STELLARTON, NS, Nov. 8, 2011 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for
the third quarter ended September 30, 2011.
2011 Highlights
-
Property revenue for the quarter ended September 30, 2011 of $54.8
million; an increase of $3.3 million or 6.5% over the $51.5 million for
the quarter ended September 30, 2010 and for the nine months ended
September 30, 2011 was $167.5 million; an increase of $13.7 million or
8.9% over the nine months ended September 30, 2010. -
Same-asset cash net operating income ("NOI") for the quarter ended
September 30, 2011 of $30.0 million; a decrease of $0.1 million or
0.5%, compared to $30.1 million for the quarter ended September 30,
2010 and for the nine months ended September 30, 2011, same-asset cash
NOI of $90.8 million; an increase of $0.9 million or 1.0% over the same
period in 2010. -
Property occupancy was 94.7% at September 30, 2011 compared with 94.9%
at June 30, 2011, and 95.5% at September 30, 2010. -
Average rent per square foot from year to date leasing activity
increased to $16.31 compared to an expiring rent per square foot of
$14.15, an increase of 15.3%. -
Crombie completed leasing activity on 815,000 square feet of GLA during
the first nine months of 2011, which represents approximately 74.6% of
the 2011 expiring lease square footage. -
Funds from operations ("FFO") for the quarter ended September 30, 2011
was $0.27 per unit (payout ratio 84.2%) compared to $0.26 per unit
(payout ratio 85.9%) for the same period in 2010. For the nine months
ended September 30, 2011, FFO was $0.82 per unit (payout ratio 81.7%)
compared to $0.79 per unit (payout ratio 84.8%) for the same period in
2010. -
Adjusted funds from operations ("AFFO") for the quarter ended September
30, 2011 was $0.22 per unit (payout ratio 101.9%) compared to $0.21 per
unit (payout ratio 104.3%) for the same period in 2010. For the nine
months ended September 30, 2011, AFFO was $0.65 per unit (payout ratio
102.7%) compared to $0.64 per unit (payout ratio 104.2%) for the same
period in 2010. Excluding the impact of the second quarter settlement
of the delayed start interest rate swap, AFFO for the nine months ended
September 30, 2011 was $0.68 per unit (payout ratio 98.8%). -
Crombie renewed its $150.0 million revolving credit facility at the end
of the second quarter for a three year period.
Commenting on the quarterly results, Donald E. Clow, FCA, President and
Chief Executive Officer stated: "We are satisfied with the continued
improvement in year over year FFO per unit results and the AFFO payout
ratio achieved in the third quarter of 2011.
The contribution from our acquisition and redevelopment programs
continue to improve our portfolio and cash flow. We are pleased to
announce that we have signed definitive asset purchase agreements on
two retail properties in Nova Scotia and one in Ontario, which we
expect to close in the fourth quarter of 2011, subject to completion of
due diligence. The total purchase price is $67.3 million, which along
with the $24.8 million of acquisitions completed in the third quarter,
brings our acquisition total for 2011 to $141.5 million. The estimated
average cap rate of the pending acquisitions is 7.1%, while the average
cap rate for the third quarter acquisitions was 7.2%, resulting in an
average cap rate for 2011 acquisitions of 7.2%. The pending
acquisitions and the completed third quarter acquisitions are
reflective of the preferential right Crombie enjoys through our
relationship with Empire Company Limited and its subsidiaries.
The acquisition activity and other pending growth opportunities will be
funded with mortgage financing and proceeds from the $75.1 million unit
issuance which closed on October 20th. Crombie issued 3.51 million REIT Units at $12.85 per unit for gross
proceeds of $45.1 million and concurrent with the issuance, Crombie
Limited Partnership issued 2.33 million Class B LP Units to ECL
Developments Limited at the same unit price of $12.85 for gross
proceeds of $30.0 million."
The table below presents a summary of financial performance for the
quarter and nine months ended September 30, 2011 compared to the same
periods in fiscal 2010. All amounts are presented in accordance with
International Financial Reporting Standards ("IFRS").
| (In millions of CAD dollars, except per unit amounts) | Three months ended Sep. 30, 2011 |
Three months ended Sep. 30, 2010 |
Nine months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2010 |
|
| Property revenue | $54.781 | $51.450 | $167.456 | $153.744 | |
| Property operating expenses | 19.611 | 18.936 | 61.674 | 57.630 | |
| Property NOI | 35.170 | 32.514 | 105.782 | 96.114 | |
| NOI margin percentage | 64.2% | 63.2% | 63.2% | 62.5% | |
| Other items: | |||||
| Lease terminations | — | 0.162 | 0.163 | 0.347 | |
| Depreciation and amortization | (7.718) | (7.536) | (23.085) | (23.297) | |
| General and administrative expenses | (2.487) | (2.627) | (7.848) | (8.153) | |
| Operating income before financing costs and income taxes | 24.965 | 22.513 | 75.012 | 65.011 | |
| Finance costs – operations | (16.075) | (14.706) | (47.170) | (42.878) | |
| Operating income before income taxes | 8.890 | 7.807 | 27.842 | 22.133 | |
| Income taxes – deferred | 0.200 | 0.300 | (0.300) | 0.700 | |
| Operating income attributable to Unitholders | 9.090 | 8.107 | 27.542 | 22.833 | |
| Finance costs – distributions to Unitholders | (15.132) | (14.251) | (44.753) | (41.388) | |
| Decrease in net assets attributable to Unitholders | $(6.042) | $(6.144) | $(17.211) | $(18.555) | |
| Operating income attributable to Unitholders per Unit, Basic and Diluted | $0.13 | $0.13 | $0.41 | $0.37 | |
Property NOI – Cash Basis
| (In millions of CAD dollars) | Three months ended Sep. 30, 2011 |
Three months ended Sep. 30, 2010 |
Nine months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2010 |
| Property NOI | $35.170 | $32.514 | $105.782 | $96.114 |
| Non-cash tenant incentive amortization | 1.369 | 1.241 | 3.836 | 3.363 |
| Non-cash straight-line rent | (0.800) | (0.829) | (2.615) | (2.612) |
| Property cash NOI | 35.739 | 32.926 | 107.003 | 96.865 |
| Acquisition and redevelopment property cash NOI | 5.780 | 2.817 | 16.198 | 6.985 |
| Same-asset property cash NOI | $29.959 | $30.109 | $90.805 | $89.880 |
Property NOI, on a cash basis, excludes straight-line rent recognition
and tenant incentive amortization amounts. The 1.0% increase in
same-asset cash NOI for the nine months ended September 30, 2011 is
primarily the result of increased average rent per square foot
resulting from 2011 leasing activity.
Crombie believes that cash NOI is a better measure of AFFO
sustainability and same-asset property performance.
Same-Asset Property NOI
| (In millions of CAD dollars) | Three months ended Sep. 30, 2011 |
Three months ended Sep. 30, 2010 |
Nine months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2010 |
| Same-asset property revenue | $46.855 | $46.875 | $144.387 | $141.581 |
| Same-asset property operating expenses | 17.403 | 17.286 | 54.691 | 52.540 |
| Same-asset property NOI | $29.452 | $29.589 | $89.696 | $89.041 |
| Same-asset NOI margin % | 62.9% | 63.1% | 62.1% | 62.9% |
Same-asset property NOI decreased slightly over Q3 of 2010. Same-asset
property revenue of $46.9 million for the quarter ended September 30,
2011 was virtually unchanged from the same period in 2010. Same-asset
property revenue of $144.4 million for the nine months ended September
30, 2011 was 2.0% higher than the nine months ended September 30, 2010
due to increased base rent and recoveries as a result of above average
renewal rates and higher recoverable property expenses.
Same-asset property expenses of $17.4 million for the quarter ended
September 30, 2011 were $0.1 million or 0.7% higher than the third
quarter ended September 30, 2010 due primarily to increased recoverable
property taxes. Same-asset property expenses of $54.7 million for the
nine months ended September 30, 2011 increased by 4.1% from the nine
months ended September 30, 2010 due primarily to increased recoverable
property taxes and snow clearing costs offset in part by reduced
non-recoverable costs.
Acquisition and Redevelopment Property NOI
| (In millions of CAD dollars) | Three months ended Sep. 30, 2011 |
Three months ended Sep. 30, 2010 |
Nine months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2010 |
| Acquisition and redevelopment property revenue | $7.926 | $4.575 | $23.069 | $12.163 |
| Acquisition and redevelopment property expenses | 2.208 | 1.650 | 6.983 | 5.090 |
| Acquisition and redevelopment property NOI | $5.718 | $2.925 | $16.086 | $7.073 |
| Acquisition and redevelopment NOI margin % | 72.1% | 63.9% | 69.7% | 58.2% |
For the three months ended and nine months ended September 30, 2011, the
acquisition and redevelopment property results include the retail
properties acquired in September and May 2011, the 20 retail properties
acquired during 2010 and the operating results of five properties that
were under redevelopment. This 2011 and 2010 activity level resulted
in significant NOI growth.
General and Administrative Expenses
General and administrative expenses for the quarter ended September 30,
2011 decreased by 0.6% from 5.1% to 4.5% as a percentage of property
revenue, when compared to the same period in 2010. Professional fees
have decreased due to lower general legal expenses during the quarter.
General and administrative expenses as a percentage of property revenue
decreased by 0.6% from 5.3% to 4.7% for the nine months ended September
30, 2011 when compared to the same period in 2010. Salaries and
benefits decreased due to the costs associated with the departure of
Crombie's Chief Financial Officer during the second quarter of 2010.
Finance Costs – Operations
| (In millions of CAD dollars) | Three months ended Sep. 30, 2011 |
Three months ended Sep. 30, 2010 |
Nine months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2010 |
| Same-asset finance costs | $11.771 | $12.036 | $35.181 | $35.621 |
| Acquisition and redevelopment finance costs | 2.276 | 1.004 | 6.373 | 2.539 |
| Amortization of effective swaps and deferred financing charges | 2.028 | 1.666 | 5.616 | 4.718 |
| Finance costs – operations | $16.075 | $14.706 | $47.170 | $42.878 |
Same-asset finance costs for the nine months ended September 30, 2011
have decreased by $0.4 million or 1.2%. Growth in acquisition and
redevelopment finance costs is consistent with Crombie's significant
acquisition activity in 2011 and 2010.
FFO and AFFO
Crombie's FFO and AFFO had the following results for the third quarter
and nine months ended September 30, 2011 and 2010:
| Three months ended Sep. 30, | Variance | |||
| (In millions of CAD dollars, except per unit amounts) | 2011 | 2010 | $ | % |
| FFO | $17.977 | $16.584 | $1.393 | 8.4% |
| FFO Per Unit – Basic | $0.27 | $0.26 | $0.01 | 3.8% |
| FFO Per Unit – Diluted | $0.26 | $0.25 | $0.01 | 4.0% |
| FFO Payout ratio | 84.2% | 85.9% | 1.7% | |
| AFFO | $14.851 | $13.668 | $1.183 | 8.7% |
| AFFO Per Unit – Basic | $0.22 | $0.21 | $0.01 | 4.8% |
| AFFO Per Unit – Diluted | $0.22 | $0.21 | $0.01 | 4.8% |
| AFFO Payout ratio | 101.9% | 104.3% | 2.4% | |
The increase in FFO for the three months ended September 30, 2011 of
$1.4 million was primarily due to growth in acquisition property NOI,
net of finance cost increases related to the acquisitions.
AFFO for the three months ended September 30, 2011 of $14.9 million was
an increase of $1.2 million over the same period in 2010 due primarily
to the improved FFO results.
| Nine months ended Sep. 30, | Variance | |||
| (In millions of CAD dollars, except per unit amounts) | 2011 | 2010 | $ | % |
| FFO | $54.763 | $48.793 | $5.970 | 12.2% |
| FFO Per Unit – Basic | $0.82 | $0.79 | $0.03 | 3.8% |
| FFO Per Unit – Diluted | $0.78 | $0.75 | $0.03 | 4.0% |
| FFO Payout ratio | 81.7% | 84.8% | 3.1% | |
| AFFO | $43.566 | $39.724 | $3.842 | 9.7% |
| AFFO Per Unit – Basic | $0.65 | $0.64 | $0.01 | 1.6% |
| AFFO Per Unit – Diluted | $0.64 | $0.63 | $0.01 | 1.6% |
| AFFO Payout ratio | 102.7% | 104.2% | 1.5% | |
| AFFO Payout ratio – Adjusted for swap settlement | 98.8% | 104.2% | 5.4% | |
The increase in FFO for the nine months ended September 30, 2011 was
primarily due to growth in same-asset NOI and higher NOI from the 2010
and 2011 acquisition properties offset in part by higher finance costs
related to those acquisitions.
AFFO for the nine months ended September 30, 2011 was $43.6 million, an
increase of $3.8 million or 9.7% over the same period in 2010, due
primarily to the improved FFO results, offset in part by the negative
impact of settlement. During the second quarter of 2011, Crombie
settled the last of its forward rate interest rate swaps for $1.7
million. Excluding the swap settlement, AFFO Per Unit – basic would
have been $0.68 and AFFO Payout ratio would have been 98.8%; a
significant improvement over the 104.2% payout ratio for the same
period in 2010.
Liquidity and Financings
Crombie's objectives when managing its capital structure are to optimize
weighted average cost of capital; maintain financial flexibility and
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
and maintains sustainable payout ratios. Crombie has an authorized
floating rate revolving credit facility of up to $150 million, of which
$99.7 million was drawn as at September 30, 2011, and an additional
$9.3 million encumbered by outstanding letters of credit, resulting in
significant available liquidity.
Debt to gross book value is 56.5% (including convertible debentures) at
September 30, 2011 compared to 57.1% at June 30, 2011, 56.5% at
December 31, 2010 and 56.4% at September 30, 2010. This leverage ratio
is below the maximum 60%, or 65% including convertible debentures,
permitted pursuant to Crombie's Declaration of Trust. On a long-term
basis, Crombie intends to maintain overall indebtedness, including
convertible debentures, in the range of 50% to 60% of gross book value,
depending upon Crombie's future acquisitions and financing
opportunities. Crombie's debt to gross book value experienced an
increase of approximately 200 basis points on transition to IFRS.
Crombie's interest and debt service coverage for the nine months ended
September 30, 2011 were 2.45 times EBITDA and 1.73 times EBITDA
respectively. This compares to 2.39 times EBITDA and 1.72 times EBITDA
respectively for the nine months ended September 30, 2010.
Definition of Non-IFRS 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 expenses.
-
Property Cash NOI is Property NOI adjusted to remove non-cash
straight-line rent and tenant improvement amortization. -
Debt is defined as bank loans plus commercial property debt 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) less (i) the
amount of any receivable reflecting interest rate subsidies on any debt
assumed by Crombie and (ii) the amount of deferred income tax liability
arising out of the fair value adjustment in respect of the indirect
acquisitions of certain properties. -
EBITDA is calculated as property revenue, adjusted to remove the impact
of amortization of tenant improvements, less property expenses and
general and administrative expenses. -
FFO is calculated as Increase (decrease) in net assets attributable to
Unitholders (computed in accordance with IFRS), excluding gains (or
losses) from sales of depreciable real estate and extraordinary items,
plus depreciation and amortization expense, deferred income taxes,
finance costs – distributions to Unitholders and after adjustments for
equity accounted entities and non-controlling interests. -
AFFO is defined as FFO adjusted for non-cash amounts affecting revenue,
less maintenance capital expenditures, maintenance tenant improvements
and leasing costs, and the settlement of effective interest rate swap
agreements.
Interim Financial Reporting
While the financial figures included in this preliminary interim
earnings announcement have been computed in accordance with IFRS
applicable to interim periods, this announcement does not contain
sufficient information to constitute an interim financial report as
that term is defined in IFRS. The Trustees expect to publish an
interim financial report that complies with International Accounting
Standard 34, Interim Financial Reporting, on November 8, 2011.
About Crombie
Crombie is an open-ended real estate investment trust established under,
and governed by, the laws of the Province of Ontario. The trust invests
in income-producing retail, office and mixed-use properties in Canada,
with a future growth strategy focused primarily on the acquisition of
retail properties. Crombie currently owns a portfolio of 136 investment
properties in eight provinces, comprising approximately 12.3 million
square feet of rentable space.
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
2010 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.
In particular, certain statements in this document discuss Crombie's
anticipated outlook of future events, including the announced
acquisition of properties and other pending growth opportunities, the
anticipated funding of those acquisitions and the anticipated extent of
the accretion of those acquisitions, which could be impacted by due
diligence matters or the demand for properties and the effect that
demand has on acquisition capitalization rates and changes in interest
rates. 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 period ended September 30, 2011 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 third quarter
ended September 30, 2011 results on a conference call to be held
Wednesday, November 9, 2011, at 2:00 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 November 23, 2011, by dialling
(416) 849-0833 or (855) 859-2056 and entering pass code 22878184, or on
the Crombie website for 90 days after the meeting.