Record occupancy, significant deleveraging, and solid operational and financial performance
NEW GLASGOW, NS, Nov. 9, 2022 /CNW/ – Crombie Real Estate Investment Trust (“Crombie”) (TSX: CRR.UN) today announced results for its third quarter ended September 30, 2022. Management will host a conference call to discuss the results at 11:00 a.m. (EST), November 10, 2022.
“Crombie’s record occupancy and solid third quarter operational and financial performance is the result of steadfast focus on our long-term strategy in the face of significant external macroeconomic pressures,” said Don Clow, President & CEO. “The overall quality of our portfolio has improved through intentional curation, investment in Empire-related initiatives, and several major development project completions. I am proud that we have advanced these key strategic priorities while at the same time prudently improving our balance sheet and responsibly allocating capital, which have resulted in notable deleveraging, ample liquidity and significant unencumbered assets.”
THIRD QUARTER SUMMARY
(In thousands of Canadian dollars, except per unit amounts and as otherwise noted)
Operational Highlights
- Record committed and economic occupancy of 96.8% and 96.2%, respectively; a 30 and 40 basis point increase compared to the third quarter of 2021
- Renewals of 152,000 square feet at rents 3.7% above expiring rates (5.2% at weighted average rent during the renewal term)
- Disposition of five retail assets to third parties and a parcel of development land to a joint venture for gross proceeds of $52,126
- Acquisition of one investment property adding 4,000 square feet of GLA for a total purchase price of $1,350
Financial Highlights
- Property revenue of $103,642, a 2.1% increase from $101,517 in the third quarter of 2021
- Operating income of $26,410, a 10.7% increase compared to the third quarter of 2021 at $23,851
- Net property income of $71,574, a 0.4% increase from $71,301 in the third quarter of 2021
- FFO(1) $52,665 or $0.30 per unit compared to $47,830 or $0.29 per unit in the third quarter of 2021
- FFO(1) payout ratio of 75.0% compared to 76.5% in the same period last year
- AFFO(1) $46,787 or $0.26 per unit compared to $41,052 or $0.25 per unit in the third quarter of 2021
- AFFO(1) payout ratio of 84.5% compared to 89.1% in the same period last year
- Same-asset property cash NOI(1) increased 2.1%
- Record high unencumbered investment properties of $2,200,890, a 50.6% increase from $1,461,775 in the same period last year
- Debt to gross fair value(1)(2) of 42.0%, an improvement from 47.3% in the same period last year
- Debt to trailing 12 months adjusted EBITDA(1)(2) of 8.50x compared to the third quarter of 2021 at 9.61x
- Available liquidity of $445,372, a 13.0% decrease from $512,168 in the third quarter of 2021
|
(1) Non-GAAP financial measures used by management to evaluate Crombie’s business performance. See “Cautionary Statements and Non-GAAP Measures” below for a reconciliation of FFO, FFO payout ratio, AFFO, AFFO payout ratio, same-asset property cash NOI, debt to gross fair value, and debt to trailing 12 months adjusted EBITDA. |
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(2) At Crombie’s proportionate share including joint ventures. |
Information in this press release is a select summary of results. This press release should be read in conjunction with Crombie’s Management’s Discussion and Analysis for the quarter ended September 30, 2022 and Consolidated Financial Statements and Notes for the quarters ended September 30, 2022, and September 30, 2021. Full details on our results can be found at www.crombie.ca and www.sedar.com.
Financial Results
Crombie’s key financial metrics for the three months ended September 30, 2022 are as follows:
|
Three months ended September 30, |
||||
|
(In thousands of Canadian dollars, except per unit amounts and as otherwise noted) |
2022 |
2021 |
Variance |
% |
|
Property revenue |
$103,642 |
$101,517 |
$2,125 |
2.1% |
|
Property operating expenses |
32,068 |
30,216 |
(1,852) |
(6.1)% |
|
Net property income |
$71,574 |
$71,301 |
$273 |
0.4% |
|
Operating income attributable to Unitholders |
$26,410 |
$23,851 |
$2,559 |
10.7% |
|
Same-asset property cash NOI (1) |
$68,251 |
$66,819 |
$1,432 |
2.1% |
|
Funds from operations (“FFO”) (1) |
||||
|
Basic |
$52,665 |
$47,830 |
$4,835 |
10.1% |
|
Per unit – Basic |
$0.30 |
$0.29 |
$0.01 |
3.4% |
|
Payout ratio(1) |
75.0% |
76.5% |
(1.5)% |
|
|
Adjusted funds from operations (“AFFO”) (1) |
||||
|
Basic |
$46,787 |
$41,052 |
$5,735 |
14.0% |
|
Per unit – Basic |
$0.26 |
$0.25 |
$0.01 |
4.0% |
|
Payout ratio(1) |
84.5% |
89.1% |
(4.6)% |
|
|
(1) Same-asset property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio are non-GAAP financial measures used by management to evaluate Crombie’s business performance. See “Cautionary Statements and Non-GAAP Measures” below for a reconciliation of same-asset property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio. |
Operating income attributable to Unitholders increased by $2,559, or 10.7%, compared to the third quarter of 2021 primarily due to higher gain on disposal of investment properties of $10,738 in the third quarter of 2022 and lower finance costs from operations of $2,186, resulting primarily from lower mortgage interest expense due to mortgage repayments and dispositions since the third quarter of 2021. General and administrative expenses decreased by $2,022 due primarily to a reduction in Unit-based compensation costs resulting from a decrease in Crombie’s Unit price. Additionally, gain on distribution from equity-accounted investments of $1,000 in the third quarter of 2022 resulted from cash distributions received from 1600 Davie Limited Partnership in excess of our investment in the joint venture. The growth in operating income was partially offset by an increase of $9,161 in impairments and higher depreciation and amortization of $3,635 compared to the same quarter in 2021 due to accelerated depreciation recorded on a property scheduled for demolition in the fourth quarter of 2022. An increase in net property income of $273 was primarily due to income of $1,983 from acquisitions, higher percentage rent of $943 as a result of lease conversions and new tenants, and increased parking revenue of $425 compared to the same quarter in 2021. This is offset in part by a decrease of $2,426 in net property income from dispositions and increased tenant incentive amortization of $608 resulting primarily from new leasing.
Same-asset property cash NOI increased by $1,432, or 2.1%, compared to the third quarter of 2021 primarily due to strong occupancy, higher percentage rent from increased sales, and increased parking revenue of $425, offset in part by a decrease in lease termination income of $373, primarily in the office portfolio. Same-asset property cash NOI adjusted for the removal of lease termination income increased by 2.7% compared to the same period in 2021.
The increase in FFO of $4,835 is primarily due to lower finance costs from operations of $2,186, driven by lower mortgage interest expense of $2,741 as a result of mortgage repayments and dispositions since the third quarter of 2021, and a decrease in general and administrative expenses of $2,022 due primarily to a $1,640 reduction in Unit-based compensation costs resulting from a decrease in Crombie’s Unit price from September 30, 2021. Additional increases in income are due to $1,983 from acquisitions since January 1, 2021, higher percentage rent of $943 resulting from lease conversions and new tenants, and increased parking revenue of $425. FFO growth is offset in part by a decrease of $2,426in net property income from dispositions.
The improvement in AFFO is primarily due to the same factors impacting FFO as described above. This is offset in part by the impact of the increase in the maintenance capital expenditure charge in the first quarter of 2022 from $0.90 to $1.00 per square foot of weighted average GLA.
Crombie’s key financial metrics for the nine months ended September 30, 2022 are as follows:
|
Nine months ended September 30, |
||||
|
(In thousands of Canadian dollars, except per unit amounts and as otherwise noted) |
2022 |
2021 |
Variance |
% |
|
Property revenue |
$311,652 |
$305,060 |
$6,592 |
2.2% |
|
Property operating expenses |
100,650 |
93,431 |
(7,219) |
(7.7)% |
|
Net property income |
$211,002 |
$211,629 |
$(627) |
(0.3)% |
|
Operating income attributable to Unitholders |
$80,082 |
$76,671 |
$3,411 |
4.4% |
|
Same-asset property cash NOI (1) |
$202,341 |
$198,799 |
$3,542 |
1.8% |
|
Funds from operations (“FFO”) (1) |
||||
|
Basic |
$151,633 |
$138,084 |
$13,549 |
9.8% |
|
Per unit – Basic |
$0.86 |
$0.86 |
$— |
—% |
|
Payout ratio(1) |
77.9% |
78.2% |
(0.3)% |
|
|
Adjusted funds from operations (“AFFO”) (1) |
||||
|
Basic |
$132,236 |
$117,064 |
$15,172 |
13.0% |
|
Per unit – Basic |
$0.75 |
$0.73 |
$0.02 |
2.7% |
|
Payout ratio(1) |
89.3% |
92.2% |
(2.9)% |
|
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(1) Same-asset property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio are non-GAAP financial measures used by management to evaluate Crombie’s business performance. See “Cautionary Statements and Non-GAAP Measures” below for a reconciliation of same-asset property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio. |
Operating income attributable to Unitholders increased by $3,411, or 4.4%, on a year to date basis primarily driven by lower finance costs from operations of $7,758 due to lower mortgage interest expense resulting from mortgage repayments and dispositions since the third quarter of 2021. A reduction in general and administrative expenses of $4,635 was primarily due to a decrease in Unit price and its impact on Unit-based compensation plans. Additionally, gain on disposal of investment properties increased by $4,457 over the same period in 2021 and gain on distribution from equity-accounted investments of $2,933 in 2022 resulted from cash distributions received from 1600 Davie Limited Partnership in excess of our investment in the joint venture. The growth in operating income was offset in part by recognizing an additional $9,161 in impairments than in 2021 and an increase in depreciation and amortization of $3,887 compared to the same period in 2021 due to accelerated depreciation recorded on a property scheduled for demolition in the fourth quarter of 2022. An increase of $2,697 in loss from equity-accounted investments, as residential development projects achieved substantial completion and move toward revenue stabilization, when revenue earned should exceed expenses, further offset the growth in operating income. A decrease in net property income of $627 compared to the same period in 2021 is primarily due to a decrease of $6,800 in net property income from dispositions, a reduction in lease termination income of $2,547, and increased tenant incentive amortization of $2,487 as a result of new leasing. This is partially offset by income of $5,881 from acquisitions, $1,389 in supplementary income from modernization investments, higher percentage rent of $1,355 as a result of lease conversions and new tenants, increased parking revenue of $1,205, and $1,200 from renewals and new leasing.
On a year to date basis, same-asset property cash NOI increased by $3,542, or 1.8%, compared to 2021 primarily due to strong occupancy, increased parking revenue of $1,205, and an increase in supplemental rents of $1,152 from modernizations and capital improvements. This is offset in part by a decrease in lease termination income of $1,759, primarily in our office portfolio. Same-asset property cash NOI adjusted for the removal of lease termination income increased by 2.7% compared to the same period in 2021.
Year to date, FFO increased $13,549 primarily driven by lower finance costs from operations of $7,758, due to lower mortgage interest expense of $7,550 resulting from mortgage repayments and dispositions since the third quarter of 2021, and reduced general and administrative expenses of $4,635, resulting primarily from a decrease in Unit price and its impact on Unit-based compensation plans of $4,520. Additional increases in income are due to $5,881 from acquisitions, $1,389 in supplementary income from modernization investments, higher percentage rent of $1,355 as a result of lease conversions and new tenants, increased parking revenue of $1,205, and $1,200 from renewals and new leasing. The improvement in FFO is offset in part by a decrease of $6,800 in net property income from dispositions and a reduction in lease termination income of $2,547.
The improvement in AFFO is primarily due to the same factors impacting FFO as described above. This is offset in part by the impact of the increase in the maintenance capital expenditure charge in the first quarter of 2022 from $0.90 to $1.00 per square foot of weighted average GLA.
Operating Results
|
September 30, |
June 30, 2022 |
March 31, 2022 |
December 31, |
September 30, |
|
|
Number of investment properties (1) |
290 |
294 |
294 |
284 |
287 |
|
Gross leasable area (2) |
18,331,000 |
18,500,000 |
18,488,000 |
17,861,000 |
18,232,000 |
|
Economic occupancy (3) |
96.2% |
95.9% |
95.5% |
95.6% |
95.8% |
|
Committed occupancy (4) |
96.8% |
96.3% |
96.4% |
96.2% |
96.5% |
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(1) This includes properties owned at full and partial interests excluding joint ventures. |
|
(2) Gross leasable area is adjusted to reflect Crombie’s proportionate interest in partially owned properties, excluding joint ventures. |
|
(3) Represents space currently under lease contract and rent has commenced. |
|
(4) Represents current economic occupancy plus completed lease contracts for future occupancy of currently available space. |
|
September 30, |
June 30, 2022 |
March 31, 2022 |
December 31, |
September 30, |
|
|
Investment properties, fair value |
$5,265,000 |
$5,273,000 |
$5,199,000 |
$5,026,000 |
$5,096,000 |
|
Unencumbered investment properties (1) |
$2,200,890 |
$2,155,326 |
$2,009,252 |
$1,752,927 |
$1,461,775 |
|
Available liquidity (2) |
$445,372 |
$444,262 |
$523,159 |
$507,777 |
$512,168 |
|
Debt to gross book value – cost basis (3)(4) |
46.2% |
46.8% |
46.5% |
48.9% |
51.2% |
|
Debt to gross fair value (4)(5)(6) |
42.0% |
42.7% |
42.5% |
45.3% |
47.3% |
|
Weighted average interest rate (7) |
3.8% |
3.8% |
3.8% |
3.8% |
3.8% |
|
Debt to trailing 12 months adjusted EBITDA(4)(5)(6)(8) |
8.50x |
8.75x |
8.72x |
8.99x |
9.61x |
|
Interest coverage ratio (5)(6)(8) |
3.32x |
3.26x |
3.27x |
3.06x |
3.07x |
|
(1) Represents fair value of unencumbered properties. |
|
(2) Represents the undrawn portion on the credit facilities, excluding joint facilities with joint operation partners. |
|
(3) See Capital Management note in the Financial Statements. |
|
(4) Calculations for comparative quarters have been restated to include Crombie’s share of debt and assets held in joint ventures. |
|
(5) Non-GAAP financial measures used by management to evaluate Crombie’s business performance. See “Cautionary Statements and Non-GAAP Measures” below for a reconciliation of debt to gross fair value, debt to trailing 12 months adjusted EBITDA, and interest coverage ratio. |
|
(6) See Debt Metrics section in the Management’s Discussion and Analysis. |
|
(7) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. |
|
(8) The 2021 calculations have been restated to include Crombie’s share of revenue and expenses in joint ventures. |
Operations and Leasing
During the quarter, Crombie achieved record economic occupancy and committed occupancy of 96.2% and 96.8%, respectively. Crombie renewed 152,000 square feet with an increase of 3.7% over expiring rents during the quarter. Year to date, new leases increased occupancy by 286,000 square feet at an average first year rate of $21.39 per square foot.
Development
Crombie segregates its development pipeline by expected timing. Near-term projects are financially committed or expected to be committed within the next two years. Currently, Crombie has five developments classified as near-term projects. Upon completion, these projects will total approximately 1,255,000 square feet of residential GLA (1,730 residential units), 112,000 square feet of commercial GLA, and 300,000 square feet of retail-related industrial GLA. The geographical breakdown of GLA in square feet is as follows: 684,000 in Vancouver; 145,000 in Victoria; 300,000 in Calgary and 538,000 in Halifax.
Voilà CFC 3, in Calgary, is under active construction with the base building work nearing completion. Building handover to the tenant occurred in late September 2022, allowing Ocado to commence their building of the interior grid, including the robotic grid platform.
Timing estimates are subject to change, as well as other development risks described in Crombie’s third quarter Management’s Discussion and Analysis under “Development” and “Risk Management”.
GRESB Submission
As part of the organization’s commitment to sustainability, Crombie is pleased to have completed its second submission to GRESB, to the Standing Investments and Development benchmarks. GRESB awarded Crombie a Green Star for excellence in development. In 2021, Crombie formalized a Sustainable Development policy to ensure that properties are designed, developed, and operated with sustainability in mind. The policy outlines our approach to energy efficiency, resource conservation, climate action, water conservation, waste management, green building certification, and sustainable procurement.
Highlighted Subsequent Events
On November 1, 2022, Crombie disposed of a 100% interest in a retail property totalling 62,000 square feet. Total proceeds, before closing and transaction costs, were approximately $108,500. As a result of this transaction, Crombie expects to realize net proceeds of approximately $84,000 in the fourth quarter of 2022.
Conference Call Invitation
Crombie will provide additional details concerning its period ended September 30, 2022 results on a conference call to be held Thursday, November 10, 2022, beginning at 11:00 a.m. (EST). Accompanying the conference call will be a presentation that will be available on Crombie’s website. To join this conference call, you may dial (416) 764-8688 or (888) 390-0546. You may also listen to a live audio webcast of the conference call by visiting the Investor section of Crombie’s website located at www.crombie.ca. Replay will be available until midnight November 17, 2022 by dialing (416) 764-8677 or (888) 390-0541 and entering passcode 848660 #, or on the Crombie website for 90 days after the meeting.
Cautionary Statements and Non-GAAP Measures
Same-asset property cash NOI (SANOI), FFO, AFFO, FFO payout ratio, AFFO payout ratio, debt to trailing 12 months adjusted EBITDA, debt to gross fair value, and interest coverage ratio are non-GAAP financial measures that do not have a standardized meaning under International Financial Reporting Standards (“IFRS”). These measures as computed by Crombie may differ from similar computations as reported by other entities and, accordingly, may not be comparable to other such entities. Management includes these measures as they represent key performance indicators to management, and it believes certain investors use these measures as a means of assessing Crombie’s financial performance. For additional information on these non-GAAP measures see our Management’s Discussion and Analysis for the three and nine months ended September 30, 2022.
The reconciliations for each non-GAAP measure included in this press release are outlined as follows:
Same-Asset Property Cash NOI
Crombie measures certain performance and operating metrics on a same-asset basis to evaluate the period-over-period performance of those properties owned and operated by Crombie. “Same-asset” refers to those properties that were owned and operated by Crombie for the current and comparative reporting periods. Properties that will be undergoing a redevelopment in a future period, including adjacent parcels of land, and those having planning activities underway are also in this category until such development activities commence and/or tenant leasing/renewal activity is suspended. Same‐asset property cash NOI reflects Crombie’s proportionate ownership of jointly operated properties (and excludes any properties held in joint ventures).
Management uses net property income on a cash basis (property cash NOI) as a measure of performance as it reflects the cash generated by properties period-over-period.
Net property income on a cash basis, which excludes non-cash straight-line rent recognition and amortization of tenant incentive amounts, is as follows:
|
Three months ended September 30, |
Nine months ended September 30, |
|||||
|
2022 |
2021 |
Variance |
2022 |
2021 |
Variance |
|
|
Net property income |
$71,574 |
$71,301 |
$273 |
$211,002 |
$211,629 |
$(627) |
|
Non-cash straight-line rent |
(572) |
(2,326) |
1,754 |
(3,784) |
(7,488) |
3,704 |
|
Non-cash tenant incentive amortization |
5,795 |
5,187 |
608 |
17,049 |
14,562 |
2,487 |
|
Property cash NOI |
76,797 |
74,162 |
2,635 |
224,267 |
218,703 |
5,564 |
|
Acquisitions and dispositions property cash NOI |
1,916 |
2,214 |
(298) |
5,502 |
5,982 |
(480) |
|
Development property cash NOI |
6,630 |
5,129 |
1,501 |
16,424 |
13,922 |
2,502 |
|
Acquisitions, dispositions and development property cash NOI |
8,546 |
7,343 |
1,203 |
21,926 |
19,904 |
2,022 |
|
Same-asset property cash NOI |
$68,251 |
$66,819 |
$1,432 |
$202,341 |
$198,799 |
$3,542 |
Funds from Operations (FFO)
Crombie follows the recommendations of the January 2022 guidance of the Real Property Association of Canada (“REALPAC”) in calculating FFO.
The reconciliation of FFO for the three and nine months ended September 30, 2022 and 2021 is as follows:
|
Three months ended September 30, |
Nine months ended September 30, |
|||||
|
2022 |
2021 |
Variance |
2022 |
2021 |
Variance |
|
|
Decrease in net assets attributable to Unitholders |
$(11,321) |
$(12,436) |
$1,115 |
$(34,034) |
$(33,205) |
$(829) |
|
Add (deduct): |
||||||
|
Amortization of tenant incentives |
5,795 |
5,187 |
608 |
17,049 |
14,562 |
2,487 |
|
Gain on disposal of investment properties |
(13,357) |
(2,619) |
(10,738) |
(18,220) |
(13,763) |
(4,457) |
|
Gain on distribution from equity accounted investments |
(1,000) |
— |
(1,000) |
(2,933) |
— |
(2,933) |
|
Impairment of investment properties |
10,400 |
1,239 |
9,161 |
10,400 |
1,239 |
9,161 |
|
Depreciation and amortization of investment properties |
22,387 |
18,758 |
3,629 |
59,753 |
55,922 |
3,831 |
|
Adjustments for equity-accounted investments |
1,248 |
737 |
511 |
3,271 |
1,426 |
1,845 |
|
Principal payments on right-of-use assets |
58 |
57 |
1 |
171 |
167 |
4 |
|
Internal leasing costs |
724 |
620 |
104 |
2,060 |
1,860 |
200 |
|
Finance costs – distributions to Unitholders |
39,513 |
36,578 |
2,935 |
118,143 |
107,922 |
10,221 |
|
Finance costs (income) – change in fair value of financial instruments |
(1,782) |
(291) |
(1,491) |
(4,027) |
1,954 |
(5,981) |
|
FFO as calculated based on REALPAC recommendations |
$52,665 |
$47,830 |
$4,835 |
$151,633 |
$138,084 |
$13,549 |
|
Basic weighted average Units (in 000’s) |
177,491 |
164,382 |
13,109 |
175,728 |
161,300 |
14,428 |
|
FFO per Unit – basic |
$0.30 |
$0.29 |
$0.01 |
$0.86 |
$0.86 |
$— |
|
FFO payout ratio (%) |
75.0% |
76.5% |
(1.5)% |
77.9% |
78.2% |
(0.3)% |
Adjusted Funds from Operations (AFFO)
Crombie follows the recommendations of REALPAC’s January 2022 guidance in calculating AFFO and has applied these recommendations to the AFFO amounts included in this press release and Management’s Discussion and Analysis.
The reconciliation of AFFO for the three and nine months ended September 30, 2022 and 2021 is as follows:
|
Three months ended September 30, |
Nine months ended September 30, |
|||||
|
2022 |
2021 |
Variance |
2022 |
2021 |
Variance |
|
|
FFO as calculated based on REALPAC recommendations |
$52,665 |
$47,830 |
$4,835 |
$151,633 |
$138,084 |
$13,549 |
|
Add (deduct): |
||||||
|
Straight-line rent adjustment |
(572) |
(2,326) |
1,754 |
(3,784) |
(7,488) |
3,704 |
|
Straight-line rent adjustment included in loss from equity-accounted investments |
80 |
191 |
(111) |
353 |
365 |
(12) |
|
Internal leasing costs |
(724) |
(620) |
(104) |
(2,060) |
(1,860) |
(200) |
|
Maintenance expenditures on a square footage basis |
(4,662) |
(4,023) |
(639) |
(13,906) |
(12,037) |
(1,869) |
|
AFFO as calculated based on REALPAC recommendations |
$46,787 |
$41,052 |
$5,735 |
$132,236 |
$117,064 |
$15,172 |
|
Basic weighted average Units (in 000’s) |
177,491 |
164,382 |
13,109 |
175,728 |
161,300 |
14,428 |
|
AFFO per Unit – basic |
$0.26 |
$0.25 |
$0.01 |
$0.75 |
$0.73 |
$0.02 |
|
AFFO payout ratio (%) |
84.5% |
89.1% |
(4.6)% |
89.3% |
92.2% |
(2.9)% |
Debt Metrics
When calculating debt to gross fair value, debt is defined under the terms of the Declaration of Trust as obligations for borrowed money, including obligations incurred in connection with acquisitions, excluding specific deferred taxes payable, trade payables, and accruals in the ordinary course of business and distributions payable. Debt includes Crombie’s share of debt held in equity-accounted joint ventures.
Gross fair value includes investment properties measured at fair value, including Crombie’s share of those held within joint ventures. All other components of gross fair value are measured at the carrying value included in Crombie’s financial statements. Crombie’s methodology for determining the fair value of investment properties includes capitalization of trailing 12 months net property income using biannual capitalization rates from external property valuators. The majority of investment properties are also subject to external, independent appraisals on a rotational basis over a period of not more than four years. Valuation techniques are more fully described in Crombie’s year-end audited financial statements.
The fair value included in this calculation reflects the fair value of the properties as at September 30, 2022 and December 31, 2021 respectively, based on each property’s current use as a revenue-generating investment property. As at September 30, 2022, Crombie’s weighted average capitalization rate used in the determination of the fair value of its investment properties was 5.71%, an increase of 0.06% from December 31, 2021. Crombie’s weighted average capitalization rate used in the determination of the fair value of its share of investment properties held in equity-accounted joint ventures was 3.53% as at September 30, 2022, an increase of 0.23% from December 31, 2021. For an explanation of how Crombie determines capitalization rates, see the “Other Disclosures” section of Crombie’s third quarter Management’s Discussion and Analysis, under “Investment Property Valuation” in the “Use of Estimates and Judgments” section, and the “Risk Management section of this Management’s Discussion and Analysis, under “Capitalization Rate Risk” in the “Risk Factors Related to the Business of Crombie” section.
|
September 30, 2022 |
December 31, 2021 (1) |
||
|
Fixed rate mortgages |
$940,882 |
$1,073,895 |
|
|
Senior unsecured notes |
1,125,000 |
1,125,000 |
|
|
Revolving credit facility |
5,989 |
9,220 |
|
|
Joint operation credit facility |
10,176 |
9,904 |
|
|
Bilateral credit facility |
75,000 |
10,000 |
|
|
Debt held in joint ventures, at Crombie’s share (2) (3) |
271,882 |
254,074 |
|
|
Lease liabilities |
34,953 |
35,352 |
|
|
Total debt outstanding |
2,463,882 |
2,517,445 |
|
|
Less: Applicable fair value debt adjustment |
— |
(53) |
|
|
Adjusted debt |
$2,463,882 |
$2,517,392 |
|
|
Investment properties, fair value |
$5,265,000 |
$5,026,000 |
|
|
Investment properties held in joint ventures, fair value, at Crombie’s share (3) |
453,000 |
387,000 |
|
|
Other assets, cost (4) |
113,052 |
102,683 |
|
|
Other assets, cost, held in joint ventures, at Crombie’s share (3) (4) (5) |
26,435 |
18,370 |
|
|
Cash and cash equivalents |
1,522 |
3,915 |
|
|
Cash and cash equivalents held in joint ventures, at Crombie’s share (3) |
3,904 |
4,453 |
|
|
Deferred financing charges |
8,022 |
9,769 |
|
|
Interest rate subsidy |
— |
(53) |
|
|
Gross fair value |
$5,870,935 |
$5,552,137 |
|
|
Debt to gross fair value |
42.0% |
45.3% |
|
(1) Prior year calculation has been restated to include Crombie’s share of debt and assets held in joint ventures. |
|
(2) Includes Crombie’s share of fixed and floating rate mortgages, construction loans, revolving credit facility, and lease liabilities held in joint ventures. |
|
(3) See the “Joint Ventures” section in the Management’s Discussion and Analysis. |
|
(4) Other assets exclude tenant incentives and related accumulated amortization, and accrued straight-line rent receivable. |
|
(5) Other assets held in joint ventures include deferred financing charges. |
The following table presents a reconciliation of property revenue to adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and should not be considered an alternative to operating income attributable to Unitholders, and may not be comparable to that used by other entities.
As of September 30, 2022, Crombie has completed a number of developments in joint ventures and, as a result, in 2022, Crombie changed its methodology in calculating adjusted EBITDA to include Crombie’s share of revenue, operating expenses, and general and administrative expenses in joint ventures. Interest service coverage calculations now include Crombie’s share of finance costs – operations in joint ventures. Prior quarters have been restated to reflect this new methodology.
|
Three months ended |
|||||
|
September 30, |
June 30, 2022 |
March 31, 2022 |
December 31, |
September 30, |
|
|
Operating income attributable to Unitholders |
$26,410 |
$28,424 |
$25,248 |
$78,730 |
$23,851 |
|
Amortization of tenant incentives |
5,795 |
5,690 |
5,564 |
5,249 |
5,187 |
|
Gain on disposal of investment properties |
(13,357) |
(4,863) |
— |
(42,762) |
(2,619) |
|
Gain on distribution from equity-accounted investments |
(1,000) |
— |
(1,933) |
(15,525) |
— |
|
Impairment of investment properties |
10,400 |
— |
— |
1,300 |
1,239 |
|
Depreciation and amortization |
22,744 |
19,222 |
18,879 |
18,805 |
19,109 |
|
Finance costs – operations |
20,884 |
20,762 |
20,745 |
22,639 |
23,070 |
|
Loss from equity-accounted investments |
1,787 |
1,627 |
1,539 |
685 |
923 |
|
Property revenue in joint ventures, at Crombie’s share |
3,258 |
2,616 |
2,356 |
2,100 |
1,578 |
|
Property operating expenses in joint ventures, at Crombie’s share |
(1,296) |
(1,002) |
(903) |
(724) |
(695) |
|
General and administrative expenses in joint ventures, at Crombie’s share |
(31) |
(21) |
(150) |
(32) |
(47) |
|
Taxes – current |
— |
— |
— |
163 |
— |
|
Adjusted EBITDA [1] |
$75,594 |
$72,455 |
$71,345 |
$70,628 |
$71,596 |
|
Trailing 12 months adjusted EBITDA [3] |
$290,022 |
$286,024 |
$281,626 |
$280,057 |
$276,643 |
|
Finance costs – operations |
$20,884 |
$20,762 |
$20,745 |
$22,639 |
$23,070 |
|
Finance costs – operations in joint ventures, at Crombie’s share |
2,564 |
2,157 |
1,776 |
1,157 |
1,031 |
|
Amortization of deferred financing charges |
(675) |
(668) |
(688) |
(742) |
(759) |
|
Adjusted interest expense [2] |
$22,773 |
$22,251 |
$21,833 |
$23,054 |
$23,342 |
|
Debt outstanding (see Debt to Gross Fair Value)(1) [4] |
$2,463,882 |
$2,502,845 |
$2,456,686 |
$2,517,392 |
$2,659,702 |
|
Interest service coverage ratio {[1]/[2]} |
3.32x |
3.26x |
3.27x |
3.06x |
3.07x |
|
Debt to trailing 12 months adjusted EBITDA {[4]/[3]} |
8.50x |
8.75x |
8.72x |
8.99x |
9.61x |
|
(1) Includes debt held in joint ventures, at Crombie’s share. |
This press 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 2021 annual Management’s Discussion and Analysis under “Risk Management” and the Annual Information Form for the year ended December 31, 2021 under “Risks”, 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, and 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 expected timing of development, each of which may be impacted by ordinary real estate market cycles, the availability of labour, financing and the cost of any such financing, capital resource allocation decisions and general economic conditions, as well as development activities undertaken by related parties not under the direct control of Crombie.
About Crombie REIT
Crombie invests in real estate that enriches local communities and enables long-term sustainable growth. As one of the country’s leading owners, operators, and developers of quality real estate, Crombie’s portfolio primarily includes grocery-anchored retail, retail-related industrial, and mixed-used residential properties in Canada’s top urban and suburban markets. As at September 30, 2022, our portfolio contains 290 income-producing properties comprising approximately 18.3 million square feet, and a significant pipeline of future development projects. Learn more at www.crombie.ca.
SOURCE Crombie REIT