CT Real Estate Investment Trust

TSX:CRT.UN

Earnings Call Transcript 2018-Q3

[Operator]

Good morning, my name is Valerie, and I will be your conference operator today. At this time, I would like to welcome everyone to CT REIT's Third Quarter Earnings Results Conference Call. [Operator Instructions] The speakers on the call today are Ken Silver, Chief Executive Officer of CT REIT; Louis Forbes, Chief Financial Officer of CT REIT; and Kevin Salsberg, Senior Vice President of CT REIT.Today's discussion may include forward-looking statements. Such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.Please see CT REIT's public filings for a discussion of these risk factors, which are included in their 2017 MD&A and AIF, which can be found on CT REIT's website and on SEDAR.I would now turn the call over to Mr. Ken Silver, Chief Executive Officer of CT REIT. Ken?

[Kenneth Silver, President, CEO & Trustee]

Thank you, operator, and good morning, everyone. We're very pleased to welcome you to CT REIT's Third Quarter 2018 Investor Conference Call. Before we get into a discussion of the quarter's results, I'd first like to welcome Lesley Gibson to CT REIT. Further to the announcement we made in August, Lesley has recently joined us and will be succeeding Louis Forbes as CFO effective November 12. Lesley is joining us on the call today. However, Louis, who will be retiring at the end of the year, will review our financial results with you and answer your questions for the final time. I'll come back to our CFO transition at the end of my comments.Beyond another very solid quarter, the third quarter of 2018 marks the fifth anniversary of CT REIT's IPO. From the outset, we've been clear and consistent on the communication and execution of our strategy. We have leveraged our unique and preferred relationship with Canadian Tire, one of Canada's leading brands and with an investment-grade rating, to deliver an attractive blend of security and growth. We describe the REIT as reliable, durable and growing, and over the past 5 years, have delivered a track record of AFFO and NAV growth per unit, distribution growth and conservative financial management that few in the REIT sector can match. Our success is reflected in our fifth consecutive distribution increase, announced yesterday and effective with the January distribution. We are confident in our ability to continue to execute on our strategy, exploiting our competitive advantages to deliver attractive results at a relatively low risk and all of this available at a relatively lower earnings multiple.Our newly announced investments reflect our ability to identify opportunities and create value and what others in the market overlook or are unable to deliver. For example, our development project in Fort St. John, British Columbia is our second investment in the market. We were originally pointed to Fort St. John by the strong performance of the Canadian Tire banners in the trade area over a long period of time and the need for a much larger Canadian Tire store. We came to understand the attractiveness of Fort St. John as the commercial center of the Montney natural gas deposit in northeastern BC and that the market has amongst the youngest demographics and highest household income in the country. The $10 billion Site C dam project is outside of town and the $40 billion LNG Canada project recently announced, we view as potential upside in the market.We are pursuing a portfolio strategy that balances growth in urban markets with attractive opportunities in secondary markets. Our redevelopment of Orillia Square Mall is another example of our ability to leverage our relationship with Canadian Tire and backfill vacant space to create value in an attractive secondary market.CTC banners traditionally perform well in the secondary markets and the returns on our investments are attractive. The reality is the operating risk of our Canadian Tire income properties is low.The last item, I'd like to comment on before turning things over to Kevin, is the property management insourcing project we announced yesterday and which we plan to implement in 2019. Notwithstanding one of the lowest, most efficient operating cost structures in the REIT sector, we've identified the opportunity to insource much of our third-party property management due to the growth of our multi-tenant portfolio through acquisitions and development since our IPO. While the multi-tenant portfolio we will be managing directly is a relatively small component of our total portfolio, we look forward to enhanced productivity at the property level and bottom line benefits beginning in the second half of 2019.With that, I'll turn things over to Kevin to provide an update on our investing activities and operations. Kevin?

[Kevin Salsberg, Senior Vice]

Thanks, Ken, and good morning. As described in yesterday's release, we are pleased to announce 6 new investments this quarter for an aggregate total investment of $72 million. These new projects include: 2 new Canadian Tire stores; store expansions in Atholville, New Brunswick and Rouyn-Noranda, Québec; the acquisition from a third party of land leased to CTC for a Canadian Tire Gas+ gas bar which is adjacent to our REIT-owned Canadian Tire store in Saint-Hyacinthe, Québec; the vend-in of an existing Canadian Tire store and Gas+ gas bar in Matane, Québec; Phase 1 and Phase 2 of the redevelopment of an enclosed mall in Orillia, Ontario, which includes the on-site replacement of a Canadian Tire store into a vacant Target box; as well as Phase 1 of a new development in Fort St. John, British Columbia where we previously acquired 52 acres of land. Phase 1 of the Fort St. John development will include new Canadian Tire and Mark's stores as well as a new Canadian Tire Gas+ gas bar and ancillary retail pads. These investments represent approximately 238,000 square feet of incremental gross leasable area and are expected to earn an average going-in cap rate of 8.1%.In the third quarter, we completed the acquisition of development land in Val-d'Or, Québec from a third party for the expansion of an existing Canadian Tire store. The REIT invested a total of $50 million during the quarter in properties that, once completed, will add approximately 450,000 square feet of incremental GLA.Also included in yesterday's release was an update on 2 previously announced investments. The timing of the development of a new Canadian Tire store in each of Sherwood Park and Grande Prairie, Alberta has been advanced and are now expected to be completed in the second quarter of 2019. They had previously been expected to be completed in the fourth quarter of 2019. At the end of the third quarter, CT REIT had 16 properties under development, representing a total committed gross leasable area of roughly 1.1 million square feet and a total committed investment of $126.3 million upon completion.As at September 30, 2018, on a committed basis, our portfolio is 98.7% occupied. Canadian Tire Corporation represents 92.7% of our annualized base minimum rent and occupies 94.5% of CT REIT's GLA. All of these metrics are relatively unchanged from a year ago.Finally, I want to add to Ken's initial comments on our property management insourcing initiative. Since our IPO, CT REIT has added over 7 million square feet of GLA and has grown its multi-tenant asset base from 26 properties representing approximately 2.6 million square feet to 56 properties with over 5.8 million square feet.Over the course of this period, our reliance on third-party property managers as well as the costs associated with such external oversight have grown. We view this initiative as a natural step in maturation of our business. With the support of Canadian Tire through our existing property management and shared services arrangements, we are confident that the implementation of the new ERP system and capabilities that we've developed through this process will serve us well in maximizing the value of our portfolio in the most cost-effective manner possible.With that, I will turn it over to Louis for a review of our financial results.

[Louis Marie Forbes, Executive Officer]

Thanks, Kevin. In Q3 2018, we reported FFO per unit of $0.289 as compared to $0.279 per unit in Q3 of 2017, an increase of 3.6%. AFFO per unit was $0.241 as compared to $0.229 in the comparable period, representing a 5.2% growth rate.Net operating income was $86.8 million, increasing 7.3% over the $80.9 million of NOI reported for Q3 2017. This growth was primarily driven by acquisitions of income-producing properties, the completion of properties which were under development in the prior year and contractual rent escalations.The same-store growth of 1.7% and same-property growth of 2% were driven by the annual rent escalations of 1.5% contained within most of the Canadian Tire store leases and the CTC distribution center leases, which are generally effective January 1, the recovery of capital expenditures and the related interest earned. The balance of the difference between the same-store and same-property growth is due to completed intensification activities undertaken on same properties. The positive contributions were partially offset by the impacts of the changes in tenancies at 11 and 25 Dufferin Place in Calgary.G&A expenses as a percentage of property revenue were 2.4%, an increase over the 2% reported in Q3 2017. This increase was primarily due to increased personnel expenses, due to the variable components of unit-based awards and increased headcount, increases in consulting and service agreement costs related to the new ERP that CT REIT expects to implement and a decreased income tax recovery in connection with general partners' activities, which resulted in a drawdown of the REIT's deferred tax assets.With respect to the insourcing project that Ken and Kevin mentioned, we incurred approximately $210,000 in Q3 or $240,000 on a year-to-date basis with respect to this initiative.To frame the conversation a bit more, one should note that this will be a cloud-based system, so the expenditure on hardware will be negligible. We are comfortable with the business case on this investment. We will undertake to report the quarterly G&A costs related to this initiative over the next few quarters until completion. Amounts will be incurred through Q2 2019, however, we expect that our G&A run rate will stabilize in the third quarter of 2019.Net interest expense increased by $2 million or 8.2% compared to Q3 of the prior year. This increase was primarily due to increased interest on the debentures issued in June 2017 and February 2018, partially offset by savings resulting from the redemption of Series 10 to 15 Class C LP units in May 2017, savings from reduced utilization of the bank credit facility and increased interest capitalization on development projects during 2018. The net effect is that the REIT has replaced inexpensive short-term debt with longer-term fixed-rate debt, which has served to reduce CT REIT's interest rate and refinancing risks.To remind everyone on the call today, CT REIT has one of the longest term debt profiles in its sector, helping to drive predictability in our returns regardless of the interest rate environment. Even though our AFFO growth was strong at 5.2%, it would have been even better had we chosen a 5-year term as did many of our peers.The REIT recorded a fair value adjustment of $16.7 million for the third quarter of 2018, an increase of $6.3 million versus Q3 2017. The increase in the fair value adjustment is primarily due to net decreases in the capitalization rates used for certain investment properties located in Québec. For clarity, we do not see cap rate compression in Québec, but rather we adjusted some of our cap rates in Québec to achieve consistency within our portfolio and to better align the rates with market valuations.With respect to the balance sheet, we continue to maintain a strong financial position. At September 30, the REIT's indebtedness ratio was 45.7%, an improvement over the 46.2% reported last quarter. We also have approximately $265 million available on our credit facility as well as approximately $7.8 million of cash, which puts our balance sheet in a strong and liquid position.Debt, as compared to earnings before interest taxes and fair value adjustments, was 7.41x, lower than the 7.62 compared in -- reported in Q4 2017, primarily related to EBIT fair value growth exceeding the growth of CT REIT's total debt.As at September 30, 2.7% of the REIT's debt bears interest at floating rates compared to 8.53% at December 31. The reduction is related to the planned repayment of the CTC bridge facility and repayments towards the bank credit facility.Also at September 30, 338 of the REIT's assets were not encumbered, representing approximately $5.6 billion or 98% of our assets. The interest coverage ratio was at 3.36x in the third quarter, which was slightly lower compared to the prior year value of 3.5x. The decrease, which we do not view as material, is mostly the result of interest and financing charges increasing at a rate larger than that of income before interest taxes and fair value adjustments.Our AFFO payout ratio this quarter was consistent with Q3 2017 at 76%.I would like to take a minute to speak to the trend in our book value per unit. At September 30, 2018, the book value per unit was $13.90, representing 3.8% growth over the book value of $13.39 reported at the end of Q4 2017.The following are contributing factors to this increase: A higher value for the income-producing properties due to ongoing growth in cash flow resulting from annual rent increases; the increase in fair value adjustment referenced previously; ongoing recoverable CapEx spend; and retained AFFO. On a trailing basis, combining distributions and book value per unit, CT REIT has consistently delivered a total annual return in excess of 10% since IPO.Before I turn it back to Ken, I would like to say thank you to a lot of people. I didn't get to express my thoughts publicly on my last exit and did not want to let this occasion go unmarked. It has been an honor and a privilege to have served everybody here at CT REIT. And I can say the same for previous tours of duty as well. Thank you to Ken and CTC for having provided me this opportunity. All stakeholders of the REIT are very well served by the fabulous team that Ken has assembled, and I will depart with the additional comfort knowing that the CFO role is in the very capable hands of Lesley Gibson. While I embrace the prospect of retirement and what that will add to my life, it is not without acknowledging the loss of what I will leave behind. That loss includes the time I have spent with many of you who have dialed in today. So thank you to you as well.With that, I will turn it back to Ken.

[Kenneth Silver, President, CEO & Trustee]

Thanks, Louis. It's hard to believe that this will be the last time I get to thank you at the end of our conference call presentations. You were my first call when CTC announced its intention to create a REIT, and we were lucky and delighted that you decided to join us, and the past 5 years working with you have been a pleasure for all of us here at CT REIT and CTC. I know our listeners, who have had the opportunity to interact with you over the years, will agree that you are an absolute gentleman and conduct yourself to the highest standard. Beyond what you have done for CT REIT and the other organizations you have worked for, I know our listeners will also agree you have contributed greatly to the growth and quality of the REIT sector as a whole. We're delighted to have Lesley on board and the smooth CFO transition underway is just one more testament to your professionalism and high standards. We look forward to working with you over the next couple of months and want to wish you a well-deserved and enjoyable retirement.And now operator, I'll turn the call back to you for any questions from our listeners.

[Operator]

[Operator Instructions] Our first question is from Sumayya Hussain with CIBC.

[Sumayya Hussain, Associate]

Just had one question this morning relating to your initiative to insource your management and support costs. Do you expect the G&A run rate as a percent of revenue to tick up once it stabilizes in H2 of '19?

[Louis Marie Forbes, Executive Officer]

Sumayya, this is Louis speaking. There's one unsettled question at the moment and that is the -- is where we will classify some of the new expenses? Will they be G&A or will they be property operating expenses? But in total, we would expect the percentage to come down under the new system.

[Operator]

Our next question is from Sam Damiani with TD Securities.

[Sam Damiani, Analyst]

First off, Louis, just congratulations again on your retirement and wish you all the best.

[Louis Marie Forbes, Executive Officer]

Thank you, Sam.

[Sam Damiani, Analyst]

Maybe just to continue on, on the property management insourcing. Will that have any impact on the way the portfolio is evaluated, or at least these specific properties are evaluated, for IFRS fair value purposes?

[Louis Marie Forbes, Executive Officer]

Sam, it's Louis again. In terms of the methodology of valuing, no, it shouldn't. If property management expenses come down, NOI may go up and that would contribute perhaps to a higher value, but that is uncertain at this point in time.

[Sam Damiani, Analyst]

Okay. Just switching over to Dufferin Place. So #11 is available for lease, and last quarter, you talked about lots of discussions going on. I assume that's a status quo there. But could you clarify what's happening at 25 Dufferin Place with respect to Canadian Tire's occupancy when that took place?

[Louis Marie Forbes, Executive Officer]

When it took place? It took place during the second quarter. So Q3 would reflect a full occupancy from 25 Dufferin Place.

[Sam Damiani, Analyst]

Full rental recognition?

[Louis Marie Forbes, Executive Officer]

Yes. So the gap in NOI during the Q3 related to 11 Dufferin.

[Sam Damiani, Analyst]

Okay. All right. Good. And so the very first time in my career that I heard about or anything about the market for real estate in Fort St. John was 2 years ago when you acquired Totem Mall, and this is the second time. So just wondering with the kickoff of this development on the land, I guess, just to the west of the town, could you just tell us what was the catalyst that made you decide to do this now as opposed to a year ago or wait any longer?

[Kenneth Silver, President, CEO & Trustee]

Sam, it's Ken. We had, had Fort St. John as a market on our radar screens at Canadian Tire for many years actually. As I noted in my comments, the market had been a very strong performer over long period of time, and the Canadian Tire store was clearly undersized. It is surprisingly difficult to get land in Fort St. John and the land that was identified first had to be annexed by the city and that was completed. So there was a fairly extensive municipal process that impacted the timing of the project. And then, the rest of it was frankly just getting alignment around Canadian Tire's overall development program and a recovery in the natural gas market was also, obviously, something that was helpful to getting the green light.

[Sam Damiani, Analyst]

And what are the plans for Totem Mall?

[Kenneth Silver, President, CEO & Trustee]

Well, that will be the next phase of our planning for Totem Mall. As noted in the comments, we will be replacing the Mark's store that is currently in Totem Mall to the new site and that will give us the ability then to start activating the redevelopment of the mall. So that will probably come in the next couple of years as well.

[Sam Damiani, Analyst]

Okay. Maybe just one more, is for Orillia Square Mall. What exactly do you have envisioned for the redevelopment there?

[Kevin Salsberg, Senior Vice]

Sure, Sam, it's Kevin. Phase 1, which is what we're pursuing within the immediate future is the on-site relocation of the Canadian Tire store. They're actually going to be occupying the old Target store box as well as taking up some portion of the enclosed mall, so we'll be eliminating some common area and some vacancy through the course of those moves, relocating a couple of tenants. Phase 2, we'll be backfilling the old Canadian Tire store, which will start, I guess, in 2020 when the new store opens.

[Operator]

Our next question is from Pammi Bir with Scotia Capital.

[Pammi Bir, Analyst]

Louis, just echoing Sam's comments, congrats on the retirement and all the best in the next stage. But before you go, can you maybe just provide some additional color on the total estimated costs of the internalization of some of these property management services? And just curious how much of these costs will be capitalized versus expensed?

[Louis Marie Forbes, Executive Officer]

Pammi, I won't give you an exact figure, but I will say it's less than $2 million, and while some of it may be capitalized, I think you should expect the large part of it to be expensed.

[Pammi Bir, Analyst]

And so the $2 million includes the $200,000 -- I guess, $240,000 so far that's already been spent?

[Louis Marie Forbes, Executive Officer]

Yes.

[Pammi Bir, Analyst]

Okay. And we should expect that this should essentially be wrapped up by the end of Q2?

[Louis Marie Forbes, Executive Officer]

Yes.

[Pammi Bir, Analyst]

Okay. And then just, I guess, overall, what would you sort of ballpark as the potential FFO per unit accretion from this investment?

[Louis Marie Forbes, Executive Officer]

Directionally, we'd agree with the sense of your question, so we think it's positive. It's a positive business case. We also think it's fairly small, so we're not talking about it.

[Pammi Bir, Analyst]

Okay. Okay, and just coming back to may be 11 Dufferin, what is your sense of the potential timing of releasing the vacancy there?

[Kevin Salsberg, Senior Vice]

Pammi, it's Kevin. It's hard to give exact items on the timing. I can say we've had a number of showings and some good discussions with potential tenants on their interest in the building. So I would say, we have some positive momentum going, but we don't really have anything concrete at this time that we're ready to discuss with you today.

[Pammi Bir, Analyst]

Is the pace a little bit surprising? Or is it kind of at where you expected?

[Kevin Salsberg, Senior Vice]

I think it's at where we expected. I think the commentary on the industrial leasing market in Calgary generally is it's going well. We're seeing positive absorption still. So I don't know if that's better than expected, but things are generally okay, right now.

[Pammi Bir, Analyst]

Okay. And then, just looking at potentially, I guess, some drop-downs from Canadian Tire and additional, I guess, acquisition opportunities. What can you comment on in terms of the outlook for, call it, over the next 12 months or maybe just looking at 2019 at this stage?

[Kenneth Silver, President, CEO & Trustee]

Pammi, it's Ken. Clearly, there is -- we're pursuing a balanced program of growth in both urban and secondary markets. We have still lots of opportunity, working with Canadian Tire in both the ability to acquire existing properties from them as well as develop and meet their needs from a store network planning perspective. I wouldn't specifically sort of lay out a number as to what we expect to invest in 2019. However, I'd say that I don't see, so far, anything that would be a radical shift in one direction or another from what we have been pursuing.

[Pammi Bir, Analyst]

Okay, that's helpful. And just, I guess, maybe lastly, what are you seeing, I guess, overall from transactions that do come across your desk from a cap rate standpoint across your markets? It sounds like -- your IFRS numbers were pretty stable. Just curious what you're seeing since then?

[Kevin Salsberg, Senior Vice]

Sure. Pammi, it's Kevin again. I think stability is exactly how I would characterize what we're seeing in the market. It always depends, obviously, on the asset and the geography, but on the whole, markets are sort of holding up and cap rates are fairly flat.

[Operator]

[Operator Instructions] Our next question is from Michael Smith with RBC Capital Markets.

[Michael Smith, Analyst]

Louis, we're going to miss you. Good luck in your retirement.

[Louis Marie Forbes, Executive Officer]

Thank you, Michael.

[Michael Smith, Analyst]

And welcome Lesley.

[Lesley Patricia Gibson, Chief Financial Officer]

Thank you.

[Michael Smith, Analyst]

So just -- I just have a couple of questions. Has there been any -- are there any real estate implications to Canadian Tire's digital strategy?

[Kenneth Silver, President, CEO & Trustee]

Michael, it's Ken. I don't think there are huge implications of Canadian Tire's digital strategy on the real estate network. I think they're continuing to evolve and announce recently some initiatives for how they were going to execute fulfillment of their e-commerce strategy and their multichannel strategy that may include some alterations to stores and whatnot. We'll see how that evolves, but I don't see any major shifts really in Canadian Tire's real estate strategy.

[Michael Smith, Analyst]

Okay. And Ken, you were -- I know you have a balanced approach to growth. Right now, you have about 48% of your AMR in [ VETCOM ] or like the markets. Do you anticipate that changing given what you're doing in some of the smaller markets over the next 5 years, do you think that will be pretty steady or...

[Kenneth Silver, President, CEO & Trustee]

Yes, I don't see really big shifts in that mix between urban and secondary. And I can point to projects like Canada Square or potential redevelopment of the Brampton, Steeles property that are much larger than the typical kind of transactions we do, which would certainly maintain that balance. We may do way more transactions in secondary markets only because they're way smaller.

[Michael Smith, Analyst]

Right, right, okay. And speaking of Canada Square, any updates on how that's going?

[Kenneth Silver, President, CEO & Trustee]

Well, I'm happy to report that there is discussions and negotiations going on between our partner Oxford with the City of Toronto and the underlying ground lease and there are discussions ongoing with Canadian Tire on their potential tenancy in a redeveloped Canada Square. These things are progressing at a pace, and I certainly look forward to the opportunity to tell you more when I have more to say.

[Michael Smith, Analyst]

But you're happy with the way things are going?

[Kenneth Silver, President, CEO & Trustee]

Yes. Certainly, they are progressing. And as I've mentioned earlier, we're somewhat constrained from a timing for the redevelopment, the construction of the LRT and the implications it has for phasing of the project.

[Operator]

Our next question is from Tal Woolley with National Bank Financial.

[Tal Woolley, Research Analyst]

Just maybe following a bit on what Michael was asking about with respect to the property redevelopment efforts by Canadian Tire. Where do you sort of see most of the renewal efforts going? Wondering if you could characterize maybe is it more Western Canada versus Eastern Canada, primary versus secondary, like -- I'm trying to get -- I'm trying to remember how those sort of progression of the larger stores went when they originally built that Tire and if that sort of holds a clue as to where we might see you doing more work at?

[Kenneth Silver, President, CEO & Trustee]

Tal, it's Ken. I would say the -- if you look at our historical announcements and project completions, they are literally coast-to-coast. Canadian Tire is pretty well penetrated across the country, so I wouldn't say that there is any significant focus one way or the other on a geographical region. And the sources of growth are pretty broad. I wouldn't say Canadian Tire is growing at a huge rate from a store count perspective. But they continue to look at the store network, improving the store network. There is some infilling that we have participated in, like the new store we're building in Sherwood Park. There are opportunities to improve the store network, like the relocation of the store in Grande Prairie. We don't own the existing store in Grande Prairie, so the replacement store will be incremental to our portfolio. And then, there has been 50-plus Canadian Tire store expansions that we have either completed or announced over the last 5 years, again from coast-to-coast. So it's kind of reflective of the health of the retailer's core business.

[Tal Woolley, Research Analyst]

Okay. And also on the e-commerce side, how -- is the current distribution for retail for the e-commerce is that all being handled through existing distribution centers?

[Kenneth Silver, President, CEO & Trustee]

Yes, I believe so through the existing distribution centers and the store network.

[Tal Woolley, Research Analyst]

And is there any sense over time yet, like a lot of retailers have to move to sort of stand-alone facilities for their e-commerce picking. Is there any sense that something that's on the horizon for Tire? Or is that a ways off?

[Kenneth Silver, President, CEO & Trustee]

Suffice it to say that as part of our relationship with Canadian Tire, we stay very close to them not just in terms of their retail store network strategy, but as well in their supply chain network strategy. And if there is an opportunity for the REIT to supply any growth, whether it's in a traditional DC facility or an e-commerce fulfillment facility that we hope to be able to participate in providing that.

[Operator]

Our next question is from Sam Damiani with TD Securities.

[Sam Damiani, Analyst]

Most of my follow-ups have been addressed, but maybe just on the IFRS fair value cap rates. You noted a little bit of truing up, I guess, in the Québec market. But was there any offsetting cap rate increases in any part of the market this quarter or year-to-date?

[Louis Marie Forbes, Executive Officer]

Sam, I think the answer is yes. Within the Québec portfolio, in particular, which really is the reason cited this quarter, we found that there was inconsistency in the cap rates we were using within the region. And so we realigned those cap rates to get better consistency and be more reflective of the external data we were getting. And that involves some cap rates going up and some cap rates going down, and what we've talked about with you is the net positive change, but there were some cap rates that went up in that analysis.

[Sam Damiani, Analyst]

So that's more of a reflection of just maybe, like as you're saying, it's sort of truing up, but presumably that reflects a change in the market from the last time these specific cap rates were revisited. Can you be more specific in terms of what components of the Québec portfolio either urban, suburban, tertiary or whatever were going up or down?

[Louis Marie Forbes, Executive Officer]

Sam, just a point of correction, we don't mean to suggest that our view of the market cap rates changed. We think the values and cap rates were very stable. It's the math we were using was inconsistent, and so we achieved better consistency within our math. That's all. So nobody's view has changed. To say whether the ups and downs were in one market or the other without having the full sheet of the portfolio in front of me, I would say it's probably ups and downs in every aspect of the market. So some urbans may have gone up, some urbans may have gone down. Some tertiaries may have gone up, some tertiaries may have gone down. And so there's no directional statement intended to be made by us.

[Sam Damiani, Analyst]

And therefore, nothing to read into?

[Louis Marie Forbes, Executive Officer]

Exactly.

[Operator]

Our next question is from Keith Howlett with Desjardins Securities.

[Keith Howlett]

I had question about the Sherwood Park and Grand Prairie stores. I take it Grand Prairie's a relocation and Sherwood Park is an additional store in that marketplace from what you say. I was just trying to determine -- the footprints don't look very big at 149,000 and 120,000-foot. I'm wondering if you can just speak to what the plan is there?

[Kenneth Silver, President, CEO & Trustee]

Keith, it's Ken, and thanks for dialing in today. They are -- the size of the stores, I think, are reflective of Canadian Tire's merchandising strategies and frankly, just the health and attractiveness of those markets.

[Operator]

Thank you. As there are no further questions at this time, I will turn the call over to Ken Silver, CEO, for any closing remarks.

[Kenneth Silver, President, CEO & Trustee]

Thank you, operator. Thank you, again, to Louis, and thank you to all of you for joining us today. We expect our fourth quarter results will be released the second week of February. We look forward to speaking with you then. It may be early, but we also wish all the best for the upcoming holiday season and a great 2019.

[Operator]

Thank you. The conference has now ended. Please disconnect your lines at this time. And we thank you for your participation.