Focus on fundamentals and operational excellence drives
strong results
NEW
GLASGOW, NS, Nov. 8, 2023
/CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX:
CRR.UN) today announced results for its third quarter ended
September 30, 2023. Management will
host a conference call to discuss the results at 12:00 p.m. (EST), November 9, 2023.
"The strength of our portfolio and our operational excellence
delivered another consistent and solid quarter, including healthy
same-asset property cash NOI and renewal growth," said Mark Holly, President and CEO. "We continue to
remain focused on stability and growth. The team's dedication to
our fundamentals, our financial condition, and the prudent
allocation of capital allows us to advance near and long-term
strategic initiatives."
THIRD QUARTER SUMMARY
(In thousands of Canadian
dollars, except per Unit amounts and square feet and as otherwise
noted)
Operational Highlights
- Committed occupancy 96.4% and economic occupancy 96.0%; a 40
basis point decrease and a 20 basis point decrease, respectively,
compared to the third quarter of 2022
- Renewals of 238,000 square feet at rents 6.5% above expiring
rental rates (an increase of 7.9% using the weighted average rent
during the renewal term)
- Crombie paid $29,961 to
subsidiaries of Empire in connection with the assignment of 24
subleases and the right-to-develop at an existing asset
- 2023 GRESB Standing Investment and Development benchmark scores
increased 45% and 25% from 2022, respectively
Financial Highlights
- Property revenue of $104,491, a
0.8% increase from $103,642 in the
third quarter of 2022
- Operating income attributable to Unitholders of $27,796, an increase of 5.2% compared to the
third quarter of 2022
- Net property income(1) of $71,453, a 0.2% decrease from $71,574 in the third quarter of 2022
- FFO(1) of $56,510 or
$0.31 per Unit compared to
$52,665 or $0.30 per Unit in the third quarter of 2022
- FFO(1) payout ratio of 70.9% for the third quarter
of 2023 compared to 75.0% for the same period last year
- AFFO(1) of $49,962 or
$0.28 per Unit compared to
$46,787 or $0.26 per Unit in the third quarter of 2022
- AFFO(1) payout ratio of 80.2% for the third quarter
of 2023 compared to 84.5% for the same period last year
- Same-asset property cash NOI(1) increased 2.8%
compared to the third quarter of 2022
- Debt to gross fair value(1)(2) of 42.4%, compared to
42.0% for the same period last year
- Debt to trailing 12 months adjusted EBITDA(1)(2) of
8.13x compared to 8.50x at the third quarter of 2022
- Fair value of unencumbered investment properties of
$2,581,919, a 17.3% increase from
$2,200,890 for the same period last
year
- Available liquidity of $564,903,
a 26.8% increase from $445,372 in the
third quarter of 2022
(1)
|
Non-GAAP financial
measures used by management to evaluate Crombie's business
performance. See "Cautionary Statements and Non-GAAP Measures"
below for a reconciliation of net property income, FFO, FFO payout
ratio, AFFO, AFFO payout ratio, same-asset property cash NOI, debt
to gross fair value, and debt to trailing 12 months adjusted
EBITDA.
|
(2)
|
At Crombie's
proportionate share including joint ventures.
|
Information in this press release is a select summary of
results. This press release should be read in conjunction with
Crombie's Management's Discussion and Analysis for the quarter
ended September 30, 2023 and
Consolidated Financial Statements and Notes for the quarters ended
September 30, 2023, and September 30, 2022. Full details on our results
can be found at www.crombie.ca and www.sedarplus.com.
Financial Results
Crombie's key financial metrics for the three months ended
September 30, 2023 are as
follows:
|
Three months ended
September 30,
|
(In thousands of
Canadian dollars, except per Unit amounts and as otherwise
noted
|
2023
|
2022
|
Variance
|
%
|
Net property income
(1)
|
$
71,453
|
$
71,574
|
$
(121)
|
(0.2) %
|
Operating income
attributable to Unitholders
|
$
27,796
|
$
26,410
|
$
1,386
|
5.2 %
|
Same-asset property
cash NOI (1)
|
$
71,455
|
$
69,534
|
$
1,921
|
2.8 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
56,510
|
$
52,665
|
$
3,845
|
7.3 %
|
Per Unit -
Basic
|
$
0.31
|
$
0.30
|
$
0.01
|
3.3 %
|
Payout ratio
(1)
|
70.9 %
|
75.0 %
|
|
(4.1) %
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
49,962
|
$
46,787
|
$
3,175
|
6.8 %
|
Per Unit -
Basic
|
$
0.28
|
$
0.26
|
$
0.02
|
7.7 %
|
Payout ratio
(1)
|
80.2 %
|
84.5 %
|
|
(4.3) %
|
(1) Net property
income, same-asset property cash NOI, FFO, FFO payout ratio,
AFFO, and AFFO payout ratio are non-GAAP financial measures used by
management to evaluate Crombie's business performance. See
"Cautionary Statements and Non-GAAP Measures" below for a
reconciliation of same-asset property cash NOI, FFO, FFO payout
ratio, AFFO, and AFFO payout ratio.
|
Operating income attributable to Unitholders increased by
$1,386, or 5.2%, primarily due to a
decrease of $10,400 in impairment of
investment properties, and lower depreciation and amortization of
$2,910 due to accelerated
depreciation recorded in the third quarter of 2022 on a property
scheduled for demolition. Income from equity-accounted investments
increased $2,663, of which
$2,345 resulted from the sale of land
at our Opal Ridge joint venture in
Dartmouth, Nova Scotia. The growth
in operating income was offset in part by gain on disposal of
investment properties of $13,357 in
the third quarter of 2022 and increased general and administrative
expenses of $1,102 due to higher
consulting costs, salaries and benefits and Unit-based compensation
costs in the third quarter of 2023. Operating income growth was
further offset by gain on distribution from equity-accounted
investments of $1,000 in the third
quarter of 2022, resulting from cash distributions received from
1600 Davie Limited Partnership in excess of our investment in the
joint venture.
Same-asset property cash NOI increased by $1,921, or 2.8%, compared to the third quarter of
2022 primarily due to renewals and new leasing, higher supplemental
rent of $467 from modernizations and
capital improvements, and increased lease termination income of
$463 resulting from a tenant
surrender.
The increase in FFO of $3,845 was
primarily due to growth in income from equity-accounted investments
of $2,663, of which $2,345 resulted from the sale of land at our
Opal Ridge joint venture in
Dartmouth, Nova Scotia in the
third quarter of 2023, increased rental revenue of $1,914 from new developments, and $1,586 from renewals and new leasing. This was
partially offset by increased general and administrative expenses
of $1,102 due to higher consulting
costs, salaries and benefits, and Unit-based compensation costs in
the third quarter of 2023. The growth in FFO in the quarter was
further offset by reduced revenue of $720 related to dispositions, and decreased
percentage rent of $509.
The increase in AFFO was primarily due to the same factors
impacting FFO, offset in part by an increase in the maintenance
expenditure charge for 2023 from $1.00 to $1.10 per
square foot of weighted average GLA, an increased charge of
$472 for the quarter.
Crombie's key financial metrics for the nine months ended
September 30, 2023 are as
follows:
|
Nine months ended
September 30,
|
(In thousands of
Canadian dollars, except per Unit amounts and as otherwise
noted)
|
2023
|
2022
|
Variance
|
%
|
Net property income
(1)
|
$
211,543
|
$
211,002
|
$
541
|
0.3 %
|
Operating income
attributable to Unitholders
|
$
72,526
|
$
80,082
|
$
(7,556)
|
(9.4) %
|
Same-asset property
cash NOI (1)
|
$
209,491
|
$
204,112
|
$
5,379
|
2.6 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
155,413
|
$
151,633
|
$
3,780
|
2.5 %
|
Per Unit -
Basic
|
$
0.87
|
$
0.86
|
$
0.01
|
1.2 %
|
Payout ratio
(1)
|
77.1 %
|
77.9 %
|
|
(0.8) %
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
134,989
|
$
132,236
|
$
2,753
|
2.1 %
|
Per Unit -
Basic
|
$
0.75
|
$
0.75
|
$
—
|
— %
|
Payout ratio
(1)
|
88.7 %
|
89.3 %
|
|
(0.6) %
|
(1) Net property
income, same-asset property cash NOI, FFO, FFO payout ratio,
AFFO, and AFFO payout ratio are non-GAAP financial measures used by
management to evaluate Crombie's business performance. See
"Cautionary Statements and Non-GAAP Measures" below for a
reconciliation of net property income, same-asset property cash
NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio.
|
Operating income attributable to Unitholders decreased by
$7,556, or 9.4%, on a year-to-date
basis, primarily due to lower gain on disposal of investment
properties of $17,632, and higher
general and administrative expenses resulting from employee
transition costs of $7,172 in the
second quarter of 2023. Also contributing to the variance year over
year was a gain on distribution from equity-accounted investments
of $2,933 in the first nine months of
2022 as a result of cash distributions received from 1600 Davie
Limited Partnership in excess of our investment in the joint
venture. The decrease was offset in part by a reduction of
$10,400 in impairment of investment
properties and growth in income from equity-accounted investments
of $6,077, of which $5,722 resulted from the sale of land at our
Opal Ridge joint venture in
Dartmouth, Nova Scotia in the
first nine months of 2023. Further offsetting the decrease in
operating income was revenue from management and development
services of $2,343, and reduced
depreciation and amortization of $2,097 due to accelerated depreciation recorded
in the third quarter of 2022 on a property scheduled for
demolition.
On a year-to-date basis, same-asset property cash NOI increased
by $5,379, or 2.6%, compared to the
same period in 2022 primarily due to renewals and new leasing, and
an increase in supplemental rent of $1,274 from modernizations and capital
improvements. Additionally, lease termination income increased by
$917 resulting from tenant surrenders
and parking revenue increased by $899
compared to the same period in 2022. The increase in same-asset
property cash NOI was offset in part by an increase in bad debt
expense of $494.
For the nine months ended September 30,
2023, FFO increased by $3,780
primarily driven by growth in income from equity-accounted
investments of $6,077, of which
$5,722 resulted from the sale of land
at our Opal Ridge joint venture in
Dartmouth, Nova Scotia in the
first nine months of 2023, and revenue from management and
development services of $2,343.
Higher rental revenue of $2,607 from
new developments, $2,478 from
renewals and new leasing, $1,603 from
acquisitions, and $1,297 in
supplemental rent from modernization investments further
contributed to the increase in FFO. Additionally, lease termination
income increased $917 and parking
revenue improved $899 compared to the
same period in 2022. FFO growth was offset in part by higher
general and administrative expenses resulting from employee
transition costs of $7,172 in the
second quarter of 2023, a decrease of $2,816 in rental revenue from dispositions, and
lower percentage rent of $711. FFO
excluding employee transition costs of $7,172 was $162,585, or $0.91
per Unit.
The growth in AFFO on a year-to-date basis was driven primarily
by the same factors impacting FFO. It was offset in part by the
increase in the maintenance expenditure charge for 2023 from
$1.00 to $1.10 per square foot of weighted average GLA, an
increased charge of $1,411 for the
period. AFFO excluding employee transition costs of $7,172 was $142,161, or $0.79
per Unit.
Operating Results
|
September 30,
2023
|
June
30, 2023
|
March
31, 2023
|
December 31,
2022
|
September 30,
2022
|
Number of investment
properties (1)
|
294
|
293
|
291
|
289
|
290
|
Gross leasable area
(2)
|
18,652,000
|
18,625,000
|
18,550,000
|
18,445,000
|
18,331,000
|
Economic occupancy
(3)
|
96.0 %
|
95.9 %
|
94.5 %
|
94.8 %
|
96.2 %
|
Committed occupancy
(4)
|
96.4 %
|
96.4 %
|
96.7 %
|
96.9 %
|
96.8 %
|
(1) This
includes properties owned at full and partial interests, excluding
joint ventures.
|
(2) Gross
leasable area is adjusted to reflect Crombie's proportionate
interest in partially owned properties, excluding joint
ventures.
|
(3)
Represents space currently under lease contract and rent has
commenced.
|
(4)
Represents current economic occupancy plus completed lease
contracts for future occupancy of currently available
space.
|
|
September 30,
2023
|
June
30, 2023
|
March
31, 2023
|
December 31,
2022
|
September 30,
2022
|
Investment properties,
fair value
|
$ 5,170,000
|
$ 5,123,000
|
$ 5,097,000
|
$ 5,050,000
|
$ 5,265,000
|
Investment properties
held in joint ventures, fair value, at Crombie's share
(1)
|
$
442,000
|
$
447,500
|
$
447,000
|
$
454,000
|
$
453,000
|
Unencumbered investment
properties (2)
|
$ 2,581,919
|
$ 2,488,359
|
$ 2,291,396
|
$ 2,154,468
|
$ 2,200,890
|
Available liquidity
(3)
|
$
564,903
|
$
614,072
|
$
735,877
|
$
583,003
|
$
445,372
|
Debt to gross book
value - cost basis (4)
|
45.3 %
|
45.2 %
|
44.9 %
|
44.6 %
|
46.2 %
|
Debt to gross fair
value (5)(6)
|
42.4 %
|
42.3 %
|
41.9 %
|
41.8 %
|
42.0 %
|
Weighted average
interest rate (7)
|
4.0 %
|
4.0 %
|
4.0 %
|
3.8 %
|
3.8 %
|
Debt to trailing 12
months adjusted EBITDA (5)(6)
|
8.13x
|
8.17x
|
7.96x
|
8.02x
|
8.50x
|
Interest coverage ratio
(5)(6)
|
3.41x
|
2.95x
|
3.24x
|
3.26x
|
3.32x
|
(1)
|
See Joint Ventures
section in the Management's Discussion and Analysis.
|
(2)
|
Represents fair value
of unencumbered properties.
|
(3)
|
Represents the undrawn
portion on the credit facilities, excluding joint facilities with
joint operation partners.
|
(4)
|
See Capital Management
note in the Financial Statements.
|
(5)
|
Non-GAAP financial
measures used by management to evaluate Crombie's business
performance. See "Cautionary Statements and Non-GAAP Measures"
below for a reconciliation of debt to gross fair value, debt to
trailing 12 months adjusted EBITDA, and interest coverage
ratio.
|
(6)
|
See Debt Metrics
section in the Management's Discussion and Analysis.
|
(7)
|
Calculated based on
interest rates for all outstanding fixed rate debt.
|
Operations and Leasing
During the quarter, Crombie achieved economic occupancy of 96.0%
and committed occupancy of 96.4%. Crombie renewed 238,000 square
feet with an increase of 6.5% over expiring rents during the
quarter. Year to date, new leases increased occupancy by 457,000
square feet at an average first year rate of $22.24 per square foot.
Development
Crombie segregates its development pipeline by expected timing.
Near-term projects indicate that a decision to commit financially
is expected to be determined within the next two years. Currently,
Crombie has three developments classified as near-term projects.
Upon completion, these projects will total approximately 960,000
square feet of residential GLA (1,461 residential units) and
105,000 square feet of commercial GLA. The geographical breakdown
of GLA in square feet is as follows: 731,000 in Vancouver; 145,000 in Victoria and 189,000 in Halifax.
The Marlstone, a 291-unit residential rental project in the
heart of downtown Halifax, is
under active development, with an estimated total cost of
$134,000 and an estimated yield on
cost of 4.5% - 5.5%. Demolition and existing building upgrades
commenced in May 2023 and the
residential tower construction will commence in December 2023. Completion is expected in the
first quarter of 2026.
Timing, total project cost, and yield on cost are estimates and
assumptions and subject to change, as well as other development
risks described in Crombie's third quarter Management's Discussion
and Analysis under "Development" and "Risk Management".
Empire Transactions
During the third quarter of 2023, Crombie paid $16,361 to a subsidiary of Empire in connection
with the assignment of 24 subleases to Crombie for retail sites in
Western Canada. This payment was
allocated to either deferred leasing costs or tenant incentive
additions, based on each component's relative fair value.
Crombie paid an initial right-to-develop fee of $13,600 to a subsidiary of Empire, which resulted
in the existing lease being modified. The right to develop will
allow Crombie flexibility as it works through the entitlement and
future development of an existing property in which a subsidiary of
Empire is currently a tenant.
2023 GRESB Submission
Crombie completed its third annual submission to GRESB, for the
Standing Investments and Development benchmarks. GRESB awarded
Crombie with a Green Star for excellence in both Standing
Investments and Development. Crombie improved its score by 45% for
the Standing Investments benchmark compared to last year, through
enhanced energy, water, and waste data coverage. Crombie's
Development benchmark score improved 25%, over last year.
Changes to the Board of Trustees
Michael Knowlton, Chair of the
Board, has announced his intention to retire from his role as Board
Chair and from the Board of Trustees following Crombie's Annual
General Meeting in May 2024. Mr.
Knowlton was appointed as Board Chair in May
2019 and has served as a Trustee since 2011. His leadership
has left a tremendous mark on Crombie and he retires leaving the
company well-positioned for continued success.
To ensure an orderly transition, Crombie's Board of Trustees
formed a special sub-committee to identify Crombie's next Board
Chair. After conducting a thorough process, the Board is announcing
Jason Shannon as Chair of the Board
of Trustees upon Mr. Knowlton's retirement. Mr. Shannon joined the
Crombie Board in 2016, has been Chair of Crombie's Investment
Committee since 2019 and brings a wealth of experience to this
role. He is President of Shannex Incorporated, a home care,
retirement and assisted living and long-term care organization.
Highlighted Subsequent Event
On November 3, 2023, Crombie
entered into a right-to-develop agreement with a subsidiary of
Empire with an initial fee payable of $20,700 which resulted in an existing lease being
modified. The right to develop will allow Crombie flexibility as it
works through the entitlement and future development of an existing
property in which a subsidiary of Empire is currently a
tenant.
Conference Call Invitation
Crombie will provide additional details concerning its period
ended September 30, 2023 results on a
conference call to be held Thursday, November 9, 2023,
beginning at 12:00 p.m. (EST).
Accompanying the conference call will be a presentation that will
be available on Crombie's website. To join this conference call,
you may dial (416) 764-8688 or (888) 390-0546. To join the
conference call without operator assistance, you may register and
enter your phone number at https://emportal.ink/3PINWC6 to receive
an instant automated call back. You may also listen to a live audio
webcast of the conference call by visiting the Investor section of
Crombie's website at www.crombie.ca.
Replay will be available until midnight November 16, 2023 by dialing (416) 764-8677 or
(888) 390-0541 and entering passcode 370472 #, or on the Crombie
website for 90 days following the conference call.
Cautionary Statements and Non-GAAP Measures
Net property income, same-asset property cash NOI, FFO, AFFO,
FFO payout ratio, AFFO payout ratio, debt to trailing 12 months
adjusted EBITDA, debt to gross fair value, and interest coverage
ratio 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 nine months ended September 30,
2023.
The reconciliations for each non-GAAP measure included in this
press release are outlined as follows:
Net Property Income
Management uses net property income as a measure of performance
of properties period-over-period.
Net property income, which excludes revenue from management and
development services and certain expenses such as interest expense
and indirect operating expenses, is as follows:
|
Three months ended
September 30,
|
|
|
Nine months ended
September 30,
|
|
2023
|
|
2022
|
|
Variance
|
|
|
2023
|
|
2022
|
|
Variance
|
Property
revenue
|
$
104,491
|
|
$
103,642
|
|
$
849
|
|
|
$
320,009
|
|
$
311,652
|
|
$ 8,357
|
Property operating
expenses
|
(33,038)
|
|
(32,068)
|
|
(970)
|
|
|
(108,466)
|
|
(100,650)
|
|
(7,816)
|
Net property
income
|
$
71,453
|
|
$
71,574
|
|
$
(121)
|
|
|
$
211,543
|
|
$
211,002
|
|
$
541
|
Same-Asset Property Cash NOI
Crombie measures certain performance and operating metrics on a
same-asset basis to evaluate the period-over-period performance of
those properties owned and operated by Crombie. "Same-asset" refers
to those properties that were owned and operated by Crombie for the
current and comparative reporting periods. Properties that will be
undergoing a redevelopment in a future period, and those for which
planning activities are underway are also in this category until
such development activities commence and/or tenant leasing/renewal
activity is suspended. Same‐asset property cash NOI reflects
Crombie's proportionate ownership of jointly operated properties
(and excludes any properties held in joint ventures).
Management uses net property income on a cash basis (property
cash NOI) as a measure of performance as it reflects the cash
generated by properties period-over-period.
Net property income on a cash basis, which excludes non-cash
straight-line rent recognition and amortization of tenant incentive
amounts, is as follows:
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Net property
income
|
$
71,453
|
$
71,574
|
$
(121)
|
$ 211,543
|
$ 211,002
|
$
541
|
Non-cash straight-line
rent
|
(774)
|
(572)
|
(202)
|
(2,917)
|
(3,784)
|
867
|
Non-cash tenant
incentive amortization (1)
|
7,838
|
5,795
|
2,043
|
19,987
|
17,049
|
2,938
|
Property cash
NOI
|
78,517
|
76,797
|
1,720
|
228,613
|
224,267
|
4,346
|
Acquisitions and
dispositions property cash NOI
|
532
|
1,100
|
(568)
|
2,066
|
4,334
|
(2,268)
|
Development property
cash NOI
|
6,530
|
6,163
|
367
|
17,056
|
15,821
|
1,235
|
Acquisitions,
dispositions, and development property cash NOI
|
7,062
|
7,263
|
(201)
|
19,122
|
20,155
|
(1,033)
|
Same-asset property
cash NOI
|
$
71,455
|
$
69,534
|
$
1,921
|
$ 209,491
|
$ 204,112
|
$
5,379
|
(1) Refer
to "Amortization of Tenant Incentives" in the Management's
Discussion and Analysis for the breakdown of tenant incentive
amortization.
|
Funds from Operations (FFO)
Crombie follows the recommendations of the January 2022 guidance of the Real Property
Association of Canada ("REALPAC")
in calculating FFO.
The reconciliation of FFO for the three and nine months ended
September 30, 2023 and 2022 is as
follows:
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Decrease in net assets
attributable to Unitholders
|
$
(11,090)
|
$
(11,321)
|
$
231
|
$
(43,936)
|
$
(34,034)
|
$
(9,902)
|
Add
(deduct):
|
|
|
|
|
|
|
Amortization of tenant
incentives
|
7,838
|
5,795
|
2,043
|
19,987
|
17,049
|
2,938
|
Gain on disposal of
investment properties
|
(477)
|
(13,357)
|
12,880
|
(588)
|
(18,220)
|
17,632
|
Gain on distribution
from equity-accounted investments
|
—
|
(1,000)
|
1,000
|
—
|
(2,933)
|
2,933
|
Impairment of
investment properties
|
—
|
10,400
|
(10,400)
|
—
|
10,400
|
(10,400)
|
Depreciation and
amortization of investment properties
|
19,453
|
22,387
|
(2,934)
|
57,637
|
59,753
|
(2,116)
|
Adjustments for
equity-accounted investments
|
1,243
|
1,248
|
(5)
|
3,515
|
3,271
|
244
|
Principal payments on
right-of-use assets
|
60
|
58
|
2
|
175
|
171
|
4
|
Internal leasing
costs
|
597
|
724
|
(127)
|
2,161
|
2,060
|
101
|
Finance costs -
distributions to Unitholders
|
40,077
|
39,513
|
564
|
119,773
|
118,143
|
1,630
|
Finance costs (income)
- change in fair value of financial instruments
(1)
|
(1,191)
|
(1,782)
|
591
|
(3,311)
|
(4,027)
|
716
|
FFO as calculated based
on REALPAC recommendations
|
$
56,510
|
$
52,665
|
$ 3,845
|
$
155,413
|
$
151,633
|
$ 3,780
|
Basic weighted average
Units (in 000's)
|
180,003
|
177,491
|
2,512
|
179,332
|
175,728
|
3,604
|
FFO per Unit -
basic
|
$ 0.31
|
$ 0.30
|
$ 0.01
|
$ 0.87
|
$ 0.86
|
$ 0.01
|
FFO payout ratio
(%)
|
70.9 %
|
75.0 %
|
(4.1) %
|
77.1 %
|
77.9 %
|
(0.8) %
|
(1)
Includes the fair value changes of Crombie's deferred unit
plan.
|
Adjusted Funds from Operations (AFFO)
Crombie follows the recommendations of REALPAC's January 2022 guidance in calculating AFFO and has
applied these recommendations to the AFFO amounts included in this
press release and Management's Discussion and Analysis.
The reconciliation of AFFO for the three and nine months ended
September 30, 2023 and 2022 is as
follows:
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
FFO as calculated based
on REALPAC recommendations
|
$
56,510
|
$
52,665
|
$
3,845
|
$ 155,413
|
$ 151,633
|
$
3,780
|
Add
(deduct):
|
|
|
|
|
|
|
Straight-line rent
adjustment
|
(774)
|
(572)
|
(202)
|
(2,917)
|
(3,784)
|
867
|
Straight-line rent
adjustment included in income (loss) from equity-accounted
investments
|
9
|
80
|
(71)
|
165
|
353
|
(188)
|
Internal leasing
costs
|
(597)
|
(724)
|
127
|
(2,161)
|
(2,060)
|
(101)
|
Maintenance
expenditures on a square footage basis
|
(5,186)
|
(4,662)
|
(524)
|
(15,511)
|
(13,906)
|
(1,605)
|
AFFO as calculated
based on REALPAC recommendations
|
$
49,962
|
$
46,787
|
$
3,175
|
$ 134,989
|
$ 132,236
|
$
2,753
|
Basic weighted average
Units (in 000's)
|
180,003
|
177,491
|
2,512
|
179,332
|
175,728
|
3,604
|
AFFO per Unit -
basic
|
$ 0.28
|
$ 0.26
|
$ 0.02
|
$ 0.75
|
$ 0.75
|
$
—
|
AFFO payout ratio
(%)
|
80.2 %
|
84.5 %
|
(4.3) %
|
88.7 %
|
89.3 %
|
(0.6) %
|
Debt Metrics
When calculating debt to gross fair value, debt is defined as
obligations for borrowed money, including obligations incurred in
connection with acquisitions, excluding trade payables and accruals
in the ordinary course of business, and distributions payable. Debt
includes Crombie's share of debt held in equity-accounted joint
ventures.
Gross fair value includes investment properties measured at fair
value, including Crombie's share of those held within joint
ventures. All other components of gross fair value are measured at
the carrying value included in Crombie's financial statements.
Crombie's methodology for determining the fair value of investment
properties includes capitalization of trailing 12 months net
property income using biannual capitalization rates from external
property valuators. The majority of investment properties are also
subject to external, independent appraisals on a rotational basis
over a period of not more than four years. Valuation techniques are
more fully described in Crombie's year-end audited financial
statements.
The fair value included in this calculation reflects the fair
value of the properties as at September 30,
2023 and December 31, 2022,
respectively, based on each property's current use as a
revenue-generating investment property. As at September 30, 2023, Crombie's weighted average
capitalization rate used in the determination of the fair value of
its investment properties was 5.96%, an increase of two basis
points from December 31, 2022.
Crombie's weighted average capitalization rate used in the
determination of the fair value of its share of investment
properties held in equity-accounted joint ventures was 3.60% as at
September 30, 2023, an increase of
thirteen basis points from December 31,
2022. For an explanation of how Crombie determines
capitalization rates, see the "Other Disclosures" section of the
Management's Discussion and Analysis, under "Investment Property
Valuation" in the "Use of Estimates and Judgments" section.
|
September
30,
2023
|
|
December 31,
2022
|
Fixed rate
mortgages
|
$
799,190
|
|
$
918,552
|
Senior unsecured
notes
|
1,175,000
|
|
975,000
|
Unsecured non-revolving
credit facility
|
77,397
|
|
150,000
|
Revolving credit
facility
|
84,820
|
|
—
|
Joint operation credit
facility
|
3,326
|
|
10,264
|
Debt held in joint
ventures, at Crombie's share (1) (2)
|
273,953
|
|
270,642
|
Lease
liabilities
|
34,698
|
|
35,000
|
Adjusted
debt
|
$
2,448,384
|
|
$
2,359,458
|
|
|
|
|
Investment properties,
fair value
|
$
5,170,000
|
|
$
5,050,000
|
Investment properties
held in joint ventures, fair value, at Crombie's share
(2)
|
442,000
|
|
447,000
|
Other assets, cost
(3)
|
115,673
|
|
99,728
|
Other assets, cost,
held in joint ventures, at Crombie's share (2) (3)
(4)
|
28,380
|
|
26,974
|
Cash and cash
equivalents
|
110
|
|
6,117
|
Cash and cash
equivalents held in joint ventures, at Crombie's share
(2)
|
8,849
|
|
2,487
|
Deferred financing
charges
|
7,617
|
|
7,843
|
Gross fair
value
|
$
5,772,629
|
|
$
5,647,149
|
Debt to gross fair
value
|
42.4 %
|
|
41.8 %
|
(1)
Includes Crombie's share of fixed and floating rate mortgages,
construction loans, revolving credit facility, and lease
liabilities held in joint ventures.
|
(2) See the
"Joint Ventures" section in the Management's Discussion and
Analysis.
|
(3)
Excludes tenant incentives, accumulated amortization, and accrued
straight-line rent receivable.
|
(4)
Includes deferred financing charges.
|
The following table presents a reconciliation of operating
income attributable to Unitholders to adjusted EBITDA. Adjusted
EBITDA is a non-GAAP measure and should not be considered an
alternative to operating income attributable to Unitholders, and
may not be comparable to that used by other entities.
|
Three months
ended
|
|
September 30,
2023
|
June 30,
2023
|
March 31,
2023
|
December 31,
2022
|
September 30,
2022
|
Operating income
attributable to Unitholders
|
$
27,796
|
$
19,557
|
$
25,173
|
$
87,718
|
$
26,410
|
Amortization of tenant
incentives
|
7,838
|
5,357
|
6,792
|
5,940
|
5,795
|
Gain on disposal of
investment properties
|
(477)
|
—
|
(111)
|
(62,584)
|
(13,357)
|
Gain on distribution
from equity-accounted investments
|
—
|
—
|
—
|
—
|
(1,000)
|
Impairment of
investment properties
|
—
|
—
|
—
|
—
|
10,400
|
Depreciation and
amortization
|
19,834
|
19,494
|
19,420
|
18,991
|
22,744
|
Finance costs -
operations
|
20,665
|
21,000
|
20,764
|
20,623
|
20,884
|
(Income) loss from
equity-accounted investments
|
(876)
|
1,425
|
(1,673)
|
1
|
1,787
|
Property revenue in
joint ventures, at Crombie's share
|
9,691
|
4,144
|
11,269
|
7,271
|
3,258
|
Property operating
expenses in joint ventures, at Crombie's share
|
(4,270)
|
(1,231)
|
(5,170)
|
(3,022)
|
(1,296)
|
General and
administrative expenses in joint ventures, at Crombie's
share
|
(145)
|
(54)
|
(107)
|
(77)
|
(31)
|
Taxes -
current
|
—
|
—
|
—
|
4
|
—
|
Adjusted EBITDA
[1]
|
$
80,056
|
$
69,692
|
$
76,357
|
$
74,865
|
$
75,594
|
Trailing 12 months
adjusted EBITDA [3]
|
$
300,970
|
$
296,508
|
$
299,271
|
$
294,259
|
$
290,022
|
|
|
|
|
|
|
Finance costs -
operations
|
$
20,665
|
$
21,000
|
$
20,764
|
$
20,623
|
$
20,884
|
Finance costs -
operations in joint ventures, at Crombie's share
|
3,428
|
3,293
|
3,430
|
2,961
|
2,564
|
Amortization of
deferred financing charges
|
(604)
|
(641)
|
(622)
|
(654)
|
(675)
|
Adjusted interest
expense [2]
|
$
23,489
|
$
23,652
|
$
23,572
|
$
22,930
|
$
22,773
|
|
|
|
|
|
|
Debt outstanding (see
Debt to Gross Fair Value) (1) [4]
|
$
2,448,384
|
$
2,421,240
|
$
2,383,231
|
$
2,359,458
|
$
2,463,882
|
|
|
|
|
|
|
Interest coverage ratio
{[1]/[2]}
|
3.41x
|
2.95x
|
3.24x
|
3.26x
|
3.32x
|
Debt to trailing 12
months adjusted EBITDA {[4]/[3]}
|
8.13x
|
8.17x
|
7.96x
|
8.02x
|
8.50x
|
(1)
Includes debt held in joint ventures, at Crombie's
share.
|
This press 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 2022 annual Management's
Discussion and Analysis under "Risk Management" and the Annual
Information Form for the year ended December
31, 2022 under "Risks", 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, and
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 expected timing of
development, estimated total cost and estimated yield on cost, each
of which may be impacted by ordinary real estate market cycles, the
availability of labour, ability to attract tenants, estimated GLA,
tenant rents, building sizes, 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.
About Crombie REIT
Crombie invests in real estate that enriches local communities
and enables long-term sustainable growth. As one of the country's
leading owners, operators, and developers of quality real estate,
Crombie's portfolio primarily includes grocery-anchored retail,
retail-related industrial, and mixed-used residential properties in
Canada's top urban and suburban
markets. As at September 30, 2023,
our portfolio contains 294 income-producing properties comprising
approximately 18.7 million square feet, and a significant pipeline
of future development projects. Learn more at www.crombie.ca.
SOURCE Crombie REIT