STELLARTON, NS, May 10, 2012 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for
the first quarter ended March 31, 2012.
2012 Highlights
-
Property revenue for the quarter ended March 31, 2012 of $59.4 million;
an increase of $3.1 million or 5.6% over the $56.3 million for the
quarter ended March 31, 2011. -
Same-asset cash net operating income ("NOI") for the quarter ended March
31, 2012 of $33.2 million; an increase of $0.3 million or 1.0%,
compared to $32.9 million for the quarter ended March 31, 2011. -
Property leased space on a committed basis was 92.7% at March 31, 2012
compared with 94.7% at December 31, 2011. Actual occupied space at
March 31, 2012 was 91.0% compared with 93.3% at December 31, 2011 and
95.3% at March 31, 2011. -
Crombie completed lease renewals during the quarter on 116,000 square
feet at an average rate of $15.51 per square foot; an increase of 6.14%
over the expiring lease rate. Crombie completed new leasing activity
during the quarter at $16.60 per square foot. -
Crombie completed new leasing and renewal activity on 207,000 square
feet of GLA during the quarter ender March 31, 2012, which represents
approximately 20.1% of its 2012 expiring lease square footage. -
Funds from operations ("FFO") for the quarter ended March 31, 2012 was
$0.26 per unit (payout ratio 88.9%) compared to $0.28 per unit (payout
ratio 80.5%) for the same period in 2011. -
Adjusted funds from operations ("AFFO") for the quarter ended March 31,
2012 was $0.22 per unit (payout ratio 107.2%) compared to $0.23 per
unit (payout ratio 96.7%) for the same period in 2011.
Commenting on the first quarter results, Donald E. Clow, FCA, President
and Chief Executive Officer stated: "We are pleased to be making
significant progress on our strategy to evolve Crombie REIT from a
dominant regional player to a high quality owner of a national
portfolio of primarily grocery and drug anchored retail properties and
to build a national platform for operations and growth.
The acquisition of 22 retail properties from Goldmanco for approximately
$255 million in April, 2012 added approximately 850,000 square feet of
primarily grocery and drug store freestanding and anchored properties
in Ontario and western Canada. It is the largest acquisition from
third parties in the REIT's history.
We expected 2012 would be a challenging year for some Canadian retailers
and this has proven to be correct. Crombie is focused on creating
value to improve our portfolio from these opportunities and we have
solid momentum in our re-leasing and redevelopment efforts."
The table below presents a summary of financial performance for the
quarter ended March 31, 2012 compared to the same period in fiscal
2011. All amounts are presented in accordance with International
Financial Reporting Standards ("IFRS").
| Three months ended | Three months ended | ||||
| (In millions of CAD dollars, except per unit amounts) | Mar. 31, 2012 | Mar. 31, 2011 | |||
| Property revenue | $59.447 | $56.318 | |||
| Property operating expenses | 23.052 | 21.424 | |||
| Property NOI | 36.395 | 34.894 | |||
| NOI margin percentage | 61.2% | 62.0% | |||
| Other items: | |||||
| Lease terminations | 0.113 | — | |||
| Depreciation and amortization | (8.525) | (7.757) | |||
| General and administrative expenses | (2.970) | (2.500) | |||
| Operating income before finance costs and income taxes | 25.013 | 24.637 | |||
| Finance costs – operations | (15.750) | (15.411) | |||
| Operating income before income taxes | 9.263 | 9.226 | |||
| Income Taxes – deferred | 0.300 | 0.100 | |||
| Operating income attributable to Unitholders | 9.563 | 9.326 | |||
| Finance costs – distributions to Unitholders | (17.167) | (14.751) | |||
| Decrease in net assets attributable to Unitholders | $(7.604) | $(5.425) | |||
| Operating income attributable to Unitholders per Unit, Basic and Diluted | $0.13 | $0.14 | |||
Property NOI – Cash Basis
| Three months ended | Three months ended | |||
| (In millions of CAD dollars) | Mar. 31, 2012 | Mar. 31, 2011 | ||
| Property NOI | $36.395 | $34.894 | ||
| Non-cash tenant incentive amortization | 1.513 | 1.346 | ||
| Non-cash straight-line rent | (1.021) | (0.828) | ||
| Property cash NOI | 36.887 | 35.412 | ||
| Acquisition, disposition and redevelopment property cash NOI | 3.719 | 2.568 | ||
| Same-asset property cash NOI | $33.168 | $32.844 |
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 quarter ended March 31, 2012 is primarily
the result of increased average rent per square foot from leasing
activity during the past 12 months.
Crombie believes that cash NOI is a better measure of AFFO
sustainability and same-asset property performance.
Same-Asset Property NOI
| Three months ended | Three months ended | |||
| (In millions of CAD dollars) | Mar. 31, 2012 | Mar. 31, 2011 | ||
| Same-asset property revenue | $52.074 | $51.111 | ||
| Same-asset property operating expenses | 19.464 | 18.818 | ||
| Same-asset property NOI | $32.610 | $32.293 | ||
| Same-asset NOI margin % | 62.6% | 63.2% |
Same-asset property NOI increased slightly over Q1 of 2011. Same-asset
property revenue of $52.1 million for the quarter ended March 31, 2012
increased by 1.9% compared to the same quarter in 2011.
Same-asset property operating expenses of $19.5 million for the quarter
ended March 31, 2012 were 3.4% higher than the quarter ended March 31,
2011 due primarily to higher recoverable property expenses, primarily
recoverable property taxes.
Acquisition, Disposition and Redevelopment Property NOI
| Three months ended | Three months ended | |||
| (In millions of CAD dollars) | Mar. 31, 2012 | Mar. 31, 2011 | ||
| Acquisition, disposition and redevelopment property revenue | $7.373 | $5.207 | ||
| Acquisition, disposition and redevelopment property expenses | 3.588 | 2.606 | ||
| Acquisition, disposition and redevelopment property NOI | $3.785 | $2.601 | ||
| Acquisition, disposition and redevelopment NOI margin % | 51.3% | 50.0% |
Acquisition, disposition and redevelopment property results include the
property acquired in March 2012, the properties acquired in December,
September and May 2011, the property disposed of in October 2011 and
the operating results of six properties that were under redevelopment
or recently completed development.
General and Administrative Expenses
General and administrative expenses for the quarter ended March 31, 2012
increased by 0.6% from 4.4% to 5.0% as a percentage of property
revenue, when compared to the same period in 2011. Salaries and
benefits increased due to the hiring of additional staff related to
continued growth and higher incentive payments. Other increases are
primarily due to higher travel costs, training and development and
increased Trustee fees.
Finance Costs – Operations
| Three months ended | Three months ended | |||
| (In millions of CAD dollars) | Mar. 31, 2012 | Mar. 31, 2011 | ||
| Same-asset finance costs | $12.091 | $12.817 | ||
| Acquisition, disposition and redevelopment finance costs | 1.922 | 0.855 | ||
| Amortization of effective swaps and deferred financing charges | 1.737 | 1.739 | ||
| Finance costs – operations | $15.750 | $15.411 |
Same-asset finance costs for the quarter ended March 31, 2012 decreased
by $0.7 million or 5.7% compared to the quarter ended March 31, 2011
primarily due to the maturity of the interest rate swap agreement in
July 2011 resulting in an increase in lower cost floating rate debt and
the conversions of Convertible Debentures.
FFO and AFFO
Crombie's FFO and AFFO had the following results for the first quarter
ended March 31, 2012 and 2011:
| Three months ended | Variance | |||||||
| Mar. 31, | ||||||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | ||||
| FFO | $19.301 | $18.329 | $0.972 | 5.3% | ||||
| FFO Per Unit – Basic | $0.26 | $0.28 | (0.02) | (7.1)% | ||||
| FFO Per Unit – Diluted | $0.25 | $0.26 | (0.01) | (3.8)% | ||||
| FFO Payout ratio | 88.9% | 80.5% | (8.4)% | |||||
| AFFO | $16.007 | $15.259 | $0.748 | 4.9% | ||||
| AFFO Per Unit – Basic | $0.22 | $0.23 | $(0.01) | (4.3)% | ||||
| AFFO Per Unit – Diluted | $0.21 | $0.22 | $(0.01) | (4.5)% | ||||
| AFFO Payout ratio | 107.2% | 96.7% | (10.5)% | |||||
Crombie's FFO and AFFO payout ratio for the quarter ended March 31, 2012
have been impacted by the following:
-
Distributions for the first quarter of 2012 increased by $615 compared
to the first quarter of 2011 related to the 4,630,000 REIT Units and
3,655,200 Class B LP Units issued on March 29, 2012. This impacted the
March 31, 2012 AFFO payout ratio by approximately 3.8%. The $116,925 in
net proceeds raised was used to fund the $255,000 in property
acquisitions completed on April 10, 2012. -
Approximately $22,000 of the net proceeds from Crombie's equity issuance
on October 20, 2011 has not been fully deployed in property
acquisitions. The additional distributions related to these net
proceeds have impacted the March 31, 2012 AFFO payout ratio by
approximately 1.3%. -
The AFFO payout ratio is further impacted by the reduced occupancy rate
of the properties from 93.3% occupied at December 31, 2011 to 91.0% at
March 31, 2012. The occupancy rate in the quarter has primarily been
impacted by: the maturity of the Walmart lease in Downsview Plaza in
Halifax, Nova Scotia; the temporary vacancy in Barrington Tower in
Halifax, Nova Scotia as the property is being developed to accommodate
the needs of a new tenant later in 2012; and, by the loss of five Hart
locations due to CCAA filing.
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
$30.0 million was drawn as at March 31, 2012, and an additional $11.5
million encumbered by outstanding letters of credit, resulting in
significant available liquidity.
Debt to gross book value is 49.1% (including convertible debentures) at
March 31, 2012 compared to 52.5% at December 31, 2011 and 54.3% at
March 31, 2011. Crombie's debt to gross book value at March 31, 2012 is
lower than usual due to the $120.1 million raised on March 29, 2012
which helped fund the property acquisitions on April 10, 2012. 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 interest and debt service coverage for the quarter ended March
31, 2012 were 2.49 times EBITDA and 1.71 times EBITDA respectively.
This compares to 2.47 times EBITDA and 1.75 times EBITDA respectively
for the quarter ended March 31, 2011.
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 incentive 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) 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 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 incentives, 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,
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. 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
161 investment properties in nine provinces, comprising approximately
13.5 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
2011 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 quarter ended March 31, 2012 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 first quarter
ended March 31, 2012 results on a conference call to be held Friday,
May 11, 2012, 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 25, 2012, by dialling
(416) 849-0833 or (855) 859-2056 and entering pass code 71609328, or on
the Crombie website for 90 days after the meeting.