Crombie REIT (TSX:CRR.UN)
STELLARTON, NS, Nov. 8, 2013 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report strong results for
the three months and nine months ended September 30, 2013.
Year to Date and Third Quarter 2013 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise
noted)
-
Strong 10.2% growth in Funds From Operations ("FFO") per unit for the
nine months ended September 30, 2013, as FFO per unit fully diluted
("FD") was $0.83 per unit compared to $0.76 per unit FD for the same
period in 2012. FFO grew 23.1% over the same period in 2012 ($78,052 vs
$63,386) with the FFO payout ratio 78.7% compared to 87.2% for the same
period in 2012. -
13.2% growth in FFO per unit for the three months ended September 30,
2013 ("Q3") as FFO per unit FD was $0.28 compared to $0.24 for the same
period in 2012. Q3 FFO grew 21.1% over the same period in 2012 ($25,841
vs $21,338) with the FFO payout ratio of 79.5% compared to 90.7% for
the same period in 2012. -
Strong 10.9% growth in Adjusted Funds From Operations ("AFFO") per unit
for the nine months ended September 30, 2013, as AFFO per unit FD was
$0.71 per unit compared to $0.64 per unit FD for the same period in
2012. AFFO grew 24.1% over the same period in 2012 ($66,032 vs $53,198)
for the nine months ended September 30, 2013 with the AFFO payout ratio
of 93.1% compared to 103.9% for the same period in 2012. -
13.2% growth in Q3 AFFO per unit as AFFO per unit FD was $0.24 compared
to $0.21 for the same period in 2012. Q3 AFFO grew 20.6% over the same
period in 2012 ($21,993 vs $18,237) with the AFFO payout ratio of 93.4%
compared to 106.1% for the same period in 2012. -
Crombie was assigned an investment grade credit rating of BBB(low) with
a Stable trend by DBRS. -
Acquisition of four drug store anchored freestanding properties in four
different provinces totaling $44 million during Q3. -
Portfolio fair value of $2.9 billion; $3.9 billion including the
subsequent acquisition. -
Solid growth of 1.6% in Same-Asset Cash Net Operating Income ("NOI") for
the nine months ended September 30, 2013 over the nine months ended
September 30, 2012. Slight reduction in Same-Asset Cash NOI of 0.3% for
the three months ended September 30, 2013 compared to the same period
in 2012. -
Property revenue of $213,044 for the nine months ended September 30,
2013, an increase of $25,492 or 13.6% over the $187,552 for the nine
months ended September 30, 2012. Q3 property revenue of $70,850,
increased $6,391 or 9.9% over Q3 2012. -
Solid occupancy on a committed basis of 92.2% at September 30, 2013,
compared with 93.5% at September 30, 2012. The September 30, 2013
leased space is impacted by the leasing expiry of three Zellers since
September 30, 2012, totalling 262,000 square feet. -
Crombie completed leasing activity on a total of 995,000 square feet
during the nine months ended September 30, 2013, including: -
Renewals on 472,000 square feet of 2013 expiring leases at an average
rate of $12.78 per square foot, an increase of 7.7% over the expiring
lease rate. This represents a renewal rate of 56% of the 2013 year to
date expired lease space; excluding the expiry of three Zellers leases,
renewals represent 82% of the expiring lease space; -
Renewals on 154,000 square feet of 2014 and later expiring leases at an
average rate of $15.03 per square foot, an increase of 12.1% over the
expiring lease rate; and -
New leases on 369,000 square feet of space, at an average rate of $16.00
per square foot. -
Weighted average lease term of 10.4 years and weighted average mortgage
term of 7.5 years; amongst the longest and most defensive in the REIT
industry. -
Weighted average interest rate on mortgages reduced to 4.99% from 5.21%
at December 31, 2012 and 5.27% at September 30, 2012. Strong 2.72 times
interest coverage. -
Debt to Gross Book Value (fair value basis) of 49.8% (53.9% on a cost
basis).
Subsequent Events
Effective November 3, 2013, Crombie acquired a portfolio of 70 retail
properties (the "Properties") representing approximately 3.0 million
square feet of gross leaseable area. The Properties were acquired from
a wholly-owned subsidiary of Sobeys Inc., a related party, for an
aggregate purchase price of $991,300, excluding closing adjustments and
transaction costs. As a condition to the closing, a wholly-owned
subsidiary of Sobeys Inc. entered into leases for each of the
Properties on a fully net basis. The Properties are among the assets
acquired by a wholly-owned subsidiary of Sobeys Inc. from Canada
Safeway Limited.
A summary of the acquisition and related financing is as follows (in
millions of CAD dollars):
| Purchase price | $ | 991.3 | ||
| Net proceeds from Subscription Receipts issued in August 2013 | 213.9 | |||
| Proceeds from Series E Debentures issued in August 2013 | 75.0 | |||
| Net proceeds from Series A Notes issued October 31, 2013 | 174.2 | |||
| Proceeds from Class B LP Units issued upon closing the acquisition | 150.0 | |||
| Mortgage proceeds received since the closing | 297.6 | |||
| Customary closing adjustments | 4.6 | |||
| Utilization of bridge credit facility | 76.0 | |||
| $ | 991.3 |
Further financing details are:
-
In August 2013, Crombie issued 17,720,000 Subscription Receipts at a
price of $12.70 each for gross proceeds of $225 million. On closing of
the acquisition, the Subscription Receipts were automatically exchanged
for REIT Units on a one-for-one basis. -
In August 2013, Crombie issued $75 million of Series E convertible,
extendible, unsecured subordinated debentures with a maturity date that
automatically extended to March 31, 2021 on completion of the
acquisition. -
On October 31 2013, Crombie issued $175 million of 3.986% Series A Notes
(Senior Unsecured) due October 31, 2018 with a rating of BBB(low)
stable trend from DBRS. -
On closing of the acquisition, Crombie issued 11,811,024 Class B LP
Units at a price of $12.70 each for gross proceeds of $150 million to
ECL Developments Limited, a wholly-owned subsidiary of Empire Company
Limited. -
Fixed rate mortgage proceeds of $297.6 million have an average term of
9.5 years, an average interest rate of 4.31% and 25 year amortizations.
Donald E. Clow, FCA, President and CEO commented: "We are successfully
executing on our growth strategy of accretively acquiring primarily
grocery and drug store anchored retail properties in the top 36 markets
in Canada. This focus has resulted in strong funds from operations
growth and improved payout ratios in spite of the loss of four Zellers
locations. Our disciplined approach and strong balance sheet are
evident in our ability to complete over $1 billion in year to date
acquisitions and attain an investment grade credit rating, which
enhances Crombie's financial flexibility and liquidity options. This is
demonstrated by Crombie having quickly completed permanent financing
for the Canada Safeway acquisition as $297.6 million of long term
mortgages with an average duration of 9.5 years and average interest
rate of 4.31% has been completed since the November 3rd closing date."
Financial Highlights
Crombie's key financial metrics for the three months and nine months
ended September 30, 2013 are as follows:
| (In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
Three months ended September 30, | Nine months ended September 30, | |||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||
| Property revenue | $ | 70,850 | $ | 64,459 | $ | 213,044 | $ | 187,552 | |||
| Operating income attributable to Unitholders | $ | 11,504 | $ | 7,911 | $ | 37,044 | $ | 27,910 | |||
| Operating income attributable to Unitholders per unit – basic | $ | 0.13 | $ | 0.09 | $ | 0.40 | $ | 0.34 | |||
| Operating income attributable to Unitholders per unit – diluted | $ | 0.12 | $ | 0.09 | $ | 0.40 | $ | 0.34 | |||
| FFO | $ | 25,841 | $ | 21,338 | $ | 78,052 | $ | 63,386 | |||
| FFO per unit – basic | $ | 0.28 | $ | 0.25 | $ | 0.85 | $ | 0.78 | |||
| FFO per unit – diluted | $ | 0.28 | $ | 0.24 | $ | 0.83 | $ | 0.76 | |||
| FFO payout ratio (%) | 79.5% | 90.7% | 78.7% | 87.2% | |||||||
| AFFO | $ | 21,993 | $ | 18,237 | $ | 66,032 | $ | 53,198 | |||
| AFFO per unit – basic | $ | 0.24 | $ | 0.21 | $ | 0.72 | $ | 0.65 | |||
| AFFO per unit – diluted | $ | 0.24 | $ | 0.21 | $ | 0.71 | $ | 0.64 | |||
| Distributions per unit | $ | 0.22 | $ | 0.22 | $ | 0.67 | $ | 0.67 | |||
| AFFO payout ratio (%) | 93.4% | 106.1% | 93.1% | 103.9% | |||||||
The increase in FFO and AFFO for the three months and nine months ended
September 30, 2013 was primarily due to acquisition and redevelopment
activity during 2013 and 2012. The three months ended September 30,
2013 was also impacted by lower finance costs related to refinancing
activity.
The table below presents a summary of financial performance for the
three months and nine months ended September 30, 2013 compared to the
same period in fiscal 2012.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| (In thousands of CAD dollars) | 2013 | 2012 | 2013 | 2012 | |||||||
| (As Restated) | (As Restated) | ||||||||||
| Property revenue | $ | 70,850 | $ | 64,459 | $ | 213,044 | $ | 187,552 | |||
| Property operating expenses | 25,596 | 22,181 | 78,110 | 68,718 | |||||||
| Property NOI | 45,254 | 42,278 | 134,934 | 118,834 | |||||||
| NOI margin percentage | 63.9% | 65.6% | 63.3% | 63.4% | |||||||
| Other items: | |||||||||||
| Lease terminations | 311 | 273 | 405 | 386 | |||||||
| Depreciation and amortization | (11,876) | (12,200) | (34,983) | (32,077) | |||||||
| General and administrative expenses | (2,851) | (2,655) | (9,423) | (7,863) | |||||||
| Operating income before finance costs and taxes | 30,838 | 27,696 | 90,933 | 79,280 | |||||||
| Finance costs – operations | (18,834) | (20,285) | (53,289) | (52,770) | |||||||
| Operating income before taxes | 12,004 | 7,411 | 37,644 | 26,510 | |||||||
| Taxes – deferred | (500) | 500 | (600) | 1,400 | |||||||
| Operating income attributable to Unitholders | 11,504 | 7,911 | 37,044 | 27,910 | |||||||
| Finance costs – distributions to Unitholders | (20,545) | (19,343) | (61,463) | (55,270) | |||||||
| Finance costs – change in fair value of financial instruments | (151) | (4,047) | 2,051 | (5,862) | |||||||
| Decrease in net assets attributable to Unitholders | $ | (9,192) | $ | (15,479) | $ | (22,368) | $ | (33,222) | |||
Growth Highlights
|
|
|
|
GLA |
Initial Purchase Price |
Occupancy Rate |
Key Tenants | |||||
| Acquisitions in Q1 | |||||||||||
| Clearwater Landing | Fort McMurray | AB | 143,000 | $ | 62,757 | 100% | Sobeys, The Brick, Mark's Work Wearhouse, Sport Chek | ||||
| West Lethbridge Towne Centre | Lethbridge | AB | 105,000 | 37,869 | 100% | Safeway | |||||
| Namao Centre | Edmonton | AB | 34,000 | 14,544 | 85% | Shoppers Drug Mart | |||||
| West Highland Towne Centre | Lethbridge | AB | 29,000 | 16,720 | 95% | Shoppers Drug Mart | |||||
| Dartmouth Crossing | Halifax | NS | 45,000 | 15,450 | 100% | Empire Theatres | |||||
| Findlay Blvd. | Riverview | NB | 66,000 | 14,650 | 100% | Sobeys | |||||
| Rivière-du-Loup | Rivière-du-Loup | QC | 9,000 | 2,455 | 100% | Société des alcools du Québec | |||||
| Acquisition in Q2 | |||||||||||
| Beaumont Shopping Centre | Beaumont | AB | 59,000 | 20,875 | 100% | Sobeys | |||||
| Acquisitions in Q3 | |||||||||||
| Whyte Avenue | Edmonton | AB | 21,000 | 20,565 | 100% | Shoppers Drug Mart | |||||
| Saskatchewan Avenue East | Portage La Prairie | MB | 20,000 | 7,362 | 100% | Shoppers Drug Mart | |||||
| Weston Road | Toronto | ON | 15,000 | 6,758 | 100% | Shoppers Drug Mart | |||||
| Westminister Avenue North | Montreal | QC | 21,000 | 9,685 | 100% | Shoppers Drug Mart | |||||
| Completed to date in 2013 | 567,000 | $ | 229,690 | ||||||||
These acquisitions continue Crombie's growth strategy of acquiring high
quality grocery or drug store anchored retail properties in the top 36
markets in Canada.
Operating Highlights
| Three months ended September 30, | Nine months ended September 30, | ||||||||||
| (In thousands of CAD dollars) | 2013 | 2012 | 2013 | 2012 | |||||||
| Property NOI | $ | 45,254 | $ | 42,278 | $ | 134,934 | $ | 118,834 | |||
| Non-cash straight-line rent | (983) | (1,249) | (3,550) | (3,564) | |||||||
| Non-cash tenant incentive amortization | 1,961 | 1,727 | 5,861 | 4,799 | |||||||
| Property cash NOI | 46,232 | 42,756 | 137,245 | 120,069 | |||||||
| Acquisition, disposition and redevelopment property cash NOI | 10,849 | 7,274 | 30,545 | 15,018 | |||||||
| Same-asset property cash NOI | $ | 35,383 | $ | 35,482 | $ | 106,700 | $ | 105,051 | |||
Property NOI, on a cash basis, excludes straight-line rent recognition
and amortization of tenant incentive amounts. The 1.6% increase in
same- asset cash NOI for the nine months ended September 30, 2013 is
primarily the result of increased average rent per square foot from
leasing activity, improved recovery rates and land use intensifications
at several properties. The 0.3% decrease in same-asset cash NOI for the
three months ended September 30, 2013 is primarily the result of
slightly lower occupancy rates and related higher non-recoverable
costs.
Crombie believes that cash NOI is a better measure of AFFO
sustainability and same-asset property performance.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| (In thousands of CAD dollars) | 2013 | 2012 | 2013 | 2012 | |||||||
| Acquisition, disposition and redevelopment property revenue | $ | 16,220 | $ | 10,894 | $ | 46,610 | $ | 25,607 | |||
| Acquisition, disposition and redevelopment property operating expenses | 5,378 | 3,669 | 15,934 | 11,006 | |||||||
| Acquisition, disposition and redevelopment property NOI | $ | 10,842 | $ | 7,225 | $ | 30,676 | $ | 14,601 | |||
| Margin % | 66.8% | 66.3% | 65.8% | 57.0% | |||||||
Capital Highlights
| Nine months ended September 30, | ||
| 2013 | 2012 | |
| Weighted Average Mortgage Term | 7.5 years | 7.6 years |
| Weighted Average Interest Rate | 4.99% | 5.27% |
| Debt to Gross Book Value (Fair Value) | 49.8% | 48.8% |
| Debt to Gross Book Value (Cost) | 53.9% | 51.6% |
| Interest Coverage | 2.72 | 2.58 |
| Debt Service Coverage | 1.77 | 1.75 |
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 $285,000, subject to available
borrowing base, of which $81,134 was drawn as at September 30, 2013,
and an additional $4,129 encumbered by outstanding letters of credit,
resulting in significant available liquidity.
Debt to gross book value on a fair value basis is 49.8% (including
convertible debentures) at September 30, 2013, compared to 48.8% at
September 30, 2012.
General and Administrative Expenses
General and administrative expenses for the nine months ended September
30, 2013 as a percentage of property revenue, increased by 0.2% from
4.2% to 4.4%, when compared to the same period in 2012. For the three
months ended September 30, 2013, general and administrative expenses as
a percentage of property revenue, decreased by 0.1% from 4.1% to 4.0%,
when compared to the same period in 2012.
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 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 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 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 extraordinary items,
plus depreciation and amortization expense, deferred income taxes,
finance costs – distributions to Unitholders and after adjustments for
equity accounted entities and non-controlling interests. -
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 primarily high quality grocery and drug
store anchored shopping centres and freestanding stores in the 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
2012 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 nine months ended September 30,
2013 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 September 30,
2013 third quarter and year to date results on a conference call to be
held Friday, November 8, 2013, 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 November 22, 2013 by dialing
(416) 849-0833 or (855) 859-2056 and entering pass code 92977150, or on
the Crombie website for 90 days after the meeting.
SOURCE Crombie REIT