Press Release

Crombie REIT Announces $193.3 Million Portfolio Disposition

Company Release - 5/28/2019 8:00 AM ET

NEW GLASGOW, NS, May 28, 2019 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) announces today that it has entered into a second agreement of purchase and sale to sell an 89% non-managing interest in a 15-property portfolio for an aggregate purchase price of approximately $193.3 million ("Partial Disposition" or "Transaction") to an affiliate of Oak Street Real Estate Capital, LLC ("Oak Street"). Crombie will retain an 11% ownership interest and will continue to manage and operate the properties. The Transaction is scheduled to close in the fall of 2019. The first transaction announced with Oak Street closed on April 25, 2019.

This Partial Disposition is consistent with Crombie's previously announced transactions to recycle capital. None of the assets subject to the current Transaction are included in Crombie's mixed-use development pipeline.

"This partial disposition is another example of our team's solid execution of our strategy," said Don Clow, President and CEO. "Priced in line with IFRS fair values, it provides important funding to facilitate significant progress towards completion of our first five major development projects, which are expected to be nicely accretive to Net Asset Value and AFFO. This transaction strengthens our balance sheet through debt reduction and enables pre-funding of our major development activities well into 2020, aligning with our long-term funding strategy."

"These properties are an excellent addition to our portfolio, which is designed to create stable long-term cash flow backed by investment-grade rated corporations," said Marc Zahr, Chief Executive Officer and Managing Partner of Oak Street. "Crombie's industry leadership and long-term commitment to invest in these locations fits perfectly with our income-based strategy. We are very pleased to continue and grow our partnership with Crombie."

Highlights of the Transaction include:

  • The aggregate selling price is in line with IFRS fair values.
  • The portfolio is 100% occupied.
  • These properties are subject to long term leases with Sobeys.
  • Crombie will head lease the properties from a new jointly-owned nominee with terms that mirror the terms of the Sobeys leases.
  • As partial consideration for the Transaction, the Buyer will assume an 89% interest in 12 mortgages which will be assigned to the new jointly-owned nominee, with Crombie remaining as guarantor on a portion of the mortgages until maturity.
  • Proceeds to Crombie, net of mortgage assumptions and transaction costs, are estimated to be approximately $102.6 million.
  • Use of proceeds will be directed towards pursuing Crombie's value-creating mixed-use major development pipeline, funding of capital investments in Sobeys-occupied properties, repaying existing indebtedness, and general trust purposes.
  • The 15-property Transaction is expected to close in the fall of 2019, subject to receipt of Competition Act approval and other customary conditions.

The Disposition includes approximately 720,698 square feet of primarily free-standing grocery-anchored properties.

Property portfolio details:

 


Property

Property Address

City, Province

Anchor Tenant

Property GLA

1

Bradford

40 Melbourne Dr

Bradford, ON

Sobeys

35,230

2

Castleridge

55 Castleridge Blvd NE

Calgary, AB

Safeway

56,437

3

Saddletowne Circle

850 Saddletowne Circle

Calgary, AB

Safeway

50,945

4

Chilliwack

45850 Yale Road

Chilliwack, BC

Safeway

51,801

5

Fort McMurray

9601 Franklin Ave

Fort McMurray, AB

Safeway

40,397

6

Kamloops

945 Columbia St. W

Kamloops, BC

Safeway

49,745

7

Lebourgneuf

555 Boulevard des Grandins

Quebec, QC

IGA Extra

58,568

8

Orangeville

500 Riddell Rd

Orangeville, ON

Sobeys

46,337

9

Panavista

612 Main St

Dartmouth, NS

Sobeys

47,897

10

Ropewalk Lane

45 Ropewalk Lane

St John's, NL

Sobeys

50,420

11

Selkirk

318 Manitoba Ave

Selkirk, MB

Safeway

42,122

12

Spruce Grove

94 McLeod Ave

Spruce Grove, AB

Safeway

50,825

13

Sherbrooke

3950 Rue King Ouest

Sherbrooke, QC

IGA Extra

52,415

14

Smithers

3664 Hwy #16

Smithers, BC

Safeway

43,096

15

Stony Plain

4202 South Park Dr

Stony Plain, AB

Safeway

44,463

Total

720,698

 

BMO Capital Markets Real Estate Inc. is acting as exclusive advisor to Crombie REIT on this Transaction.

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 drugstore-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.

About Oak Street

Oak Street Real Estate Capital is a real estate investment management firm based in Chicago, Illinois, USA. Oak Street manages both commingled funds and separate accounts on behalf of both institutional and high net-worth investors. The firm focuses on acquiring properties net-leased to investment grade rated tenants and specializes in providing unique and flexible capital solutions to a variety of organizations including corporations, healthcare systems, universities, and government entities. For more information on Oak Street, please visit www.oakstreetrec.com.

Forward-looking Information

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 2018 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, forward-looking statements regarding the anticipated timing for completion of pending co-ownership transactions, statements regarding Crombie's intended use of proceeds from completed and pending dispositions, which may depend on Crombie's financial requirements at the time proceeds are received, and statements regarding the accretive nature of Crombie's five major development projects, which depend on such developments being completed with costs consistent with Crombie's current budgets, market capitalization rates in the local areas where the major development projects are located remaining the same as current capitalization rates, Crombie's expected costs of financing such development projects remaining as currently budgeted, successful leasing of such completed developments at rents consistent with current market rents in such jurisdictions, and Crombie's net operating income derive from the completed projects equaling or exceeding Crombie's current expectations as a percentage of Crombie's currently budgeted costs to develop.  There can be no assurance that these factors will not have changed by the time the five major development projects are completed, which may adversely impact the possible accretion to Crombie's Net Asset Value or adjusted funds from operations.

Non-GAAP Measures

Net Asset Value and adjusted funds from operations 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 considers 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 months ended March 31, 2019.

 

SOURCE Crombie REIT

Media Inquiries: Clinton Keay, CPA, CA, Chief Financial Officer and Secretary, 902-755-8100; Claire Mahaney Lyon, CFA, MFM, Manager, Investor Relations, 902-474-6670