Choice Properties REIT reports higher-than-forecast earnings from latest quarter

TORONTO – The real estate spin-off from grocery giant Loblaws says it’s on target with building its portfolio of properties despite an uncertain economic climate.

“While the global economic environment remains uncertain, we believe market fundamentals in Canada remain strong and that our core supermarket anchored retail properties are well positioned to withstand market headwinds,” said John Morrison, president and chief executive of Choice Properties REIT, in an analyst call Tuesday.

When asked in the call, Morrison said the company “hasn’t had any conversations” about any possible real estate investments that may result from the $12.4-billion acquisition of Shoppers Drug Mart Corp. (TSX:SC) by its primary tenant, and majority shareholder, Loblaw Companies Ltd. (TSX:L).

Last month, Choice announced plans to acquire a portfolio of 10 commercial and retail properties across the country for a combined price of $150 million.

Nine of the properties are being bought from Choice’s majority owner, Loblaw Companies Ltd. (TSX:L). Two are located in Nova Scotia, six in Ontario and one in British Columbia. The tenth property in London, Ont. was bought from an unnamed third-party.

Together, the assets include four stand-alone supermarkets, three shopping centres, two single-tenant retail stores and one commercial complex, which includes a stand-alone supermarket and warehouse.

In the first time reporting its financial results, the real estate trust (TSX:CHP.UN) said it earned $73.6 million, or 21 cents per diluted unit, for the period that began on July 5, when it launched its initial public offering, to Sept. 30.

The earnings topped what the trust had forecasted for the quarter, prior to launching the public offering. Choice had expected earnings of $29.7 million, or nine cents per unit.

It said the results included a $75.5-million gain attributed to fair market value adjustments, and a loss of $35.5 million due to fair value of financial instruments.

The trust said revenue from rent came in at $153.7 million, slightly higher than the forecasted $154.8 million.

It added that it remains on track with its occupancy rate, which was 97.6 per cent in the quarter, compared with a forecasted 97.9 per cent.

The trust portfolio includes 433 properties representing some 36.2 million square feet of retail, warehouse and office space.