Crombie REIT reports fourth quarter and fiscal 2015 results

NEW GLASGOW, NS, Feb. 24, 2016 /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, 2015.

Fourth quarter 2015 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).

• Portfolio fair value of $4.1 billion.
• Funds From Operations ("FFO"):
  • FFO for the year ended December 31, 2015 increased 5.2% to $149,474; or $1.13 per unit Diluted, an increase of $0.03 per unit from the year ended December 31, 2014.
  • FFO for the three months ended December 31, 2015 increased 5.4% to $38,311; or $0.29 per unit Diluted, an increase of $0.01 per unit from the three months ended December 31, 2014.
  • FFO payout ratio of 78.0% for the year ended December 31, 2015 compared to 80.2% for the same period in 2014.
  • FFO payout ratio of 76.3% for the three months ended December 31, 2015 compared to 79.9% for the same period in 2014.
• Adjusted Funds From Operations ("AFFO"):
  • AFFO for the year ended December 31, 2015 increased 6.3% to $125,654; or $0.96 per unit Diluted, an increase of $0.03 per unit from the year ended December 31, 2014.
  • AFFO for the three months ended December 31, 2015 increased 6.9% to $32,310; or $0.25 per unit Diluted, an increase of $0.02 per unit from the three months ended December 31, 2014.
  • AFFO payout ratio of 92.8% for the year ended December 31, 2015 compared to 96.4% for the same period in 2014.
  • AFFO payout ratio of 90.5% for the three months ended December 31, 2015 compared to 96.2% for the same period in 2014.
• Same-asset property cash NOI for the year ended December 31, 2015 increased by 1.8% or $3,970 ($229,962 compared to $225,992 for the year ended December 31, 2014). Increase in same-asset property cash NOI for the three months ended December 31, 2015 of 2.5% or $1,422 ($57,846 compared to $56,424 for the three months ended December 31, 2014).
• Property revenue for the year ended December 31, 2015 of $369,866, an increase of $11,547 or 3.2% over the year ended December 31, 2014. Fourth quarter property revenue of $92,847, increased $2,245, or 2.5% over fourth quarter 2014.
• Occupancy, on a committed basis, was 93.6% at December 31, 2015 compared with 93.2% at September 30, 2015 and 94.0% at December 31, 2014.
• Crombie's renewal activity during the year ended December 31, 2015 included;
  • Renewals on 246,000 square feet of 2015 expiring leases at an average rate of $19.01 per square foot, an increase of 8.2% over the expiring lease rate; and
  • Renewals on 231,000 square feet of 2016 and later expiring leases at an average rate of $16.32 per square foot, an increase of 7.7% over the expiring lease rate.
• New leasing activity affecting 2015 includes replacing 299,000 square feet of vacant or maturing space at an average rate of $14.91 per square foot and 50,000 square feet of new square footage on existing properties at an average rate of $16.90 per square foot.
• Debt to gross book value (fair value basis) was 52.5% at December 31, 2015, compared to 52.8% at December 31, 2014.
• Strong 2.72 times EBITDA interest coverage for the year ended December 31, 2015. Weighted average interest rate on mortgages reduced to 4.62% from 4.77% at December 31, 2014.
• Closed $125,000 principal amount Series C Five Year Senior Unsecured Notes offering with an effective yield of 2.775% on February 10, 2015. Redeemed the $45,000 5.75% Series C Convertible Debentures on February 18, 2015.
• Completed acquisition of five retail properties and four additions to existing retail properties totalling 333,800 square feet for a total purchase price of $96,308 before closing and transaction costs.

Events Subsequent to Fourth Quarter

• On January 29, 2016, Crombie and a third party waived conditions for the disposition of 11 retail properties, totalling 857,000 square feet of gross leaseable area, with an expected closing in the first quarter of 2016. Total proceeds, before closing adjustments and transaction costs, are approximately $150,000 resulting in a gain on disposal of approximately $30,000.

Donald E. Clow, FCPA, FCA, President and CEO commented: "Our strong 2015 growth in FFO & AFFO per unit, same-asset NOI, improved payout ratios and solid leasing activity demonstrate the defensiveness and resilience of Crombie's business in the face of difficult economic and market conditions. This stability combined with our enthusiasm for our major development project pipeline and ongoing strategic Sobeys relationship, bode well for our future growth prospects. We are very proud of our award winning Crombie team and their performance on multiple fronts in 2015 to advance our long term strategy."

Financial Highlights

Crombie's key financial metrics for the three months and year ended December 31, 2015 are as follows:

The increase in FFO and AFFO for the year ended December 31, 2015 was primarily due to increased property cash NOI results, including acquisition and development activity during 2015 and 2014; lower finance costs – operations from refinancings and lower interest rates offset in part by increased income tax expense. FFO and AFFO were also positively impacted by an increase of approximately $1.0 million of cash lease termination income received in 2015 compared to 2014.

The table below presents a summary of financial performance for the three months and year ended December 31, 2015 compared to the same periods in fiscal 2014.

Growth Highlights

Operating Highlights

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The +2.5% and +1.8% increases in same-asset property cash NOI for the three months and year ended December 31, 2015 respectively are primarily the result of increased average rent per square foot from leasing activity; rental rate increases in existing leases; improved recovery rates; increased lease termination income; and, revenues from land use intensifications at certain properties.

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:

Growth in acquisitions and dispositions property cash NOI reflects the property acquisition and disposition activity throughout 2015 and 2014 including the acquisition of five retail properties in 2015.

Capital Highlights

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 $300,000, subject to available borrowing base, of which $130,000 was drawn as at December 31, 2015, and an additional $1,425 encumbered by outstanding letters of credit, resulting in significant available liquidity.

Debt to gross book value on a fair value basis is 52.5% (including convertible debentures) at December 31, 2015, compared to 52.8% at December 31, 2014.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2015, as a percentage of property revenue, decreased by 0.2% from 4.1% to 3.9%, when compared to the same period in 2014. For the three months ended December 31, 2015, general and administrative expenses as a percentage of property revenue, increased by 0.1% from 3.7% to 3.8%, when compared to the same period in 2014. The increase is due to increased employee training and development costs.

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 related intangible assets) 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 intangible assets, 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.
• 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, 2015.

Crombie's interim condensed consolidated financial statements and management's discussion and analysis for the three months and year ended December 31, 2015 can be found on Crombie's web site at www.crombiereit.com or on the SEDAR web site 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 261 retail, mixed use and office properties across Canada, comprising approximately 17.7 million square feet with a strategy to own and operate a portfolio of high quality grocery and drug store anchored shopping centres and freestanding stores primarily in Canada's top 36 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 2015 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:

Conference Call Invitation

Crombie will provide additional details concerning its year ended December 31, 2015 results on a conference call to be held Thursday, February 25, 2016, at 12:30 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 web cast of the conference call by visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight March 10, 2016 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 32543024, or on the Crombie website for 90 days after the meeting.

SOURCE Crombie REIT