Operational excellence and financial strength underpinned
by grocery-anchored portfolio drive solid 2023 results
NEW
GLASGOW, NS, Feb. 21,
2024 /CNW/ - Crombie Real Estate Investment Trust
("Crombie") (TSX: CRR.UN) today announced results for its fourth
quarter and year ended December 31,
2023. Management will host a conference call to discuss the
results at 12:00 p.m. (EST),
February 22, 2024.
"Our operating and financial results for the quarter and year
continue to demonstrate our team's ability to drive growth and
create value. Our deliberate focus on operational excellence and
the strength of our grocery-anchored portfolio resulted in healthy
same-asset property cash NOI growth and steady occupancy," said
Mark Holly, President and Chief
Executive Officer. "During the year, we advanced several key
priorities including the commencement of a major development
project, the acceleration of entitlements, and unlocked a new
revenue platform from management and development services. We are
entering 2024 on solid footing, with a robust balance sheet, ample
liquidity, and access to multiple sources of capital. It is our
commitment to financial strength and flexibility, paired with
prudent capital allocation that positions us well for sustained
long-term value creation."
FOURTH QUARTER SUMMARY
(In thousands of Canadian dollars, except per Unit amounts and
square feet and as otherwise noted)
Operational Highlights
- Committed occupancy 96.5% and economic occupancy 96.0%; a 40
basis point decrease and a 120 basis point increase, respectively,
compared to 2022
- Renewals of 246,000 square feet at rents 8.4% above expiring
rental rates (an increase of 8.9% using the weighted average rent
during the renewal term)
- Crombie paid $20,700 to a
subsidiary of Empire in connection with a right-to-develop
agreement at our existing asset, Kingsway and Tyne in Vancouver, British Columbia. Commencing in
2024, Crombie will receive revenue from development services for
advancing entitlement work at the site.
Financial Highlights
- Property revenue(1) of $114,299, a 3.9% increase from $110,061 in the fourth quarter of 2022
- Revenue from management and development services of
$1,087 for the fourth quarter of
2023, a new revenue source in 2023
- Operating income attributable to Unitholders of $26,295, a decrease of 70.0% compared to the
fourth quarter of 2022
- FFO(2) of $0.30 per
Unit compared to $0.29 per Unit in
the fourth quarter of 2022
- AFFO(2) of $0.26 per
Unit compared to $0.25 per Unit in
the fourth quarter of 2022
- Same-asset property cash NOI(2) increased 4.0%
compared to the fourth quarter of 2022
- Debt to gross fair value(2)(3) of 43.0%, compared to
41.8% for the same period last year
- Debt to trailing 12 months adjusted EBITDA(2)(3) of
8.03x compared to 8.02x at the fourth quarter of 2022
- Available liquidity of $583,770,
a 0.1% increase from $583,003 in the
fourth quarter of 2022
- Crombie closed on a 5.28% mortgage loan of $72,000 for a retail-related industrial asset,
maturing January 1, 2031
(1)
|
Consistent with the
current year presentation, property revenue for the three months
ended December 31, 2022 has been increased by $2,122 to reflect a
change in the presentation of recoverable property taxes for
certain properties where a tenant pays the property taxes on
Crombie's behalf.
|
(2)
|
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, AFFO, same-asset property
cash NOI, debt to gross fair value, and debt to trailing 12
months adjusted EBITDA.
|
(3)
|
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 year ended
December 31, 2023 and Consolidated
Financial Statements and Notes for the years ended December 31, 2023, and December 31, 2022. Full details on our results
can be found at www.crombie.ca and www.sedarplus.ca.
Financial Results
Crombie's key financial metrics for the three months ended
December 31, 2023 are as follows:
|
Three months ended
December 31,
|
(In thousands of
Canadian dollars, except per Unit amounts and as otherwise
noted
|
2023
|
2022
|
Variance
|
%
|
Net property income
(1)
|
$
75,869
|
$
70,816
|
$
5,053
|
7.1 %
|
Operating income
attributable to Unitholders
|
$
26,295
|
$
87,718
|
$
(61,423)
|
(70.0) %
|
Same-asset property
cash NOI (1)
|
$
77,519
|
$
74,567
|
$
2,952
|
4.0 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
54,590
|
$
52,104
|
$
2,486
|
4.8 %
|
Per Unit -
Basic
|
$
0.30
|
$
0.29
|
$
0.01
|
3.4 %
|
Payout ratio
(1)
|
73.7 %
|
76.2 %
|
|
(2.5) %
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
46,111
|
$
45,061
|
$
1,050
|
2.3 %
|
Per Unit -
Basic
|
$
0.26
|
$
0.25
|
$
0.01
|
4.0 %
|
Payout ratio
(1)
|
87.3 %
|
88.1 %
|
|
(0.8) %
|
(1)
|
Net property income,
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 net property
income, same-asset property cash NOI, FFO, FFO payout ratio, AFFO,
and AFFO payout ratio.
|
Operating income attributable to Unitholders decreased by
$61,423, or 70.0%, primarily due to a
gain on disposal of investment properties of $62,584 in the fourth quarter of 2022. Higher
interest rates combined with higher average loan balances compared
to the same period in 2022 resulted in increased interest on
floating rate debt of $2,421, and
interest on senior unsecured notes increased by $1,800 from the issuance of Series K notes in the
first quarter of 2023 and the redemption of Series D notes in the
fourth quarter of 2022. Additionally, depreciation and amortization
increased by $1,096 due to completed
developments, acquisitions, and accelerated depreciation on
properties scheduled for redevelopment. Property revenue was
reduced by $1,031 related to
dispositions in 2022. The decrease in operating income was offset
in part by growth in property revenue of $2,257 from new developments, $1,597 from renewals and new leasing, and reduced
mortgage interest expense of $1,208
from mortgage repayments. The decrease in operating income was
further offset by revenue from management and development services,
earned from co-owners, related parties, and third parties, of
$1,087.
Same-asset property cash NOI increased by $2,952, or 4.0%, compared to the fourth quarter
of 2022 primarily due to renewals, new leasing, and lease
termination income.
The increase in FFO of $2,486 was
primarily due to growth in property revenue of $2,257 from new developments, $1,597 from renewals and new leasing, reduced
mortgage interest expense of $1,208
from mortgage repayments, and revenue from management and
development services of $1,087. This
was partially offset by increased interest on floating rate debt of
$2,421 resulting from higher interest
rates combined with higher average loan balances compared to the
same period in 2022, and higher interest on senior unsecured notes
of $1,800 from the issuance of Series
K notes in the first quarter of 2023 and the redemption of Series D
notes in the fourth quarter of 2022. The growth in FFO in the
quarter was further offset by reduced property revenue of
$1,031 related to dispositions in
2022.
The increase in AFFO was primarily due to the same factors
impacting FFO for the quarter.
Crombie's key financial metrics for the year ended December 31, 2023 are as follows:
|
Year ended December
31,
|
(In thousands of
Canadian dollars, except per Unit amounts and as otherwise
noted)
|
2023
|
2022
|
Variance
|
%
|
Net property income
(1)
|
$
287,412
|
$
281,818
|
$
5,594
|
2.0 %
|
Operating income
attributable to Unitholders
|
$
98,821
|
$
167,800
|
$
(68,979)
|
(41.1) %
|
Same-asset property
cash NOI (1)
|
$
287,010
|
$
278,679
|
$
8,331
|
3.0 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
210,003
|
$
203,737
|
$
6,266
|
3.1 %
|
Per Unit -
Basic
|
$
1.17
|
$
1.16
|
$
0.01
|
0.9 %
|
Payout ratio
(1)
|
76.2 %
|
77.5 %
|
|
(1.3) %
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
181,100
|
$
177,297
|
$
3,803
|
2.1 %
|
Per Unit -
Basic
|
$
1.01
|
$
1.01
|
$
—
|
— %
|
Payout ratio
(1)
|
88.4 %
|
89.0 %
|
|
(0.6) %
|
(1)
|
Net property income,
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 net property
income, same-asset property cash NOI, FFO, FFO payout ratio, AFFO,
and AFFO payout ratio.
|
Operating income attributable to Unitholders decreased by
$68,979, or 41.1%, on an annual basis
primarily due to lower gain on disposal of investment properties of
$80,216, higher general and
administrative expenses resulting from employee transition costs of
$7,386 in the second quarter of 2023,
increased interest on floating rate debt of $4,922 due to higher interest rates and higher
average loan balances compared to 2022, reduced property revenue of
$3,827 related to dispositions in
2022, and increased tenant incentive amortization of $3,527 primarily from modernizations and
accelerated amortization related to lease amendments as a result of
the assignment of subleases to Crombie from a subsidiary of Empire.
Also contributing to the variance year over year was a gain on
distribution from equity-accounted investments of $2,933 in 2022 as a result of cash distributions
received from 1600 Davie Limited Partnership in excess of our
investment in the joint venture. Interest on senior unsecured notes
increased by $2,515 from the issuance
of Series K notes in the first quarter of 2023 and the redemption
of Series D notes in the fourth quarter of 2022. The decrease in
operating income was offset in part by $10,400 in impairment of investment properties in
2022, and growth in income from equity-accounted investments of
$5,098, of which the main driver was
the sale of land at our Opal Ridge
joint venture in Dartmouth, Nova
Scotia in 2023. Further offsetting the decrease in operating
income was a reduction in mortgage interest of $4,977 from mortgage repayments and dispositions,
growth in property revenue from new developments of $4,864, renewals and new leasing of $3,966, higher property revenue of $2,003 from acquisitions, $1,394 from lease terminations, and $1,387 in supplemental rent from modernization
investments. Revenue from management and development services of
$3,430 also contributed to the
offset. A reduction in depreciation and amortization of
$1,001 was due to accelerated
depreciation recorded in the third quarter of 2022 on a property
that was demolished, net of depreciation on completed developments
and acquisitions in 2023.
On an annual basis, same-asset property cash NOI increased by
$8,331, or 3.0%, compared to the same
period in 2022, primarily due to renewals, new leasing, increased
lease termination income of $1,394,
and higher supplemental rent of $1,364 from modernizations and capital
improvements.
The increase in FFO of $6,266 was
primarily driven by growth in income from equity-accounted
investments of $5,098, of which the
main driver was the sale of land at our Opal Ridge joint venture in Dartmouth, Nova Scotia in 2023, and a
reduction in mortgage interest of $4,977 from mortgage repayments and dispositions.
Growth in property revenue from new developments of $4,864, renewals and new leasing of $3,966, higher property revenue of $2,003 from acquisitions, $1,394 from lease terminations, and $1,387 in supplemental rent from modernization
investments further contributed to the increase in FFO.
Additionally, revenue from management and development services
increased FFO by $3,430. FFO growth
was offset in part by higher general and administrative expenses
resulting from employee transition costs of $7,386 in the second quarter of 2023, increased
interest on floating rate debt of $4,922 due to higher interest rates and higher
average loan balances compared to 2022, and reduced property
revenue of $3,827 related to
dispositions in 2022. Further offsetting the increase in FFO year
over year was an increase in interest on senior unsecured notes of
$2,515 from the issuance of Series K
notes in the first quarter of 2023 and the redemption of Series D
notes in the fourth quarter of 2022. FFO excluding employee
transition costs of $7,386 was
$217,389 or $1.21 per Unit.
The improvement in AFFO, on an annual basis, was driven
primarily by the same factors impacting FFO. Additionally, it was
offset in part by the increase in the maintenance expenditure
charge for 2023, from $1.00 to
$1.10 per square foot of weighted
average GLA, an increased charge of $1,887 for the period. AFFO excluding employee
transition costs of $7,386 was
$188,486 or $1.05 per Unit.
Operating Results
|
December 31,
2023
|
September 30,
2023
|
June
30,
2023
|
March
31, 2023
|
December 31,
2022
|
Number of investment
properties (1)
|
294
|
294
|
293
|
291
|
289
|
Gross leasable area
(2)
|
18,681,000
|
18,652,000
|
18,625,000
|
18,550,000
|
18,445,000
|
Economic occupancy
(3)
|
96.0 %
|
96.0 %
|
95.9 %
|
94.5 %
|
94.8 %
|
Committed occupancy
(4)
|
96.5 %
|
96.4 %
|
96.4 %
|
96.7 %
|
96.9 %
|
(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.
|
|
December 31,
2023
|
September 30,
2023
|
June 30,
2023
|
March 31,
2023
|
December 31,
2022
|
Investment properties,
fair value
|
$ 5,096,000
|
$ 5,170,000
|
$ 5,123,000
|
$ 5,097,000
|
$ 5,050,000
|
Investment properties
held in joint ventures, fair value, at Crombie's share
(1)
|
$
472,500
|
$
442,000
|
$
447,500
|
$
447,000
|
$
454,000
|
Unencumbered investment
properties (2)
|
$ 2,607,934
|
$ 2,581,919
|
$ 2,488,359
|
$ 2,291,396
|
$ 2,154,468
|
Available liquidity
(3)
|
$
583,770
|
$
564,903
|
$
614,072
|
$
735,877
|
$
583,003
|
Debt to gross book
value - cost basis (4)
|
45.2 %
|
45.3 %
|
45.2 %
|
44.9 %
|
44.6 %
|
Debt to gross fair
value (5)(6)
|
43.0 %
|
42.4 %
|
42.3 %
|
41.9 %
|
41.8 %
|
Weighted average
interest rate (7)
|
4.1 %
|
4.0 %
|
4.0 %
|
4.0 %
|
3.8 %
|
Debt to trailing 12
months adjusted EBITDA (5)(6)
|
8.03x
|
8.13x
|
8.17x
|
7.96x
|
8.02x
|
Interest coverage ratio
(5)(6)
|
3.06x
|
3.41x
|
2.95x
|
3.24x
|
3.26x
|
(1)
|
See Joint Ventures
section in the Management's Discussion and Analysis.
|
(2)
|
Represents fair value
of unencumbered properties.
|
(3)
|
Represents the undrawn
portion on the credit facilities, excluding joint facilities with
joint operation partners.
|
(4)
|
See Capital Management
note in the Financial Statements.
|
(5)
|
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.
|
(6)
|
See Debt Metrics
section in the Management's Discussion and Analysis.
|
(7)
|
Calculated based on
interest rates for all outstanding fixed rate debt.
|
Operations and Leasing
Crombie achieved economic occupancy of 96.0% and committed
occupancy of 96.5%. In the fourth quarter, Crombie renewed 246,000
square feet with an increase of 8.4% over expiring rents. New
leases increased occupancy by 477,000 square feet at an average
first year rate of $22.71 per square
foot.
Development
Crombie segregates its development pipeline by expected timing.
Near-term projects indicate that a decision to commit financially
is expected to be determined within the next two years. Currently,
Crombie has three developments classified as near-term projects.
Upon completion, these projects will total approximately 960,000
square feet of residential GLA (1,461 residential units) and
105,000 square feet of commercial GLA. The geographical breakdown
of GLA in square feet is as follows: 731,000 in Vancouver; 145,000 in Victoria and 189,000 in Halifax.
Empire Transaction
During the fourth quarter of 2023, Crombie paid an initial
right-to-develop fee of $20,700 to a
subsidiary of Empire, which resulted in the existing lease at
Kingsway and Tyne, in Vancouver, British
Columbia, being modified. The right to develop will allow
Crombie flexibility as it works through the entitlement and future
development of this site, in which a subsidiary of Empire is
currently a tenant.
Highlighted Subsequent Event
On February 20, 2024, Crombie and
its joint venture partner closed on a 4.35% mortgage loan of
$243,457 for a residential property
held within an equity-accounted investment, maturing on
June 1, 2029. Installments of
principal and interest are to be paid on the first day of each
month. Upon receipt of proceeds, the joint venture intends to repay
the outstanding construction facility and partnership loans
totalling $233,664 with a weighted
average interest rate of 7.10% as of December 31, 2023.
Conference Call Invitation
Crombie will provide additional details concerning its period
ended December 31, 2023 results on a
conference call to be held Thursday, February 22, 2024,
beginning at 12:00 p.m. (EST).
Accompanying the conference call will be a presentation that will
be available on the Investors section of Crombie's website. To join
this conference call, you may dial (416) 764-8688 or (888)
390-0546. To join the conference call without operator assistance,
you may register and enter your phone number at
https://emportal.ink/41LVXMg to receive an instant automated call
back. You may also listen to a live audio webcast of the conference
call by visiting the Investors section of Crombie's website at
www.crombie.ca.
Replay will be available until midnight February 29, 2024 by dialing (416) 764-8677 or
(888) 390-0541 and entering passcode 701516 #, or on the Crombie
website for 90 days following the conference call.
Cautionary Statements and Non-GAAP Measures
Net property income, same-asset property cash NOI, 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
months and year ended December 31,
2023.
The reconciliations for each non-GAAP measure included in this
press release are outlined as follows:
Net Property Income
Management uses net property income as a measure of performance
of properties period-over-period.
Net property income, which excludes revenue from management and
development services and certain expenses such as interest expense
and indirect operating expenses, is as follows:
|
Three months ended
December 31,
|
|
|
Year ended December
31,
|
|
2023
|
|
2022
|
(1)
|
Variance
|
|
|
2023
|
|
2022
|
(1)
|
Variance
|
Property
revenue
|
$
114,299
|
|
$
110,061
|
|
$ 4,238
|
|
|
$
440,939
|
|
$
428,079
|
|
$
12,860
|
Property operating
expenses
|
(38,430)
|
|
(39,245)
|
|
815
|
|
|
(153,527)
|
|
(146,261)
|
|
(7,266)
|
Net property
income
|
$
75,869
|
|
$
70,816
|
|
$ 5,053
|
|
|
$
287,412
|
|
$
281,818
|
|
$ 5,594
|
(1)
|
Consistent with the
current year presentation, property revenue and property
operating expenses for the three months and year ended December 31,
2022 have been increased by $2,122 and $8,488, respectively, to
reflect a change in the presentation of recoverable property taxes
for certain properties where a tenant pays the property taxes on
Crombie's behalf.
|
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, and those for which
planning activities are 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
December 31,
|
Year ended December
31,
|
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Net property
income
|
$
75,869
|
$
70,816
|
$
5,053
|
$ 287,412
|
$ 281,818
|
$
5,594
|
Non-cash straight-line
rent
|
(2,498)
|
(1,648)
|
(850)
|
(5,415)
|
(5,432)
|
17
|
Non-cash tenant
incentive amortization (1)
|
6,529
|
5,940
|
589
|
26,516
|
22,989
|
3,527
|
Property cash
NOI
|
79,900
|
75,108
|
4,792
|
308,513
|
299,375
|
9,138
|
Acquisitions and
dispositions property cash NOI
|
530
|
502
|
28
|
2,596
|
4,836
|
(2,240)
|
Development property
cash NOI
|
1,851
|
39
|
1,812
|
18,907
|
15,860
|
3,047
|
Acquisitions,
dispositions, and development property cash NOI
|
2,381
|
541
|
1,840
|
21,503
|
20,696
|
807
|
Same-asset property
cash NOI
|
$
77,519
|
$
74,567
|
$
2,952
|
$ 287,010
|
$ 278,679
|
$
8,331
|
(1) Refer to
"Amortization of Tenant Incentives" in the Management's Discussion
and Analysis for a breakdown of tenant incentive
amortization.
|
Funds from Operations (FFO)
Crombie follows the recommendations of the January 2022 guidance of the Real Property
Association of Canada ("REALPAC")
in calculating FFO.
The reconciliation of FFO for the three months and year ended
December 31, 2023 and 2022 is as
follows:
|
Three months ended
December 31,
|
Year ended December
31,
|
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
Increase (decrease) in
net assets attributable to Unitholders
|
$
(15,342)
|
$
46,317
|
$
(61,659)
|
$
(59,278)
|
$
12,283
|
$
(71,561)
|
Add
(deduct):
|
|
|
|
|
|
|
Amortization of tenant
incentives
|
6,529
|
5,940
|
589
|
26,516
|
22,989
|
3,527
|
Gain on disposal of
investment properties(1)
|
—
|
(62,584)
|
62,584
|
(588)
|
(80,804)
|
80,216
|
Gain on distribution
from equity-accounted investments
|
—
|
—
|
—
|
—
|
(2,933)
|
2,933
|
Impairment of
investment properties
|
—
|
—
|
—
|
—
|
10,400
|
(10,400)
|
Depreciation and
amortization of investment properties
|
19,715
|
18,630
|
1,085
|
77,352
|
78,383
|
(1,031)
|
Adjustments for
equity-accounted investments
|
1,259
|
1,426
|
(167)
|
4,774
|
4,697
|
77
|
Principal payments on
right-of-use assets
|
155
|
59
|
96
|
330
|
230
|
100
|
Internal leasing
costs
|
637
|
915
|
(278)
|
2,798
|
2,975
|
(177)
|
Finance costs -
distributions to Unitholders
|
40,237
|
39,697
|
540
|
160,010
|
157,840
|
2,170
|
Finance costs (income)
- change in fair value of financial instruments
(2)
|
1,400
|
1,704
|
(304)
|
(1,911)
|
(2,323)
|
412
|
FFO as calculated based
on REALPAC recommendations
|
$
54,590
|
$
52,104
|
$ 2,486
|
$
210,003
|
$
203,737
|
$ 6,266
|
Basic weighted average
Units (in 000's)
|
180,728
|
178,095
|
2,633
|
179,684
|
176,325
|
3,359
|
FFO per Unit -
basic
|
$ 0.30
|
$ 0.29
|
$ 0.01
|
$ 1.17
|
$ 1.16
|
$ 0.01
|
FFO payout ratio
(%)
|
73.7 %
|
76.2 %
|
(2.5) %
|
76.2 %
|
77.5 %
|
(1.3) %
|
(1)
|
The gain on disposal of
investment properties for the year ended December 31, 2023 is a
deferred gain on the sale of land sold to a joint venture in the
third quarter of 2022, which was subsequently sold to a third party
in 2023.
|
(2)
|
Includes the fair value
changes of Crombie's deferred unit plan.
|
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
press release and Management's Discussion and Analysis.
The reconciliation of AFFO for the three months and year ended
December 31, 2023 and 2022 is as
follows:
|
Three months ended
December 31,
|
Year ended December
31,
|
|
2023
|
2022
|
Variance
|
2023
|
2022
|
Variance
|
FFO as calculated based
on REALPAC recommendations
|
$
54,590
|
$
52,104
|
$
2,486
|
$ 210,003
|
$ 203,737
|
$
6,266
|
Add
(deduct):
|
|
|
|
|
|
|
Straight-line rent
adjustment
|
(2,498)
|
(1,648)
|
(850)
|
(5,415)
|
(5,432)
|
17
|
Straight-line rent
adjustment included in income (loss) from equity-accounted
investments
|
(98)
|
140
|
(238)
|
67
|
493
|
(426)
|
Internal leasing
costs
|
(637)
|
(915)
|
278
|
(2,798)
|
(2,975)
|
177
|
Maintenance
expenditures on a square footage basis
|
(5,246)
|
(4,620)
|
(626)
|
(20,757)
|
(18,526)
|
(2,231)
|
AFFO as calculated
based on REALPAC recommendations
|
$
46,111
|
$
45,061
|
$
1,050
|
$ 181,100
|
$ 177,297
|
$
3,803
|
Basic weighted average
Units (in 000's)
|
180,728
|
178,095
|
2,633
|
179,684
|
176,325
|
3,359
|
AFFO per Unit -
basic
|
$ 0.26
|
$ 0.25
|
$ 0.01
|
$ 1.01
|
$ 1.01
|
$
—
|
AFFO payout ratio
(%)
|
87.3 %
|
88.1 %
|
(0.8) %
|
88.4 %
|
89.0 %
|
(0.6) %
|
Debt Metrics
When calculating debt to gross fair value, debt is defined as
obligations for borrowed money, including obligations incurred in
connection with acquisitions, excluding 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
equity-accounted 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 December 31,
2023 and December 31, 2022,
respectively, based on each property's current use as a
revenue-generating investment property. Additionally, as properties
are prepared for redevelopment, Crombie considers each property's
progress through entitlement in determining the fair value of a
property. As at December 31, 2023,
Crombie's weighted average capitalization rate used in the
determination of the fair value of its investment properties was
6.12%, an increase of 18 basis points from December 31, 2022. 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 3.67% as at December 31,
2023, an increase of 20 basis points from December 31, 2022. For an explanation of how
Crombie determines capitalization rates, see the "Other
Disclosures" section of the Management's Discussion and Analysis,
under "Investment Property Valuation" in the "Use of Estimates and
Judgments" section.
|
December 31,
2023
|
|
December 31,
2022
|
Fixed rate
mortgages
|
$
838,957
|
|
$
918,552
|
Senior unsecured
notes
|
1,175,000
|
|
975,000
|
Unsecured non-revolving
credit facility
|
93,297
|
|
150,000
|
Revolving credit
facility
|
47,591
|
|
—
|
Joint operation credit
facility
|
3,503
|
|
10,264
|
Debt held in joint
ventures, at Crombie's share (1) (2)
|
274,115
|
|
270,642
|
Lease
liabilities
|
36,292
|
|
35,000
|
Adjusted
debt
|
$
2,468,755
|
|
$
2,359,458
|
|
|
|
|
Investment properties,
fair value
|
$
5,096,000
|
|
$
5,050,000
|
Investment properties
held in joint ventures, fair value, at Crombie's share
(2)
|
472,500
|
|
454,000
|
Other assets, cost
(3)
|
136,081
|
|
99,728
|
Other assets, cost,
held in joint ventures, at Crombie's share (2) (3)
(4)
|
26,214
|
|
26,974
|
Cash and cash
equivalents
|
—
|
|
6,117
|
Cash and cash
equivalents held in joint ventures, at Crombie's share
(2)
|
3,004
|
|
2,487
|
Deferred financing
charges
|
7,560
|
|
7,843
|
Gross fair
value
|
$
5,741,359
|
|
$
5,647,149
|
Debt to gross fair
value
|
43.0 %
|
|
41.8 %
|
(1)
|
Includes Crombie's
share of fixed and floating rate mortgages, construction loans,
revolving credit facility, and lease liabilities held in joint
ventures.
|
(2)
|
See the "Joint
Ventures" section in the Management's Discussion and
Analysis.
|
(3)
|
Excludes tenant
incentives, accumulated amortization, and accrued straight-line
rent receivable.
|
(4)
|
Includes deferred
financing charges.
|
The following table presents a reconciliation of operating
income attributable to Unitholders 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.
|
|
|
Three months
ended
|
|
December 31,
2023
|
September 30,
2023
|
June 30,
2023
|
March 31,
2023
|
December 31,
2022
|
Operating income
attributable to Unitholders
|
$
26,295
|
$
27,796
|
$
19,557
|
$
25,173
|
$
87,718
|
Amortization of tenant
incentives
|
6,529
|
7,838
|
5,357
|
6,792
|
5,940
|
Gain on disposal of
investment properties(1)
|
—
|
(477)
|
—
|
(111)
|
(62,584)
|
Gain on distribution
from equity-accounted investments
|
—
|
—
|
—
|
—
|
—
|
Impairment of
investment properties
|
—
|
—
|
—
|
—
|
—
|
Depreciation and
amortization
|
20,087
|
19,834
|
19,494
|
19,420
|
18,991
|
Finance costs -
operations
|
23,839
|
20,665
|
21,000
|
20,764
|
20,623
|
(Income) loss from
equity-accounted investments
|
980
|
(876)
|
1,425
|
(1,673)
|
1
|
Property revenue in
joint ventures, at Crombie's share
|
7,222
|
9,691
|
4,144
|
11,269
|
7,271
|
Property operating
expenses in joint ventures, at Crombie's share
|
(3,684)
|
(4,270)
|
(1,231)
|
(5,170)
|
(3,022)
|
General and
administrative expenses in joint ventures, at Crombie's
share
|
(23)
|
(145)
|
(54)
|
(107)
|
(77)
|
Taxes -
current
|
6
|
—
|
—
|
—
|
4
|
Adjusted EBITDA
[1]
|
$
81,251
|
$
80,056
|
$
69,692
|
$
76,357
|
$
74,865
|
Trailing 12 months
adjusted EBITDA [3]
|
$
307,356
|
$
300,970
|
$
296,508
|
$
299,271
|
$
294,259
|
|
|
|
|
|
|
Finance costs -
operations
|
$
23,839
|
$
20,665
|
$
21,000
|
$
20,764
|
$
20,623
|
Finance costs -
operations in joint ventures, at Crombie's share
|
3,279
|
3,428
|
3,293
|
3,430
|
2,961
|
Amortization of
deferred financing charges
|
(588)
|
(604)
|
(641)
|
(622)
|
(654)
|
Adjusted interest
expense [2]
|
$
26,530
|
$
23,489
|
$
23,652
|
$
23,572
|
$
22,930
|
|
|
|
|
|
|
Debt outstanding (see
Debt to Gross Fair Value) (2) [4]
|
$
2,468,755
|
$
2,448,384
|
$
2,421,240
|
$
2,383,231
|
$
2,359,458
|
|
|
|
|
|
|
Interest coverage ratio
{[1]/[2]}
|
3.06x
|
3.41x
|
2.95x
|
3.24x
|
3.26x
|
Debt to trailing 12
months adjusted EBITDA {[4]/[3]}
|
8.03x
|
8.13x
|
8.17x
|
7.96x
|
8.02x
|
(1)
|
The gain on disposal of
investment properties for the year ended December 31, 2023 is a
deferred gain on the sale of land sold to a joint venture in the
third quarter of 2022, which was subsequently sold to a third party
in 2023.
|
(2)
|
Includes debt held in
joint ventures, at Crombie's share.
|
This press 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 2023 annual Management's
Discussion and Analysis under "Risk Management" and the Annual
Information Form for the year ended December
31, 2022 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 of
development, which may be impacted by ordinary real estate market
cycles, the availability of labour, ability to attract tenants,
estimated GLA, tenant rents, building sizes, 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.
About Crombie REIT
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 assets,
Crombie's portfolio primarily includes grocery-anchored retail,
retail-related industrial, and mixed-use residential properties. As
at December 31, 2023, our portfolio
contains 304 properties comprising approximately 19.2 million
square feet, inclusive of joint ventures at Crombie's share, and a
significant pipeline of future development projects. Learn more at
www.crombie.ca.
SOURCE Crombie REIT