2,500
4,156
14,609
(324)
14,285
1 Includes unit-based awards including (gain) loss adjustments as a result of the change in the fair market value of the Units of $134 ( 2019 - $2,029) for the year ended December 31,
2020.
2 See Note 20.
94 CT REIT 2020 ANNUAL REPORT
16. NET INTEREST AND OTHER FINANCING CHARGES
Net interest and other financing charges are comprised of the following:
For the year ended December 31,
Interest on Class C LP Units 1
Interest and financing costs - debentures
Interest and financing costs - Bank Credit Facility
Interest on mortgages payable
Interest on lease liabilities
Interest and financing costs - CTC Credit Facility
Less: capitalized interest
Interest and other financing charges
Less: interest income
Net interest and other financing charges
1 Paid or payable to CTC.
17. CHANGES IN WORKING CAPITAL AND OTHER
Changes in working capital are comprised of the following:
For the year ended December 31,
Changes in working capital and other
Tenant and other receivables
Other assets
Other liabilities
Other
Changes in working capital and other
18. SEGMENTED INFORMATION
$
$
$
$
$
$
2020
65,736 $
36,615
1,175
1,665
3,624
72
108,887 $
(844)
108,043 $
(145)
107,898 $
2020
(2,029) $
(13)
4,304
(17)
2,245 $
2019
68,219
35,723
1,466
1,763
3,317
—
110,488
(1,351)
109,137
(384)
108,753
2019
(737)
446
8,269
200
8,178
CT REIT has one segment for financial reporting purposes which comprises the ownership and management of primarily net
leased single-tenant retail investment properties located across Canada.
19. COMMITMENTS AND CONTINGENCIES
CT REIT has agreed to indemnify, in certain circumstances, the trustees and officers of CT REIT and its subsidiaries.
As at December 31, 2020, CT REIT had obligations of $132,715 (December 31, 2019 – $145,667) in future payments for the
completion of developments. Included in the commitments is $106,375 due to CTC.
CT REIT 2020 ANNUAL REPORT 95
20. RELATED-PARTY TRANSACTIONS
In the normal course of operations, CT REIT enters into various transactions with related parties that have been measured at
amounts agreed to between the parties and are recognized in the consolidated financial statements.
(a) Arrangements with CTC
Services Agreement
Under the services agreement among the Partnership and CTC entered into on October 23, 2013 (“Services Agreement”),
CTC provides the REIT with certain administrative, information technology, internal audit and other support services as may
be reasonably required from time to time (the “Services”). CTC provides these Services to the REIT on a cost recovery basis
pursuant to which CT REIT reimburses CTC for all costs and expenses incurred by CTC in connection with providing the
Services, plus applicable taxes. The Services Agreement is automatically renewable for one year terms, unless otherwise
terminated in accordance with its terms. The Services Agreement was automatically renewed for 2021 and CTC will continue
to provide such Services on a cost recovery basis.
Property Management Agreement
Under the property management agreement, among the Partnership and CTC entities entered into on October 23, 2013
(“Property Management Agreement”), CTC provides the REIT with certain property management services (the ‘‘Property
Management Services’’). CTC provides these Property Management Services to the REIT on a cost recovery basis pursuant
to which the REIT reimburses CTC for all costs and expenses incurred by CTC in connection with providing the Property
Management Services, plus applicable taxes. The Property Management Agreement is automatically renewable for one year
terms, unless otherwise terminated in accordance with its terms. The Property Management Agreement was automatically
renewed for 2021 and CTC will continue to provide such Property Management Services on a cost recovery basis.
CTC Credit Facility
CT REIT entered into the CTC Credit Facility and is automatically renewed for one year terms, unless otherwise terminated in
accordance with its terms. CTC Credit Facility was automatically renewed for 2021, expiring in December 2021. The CTC
Credit Facility bears interest at a rate based on the bank’s prime rate of interest or bankers’ acceptances plus a margin.
(b) Transactions and balances with related parties
Transactions with CTC are comprised of the following, excluding acquisition, intensification and development activities with
CTC which are contained in Note 5:
For the year ended December 31,
Rental revenue
Property Management and Services Agreement expense 1
Distributions on Units
Distributions on Class B LP Units 2
Interest expense on Class C LP Units
Interest expense on the CTC Credit Facility
Note
14
16
16
$
$
$
$
$
$
2020
448,629 $
1,755 $
26,988 $
98,857 $
65,736 $
72 $
2019
437,391
4,253
31,139
93,925
68,219
—
1The Service Agreement and Property Management Agreement decreased as a result of insourcing some property management and support services during 2020.
2 Includes distributions deferred at the election of the holders of the Class B LP Units.
96 CT REIT 2020 ANNUAL REPORT
The net balance due to CTC is comprised of the following:
As at
Tenant and other receivables
Class C LP Units
Amounts payable on Class C LP Units
Loans receivable in respect of payments on Class C LP Units
Other liabilities
Distributions payable on Units and Class B LP Units 1
Loans receivable in respect of distributions on Class B LP Units
CTC Credit Facility 2
Net balance due to CTC
1 Includes distributions deferred at the election of the holders of the Class B LP Units.
2 See Note 10.
December 31, 2020
December 31, 2019
$
(1,549) $
(1,890)
1,451,550
1,451,550
65,228
(59,898)
29,467
31,343
(20,643)
63,200
67,712
(62,027)
6,695
29,589
(19,202)
2,000
$
1,558,698 $
1,474,427
(c) Compensation of executives and independent trustees
The remuneration of (i) the chief executive officer, chief financial officer, chief operating officer and (ii) the trustees who were
not employees or officers of the REIT or any of its affiliates, is as follows:
For the year ended December 31,
Salaries and short-term employee benefits
Unit-based awards 1
Total
$
$
2020
3,127 $
1,394
4,521 $
2019
2,674
2,746
5,420
1 Unit-based awards, as described in Note 12, includes increase (reduction) in expense as a result of the change in the fair market value of the Units of $96 (2019 - $1,588).
The remuneration of the chief executive officer, chief financial officer and chief operating officer consist principally of base
salary, short-term cash incentives and long-term incentives (in the form of unit-based awards). The remuneration is
determined by CT REIT’s Board of Trustees, on the recommendation of the Governance, Compensation and Nominating
Committee.
The compensation of trustees, who are not employees or officers of CT REIT or any of its affiliates, consists of an annual
retainer and meeting fees.
CT REIT 2020 ANNUAL REPORT 97
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
a) Fair value of financial instruments
For financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
•
•
•
Level 1 inputs: Are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs: Are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
Level 3 inputs: Are unobservable inputs for the asset or liability.
The fair value of the Class C LP Units is determined by discounting contractual principal and interest payments at estimated
current market interest rates for the instrument. Current market interest rates are determined with reference to current
benchmark rates for a similar term and current credit spreads for debt with similar terms and risks.
The fair value of the Class C LP Units, debentures and mortgages payable at December 31, 2020, is $1,715,615, $1,157,903
and $67,498, respectively. The fair value measurement of the Class C LP Units and mortgages payable is based on Level 2
inputs. The significant inputs used to determine the fair value of the Class C LP Units and mortgages payable are interest
rates, term to maturity, and credit spreads. The debentures are actively traded on the secondary market and the fair value is
determined using Level 1 inputs. There have been no transfers during the period between levels.
Financial assets consist of cash and cash equivalents, tenant and other receivables and deposits which are classified at
amortized cost. Financial liabilities, other than those discussed in the preceding paragraph, consist of other liabilities, Credit
Facilities and distributions payable, which are carried at amortized cost, except for liabilities for unit-based compensation plans
which are included in other liabilities and are carried at fair value, equivalent to the trading price of Units, which is a Level 1
input. The carrying amounts of the liabilities for the unit-based compensation plans approximate their fair value due to their
short-term nature.
(b) Financial risk management
In the normal course of business, CT REIT has exposure to risks from its use of financial instruments. CT REIT is exposed to
liquidity and credit risk in connection with its financial instruments. Financial risk management policies are established for CT
REIT to identify and analyze the risks faced by CT REIT, to set acceptable risk tolerance limits and controls and to monitor
risks and adherence to limits. CT REIT is not exposed to significant currency or market risk arising from financial instruments.
Additionally, CT REIT’s exposure to interest rate changes is limited as a significant portion of its indebtedness is at fixed
interest rates. Exposure to interest rate changes is dependent on the extent to which CT REIT has short term borrowings
under its credit facilities, any new debt is issued or assumed on acquisitions, new series of Class C LP Units are issued to
finance future real estate transactions or any existing Class C LP Units being re-priced or redeemed, as all are market
dependent (see Note 6).
98 CT REIT 2020 ANNUAL REPORT
Liquidity risk
Liquidity risk is the risk that CT REIT will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. CT REIT’s approach to managing liquidity is to ensure that it has
sufficient liquidity available through cash, assets readily convertible to cash and committed bank lines of credit to support its
monthly cash distributions to Unitholders, meet operating and plan requirements and meet unexpected financial challenges.
CT REIT has in place a leverage and liquidity policy to manage its exposure to liquidity risk.
Management has identified key financial credit metric ratios and calculates these ratios in a manner to approximate the
methodology of credit rating agencies. Management monitors these metrics against industry-accepted targets to maintain
investment-grade ratings from two credit rating agencies.
CT REIT uses a detailed consolidated cash flow forecast model to regularly monitor its near-term and longer-term cash flow
requirements, which assists in optimizing its cash distributions to Unitholders and evaluating longer-term funding strategies.
CT REIT has access to several financing sources to ensure that the appropriate level of liquidity is available to meet its
monthly distributions and objectives, including its committed Bank Credit Facility totalling $300,000, direct access to debt and
equity markets subject to consent from CTC, and contributions from CTC to the extent cash flows from property operations are
not sufficient.
Credit risk
Credit risk is the risk of financial loss if a counterparty to a financial instrument fails to meet its contractual obligations and
arises principally from CT REIT’s tenants and from investment securities counterparties. Credit risk arises from the possibility
that CT REIT’s tenants may experience financial difficulty and be unable to meet their lease obligations. CTC is CT REIT’s
most significant tenant and will be for the foreseeable future. CT REIT’s revenues will be dependent on the ability of CTC to
meet its rent obligations and CT REIT’s ability to collect rent from CTC.
CT REIT has a Financial Risk Management Board Policy in place for management of counterparty risk related to investing
activity. The overall credit risk compliance mechanisms established in this policy include credit rating requirements, approval
authorities, counterparty limits, notional limits, term to maturity and portfolio diversification requirements. CT REIT limits its
exposure to credit risk by investing only in highly liquid and rated term deposits, bankers’ acceptances or other approved
securities and only with highly rated financial institutions and government counterparties.
Interest rate risk
Interest rate risk is the potential for financial loss arising from increases in interest rates. CT REIT has minimal exposure to
interest rate changes as the initial rate on the Class C LP Units, debentures and certain mortgages payable are at fixed
interest rates. CT REIT incurs variable rates indebtedness through certain mortgages payable and borrowings under its Credit
Facilities. CT REIT currently has $63,200 (2019 - $2,000) in short-term borrowings outstanding under its Credit Facilities.
CT REIT 2020 ANNUAL REPORT 99
22. CAPITAL MANAGEMENT AND LIQUIDITY
CT REIT’s objectives when managing capital are to ensure access to capital and sufficient liquidity is available to support
ongoing property operations, developments and acquisitions while generating reliable, durable and growing monthly cash
distributions on a tax-efficient basis to maximize long-term Unitholder value.
The definition of capital varies from entity to entity, industry to industry and for different purposes. CT REIT’s strategy and
process for managing capital is driven by requirements established under its declaration of trust as amended and restated as
of October 22, 2013 and as further amended and restated as of April 5, 2020 ("Declaration of Trust"), the trust indenture dated
June 9, 2015, as supplemented by supplemental indentures thereto (collectively, the “Trust Indenture”) and the Credit
Facilities.
The following schedule details the capitalization of CT REIT:
As at
Liabilities
Class C LP Units
Mortgages payable
Debentures
Credit Facilities
Equity
Unitholders’ equity
Non-controlling interests
Total
December 31, 2020
December 31, 2019
$
1,451,550 $
1,451,550
65,956
1,071,635
63,200
1,481,849
1,894,021
$
6,028,211 $
48,049
1,070,695
2,000
1,464,939
1,869,166
5,906,399
CT REIT’s Class C LP Units have a fixed, cumulative, preferential cash distribution, if, as and when declared by the board of
directors of the GP.
Under the Declaration of Trust, the Trust Indenture, and the Credit Facilities, key financial covenants are reviewed on an
ongoing basis by management to monitor compliance with the agreements. The key financial covenants for CT REIT are as
follows:
•
a requirement to maintain, at all times:
◦
◦
◦
◦
◦
a specified maximum ratio of total indebtedness of CT REIT (plus the aggregate par value of the Class C LP
Units) to gross book value of assets
a specified maximum ratio of total secured indebtedness of CT REIT (plus the aggregate par value of the
Class C LP Units) to gross book value of assets
a minimum Unitholders’ equity
a ratio of unencumbered assets to unconsolidated unsecured indebtedness
a specified minimum debt service coverage ratio defined as earnings before interest and taxes as a
percentage of interest expense, which for greater clarity includes payments on the Class C LP Units
100 CT REIT 2020 ANNUAL REPORT
As at December 31, 2020, CT REIT was in compliance with all of its financial covenants. Under these financial covenants, CT
REIT has sufficient flexibility to fund business growth and maintain or amend distribution rates within its existing distribution
policy.
CT REIT’s strategy is to satisfy its liquidity needs using cash flows generated from operating activities and cash provided by
financing activities. Rental income, recoveries from tenants, interest and other income, draws on the Credit Facilities and
further issuance of debt and equity are CT REIT’s principal sources of liquidity used to pay operating expenses, distributions,
debt service, and recurring capital and leasing costs in its investment property portfolio.
The principal liquidity needs for periods beyond the next year are for Unit distributions, redemptions of Class C LP Units upon
scheduled expiry of the Initial Fixed Rate Period and capital expenditures. CT REIT’s strategy is to meet these needs through
cash flows generated from operating activities and further issuance of debt and equity.
The following table presents the contractual maturities of CT REIT’s financial liabilities:
Class C LP Units 1
Debentures 2
Total
2021
2022
2023
2024
2025
2026 and
thereafter
$ 1,451,550 $
— $
— $
— $200,000 $ 251,550 $ 1,000,000
1,075,000 150,000 150,000
—
— 200,000
575,000
Payments on Class C LP Units 1
680,499
63,962
63,962
63,962
58,712
51,484
378,417
Interest on debentures
Credit Facilities
Mortgages payable
Other liabilities
Distributions payable 3
Payable on Class C LP Units, net of loans
receivable
Interest on mortgages payable
Interest on CTC Credit Facility
169,529
33,330
29,572
27,433
27,433
23,906
27,855
63,200
63,200
—
—
65,835
420
9,715
55,700
57,947
52,671
5,276
15,459
15,459
—
—
—
5,330
5,330
—
—
3,099
1,560
1,328
211
72
72
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
$ 3,587,520 $ 386,004 $ 259,853 $ 147,306 $ 286,145 $ 526,940 $ 1,981,272
1 Assumes redemption on Initial Fixed Rate Period for each series.
2 Refer to Note 23.
3 On Units and Class B LP Units.
23. SUBSEQUENT EVENTS
On January 6, 2021, CT REIT completed the issuance of $150,000 of Series G unsecured debentures with a ten-year term
and a coupon of 2.371% per annum. On January 10, 2021, the net proceeds, along with cash on hand, were used to redeem
the Series C senior unsecured debentures in the aggregate principal amount of $150,000 with a coupon of 2.159% due June
1, 2021.
In January 2021, CT REIT sold its Arnprior Mall property in Arnprior, Ontario for approximately $21,000.
CT REIT 2020 ANNUAL REPORT 101
GLOSSARY OF TERMS
Glossary of Terms
“Affiliate” means an affiliate, as such term is defined in the Securities Act (Ontario) of CT REIT (including a partnership or
trust controlled by the REIT).
“AFFO” is a non-GAAP financial measure and has the meaning given to that term in Real Property Association of Canada’s
white paper titled “White Paper on Funds From Operations & Adjusted Funds from Operations for IFRS” (the “White Paper on
FFO & AFFO”) issued in February 2019. It is calculated as FFO subject to certain adjustments to remove the impact of
recognizing property rental revenues or expenses on a straight-line basis, and the deduction of a reserve for normalized
maintenance capital expenditures, tenant inducements and leasing commissions.
“Atlantic Canada” means the provinces of New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward
Island.
“Board” means the Board of Trustees of the REIT.
“Change of Control” means the acquisition by a person, or group of persons acting jointly or in concert, directly or indirectly,
other than CTC or any of its Subsidiaries, of more than 50% of the aggregate voting rights attached to the Units and Special
Voting Units of the REIT (taking into account (i) full dilution from the exchange of all then-outstanding Class B LP Units into
Units of the REIT; and (ii) in respect of any other securities that are convertible or exchangeable into Units of the REIT, only
dilution resulting from the conversion or exercise of such other convertible or exchangeable securities held by such person or
group of persons).
“Class A LP Units” means, collectively, the Class A limited partnership units of the Partnership. “Class A LP Unit” means any
one of them.
“Class B LP Units” means, collectively, the Class B limited partnership units of the Partnership, and “Class B LP Unit” means
any one of them.
“Class C LP Units” means, collectively, the Class C limited partnership units of the Partnership, and “Class C LP Unit” means
any one of them.
“Competitor” means a person who carries on business, or any person who controls or is controlled by such person, in one or
more of the following categories: hardware, automotive, sporting goods, apparel and housewares.
“CTC” means Canadian Tire Corporation, Limited together with its Subsidiaries (excluding the REIT and the REIT’s
Subsidiaries), or, as the context requires, any of them.
“CTC Banner” means a CTC name or trademark, including the Canadian Tire, Mark’s, Sport Chek, Sports Experts and
Atmosphere, names or trademarks.
102 CT REIT 2020 ANNUAL REPORT
GLOSSARY OF TERMS
“CTREL” means Canadian Tire Real Estate Limited, a wholly-owned Subsidiary of CTC.
“Development Agreement” means the development agreement among the REIT, the Partnership, CTREL and CTC entered
into on October 23, 2013, as further described under “Arrangements with CTC - Commercial Agreements with CTC -
Development Agreement” of the AIF.
“Development Properties” means those Properties being developed or redeveloped, but excludes properties undergoing
intensification activities, consisting of the construction of additional buildings on existing assets and modifications to existing
buildings, as well as the redevelopment of mixed-use properties.
“EBITFV” is a non-GAAP measure of operating cash flow. It is calculated as net income in accordance with GAAP, adjusted by
removing the impact of; (i) non-cash adjustments including fair value adjustments on investment properties; (ii) interest
expense and other financing costs; (iii) income tax expense; (iv) gains or losses the sale of investment properties; and (v) non-
recurring items that may occur under IFRS.
“ECL” means expected credit losses.
“FFO” is a non-GAAP financial measure and has the meaning given to it in the White Paper on FFO & AFFO. It is calculated
as net income in accordance with GAAP, adjusted by removing the impact of: (i) fair value adjustments on investment
properties; (ii) other fair value adjustments; (iii) gains and losses on the sale of investment properties; (iv) incremental leasing
costs; (v) operational revenue and expenses from right-of-use assets; and (vi) deferred taxes.
“FVTPL” means fair value through profit or loss.
“GAAP” means generally accepted accounting principles in Canada (which for Canadian reporting issuers is IFRS) as in effect
from time to time and as adopted by the REIT from time to time for the purposes of its public financial reporting.
“GLA” means gross leasable area.
“Gross Book Value” means at any time the total assets of the REIT as shown in its then most recent Consolidated Balance
Sheets.
“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board and as
adopted by the Chartered Professional Accountants of Canada in Part I of The CPA Canada Handbook - Accounting, as
amended from time to time.
“Intensification” means the development of a property, site or area at a higher density than currently exists, through
development, redevelopment, infill and expansion or conversion of existing buildings.
“Investment Properties” means the portfolio of properties owned by the REIT
CT REIT 2020 ANNUAL REPORT 103
GLOSSARY OF TERMS
“NOI” means property revenue less property expense and is further adjusted for straight-line rent.
“Property Management Agreement” means the property management agreement among the Partnership, CTC and CTREL
entered into on October 23, 2013, as further described under “Arrangements with CTC - Commercial Agreements with CTC -
Property Management Agreement” of the AIF.
“Properties Under Development” means that portion of any (i) Development Property, (ii) Properties undergoing
intensification activities, consisting of the construction of additional buildings on existing assets and modifications to existing
buildings, and (iii) mixed use properties being developed or redeveloped.
“REIT Exception” means the exclusion from the definition of “SIFT trust” in the Tax Act for a trust qualifying as a “real estate
investment trust” under the Tax Act.
“ROFO Agreement” means the right of first offer agreement among the REIT, the Partnership and CTC entered into on
October 23, 2013, as described under “Arrangements with CTC - Commercial Agreements with CTC” of the AIF.
“Services Agreement” means the services agreement among the REIT, the Partnership and CTC entered into on October 23,
2013 pursuant to which CTC or certain of its Subsidiaries provide the Services, as further described under “Arrangements with
CTC - Commercial Agreements with CTC - Services Agreement” of the AIF.
“SIFT Rules” means the specified investment flow-through rules applicable to SIFT trusts and SIFT partnerships in the Tax
Act.
“Special Voting Units” means special voting units of the REIT, and “Special Voting Unit” means any one of them.
“Unitholders” means holders of Units, and “Unitholder” means any one of them.
“Units” means trust units in the capital of the REIT, other than Special Voting Units, and “Unit” means any one of them.
104 CT REIT 2020 ANNUAL REPORT
CT Real Estate Investment Trust
2180 Yonge Street, P.O. Box 770, Station K, Toronto, Ontario, Canada M4P 2V8
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ctreit.com