NEW GLASGOW, NS, Feb. 27, 2019 /CNW/ – Crombie Real Estate Investment Trust (“Crombie”) (TSX: CRR.UN) today announced results for its fourth quarter ended December 31, 2018. Management will host a conference call to discuss the results at 12:00pm (ET), February 28, 2019.
“Our core fundamentals remain very solid as is evident by our year-ending occupancy of 96%, robust 2.7% full-year same-asset property cash net operating income (NOI) growth and 2.8% growth in 2018 AFFO / Unit. We sold approximately $220 million in assets to fund our growth and have invested approximately $190 million in our five active major development projects,” said Don Clow, President and CEO. “With our balanced and measured execution of value creation via the relationship with Sobeys and our major developments, newly aligned teams, ample liquidity and access to multiple sources of capital, I’m excited about Crombie’s future.”
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 and year ended December 31, 2018 are as follows: |
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Three months ended December 31, |
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(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
2018 |
2017 |
Change |
Change (%) |
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Property revenue |
$ |
104,296 |
$ |
105,667 |
$ |
(1,371) |
(1.3)% |
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Property operating expenses |
30,817 |
31,622 |
805 |
2.5% |
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Property net operating income (“NOI”) |
$ |
73,479 |
$ |
74,045 |
$ |
(566) |
(0.8)% |
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Operating income attributable to unitholders |
$ |
20,111 |
$ |
27,048 |
$ |
(6,937) |
(25.6)% |
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Same-asset property cash NOI (1) |
$ |
63,102 |
$ |
61,058 |
$ |
2,044 |
3.3% |
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Funds from operations (“FFO”) (1) |
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Basic |
$ |
46,490 |
$ |
47,237 |
$ |
(747) |
(1.6)% |
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Diluted |
$ |
46,490 |
$ |
48,222 |
$ |
(1,732) |
(3.6)% |
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Per unit – Basic |
$ |
0.31 |
$ |
0.31 |
$ |
â |
(2.2)% |
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Per unit – Diluted |
$ |
0.31 |
$ |
0.31 |
$ |
â |
(1.5)% |
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Payout ratio (%) |
72.5% |
70.9% |
(1.6)% |
â |
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Adjusted funds from operations (“AFFO”) (1) |
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Basic |
$ |
39,771 |
$ |
39,481 |
$ |
290 |
0.7% |
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Diluted |
$ |
39,771 |
$ |
40,466 |
$ |
(695) |
(1.7)% |
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Per unit – Basic |
$ |
0.26 |
$ |
0.26 |
$ |
â |
0.1% |
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Per unit – Diluted |
$ |
0.26 |
$ |
0.26 |
$ |
â |
0.4% |
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Payout ratio (%) |
84.8% |
84.9% |
0.1% |
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 December 31, 2018 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO. |
Compared to the fourth quarter of 2017, operating income attributable to unitholders was impacted by:
- an increased gain on disposal of properties of $2.1 million ($4.6 million compared to $2.5 million) on three properties in the fourth quarter compared to one property in 2017;
- recognition in the fourth quarter of $7.0 million of impairment charges related to an office property;
- decrease in depreciation and amortization of $0.7 million impacted by net disposition activity; and,
- decrease in interest and deferred financing charges of $0.7 million. The decrease was impacted by net disposition activity; early redemption of $74.4 million of 5.25% Series E Convertible Debentures refinanced in the third quarter of 2018; offset by refinancing of the 3.986% Series A Unsecured Notes which matured in the fourth quarter.
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Year ended December 31, |
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(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
2018 |
2017 |
Change |
Change (%) |
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Property revenue |
$ |
414,649 |
$ |
411,813 |
$ |
2,836 |
0.7% |
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Property operating expenses |
121,306 |
121,069 |
(237) |
(0.2)% |
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Property NOI |
$ |
293,343 |
$ |
290,744 |
$ |
2,599 |
0.9% |
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Operating income attributable to unitholders |
107,407 |
163,696 |
$ |
(56,289) |
(34.4)% |
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Same-asset property cash NOI (1) |
$ |
248,599 |
$ |
242,151 |
$ |
6,448 |
2.7% |
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FFO (1) |
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Basic |
$ |
184,034 |
$ |
181,152 |
$ |
2,882 |
1.6% |
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Diluted |
$ |
186,644 |
$ |
186,582 |
$ |
62 |
â% |
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Per unit – Basic |
$ |
1.22 |
$ |
1.21 |
$ |
0.01 |
0.4% |
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Per unit – Diluted |
$ |
1.21 |
$ |
1.20 |
$ |
0.01 |
0.8% |
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Payout ratio (%) |
73.2% |
73.6% |
0.4% |
â |
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AFFO (1) |
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Basic |
$ |
155,794 |
$ |
149,858 |
$ |
5,936 |
4.0% |
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Diluted |
$ |
158,404 |
$ |
153,764 |
$ |
4,640 |
3.0% |
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Per unit – Basic |
$ |
1.03 |
$ |
1.00 |
$ |
0.03 |
2.8% |
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Per unit – Diluted |
$ |
1.03 |
$ |
1.00 |
$ |
0.03 |
2.8% |
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Payout ratio (%) |
86.5% |
88.9% |
2.4% |
â |
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(1) Refer to Crombie’s December 31, 2018 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO. |
For the 2018 year compared to 2017, Crombie’s results have been impacted by the above noted events in the quarter as well as:
- gain on disposal of properties of $50 million compared to $2.5 million in 2017;
- impairment charges of $15.0 million, $8.0 million taken in the second quarter related to two retail properties and $7.0 million in the fourth quarter related to an office property. The impairments were the result of the fair value impact of tenant lease expiries and departures and slower than expected leasing activity; and,
- additional depreciation of $14.1 million related to accelerated depreciation of $17.4 million primarily related to the partial demolition of three properties to facilitate redevelopment.
FFO and AFFO year to date were not impacted by the above non-operating events as they are excluded from the Real Property Association of Canada (REALPAC) definitions of FFO and AFFO.
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OPERATING RESULTS |
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December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
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2018 |
2018 |
2018 |
2017 |
2017 |
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Number of income-producing properties |
288 |
289 |
290 |
284 |
286 |
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Gross leaseable area |
18,896,000 |
18,759,000 |
18,778,000 |
18,858,000 |
19,201,000 |
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Committed occupancy |
96.0% |
96.2% |
96.1% |
95.7% |
95.2% |
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Economic occupancy |
95.3% |
95.5% |
95.2% |
94.9% |
94.8% |
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December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
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2018 |
2018 |
2018 |
2017 |
2017 |
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Investment properties, fair value |
$ |
4,776,000 |
$ |
4,786,000 |
$ |
4,862,000 |
$ |
4,943,000 |
$ |
4,944,000 |
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Unencumbered investment properties (1) |
$ |
998,523 |
$ |
1,032,113 |
$ |
1,092,650 |
$ |
1,008,057 |
$ |
953,776 |
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Available liquidity (2) |
$ |
312,459 |
$ |
337,154 |
$ |
358,859 |
$ |
430,120 |
$ |
438,113 |
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Debt to gross book value – fair value (4) |
51.0% |
50.5% |
49.9% |
49.6% |
50.3% |
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Weighted average interest rate (3) |
4.20% |
4.14% |
4.18% |
4.20% |
4.21% |
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Debt to trailing 12 months EBITDA (4) |
8.67x |
8.57x |
8.50x |
8.63x |
8.84x |
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Interest coverage ratio (4) |
2.93x |
2.97x |
2.92x |
2.88x |
2.92x |
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(1) Refer to Crombie’s December 31, 2018 MD&A liquidity and capital resources section. |
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(2) Refer to Crombie’s December 31, 2018 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 December 31, 2018 MD&A coverage ratio section. |
Operations and Leasing
Driven by occupancy improvements, Crombie’s same-asset property cash NOI was up 3.3% from the comparable quarter last year. During the quarter, economic occupancy was 95.3% and committed occupancy reached a year-end record high of 96.0%. Renewal activity during the three months ended December 31, 2018 included renewals on 116,000 square feet of 2018 expiring leases with an increase of 6.1% over the expiring lease rate and renewals on 39,000 square feet of future years expiring leases with an increase of 5.7% over the expiring lease rate. New leases and expansions increased occupancy by 392,000 square feet at December 31, 2018 at an average first year rate of $17.28 per square foot.
Development
Crombie expects to invest approximately $511 million in its mixed use active major developments, with an estimated yield on cost of 5.2%-6.2% over the next three 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 Victoria. Davie Street in Vancouver has emerged from the ground and is growing taller as concrete is poured, and Phase I of Belmont Market in Langford, BC is officially producing cash flow, an important milestone. Crombie expects its capital outlay for the remaining estimated cost to complete of approximately $324 million will be incurred over the ensuing three calendar years.
Dispositions
During 2018, Crombie sold $220.1 million of lower growth/non-core assets, including a $77.9 million partial interest portfolio to a third party. These asset sales have been executed at or above IFRS fair values. This shift in capital allocation focus has allowed Crombie to redirect capital to developments that have the potential to deliver higher returns. As previously announced, during the fourth quarter of 2018 Crombie sold $26.6 million in assets.
Crombie has been innovative in the transactions completed by selling partial interests in properties deemed non-core/lower growth.
Acquisitions
Crombie acquired $14.9 million in the fourth quarter, including an add-on parcel to a mixed use development pipeline property located on Elbow Drive in Calgary for $5.6 million and a 40,053 square foot grocery anchored property for $9.3 million in Sorel, Quebec.
Highlighted Subsequent Events
During the first quarter of 2019, Crombie closed on $106.4 million in dispositions. As previously announced, Crombie closed on a 50% interest in a 296,376 square foot portfolio to Firm Capital for $41.6 million on February 5th. On January 29th, Crombie closed on the sale of a 114,020 square foot non-grocery anchored retail centre in Hamilton, ON for $35.2 million.
Crombie closed on two additional dispositions totaling $29.6 million. On February 8th, Crombie closed on the sale of a retail property in Canmore, Alberta to a third party for $19.9 million, and on February 14th closed on the sale of a retail property in St Lambert, Quebec for $9.7 million.
Crombie’s 2019 dispositions have been executed at or above IFRS fair values and consistent with Crombie’s previously announced disposition strategy.
Conference Call Invitation
Crombie will provide additional details concerning its period ended December 31, 2018 results on a conference call to be held Thursday, February 28, 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 March 14, 2019 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 635944 #, 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 and year ended December 31, 2018.
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
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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