Loblaws real estate spinoff Choice Properties beats its first-quarter forecast

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BRAMPTON, Ont. – Loblaw spinoff Choice Properties Real Estate Investment Trust (TSX:CHP.UN) delivered first-quarter results on Wednesday that it says are in line with forecasts it made last summer.

The real estate trust, which mainly holds a portfolio of retail and warehouse properties housing the businesses of grocer Loblaws, said it recorded an adjusted profit of $40.2 million, above a forecast of $34.8 million prior to its initial public offering.

Funds from operations, another key financial measure for real estate companies, equalled 23.3 cents per unit, which compared with the forecast of 22.3 cents per unit.

Choice said the results were helped by general savings it made in its administrative expenses, and benefits from the early repayment of some debt.

Under standard accounting, the trust said it lost $8.2 million due to fair-value adjustments.

Occupancy rates held steady at 97.7 per cent.

In its earnings release, Choice said the Canadian retail and commercial real estate markets are “relatively stable” and provide it with future growth opportunities that include “improved tenancy potential” that it hopes to capitalize on through redevelopment of existing locations and further acquisitions.

The REIT was spun off as a separate business last year by Loblaw Companies Ltd. (TSX:L), which remains its largest investor and tenant. Its units began trading in July after selling about $400 million of equity through an initial public offering.

Loblaw parent George Weston Ltd. (TSX:WN) indirectly purchased 20 million units for $200 million, representing a 5.6 per cent interest.

At the time of the spinoff, Choice had 415 retail properties, one office complex and nine warehouse properties totalling 35.3 million square feet of gross leasable area.

Since then, the trust has acquired numerous properties, including an industrial property in Mississauga, Ont., for $15.5 million during the quarter, which it says became immediately accretive to its business.

The units traded 10 cents lower Wednesday, closing at $10.60 on the Toronto Stock Exchange, before the financial results were released after markets closed.

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