Crombie REIT Reports Second Quarter 2018 Results

NEW GLASGOW, NS, Aug. 8, 2018 /CNW/ – Crombie Real Estate Investment Trust (“Crombie”) (TSX: CRR.UN) is pleased to report its financial results for the  three and six months ended June 30, 2018.

Second quarter 2018 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).

• Second quarter property revenue of $104,143, an increase of $2,552 or 2.5% over second quarter 2017.
• Second quarter operating income attributable to Uniholders of $49,033, a decrease of $47,310 compared to the second quarter of 2017. During the second quarter of 2017, Crombie completed a tax reorganization resulting in a deferred tax recovery of $76,400. Dispositions in the second quarter of 2018 resulted in a gain on disposal of $33,502.
• Capital recycling (dollar amounts are before closing and transaction costs) including:
• Dispositions in the three months ended June 30, 2018 of two retail properties and one mixed use property totalling 338,000 square feet for proceeds of $74,250 and disposition of a 50% interest in nine retail properties for consideration of $77,929. Dispositions for the six months ended June 30, 2018 totalled $193,531.
• Acquisitions in the three months ended June 30, 2018 of 10 retail properties and additions to two existing retail properties from Sobeys, a related party, for a total purchase price of $100,610.
• Same-asset property cash NOI for the three months ended June 30, 2018 increased by 2.9% or $1,728 ($62,308 compared to $60,580 for the three months ended June 30, 2017).
• FFO for the three months ended June 30, 2018 compared to the three months ended June 30, 2017:
• increased 6.9% to $46,325;
• increased 5.6% to $0.30 per unit diluted;
• FFO payout ratio of 72.7% versus 76.7%.
• AFFO for the three months ended June 30, 2018 compared to the three months ended June 30, 2017:
• increased 11.1% to $39,492;
• increased 9.4% to $0.26 per unit diluted;
• AFFO payout ratio of 85.3% versus 93.6%.
• Occupancy and leasing results:
• Overall leased space (occupied plus committed square feet) was 96.1% at June 30, 2018 compared with 95.2% at December 31, 2017 and 94.6% at June 30, 2017.
• Crombie’s renewal activity during the six months ended June 30, 2018 included renewals on 366,000 square feet of 2018 expiring leases with an increase of 3.1% over the expiring lease rate and renewals on 59,000 square feet of future years expiring leases with a decrease of 2.7% over the expiring lease rate.
• New leases and expansions increased occupancy by 144,000 square feet at June 30, 2018 at an average first year rate of $15.66 per square foot.
• Other metrics:
• Debt to gross book value (fair value basis) was 49.9% at June 30, 2018, compared to 49.8% at June 30, 2017.
• Crombie’s interest service coverage for the six months ended June 30, 2018 was 2.90 times EBITDA.
• Crombie’s debt service coverage was 1.88 times EBITDA, compared to 2.82 times EBITDA and 1.85 times EBITDA, respectively, for the six months ended June 30, 2017.
• On July 31, 2018, Crombie announced the early redemption of its $74,400, 5.25% Series E Convertible Debentures originally scheduled to mature March 31, 2021.

“During Q2 we continued to drive strong fundamentals with record occupancy at 96.1%, solid 2.9% growth in same-asset cash NOI and strong 9.4% and 5.6% growth in AFFO and FFO per Unit, respectively”, said Don Clow, President and CEO. “Our mixed use development execution continues on track with the projected $450 million investment in our first five projects expected to deliver Net Asset Value (NAV) growth of $1.00 to $2.00 per Unit over the next two to three years. We are prudently sourcing capital for these developments with $194 million of dispositions completed year to date. Crombie’s experienced professionals are successfully transforming Crombie from an owner of convenient needs based retail real estate to a fully integrated owner/developer of retail and residential real estate in Canada’s top markets. Our balanced approach is consistent with our commitment to deliver long-term sustainable growth to our investors and the communities across Canada in which we operate.”  

 

 

The table below presents a summary of financial performance for the three and six months ended June 30, 2018 compared to the same periods in fiscal 2017.

 

 

 

 

 

Property NOI, on a cash basis, excludes non-cash straight-line rent recognition and amortization of tenant incentive amounts. The $1,728 or 2.9% increase and $3,248 or 2.7% increase in same-asset cash NOI for the three and six months ended June 30, 2018 over the same period in 2017 is primarily due to improved occupancy rates and revenues from land use intensifications at certain properties.

Crombie emphasizes property NOI on a cash basis as it reflects the cash generated by the properties period-over-period.

 

 

Growth in acquisitions and dispositions property cash NOI reflects property acquisitions early in the second quarter of 2018 and during 2017, offset in part by property dispositions in the first and second quarters of 2018 and the fourth quarter of 2017.

 

 

Crombie’s objectives when managing its capital structure are to optimize weighted average cost of capital; maintain financial flexibility through access to long-term debt and equity markets; and maintain ample liquidity. In pursuit of these objectives, Crombie utilizes staggered debt maturities, optimizes its ongoing exposure to floating rate debt, pursues a range of fixed rate secured and unsecured debt and maintains sustainable payout ratios. Crombie has an authorized floating rate revolving credit facility of up to $400,000, subject to available borrowing base, of which $32,422 was drawn as at June 30, 2018, and an additional $8,719 encumbered by outstanding letters of credit, resulting in significant available liquidity and a $100,000 unsecured floating rate bilateral credit facility, of which $100,000 was drawn at June 30, 2018.

Debt to gross book value on a fair value basis is 49.9% at June 30, 2018, compared to 49.8% at June 30, 2017.

General and Administrative Expenses

For the three months ended June 30, 2018, general and administrative expenses, as a percentage of property revenue, were 4.4%, a decrease of 0.7% from the same period in 2017, with expenses decreasing $534 or 10.3% and property revenue increasing 2.5%. For the six months ended June 30, 2018, general and administrative expenses, as a percentage of property revenue, decreased 0.7% compared to the six months ended June 30, 2017, with expenses decreasing $1,039 or 10.2% and property revenue increasing 3.0%. Effective June 30, 2017, Crombie completed a tax reorganization which resulted in the elimination of the $76,400 deferred tax liability associated with Crombie’s most significant corporate subsidiary. Costs related to the reorganization of approximately $494 are included in professional fees for the three months ended June 30, 2017 and approximately $1,059 for the six months ended June 30, 2017. Excluding these costs, general and administrative expenses represented 4.6% of property revenue for the three months ended June 30, 2017 and 4.5% of property revenue for the six months ended June 30, 2017.

Definition of Non-GAAP Measures

Certain financial measures included in this news release do not have standardized meaning under IFRS and therefore may not be comparable to similarly titled measures used by other publicly traded 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.

• Property NOI is property revenue less property operating expenses.
• Property Cash NOI is Property NOI adjusted to remove non-cash straight-line rent and tenant incentive amortization.
• Debt is defined as bank loans plus investment property debt, senior unsecured notes and convertible debentures.
• Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus deferred financing charges, accumulated depreciation and amortization in respect of Crombie’s properties and cost of any below-market component of properties less (i) the amount of any receivable reflecting interest rate subsidies on any debt assumed by Crombie; (ii) subscription receipts held in trust; and (iii) the amount of deferred income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties. Gross book value (fair value basis) differs from gross book value as defined above in that it includes Crombie’s investment properties at fair value and excludes the book value of investment properties and related accumulated depreciation and amortization as well as tenant incentives and accumulated straight-line rent receivable.
• EBITDA is calculated as property revenue, adjusted to remove the impact of amortization of tenant incentives, less property operating expenses and general and administrative expenses.
• FFO is calculated as Increase (decrease) in net assets attributable to Unitholders (computed in accordance with IFRS), excluding gains (or losses) from sales of depreciable real estate and any related income taxes, plus depreciation and amortization expense, incremental internal leasing expenses, deferred income taxes, finance costs – distributions to Unitholders, impairment charges and recoveries and change in fair value of financial instruments.
• AFFO is defined as FFO adjusted for non-cash amounts affecting revenue, amortization of effective swap agreements, less maintenance capital expenditures, maintenance tenant incentives and leasing costs, and the settlement of effective interest rate swap agreements.
• ACFO is a measure of sustainable, economic cash flow and is calculated as cash flow from operating activities (computed in accordance with IFRS) adjusted for distributions to unitholders, changes in working capital, maintenance expenditures and deferred financing charges.

For additional information on these non-GAAP measures see our Management’s Discussion and Analysis for the  three and six months ended June 30, 2018.

Crombie’s consolidated financial statements and management’s discussion and analysis for the three and six months ended June 30, 2018 can be found on Crombie’s website at www.crombiereit.com or on the SEDAR website for Canadian regulatory filings at www.sedar.com.

About Crombie

Crombie Real Estate Investment Trust 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.

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 2017 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 net asset value growth from our mixed use development pipeline, which could be impacted by real estate market cycles, the availability of labour, 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.

Conference Call Invitation

Crombie will provide additional details concerning its period ended June 30, 2018 results on a conference call to be held Thursday, August 9, 2018, beginning at 12:00 p.m. Eastern time. Accompanying the conference call will be a presentation which will be available on our 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 under Investor Centre. Replay will be available until midnight August 23, 2018 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 989425 #, or on the Crombie website for 90 days after the meeting.

 

SOURCE Crombie REIT

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