Crombie REIT reports strong first quarter results and $185 million of year to date acquisitions

May 09, 2013, 07:38 ET from Crombie REIT

STELLARTON, NS, May 9, 2013 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report strong results for the first quarter ended March 31, 2013.

First Quarter 2013 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted)

  • Strong 9.5% growth in Funds From Operations ("FFO") per unit for the three months ended March 31, 2013 ("Q1") as FFO per unit fully diluted ("FD") was $0.28 per unit compared to $0.25 per unit FD for the same period in 2012. Q1 FFO grew 33.3% over the same period in 2012 ($25,721 vs $19,301) with the FFO payout ratio of 79.5% compared to 88.9% for the same period in 2012.
  • Strong 10.1% growth in Q1 Adjusted Funds From Operations ("AFFO") per unit as AFFO per unit FD was $0.23 per unit compared to $0.21 per unit FD for the same period in 2012. AFFO grew 35.0% over the same period in 2012 ($21,606 vs $16,007) for the three months ended March 31, 2013 with the AFFO payout ratio of 94.6% compared to 107.2% for the same period in 2012.
  • $164 million in acquisitions of high quality grocery and drug store anchored or other retail properties from third parties, Sobeys and Empire during Q1

  • Acquisition of a grocery anchored retail property from Sobeys for $21 million subsequent to the quarter end, bringing year to date acquisitions to $185 million.

  • Replacement of $92 million of short term debt with $135 million of 11.3 year average term mortgages at a 4.22% average interest rate.
  • Portfolio fair value reaches $2.8 billion - one of the largest retail REITs in Canada.
  • Same Asset Cash Net Operating Income ("NOI") growth of 1.8% in Q1 over Q1 2012.
  • Property revenue of $71,006, an increase of $11,559 or 19.4% over the $59,447 for Q1 2012.
  • Solid occupancy on a committed basis of 93.5% compared with 92.7% at Q1 2012.
  • Crombie completed leasing activity on 243,000 square feet during the quarter, which represents approximately 20.7% of its 2013 expiring lease square footage.
  • Lease renewals during the quarter of 119,000 square feet at an average rate of $16.37 per square foot, an increase of 2.2% over the expiring lease rate. Lease renewals of 11,000 square feet for 2014 lease expiries at an increase of 8.6% over the expiring lease rate.
  • Weighted average lease term of 10.3 years and weighted average mortgage term of 7.7 years; amongst the longest and most defensive in the REIT industry.
  • Weighted average interest rate on mortgages reduced to 5.09% from 5.21% at December 31, 2012 and 5.59% at March 31, 2012. Strong 2.82 times interest coverage.
  • Debt to Gross Book Value (fair value basis) of 48.3% (53.0% on a cost basis).

Donald E. Clow, FCA, President and CEO commented: "We are pleased with our cash flow growth and operating performance, as well as with the solid growth of Crombie's high quality retail portfolio and platform across Canada during the first few months of 2013. With the third party acquisitions of four grocery and drug store anchored shopping centres in Alberta for $132 million and the acquisition of two grocery anchored plazas and two other retail properties in Atlantic Canada and Quebec for $53 million through our strategic relationship with Sobeys and Empire, we are leveraging our strengths and improving our geographic and tenant diversification. The fair value of Crombie's assets now exceeds $2.8 billion and our market capitalization exceeds $1.35 billion at the end of Q1."

Financial Highlights

Crombie's key financial metrics for the first quarter ended March 31, 2013 are as follows:

(In thousands of CAD dollars, except per unit amounts and
as otherwise noted)
Three Months Ended March 31,
  2013   2012
Property revenue $ 71,006 $ 59,447
Operating income attributable to Unitholders $ 12,959 $ 9,563
Basic and diluted operating income attributable to Unitholders per unit $ 0.14 $ 0.13
FFO $ 25,721 $ 19,301
FFO per unit - basic $ 0.28 $ 0.26
FFO per unit- diluted $ 0.28 $ 0.25
FFO payout ratio (%)   79.5%   88.9%
AFFO $ 21,606 $ 16,007
AFFO per unit - basic $ 0.24 $ 0.22
AFFO per unit - diluted $ 0.23 $ 0.21
Distributions per unit $ 0.22 $ 0.22
AFFO payout ratio (%)   94.6%   107.2%

The increase in FFO and AFFO for the quarter ended March 31, 2013 was primarily due to the significant acquisition activity during 2013 and 2012.

The table below presents a summary of financial performance for the quarter ended March 31, 2013 compared to the same period in fiscal 2012.

(In thousands of CAD dollars, except per unit amounts and as otherwise noted) Three Months Ended March 31,
  2013   2012
        (As Restated)
Property revenue $ 71,006 $ 59,447
Property operating expenses   26,818   23,502
Property NOI   44,188   35,945
NOI margin percentage   62.2%   60.5%
Other items:        
  Lease terminations   6   113
  Depreciation and amortization   (11,122)   (8,525)
  General and administrative expenses   (3,206)   (2,520)
Operating income before finance costs and taxes   29,866   25,013
Finance costs - operations   (16,807)   (15,750)
Operating income before taxes   13,059   9,263
Taxes - deferred   (100)   300
Operating income attributable to Unitholders   12,959   9,563
Finance costs - distributions to Unitholders   (20,438)    (17,167)
Finance costs - change in fair value of financial instruments   617   1,860
Decrease in net assets attributable to Unitholders $ (6,862) $ (5,744)

Growth Highlights

  GLA Initial
Purchase Price
Key Tenants
Acquisitions in Q1
  Clearwater Landing Fort McMurray AL 143,000 $ 62,757 100% Sobeys, The Brick, Mark's Work Warehouse, Sport Chek
  West Lethbridge Towne Centre Lethbridge AL 105,000   37,869 100% Safeway
  Namao Centre Edmonton AL 34,000   14,544 85% Shoppers Drug Mart
  West Highland Towne Centre Lethbridge AL 29,000   16,720 95% Shoppers Drug Mart
  Dartmouth Crossing Halifax NS 45,000   15,450 100% Empire Theatres
  Findlay Blvd.  Riverview NB 66,000   14,650 100% Sobeys 
  Riviere-du-Loup Riviere-du-Loup QC 9,000   2,455 100% Societe des alcools du Quebec
    431,000   164,445  
Acquisition subsequent to Q1            
  Beaumont Shopping Centre Beaumont AL 59,000   20,875 100% Sobeys
Completed to date in 2013  490,000 $ 185,320  

These acquisitions continue Crombie's growth strategy of acquiring high quality grocery or drug store anchored retail properties in the top 30 markets or stable or growing trade areas in Canada.

Operating Highlights

  Three Months Ended March 31,    
(In thousands of CAD dollars)   2013   2012   Variance
Property NOI $ 44,188 $ 35,945 $ 8,243
Non-cash straight-line rent   (1,359)   (1,021)   (338)
Non-cash tenant incentive amortization   1,970   1,513   457
Property cash NOI   44,799   36,437   8,362
Acquisition, disposition and redevelopment property cash NOI   8,497   792   7,705
Same-asset cash NOI $ 36,302 $ 35,645 $ 657

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The 1.8% increase in same-asset cash NOI for the quarter ended March 31, 2013 is primarily the result of increased average rent per square foot from leasing activity during the past 12 months, completed land use intensification development projects and improved recovery rates.

Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance.

Capital Highlights

  Three Months Ended March 31,
  2013 2012
Weighted Average Mortgage Term 7.7 years 7.7 years
Weighted Average Interest Rate 5.09% 5.59%
Debt to Gross Book Value (Fair value) 48.3% 47.6%
Debt to Gross Book Value (Cost) 53.0% 49.1%
Interest Coverage 2.82 2.49
Debt Service Coverage 1.86 1.71

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 $285,000, subject to available borrowing base of which $145,000 was drawn as at March 31, 2013, and an additional $11,329 encumbered by outstanding letters of credit, resulting in significant available liquidity. On February 22, 2013, Crombie increased the maximum principal amount of its revolving credit facility from $200,000 to $285,000 in conjunction with property acquisitions on that date.

Debt to Gross Book Value on a fair value basis is 48.3% (including convertible debentures) at March 31, 2013, compared to 47.6% at March 31, 2012.

General and Administrative Expenses

General and administrative expenses for the quarter ended March 31, 2013 as a percentage of property revenue, increased by 0.3% from 4.2% to 4.5% when compared to the same period in 2012.

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.  Crombie includes these measures because it believes certain investors use these measures as a means of assessing Crombie's financial performance. 

  • Property NOI is property revenue less property expenses.
  • Property Cash NOI is Property NOI adjusted to remove non-cash straight-line rent and tenant incentive amortization.
  • Debt is defined as bank loans plus investment property debt and convertible debentures.
  • Gross book value means, at any time, the book value of the assets of Crombie and its consolidated subsidiaries plus deferred financing charges, accumulated depreciation and amortization in respect of Crombie's properties (and related intangible assets) and cost of any below-market component of properties less (i) the amount of any receivable reflecting interest rate subsidies on any debt assumed by Crombie and (ii) the amount of deferred income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties. 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 intangible assets, 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 expenses and general and administrative expenses.
  • FFO is calculated as Increase (decrease) in net assets attributable to Unitholders (computed in accordance with IFRS), excluding gains (or losses) from sales of depreciable real estate and extraordinary items, plus depreciation and amortization expense, deferred income taxes, finance costs - distributions to Unitholders and after adjustments for equity accounted entities and non-controlling interests.
  • AFFO is defined as FFO adjusted for non-cash amounts affecting revenue, amortization of effective swap agreements, less maintenance capital expenditures, maintenance tenant incentives and deferred leasing costs, and the settlement of effective interest rate swap agreements.

About Crombie

Crombie is an open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. Crombie currently owns a portfolio of 176 retail and office properties across Canada, comprising approximately 14.5 million square feet with a strategy to own and operate a portfolio of primarily high quality grocery and drug store anchored shopping centers and freestanding stores in the top 30 markets or stable or growing trade areas in Canada.

This news release contains forward-looking statements that reflect the current expectations of management of Crombie about Crombie's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "may", "will", "estimate", "anticipate", "believe", "expect", "intend" and similar expressions have been used to identify these forward-looking statements. These statements reflect current beliefs and are based on information currently available to management of Crombie. Forward-looking statements necessarily involve known and unknown risks and uncertainties. A number of factors, including those discussed in the 2012 annual Management Discussion and Analysis under "Risk Management", could cause actual results, performance, achievements, prospects or opportunities to differ materially from the results discussed or implied in the forward-looking statements. These factors should be considered carefully and a reader should not place undue reliance on the forward-looking statements. There can be no assurance that the expectations of management of Crombie will prove to be correct. Readers are cautioned that such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Crombie can give no assurance that actual results will be consistent with these forward-looking statements.

Crombie's consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2013 can be found on Crombie's web site at or on the SEDAR web site for Canadian regulatory filings at

Conference Call Invitation

Crombie will provide additional details concerning its first quarter ended March 31, 2013 results on a conference call to be held Thursday, May 9, 2013, 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 web cast of the conference call by visiting Crombie's website located at Replay will be available until midnight May 23, 2013, by dialling (416) 849-0833 or (855) 859-2056 and entering pass code 45221702, or on the Crombie website for 90 days after the meeting.