Press Release

Crombie REIT Announces Fourth Quarter 2019 Results

Company Release - 2/26/2020 4:47 PM ET

Fourth Quarter Summary
(In thousands of CAD dollars, except per unit amounts and as otherwise noted)

  • Operating income of $44,149
  • Property revenue of $96,823
  • Same-asset property cash NOI growth of 3.0%
  • Debt to gross book value - fair value basis of 48.9%
  • Renewals of 699,000 square feet at rents 3.9% above expiring rates
  • Record year end committed occupancy of 96.1%
  • Gross purchase price on acquisitions of $114,933 and gross proceeds on dispositions of $193,333
  • Issuance of $150,000 Series G notes at an interest rate of 3.917% maturing in June 2027

NEW GLASGOW, NS, Feb. 26, 2020 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) today announced results for its fourth quarter ended December 31, 2019. Management will host a conference call to discuss the results at 1:00 p.m. (EST), February 27, 2020.

"Crombie demonstrated a disciplined commitment to net asset value ("NAV") creation during 2019 through innovative capital recycling, strong execution & expansion of our mixed-use development pipeline and solid operating fundamentals. We were pleased with our 35% Total Unitholder Return ("TUR") during 2019 and our 10 year average annual TUR of 11%," said Don Clow, President & CEO. "With an enhanced strategic relationship with Empire and Sobeys, a strong grocery anchored retail portfolio, one of the best mixed-use development pipelines in the Canadian REIT industry, a balanced capital structure with ample liquidity and multiple sources of capital, and a dynamic team, we are well positioned to continue executing on our strategy in 2020 and beyond."

Full details on our results can be found at www.crombiereit.com and www.sedar.com.

 

FINANCIAL RESULTS


Crombie's key financial metrics for the three and twelve months ended December 31, 2019 are as follows:



Three months ended December 31,

(In thousands of CAD dollars, except per unit amounts and as otherwise noted)

2019

2018

Change

Change (%)

Property revenue

$

96,823

$

104,296

$

(7,473)

(7.2)%

Property operating expenses


29,852


30,817


965

3.1%

Property net operating income ("NOI")

$

66,971

$

73,479

$

(6,508)

(8.9)%

Operating income attributable to Unitholders

$

44,149

$

20,111

$

24,038

119.5%

Same-asset property cash NOI (1)

$

59,760

$

57,998

$

1,762

3.0%

Funds from operations ("FFO") (1)








Basic

$

42,132

$

46,490

$

(4,358)

(9.4)%

Per unit - Basic

$

0.28

$

0.31

$

(0.03)

(9.7)%

Payout ratio, excluding special distribution (%)


80.1%


72.5%


7.6%


Adjusted funds from operations ("AFFO") (1)








Basic

$

36,006

$

39,771

$

(3,765)

(9.5)%

Per unit - Basic

$

0.24

$

0.26

$

(0.02)

(7.7)%

Payout ratio, excluding special distribution (%)


93.8%


84.8%


9.0%




(1)

Same-asset property cash NOI, FFO and AFFO are non-GAAP financial measures used by management to evaluate Crombie's business performance. See "Cautionary Statements" below and refer to Crombie's December 31, 2019 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO.

 

Same-asset property cash NOI increased by $1,762 or 3.0% compared to the fourth quarter of 2018 primarily due to rate increases on existing tenant leases, new leasing activity, and revenues from modernization investments and land use intensifications at certain properties. These items make up $1,471 (or 2.5%) of the increase, with the remaining increase due to the favourable impact from the adoption of IFRS 16 'Leases' on January 1, 2019.

Operating income attributable to Unitholders increased by $24,038 or 119.5% compared to the fourth quarter of 2018 primarily due to the disposition of investment properties, resulting in an increase of $25,618 from the gain on disposal of investment properties, a decrease in property NOI of $6,508, and a decrease of $3,158 in finance costs from operations due to repayments of debt.

FFO for the quarter was negatively impacted by the disposition of properties in the current and prior quarters as well as increases in general and administrative costs, primarily related to increased wages and benefits. The decline in AFFO is primarily due to the disposition of properties in the current and prior quarters and partially offset by the resulting decrease in maintenance expenditures on a square footage basis. FFO and AFFO were impacted by significant dispositions in 2018 and 2019 and by our investment in major development projects that will commence income generation and fuel FFO/AFFO growth in the next 12 to 24 months.

 



Twelve months ended December 31,

(In thousands of CAD dollars, except per unit amounts and as otherwise noted)

2019

2018

Change

Change (%)

Property revenue

$

398,741

$

414,649

$

(15,908)

(3.8)%

Property operating expenses


117,645

121,306


3,661

3.0%

Property NOI

$

281,096

$

293,343

$

(12,247)

(4.2)%

Operating income attributable to Unitholders

$

161,875

$

107,407

$

54,468

50.7%

Same-asset property cash NOI (1)

$

236,565

$

228,582

$

7,983

3.5%

FFO (1)








Basic

$

175,539

$

184,034

$

(8,495)

(4.6)%

Per unit - Basic

$

1.16

$

1.22

$

(0.06)

(4.9)%

Payout ratio, excluding special distribution (%)


76.9%


73.2%


3.7%


AFFO (1)








Basic

$

148,632

$

155,794

$

(7,162)

(4.6)%

Per unit - Basic

$

0.98

$

1.03

$

(0.05)

(4.9)%

Payout ratio, excluding special distribution (%)


90.8%


86.5%


4.3%




(1)

Same-asset property cash NOI, FFO and AFFO are non-GAAP financial measures used by management to evaluate Crombie's business performance. See "Cautionary Statements" below and refer to Crombie's December 31, 2019 Management's Discussion and Analysis ("MD&A") for a reconciliation of same-asset property cash NOI, FFO and AFFO.

 

Same-asset property cash NOI increased by $7,983 or 3.5% compared to the twelve months ending December 31, 2018 primarily due to rate increases on existing tenant leases, new leasing activity, lease termination income and revenues from modernization investments and land use intensifications accounting for approximately $6,821 (or 3.0%) of the increase, with the remaining increase due to the favourable impact from the adoption of IFRS 16.

On a year to date basis, operating income attributable to Unitholders increased by $54,468 or 50.7%. In addition to factors noted above, contributing to the magnitude of the increase was an impairment of $15,000 recognized on two retail properties in the second quarter of 2018 and an office property in the fourth quarter of 2018.

As mentioned above, FFO and AFFO were negatively impacted by the disposition of properties and increases in general and administrative costs, primarily related to the impact of increased unit price on unit-based compensation expense.

 

OPERATING RESULTS



December 31,
2019

September 30,
2019

June 30,

 2019

March 31,

 2019

December
31, 2018

Number of investment properties (1)

285

284

284

285

288

Gross leaseable area (2)

17,558,000

17,732,000

17,746,000

18,604,000

18,896,000

Economic occupancy (3)

95.4%

95.6%

95.2%

95.0%

95.3%

Committed occupancy (4)

96.1%

96.1%

95.9%

95.7%

96.0%



(1)

This includes properties owned at full and partial interests.

(2)

Gross leaseable area is adjusted to reflect Crombie's proportionate interest in partially-owned properties.

(3)

Represents space currently occupied.

(4)

Represents current economic occupancy plus lease contracts for future occupancy of currently vacant space.

 




December 31,
2019

September 30,
2019

June 30,

 2019

March 31,

 2019

December 31,
2018

Investment properties, fair value

$

4,605,000

$

4,626,000

$

4,592,000

$

4,755,000

$

4,776,000

Unencumbered investment properties (1)

$

1,223,452

$

960,275

$

953,738

$

1,012,707

$

998,523

Available liquidity (2)

$

449,016

$

450,967

$

413,087

$

346,347

$

312,459

Debt to gross book value - fair value (4)


48.9%


48.9%


49.2%


50.3%


51.0%

Weighted average interest rate (3)


4.17%


4.22%


4.19%


4.20%


4.20%

Debt to trailing 12 months EBITDA (4)


8.52x


8.35x


8.21x


8.56x


8.66x

Interest coverage ratio (4)


2.99x


2.90x


3.00x


2.93x


2.94x



(1)

Refer to Crombie's December 31, 2019 MD&A liquidity and capital resources section.

(2)

Refer to Crombie's December 31, 2019 MD&A highlights section.

(3)

Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.

(4)

Refer to Crombie's December 31, 2019 MD&A coverage ratio section.

 

Operations and Leasing

During the quarter, economic occupancy was 95.4% along with a record year end committed occupancy of 96.1%. During the quarter, Crombie renewed 699,000 square feet with an increase of 3.9% over expiring rent. New leases increased occupancy by 247,000 square feet at December 31, 2019 at an average first year rate of $20.68 per square foot.

Development

Crombie expects to invest, in total, approximately $609,200 in its first six active mixed-use major developments, with an estimated yield on cost of 5.5%-6.0%, at Crombie's share. Upon completion, these projects will total 759,000 square feet of commercial gross leasable area ("GLA") and 961,000 square feet of residential rental GLA and are broken out geographically as follows: 520,000 in the Greater Toronto Area, 308,000 in Vancouver, 567,000 in Montreal, 165,000 in St. John's and 160,000 in Langford, near Victoria.

Once complete, Crombie's active major development pipeline will increase our presence in Canada's top urban markets, diversify and improve our overall portfolio quality, and are expected to create significant NAV and AFFO growth. Crombie estimates its remaining capital outlay to complete these six projects is approximately $235,400 and will be incurred over the next two years. These estimates are subject to changes in construction costs and time to completion, as well as other development risks described in Crombie's 2019 annual MD&A under "Risk Management".

Dispositions

During the three months ended December 31, 2019, Crombie had total gross proceeds of $193,333 from the disposition of an 89% partial interest portfolio comprised of 15 properties across the country. This asset sale has been transacted in line with IFRS fair values and is part of Crombie's funding strategy, which redirects capital into developments that have the potential to deliver higher returns, at the same time improving our portfolio quality.

Acquisitions

During the fourth quarter, Crombie completed three transactions for total purchase price, before closing and transaction costs, of $114,933. This included a 100% interest in the retail component of an existing mixed-use development totalling 29,000 square feet for $6,611 and a 40,000 square foot freestanding Sobeys store in Halifax, Nova Scotia for $12,422. In addition, Crombie acquired the remaining 50% of a distribution centre in Vaughan, Ontario for $95,900, from related party, Empire Company Limited.

Highlighted Subsequent Events

On February 11, 2020, Crombie closed on an offering, on a bought deal basis, of $58,512 of Units at a price of $16.00 per Unit to a syndicate of underwriters co-led by CIBC Capital Markets and BMO Capital Markets. In addition, a subsidiary of Empire purchased, on a private placement basis, $41,500 of Class B LP Units of a subsidiary of Crombie, together with the attached Special Voting Units of Crombie, at a price of $16.00 per Class B Unit. After the closing of the public offering and the private placement, Empire continues to hold a 41.5% economic and voting interest in Crombie.

Conference Call Invitation

Crombie will provide additional details concerning its period ended December 31, 2019 results on a conference call to be held Thursday, February 27, 2020, beginning at 1:00 p.m. Eastern time. Accompanying the conference call will be a presentation which will be available on Crombie's website. To join this conference call, you may dial (416) 764-8688 or (888) 390-0546. You may also listen to a live audio webcast of the conference call by visiting Crombie's website located at www.crombiereit.com on the Investor Relations section of our website. Replay will be available until midnight March 12, 2020 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 736834 #, or on the Crombie website for 90 days after the meeting.

Cautionary Statements

NOI, same-asset property cash NOI, FFO, AFFO, EBITDA, available liquidity and unencumbered investment properties are non-GAAP financial measures that do not have a standardized meaning under International Financial Reporting Standards ("IFRS"). These measures as computed by Crombie may differ from similar computations as reported by other entities and, accordingly, may not be comparable to other such entities. Management includes these measures as they represent key performance indicators to management and it believes certain investors use these measures as a means of assessing Crombie's financial performance. For additional information on these non-GAAP measures see our Management's Discussion and Analysis for the three and twelve months ended December 31, 2019.

This news release contains forward-looking statements that reflect the current expectations of management of Crombie about Crombie's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may", "will", "estimate", "anticipate", "believe", "expect", "intend" and similar expressions have been used to identify these forward-looking statements. These statements reflect current beliefs and are based on information currently available to management of Crombie. Forward-looking statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed in the 2019 annual Management Discussion and Analysis under "Risk Management", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully, and a reader should not place undue reliance on the forward-looking statements. There can be no assurance that the expectations of management of Crombie will prove to be correct. Readers are cautioned that such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Crombie can give no assurance that actual results will be consistent with these forward-looking statements.

Specifically, this document includes, but is not limited to, forward-looking statements regarding:

(i) general growth and development opportunities and expansion across Canada including the expected impact of such growth from our mixed-use development pipeline, which could be impacted by real estate market cycles, the availability of labour, financing, and the cost of any such financing, capital resource allocation decisions and general economic conditions, as well as development activities undertaken by related parties not under the direct control of Crombie;

(ii) overall indebtedness levels and terms and expectations relating to refinancing, which could be impacted by the level of acquisition and disposition activity that Crombie is able to achieve, future financing opportunities, future interest rates and market conditions; and,

(iii) expected timing and costs of development projects currently underway and planned into the future.

About Crombie REIT

Crombie Real Estate Investment Trust ("Crombie") is an unincorporated, open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. Crombie is one of the country's leading national retail property landlords with a strategy to own, operate and develop a portfolio of high quality grocery- and drug store-anchored shopping centres, freestanding stores and mixed-use developments primarily in Canada's top urban and suburban markets. More information about Crombie can be found at www.crombiereit.com.

SOURCE Crombie REIT

Media Contact, Clinton Keay, CPA, CA, Chief Financial Officer and Secretary, Crombie REIT, (902) 755-8100