Crombie REIT Announces Fourth Quarter and Year-End Results
Operational excellence and financial strength underpinned by grocery-anchored portfolio drive solid 2023 results
"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
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 inVancouver, 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, maturingJanuary 1, 2031
(1) |
Consistent with the current year presentation, property revenue for the three months ended |
(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
Financial Results
Crombie's key financial metrics for the three months ended
|
Three months ended |
|||
(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
Same-asset property cash NOI increased by
The increase in FFO of
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
|
Year ended |
|||
(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
On an annual basis, same-asset property cash NOI increased by
The increase in FFO of
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
Operating Results
|
|
|
|
|
|
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. |
|
|
|
|
|
|
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) |
|
(2) |
Represents fair value of unencumbered properties. |
(3) |
Represents the undrawn portion on the credit facilities, excluding joint facilities with joint operation partners. |
(4) |
|
(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
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
Empire Transaction
During the fourth quarter of 2023, Crombie paid an initial right-to-develop fee of
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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
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:
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Three months ended |
|
|
Year ended |
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|
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 |
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 |
Year ended |
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|
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
The reconciliation of FFO for the three months and year ended
|
Three months ended |
Year ended |
||||
|
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 |
(2) |
Includes the fair value changes of Crombie's deferred unit plan. |
Adjusted Funds from Operations (AFFO)
Crombie follows the recommendations of REALPAC's
The reconciliation of AFFO for the three months and year ended
|
Three months ended |
Year ended |
||||
|
2023 |
2022 |
Variance |
2023 |
2022 |
Variance |
FFO as calculated based on REALPAC recommendations |
$ 54,590 |
$ 52,104 |
$ 2,486 |
|
|
$ 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 |
|
|
$ 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
|
2023 |
|
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.
|
|
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Three months ended |
||
|
|
|
|
|
|
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 |
(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
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
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