STELLARTON, NS, Feb. 28, 2013 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for
the fourth quarter and fiscal year ended December 31, 2012.
2012 Highlights
-
Funds from operations ("FFO") for the quarter ended December 31, 2012
was $0.31 per unit (payout ratio 72.4%) compared to $0.27 per unit
(payout ratio 83.9%) for the same period in 2011. Excluding the impact
of non-recurring items (see Non-recurring items below), FFO for the
quarter ended December 31, 2012 would have been $0.27 (payout ratio
82.7%). -
FFO for the year ended December 31, 2012 was $1.09 per unit (payout
ratio 82.7%) compared to $1.09 per unit (payout ratio 82.3%) for the
same period in 2011. Excluding the impact of non-recurring items, FFO
for the year ended December 31, 2012 would have been $1.09 (payout
ratio 83.1%). -
Adjusted funds from operations ("AFFO") for the quarter ended December
31, 2012 was $0.27 per unit (payout ratio 84.6%) compared to $0.23 per
unit (payout ratio 100.3%) for the same period in 2011. Excluding the
impact of non-recurring items, AFFO for the quarter ended December 31,
2012 would have been $0.23 (payout ratio 99.1%). -
AFFO for the year ended December 31, 2012 was $0.92 per unit (payout
ratio 98.0%) compared to $0.88 per unit (payout ratio 102.1%) for the
same period in 2011. Excluding the impact of non-recurring items, AFFO
for the year ended December 31, 2012 would have been $0.91 (payout
ratio 99.5%). -
Crombie completed the acquisition of two properties and also acquired
additional development on two properties in the quarter ended December
31, 2012 totaling $53.1 million, excluding closing and transaction
costs; 32 properties totaling $394.0 million have been acquired year to
date which increases 2012 year end gross book value to $2.4 billion. -
Property revenue for the quarter ended December 31, 2012 of $68.5
million; an increase of $9.8 million or 16.7% over the $58.7 million
for the quarter ended December 31, 2011 and for the year ended December
31, 2012 was $256.0 million; an increase of $29.9 million or 13.2% over
the year ended December 31, 2011. -
Same-asset cash net operating income ("NOI") for the quarter ended
December 31, 2012 of $32.8 million; an increase of $0.8 million or
2.4%, compared to $32.0 million for the quarter ended December 31, 2011
and for the year ended December 31, 2012, same-asset cash NOI of $132.0
million; an increase of $3.2 million or 2.5% over the same period in
2011. -
Occupancy on a committed basis was 93.2% at December 31, 2012 compared
with 93.5% at September 30, 2012, and 94.7% at December 31, 2011.
Actual occupied space at December 31, 2012 was 92.6% compared with
92.2% at September 30, 2012, and 93.3% at December 31, 2011. -
Crombie completed leasing activity on 1,097,000 square feet of GLA
during the year ended December 31, 2012, which represents approximately
106.4% of its 2012 expiring lease square footage. -
Crombie's 2012 leasing activity included lease renewals during the year
on 465,000 square feet at an average rate of $13.49 per square foot; an
increase of 5.3% over the expiring lease rate. Crombie's new leasing
activity during the year was completed at an average rate of $11.88 per
square foot.
Commenting on the annual results, Donald E. Clow, FCA, President and
Chief Executive Officer stated: "We are very pleased that 2012 was one
of the strongest years in Crombie's history with over $400 million of
property acquisitions and development, solid 2.5% same asset cash NOI
performance and a significant refinancing of a pool of mortgages. Since
2008 we have invested over $1.1 billion in our focused strategy of
building a portfolio of grocery and drugstore anchored shopping centers
located primarily in the top 30 markets diversified across Canada such
that our total assets at the end of 2012 exceeded $2.4 billion in gross
book value and our market capitalization exceeded $1.3 billion. We have
started 2013 on solid footing with the recently announced acquisition
of four grocery or drugstore anchored shopping centers in Alberta for a
purchase price of $132 million."
FFO and AFFO
Crombie's FFO and AFFO had the following results for the fourth quarter
and year ended December 31, 2012 and 2011:
|
Three months ended Dec. 31, |
Variance | |||||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | ||||
| FFO | $27.351 | $19.708 | $7.643 | 38.8% | ||||
| FFO Per Unit – Basic | $0.31 | $0.27 | $0.04 | 14.8% | ||||
| FFO Per Unit – Diluted | $0.30 | $0.26 | $0.04 | 15.4% | ||||
| FFO Payout ratio | 72.4% | 83.9% | 11.5% | |||||
| Excluding the impact of lease termination settlement:(1) | ||||||||
| FFO Per Unit – Basic | $0.27 | $0.27 | — | — | ||||
| FFO Per Unit – Diluted | $0.27 | $0.26 | $0.01 | 3.8% | ||||
| FFO Payout ratio | 82.7% | 83.9% | 1.2% | |||||
| AFFO | $23.407 | $16.486 | $6.921 | 42.0% | ||||
| AFFO Per Unit – Basic | $0.27 | $0.23 | $0.04 | 17.4% | ||||
| AFFO Per Unit – Diluted | $0.26 | $0.22 | $0.04 | 18.2% | ||||
| AFFO Payout ratio | 84.6% | 100.3% | 15.7% | |||||
| Excluding the impact of lease termination settlement:(1) | ||||||||
| AFFO Per Unit – Basic | $0.23 | $0.23 | — | — | ||||
| AFFO Per Unit – Diluted | $0.22 | $0.22 | — | — | ||||
| AFFO Payout ratio | 99.1% | 100.3% | 1.2% | |||||
| (1) |
As discussed under Non-recurring items, Crombie recognized lease termination income from a national retailer for early termination of two leases. |
The increase in FFO for the quarter ended December 31, 2012 was
primarily due to the significant acquisition activity during 2011 and
2012. In addition, Crombie reached agreement with a national retailer
for early termination of two leases. These increases were offset in
part by increased general and administrative expenses.
AFFO for the quarter ended December 31, 2012 was $23.4 million, an
increase of $6.9 million or 42.0% over the same period in 2011, due
primarily to the improved FFO results as previously discussed.
|
Year ended Dec. 31, |
Variance | |||||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | ||||
| FFO | $90.737 | $74.471 | $16.266 | 21.8% | ||||
| FFO Per Unit – Basic | $1.09 | $1.09 | — | — | ||||
| FFO Per Unit – Diluted | $1.06 | $1.04 | $0.02 | 1.9% | ||||
| FFO Payout ratio | 82.7% | 82.3% | (0.4)% | |||||
|
Excluding the impact of Refinanced Mortgages and lease termination settlement :(1) |
||||||||
| FFO Per Unit – Basic | $1.09 | $1.09 | — | — | ||||
| FFO Per Unit – Diluted | $1.06 | $1.04 | $0.02 | 1.9% | ||||
| FFO Payout ratio | 83.1% | 82.3% | (0.8)% | |||||
| AFFO | $76.605 | $60.051 | $16.554 | 27.6% | ||||
| AFFO Per Unit – Basic | $0.92 | $0.88 | $0.04 | 4.5% | ||||
| AFFO Per Unit – Diluted | $0.90 | $0.86 | $0.04 | 4.7% | ||||
| AFFO Payout ratio | 98.0% | 102.1% | 4.1% | |||||
|
Excluding the impact of Refinanced Mortgages and lease termination settlement:(1) |
||||||||
| AFFO Per Unit – Basic | $0.91 | $0.88 | $0.03 | 3.4% | ||||
| AFFO Per Unit – Diluted | $0.89 | $0.86 | $0.03 | 3.5% | ||||
| AFFO Payout ratio | 99.5% | 102.1% | 2.6% | |||||
| (1) |
As discussed under Non-recurring items, Crombie refinanced mortgages during 2012, resulting in refinancing expenses. In addition, Crombie recognized lease termination income from a national retailer for early termination of two leases. |
The increase in FFO for the year ended December 31, 2012 was due
primarily to significant acquisition activity which resulted in
improved NOI results and, higher lease termination income. This was
offset in part by increased general and administrative expenses and
increased operating finance costs related to the acquisitions.
AFFO for the year ended December 31, 2012 was $76.6 million, an increase
of $16.6 million or 27.6% over the same period in 2011, due primarily
to the improved FFO results and the unfavourable swap agreement
settlement of $1.7 million in the year ended December 31, 2011.
Property NOI – Cash Basis
| (In millions of CAD dollars) | Three months ended Dec. 31, 2012 |
Three months ended Dec. 31, 2011 |
Year ended Dec. 31, 2012 |
Year ended Dec. 31, 2011 |
|||
| Property NOI | $43.116 | $36.154 | $163.300 | $141.936 | |||
| Non-cash tenant incentive amortization | 1.533 | 1.333 | 6.332 | 5.169 | |||
| Non-cash straight-line rent | (1.245) | (1.004) | (4.809) | (3.619) | |||
| Property cash NOI | 43.404 | 36.483 | 164.823 | 143.486 | |||
| Acquisition, disposition and redevelopment property cash NOI | 10.645 | 4.504 | 32.824 | 14.720 | |||
| Same-asset property cash NOI | $32.759 | $31.979 | $131.999 | $128.766 |
Property NOI, on a cash basis, excludes straight-line rent recognition
and amortization of tenant incentive amounts. The 2.5% increase in
same-asset cash NOI for the year ended December 31, 2012 is primarily
the result of increased average rent per square foot from leasing
activity during the past 12 months, completed land use intensification
development projects and improved recovery rates.
Crombie believes that cash NOI is a better measure of AFFO
sustainability and same-asset property performance.
Acquisition, Disposition and Redevelopment Property NOI
| (In millions of CAD dollars) | Three months ended Dec. 31, 2012 |
Three months ended Dec. 31, 2011 |
Year ended Dec. 31, 2012 |
Year ended Dec. 31, 2011 |
|||
| Property revenue | $15.958 | $7.561 | $50.806 | $25.788 | |||
| Property operating expenses | 5.217 | 3.127 | 17.997 | 11.673 | |||
| Property NOI | $10.741 | $4.434 | $32.809 | $14.115 | |||
| Property NOI margin % | 67.3% | 58.6% | 64.6% | 54.7% |
For the quarter ended and year ended December 31, 2012, the acquisition,
disposition and redevelopment property results have significantly
increased over the same periods in 2011. The growth is impacted by the
significant acquisition activity during 2011 and 2012 as well as the
increased focus on property redevelopment over that same period.
General and Administrative Expenses
General and administrative expenses for the quarter ended December 31,
2012 increased by 1.2% from 4.8% to 6.0% as a percentage of property
revenue, when compared to the same period in 2011. Salaries and
benefits increased due to the hiring of additional staff related to
continued national growth and higher 2012 incentive payments. Other
increases are primarily due to higher travel costs, training and
development and increased public company costs.
General and administrative expenses as a percentage of property revenue
increased by 0.5% from 4.7% to 5.2% as a percentage of revenue for the
year ended December 31, 2012 when compared to the same period in 2011.
Salaries and benefits increased due to the hiring of additional staff
related to continued national growth and higher 2012 incentive
payments. Other increases are primarily due to higher travel costs,
training and development, increased public company costs and costs
associated with due diligence on potential property acquisitions.
Finance Costs – Operations
|
(In millions of CAD dollars) |
Three months ended Dec. 31, 2012 |
Three months ended Dec. 31, 2011 |
Year ended Dec. 31, 2012 |
Year ended Dec. 31, 2011 |
|||
| Same-asset finance costs | $10.942 | $11.536 | $46.855 | $49.787 | |||
| Acquisition, disposition and redevelopment finance costs | 4.136 | 1.710 | 13.130 | 5.013 | |||
| Amortization of effective swaps and deferred financing charges | 1.561 | 1.732 | 9.424 | 7.348 | |||
| Finance costs – operations | $16.639 | $14.978 | $69.409 | $62.148 |
Same-asset finance costs for the quarter ended December 31, 2012
decreased 5.1% compared to the same period in 2011 primarily due to
interest savings realized on the Refinanced Mortgages. Same-asset
finance costs for the year ended December 31, 2012 decreased 5.9%
compared to the same period in 2011 primarily due to the maturity of an
interest rate swap in July 2011 on the revolving credit facility
resulting in greater utilization of lower cost floating rate debt;
interest savings from conversions of Convertible Debentures; and,
interest savings in the quarter from the Refinanced Mortgages; offset
in part by the approximately $1.5 million in cash costs incurred in the
third quarter of 2012 related to the refinancing.
Acquisition, disposition and redevelopment finance costs have increased
over the comparative period in 2011 due to the significant acquisition
and redevelopment activity over the last two years.
Liquidity and Financings
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 $200 million, subject to available
borrowing base of which $30.4 million was drawn as at December 31,
2012, and an additional $11.3 million encumbered by outstanding letters
of credit, resulting in significant available liquidity. On February
22, 2013, Crombie temporarily increased the maximum principal amount of
its revolving credit facility from $200 million to $285 million in
conjunction with property acquisitions on that date.
Debt to gross book value is 50.0% (including convertible debentures) at
December 31, 2012 compared to 52.5% at December 31, 2011. This
leverage ratio is below the maximum 60%, or 65% including convertible
debentures, permitted pursuant to Crombie's Declaration of Trust. On a
long-term basis, Crombie intends to maintain overall indebtedness,
including convertible debentures, in the range of 50% to 60% of gross
book value, depending upon Crombie's future acquisitions and financing
opportunities.
Crombie's interest and debt service coverage for the year ended December
31, 2012 were 2.61 times EBITDA and 1.76 times EBITDA respectively.
This compares to 2.49 times EBITDA and 1.79 times EBITDA respectively
for the year ended December 31, 2011.
The table below presents a summary of financial performance for the
quarter and year ended December 31, 2012 compared to the same periods
in fiscal 2011.
| (In millions of CAD dollars, except per unit amounts) | Three months ended Dec. 31, 2012 |
Three months ended Dec. 31, 2011 (As restated) |
Year ended Dec. 31, 2012 |
Year ended Dec. 31, 2011 (As restated) |
||||
| Property revenue | $68.470 | $58.682 | $256.022 | $226.138 | ||||
| Property operating expenses | 25.354 | 22.528 | 92.722 | 84.202 | ||||
| Property NOI | 43.116 | 36.154 | 163.300 | 141.936 | ||||
| NOI margin percentage | 63.0% | 61.6% | 63.8% | 62.8% | ||||
| Other items: | ||||||||
| Lease terminations | 3.458 | 0.005 | 3.844 | 0.168 | ||||
| Depreciation and amortization | (12.493) | (8.302) | (44.570) | (31.387) | ||||
| General and administrative expenses | (4.117) | (2.806) | (13.330) | (10.654) | ||||
| Operating income before finance costs and taxes | 29.964 | 25.051 | 109.244 | 100.063 | ||||
| Finance costs – operations | (16.639) | (14.978) | (69.409) | (62.148) | ||||
| Operating income before taxes | 13.325 | 10.073 | 39.835 | 37.915 | ||||
| Taxes – deferred | (1.500) | 0.600 | (0.100) | 0.300 | ||||
| Operating income attributable to Unitholders | 11.825 | 10.673 | 39.735 | 38.215 | ||||
| Finance costs – distributions to Unitholders | (19.809) | (16.530) | (75.079) | (61.283) | ||||
| Finance costs – change in fair value of financial instruments | 3.984 | (6.417) | (1.878) | (8.644) | ||||
| Decrease in net assets attributable to Unitholders | $(4.000) | $(12.274) | $(37.222) | $(31.712) | ||||
| Operating income attributable to Unitholders per Unit, Basic and Diluted |
$0.13 | $0.15 | $0.48 | $0.56 | ||||
Restatement of financial results
During preparation of the fourth quarter of 2012 financial results,
Crombie determined that the conversion feature and redemption option
attached to the convertible debentures represent a financial liability
requiring fair value measurement each reporting period, with any
adjustment to fair value being recognized through decrease in net
assets attributable to Unitholders. The fair value adjustment is being
accounted for as Finance costs – change in fair value of financial
instruments in the decrease in net assets attributable to Unitholders.
This restatement is more fully explained in Crombie's Management
Discussion & Analysis for the year ended December 31, 2012.
Non-recurring items included in 2012 operating income
During 2012, Crombie realized the following operating results which it
considers non-recurring events:
-
In September 2012, Crombie assigned a portfolio of mortgages on 23
investment properties (the "Refinanced Mortgages") to a new lender.
Concurrent with the assignment of the mortgages to the new lender,
Crombie renegotiated the terms of the debt, refinancing them with a 30
month floating rate term credit facility. Included in Finance costs –
operations are expenses of approximately $3.0 million associated with
this transaction (approximately $1.5 million in cash costs related to
legal fees, term loan set up fees and a repayment fee paid to the
mortgage lender are included in same-asset finance costs and
approximately $1.5 million representing the unamortized balance of
deferred financing and other costs previously paid in respect of the
2008 mortgage financing are included in Amortization of effective swaps
and deferred financing charges). The mortgages, with a weighted average
interest rate of 5.91% and terms to maturity from 2013 to 2017, totaled
$92.4 million, while the floating rate term credit facility of $92.7
million had an interest rate of 3.08% at December 31, 2012. The
floating rate is based on bankers' acceptance rates plus a spread or
prime rates plus a spread. -
In December 2012, Crombie reached agreement with a national retailer on
early termination of two leases resulting in lease termination income
of $3.4 million. The two leases will terminate April 30, 2013, with
the retailer paying rent until that date. Crombie's leasing and asset
management staff are currently working on options for the space
including replacement tenants and/or redevelopment opportunities for
the properties.
Definition of Non-IFRS 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 commercial 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. -
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, finance costs – change in
fair value of financial instruments 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. The trust
invests in income-producing retail, office and mixed-use properties in
Canada, with a future growth strategy focused primarily on the
acquisition of grocery-anchored and drug store-anchored retail
properties. Crombie currently owns a portfolio of 173 investment
properties in nine provinces, comprising approximately 14.4 million
square feet of rentable space.
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.
In particular, certain statements in this document discuss Crombie's
anticipated outlook of future events, including the realization of any
benefits from refinancing the portfolio of mortgages, future
development and acquisition of properties and other pending growth
opportunities and expected pace of growth, all of which could be
impacted by financing market conditions, the demand for properties and
the effect that demand has on acquisition capitalization rates and
changes in interest rates. 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 year ended December 31, 2012 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 fourth quarter
and year ended December 31, 2012 results on a conference call to be
held Thursday, February 28, 2013, 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 web cast of the conference call by
visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight March 14, 2013, by dialling
(416) 849-0833 or (855) 859-2056 and entering pass code 92680245, or on
the Crombie website for 90 days after the meeting.