Crombie REIT Reports Third Quarter 2017 Results

NEW GLASGOW, NS, Nov. 8, 2017 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report its financial results for the three and nine months ended September 30, 2017.

Third quarter 2017 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).

• Funds From Operations ("FFO"):
• FFO for the three months ended September 30, 2017 increased 1.2% to $46,652; or $0.31 per unit diluted, an increase of 0.1% per unit from the three months ended September 30, 2016.
• FFO payout ratio of 71.6% for the three months ended September 30, 2017 compared to 71.4% for the same period in 2016.
• Same-asset property cash NOI for the three months ended September 30, 2017 increased by 1.7% or $1,010 ($61,259 compared to $60,249 for the three months ended September 30, 2016).
• Completed acquisition of six retail properties totalling 300,000 square feet, one in Toronto, ON and five in Quebec, for a total purchase price of $100,257 before closing and transaction costs. Completed acquisition from Empire Company Limited of 31,000 square feet of additional development on a pre-existing retail property in Ontario for a total purchase price of $7,671 before closing and transaction costs.
• Property revenue for the three months ended September 30, 2017 increased by $3,667 or 3.7% to $102,424 over the three months ended September 30, 2016.
• Occupancy, on a committed basis, was 94.7% at September 30, 2017 compared with 94.4% at December 31, 2016 and 94.2% at September 30, 2016. Committed space at September 30, 2017 was 46,000 square feet at an average first year rate of $22.83 per square foot.
• Renewals during the quarter on 93,000 square feet of 2017 expiring leases with an increase of 1.9% over the expiring lease rate. Renewals during the quarter on 207,000 square feet of future years expiring leases with an increase of 3.4% over the expiring lease rate.
• Debt to gross book value (fair value basis) was 50.2% at September 30, 2017, compared to 50.5% at September 30, 2016.
• Interest service coverage for the nine months ended September 30, 2017 was 2.86 times EBITDA. Weighted average interest rate on mortgages reduced to 4.33% from 4.54% at September 30, 2016.

"We remain focused on value creation through our existing asset portfolio, and through acquisitions that further enhance our growing development pipeline," said Donald Clow, President and CEO of Crombie. "We are excited to have kicked off Davie Street in Vancouver, our first major mixed use development project during the quarter, and very pleased to have acquired a retail plaza at McCowan and Ellesmere in Toronto, a significant, transit-oriented, future major development site. As the Canadian retail landscape continues to evolve, our convenience and everyday needs, grocery anchored portfolio is poised to provide a stable and resilient base from which to drive unitholder value."

 

 

The table below presents a summary of financial performance for the three and nine months ended September 30, 2017 compared to the same periods in fiscal 2016.

 

 

 

 

Same-asset property cash NOI is as follows:

 

 

Property NOI, on a cash basis, excludes non-cash straight-line rent recognition and amortization of tenant incentive amounts. The $1,010 or 1.7% increase and $4,362 or 2.5% increase in same-asset cash NOI for the three and nine months ended September 30, 2017 over the same periods in 2016 is primarily the result of: improved occupancy rates; increased average rent per square foot from leasing activity; rental rate increases in existing leases; improved recovery rates; and, revenues from land use intensifications at certain properties.

Crombie emphasizes property NOI on a cash basis as it reflects the cash generated by the properties period-over-period.

Acquisitions, dispositions and development property cash NOI is as follows:

 

 

Growth in acquisitions and dispositions property cash NOI reflects the property acquisition and disposition activity throughout 2016 and 2017, including the acquisition of 41 properties and disposition of 19 retail properties in 2016.

 

 

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 $400,000, subject to available borrowing base, of which $100,491 was drawn as at September 30, 2017, and an additional $8,136 encumbered by outstanding letters of credit, resulting in significant available liquidity and a $100,000 unsecured floating rate bilateral credit facility, of which $100,000 was drawn at September 30, 2017.

Debt to gross book value on a fair value basis is 50.2% at September 30, 2017, compared to 50.5% at September 30, 2016.

General and Administrative Expenses

For the three months ended September 30, 2017, general and administrative expenses, as a percentage of property revenue, were 4.6%, an increase of 1.0% from the same period in 2016, with expenses increasing $1,129 or 31.8% and property revenue increasing 3.7%. For the nine months ended September 30, 2017, general and administrative expenses, as a percentage of property revenue, increased 0.7% compared to the nine months ended September 30, 2016, with expenses increasing $2,756 or 22.8% and property revenue increasing by 3.9%. Effective June 30, 2017, Crombie underwent a tax reorganization which resulted in the elimination of the $76,400 deferred tax liability associated with Crombie's most significant corporate subsidiary. Costs related to the reorganization of approximately $1,059 are included in professional fees for the nine months ended September 30, 2017. Excluding these costs, general and administrative expenses represent 4.5% of property revenue for the nine months ended September 30, 2017.

General and administrative expenses also increased due to increases in employee recruitment, transition, hiring and personnel development costs.

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. 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.

• Property NOI is property revenue less property operating expenses.
• Property Cash NOI is Property NOI adjusted to remove non-cash straight-line rent and tenant incentive amortization.
• Debt is defined as bank loans plus investment property debt, senior unsecured notes and convertible debentures.
• Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus deferred financing charges, accumulated depreciation and amortization in respect of Crombie's properties and 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 tenant incentives and accumulated straight-line rent receivable.
• EBITDA is calculated as property revenue, adjusted to remove the impact of amortization of tenant incentives, less property operating expenses and general and administrative expenses.
• FFO is calculated as Increase (decrease) in net assets attributable to Unitholders (computed in accordance with IFRS), excluding gains (or losses) from sales of depreciable real estate and any related income taxes, plus depreciation and amortization expense, incremental internal leasing expenses, deferred income taxes, finance costs – distributions to Unitholders, impairment charges and recoveries and change in fair value of financial instruments.
• AFFO is defined as FFO adjusted for non-cash amounts affecting revenue, amortization of effective swap agreements, less maintenance capital expenditures, maintenance tenant incentives and leasing costs, and the settlement of effective interest rate swap agreements.
• ACFO is a measure of sustainable, economic cash flow and is calculated as cash flow from operating activities (computed in accordance with IFRS) adjusted for distributions to unitholders, changes in working capital, maintenance expenditures and deferred financing charges.

For additional information on these non-GAAP measures see our Management's Discussion and Analysis for the three and nine months ended September 30, 2017.

Crombie's consolidated financial statements and management's discussion and analysis for the three and nine months ended September 30, 2017 can be found on Crombie's website at www.crombiereit.com or on the SEDAR website for Canadian regulatory filings at www.sedar.com.

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 287 income-producing properties across Canada, comprising approximately 19.5 million square feet with a strategy to own, operate and develop a portfolio of high quality grocery and drug store anchored shopping centres, freestanding stores and mixed use developments primarily in Canada's top urban and suburban 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 2016 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.

Specifically, this document includes, but is not limited to, forward-looking statements regarding:

(i) general growth and development opportunities and expansion across Canada, which could be impacted by real estate market cycles, the availability of labour, 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; and,

(ii) overall indebtedness levels and terms and expectations relating to refinancing, which could be impacted by the level of acquisition activity that Crombie is able to achieve, future financing opportunities, future interest rates and market conditions.

Conference Call Invitation

Crombie will provide additional details concerning its period ended September 30, 2017 results on a conference call to be held Thursday, November 9, 2017, at 12:00 p.m. Eastern time. To join this conference call you may dial (647) 427-7450 or (888) 231-8191. You may also listen to a live audio webcast of the conference call by visiting Crombie's website located at www.crombiereit.com. Replay will be available until midnight November 23, 2017 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 95677482, or on the Crombie website for 90 days after the meeting.

 

SOURCE Crombie REIT