Solid fundamentals with continued focus on value creation
as Voilà CFC 3 enters economic occupancy and The Marlstone breaks
ground
NEW GLASGOW, NS,
Aug. 9,
2023 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) today announced results for its second
quarter ended June 30, 2023.
Management will host a conference call to discuss the results at
12:00 p.m. (EDT), August 10,
2023.
"Crombie's stable portfolio delivered solid results this
quarter, with strong occupancy and consistent, healthy same-asset
NOI growth. We continue leveraging our strengths, creating value on
a sustainable basis," said Mark
Holly, President and CEO. "In the second quarter, we
announced and broke ground on our major development, The Marlstone,
advanced entitlements at key properties in highly-desirable
markets, and Voilà CFC 3, our second industrial customer
fulfillment centre, moved into economic occupancy in early June. We
are also pleased to announce that we received validation and
approval from the Science Based Targets initiative in support of
our Climate Action Plan."
SECOND 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 95.9%; a 10
basis point increase in committed occupancy and economic occupancy
remained constant compared to the second quarter of 2022
- Renewals of 245,000 square feet at rents 3.3% above expiring
rental rates (an increase of 5.8% using the weighted average rent
during the renewal term)
- Acquisition of one investment property added 58,000 square feet
of GLA at a total aggregate purchase price of $9,760
- Construction commenced at our 291-unit residential rental
development, The Marlstone, in Halifax,
Nova Scotia
- The Science Based Targets initiative ("SBTi") has validated and
approved Crombie's plan to reduce greenhouse gas ("GHG") emissions
as part of its Climate Action Plan
Financial Highlights
- Property revenue of $107,967, a
4.8% increase from $103,064 in the
second quarter of 2022
- Operating income attributable to Unitholders of $19,557, a decrease of 31.2% compared to the
second quarter of 2022 of $28,424
(operating income attributable to Unitholders excluding employee
transition costs was $26,729 for the
quarter)
- Net property income(1) of $71,442, a 1.9% increase from $70,097 in the second quarter of 2022
- FFO(1) of $46,068 or
$0.26 per Unit compared to
$49,877 or $0.28 per Unit in the second quarter of 2022 (FFO
per Unit excluding employee transition costs was $0.30 for the quarter)
- FFO(1) payout ratio of 86.7% for the second quarter
of 2023 compared to 79.0% for the same period last year
- AFFO(1) of $39,118 or
$0.22 per Unit compared to
$43,551 or $0.25 per Unit in the second quarter of 2022
(AFFO per Unit excluding employee transition costs was $0.26 for the quarter)
- AFFO(1) payout ratio of 102.1% for the second
quarter of 2023 compared to 90.5% for the same period last
year
- Same-asset property cash NOI(1) increased 2.7%
compared to the second quarter of 2022
- Debt to gross fair value(1)(2) of 42.3%, an
improvement from 42.7% for the same period last year
- Debt to trailing 12 months adjusted EBITDA(1)(2) of
8.17x compared to the second quarter of 2022 at 8.75x
- Fair value of unencumbered investment properties of
$2,488,359, a 15.5% increase from
$2,155,326 for the same period last
year
- Available liquidity of $614,072,
a 38.2% increase from $444,262 in the
second 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 June 30, 2023 and Consolidated
Financial Statements and Notes for the quarters ended June 30, 2023, and June
30, 2022. Full details on our results can be found at
www.crombie.ca and www.sedar.com.
Financial Results
Crombie's key financial metrics for the three months ended
June 30, 2023 are as follows:
|
|
|
Three months ended June
30,
|
(In thousands of
Canadian dollars, except per Unit amounts and as otherwise
noted
|
2023
|
2022
|
Variance
|
%
|
Net property
income(1)
|
$
71,442
|
$
70,097
|
$
1,345
|
1.9 %
|
Operating income
attributable to Unitholders
|
$
19,557
|
$
28,424
|
$
(8,867)
|
(31.2) %
|
Same-asset property
cash NOI (1)
|
$
71,491
|
$
69,585
|
$
1,906
|
2.7 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
46,068
|
$
49,877
|
$
(3,809)
|
(7.6) %
|
Per Unit -
Basic
|
$
0.26
|
$
0.28
|
$
(0.02)
|
(7.1) %
|
Payout
ratio(1)
|
86.7 %
|
79.0 %
|
|
7.7 %
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
39,118
|
$
43,551
|
$
(4,433)
|
(10.2) %
|
Per Unit -
Basic
|
$
0.22
|
$
0.25
|
$
(0.03)
|
(12.0) %
|
Payout
ratio(1)
|
102.1 %
|
90.5 %
|
|
11.6 %
|
(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 same-asset
property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout
ratio.
|
Operating income attributable to Unitholders decreased by
$8,867, or 31.2%, primarily due to
increased general and administrative expenses of $7,087 resulting from employee transition costs
of $7,172 in the second quarter of
2023 and gain on disposal of investment properties of $4,863 in the second quarter of 2022. Total
estimated costs related to these employee transitions have been
captured in the quarter. The reduction in operating income was
offset in part by revenue from management and development services
of $2,046, consisting primarily of
fees from a related party for work on our customer fulfillment
centres, and increased net property income of $1,345.
Same-asset property cash NOI increased by $1,906, or 2.7%, compared to the second quarter
of 2022 primarily due to renewals and new leasing, and higher
supplemental rent of $271 from
modernizations and capital improvements.
The decrease in FFO of $3,809 was
primarily due to increased general and administrative expenses of
$7,087 resulting from employee
transition costs of $7,172 in the
second quarter of 2023. This was offset in part by revenue from
management and development services of $2,046, consisting mainly of fees from a related
party for work on our customer fulfillment centres. Additionally,
rental revenue increased $1,084 from
renewals, new leasing, and acquisitions, and $504 from new developments, partially offset by
$456 due to dispositions. FFO
excluding employee transition costs of $7,172 was $53,240
for the quarter or $0.30 per
Unit.
The reduction in AFFO was primarily due to the same factors
impacting FFO as described above. It was further impacted 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 $471 for the
quarter. AFFO excluding employee transition costs of $7,172 was $46,290
for the quarter or $0.26 per
Unit.
Crombie's key financial metrics for the six months ended
June 30, 2023 are as follows:
|
|
|
Six months ended June
30,
|
(In thousands of
Canadian dollars, except per Unit amounts and as otherwise
noted)
|
2023
|
2022
|
Variance
|
%
|
Net property
income(1)
|
$
140,090
|
$
139,428
|
$
662
|
0.5 %
|
Operating income
attributable to Unitholders
|
$
44,730
|
$
53,672
|
$
(8,942)
|
(16.7) %
|
Same-asset property
cash NOI (1)
|
$
139,650
|
$
136,123
|
$
3,527
|
2.6 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
98,903
|
$
98,968
|
$
(65)
|
(0.1) %
|
Per Unit -
Basic
|
$
0.55
|
$
0.57
|
$
(0.02)
|
(3.5) %
|
Payout
ratio(1)
|
80.6 %
|
79.5 %
|
|
1.1 %
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
85,027
|
$
85,449
|
$
(422)
|
(0.5) %
|
Per Unit -
Basic
|
$
0.48
|
$
0.49
|
$
(0.01)
|
(2.0) %
|
Payout
ratio(1)
|
93.7 %
|
92.0 %
|
|
1.7 %
|
(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
$8,942, or 16.7%, on a year to date
basis primarily driven by higher general and administrative
expenses resulting from employee transition costs of $7,172 in the second quarter of 2023 and lower
gain on disposal of investment properties of $4,752 compared to the same period in 2022. Total
estimated costs related to these employee transitions have been
captured in the second quarter of 2023. Also leading to the
variance year over year was a gain on distribution from
equity-accounted investments of $1,933 in the first quarter 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 growth in income from equity-accounted
investments of $3,414 resulting from
the sale of two parcels of land at our Opal
Ridge property in Dartmouth, Nova
Scotia in the first quarter of 2023 and by revenue from
management and development services of $2,046, consisting primarily of fees from a
related party for work on our customer fulfillment centres.
On a year to date basis, same-asset property cash NOI increased
by $3,527, or 2.6%, compared to the
same period in 2022 primarily due to renewals and new leasing,
improved parking revenue of $787, and
an increase in supplemental rent of $712 from modernizations and capital
improvements. Additionally, lease termination income increased by
$454 resulting from tenant
surrenders. The increase in same-asset property cash NOI was offset
in part by an increase in bad debt expense of $343.
For the six months ended June 30,
2023, FFO decreased $65
primarily driven by higher general and administrative expenses
resulting from employee transition costs of $7,172 in the second quarter of 2023 and a
decrease of $2,099 in rental revenue
from properties that were disposed. This was offset in part by
growth in income from equity-accounted investments of $3,414 resulting from the sale of two parcels of
land at our Opal Ridge property in
Dartmouth, Nova Scotia in the
first quarter of 2023 and by revenue from management and
development services of $2,046,
consisting primarily of fees from a related party for work on our
customer fulfillment centres. Increased income of $2,175 from renewals and new leasing,
$1,016 from acquisitions,
$830 in supplemental rent from
modernizations investments, improved parking revenue of
$787, and increased rental revenue
from new developments of $661 further
offset the decrease in FFO. FFO excluding employee transition costs
of $7,172 was $106,075 or $0.59
per Unit.
The reduction in AFFO on a year to date basis was driven
primarily 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 $939 for the
period. This was offset in part by the factors impacting FFO as
described above. AFFO excluding employee transition costs of
$7,172 was $92,199 or $0.52
per Unit.
Operating Results
|
|
|
|
|
|
|
June 30,
2023
|
March 31,
2023
|
December 31,
2022
|
September 30,
2022
|
June 30,
2022
|
Number of investment
properties (1)
|
293
|
291
|
289
|
290
|
294
|
Gross leasable area
(2)
|
18,625,000
|
18,550,000
|
18,445,000
|
18,331,000
|
18,500,000
|
Economic occupancy
(3)
|
95.9 %
|
94.5 %
|
94.8 %
|
96.2 %
|
95.9 %
|
Committed occupancy
(4)
|
96.4 %
|
96.7 %
|
96.9 %
|
96.8 %
|
96.3 %
|
(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.
|
|
|
|
|
|
|
|
June 30,
2023
|
March
31,
2023
|
December 31,
2022
|
September
30,
2022
|
June 30,
2022
|
Investment properties,
fair value
|
$ 5,123,000
|
$ 5,097,000
|
$ 5,050,000
|
$ 5,265,000
|
$ 5,273,000
|
Investment properties
held in joint ventures, fair value, at Crombie's
share(1)
|
$
447,500
|
$
447,000
|
$
454,000
|
$
453,000
|
$
445,500
|
Unencumbered investment
properties (2)
|
$ 2,488,359
|
$ 2,291,396
|
$ 2,154,468
|
$ 2,200,890
|
$ 2,155,326
|
Available liquidity
(3)
|
$
614,072
|
$
735,877
|
$
583,003
|
$
445,372
|
$
444,262
|
Debt to gross book
value - cost basis (4)
|
45.2 %
|
44.9 %
|
44.6 %
|
46.2 %
|
46.8 %
|
Debt to gross fair
value (5)(6)
|
42.3 %
|
41.9 %
|
41.8 %
|
42.0 %
|
42.7 %
|
Weighted average
interest rate (7)
|
4.0 %
|
4.0 %
|
3.8 %
|
3.8 %
|
3.8 %
|
Debt to trailing 12
months adjusted EBITDA(5)(6)
|
8.17x
|
7.96x
|
8.02x
|
8.50x
|
8.75x
|
Interest coverage ratio
(5)(6)
|
2.95x
|
3.24x
|
3.26x
|
3.32x
|
3.26x
|
(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)
|
Weighted average
interest rate is calculated based on interest rates for all
outstanding fixed rate debt.
|
Operations and Leasing
During the quarter, Crombie achieved economic occupancy of 95.9%
and committed occupancy of 96.4%. Crombie renewed 245,000 square
feet with an increase of 3.3% over expiring rents during the
quarter. Year to date, new leases increased occupancy by 419,000
square feet at an average first year rate of $19.86 per square foot. In the second quarter,
Voilà CFC 3, in Calgary, Alberta,
moved into economic occupancy and is included in year to date new
leases.
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 1,083,000
square feet of residential GLA (1,451 residential units) and
104,000 square feet of commercial GLA. The geographical breakdown
of GLA in square feet is as follows: 854,000 in Vancouver; 145,000 in Victoria and 188,000 in Halifax.
The Marlstone, a 291-unit residential rental project in the
heart of downtown Halifax, is
under active development. Construction commenced in May 2023 and is expected to be completed in the
second quarter of 2026.
Timing estimates are subject to change, as well as other
development risks described in Crombie's second quarter
Management's Discussion and Analysis under "Development" and "Risk
Management".
Climate Action
In the second quarter of 2023, Crombie announced the advancement
of its environmental commitments through its newly created Climate
Action Plan. Through this plan, Crombie is committed to achieve net
zero by 2050 for scopes 1, 2, and 3. In the near term, Crombie is
committed to reducing scope 1 and 2 emissions by a minimum of 50%
by 2030 from its 2019 base year. All targets were submitted to SBTi
and validation and approval was received subsequent to the second
quarter of 2023.
SBTi is an internationally recognized body that defines and
promotes best practice in emissions reductions and net zero targets
in line with climate science. Scope 1 refers to an entity's direct
emissions, while Scope 2 is an entity's indirect emissions through
its energy use. Scope 3 emissions are the result of activities not
controlled by the entity, but indirectly related to its value
chain.
Subsequent Event
On July 31, 2023, Crombie paid an
amount of $16,361, excluding
transaction costs, to a subsidiary of Empire in connection with the
assignment to Crombie of 24 subleases for retail fuel sites in
Western Canada owned by Crombie,
following the completion of Empire's previously announced
transaction with a subsidiary of Shell Canada.
Conference Call
Invitation
Crombie will provide additional details concerning its period
ended June 30, 2023 results on a
conference call to be held Thursday, August 10, 2023,
beginning at 12:00 p.m. (EDT).
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/3PaJVI2 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 August 17, 2023 by dialing (416) 764-8677 or
(888) 390-0541 and entering passcode 585088 #, 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 (SANOI), 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 six months ended June 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 June
30,
|
|
|
Six months ended June
30,
|
|
2023
|
|
2022
|
|
Variance
|
|
|
2023
|
|
2022
|
|
Variance
|
Property
revenue
|
$
107,967
|
|
$
103,064
|
|
$ 4,903
|
|
|
$
215,518
|
|
$
208,010
|
|
$ 7,508
|
Property operating
expenses
|
(36,525)
|
|
(32,967)
|
|
(3,558)
|
|
|
(75,428)
|
|
(68,582)
|
|
(6,846)
|
Net property
income
|
$
71,442
|
|
$
70,097
|
|
$ 1,345
|
|
|
$
140,090
|
|
$
139,428
|
|
$
662
|
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 June
30,
|
|
Six months ended June
30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
Net property
income
|
$
71,442
|
$
70,097
|
$
1,345
|
|
$ 140,090
|
$ 139,428
|
$
662
|
Non-cash straight-line
rent
|
(838)
|
(1,133)
|
295
|
|
(2,143)
|
(3,212)
|
1,069
|
Non-cash tenant
incentive amortization(1)
|
5,357
|
5,690
|
(333)
|
|
12,149
|
11,254
|
895
|
Property cash
NOI
|
75,961
|
74,654
|
1,307
|
|
150,096
|
147,470
|
2,626
|
Acquisitions and
dispositions property cash NOI
|
540
|
1,443
|
(903)
|
|
1,534
|
3,233
|
(1,699)
|
Development property
cash NOI
|
3,930
|
3,626
|
304
|
|
8,912
|
8,114
|
798
|
Acquisitions,
dispositions and development property cash NOI
|
4,470
|
5,069
|
(599)
|
|
10,446
|
11,347
|
(901)
|
Same-asset property
cash NOI
|
$
71,491
|
$
69,585
|
$
1,906
|
|
$ 139,650
|
$ 136,123
|
$
3,527
|
(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 six months ended
June 30, 2023 and 2022 is as
follows:
|
|
|
|
|
Three months ended June
30,
|
|
Six months ended June
30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
Decrease in net assets
attributable to Unitholders
|
$
(18,847)
|
$
(8,936)
|
$
(9,911)
|
|
$
(32,846)
|
$
(22,713)
|
$
(10,133)
|
Add
(deduct):
|
|
|
|
|
|
|
|
Amortization of tenant
incentives
|
5,357
|
5,690
|
(333)
|
|
12,149
|
11,254
|
895
|
Gain on disposal of
investment properties
|
—
|
(4,863)
|
4,863
|
|
(111)
|
(4,863)
|
4,752
|
Gain on distribution
from equity-accounted investments
|
—
|
—
|
—
|
|
—
|
(1,933)
|
1,933
|
Depreciation and
amortization of investment properties
|
19,115
|
18,842
|
273
|
|
38,184
|
37,366
|
818
|
Adjustments for
equity-accounted investments
|
1,015
|
1,081
|
(66)
|
|
2,272
|
2,023
|
249
|
Principal payments on
right-of-use assets
|
58
|
57
|
1
|
|
115
|
113
|
2
|
Internal leasing
costs
|
966
|
646
|
320
|
|
1,564
|
1,336
|
228
|
Finance costs -
distributions to Unitholders
|
39,921
|
39,394
|
527
|
|
79,696
|
78,630
|
1,066
|
Finance costs (income)
- change in fair value of financial
instruments(1)
|
(1,517)
|
(2,034)
|
517
|
|
(2,120)
|
(2,245)
|
125
|
FFO as calculated based
on REALPAC recommendations
|
$
46,068
|
$
49,877
|
$
(3,809)
|
|
$
98,903
|
$
98,968
|
$
(65)
|
Basic weighted average
Units (in 000's)
|
179,309
|
176,976
|
2,333
|
|
178,991
|
174,832
|
4,159
|
FFO per Unit -
basic
|
$ 0.26
|
$ 0.28
|
$ (0.02)
|
|
$ 0.55
|
$ 0.57
|
$ (0.02)
|
FFO payout ratio
(%)
|
86.7 %
|
79.0 %
|
7.7 %
|
|
80.6 %
|
79.5 %
|
1.1 %
|
(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 six months ended
June 30, 2023 and 2022 is as
follows:
|
|
|
|
|
Three months ended June
30,
|
|
Six months ended June
30,
|
|
2023
|
2022
|
Variance
|
|
2023
|
2022
|
Variance
|
FFO as calculated based
on REALPAC recommendations
|
$
46,068
|
$
49,877
|
$ (3,809)
|
|
$ 98,903
|
$ 98,968
|
$ (65)
|
Add
(deduct):
|
|
|
|
|
|
|
|
Straight-line rent
adjustment
|
(838)
|
(1,133)
|
295
|
|
(2,143)
|
(3,212)
|
1,069
|
Straight-line rent
adjustment included in income (loss) from equity-accounted
investments
|
36
|
112
|
(76)
|
|
156
|
273
|
(117)
|
Internal leasing
costs
|
(966)
|
(646)
|
(320)
|
|
(1,564)
|
(1,336)
|
(228)
|
Maintenance
expenditures on a square footage basis
|
(5,182)
|
(4,659)
|
(523)
|
|
(10,325)
|
(9,244)
|
(1,081)
|
AFFO as calculated
based on REALPAC recommendations
|
$ 39,118
|
$ 43,551
|
$ (4,433)
|
|
$ 85,027
|
$ 85,449
|
$
(422)
|
Basic weighted average
Units (in 000's)
|
179,309
|
176,976
|
2,333
|
|
178,991
|
174,832
|
4,159
|
AFFO per Unit -
basic
|
$
0.22
|
$
0.25
|
$
(0.03)
|
|
$
0.48
|
$
0.49
|
$
(0.01)
|
AFFO payout ratio
(%)
|
102.1 %
|
90.5 %
|
11.6 %
|
|
93.7 %
|
92.0 %
|
1.7 %
|
Debt Metrics
When calculating debt to gross fair value, debt is defined under
the terms of the Declaration of Trust 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 June 30,
2023 and December 31, 2022,
respectively, based on each property's current use as a
revenue-generating investment property. As at June 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 3.51% as at
June 30, 2023, an increase of four
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.
|
|
|
|
|
June 30,
2023
|
|
December 31,
2022
|
Fixed rate
mortgages
|
$
823,462
|
|
$
918,552
|
Senior unsecured
notes
|
1,175,000
|
|
975,000
|
Unsecured non-revolving
credit facility
|
61,020
|
|
150,000
|
Revolving credit
facility
|
52,491
|
|
—
|
Joint operation credit
facility
|
3,292
|
|
10,264
|
Debt held in joint
ventures, at Crombie's share (1) (2)
|
270,985
|
|
270,642
|
Lease
liabilities
|
34,990
|
|
35,000
|
Adjusted
debt
|
$
2,421,240
|
|
$
2,359,458
|
|
|
|
|
Investment properties,
fair value
|
$
5,123,000
|
|
$
5,050,000
|
Investment properties
held in joint ventures, fair value, at Crombie's share
(2)
|
447,500
|
|
454,000
|
Other assets, cost
(3)
|
114,223
|
|
99,728
|
Other assets, cost,
held in joint ventures, at Crombie's share (2) (3)
(4)
|
27,633
|
|
26,974
|
Cash and cash
equivalents
|
231
|
|
6,117
|
Cash and cash
equivalents held in joint ventures, at Crombie's share
(2)
|
1,213
|
|
2,487
|
Deferred financing
charges
|
7,930
|
|
7,843
|
Gross fair
value
|
$
5,721,730
|
|
$
5,647,149
|
Debt to gross fair
value
|
42.3 %
|
|
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)
|
Other assets exclude
tenant incentives, accumulated amortization, and accrued
straight-line rent receivable.
|
(4)
|
Other assets held in
joint ventures include deferred financing charges.
|
The following table presents a reconciliation of property
revenue 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
|
|
June 30,
2023
|
March 31,
2023
|
December 31,
2022
|
September
30,
2022
|
June 30,
2022
|
Operating income
attributable to Unitholders
|
$
19,557
|
$
25,173
|
$
87,718
|
$
26,410
|
$
28,424
|
Amortization of tenant
incentives
|
5,357
|
6,792
|
5,940
|
5,795
|
5,690
|
Gain on disposal of
investment properties
|
—
|
(111)
|
(62,584)
|
(13,357)
|
(4,863)
|
Gain on distribution
from equity-accounted investments
|
—
|
—
|
—
|
(1,000)
|
—
|
Impairment of
investment properties
|
—
|
—
|
—
|
10,400
|
—
|
Depreciation and
amortization
|
19,494
|
19,420
|
18,991
|
22,744
|
19,222
|
Finance costs -
operations
|
21,000
|
20,764
|
20,623
|
20,884
|
20,762
|
(Income) loss from
equity-accounted investments
|
1,425
|
(1,673)
|
1
|
1,787
|
1,627
|
Property revenue in
joint ventures, at Crombie's share
|
4,144
|
11,269
|
7,271
|
3,258
|
2,616
|
Property operating
expenses in joint ventures, at Crombie's share
|
(1,231)
|
(5,170)
|
(3,022)
|
(1,296)
|
(1,002)
|
General and
administrative expenses in joint ventures, at Crombie's
share
|
(54)
|
(107)
|
(77)
|
(31)
|
(21)
|
Taxes -
current
|
—
|
—
|
4
|
—
|
—
|
Adjusted EBITDA
[1]
|
$
69,692
|
$
76,357
|
$
74,865
|
$
75,594
|
$
72,455
|
Trailing 12 months
adjusted EBITDA [3]
|
$
296,508
|
$
299,271
|
$
294,259
|
$
290,022
|
$
286,024
|
|
|
|
|
|
|
Finance costs -
operations
|
$
21,000
|
$
20,764
|
$
20,623
|
$
20,884
|
$
20,762
|
Finance costs -
operations in joint ventures, at Crombie's share
|
3,293
|
3,430
|
2,961
|
2,564
|
2,157
|
Amortization of
deferred financing charges
|
(641)
|
(622)
|
(654)
|
(675)
|
(668)
|
Adjusted interest
expense [2]
|
$
23,652
|
$
23,572
|
$
22,930
|
$
22,773
|
$
22,251
|
|
|
|
|
|
|
Debt outstanding (see
Debt to Gross Fair Value)(1) [4]
|
$
2,421,240
|
$
2,383,231
|
$
2,359,458
|
$
2,463,882
|
$
2,502,845
|
|
|
|
|
|
|
Interest service
coverage ratio {[1]/[2]}
|
2.95x
|
3.24x
|
3.26x
|
3.32x
|
3.26x
|
Debt to trailing 12
months adjusted EBITDA {[4]/[3]}
|
8.17x
|
7.96x
|
8.02x
|
8.50x
|
8.75x
|
(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, each of which may be impacted by ordinary 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.
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 June 30, 2023, our
portfolio contains 293 income-producing properties comprising
approximately 18.6 million square feet, and a significant pipeline
of future development projects. Learn more at www.crombie.ca.
SOURCE Crombie REIT