NEW GLASGOW, NS, Feb. 22, 2017 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX:CRR.UN) is pleased to report its financial results for the three months and year ended December 31, 2016.
Fourth quarter 2016 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).
- Funds From Operations ("FFO"):
- FFO, as adjusted, for the year ended December 31, 2016 increased 11.2% to $166,235; or $1.17 per unit diluted, an increase of $0.04 per unit or 3.9% from the year ended December 31, 2015.
- FFO for the three months ended December 31, 2016 increased 18.6% to $45,452; or $0.30 per unit diluted, an increase of $0.01 per unit or 5.1% from the three months ended December 31, 2015.
- FFO, as adjusted, payout ratio of 75.6% for the year ended December 31, 2016 compared to 78.0% for the same period in 2015.
- FFO payout ratio of 72.6% for the three months ended December 31, 2016 compared to 76.3% for the same period in 2015.
- Adjusted Funds From Operations ("AFFO"):
- AFFO for the year ended December 31, 2016 increased 12.0% to $140,739; or $1.00 per unit diluted, an increase of $0.04 per unit or 4.6% from the year ended December 31, 2015.
- AFFO for the three months ended December 31, 2016 increased 19.0% to $38,452; or $0.26 per unit diluted, an increase of $0.01 per unit or 5.3% from the three months ended December 31, 2015.
- AFFO payout ratio of 89.3% for the year ended December 31, 2016 compared to 92.8% for the same period in 2015.
- AFFO payout ratio of 85.8% for the three months ended December 31, 2016 compared to 90.5% for the same period in 2015.
- Same-asset property cash NOI for the year ended December 31, 2016 increased 4.2% or $9,393 ($234,710 compared to $225,317 for the year ended December 31, 2015). Increase in same-asset property cash NOI for the three months ended December 31, 2016 of 9.2% or $5,203 ($61,785 compared to $56,582 for the three months ended December 31, 2015).
- Portfolio fair value of $4.8 billion, an increase of $800 million over 2015.
- Completed acquisitions totalling 2,652,000 square feet for $573,833 before closing and transaction costs, including 38 retail properties; a 50% interest in three distribution centres; two parcels of development land adjacent to existing Crombie properties and a 50% interest in an additional development property; and, invested $58,823 in the renovation and expansion of 10 existing Sobeys anchored properties.
- Completed dispositions of 19 retail properties totalling 1,211,000 square feet for proceeds of approximately $195,550 before closing and transaction costs.
- Property revenue for the year ended December 31, 2016 of $400,001, an increase of $30,135 or 8.1% over the year ended December 31, 2015. Fourth quarter property revenue of $105,269 increased $12,422, or 13.4%, over fourth quarter 2015.
- Occupancy, on a committed basis, was 94.4% at December 31, 2016 compared with 94.2% at September 30, 2016 and 93.6% at December 31, 2015.
- Crombie's renewal activity during the year ended December 31, 2016 included:
- Renewals on 499,000 square feet of 2016 expiring leases at an average rate of $16.96 per square foot, an increase of 9.9% over the expiring lease rate.
- Renewals on 222,000 square feet of 2017 and later expiring leases at an average rate of $17.05 per square foot, an increase of 5.3% over the expiring lease rate.
- New leases and expansions increased occupancy by 290,000 square feet at December 31, 2016 at an average first year rate of $15.05 per square foot. 132,000 square feet of space was committed at December 31, 2016 at an average first year rate of $12.51 per square foot.
- Debt to gross book value (fair value basis) was 50.3% at December 31, 2016, compared to 52.5% at December 31, 2015.
- Interest service coverage for the year ended December 31, 2016 was 2.97 times EBITDA. Weighted average interest rate on mortgages reduced to 4.46% from 4.62% at December 31, 2015.
- Recognized $14,172 in property revenue during the year ended December 31, 2016 related to settlement proceeds from Target Canada for three leases vacated in May 2015 and from Best Buy/Future Shop related to one vacated lease. These amounts have been adjusted out of FFO for the year ended December 31, 2016.
Donald E. Clow, FCPA, FCA, President and CEO commented: "2016 was a breakout year for Crombie as we improved the quality of our portfolio by investing over $600 million in urban and suburban growth and divested almost $200 million of non-core assets. We achieved record AFFO of $1.00 per unit and strong FFO and AFFO per unit growth of 3.9% and 4.6% respectively. Our AFFO payout ratio finished the year at 89.3% with Q4 improving to 85.8%.
Occupancy finished the year at 94.4% with strong leasing momentum and healthy renewal rents (+9.9%) achieved on 2016 renewals. Same-asset cash NOI grew 4.2% during 2016 and our financial condition improved with year-end leverage at 50.3%. Significant recent mortgage financings will deliver long-term interest savings and substantial liquidity to fund future growth. We are very excited by the extraordinary quality of our mixed use development pipeline with 2017 being the launching point to further diversify, urbanize and drive AFFO growth and net asset value."
Financial Highlights
Crombie's key financial metrics for the three months and year ended December 31, 2016 are as follows:
|
Three months ended December 31, |
Year ended December 31, |
||||||||||
|
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
2016 |
2015 |
2016 |
2015 |
|||||||
|
Property revenue |
$ |
105,269 |
$ |
92,847 |
$ |
400,001 |
$ |
369,866 |
|||
|
Operating income attributable to Unitholders |
$ |
31,478 |
$ |
13,945 |
$ |
125,130 |
$ |
65,729 |
|||
|
Operating income attributable to Unitholders per unit – basic |
$ |
0.21 |
$ |
0.11 |
$ |
0.89 |
$ |
0.50 |
|||
|
Operating income attributable to Unitholders per unit – diluted |
$ |
0.21 |
$ |
0.11 |
$ |
0.89 |
$ |
0.50 |
|||
|
FFO, as adjusted – basic |
$ |
45,452 |
$ |
38,311 |
$ |
166,235 |
$ |
149,474 |
|||
|
FFO, as adjusted – diluted |
$ |
47,193 |
$ |
40,052 |
$ |
173,141 |
$ |
156,720 |
|||
|
FFO, as adjusted per unit – basic |
$ |
0.31 |
$ |
0.29 |
$ |
1.19 |
$ |
1.14 |
|||
|
FFO, as adjusted per unit – diluted |
$ |
0.30 |
$ |
0.29 |
$ |
1.17 |
$ |
1.13 |
|||
|
FFO, as adjusted payout ratio (%) |
72.6% |
76.3% |
75.6% |
78.0% |
|||||||
|
AFFO – basic |
$ |
38,452 |
$ |
32,310 |
$ |
140,739 |
$ |
125,654 |
|||
|
AFFO – diluted |
$ |
40,193 |
$ |
33,295 |
$ |
144,645 |
$ |
129,900 |
|||
|
AFFO per unit – basic |
$ |
0.26 |
$ |
0.25 |
$ |
1.01 |
$ |
0.96 |
|||
|
AFFO per unit – diluted |
$ |
0.26 |
$ |
0.25 |
$ |
1.00 |
$ |
0.96 |
|||
|
Distributions per unit |
$ |
0.22 |
$ |
0.22 |
$ |
0.89 |
$ |
0.89 |
|||
|
AFFO payout ratio (%) |
85.8% |
90.5% |
89.3% |
92.8% |
|||||||
Operating income attributable to Unitholders for the year ended December 31, 2016 was impacted by the $37,490 gain on disposal of 19 retail properties during 2016, and lease termination income of $14,584 in 2016 compared to $4,175 in 2015.
|
Three months ended December 31, |
Year ended December 31, |
||||||||||||||||||
|
(In thousands of CAD dollars) |
2016 |
2015 |
Variance |
2016 |
2015 |
Variance |
|||||||||||||
|
FFO as calculated based on REALpac recommendations |
$ |
49,280 |
$ |
38,311 |
$ |
10,969 |
$ |
179,794 |
$ |
152,435 |
$ |
27,359 |
|||||||
|
Adjustments |
|||||||||||||||||||
|
Net lease termination income from Target Canada and Best Buy/Future Shop |
(3,828) |
— |
(3,828) |
(14,172) |
— |
(14,172) |
|||||||||||||
|
Subscription Receipts Adjustment Payment |
— |
— |
— |
613 |
— |
613 |
|||||||||||||
|
Lease termination income, non-cash |
— |
— |
— |
— |
(2,961) |
2,961 |
|||||||||||||
|
FFO, as adjusted |
$ |
45,452 |
$ |
38,311 |
$ |
7,141 |
$ |
166,235 |
$ |
149,474 |
$ |
16,761 |
|||||||
FFO for the year ended December 31, 2016 has been adjusted to remove $13,559 in lease termination income from Target Canada for three leases vacated in May 2015 and from Best Buy/Future Shop related to one vacated lease and for $613 in finance expense related to subscription receipts issued in May 2016 and converted to REIT Units on June 29, 2016. FFO for the year ended December 31, 2015 has been adjusted to remove $2,961 in non-cash lease termination income. The increase in FFO and AFFO for the year ended December 31, 2016 compared to the same period in 2015 was primarily due to improved operating results from leasing and acquisition activity, offset in part by the disposition of 19 retail properties during 2016.
The table below presents a summary of financial performance for the three months and year ended December 31, 2016 compared to the same period in fiscal 2015.
|
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
Three months ended December 31, |
Year ended December 31, |
|||||||||||
|
2016 |
2015 |
2016 |
2015 |
||||||||||
|
Property revenue |
$ |
105,269 |
$ |
92,847 |
$ |
400,001 |
$ |
369,866 |
|||||
|
Property operating expenses |
29,395 |
28,858 |
115,306 |
113,261 |
|||||||||
|
Property NOI |
75,874 |
63,989 |
284,695 |
256,605 |
|||||||||
|
NOI margin percentage |
72.1% |
68.9% |
71.2% |
69.4% |
|||||||||
|
Other items: |
|||||||||||||
|
Gain on disposal of investment properties |
9,761 |
25 |
37,490 |
23 |
|||||||||
|
Impairment of investment properties |
(6,000) |
(7,300) |
(6,000) |
(12,575) |
|||||||||
|
Depreciation and amortization |
(19,435) |
(16,789) |
(73,332) |
(66,576) |
|||||||||
|
General and administrative expenses |
(4,266) |
(3,541) |
(16,341) |
(14,401) |
|||||||||
|
Finance costs – operations |
(25,656) |
(24,600) |
(100,156) |
(98,611) |
|||||||||
|
Operating income before taxes |
30,278 |
11,784 |
126,356 |
64,465 |
|||||||||
|
Taxes – current |
— |
(39) |
(26) |
(2,936) |
|||||||||
|
Taxes – deferred |
1,200 |
2,200 |
(1,200) |
4,200 |
|||||||||
|
Operating income attributable to Unitholders |
31,478 |
13,945 |
125,130 |
65,729 |
|||||||||
|
Finance costs – distributions to Unitholders |
(32,987) |
(29,236) |
(125,737) |
(116,576) |
|||||||||
|
Finance income (costs) – change in fair value of financial instruments |
(46) |
3,068 |
312 |
56 |
|||||||||
|
Increase (decrease) in net assets attributable to Unitholders |
$ |
(1,555) |
$ |
(12,223) |
$ |
(295) |
$ |
(50,791) |
|||||
|
Operating income attributable to Unitholders per Unit, Basic |
$ |
0.21 |
$ |
0.11 |
$ |
0.89 |
$ |
0.50 |
|||||
|
Operating income attributable to Unitholders per Unit, Diluted |
$ |
0.21 |
$ |
0.11 |
$ |
0.89 |
$ |
0.50 |
|||||
|
Basic weighted average Units outstanding (in 000's) |
148,039 |
131,182 |
139,920 |
130,788 |
|||||||||
|
Diluted weighted average Units outstanding (in 000's) |
148,179 |
131,334 |
140,063 |
130,946 |
|||||||||
|
Distributions per Unit to Unitholders |
$ |
0.22 |
$ |
0.22 |
$ |
0.89 |
$ |
0.89 |
|||||
Growth Highlights
|
Initial Purchase |
||||||||||
|
(In thousands of CAD dollars) |
GLA |
Price |
Occupancy |
Key Tenants |
||||||
|
Acquisitions in Q1 |
||||||||||
|
5700 50th Street |
Beaumont |
AB |
21,000 |
$ |
5,500 |
100% |
Beaumont Home Hardware, Dollarama |
|||
|
Acquisitions in Q2 |
||||||||||
|
Mercier Boulevard |
St-Jean-Baptiste |
QC |
58,000 |
15,700 |
100% |
IGA |
||||
|
680 Longworth Street |
Bowmanville |
ON |
42,000 |
14,200 |
100% |
Sobeys |
||||
|
Bronte Village |
Oakville |
ON |
75,000 |
32,000 |
75.6% |
Sobeys |
||||
|
Nine BMO properties |
AB, BC, ON, QC |
94,000 |
32,272 |
100% |
BMO Bank of Montreal |
|||||
|
6102 50th Street |
Leduc |
AB |
37,000 |
7,000 |
100% |
Dollarama |
||||
|
Park West Centre |
Halifax |
NS |
84,000 |
29,000 |
100% |
Sobeys, Royal Bank |
||||
|
Park West Annex |
Halifax |
NS |
54,000 |
14,150 |
—% |
|||||
|
Empire acquisition |
AB, BC, ON, QC |
2,090,000 |
348,386 |
98.7% |
Safeway, IGA, Sobeys, Dollarama |
|||||
|
Development land |
Halifax |
NS |
— |
9,975 |
||||||
|
Acquisitions in Q3 |
||||||||||
|
King George Boulevard |
Surrey |
BC |
62,000 |
26,400 |
100% |
Safeway |
||||
|
Development land |
Toronto |
ON |
— |
5,250 |
||||||
|
Acquisitions in Q4 |
||||||||||
|
3362-3370 Yonge Street |
Toronto |
ON |
29,000 |
29,000 |
100% |
Shoppers Drug Mart |
||||
|
3130 Danforth Avenue |
Scarborough |
ON |
6,000 |
5,000 |
100% |
The Beer Store |
||||
|
2,652,000 |
$ |
573,833 |
||||||||
Crombie also invested $58,823 in the renovation and expansion of 10 existing Sobeys anchored properties. The Park West Annex acquisition in Q2 was a vacant building which has since been demolished as part of a redevelopment plan for the property.
Operating Highlights
|
Three months ended December 31, |
Year ended December 31, |
||||||||||
|
(In thousands of CAD dollars) |
2016 |
2015 |
2016 |
2015 |
|||||||
|
Property NOI |
$ |
75,874 |
$ |
63,989 |
$ |
284,695 |
$ |
256,605 |
|||
|
Non-cash straight-line rent |
(3,840) |
(2,801) |
(12,876) |
(11,142) |
|||||||
|
Non-cash tenant incentive amortization |
3,328 |
2,512 |
11,622 |
9,712 |
|||||||
|
Property cash NOI |
75,362 |
63,700 |
283,441 |
255,175 |
|||||||
|
Acquisitions, dispositions and development property cash NOI |
13,577 |
7,118 |
48,731 |
29,858 |
|||||||
|
Same-asset property cash NOI |
$ |
61,785 |
$ |
56,582 |
$ |
234,710 |
$ |
225,317 |
|||
|
Same-asset property cash NOI is as follows: |
|||||||||||
|
Three months ended December 31, |
Year ended December 31, |
||||||||||
|
(In thousands of CAD dollars) |
2016 |
2015 |
2016 |
2015 |
|||||||
|
Retail and Mixed Use |
$ |
59,064 |
$ |
53,848 |
$ |
223,633 |
$ |
214,579 |
|||
|
Office |
2,721 |
2,734 |
11,077 |
10,738 |
|||||||
|
Same-asset property cash NOI |
$ |
61,785 |
$ |
56,582 |
$ |
234,710 |
$ |
225,317 |
|||
Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The +9.2% and +4.2% increases in same-asset property cash NOI for the three months and year ended December 31, 2016 are primarily the result of higher lease termination income, increased average rent from leasing activity, rental rate increases, improved recovery rates, as well as continued land use intensification and additional NOI from the $58,823 investment in Sobeys anchored properties on June 29, 2016.
Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance.
Acquisitions, dispositions and development property cash NOI is as follows:
|
Three months ended December 31, |
Year ended December 31, |
||||||||||
|
(In thousands of CAD dollars) |
2016 |
2015 |
2016 |
2015 |
|||||||
|
Acquisitions and dispositions property cash NOI |
$ |
9,907 |
$ |
4,655 |
$ |
27,214 |
$ |
19,011 |
|||
|
Development property cash NOI |
3,670 |
2,463 |
21,517 |
10,847 |
|||||||
|
Total acquisitions, dispositions and development property cash NOI |
$ |
13,577 |
$ |
7,118 |
$ |
48,731 |
$ |
29,858 |
|||
Growth in acquisitions and dispositions property cash NOI reflects the property acquisition and disposition activity throughout 2016 and 2015 including the acquisition of 41 properties in 2016, the disposition of 19 retail properties in 2016 and the acquisition of five retail properties in 2015.
Capital Highlights
|
December 31, |
|||||
|
2016 |
2015 |
||||
|
Weighted Average Mortgage Term |
5.90 years |
6.6 years |
|||
|
Weighted Average Mortgage Interest Rate |
4.46% |
4.62% |
|||
|
Debt to Gross Book Value (Fair Value) |
50.3% |
52.5% |
|||
|
Interest Coverage |
2.97x |
2.72x |
|||
|
Debt Service Coverage |
1.96x |
1.81x |
|||
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 $120,374 was drawn as at December 31, 2016, and an additional $5,027 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 December 31, 2016.
Debt to gross book value on a fair value basis is 50.3% at December 31, 2016, compared to 52.5% at December 31, 2015.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2016, as a percentage of property revenue, increased by 0.2% from 3.9% to 4.1%, when compared to the same period in 2015. The increase is impacted by the implementation of Crombie's Restricted Unit Plan in 2015 which recognizes a portion of long-term compensation over a vesting period and the valuation of the Restricted Unit Plan is impacted by mark to market adjustments to the Units which impacts salaries and benefits.
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. Crombie includes these measures because 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, deferred income taxes, finance costs – distributions to Unitholders, impairment charges and recoveries and change in fair value of financial instruments. FFO, as adjusted, is calculated as FFO plus or minus specific unusual amounts not expected to be recurring.
- 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 deferred leasing costs, and the settlement of effective interest rate swap agreements.
For additional information on these non-GAAP measures see our Management's Discussion and Analysis for the year ended December 31, 2016.
Crombie's consolidated financial statements and management's discussion and analysis for the three months and year ended December 31, 2016 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 is an open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. Crombie currently owns a portfolio of 280 commercial properties across Canada, comprising approximately 19.1 million square feet 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 2016 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, 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; and,
(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.
Conference Call Invitation
Crombie will provide additional details concerning its year ended December 31, 2016 results on a conference call to be held Thursday, February 23, 2017, at 1:00 p.m. Eastern time. To join this conference call you may dial (647) 427-7450 or (888) 231-8191. You may also listen to a live audio webcast of the conference call by visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight March 9, 2017 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 54107025, or on the Crombie website for 90 days after the meeting.
SOURCE Crombie REIT