NEW GLASGOW, NS, May 10, 2017 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report its financial results for the three months ended March 31, 2017.
First 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 March 31, 2017 increased 14.2% to $43,928; or $0.29 per unit diluted, unchanged from the three months ended March 31, 2016.
- FFO payout ratio of 75.4% for the three months ended March 31, 2017 compared to 76.2% for the same period in 2016.
- Adjusted Funds From Operations ("AFFO"):
- AFFO for the three months ended March 31, 2017 increased 14.9% to $36,132; or $0.24 per unit diluted, unchanged from the three months ended March 31, 2016.
- AFFO payout ratio of 91.6% for the three months ended March 31, 2017 compared to 93.3% for the same period in 2016.
- FFO and AFFO for the three months ended March 31, 2017 have been impacted by approximately $565 in general and administrative expenses for professional fees related to Crombie's proposed tax reorganization. Excluding this $565, increases in the three months ended March 31, 2017 would have been:
- FFO would have been $0.30 per unit diluted, an increase of $0.01 or +2.4% per unit from the three months ended March 31, 2016; and,
- AFFO would have been $0.25 per unit diluted, an increase of $0.01 or +3.3% per unit from the three months ended March 31, 2016.
- Adjusted Cash Flow From Operations ("ACFO"):
- ACFO for the three months ended March 31, 2017, increased 18.7% to $36,709 compared to the three months ended March 31, 2016.
- ACFO payout ratio of 90.2% for the three months ended March 31, 2017 compared to 94.8% for the same period in 2016.
- Same-asset property cash NOI for the three months ended March 31, 2017 increased by 2.3% or $1,385 ($60,767 compared to $59,382 for the three months ended March 31, 2016).
- Completed acquisition of one retail property totalling 50,000 square feet from Empire Company Limited ("Empire") for a total purchase price of $8,320 before closing and transaction costs.
- Property revenue for the three months ended March 31, 2017 of $102,131, an increase of $7,187 or 7.6% over the three months ended March 31, 2016.
- Occupancy, on a committed basis, was 94.6% at March 31, 2017 compared with 94.4% at December 31, 2016 and 93.3% at March 31, 2016.
- Crombie's renewal activity during the three months ended March 31, 2017 included:
- Renewals on 89,000 square feet of 2017 expiring leases at an average rate of $21.90 per square foot, an increase of 4.5% over the expiring lease rate.
- New leases and expansions increased occupancy by 42,000 square feet at March 31, 2017 at an average first year rate of $18.12 per square foot. 189,000 square feet of space was committed at March 31, 2017 at an average first year rate of $13.17 per square foot.
- Debt to gross book value (fair value basis) was 50.1% at March 31, 2017, compared to 49.7% at March 31, 2016.
- Interest service coverage for the three months ended March 31, 2017 was 2.84 times EBITDA. Weighted average interest rate on mortgages reduced to 4.39% from 4.59% at March 31, 2016.
Donald E. Clow, FCPA, FCA, President and CEO commented: "We are pleased with the solid start to 2017. We completed over $265 million of debt refinancing so far in 2017 which provides significant available liquidity and financial flexibility to fund growth going forward. Our key operating and financial metrics are solid which reflects continued traction in executing our strategy and progress in the continuous improvement of our portfolio."
Financial Highlights
Crombie's key financial metrics for the three months ended March 31, 2017 are as follows:
|
Three months ended March 31, |
||||||
|
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
2017 |
2016 |
||||
|
Property revenue |
$ |
102,131 |
$ |
94,944 |
||
|
Operating income attributable to Unitholders |
$ |
18,984 |
$ |
43,318 |
||
|
Operating income attributable to Unitholders per unit – basic |
$ |
0.13 |
$ |
0.33 |
||
|
Operating income attributable to Unitholders per unit – diluted |
$ |
0.13 |
$ |
0.33 |
||
|
FFO – basic (1) |
$ |
43,928 |
$ |
38,473 |
||
|
FFO – diluted (1) |
$ |
45,640 |
$ |
40,185 |
||
|
FFO per unit – basic (1) |
$ |
0.30 |
$ |
0.29 |
||
|
FFO per unit – diluted (1) |
$ |
0.29 |
$ |
0.29 |
||
|
FFO payout ratio (%) (1) |
75.4% |
76.2% |
||||
|
AFFO – basic (2) |
$ |
36,132 |
$ |
31,436 |
||
|
AFFO – diluted (2) |
$ |
37,100 |
$ |
32,404 |
||
|
AFFO per unit – basic (2) |
$ |
0.24 |
$ |
0.24 |
||
|
AFFO per unit – diluted (2) |
$ |
0.24 |
$ |
0.24 |
||
|
Distributions per unit |
$ |
0.22 |
$ |
0.22 |
||
|
AFFO payout ratio (%) (2) |
91.6% |
93.3% |
||||
|
ACFO |
$ |
36,709 |
$ |
30,934 |
||
|
ACFO payout ratio (%) |
90.2% |
94.8% |
||||
|
(1) FFO for 2016 has been restated to include add back of incremental internal leasing costs. |
|
(2) AFFO for 2016 is now calculated based on REALpac's February 2017 white paper. |
The table below presents a summary of financial performance for the three months ended March 31, 2017 compared to the same period in fiscal 2016.
|
Three months ended March 31, |
||||||
|
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) |
2017 |
2016 |
||||
|
Property revenue |
$ |
102,131 |
$ |
94,944 |
||
|
Property operating expenses |
31,395 |
30,641 |
||||
|
Property NOI |
70,736 |
64,303 |
||||
|
NOI margin percentage |
69.3% |
67.7% |
||||
|
Other items: |
||||||
|
Gain on disposal of investment properties |
— |
26,260 |
||||
|
Depreciation and amortization |
(19,796) |
(16,450) |
||||
|
General and administrative expenses |
(4,996) |
(4,407) |
||||
|
Finance costs – operations |
(25,960) |
(24,365) |
||||
|
Operating income before taxes |
19,984 |
45,341 |
||||
|
Taxes – current |
— |
(23) |
||||
|
Taxes – deferred |
(1,000) |
(2,000) |
||||
|
Operating income attributable to Unitholders |
18,984 |
43,318 |
||||
|
Finance costs – distributions to Unitholders |
(33,115) |
(29,322) |
||||
|
Finance income (costs) – change in fair value of financial instruments |
101 |
(34) |
||||
|
Increase (decrease) in net assets attributable to Unitholders |
$ |
(14,030) |
$ |
13,962 |
||
|
Operating income attributable to Unitholders per Unit, Basic |
$ |
0.13 |
$ |
0.33 |
||
|
Operating income attributable to Unitholders per Unit, Diluted |
$ |
0.13 |
$ |
0.33 |
||
|
Basic weighted average Units outstanding (in 000's) |
148,591 |
131,569 |
||||
|
Diluted weighted average Units outstanding (in 000's) |
148,730 |
131,719 |
||||
|
Distributions per Unit to Unitholders |
$ |
0.22 |
$ |
0.22 |
||
Growth Highlights
|
(In thousands of CAD dollars) |
GLA |
Initial Purchase |
Occupancy |
Key Tenants |
|
|
Acquisitions in Q1 |
|||||
|
50,000 |
$ |
8,320 |
100% |
Sobeys |
|
|
50,000 |
$ |
8,320 |
|||
Operating Highlights
|
Three months ended March 31, |
|||||
|
(In thousands of CAD dollars) |
2017 |
2016 |
|||
|
Property NOI |
$ |
70,736 |
$ |
64,303 |
|
|
Non-cash straight-line rent |
(3,394) |
(2,724) |
|||
|
Non-cash tenant incentive amortization |
3,542 |
2,453 |
|||
|
Property cash NOI |
70,884 |
64,032 |
|||
|
Acquisitions, dispositions and development property cash NOI |
10,117 |
4,650 |
|||
|
Same-asset property cash NOI |
$ |
60,767 |
$ |
59,382 |
|
Same-asset property cash NOI is as follows:
|
Three months ended March 31, |
|||||
|
(In thousands of CAD dollars) |
2017 |
2016 |
|||
|
Retail and Mixed Use |
$ |
58,058 |
$ |
56,573 |
|
|
Office |
2,709 |
2,809 |
|||
|
Same-asset property cash NOI |
$ |
60,767 |
$ |
59,382 |
|
Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The +2.3% increase in same-asset property cash NOI for the three months ended March 31, 2017 is primarily the result of: increased average rent per square foot from leasing activity; rental rate increases in existing leases; improved recovery rates; revenues from land use intensifications at several properties; and, the June, 2016 $58,823 investment in 10 Sobeys anchored properties which generated $1,029 in same-asset property cash NOI.
Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance.
Acquisitions, dispositions and development property cash NOI is as follows:
|
Three months ended March 31, |
|||||
|
(In thousands of CAD dollars) |
2017 |
2016 |
|||
|
Acquisitions and dispositions property cash NOI |
$ |
8,192 |
$ |
2,788 |
|
|
Development property cash NOI |
1,925 |
1,862 |
|||
|
Total acquisitions, dispositions and development property cash NOI |
$ |
10,117 |
$ |
4,650 |
|
Growth in acquisitions and dispositions property cash NOI reflects the property acquisition and disposition activity throughout 2016 including the acquisition of 41 properties and disposition of 19 retail properties in 2016.
Capital Highlights
|
March 31, |
|||
|
2017 |
2016 |
||
|
Weighted Average Mortgage Term |
5.8 years |
6.5 years |
|
|
Weighted Average Mortgage Interest Rate |
4.39% |
4.59% |
|
|
Debt to Gross Book Value (Fair Value) |
50.1% |
49.7% |
|
|
Interest Coverage |
2.84x |
2.72x |
|
|
Debt Service Coverage |
1.87x |
1.75x |
|
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 $31,766 was drawn as at March 31, 2017, and an additional $5,027 encumbered by outstanding letters of credit, resulting in significant available liquidity and a $100,000 unsecured floating rate bilateral credit facility, of which $20,000 was drawn at March 31, 2017.
Debt to gross book value on a fair value basis is 50.1% at March 31, 2017, compared to 49.7% at March 31, 2016.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2017, as a percentage of property revenue, increased by 0.3% from 4.6% to 4.9%, when compared to the same period in 2016. Crombie is proposing a tax reorganization which, if approved by unitholders, will result in the elimination of Crombie's most significant corporate subsidiary and related income tax liability. Costs related to the proposed reorganization of approximately $565 are included in professional fees for the three months ended March 31, 2017. Excluding these costs, general and administrative expenses represent 4.3% of property revenue.
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 months ended March 31, 2017.
Crombie's consolidated financial statements and management's discussion and analysis for the three months ended March 31, 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 281 income-producing properties across Canada, comprising approximately 19.1 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 quarter ended March 31, 2017 results on a conference call to be held Thursday, May 11, 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 May 25, 2017 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 3817182, or on the Crombie website for 90 days after the meeting.
SOURCE Crombie REIT