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Crombie REIT reports first quarter results

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SOURCE Crombie REIT

Crombie REIT (TSX:CRR.UN)

STELLARTON, NS, May 14, 2014 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX:CRR.UN) is pleased to report its financial results for the first quarter ended March 31, 2014.

First Quarter 2014 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).

  • Portfolio fair value of $3.9 billion.

  • Funds From Operations ("FFO"):
    • FFO per unit fully diluted remained stable at $0.28, unchanged from the same period in 2013.

    • FFO grew by 34.1% over the same period in 2013 ($34,494 vs. $25,721).

    • FFO payout ratio decreased slightly to 79.3% compared to 79.5% for the same period in 2013.
  • Adjusted Funds From Operations ("AFFO"):
    • AFFO per unit fully diluted remained stable at $0.23, unchanged from the same period in 2013.

    • AFFO grew by 33.2% over the same period in 2013 ($28,769 vs. $21,606).

    • AFFO payout ratio increased slightly to 95.1% compared to 94.6% for the same period in 2013.
  • Same-asset Cash Net Operating Income ("NOI") showed strong 2.5% growth over the same period in 2013.

  • Property revenue of $90,913, an increase of $20,331 or 28.8% over the $70,582 for Q1 2013.

  • Occupancy, on a committed basis, was 93.1% at March 31, 2014, compared with 93.2% at December 31, 2013.

  • Crombie completed leasing activity on a total of 260,000 square feet during the quarter, including:
    • Renewals on 149,000 square feet of 2014 expiring leases at an average rate of $16.52 per square foot, an increase of 8.7% over the expiring lease rate; and

    • New leases on 111,000 square feet of space, at an average rate of $14.61 per square foot.
  • Weighted average lease term of 11.8 years and weighted average mortgage term of 7.9 years; amongst the longest and most defensive in the REIT industry.
  • Weighted average interest rate on mortgages reduced to 4.79% from 4.82% at December 31, 2013 and 5.09% at March 31, 2013. Strong 2.53 times interest coverage.
  • Debt to Gross Book Value (fair value basis) of 53.1%.

Donald E. Clow, FCA, President and CEO commented:" We are pleased with our progress on the integration of the Safeway portfolio; our continued access to new sources of capital; and the enhancement of our national platform, including the improved focus of our senior leadership team and the addition of a new regional vice-president position in Western Canada."

Financial Highlights

Crombie's key financial metrics for the three months ended March 31, 2014 are as follows:

 
(In thousands of CAD dollars, except per unit amounts and
as otherwise noted)
Three Months Ended March 31,
2014 2013
Property revenue $ 90,913 $ 70,582
Operating income attributable to Unitholders $ 15,900 $ 12,959
Operating income attributable to Unitholders per unit - basic $ 0.13 $ 0.14
Operating income attributable to Unitholders per unit - diluted $ 0.13 $ 0.14
FFO $ 34,494 $ 25,721
FFO per unit - basic $ 0.28 $ 0.28
FFO per unit - diluted $ 0.28 $ 0.28
FFO payout ratio (%)   79.3%   79.5%
AFFO $ 28,769 $ 21,606
AFFO per unit - basic $ 0.23 $ 0.24
AFFO per unit - diluted $ 0.23 $ 0.23
Distributions $ 0.22 $ 0.22
AFFO payout ratio (%)   95.1%   94.6%

The increase in FFO and AFFO for the three months ended March 31, 2014 was primarily due to the 70 property Sobey / Safeway acquisition during the fourth quarter of 2013 and completed redevelopment and land use intensification projects during 2013, resulting in significant growth in property NOI, offset in part by higher finance costs - operations.

The table below presents a summary of financial performance for the three months ended March 31, 2014 compared to the same period in fiscal 2013.

 
(In thousands of CAD dollars, except per unit amounts and as otherwise noted) Three Months Ended March 31,
2014 2013
Property revenue $ 90,913 $ 70,582
Property operating expenses   29,554   26,818
Property NOI   61,359   43,764
NOI margin percentage   67.5%   62.0%
Other items:        
  Gain (loss) on derecognition of investment properties   (157)   430
  Depreciation and amortization   (16,525)   (11,122)
  General and administrative expenses   (3,756)   (3,206)
Operating income before finance costs and taxes   40,921   29,866
Finance costs - operations   (25,246)   (16,807)
Operating income before taxes   15,675    13,059
Taxes - deferred   225   (100)
Operating income attributable to Unitholders   15,900   12,959
Finance costs - distributions to Unitholders   (27,355)   (20,438)
Finance income (costs) - change in fair value of financial instruments   55   617
Decrease in net assets attributable to Unitholders $ (11,400) $ (6,862)

Growth Highlights

  GLA Initial Purchase
Price
Occupancy
Rate
Key Tenants
Acquisitions in Q1  
Penhorn Plaza Dartmouth NS 6,683 $ 1,490,000 100% Mr. Lube, Fast Fuels
Completed to date in 2014     6,683 $ 1,490,000    

Since January 1, 2014, Crombie's GLA reflects a net decrease of 18,000 square feet from acquisition and disposition activity. Crombie exchanged a property in Alberta for another Alberta property, resulting in no net change in GLA. In addition, Crombie disposed of part of an existing property in Nova Scotia, resulting in a 25,000 square foot reduction in GLA and completed the above acquisition of additional development property.

Operating Highlights

        Three Months Ended March 31,  
(In thousands of CAD dollars)       2014 2013 Variance
Property NOI       $ 61,359 $ 43,764 $ 17,595
Non-cash straight-line rent         (2,754)   (1,359)   (1,395)
Non-cash tenant incentive amortization         2,137   1,970   167
Property cash NOI         60,742   44,375   16,367
Acquisition, disposition and redevelopment property cash NOI         19,541   4,175   15,366
Same-asset property cash NOI       $ 41,201 $ 40,200 $ 1,001
 
    Three Months Ended March 31,  
(In thousands of CAD dollars)   2014 2013 Variance   Percent
Retail Enclosed   $ 6,492 $  6,061 $ 431   7.1%
Retail Freestanding     8,533   8,181   352   4.3%
Retail Plaza     20,045   19,882   163   0.8%
Retail total     35,070   34,124   946   2.8%
Mixed Use     3,155   3,166   (11)   (0.3)%
Office     2,976   2,910   66   2.3%
Same-asset property cash NOI   $  41,201 $ 40,200 $ 1,001   2.5%

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The 2.5% increase in same-asset cash NOI for the three months ended March 31, 2014 is primarily the result of increased average rent per square foot from leasing activity and rental rate increases in existing leases as well as improved recovery rates and revenues from land use intensifications at several properties.

During the first quarter of 2014, Crombie classified an investment property as held for sale. The operating results for that property are included in acquisition, disposition and redevelopment for the current and comparative periods.

Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance.

Acquisition, disposition and redevelopment property cash NOI is as follows:

  Three Months Ended March 31,  
(In thousands of CAD dollars) 2014 2013 Variance
Acquisition and disposition property cash NOI $ 17,998 $ 1,926 $  16,072
Redevelopment property cash NOI   1,543   2,249   (706)
Total acquisition, disposition and redevelopment property cash NOI $ 19,541 $ 4,175 $ 15,366

The significant growth in Acquisition and disposition property cash NOI was primarily due to the 70 property Sobeys / Safeway acquisition during the fourth quarter of 2013.

Capital Highlights

  Three Months Ended March 31,
  2014 2013
Weighted Average Mortgage Term 7.9 years 7.7 years
Weighted Average Interest Rate 4.79% 5.09%
Debt to Gross Book Value (Fair Value) 53.1% 48.3%
Interest Coverage 2.53 2.79
Debt Service Coverage 1.69 1.85

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 $285,000, subject to available borrowing base, of which $50,000 was drawn as at March 31, 2014, and an additional $4,135 encumbered by outstanding letters of credit, resulting in significant available liquidity.

Debt to gross book value on a fair value basis is 53.1% (including convertible debentures) at March 31, 2014, compared to 48.3% at March 31, 2013.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2014, as a percentage of property revenue, decreased by 0.4% from 4.5% to 4.1%, when compared to the same period in 2013, reflecting the impact of significant business growth during 2013.

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, 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.

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 250 retail and office properties across Canada, comprising approximately 17.6 million square feet with a strategy to own and operate a portfolio of primarily high quality grocery and drug store anchored shopping centres and freestanding stores 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 2013 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.

Crombie's consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2014 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.

Conference Call Invitation

Crombie will provide additional details concerning its three months ended March 31, 2014  results on a conference call to be held Wednesday, May 14, 2014, 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 28, 2014 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 34849692, or on the Crombie website for 90 days after the meeting.

 

 

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