Strong Asset Growth
CREIT's assets have grown from $84 million in December 1994 to $2.2 billion in December 2009.
Cash Distributions
Cash distributions are paid from operating cash flows. Having a conservative payout ratio reflects a prudent approach to financial management, thereby helping to ensure that cash distributions are reliable and sustainable. CREIT's annual distributions have grown from $0.58 per unit in 1994 to $1.36 per unit in 2009.
Favourable Tax Treatment
As a REIT, CREIT's distributions to unitholders attract favourable tax treatment mainly because of the ability to deduct capital cost allowance or depreciation for tax purposes.
A Prudent Diversification Strategy
CREIT owns and manages a portfolio of properties diversified in three primary asset classes across Canada. Diversification provides CREIT with the ability to mitigate its portfolio risk across various product types and various tenants.
CREIT focuses on properties located in areas supported by strong demographic and economic fundamentals. You can find CREIT properties in most Canadian provinces with the largest representation in Alberta and Ontario.
Asset Classes
Retail Assets
Management attempts to balance the real estate portfolio so that 50% of CREIT's income is generated from retail real estate assets with a focus on "proprietary" retail property. CREIT defines "proprietary" assets to mean assets that are both the 'product of choice' for tenants and that enjoy significant barriers to entry from new competitive product. In this "niche" sub-set of retail real estate, Management focuses on food-store-anchored, open-concept plazas and other unenclosed centres anchored by leading retailers, with long-term leases.
Characteristics of proprietary retail real estate include national, or high credit-worthy tenants on long-term leases, little volatility over time in occupancy, limited income growth in the short-to-mid-term, a low yield given the low investment risk and a commensurate high cost or purchase price.
Management views the retail real estate portion of the portfolio as the foundation to a reliable cash distribution. Proprietary retail real estate, however, will not deliver the income growth required to achieve the Trust's growth objectives because many tenants are on long-term lease contracts with minimal rental increases.
CREIT may also invest in retail assets that are not "proprietary" in nature, particularly if the tenant base is strong and the yield is attractive.
Industrial Assets
Management attempts to balance the portfolio such that 25% of CREIT's income is generated from industrial properties (distribution facilities and buildings used for light manufacturing) of a size and configuration that will readily accommodate the diverse needs of a broad range of tenants.
Management's focus in this portion of the portfolio is on high-quality "generic" product, located in target markets where CREIT can build up critical mass, so as to enjoy management efficiencies, and as well, to accommodate any expansion or contraction requirements of the tenant base.
Generic industrial real estate provides some degree of reliability in occupancy; however, it has greater volatility than proprietary retail product. Generic industrial product does, however, offer reasonable income growth possibilities.
Office Assets
Management attempts to balance the real estate portfolio such that 25% of CREIT's income is generated from office buildings. Management's focus is on large, well-located buildings in target cities.
Office is the most volatile of CREIT's three asset classes, both in terms of occupancy and rental rates. As a result, Management's aim is to seek an institutional partner for each of the office assets, so that CREIT reduces its exposure to any one office tenant.
Conservative Management
Our Declaration of Trust sets out prudent financial management and operating safeguards that govern CREIT:
Our maximum permitted indebtedness is 60% of total adjusted assets.
Management attempts to stagger the maturity of CREIT's debt with the objective of achieving relative, even, annual maturities over a 10-year time horizon. This strategy attempts to reduce CREIT's exposure to interest rate fluctuations in any one period.
Mortgage Maturities as at June 30, 2010
Management also tries to mitigate the risk of lease renewals by maintaining a diversified portfolio mix, both geographically and by asset type (as described above).
Lease Maturuties as at June 30, 2010
