NEW GLASGOW, NS, May 9, 2019 /CNW/ – Crombie Real Estate Investment Trust (“Crombie”) (TSX: CRR.UN) today announced results for its first quarter ended March 31, 2019. Management will host a conference call to discuss the results at 12:00pm (ET), May 9, 2019.
“Crombie’s focused strategy is evolving nicely with our relationship with Sobeys unlocking value from new acquisitions and state-of-the-art developments, the execution of our active developments remaining on track and on budget, ample liquidity on our balance sheet, access to multiple and innovative sources of capital and the building of one of the best development platforms in the Canadian REIT industry,” said Don Clow, President and CEO. “In addition, our core retail fundamentals remain very solid as is evident by our robust 3.4% same-asset property cash net operating income growth. Year to date, we have sold approximately $289 million in assets to fund our growth. We are excited to announce the acquisition of a 20.25-acre land site near Montreal, slated to be developed by Crombie as Empire’s new state-of-the-art e-commerce Customer Fulfillment Centre.”
Full details on our results can be found at www.crombiereit.com and www.sedar.com.
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FINANCIAL RESULTS |
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Crombie’s key financial metrics for the three months ended March 31, 2019 are as follows: |
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Three months ended March 31, |
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(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
2019 |
2018 |
Change |
Change (%) |
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|
Property revenue |
$ |
105,240 |
$ |
105,705 |
$ |
(465) |
(0.4)% |
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Property operating expenses |
32,366 |
32,904 |
538 |
1.6% |
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Property net operating income (“NOI”) |
$ |
72,874 |
$ |
72,801 |
$ |
73 |
0.1% |
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Operating income attributable to unitholders |
$ |
48,228 |
$ |
25,445 |
$ |
22,783 |
89.5% |
|
Same-asset property cash NOI (1) |
$ |
64,819 |
$ |
62,236 |
$ |
2,583 |
4.2%(2) |
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Funds from operations (“FFO”) (1) |
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Basic |
$ |
45,460 |
$ |
45,864 |
$ |
(404) |
(0.9)% |
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Per unit – Basic |
$ |
0.30 |
$ |
0.30 |
$ |
â |
â % |
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Payout ratio (%) |
74.2% |
73.3% |
(0.9)% |
â % |
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Adjusted funds from operations (“AFFO”) (1) |
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Basic |
$ |
38,660 |
$ |
38,664 |
$ |
(4) |
â % |
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Per unit – Basic |
$ |
0.26 |
$ |
0.26 |
$ |
â |
â % |
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Payout ratio (%) |
87.3% |
86.9% |
(0.4)% |
â % |
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(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 March 31, 2019 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO. |
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(2) |
Same-asset property cash NOI adjusted for the effects of IFRS 16 “Leases” is 3.4%. |
Compared to the first quarter of 2018, operating income attributable to unitholders was impacted by:
- an increased gain on disposal of properties of $14.8 million ($26.6 million compared to $11.8 million) on 10 properties in the first quarter compared to three properties in the first quarter of 2018;
- decrease in depreciation and amortization of $8.1 million impacted by net disposition activity; and,
- an increase in general and administrative expenses of $1.3 million impacted primarily by higher salary and benefit costs and in part by the increase in Crombie’s unit price on unit-based compensation plans.
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OPERATING RESULTS |
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March 31, 2019 |
December 31, |
September 30, |
June 30, 2018 |
March 31, 2018 |
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Number of income-producing properties |
285 |
288 |
289 |
290 |
284 |
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Gross leaseable area |
18,604,000 |
18,896,000 |
18,759,000 |
18,778,000 |
18,858,000 |
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Committed occupancy |
95.7% |
96.0% |
96.2% |
96.1% |
95.7% |
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Economic occupancy |
95.0% |
95.3% |
95.5% |
95.2% |
94.9% |
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March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
June 30, 2018 |
March 31, 2018 |
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Investment properties, fair value |
$ |
4,755,000 |
$ |
4,776,000 |
$ |
4,786,000 |
$ |
4,862,000 |
$ |
4,943,000 |
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Unencumbered investment properties (1) |
$ |
1,012,707 |
$ |
998,523 |
$ |
1,032,113 |
$ |
1,092,650 |
$ |
1,008,057 |
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Available liquidity (2) |
$ |
346,347 |
$ |
312,459 |
$ |
337,154 |
$ |
358,859 |
$ |
430,120 |
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Debt to gross book value – fair value (4) |
50.3% |
51.0% |
50.5% |
49.9% |
49.6% |
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Weighted average interest rate (3) |
4.20% |
4.20% |
4.14% |
4.18% |
4.20% |
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Debt to trailing 12 months EBITDA (4) |
8.57x |
8.67x |
8.57x |
8.50x |
8.63x |
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Interest coverage ratio (4) |
2.92x |
2.93x |
2.97x |
2.92x |
2.88x |
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(1) |
Refer to Crombie’s March 31, 2019 MD&A liquidity and capital resources section. |
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(2) |
Refer to Crombie’s March 31, 2019 MD&A highlights section. |
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(3) |
Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. |
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(4) |
Refer to Crombie’s March 31, 2019 MD&A coverage ratio section. |
Operations and Leasing
Crombie’s same-asset property cash NOI growth was very strong, up 4.2% from the comparable quarter last year driven by strong occupancy, land use intensification and the impact of IFRS 16. Excluding the impact from IFRS 16, same-asset property cash NOI growth was 3.4%. During the quarter, economic occupancy was 95.0% and committed occupancy reached 95.7%. Renewal activity during the three months ended March 31, 2019 included renewals on 145,000 square feet of 2019 expiring leases with an increase of 0.6% over the expiring lease rate. Two commercial mixed-use leases at lower rent negatively impacted these renewals. 2019 retail renewals were strong during the quarter with 53,000 square feet renewed at an increase of 5.6%. Renewals on 38,000 square feet of future years expiring leases declined 2.8% over the expiring lease rate. New leases and expansions increased occupancy by 33,000 square feet at March 31, 2019 at an average first year rate of $24.21 per square foot.
Development
Crombie expects to invest approximately $511 million in its first five active mixed-use major developments, with an estimated yield on cost of 5.2%-6.2% over the next two and a half years, at Crombie’s share. Upon completion, these projects will total 452,000 square feet of commercial GLA and 976,000 square feet of residential rental GLA. These five projects, totalling approximately 1.4 million square feet, are broken out geographically as follows: 520,000 in Oakville, 306,000 in Vancouver, 277,000 in Montreal, 165,000 in St. John’s and 160,000 in Langford, near Victoria.
Once complete, Crombie’s active major development pipeline will contribute to diversifying our portfolio and income stream, increase our urban exposure and improve our overall portfolio quality. Crombie expects its capital outlay to complete these five projects will be approximately $280 million and will be incurred over the next two and a half years.
During the quarter, Crombie added a 24th major development property to its pipeline with the acquisition of a $32.4 million 20.25-acre site located in Pointe-Claire, Quebec. Crombie will be the owner and developer of the Customer Fulfillment Centre (“CFC”) and will work collaboratively with Empire Company Limited (“Empire”) to develop Empire’s new state-of-the-art CFC. This 285,000 square foot CFC will be powered by Ocado Group plc’s world-leading online grocery platform, and will become Empire’s e-commerce distribution hub for Quebec and the Ottawa area. Empire will lease the location from Crombie and Crombie will build the site to Empire’s specifications. Empire expects to launch their e-commerce service for Quebec and the Ottawa area in 2021.
Dispositions
During the three months ended March 31, 2019, Crombie sold $106.4 million of lower growth and/or non-core assets, including a $41.6 million partial interest portfolio. These asset sales have been executed in line with IFRS fair values and are part of Crombie’s funding strategy, which allows capital to be redirected into developments that have the potential to deliver higher returns.
Crombie continues to be innovative in the transactions completed by selling full or partial interests in properties deemed non-core and/or lower growth.
Acquisitions
As mentioned above, Crombie acquired a $32.4 million 20.25-acre land site located in Pointe-Claire, Quebec.
Highlighted Subsequent Events
As previously announced, on April 11, 2019, Crombie sold a $161.6 million 89% partial interest in a 26-property portfolio. Proceeds to Crombie net of mortgage assumptions and transaction costs were approximately $107.8 million. The disposition includes approximately 883,200 square feet of primarily free-standing grocery-anchored properties in secondary and tertiary markets.
Announcing today that on April 29, 2019, Crombie closed on the sale of a $21.5 million 39,000 square foot retail property located at Markham Road in Toronto, ON.
Conference Call Invitation
Crombie will provide additional details concerning its period ended March 31, 2019 results on a conference call to be held Thursday, May 9, 2019, beginning at 12:00 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 May 23, 2019 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 888726 #, 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 months ended March 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 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, 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 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
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