Crombie REIT (TSX:CRR.UN)
STELLARTON, NS, Aug. 8, 2013 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report strong results for
the three months and six months ended June 30, 2013.
Year to Date and Second Quarter 2013 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise
noted)
-
Strong 8.6% growth in Funds From Operations ("FFO") per unit for the six
months ended June 30, 2013, as FFO per unit fully diluted ("FD") was
$0.56 per unit compared to $0.51 per unit FD for the same period in
2012. FFO grew 24.2% over the same period in 2012 ($52,211 vs $42,048)
with the FFO payout ratio of 78.4% compared to 85.4% for the same
period in 2012. -
5.8% growth in FFO per unit for the three months ended June 30, 2013
("Q2") as FFO per unit FD was $0.28 compared to $0.26 for the same
period in 2012. Q2 FFO grew 16.5% over the same period in 2012
($26,490 vs $22,747) with the FFO payout ratio of 77.3% compared to
82.5% for the same period in 2012. -
Strong 9.5% growth in Adjusted Funds From Operations ("AFFO") per unit
for the six months ended June 30, 2013, as AFFO per unit FD was $0.48
per unit compared to $0.43 per unit FD for the same period in 2012.
AFFO grew 26.0% over the same period in 2012 ($44,039 vs $34,961) for
the six months ended June 30, 2013 with the AFFO payout ratio of 92.9%
compared to 102.8% for the same period in 2012. -
7.2% growth in Q2 AFFO per unit as AFFO per unit FD was $0.24 compared
to $0.22 for the same period in 2012. Q2 AFFO grew 18.4% over the same
period in 2012 ($22,433 vs $18,954) with the AFFO payout ratio of 91.3%
compared to 99.0% for the same period in 2012. -
Acquisition of a high quality grocery anchored retail property in
Alberta for $21 million from Sobeys during Q2. - Portfolio fair value of $2.8 billion.
-
Solid growth of 2.0% in Same-Asset Cash Net Operating Income ("NOI") for
the six months ended June 30, 2013 over the six months ended June 30,
2012. Same-Asset Cash NOI growth of 2.3% for the three months ended
June 30, 2013 compared to the same period in 2012. -
Property revenue of $142,194 for the six months ended June 30, 2013, an
increase of $19,101 or 15.5% over the $123,093 for the six months ended
June 30, 2012. Q2 property revenue of $71,188, increased $7,542 or
11.9% over Q2 2012. -
Solid occupancy on a committed basis of 91.8% at June 30, 2013, compared
with 93.5% at June 30, 2012. The June 30, 2013 leased space is impacted
by the leasing expiry of four Zellers since June 30, 2012, totalling
352,000 square feet. -
Crombie completed leasing activity on 525,000 square feet during the six
months ended June 30, 2013, which represents approximately 44.6% of its
2013 expiring lease square footage. The 2013 expiring lease square
footage includes 262,000 square feet related to three Zellers leases. -
Lease renewals on 333,000 square feet expiring in 2013 at an average
rate of $14.74 per square foot, an increase of 6.8% over the expiring
lease rate. Lease renewals of 25,000 square feet at an average rate of
$17.00 for 2014 lease expiries at an increase of 7.0% over the expiring
lease rate. Crombie completed new leasing activity during 2013 on
193,000 square feet at $18.76 per square foot. -
Weighted average lease term of 10.5 years and weighted average mortgage
term of 7.7 years; amongst the longest and most defensive in the REIT
industry. -
Weighted average interest rate on mortgages reduced to 5.00% from 5.21%
at December 31, 2012 and 5.35% at June 30, 2012. Strong 2.78 times
interest coverage. -
Debt to Gross Book Value (fair value basis) of 49.6% (53.4% on a cost
basis).
Subsequent Event
On July 24, 2013, Crombie announced an agreement to acquire a portfolio
of 68 retail properties (the "Properties") representing approximately
3.0 million square feet of gross leasable area. The Properties are
being acquired from a wholly-owned subsidiary of Sobeys Inc., a related
party, for an aggregate purchase price of $990,000, excluding closing
adjustments and transaction costs and the acquisition is expected to
close prior to December 12, 2013. Should the acquisition not close by
March 12, 2014, the acquisition agreement will terminate unless Crombie
agrees to extend the closing date. As a condition to the closing, a
wholly-owned subsidiary of Sobeys Inc. will lease each of the
Properties on a fully net basis. The Properties are among the assets to
be acquired by a wholly-owned subsidiary of Sobeys Inc. from Canada
Safeway Limited (the "Canada Safeway Acquisition"), and the acquisition
of the Properties is subject to closing of the Canada Safeway
Acquisition and receipt of required unitholder and regulatory
approvals.
In conjunction with the acquisition, Crombie has:
-
Agreed to sell, subject to regulatory approval and on a bought-deal
basis, $225,044 of subscription receipts (the "Subscription Receipts")
at a price of $12.70 per Subscription Receipt. The Subscription
Receipts will be converted into REIT Units on a one for one basis upon
the closing of the acquisition and the holders will be entitled to
receive a payment equal to the amount per Unit of any cash
distributions made by Crombie for which record dates occur during the
period that the Subscription Receipts are outstanding. Should the
acquisition agreement be terminated or the acquisition not close on or
before March 12, 2014, the Subscription Receipts proceeds will be
returned to the holders along with any interest earned on the proceeds; -
Agreed to sell, subject to regulatory approval and on a bought deal
basis, $75,000 of convertible extendible unsecured subordinated
debentures (the "Debentures"), bearing interest at a rate of 5.25% per
annum, payable semi-annually. The Debentures will have an initial
maturity date of March 12, 2014, which will be extended to March 31,
2021 upon the acquisition closing. The Debentures are convertible to
REIT Units at the option of the holder at a conversion price of $17.15
per REIT Unit; -
Agreed to sell $150,000 of Class B LP Units to Empire, on a private
placement basis, on the acquisition closing date, at the same $12.70
offering price as the Subscription Receipts; and -
Obtained a commitment from a Canadian chartered bank to provide bridge
credit facilities, which consists of three fully-underwritten
non-revolving credit facilities totalling $600,000 in aggregate to be
used in whole or in part to finance part of the purchase price for the
Properties.
Donald E. Clow, FCA, President and CEO commented: "We are very pleased
with the solid operating performance and strategic growth of our high
quality grocery and drug store anchored portfolio so far in 2013. Our
year to date same-asset cash NOI growth of 2%, AFFO per unit
improvement of 9% and AFFO payout ratio of 92.9% reflects a solid
performance by our portfolio and our team. The recently announced
agreement to acquire 68 retail properties for $990 million through our
strategic relationship with Sobeys and Empire is a tremendous
opportunity to increase the REIT's asset value by approximately 35%,
increase the number of urban grocery anchored properties in Western
Canada, and grow our platform nationally."
Financial Highlights
|
Crombie's key financial metrics for the three months and six months ended June 30, 2013 are as follows: |
|||||||||||
| (In thousands of CAD dollars, except per unit amounts | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
| and as otherwise noted) | 2013 | 2012 | 2013 | 2012 | |||||||
| Property revenue | $ | 71,188 | $ | 63,646 | $ | 142,194 | $ | 123,093 | |||
| Operating income attributable to Unitholders | $ | 12,581 | $ | 10,436 | $ | 25,540 | $ | 19,999 | |||
| Basic and diluted operating income attributable to Unitholders per unit(1) | $ | 0.14 | $ | 0.12 | $ | 0.28 | $ | 0.25 | |||
| FFO | $ | 26,490 | $ | 22,747 | $ | 52,211 | $ | 42,048 | |||
| FFO per unit – basic | $ | 0.29 | $ | 0.27 | $ | 0.57 | $ | 0.53 | |||
| FFO per unit– diluted | $ | 0.28 | $ | 0.26 | $ | 0.56 | $ | 0.51 | |||
| FFO payout ratio (%) | 77.3% | 82.5% | 78.4% | 85.4% | |||||||
| AFFO | $ | 22,433 | $ | 18,954 | $ | 44,039 | $ | 34,961 | |||
| AFFO per unit – basic | $ | 0.24 | $ | 0.23 | $ | 0.48 | $ | 0.44 | |||
| AFFO per unit – diluted | $ | 0.24 | $ | 0.22 | $ | 0.48 | $ | 0.43 | |||
| Distributions per unit | $ | 0.22 | $ | 0.22 | $ | 0.45 | $ | 0.45 | |||
| AFFO payout ratio (%) | 91.3% | 99.0% | 92.9% | 102.8% | |||||||
The increase in FFO and AFFO for the three months and six months ended
June 30, 2013 was primarily due to the acquisition activity during 2013
and 2012.
The table below presents a summary of financial performance for the
three months and six months ended June 30, 2013 compared to the same
period in fiscal 2012.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| (In thousands of CAD dollars) | 2013 | 2012 | 2013 | 2012 | |||||||
| (As Restated) | (As Restated) | ||||||||||
| Property revenue | $ | 71,188 | $ | 63,646 | $ | 142,194 | $ | 123,093 | |||
| Property operating expenses | 25,696 | 23,035 | 52,514 | 46,537 | |||||||
| Property NOI | 45,492 | 40,611 | 89,680 | 76,556 | |||||||
| NOI margin percentage | 63.9% | 63.8% | 63.1% | 62.2% | |||||||
| Other items: | |||||||||||
| Lease terminations | 88 | – | 94 | 113 | |||||||
| Depreciation and amortization | (11,985) | (11,352) | (23,107) | (19,877) | |||||||
| General and administrative expenses | (3,366) | (2,688) | (6,572) | (5,208) | |||||||
| Operating income before finance costs and taxes | 30,229 | 26,571 | 60,095 | 51,584 | |||||||
| Finance costs – operations | (17,648) | (16,735) | (34,455) | (32,485) | |||||||
| Operating income before taxes | 12,581 | 9,836 | 25,640 | 19,099 | |||||||
| Taxes – deferred | – | 600 | (100) | 900 | |||||||
| Operating income attributable to Unitholders | 12,581 | 10,436 | 25,540 | 19,999 | |||||||
| Finance costs – distributions to Unitholders | (20,480) | (18,760) | (40,918) | (35,927) | |||||||
| Finance costs – change in fair value of financial instruments | 1,585 | (3,675) | 2,202 | (1,815) | |||||||
| Decrease in net assets attributable to Unitholders | $ | (6,314) | $ | (11,999) | $ | (13,176) | $ | (17,743) | |||
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 | |||
| Completed to date in 2013 | 490,000 | $ | 185,320 |
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 June 30, | Six Months Ended June 30, | |||||||||||
| (In thousands of CAD dollars) | 2013 | 2012 | 2013 | 2012 | ||||||||
| Property NOI | $ | 45,492 | $ | 40,611 | $ | 89,680 | $ | 76,556 | ||||
| Non-cash straight-line rent | (1,208) | (1,294) | (2,567) | (2,315) | ||||||||
| Non-cash tenant incentive amortization | 1,930 | 1,559 | 3,900 | 3,072 | ||||||||
| Property cash NOI | 46,214 | 40,876 | 91,013 | 77,313 | ||||||||
| Acquisition, disposition and redevelopment property cash NOI | 10,219 | 5,706 | 19,396 | 7,116 | ||||||||
| Same-asset property cash NOI | $ | 35,995 | $ | 35,170 | $ | 71,617 | $ | 70,197 | ||||
Property NOI, on a cash basis, excludes straight-line rent recognition
and amortization of tenant incentive amounts. The 2.3% and 2.0%
increases in same-asset cash NOI for the three months and six months
ended June 30, 2013, respectively, are primarily the result of
increased average rent per square foot from leasing activity, improved
recovery rates and land use intensifications at several properties.
Crombie believes that cash NOI is a better measure of AFFO
sustainability and same-asset property performance.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
| (In thousands of CAD dollars) | 2013 | 2012 | 2013 | 2012 | |||||||
| Acquisition, disposition and redevelopment property revenue | $ | 15,609 | $ | 9,299 | $ | 29,665 | $ | 13,697 | |||
| Acquisition, disposition and redevelopment property operating expenses | 5,311 | 3,668 | 10,096 | 6,885 | |||||||
| Acquisition, disposition and redevelopment property NOI | $ | 10,298 | $ | 5,631 | $ | 19,569 | $ | 6,812 | |||
| Margin % | 66.0% | 60.6% | 66.0% | 49.7% | |||||||
Capital Highlights
| Six Months Ended June 30, | ||
| 2013 | 2012 | |
| Weighted average mortgage term | 7.7 years | 7.3 years |
| Weighted average interest rate | 5.00% | 5.35% |
| Debt to gross book value (fair value) | 49.6% | 51.2% |
| Debt to gross book value (cost) | 53.4% | 52.4% |
| Interest coverage | 2.78 | 2.58 |
| Debt service coverage | 1.81 | 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 $115,146 was drawn as at June 30, 2013, and an
additional $11,329 encumbered by outstanding letters of credit,
resulting in significant available liquidity.
Debt to gross book value on a fair value basis is 49.6% (including
convertible debentures) at June 30, 2013, compared to 51.2% at June 30,
2012.
General and Administrative Expenses
General and administrative expenses for the three months and six months
ended June 30, 2013 as a percentage of property revenue, increased by
0.5% and 0.4%, respectively, from 4.2% to 4.7% and from 4.2% to 4.6%,
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 and (ii) 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 176 retail and office properties across Canada,
comprising approximately 14.5 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 six months ended June 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 June 30, 2013
second quarter and year to date results on a conference call to be held
Thursday, August 8, 2013, at 3:00 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, 2013 by dialling
(416) 849-0833 or (855) 859-2056 and entering pass code 15404464, or on
the Crombie website for 90 days after the meeting.
SOURCE Crombie REIT