Resilient portfolio with strong financial condition poised for sustainable growth
NEW GLASGOW, NS, August 10, 2022 /CNW/ – Crombie Real Estate Investment Trust (“Crombie”) (TSX: CRR.UN) today announced results for its second quarter ended June 30, 2022. Management will host a conference call to discuss the results at 11:30 a.m. (EDT), August 11, 2022.
“Crombie’s strategy continues to deliver stability and growth despite the uncertainty and volatility of the global economy, geopolitics and the capital markets. Our grocery-anchored, retail-related industrial, and residential portfolio continues to deliver consistent operating and financial performance including strong occupancy and healthy renewal growth, enabled by one of the longest weighted average lease terms in the real estate industry. Crombie actively de-levered its balance sheet while maintaining strong liquidity which enables us to not only manage significant volatility but responsibly grow our business,” said Don Clow, President and CEO. “Looking forward, Crombie is well positioned to advance our focused and balanced strategic priorities of investment in Empire-related initiatives and development to drive long-term sustainable growth while maintaining a strong financial condition.”
(In thousands of Canadian dollars, except per unit amounts and as otherwise noted)
- Committed and economic occupancy of 96.3% and 95.9%, respectively; a 10 and 30 basis point increase compared to the second quarter of 2021
- Renewals of 275,000 square feet at rents 6.4% above expiring rates (7.5% at weighted average rent during the renewal term)
- Acquisition of one investment property adding 67,000 square feet of GLA and one development property for a total aggregate purchase price of $15,939
- Disposition of one 19,000 square foot investment property for gross proceeds of $10,250
Financial Highlights
- Property revenue of $103,064, a 3.1% increase from $100,006 in the second quarter of 2021
- Operating income of $28,424, a 45.0% increase from $19,605 in the second quarter of 2021
- Net property income of 70,097, a 0.1% decrease from 70,192 in the second quarter of 2021
- FFO(1) $49,877 or $0.28 per unit compared to $44,201 or $0.27 per unit in the second quarter of 2021
- FFO(1) payout ratio of 79.0% compared to 81.7% in the second quarter of 2021
- AFFO(1) $43,551 or $0.25 per unit compared to $37,109 or $0.23 per unit in the second quarter of 2021
- AFFO(1) payout ratio of 90.5% compared to 97.3% in the second quarter of 2021
- Same-asset property cash NOI(1) increase of 1.9% over the second quarter of 2021
- Record high unencumbered investment properties of $2,155,326, a 49.1% increase from $1,445,423 in the second quarter of 2021
- Debt to gross fair value(1)(2) of 42.6%, an improvement from 47.4% in the second quarter of 2021
- Debt to trailing 12 months adjusted EBITDA(1)(2) of 8.73x compared to 9.70x in the second quarter of 2021
- Available liquidity of $444,262, a 20.6% increase from $368,483 in the second 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. |
|
(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 June 30, 2022 and Consolidated Financial Statements and Notes for the quarters ended June 30, 2022, and June 30, 2021. Full details on our results can be found at www.crombie.ca and www.sedar.com.
Crombie’s key financial metrics for the three months ended June 30, 2022 are as follows:
|
Three months ended June 30, |
||||
|
(In thousands of Canadian dollars, except per unit amounts and as otherwise noted) |
2022 |
2021 |
Variance |
% |
|
Property revenue |
$ 103,064 |
$ 100,006 |
$ 3,058 |
3.1 % |
|
Property operating expenses |
32,967 |
29,814 |
(3,153) |
(10.6) % |
|
Net property income |
$ 70,097 |
$ 70,192 |
$ (95) |
(0.1) % |
|
Operating income attributable to Unitholders |
$ 28,424 |
$ 19,605 |
$ 8,819 |
45.0 % |
|
Same-asset property cash NOI (1) |
$ 67,441 |
$ 66,157 |
$ 1,284 |
1.9 % |
|
Funds from operations (“FFO”) (1) |
||||
|
Basic |
$ 49,877 |
$ 44,201 |
$ 5,676 |
12.8 % |
|
Per unit – Basic |
$ 0.28 |
$ 0.27 |
$ 0.01 |
3.7 % |
|
Payout ratio(1) |
79.0 % |
81.7 % |
(2.7) % |
|
|
Adjusted funds from operations (“AFFO”) (1) |
||||
|
Basic |
$ 43,551 |
$ 37,109 |
$ 6,442 |
17.4 % |
|
Per unit – Basic |
$ 0.25 |
$ 0.23 |
$ 0.02 |
8.7 % |
|
Payout ratio(1) |
90.5 % |
97.3 % |
(6.8) % |
|
|
(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 $8,819, or 45.0%, compared to the second quarter of 2021 primarily due to a gain on disposal of investment properties of $4,863 in the second quarter of 2022 and lower finance costs from operations of $2,856, resulting primarily from deleveraging, lower mortgage interest due to mortgage repayments and dispositions since the second quarter of 2021. Additionally, general and administrative expenses decreased by $2,428 due primarily to a reduction in Unit-based compensation costs resulting from a decrease in Crombie’s Unit price, offset in part by a one-time payment in respect of an executive retirement arrangement of $1,211. The growth in operating income was further offset by the increased loss from equity-accounted investments of $1,065 compared to the second quarter of 2021, as residential development projects achieved substantial completion and move toward revenue stabilization, when revenue earned will exceed expenses. A slight reduction in net property income of $95 was primarily due to increased tenant incentive amortization of $850 resulting primarily from new leasing, a reduction in lease termination income of $662, and a decrease of $1,800 from dispositions since the second quarter of 2021. This is offset in part by income of $2,026 from acquisitions since the second quarter of 2021.
Same-asset property cash NOI (SANOI) increased by $1,284, or 1.9%, compared to the second quarter of 2021 primarily due to strong occupancy and increased parking revenue of $658, offset in part by a decrease in lease termination income of $652, primarily in our office portfolio. Same-asset property cash NOI adjusted for the removal of lease termination income increased by 3.0% compared to the same period in 2021.
The increase in FFO of $5,676 is primarily due to lower finance costs from operations of $2,856, driven by lower mortgage interest of $2,593 as a result of mortgage repayments and dispositions since the second quarter of 2021, and a decrease in general and administrative expenses of $2,428 due primarily to a $2,368 reduction in Unit-based compensation costs resulting from a decrease in Crombie’s Unit price from June 30, 2021. Additional increases in income are due to $2,026 from acquisitions since the second quarter of 2021. FFO growth is offset in part by a reduction in lease termination income of $662 and a decrease of $1,800 from dispositions since the second quarter of 2021.
The increase in AFFO is largely due to the impacts on 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 six months ended June 30, 2022 are as follows:
|
Six months ended June 30, |
||||
|
(In thousands of Canadian dollars, except per unit amounts and as otherwise noted) |
2022 |
2021 |
Variance |
% |
|
Property revenue |
$ 208,010 |
$ 203,543 |
$ 4,467 |
2.2 % |
|
Property operating expenses |
68,582 |
63,215 |
(5,367) |
(8.5) % |
|
Net property income |
$ 139,428 |
$ 140,328 |
$ (900) |
(0.6) % |
|
Operating income attributable to Unitholders |
$ 53,672 |
$ 52,820 |
$ 852 |
1.6 % |
|
Same-asset property cash NOI (1) |
$ 134,090 |
$ 131,980 |
$ 2,110 |
1.6 % |
|
Funds from operations (“FFO”) (1) |
||||
|
Basic |
$ 98,968 |
$ 90,304 |
$ 8,664 |
9.6 % |
|
Per unit – Basic |
$ 0.57 |
$ 0.57 |
$ — |
— % |
|
Payout ratio(1) |
79.5 % |
79.0 % |
0.5 % |
|
|
Adjusted funds from operations (“AFFO”) (1) |
||||
|
Basic |
$ 85,449 |
$ 75,888 |
$ 9,561 |
12.6 % |
|
Per unit – Basic |
$ 0.49 |
$ 0.48 |
$ 0.01 |
2.1 % |
|
Payout ratio(1) |
92.0 % |
94.0 % |
(2.0) % |
|
|
(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 $852, or 1.6%, on a year to date basis primarily driven by lower finance costs from operations of $5,572 due to deleveraging, lower mortgage interest resulting from mortgage repayments and dispositions since the second quarter of 2021. A reduction in general and administrative expenses of $2,613 was primarily due to a decrease in Unit price and its impact on Unit-based compensation plans, partially offset by a one-time payment in respect of an executive retirement arrangement of $1,211 in the second quarter of 2022. The growth in operating income was offset in part by a $6,281 decrease in gain on disposal of investment properties due to three dispositions in the first quarter of 2021 compared to just one disposition in the second quarter of 2022. Additionally, net property income decreased by $900 compared to the same period in 2021 primarily due to a reduction in lease termination income of $2,176, increased tenant incentive amortization of $1,879, and a decrease of $3,100 from dispositions. This is partially offset by income of $3,191 from acquisitions, $1,400 from renewals and new leasing, and reduction of $1,152 in bad debt expense.
On a year to date basis, same-asset property cash NOI (SANOI) increased 1.6% compared to 2021 primarily due to strong occupancy, increased parking revenue of $780, and an increase in supplemental rents of $760 from modernizations and capital improvements. This is offset in part by a decrease in lease termination income of $1,386, 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.
On a year to date basis, FFO increased $8,664 primarily driven by lower finance costs from operations of $5,572, due to lower mortgage interest of $4,809 resulting from mortgage repayments and dispositions since the second quarter of 2021, and reduced general and administrative expenses of $2,613, resulting primarily from a decrease in Unit price and its impact on Unit-based compensation plans of $2,880. Increased income of $3,191 from acquisitions and $1,400 from renewals and new leasing, and a reduction of $1,152 in bad debt expense contributed to FFO growth. The improvement in FFO is offset in part by a reduction in lease termination income of $2,176, increased tenant incentive amortization of $1,879, and a decrease of $3,100 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.
|
June 30, |
March 31, |
December 31, |
September 30, |
June 30, |
|
|
Number of investment properties (1) |
294 |
294 |
284 |
287 |
287 |
|
Gross leasable area (2) |
18,500,000 |
18,488,000 |
17,861,000 |
18,232,000 |
18,235,000 |
|
Economic occupancy (3) |
95.9 % |
95.5 % |
95.6 % |
95.8 % |
95.6 % |
|
Committed occupancy (4) |
96.3 % |
96.4 % |
96.2 % |
96.5 % |
96.2 % |
|
(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. |
|
June 30, |
March 31, |
December 31, |
September 30, |
June 30, |
|
|
Investment properties, fair value |
$ 5,273,000 |
$ 5,199,000 |
$ 5,026,000 |
$ 5,096,000 |
$ 5,053,000 |
|
Unencumbered investment properties (1) |
$ 2,155,326 |
$ 2,009,252 |
$ 1,752,927 |
$ 1,461,775 |
$ 1,445,423 |
|
Available liquidity (2) |
$ 444,262 |
$ 523,159 |
$ 507,777 |
$ 512,168 |
$ 368,483 |
|
Debt to gross book value – cost basis (3)(7) |
46.7 % |
46.4 % |
48.8 % |
51.1 % |
50.8 % |
|
Debt to gross fair value (4)(5)(7) |
42.6 % |
42.4 % |
45.2 % |
47.2 % |
47.4 % |
|
Weighted average interest rate (6) |
3.8 % |
3.8 % |
3.8 % |
3.8 % |
3.9 % |
|
Debt to trailing 12 months adjusted EBITDA(4)(5)(7)(8) |
8.73x |
8.70x |
8.96x |
9.59x |
9.70x |
|
Interest coverage ratio (4)(5)(8) |
3.26x |
3.27x |
3.06x |
3.07x |
2.91x |
|
(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) |
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. |
|
(5) |
See Debt Metrics section in the Management’s Discussion and Analysis. |
|
(6) |
Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. |
|
(7) |
The 2021 calculations have been restated to include Crombie’s share of debt and assets held in joint ventures. |
|
(8) |
The 2021 calculations have been restated to include Crombie’s share of revenue and expenses in joint ventures. |
During the quarter, Crombie maintained strong economic occupancy and committed occupancy of 95.9% and 96.3%, respectively. Crombie renewed 275,000 square feet with an increase of 6.4% over expiring rents during the quarter. New leases increased occupancy by 256,000 square feet at an average first year rate of $20.72 per square foot.
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 1,103,000 square feet of residential GLA and 1,490 residential units, 115,000 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: 535,000 in Vancouver; 145,000 in Victoria; 300,000 in Calgary and 538,000 in Halifax.
Voilà CFC3, in Calgary, is under active construction with the base building work nearing completion and full handover to the tenant is scheduled for the end of September 2022, allowing Ocado to commence their building of the interior grid, which includes the robotic grid platform.
These timing and cost estimates are subject to changes, as well as other development risks described in Crombie’s second quarter Management’s Discussion and Analysis under “Development” and “Risk Management”.
Pursuant to Section 3.8 of Crombie’s Amended and Restated Declaration of Trust, ECL Development Limited (“ECL”) has the right to appoint up to five trustees to Crombie’s Board of Trustees. Effective June 8, 2022, Jana Sobey, an ECL appointed trustee, resigned from the Board of Trustees. Ms. Sobey was recently promoted at Empire, and to allow her to focus on her new role, Empire agreed to have her step down from the Board of Trustees. ECL retains the right to name a replacement at a future date.
On July 7, 2022, Crombie acquired a 100% interest in one retail property totalling 4,300 square feet for $1,350, excluding closing and transaction costs.
On August 8, 2022, Crombie disposed of a 100% interest in a retail property totalling 74,000 square feet. Total proceeds, before closing and transaction costs, were approximately $26,500.
On August 10, 2022, Crombie disposed of a 100% interest in a retail property totalling 6,000 square feet. Total proceeds, before closing and transaction costs, were approximately $1,125.
Crombie will provide additional details concerning its period ended June 30, 2022 results on a conference call to be held Thursday, August 11, 2022, beginning at 11:30 a.m. (EDT). 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 August 18, 2022 by dialing (416) 764-8677 or (888) 390-0541 and entering passcode 847382 #, or on the Crombie website for 90 days after the meeting.
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 six months ended June 30, 2022.
The reconciliations for each non-GAAP measure included in this news 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 June 30, |
Six months ended June 30, |
|||||
|
2022 |
2021 |
Variance |
2022 |
2021 |
Variance |
|
|
Net property income |
$ 70,097 |
$ 70,192 |
$ (95) |
$ 139,428 |
$ 140,328 |
$ (900) |
|
Non-cash straight-line rent |
(1,133) |
(2,448) |
1,315 |
(3,212) |
(5,162) |
1,950 |
|
Non-cash tenant incentive amortization |
5,690 |
4,840 |
850 |
11,254 |
9,375 |
1,879 |
|
Property cash NOI |
74,654 |
72,584 |
2,070 |
147,470 |
144,541 |
2,929 |
|
Acquisitions and dispositions property cash NOI |
1,802 |
2,007 |
(205) |
3,586 |
3,768 |
(182) |
|
Development property cash NOI |
5,411 |
4,420 |
991 |
9,794 |
8,793 |
1,001 |
|
Acquisitions, dispositions and development property cash NOI |
7,213 |
6,427 |
786 |
13,380 |
12,561 |
819 |
|
Same-asset property cash NOI |
$ 67,441 |
$ 66,157 |
$ 1,284 |
$ 134,090 |
$ 131,980 |
$ 2,110 |
Funds from Operations (FFO)
Crombie follows the recommendations of the Real Property Association of Canada (“REALPAC”)’s January 2022 guidance in calculating FFO.
The reconciliation of FFO for the three and six months ended June 30, 2022 and 2021 is as follows:
|
Three months ended June 30, |
Six months ended June 30, |
|||||
|
2022 |
2021 |
Variance |
2022 |
2021 |
Variance |
|
|
Decrease in net assets attributable to Unitholders |
$ (8,936) |
$ (17,738) |
$ 8,802 |
$ (22,713) |
$ (20,769) |
$ (1,944) |
|
Add (deduct): |
||||||
|
Amortization of tenant incentives |
5,690 |
4,840 |
850 |
11,254 |
9,375 |
1,879 |
|
Gain on disposal of investment properties |
(4,863) |
— |
(4,863) |
(4,863) |
(11,144) |
6,281 |
|
Gain on distribution from equity accounted investments |
— |
— |
— |
(1,933) |
— |
(1,933) |
|
Depreciation and amortization of investment properties |
18,842 |
18,710 |
132 |
37,366 |
37,164 |
202 |
|
Adjustments for equity-accounted investments |
1,081 |
370 |
711 |
2,023 |
739 |
1,284 |
|
Principal payments on right-of-use assets |
57 |
56 |
1 |
113 |
110 |
3 |
|
Internal leasing costs |
646 |
620 |
26 |
1,336 |
1,240 |
96 |
|
Finance costs – distributions to Unitholders |
39,394 |
36,124 |
3,270 |
78,630 |
71,344 |
7,286 |
|
Finance costs (income) – change in fair value of financial instruments |
(2,034) |
1,219 |
(3,253) |
(2,245) |
2,245 |
(4,490) |
|
FFO as calculated based on REALPAC recommendations |
$ 49,877 |
$ 44,201 |
$ 5,676 |
$ 98,968 |
$ 90,304 |
$ 8,664 |
|
Basic weighted average Units (in 000’s) |
176,976 |
161,170 |
15,806 |
174,832 |
159,734 |
15,098 |
|
FFO per Unit – basic |
$ 0.28 |
$ 0.27 |
$ 0.01 |
$ 0.57 |
$ 0.57 |
$ — |
|
FFO payout ratio (%) |
79.0 % |
81.7 % |
(2.7) % |
79.5 % |
79.0 % |
0.5 % |
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 news release and Management’s Discussion and Analysis.
The reconciliation of AFFO for the three and six months ended June 30, 2022 and 2021 is as follows:
|
Three months ended June 30, |
Six months ended June 30, |
|||||
|
2022 |
2021 |
Variance |
2022 |
2021 |
Variance |
|
|
FFO as calculated based on REALPAC recommendations |
$ 49,877 |
$ 44,201 |
$ 5,676 |
$ 98,968 |
$ 90,304 |
$ 8,664 |
|
Add (deduct): |
||||||
|
Straight-line rent adjustment |
(1,133) |
(2,448) |
1,315 |
(3,212) |
(5,162) |
1,950 |
|
Straight-line rent adjustment included in loss from equity-accounted investments |
112 |
— |
112 |
273 |
— |
273 |
|
Internal leasing costs |
(646) |
(620) |
(26) |
(1,336) |
(1,240) |
(96) |
|
Maintenance expenditures on a square footage basis |
(4,659) |
(4,024) |
(635) |
(9,244) |
(8,014) |
(1,230) |
|
AFFO as calculated based on REALPAC recommendations |
$ 43,551 |
$ 37,109 |
$ 6,442 |
$ 85,449 |
$ 75,888 |
$ 9,561 |
|
Basic weighted average Units (in 000’s) |
176,976 |
161,170 |
15,806 |
174,832 |
159,734 |
15,098 |
|
AFFO per Unit – basic |
$ 0.25 |
$ 0.23 |
$ 0.02 |
$ 0.49 |
$ 0.48 |
$ 0.01 |
|
AFFO payout ratio (%) |
90.5 % |
97.3 % |
(6.8) % |
92.0 % |
94.0 % |
(2.0) % |
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 June 30, 2022 and December 31, 2021 respectively, based on each property’s current use as a revenue-generating investment property. During the six months ended June 30, 2022, Crombie’s weighted average capitalization rate used in the determination of the fair value of its investment properties decreased 0.02% to 5.63% from 5.65%. 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% during the six months ended June 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 second quarter Management’s Discussion and Analysis, under “Investment Property Valuation” in the “Use of Estimates and Judgments” section.
|
June 30, |
December 31, |
||
|
Fixed rate mortgages |
$ 983,788 |
$ 1,073,895 |
|
|
Senior unsecured notes |
1,125,000 |
1,125,000 |
|
|
Revolving credit facility |
2,525 |
9,220 |
|
|
Joint operation credit facility |
10,089 |
9,904 |
|
|
Bilateral credit facility |
80,000 |
10,000 |
|
|
Debt held in joint ventures, at Crombie’s share (2) (3) |
261,236 |
246,308 |
|
|
Lease liabilities |
35,025 |
35,352 |
|
|
Total debt outstanding |
2,497,663 |
2,509,679 |
|
|
Less: Applicable fair value debt adjustment |
— |
(53) |
|
|
Adjusted debt |
$ 2,497,663 |
$ 2,509,626 |
|
|
Investment properties, fair value |
$ 5,273,000 |
$ 5,026,000 |
|
|
Investment properties held in joint ventures, fair value, at Crombie’s share (3) |
445,500 |
387,000 |
|
|
Other assets, cost (4) |
108,985 |
102,683 |
|
|
Other assets, cost, held in joint ventures, at Crombie’s share (3) (4) (5) |
25,744 |
18,370 |
|
|
Cash and cash equivalents |
1,522 |
3,915 |
|
|
Cash and cash equivalents held in joint ventures, at Crombie’s share (3) |
4,274 |
4,453 |
|
|
Deferred financing charges |
8,425 |
9,769 |
|
|
Interest rate subsidy |
— |
(53) |
|
|
Gross fair value |
$ 5,867,450 |
$ 5,552,137 |
|
|
Debt to gross fair value |
42.6 % |
45.2 % |
|
(1) |
The December 31, 2021 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 June 30, 2022, Crombie has completed a number of developments in joint ventures and, as a result, in March 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 and debt service coverage calculations now include Crombie’s share of finance costs – operations and debt repayments in joint ventures. Prior quarters have been restated to reflect this new methodology.
|
Three months ended |
||||||||
|
June 30, |
March 31, |
December 31, |
September 30, |
June 30, |
||||
|
Operating income attributable to Unitholders |
$ 28,424 |
$ 25,248 |
$ 78,730 |
$ 23,851 |
$ 19,605 |
|||
|
Amortization of tenant incentives |
5,690 |
5,564 |
5,249 |
5,187 |
4,840 |
|||
|
Gain on disposal of investment properties |
(4,863) |
— |
(42,762) |
(2,619) |
— |
|||
|
Gain on distribution from equity-accounted investments |
— |
(1,933) |
(15,525) |
— |
— |
|||
|
Impairment of investment properties |
— |
— |
1,300 |
1,239 |
— |
|||
|
Depreciation and amortization |
19,222 |
18,879 |
18,805 |
19,109 |
19,054 |
|||
|
Finance costs – operations |
20,762 |
20,745 |
22,639 |
23,070 |
23,618 |
|||
|
Loss (income) from equity-accounted investments |
1,627 |
1,539 |
685 |
923 |
562 |
|||
|
Property revenue in joint ventures, at Crombie’s share |
2,616 |
2,356 |
2,100 |
1,578 |
968 |
|||
|
Property operating expenses in joint ventures, at Crombie’s share |
(1,002) |
(903) |
(724) |
(695) |
(483) |
|||
|
General and administrative expenses in joint ventures, at Crombie’s share |
(21) |
(150) |
(32) |
(47) |
(110) |
|||
|
Taxes – current |
— |
— |
163 |
— |
2 |
|||
|
Adjusted EBITDA [1] |
$ 72,455 |
$ 71,345 |
$ 70,628 |
$ 71,596 |
$ 68,056 |
|||
|
Trailing 12 months adjusted EBITDA [3] |
$ 286,024 |
$ 281,626 |
$ 280,057 |
$ 276,643 |
$ 270,324 |
|||
|
Finance costs – operations |
$ 20,762 |
$ 20,745 |
$ 22,639 |
$ 23,070 |
$ 23,618 |
|||
|
Finance costs – operations in joint ventures, at Crombie’s share |
2,157 |
1,776 |
1,157 |
1,031 |
568 |
|||
|
Amortization of deferred financing charges |
(668) |
(688) |
(742) |
(759) |
(764) |
|||
|
Adjusted interest expense [2] |
$ 22,251 |
$ 21,833 |
$ 23,054 |
$ 23,342 |
$ 23,422 |
|||
|
Debt outstanding (see Debt to Gross Fair Value)(1) [4] |
$ 2,497,663 |
$ 2,451,504 |
$ 2,509,626 |
$ 2,651,936 |
$ 2,621,803 |
|||
|
Interest service coverage ratio {[1]/[2]} |
3.26x |
3.27x |
3.06x |
3.07x |
2.91x |
|||
|
Debt to trailing 12 months adjusted EBITDA {[4]/[3]} |
8.73x |
8.70x |
8.96x |
9.59x |
9.70x |
|||
|
(1) |
Includes debt held in joint ventures, at Crombie’s share. |
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 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 and costs of development and expected impact on NAV and AFFO growth for projects currently underway and planned into the future, 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.
Crombie Real Estate Investment Trust (“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 June 30, 2022, our portfolio contains 294 income-producing properties comprising approximately 18.5 million square feet, and a significant pipeline of future development projects. Learn more at www.crombie.ca.
SOURCE Crombie REIT