Solid first quarter, strong balance sheet, achieved stabilized occupancy at
NEW GLASGOW, NS,
"Crombie's unwavering focus on operational excellence and financial strength, once again, guided us to deliver solid and consistent quarterly results," said
FIRST QUARTER SUMMARY
(In thousands of Canadian dollars, except per Unit amounts and square feet and as otherwise noted)
Operational Highlights
- Committed occupancy 96.2% and economic occupancy 95.7%; a 50 basis point decrease and a 120 basis point increase, respectively, compared to the first quarter of 2023
- Renewals of 249,000 square feet at rents 10.1% above expiring rental rates (an increase of 10.6% using the weighted average rent during the renewal term)
The Village at Bronte Harbour reached occupancy stabilization in the first quarter of 2024, ending the quarter with committed occupancy of 93.3%
Financial Highlights
- Completed offering of
$200,000 Series L senior unsecured notes maturingMarch 29, 2030 , bearing an interest rate of 5.14% per annum - Closed on a 4.35% mortgage loan of
$243,457 , with our joint venture partner, for a residential property held within an equity-accounted investment maturingJune 1, 2029
Three months ended | ||||||
2024 | 2023 | Variance | % | |||
Property revenue (1) | $ 118,609 | $ 112,449 | $ 6,160 | 5.5 % | ||
Revenue from management and development services | $ 749 | $ — | $ 749 | 100.0 % | ||
Operating income attributable to Unitholders | $ 26,205 | $ 25,173 | $ 1,032 | 4.1 % | ||
FFO (2) per Unit - basic | $ 0.30 | $ 0.30 | $ — | — % | ||
AFFO (2) per Unit - basic | $ 0.26 | $ 0.26 | $ — | — % | ||
Same-asset property cash NOI (2) | $ 76,532 | $ 74,141 | $ 2,391 | 3.2 % | ||
Available Liquidity | $ 736,990 | $ 735,877 | $ 1,113 | 0.2 % | ||
Debt to gross fair value (2)(3) | 42.9 % | 41.9 % | 1.0 % | |||
Debt to trailing 12 months adjusted EBITDA (2)(3) | 7.97x | 7.96x | 0.01x | 0.1 % |
(1) | 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 quarter ended
Operational Metrics
Number of investment properties (1) | 295 | 291 |
Gross leasable area (2) | 18,709,000 | 18,550,000 |
Economic occupancy (3) | 95.7 % | 94.5 % |
Committed occupancy (4) | 96.2 % | 96.7 % |
Total properties (5) | 304 | 303 |
Gross leasable area inclusive of joint ventures | 19,239,000 | 19,080,000 |
(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. |
(5) | Inclusive of properties under development and properties owned in joint ventures. |
Committed occupancy of 96.2% included 94,000 square feet of space committed in the quarter. Approximately 67,000 square feet of committed space was in VECTOM and Major Markets, including 31,000 square feet in
New leases increased occupancy by 64,000 square feet at
Renewal activity for the first quarter of 2024 consisted of 249,000 square feet with an increase of 10.1% over expiring rental rates. The primary driver of renewal growth in the quarter was 228,000 square feet of retail renewals with an increase of 11.6% over expiring rental rates. When comparing the expiring rental rates to the weighted average rental rate for the renewal term, Crombie achieved an increase of 10.6% for the three months ended
Financial Metrics
Three months ended | ||||
2024 | 2023 | Variance | % | |
Net property income (1) | $ 73,641 | $ 68,648 | $ 4,993 | 7.3 % |
Operating income attributable to Unitholders | $ 26,205 | $ 25,173 | $ 1,032 | 4.1 % |
Same-asset property cash NOI (1) | $ 76,532 | $ 74,141 | $ 2,391 | 3.2 % |
Funds from operations ("FFO") (1) | ||||
Basic | $ 54,868 | $ 52,835 | $ 2,033 | 3.8 % |
Per Unit - Basic | $ 0.30 | $ 0.30 | $ — | — % |
Payout ratio (1) | 73.6 % | 75.3 % | (1.7) % | |
Adjusted funds from operations ("AFFO") (1) | ||||
Basic | $ 46,947 | $ 45,909 | $ 1,038 | 2.3 % |
Per Unit - Basic | $ 0.26 | $ 0.26 | $ — | — % |
Payout ratio (1) | 86.1 % | 86.6 % | (0.5) % |
(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. |
First Quarter 2024 Results
Operating income attributable to Unitholders
The increase in operating income in the quarter resulted mainly from growth in property revenue from recently completed developments, renewals, new leasing activity, lower interest expense on floating rate debt, revenue from management and development services, and increased capitalized interest. This was offset in part by higher interest expense on senior unsecured notes and a decrease in income from equity-accounted investments related to the sale of land within a joint venture in the first quarter of 2023.
Same-asset property cash NOI
The increase in same-asset property cash NOI for the quarter was primarily driven by increased property revenue from renewals and new leasing.
FFO
The increase in total FFO was driven primarily by higher property revenue from recently completed developments, renewals, and new leasing. Reduced interest expense on floating rate debt, revenue from management and development services, and higher capitalized interest further contributed to FFO growth. This was offset in part by an increase in interest expense on senior unsecured notes and a decrease in income from equity-accounted investments related to the sale of land within a joint venture in the first quarter of 2023.
AFFO
Total AFFO increased in the quarter primarily due to higher property revenue from recently completed developments, renewals, and new leasing, reduced interest expense on floating rate debt, revenue from management and development services, and higher capitalized interest. This was partially offset by increased interest expense on senior unsecured notes and decreased income from equity-accounted investments related to the sale of land within a joint venture in the first quarter of 2023.
Financial Condition Metrics
Unencumbered investment properties (1) | $ 2,771,000 | $ 2,608,000 | $ 2,291,000 |
Available liquidity (2) | $ 736,990 | $ 583,770 | $ 735,877 |
Debt to gross book value - cost basis (3) | 45.1 % | 45.2 % | 44.9 % |
Debt to gross fair value (4)(5) | 42.9 % | 43.0 % | 41.9 % |
Weighted average interest rate (6) | 4.2 % | 4.1 % | 4.0 % |
Debt to trailing 12 months adjusted EBITDA (4)(5) | 7.97x | 8.03x | 7.96x |
Interest coverage ratio (4)(5) | 3.23x | 3.06x | 3.24x |
(1) | Represents fair value of unencumbered properties. |
(2) | Represents the undrawn portion on the credit facilities, excluding joint facilities with joint operation partners. |
(3) | |
(4) | 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. |
(5) | See Debt Metrics section in the Management's Discussion and Analysis. |
(6) | Calculated based on interest rates for all outstanding fixed rate debt. |
Portfolio Optimization
Our development program is divided into major development; projects with a total estimated cost greater than
Crombie currently has one active major development, The Marlstone, a 291-unit residential rental project in
Non-major developments are accretive with shorter project durations and less overall risk than our major development projects. These projects have the ability to create value while enhancing the overall quality of the portfolio.
Non-major development added 26,000 square feet of gross leasable area to the portfolio in the first quarter of 2024.
Asset Class | Location | Market Class | Tenant | |
Retail-related industrial | VECTOM | 26,000 | Empire |
The below table summarizes active non-major developments within Crombie's portfolio at
At Crombie's Share | |||
Type | GLA on Completion | Estimated Total Cost | Estimated Cost to |
Land-use intensification | 52,000 | $ 18,000 | $ 16,000 |
Modernizations(1), Redevelopments, and Other | — | 8,000 | 2,000 |
Total Non-major Developments | 52,000 | $ 26,000 | $ 18,000 |
(1) | Modernizations are a capital investment to modernize/renovate Crombie-owned grocery store properties in exchange for a defined return and potential extended lease term. The first quarter spend on modernizations totals |
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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
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 | |||||
2024 | 2023 | (1) | Variance | ||
Property revenue | $ 118,609 | $ 112,449 | $ 6,160 | ||
Property operating expenses | (44,968) | (43,801) | (1,167) | ||
Net property income | $ 73,641 | $ 68,648 | $ 4,993 |
(1) | Property revenue and property operating expenses for the three months 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 | |||
2024 | 2023 | Variance | |
Net property income | $ 73,641 | $ 68,648 | $ 4,993 |
Non-cash straight-line rent | (1,497) | (1,305) | (192) |
Non-cash tenant incentive amortization (1) | 6,718 | 6,792 | (74) |
Property cash NOI | 78,862 | 74,135 | 4,727 |
Acquisitions and dispositions property cash NOI | 338 | 17 | 321 |
Development property cash NOI | 1,992 | (23) | 2,015 |
Acquisitions, dispositions, and development property cash NOI | 2,330 | (6) | 2,336 |
Same-asset property cash NOI | $ 76,532 | $ 74,141 | $ 2,391 |
(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 ended
Three months ended | |||
2024 | 2023 | Variance | |
Decrease in net assets attributable to Unitholders | $ (14,072) | $ (13,999) | $ (73) |
Add (deduct): | |||
Amortization of tenant incentives | 6,718 | 6,792 | (74) |
Gain on disposal of investment properties | — | (111) | 111 |
Depreciation and amortization of investment properties | 19,638 | 19,069 | 569 |
Adjustments for equity-accounted investments | 1,263 | 1,257 | 6 |
Principal payments on right-of-use assets | 59 | 57 | 2 |
Internal leasing costs | 985 | 598 | 387 |
Finance costs - distributions to Unitholders | 40,399 | 39,775 | 624 |
Change in fair value of financial instruments (1) | (122) | (603) | 481 |
FFO as calculated based on REALPAC recommendations | $ 54,868 | $ 52,835 | $ 2,033 |
Basic weighted average Units (in 000's) | 181,450 | 178,669 | 2,781 |
FFO per Unit - basic | $ 0.30 | $ 0.30 | $ — |
FFO payout ratio (%) | 73.6 % | 75.3 % | (1.7) % |
(1) | 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 ended
Three months ended | |||
2024 | 2023 | Variance | |
FFO as calculated based on REALPAC recommendations | $ 54,868 | $ 52,835 | $ 2,033 |
Add (deduct): | |||
Straight-line rent adjustment | (1,497) | (1,305) | (192) |
Straight-line rent adjustment included in income (loss) from equity-accounted investments | 79 | 120 | (41) |
Internal leasing costs | (985) | (598) | (387) |
Maintenance expenditures on a square footage basis | (5,518) | (5,143) | (375) |
AFFO as calculated based on REALPAC recommendations | $ 46,947 | $ 45,909 | $ 1,038 |
Basic weighted average Units (in 000's) | 181,450 | 178,669 | 2,781 |
AFFO per Unit - basic | $ 0.26 | $ 0.26 | $ — |
AFFO payout ratio (%) | 86.1 % | 86.6 % | (0.5) % |
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
Fixed rate mortgages | $ 781,352 | $ 838,957 | $ 892,734 |
Senior unsecured notes | 1,375,000 | 1,175,000 | 1,175,000 |
Unsecured non-revolving credit facility | — | 93,297 | — |
Revolving credit facility | — | 47,591 | — |
Joint operation credit facility | 3,430 | 3,503 | 10,370 |
Debt held in joint ventures, at Crombie's share (1) (2) | 279,452 | 274,115 | 270,145 |
Lease liabilities | 36,109 | 36,292 | 34,982 |
Adjusted debt | $ 2,475,343 | $ 2,468,755 | $ 2,383,231 |
Investment properties, fair value | $ 5,174,000 | $ 5,096,000 | $ 5,097,000 |
Investment properties held in joint ventures, fair value, at Crombie's share (2) | 470,000 | 472,500 | 447,000 |
Other assets, cost (3) | 76,723 | 136,081 | 93,235 |
Other assets, cost, held in joint ventures, at Crombie's share (2) (3) (4) | 29,028 | 26,214 | 26,304 |
Cash and cash equivalents | 12,276 | — | 9,050 |
Cash and cash equivalents held in joint ventures, at Crombie's share (2) | 3,631 | 3,004 | 5,612 |
Deferred financing charges | 8,121 | 7,560 | 8,293 |
Gross fair value | $ 5,773,779 | $ 5,741,359 | $ 5,686,494 |
Debt to gross fair value | 42.9 % | 43.0 % | 41.9 % |
(1) | Includes Crombie's share of fixed rate mortgages, floating rate 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.
In calculating adjusted EBITDA, Crombie includes its share of revenue, operating expenses, and general and administrative expenses in joint ventures, and excludes its share of amortization of tenant incentives in joint ventures. Interest coverage calculations also include Crombie's share of finance costs - operations and debt repayments in joint ventures.
Three months ended | |||
Operating income attributable to Unitholders | $ 26,205 | $ 26,295 | $ 25,173 |
Amortization of tenant incentives | 6,718 | 6,529 | 6,792 |
Gain on disposal of investment properties | — | — | (111) |
Depreciation and amortization | 20,014 | 20,087 | 19,420 |
Finance costs - operations | 22,283 | 23,839 | 20,764 |
(Income) loss from equity-accounted investments | 1,141 | 980 | (1,673) |
Property revenue in joint ventures, at Crombie's share | 4,918 | 7,222 | 11,269 |
Amortization of tenant incentives in joint ventures, at Crombie's share | 75 | — | — |
Property operating expenses in joint ventures, at Crombie's share | (1,617) | (3,684) | (5,170) |
General and administrative expenses in joint ventures, at Crombie's share | (55) | (23) | (107) |
Taxes - current | — | 6 | — |
Adjusted EBITDA [1] | $ 79,682 | $ 81,251 | $ 76,357 |
Trailing 12 months adjusted EBITDA [3] | $ 310,681 | $ 307,356 | $ 299,271 |
Finance costs - operations | $ 22,283 | $ 23,839 | $ 20,764 |
Finance costs - operations in joint ventures, at Crombie's share | 3,228 | 3,279 | 3,430 |
Amortization of deferred financing charges | (554) | (588) | (622) |
Amortization of deferred financing charges in joint ventures, at Crombie's | (316) | — | — |
Adjusted interest expense [2] | $ 24,641 | $ 26,530 | $ 23,572 |
Debt outstanding (see Debt to Gross Fair Value) (1) [4] | $ 2,475,343 | $ 2,468,755 | $ 2,383,231 |
Interest coverage ratio {[1]/[2]} | 3.23x | 3.06x | 3.24x |
Debt to trailing 12 months adjusted EBITDA {[4]/[3]} | 7.97x | 8.03x | 7.96x |
(1) | 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 and cost 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 with a vision of enriching communities together by building spaces and value today that leave a positive impact on tomorrow. As one of the country's leading owners, operators, and developers of quality real estate assets, Crombie's portfolio primarily includes grocery-anchored retail, retail-related industrial, and mixed-use residential properties. As at
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