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07.11.2018 23:36:00
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Crombie REIT Announces Third Quarter 2018 Results
NEW GLASGOW, NS, Nov. 7, 2018 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) today announced results for its third quarter ended September 30, 2018. Management will host a conference call to discuss the results at 12:30pm (ET), November 8, 2018.
"Crombie's fundamentals remain strong with record occupancy, solid same asset NOI growth and robust AFFO growth excluding deferred finance cost write offs and severance costs incurred in the quarter. The transformation of our REIT, by adding complementary and valuable mixed use residential investments in Canada's major markets to one of the best grocery anchored retail portfolios in Canada, continues to advance with the first revenue from our five active major developments starting in less than 12 months." said Don Clow, President and CEO. "With this balanced execution, a solid balance sheet, ample liquidity and access to multiple sources of capital as well as one of the best teams in Canadian real estate, I am excited about Crombie's future and confident in our ability to create sustainable NAV and cash flow growth."
Full details on our results can be found at www.crombiereit.com and www.sedar.com.
FINANCIAL RESULTS | |||||||||
Crombie's key financial metrics for the three and nine months ended September 30, 2018 are as follows: | |||||||||
Three months ended September 30, | |||||||||
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) | 2018 | 2017 | Change | Change (%) | |||||
Property revenue | $ | 100,505 | $ | 102,424 | $ | (1,919) | (1.9)% | ||
Property operating expenses | 27,660 | 28,259 | 599 | 2.1% | |||||
Property net operating income ("NOI") | $ | 72,845 | $ | 74,165 | $ | (1,320) | (1.8)% | ||
Operating income attributable to unitholders | $ | 12,818 | $ | 21,321 | $ | (8,503) | (39.9)% | ||
Same-asset property cash NOI (1) | $ | 62,613 | $ | 61,442 | $ | 1,171 | 1.9% | ||
Funds from operations ("FFO") | |||||||||
Basic | $ | 45,355 | $ | 46,652 | $ | (1,297) | (2.8)% | ||
Diluted | $ | 46,019 | $ | 47,664 | $ | (1,645) | (3.5)% | ||
Per unit - Basic | $ | 0.30 | $ | 0.31 | $ | (0.01) | (3.8)% | ||
Per unit - Diluted | $ | 0.30 | $ | 0.31 | $ | (0.01) | (3.5)% | ||
Payout ratio (%) | 74.3% | 71.6% | (2.7)% | — | |||||
Adjusted funds from operations ("AFFO") | |||||||||
Basic | $ | 37,867 | $ | 38,713 | $ | (846) | (2.2)% | ||
Diluted | $ | 38,531 | $ | 39,725 | $ | (1,194) | (3.0)% | ||
Per unit - Basic | $ | 0.25 | $ | 0.26 | $ | (0.01) | (3.2)% | ||
Per unit - Diluted | $ | 0.25 | $ | 0.26 | $ | (0.01) | (3.0)% | ||
Payout ratio (%) | 89.0% | 86.2% | (2.8)% | — | |||||
(1) | Refer to Crombie's September 30, 2018 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO. |
During the quarter, operating income attributable to unitholders was impacted by:
- Accelerated depreciation of $8,930 related to the partial demolition of a retail property to facilitate redevelopment;
- Accelerated write off of $982 of deferred financing charges related to the early redemption of $74,400 of 5.25% Convertible Debentures, originally scheduled to mature March 31, 2021; and,
- Employee severance costs.
FFO and AFFO for the quarter were also negatively impacted by the deferred financing charges and severance costs.
During the quarter, Crombie issued $75,000 of 3.962% Series B Notes with the proceeds used to fund the redemption of the Convertible Debentures.
Nine months ended September 30, | ||||||||
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) | 2018 | 2017 | Change | Change (%) | ||||
Property revenue | $ | 310,353 | $ | 306,146 | $ | 4,207 | 1.4% | |
Property operating expenses | 90,489 | 89,447 | (1,042) | (1.2)% | ||||
Property NOI | $ | 219,864 | $ | 216,699 | $ | 3,165 | 1.5% | |
Operating income attributable to unitholders | $ | 87,296 | $ | 136,648 | $ | (49,352) | (36.1)% | |
Same-asset property cash NOI (1) | $ | 186,568 | $ | 182,204 | $ | 4,364 | 2.4% | |
FFO | ||||||||
Basic | $ | 137,544 | $ | 133,915 | $ | 3,629 | 2.7% | |
Diluted | $ | 140,150 | $ | 138,361 | $ | 1,789 | 1.3% | |
Per unit - Basic | $ | 0.91 | $ | 0.90 | $ | 0.01 | 1.4% | |
Per unit - Diluted | $ | 0.90 | $ | 0.89 | $ | 0.01 | 1.7% | |
Payout ratio (%) | 73.4% | 74.5% | 1.1% | — | ||||
AFFO | ||||||||
Basic | $ | 116,023 | $ | 110,377 | $ | 5,646 | 5.1% | |
Diluted | $ | 118,629 | $ | 113,298 | $ | 5,331 | 4.7% | |
Per unit - Basic | $ | 0.77 | $ | 0.74 | $ | 0.03 | 3.8% | |
Per unit - Diluted | $ | 0.76 | $ | 0.74 | $ | 0.02 | 3.7% | |
Payout ratio (%) | 87.1% | 90.4% | 3.3% | — | ||||
(1) | Refer to Crombie's September 30, 2018 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO. |
Year to date, Crombie's results have been impacted by the above noted events in the quarter as well as:
- Additional accelerated depreciation of $8,444 in the first quarter related to the partial demolition of two retail properties to facilitate redevelopment;
- Impairment charges of $8,000 taken in the second quarter on two retail properties;
- Gain on disposal of investment properties realized year to date, primarily in the second quarter; and,
- A tax reorganization completed in the second quarter of 2017 which resulted in a deferred tax recovery of $75,400 in 2017.
FFO and AFFO year to date were not impacted by these events.
OPERATING RESULTS | |||||
September 30, | June 30, | March 31, | December 31, | September 30, | |
Number of income-producing properties | 289 | 290 | 284 | 286 | 287 |
Gross leaseable area | 18,759,000 | 18,778,000 | 18,858,000 | 19,201,000 | 19,453,000 |
Committed occupancy | 96.2% | 96.1% | 95.7% | 95.2% | 94.7% |
Economic occupancy | 95.5% | 95.2% | 94.9% | 94.8% | 94.5% |
During the quarter, title transfer of Bronte Village was completed as part of the development agreement with Prince Developments, resulting in the property being removed from the above "Number of income-producing properties" and transferred to joint venture properties.
September 30, | June 30, | March 31, | December 31, | September 30, | ||||||
Investment properties, fair value | $ | 4,786,000 | $ | 4,862,000 | $ | 4,943,000 | $ | 4,944,000 | $ | 4,969,000 |
Unencumbered investment properties (1) | $ | 1,032,113 | $ | 1,092,650 | $ | 1,008,057 | $ | 953,776 | $ | 955,284 |
Available liquidity (2) | $ | 337,154 | $ | 358,859 | $ | 430,120 | $ | 438,113 | $ | 291,373 |
Debt to gross book value - fair value (4) | 50.5% | 49.9% | 49.6% | 50.3% | 50.2% | |||||
Weighted average interest rate (3) | 4.14% | 4.18% | 4.20% | 4.21% | 4.21% | |||||
Debt to trailing 12 months EBITDA (4) | 8.57x | 8.50x | 8.63x | 8.84x | 8.83x | |||||
Interest coverage ratio (4) | 2.97x | 2.92x | 2.88x | 2.92x | 2.93x | |||||
(1) | Refer to Crombie's September 30, 2018 MD&A liquidity and capital resources section. |
(2) | Refer to Crombie's September 30, 2018 MD&A highlights section. |
(3) | Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. |
(4) | Refer to Crombie's September 30, 2018 MD&A coverage ratio section. |
Operations and Leasing
Driven by occupancy improvements and rental rate increases, Crombie's same-asset property cash NOI was up 1.9% from the comparable quarter last year. During the quarter, Crombie increased economic occupancy to 95.5% and committed occupancy reached 96.2%, the highest in Crombie's history. Renewal activity during the three months ended September 30, 2018 included renewals on 140,000 square feet of 2018 expiring leases with an increase of 3.1% over the expiring lease rate and renewals on 116,000 square feet of future years expiring leases with an increase of 5.3% over the expiring lease rate. New leases and expansions increased occupancy by 231,000 square feet at September 30, 2018 at an average first year rate of $14.82 per square foot.
Development
Crombie intends to invest approximately $511 million in its mixed use active major developments, with an estimated yield on cost of 5.2-6.2% over the next four years, at Crombie's share. Upon completion, these projects will total 453,000 square feet of commercial GLA and 976,000 square feet of residential rental GLA. These five projects, totalling approximately 1.4 million square feet, are broken out geographically as follows: 520,000 in Oakville, 306,000 in Vancouver, 277,000 in Montreal, 165,000 in St. John's and 160,000 in Victoria. To date, these projects are on time and on budget, with the first deliveries of phase I at Belmont in Victoria expected in the fourth quarter of 2018. Crombie expects its capital outlay for the remaining estimated cost to complete of approximately $351 million will be incurred during the remainder of 2018 and the ensuing three calendar years.
Highlighted Subsequent Event
On October 31, 2018, Crombie issued $175 million Series E Senior Unsecured Notes maturing on January 31, 2025. The notes bear interest at a rate of 4.8%. Net proceeds from the offering were used for the repayment of the $175 million Series A Notes which matured on October 31, 2018. The Series E Notes are Crombie's first unsecured issuance greater than five years, improving its debt ladder and extending its weighted average term to maturity.
Conference Call Invitation
Crombie will provide additional details concerning its period ended September 30, 2018 results on a conference call to be held Thursday, November 8, 2018, beginning at 12:30 p.m. Eastern time. Accompanying the conference call will be a presentation which will be available on our 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 Crombie's website located at www.crombiereit.com on the Investor Relations section of our website. Replay will be available until midnight November 22, 2018 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 442611 #, or on the Crombie website for 90 days after the meeting.
Cautionary Statements
NOI, same-asset property cash NOI, FFO, AFFO, EBITDA, available liquidity and unencumbered investment properties 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, 2018.
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 2017 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 including the expected impact of such growth from our mixed use development pipeline, which could be impacted by 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;
(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; and,
(iii) expected timing and costs of development projects currently underway and planned into the future.
About Crombie
Crombie Real Estate Investment Trust ("Crombie") is an unincorporated, open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. Crombie is one of the country's leading national retail property landlords 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. More information about Crombie can be found at www.crombiereit.com.
SOURCE Crombie REIT
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