Crombie REIT reports first quarter results

NEW GLASGOW, NS, May 4, 2016 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX:CRR.UN) is pleased to report its financial results for the three months ended March 31, 2016.

First quarter 2016 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).

  • Portfolio fair value of $4.1 billion.
  • Funds From Operations ("FFO"):
    • FFO for the three months ended March 31, 2016 increased 6.1% to $37,961; or $0.29 per unit Diluted, an increase of $0.02 per unit from the three months ended March 31, 2015.
    • FFO payout ratio of 77.2% for the three months ended March 31, 2016 compared to 81.3% for the same period in 2015.
  • Adjusted Funds From Operations ("AFFO"):
    • AFFO for the three months ended March 31, 2016 increased 7.1% to $32,048; or $0.24 per unit Diluted, an increase of $0.01 per unit from the three months ended March 31, 2015.
    • AFFO payout ratio of 91.5% for the three months ended March 31, 2016 compared to 97.2% for the same period in 2015.
  • Same-asset property cash NOI for the three months ended March 31, 2016 increased 3.4% or $1,884 ($58,052 compared to $56,168 for the three months ended March 31, 2015).
  • Property revenue for the three months ended March 31, 2016 of $94,944, an increase of $2,443 or 2.6% over the three months ended March 31, 2015.
  • Occupancy, on a committed basis, was 93.3% at March 31, 2016 compared with 93.6% at December 31, 2015 and 94.1% at March 31, 2015.
  • Crombie's renewal activity during the three months ended March 31, 2016 included:
    • Renewals on 127,000 square feet of 2016 expiring leases at an average rate of $19.59 per square foot, an increase of 9.0% over the expiring lease rate.
  • New leases and expansions increased occupancy by 37,000 square feet at March 31, 2016 at an average first year rate of $23.01 per square foot. 131,000 square feet of space was committed at March 31, 2016 at an average first year rate of $12.07 per square foot.
  • Debt to gross book value (fair value basis) was 49.7% at March 31, 2016, compared to 52.2% at March 31, 2015.
  • Strong 2.72 times EBITDA interest coverage for the three months ended March 31, 2016. Weighted average interest rate on mortgages reduced to 4.59% from 4.77% at March 31, 2015.
  • Completed acquisition of one retail property totalling 21,000 square feet for a total purchase price of $5,500 before closing and transaction costs.
  • Completed disposition of 10 retail properties totalling 791,000 square feet for proceeds of approximately $143,400 before closing and transaction costs.

Donald E. Clow, FCPA, FCA, President and CEO commented: "We are pleased with the solid start to 2016. The improvements in a number of our key operating and financial metrics, as well as progress with capital recycling activities, indicate solid 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, 2016 are as follows:


Three months ended March 31,

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

2016



2015


Property revenue

$

94,944



$

92,501


Operating income attributable to Unitholders

$

43,318



$

16,702


Operating income attributable to Unitholders per unit - basic

$

0.33



$

0.13


Operating income attributable to Unitholders per unit - diluted

$

0.33



$

0.13


FFO – basic

$

37,961



$

35,772


FFO – diluted

$

39,673



$

37,824


FFO per unit – basic

$

0.29



$

0.27


FFO per unit – diluted

$

0.29



$

0.27


FFO payout ratio (%)


77.2

%



81.3

%

AFFO – basic

$

32,048



$

29,917


AFFO – diluted

$

33,016



$

31,225


AFFO per unit – basic

$

0.24



$

0.23


AFFO per unit – diluted

$

0.24



$

0.23


Distributions per unit

$

0.22



$

0.22


AFFO payout ratio (%)


91.5

%



97.2

%

Operating income attributable to Unitholders for the three months ended March 31, 2016 was impacted by the $26,260 gain on disposal of 10 retail properties during the quarter. The increase in FFO and AFFO for the three months ended March 31, 2016 compared to the same period in 2015 was primarily due to increased property cash NOI results, including the impact of property acquisitions completed during the fourth quarter of 2015 and decreased finance costs - operations; offset in part by property dispositions during the first quarter of 2016 and higher general and administrative expenses.

The table below presents a summary of financial performance for the three months ended March 31, 2016 compared to the same period in fiscal 2015.



Three months ended March 31,

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


2016




2015


Property revenue

$

94,944



$

92,501


Property operating expenses

30,641




30,183


Property NOI


64,303




62,318


NOI margin percentage


67.7

%



67.4

%

Other items:




Gain (loss) on disposal of investment properties


26,260




(2)



Depreciation and amortization


(16,450)




(16,522)



General and administrative expenses


(4,407)




(3,474)


Operating income before finance costs and taxes


69,706




42,320


Finance costs – operations


(24,365)




(25,418)


Operating income before taxes


45,341




16,902


Taxes – current


(23)





Taxes – deferred

(2,000)




(200)


Operating income attributable to Unitholders


43,318




16,702


Finance costs – distributions to Unitholders


(29,322)




(29,076)


Finance income (costs) – change in fair value of financial instruments


(34)




(268)


Increase (decrease) in net assets attributable to Unitholders

$

13,962



$

(12,642)


Operating income attributable to Unitholders per Unit, Basic

$

0.33



$

0.13


Operating income attributable to Unitholders per Unit, Diluted

$

0.33



$

0.13


Basic weighted average Units outstanding (in 000's)


131,569




130,489


Diluted weighted average Units outstanding (in 000's)


131,719




130,655


Distributions per Unit to Unitholders

$

0.22



$

0.22








Growth Highlights












(In thousands of CAD dollars)


GLA

Initial Purchase
Price

Occupancy

Key Tenants

Acquisitions in Q1














5700 50th Street

Beaumont

AB

21,000

$


5,500

100

%

Beaumont Home Hardware, Dollarama



Operating Highlights





Three months ended March 31,

(In thousands of CAD dollars)


2016


2015

Property NOI

$

64,303

$

62,318

Non-cash straight-line rent


(2,724)


(2,694)

Non-cash tenant incentive amortization


2,453


2,346

Property cash NOI


64,032


61,970

Acquisitions, dispositions and development property cash NOI


5,980


5,802

Same-asset property cash NOI

$

58,052

$

56,168

Same-asset property cash NOI is as follows:


Three months ended March 31,

(In thousands of CAD dollars)


2016



2015

Retail and Mixed Use

$

55,243


$

53,544

Office


2,809



2,624

Same-asset property cash NOI

$

58,052


$

56,168

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The $1,884 or +3.4% increase in same-asset property cash NOI for the three months ended March 31, 2016 is primarily the result of 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 several properties.

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)


2016



2015

Acquisitions and dispositions property cash NOI

$

3,548


$

2,791

Development property cash NOI


2,432



3,011

Total acquisitions, dispositions and development property cash NOI

$

5,980


$

5,802

Growth in acquisitions and dispositions property cash NOI reflects the property acquisition and disposition activity throughout 2016 and 2015 including the disposition of 10 retail properties in 2016 and the acquisition of five retail properties in 2015.

Capital Highlights





March 31,


2016


2015

Weighted Average Mortgage Term

6.5 years


7.3 years

Weighted Average Mortgage Interest Rate

4.59 %


4.77 %

Debt to Gross Book Value (Fair Value)

49.7 %


52.2 %

Interest Coverage

2.72 x


2.62 x

Debt Service Coverage

1.75 x


1.75 x

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 $300,000 (subsequently increased to $400,000), subject to available borrowing base, of which $8,706 was drawn as at March 31, 2016, and an additional $1,611 encumbered by outstanding letters of credit, resulting in significant available liquidity.

Debt to gross book value on a fair value basis is 49.7% (including convertible debentures) at March 31, 2016, compared to 52.2% at March 31, 2015.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2016, as a percentage of property revenue, increased by 0.8% from 3.8% to 4.6%, when compared to the same period in 2015. The increase is impacted by increased professional fees and the implementation of Crombie's Restricted Unit Plan in 2015 which recognizes a portion of long-term compensation over a vesting period and is also impacted by mark to market adjustments to the Units during the quarter.

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 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 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; (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 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 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, 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 deferred leasing costs, and the settlement of effective interest rate swap agreements.

For additional information on these non-GAAP measures see our Management's Discussion and Analysis for the period ended March 31, 2016.

Crombie's interim condensed consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2016 can be found on Crombie's web site at www.crombiereit.com or on the SEDAR web site 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 252 retail, mixed use and office properties across Canada, comprising approximately 17 million square feet with a strategy to own and operate a portfolio of high quality grocery and drug store anchored shopping centres and freestanding stores primarily in Canada's top 36 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 2015 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, 2016 results on a conference call to be held Thursday, May 5, 2016, 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 www.crombiereit.com. Replay will be available until midnight May 19, 2016 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 84556635, or on the Crombie website for 90 days after the meeting.

SOURCE Crombie REIT

For further information: Media Contact: Glenn Hynes, FCPA, FCA, Executive Vice President, Chief Financial Officer and Secretary, Crombie REIT, (902) 755-8100

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www.crombiereit.com

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