Crombie REIT (TSX: CRR.UN)
STELLARTON, NS, Aug. 8, 2014 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report its financial
results for the three months and six months ended June 30, 2014.
Second Quarter 2014 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise
noted).
- Portfolio fair value of $3.9 billion.
- Funds From Operations ("FFO"):
-
FFO for the six months ended June 30, 2014 increased 32.8% to $69,330;
or $0.55 per unit Diluted, a decrease of $0.01 per unit from the same
period in 2013. -
FFO for the three months ended June 30, 2014 increased 31.5% to $34,836;
or $0.27 per unit Diluted, a decrease of $0.01 per unit from the three
months ended June 30, 2013. -
FFO payout ratio of 80.5% for the six months ended June 30, 2014
compared to 78.4% for the same period in 2013. -
FFO payout ratio of 81.8% for the three months ended June 30, 2014
compared to 77.3% for the three months ended June 30, 2013. - Adjusted Funds From Operations ("AFFO"):
-
AFFO for the six months ended June 30, 2014 increased 31.1% to $57,741;
or $0.46 per unit Diluted, a decrease of $0.02 per unit from the same
period in 2013. -
AFFO for the three months ended June 30, 2014 increased 29.1% to
$28,972; or $0.23 per unit Diluted, a decrease of $0.01 per unit from
the three months ended June 30, 2013. -
AFFO payout ratio of 96.7% for the six months ended June 30, 2014
compared to 92.9% for the same period in 2013. -
AFFO payout ratio of 98.3% for the three months ended June 30, 2014
compared to 91.3% for the same period in 2013. -
Same-asset Cash Net Operating Income ("NOI") for the six months ended
June 30, 2014 showed solid growth of 1.9% compared to the same six
months ended June 30, 2013. Increase in same-asset cash NOI of 1.3% for
the three months ended June 30, 2014 compared to the same period in
2013. -
Property revenue for the six months ended June 30, 2014 of $179,921, an
increase of $38,069 or 26.8% over the six months ended June 30, 2013.
Property revenue of $89,008 for Q2 2014 increased $17,738 or 24.9% over
Q2 2013. -
Occupancy, on a committed basis, was 93.3% at June 30, 2014, compared
with 93.1% at March 31, 2014. -
Crombie completed leasing activity on a total of 531,000 square feet
during the six months ended June 30, 2014, including: -
Renewals on 237,000 square feet of 2014 expiring leases at an average
rate of $17.50 per square foot, an increase of 10.0% over the expiring
lease rate; -
Renewals on 20,000 square feet of 2015 and later expiring leases at an
average rate of $15.17 per square foot, an increase of 8.5% over the
expiring lease rate; and -
New leases on 274,000 square feet of space, at an average rate of $15.26
per square foot. -
Weighted average lease term of 12.0 years and weighted average mortgage
term of 7.8 years; amongst the longest and most defensive in the REIT
industry. -
Strong 2.54 times interest coverage. Weighted average interest rate on
mortgages reduced to 4.78% from 4.79% at March 31, 2014 and 5.00% at
June 30, 2013. -
Debt to Gross Book Value (fair value basis) of 51.6% compared to 53.1%
at March 31, 2014. -
Completed $100,000 Units and Class B LP Units issuance on May 30, 2014;
$60,000 of which is the first issuance under the $500,000 Short Form
Shelf Prosspectus filed on May 13, 2014. -
Closed $100,000 principal amount Series B Senior Unsecured Notes
offering with an effective yield of 3.90% on March 5, 2014.
Donald E. Clow, FCA, President and CEO commented: "Focus on our long
term strategy of owning one of the best real estate portfolios in
Canada, building a national platform and enhancing our financial
condition is clear and unwavering. During the quarter we continued the
integration and scoping of development opportunities in the new Safeway
acquisitions as well as assessing other significant value creation
projects in urban markets in the rest of Canada. In addition to retail
development opportunities we are considering participating in mixed use
components of these developments including Crombie developing up to
4,000 residential units over the next 10 to 15 years."
Financial Highlights
Crombie's key financial metrics for the three months and six months
ended June 30, 2014 are as follows:
| (In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2014 | 2013 | 2014 | 2013 | ||||||
| Property revenue | $ | 89,008 | $ | 71,270 | $ | 179,921 | $ | 141,852 | |
| Operating income attributable to Unitholders | $ | 17,000 | $ | 12,581 | $ | 32,900 | $ | 25,540 | |
| Operating income attributable to Unitholders per unit – basic | $ | 0.14 | $ | 0.14 | $ | 0.27 | $ | 0.28 | |
| Operating income attributable to Unitholders per unit – diluted | $ | 0.14 | $ | 0.14 | $ | 0.26 | $ | 0.28 | |
| FFO | $ | 34,836 | $ | 26,490 | $ | 69,330 | $ | 52,211 | |
| FFO per unit – basic | $ | 0.28 | $ | 0.29 | $ | 0.56 | $ | 0.57 | |
| FFO per unit- diluted | $ | 0.27 | $ | 0.28 | $ | 0.55 | $ | 0.56 | |
| FFO payout ratio (%) | 81.8% | 77.3% | 80.5% | 78.4% | |||||
| AFFO | $ | 28,972 | $ | 22,433 | $ | 57,741 | $ | 44,039 | |
| AFFO per unit – basic | $ | 0.23 | $ | 0.24 | $ | 0.47 | $ | 0.48 | |
| AFFO per unit – diluted | $ | 0.23 | $ | 0.24 | $ | 0.46 | $ | 0.48 | |
| Distributions | $ | 0.22 | $ | 0.22 | $ | 0.45 | $ | 0.45 | |
| AFFO payout ratio (%) | 98.3% | 91.3% | 96.7% | 92.9% | |||||
The increase in FFO and AFFO for the three months and six months ended
June 30, 2014 was primarily due to the 70 property Sobey / Safeway
acquisition during the fourth quarter of 2013 and completed development
and land use intensification projects during 2013, resulting in
significant growth in property NOI, offset in part by higher finance
costs – operations.
The table below presents a summary of financial performance for the
three months and six months ended June 30, 2014 compared to the same
period in fiscal 2013.
| (In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||
| Property revenue | $ | 89,008 | $ | 71,270 | $ | 179,921 | $ | 141,852 | |||
| Property operating expenses | 27,049 | 25,696 | 56,963 | 52,514 | |||||||
| Property NOI | 61,599 | 45,574 | 122,958 | 89,338 | |||||||
| NOI margin percentage | 69.2% | 63.9% | 68.3% | 63.0% | |||||||
| Other items: | |||||||||||
| Gain (loss) on derecognition of investment properties | (3) | 6 | (160) | 436 | |||||||
| Depreciation and amortization | (15,943) | (11,985) | (32,468) | (23,107) | |||||||
| General and administrative expenses | (4,083) | (3,366) | (7,839) | (6,572) | |||||||
| Operating income before finance costs and taxes | 41,570 | 30,229 | 82,491 | 60,095 | |||||||
| Finance costs – operations | (25,070) | (17,648) | (50,316) | (34,455) | |||||||
| Operating income before taxes | 16,500 | 12,581 | 32,175 | 25,640 | |||||||
| Taxes – deferred | 500 | – | 725 | (100) | |||||||
| Operating income attributable to Unitholders | 17,000 | 12,581 | 32,900 | 25,540 | |||||||
| Finance costs – distributions to Unitholders | (28,480) | (20,480) | (55,835) | (40,918) | |||||||
| Finance income (costs) – change in fair value of financial instruments | 130 | 1,585 | 185 | 2,202 | |||||||
| Decrease in net assets attributable to Unitholders | $ | (11,350) | $ | (6,314) | $ | (22,750) | $ | (13,176) | |||
Growth Highlights
| GLA |
Initial Purchase Price |
Occupancy Rate |
Key Tenants | ||||||||
| Acquisitions in Q1 | |||||||||||
| Penhorn Plaza | Dartmouth | NS | 6,683 | $ | 1,490,000 | 100% | Mr. Lube, Fast Fuels | ||||
| Acquisitions in Q2 | |||||||||||
| London Pine Valley | London | ON | 39,000 | 10,176,000 | 100% | FreshCo, Dollar Tree | |||||
| Completed to date in 2014 | 45,683 | $ | 11,666,000 | 100% | |||||||
Since January 1, 2014, Crombie's GLA reflects a net increase of 21,000
square feet from acquisition and disposition activity. Crombie
exchanged a property in Alberta for another Alberta property, resulting
in no net change in GLA. In addition, Crombie disposed of part of an
existing property in Nova Scotia, resulting in a 25,000 square foot
reduction in GLA and completed the above acquisitions.
Operating Highlights
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
| (In thousands of CAD dollars) | 2014 | 2013 | 2014 | 2013 | |||||
| Property NOI | $ | 61,599 | $ | 45,574 | $ | 122,958 | $ | 89,338 | |
| Non-cash straight-line rent | (2,706) | (1,208) | (5,460) | (2,567) | |||||
| Non-cash tenant incentive amortization | 2,390 | 1,930 | 4,527 | 3,900 | |||||
| Property cash NOI | 61,283 | 46,296 | 122,025 | 90,671 | |||||
| Acquisitions, dispositions and development property cash NOI | 20,161 | 5,691 | 39,702 | 9,866 | |||||
| Same-asset property cash NOI | $ | 41,122 | $ | 40,605 | $ | 82,323 | $ | 80,805 | |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
| (In thousands of CAD dollars) | 2014 | 2013 | 2014 | 2013 | ||||||
| Retail Enclosed | $ | 6,075 | $ | 5,985 | $ | 12,567 | $ | 12,046 | ||
| Retail Freestanding | 8,487 | 8,183 | 17,020 | 16,364 | ||||||
| Retail Plaza | 20,492 | 20,086 | 40,537 | 39,968 | ||||||
| Retail total | 35,054 | 34,254 | 70,124 | 68,378 | ||||||
| Mixed Use | 3,341 | 3,243 | 6,496 | 6,409 | ||||||
| Office | 2,727 | 3,108 | 5,703 | 6,018 | ||||||
| Same-asset property cash NOI | $ | 41,122 | $ | 40,605 | $ | 82,323 | $ | 80,805 | ||
Property NOI, on a cash basis, excludes straight-line rent recognition
and amortization of tenant incentive amounts. The 1.3% and 1.9%
increases in same-asset property cash NOI for the three months and six
months ended June 30, 2014 is primarily the result of increased average
rent per square foot from leasing activity and rental rate increases in
existing leases as well as improved recovery rates and revenues from
land use intensifications at several properties.
During the first quarter of 2014, Crombie classified an investment
property as held for sale. The operating results for that property are
included in acquisitions, dispositions and development for the current
and comparative periods.
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 June 30, | Six Months Ended June 30, | ||||||||
| (In thousands of CAD dollars) | 2014 | 2013 | 2014 | 2013 | |||||
| Acquisitions and dispositions property cash NOI | $ | 18,956 | $ | 4,912 | $ | 36,954 | $ | 6,838 | |
| Development property cash NOI | 1,205 | 779 | 2,748 | 3,028 | |||||
| Total acquisition, disposition and development property cash NOI | $ | 20,161 | $ | 5,691 | $ | 39,702 | $ | 9,866 | |
The significant growth in acquisitions and dispositions property cash
NOI was primarily due to the 70 property Sobeys / Safeway acquisition
during the fourth quarter of 2013.
Capital Highlights
| Six Months Ended June 30, | ||
| 2014 | 2013 | |
| Weighted Average Mortgage Term | 7.8 years | 7.7 years |
| Weighted Average Interest Rate | 4.78% | 5.00% |
| Debt to Gross Book Value (Fair Value) | 51.6% | 49.6% |
| Interest Coverage | 2.54 | 2.77 |
| Debt Service Coverage | 1.70 | 1.80 |
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 $28,785 was drawn as at June 30, 2014, and an
additional $2,535 encumbered by outstanding letters of credit,
resulting in significant available liquidity.
Debt to gross book value on a fair value basis is 51.6% (including
convertible debentures) at June 30, 2014, compared to 49.6% at June 30,
2013.
General and Administrative Expenses
General and administrative expenses for the six months ended June 30,
2014, as a percentage of property revenue, decreased by 0.2% from 4.6%
to 4.4%, when compared to the same period in 2013. For the three months
ended June 30, 2014, general and administrative expenses as a
percentage of property revenue, decreased by 0.1% from 4.7% to 4.6%,
when compared to the same period in 2013.
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, 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.
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 250 retail and office properties across Canada,
comprising approximately 17.6 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
2013 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.
Crombie's consolidated financial statements and management's discussion
and analysis for the three months and six months ended June 30, 2014
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.
Conference Call Invitation
Crombie will provide additional details concerning its June 30, 2014
second quarter and year to date results on a conference call to be held
Friday, August 8, 2014, at 12:00 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 web cast of the conference call by visiting
Crombie's website located at www.crombiereit.com. Replay will be available until midnight August 22, 2014 by dialing
(416) 849-0833 or (855) 859-2056 and entering pass code 76367802, or on
the Crombie website for 90 days after the meeting.
SOURCE Crombie REIT