STELLARTON, NS, Aug. 7, 2012 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for
the second quarter ended June 30, 2012.
2012 Highlights
-
Crombie completed the acquisition of 27 retail properties in the quarter
ended June 30, 2012 totalling $302.4 million; 28 retail properties
totalling $316.3 million year to date which increases total assets in
excess of $2.0 billion. -
Property revenue for the quarter ended June 30, 2012 of $63.6 million;
an increase of $7.3 million or 12.9% over the $56.3 million for the
quarter ended June 30, 2011. -
Same-asset cash net operating income ("NOI") for the quarter ended June
30, 2012 of $33.3 million; an increase of $0.5 million or 1.6%,
compared to $32.8 million for the quarter ended June 30, 2011 and for
the six months ended June 30, 2011, same-asset cash NOI of $66.5
million; an increase of $0.8 million or 1.3% over the same period in
2011. -
Occupancy on a committed basis was 93.5% at June 30, 2012 compared with
92.7% at March 31, 2012, and 94.7% at December 31, 2011. Actual
occupied space at June 30, 2012 was 91.8% compared with 93.3% at
December 31, 2011 and 94.9% at June 30, 2011. -
Crombie completed leasing activity on 673,000 square feet of GLA during
the six months ended June 30, 2012, which represents approximately
65.3% of its 2012 expiring lease square footage. -
Crombie's leasing activity included lease renewals during the first six
months of 2012 on 268,000 square feet at an average rate of $13.30 per
square foot; an increase of 9.4% over the expiring lease rate.
Crombie's new leasing activity during the first six months was
completed at an average rate of $13.58 per square foot. -
Funds from operations ("FFO") for the quarter ended June 30, 2012 was
$0.27 per unit (payout ratio 82.5%) compared to $0.28 per unit (payout
ratio 80.6%) for the same period in 2011. -
Adjusted funds from operations ("AFFO") for the quarter ended June 30,
2012 was $0.23 per unit (payout ratio 99.0%) compared to $0.20 per unit
(payout ratio 110.5%) for the same period in 2011. -
On June 22, 2012, as part of the annual renewal, the revolving credit
facility's accordion feature was exercised and approved by lenders
which increased the maximum principal amount thereof to $200 million,
subject to available borrowing base.
Commenting on the second quarter results, Donald E. Clow, FCA, President
and Chief Executive Officer stated: "We are pleased to have
successfully executed one of the most productive quarters in Crombie's
history. With Q2 property acquisitions, development and redevelopment
in excess of $300 million, we are delivering on our strategy to
increase our pace of high quality growth and national geographic
diversification while maintaining ample liquidity and financial
flexibility in these uncertain global economic times. We successfully
financed this Q2 growth with a Unit offering, long term mortgage and
convertible debenture financings and utilization of our expanded $200
million revolving credit facility; all on very attractive terms. Going
forward we will continue to focus on building a national portfolio of
primarily grocery and drug anchored retail centres supported by a
strong national real estate platform."
The table below presents a summary of financial performance for the
quarter and six months ended June 30, 2012 compared to the same period
in fiscal 2011. All amounts are presented in accordance with
International Financial Reporting Standards ("IFRS").
| (In millions of CAD dollars, except per unit amounts) | Three months ended June 30, 2012 |
Three months ended June 30, 2011 |
Six months ended June 30, 2012 |
Six months ended June 30, 2011 |
||||
| Property revenue | $63.646 | $56.357 | $123.093 | $112.675 | ||||
| Property operating expenses | 22.585 | 20.639 | 45.637 | 42.063 | ||||
| Property NOI | 41.061 | 35.718 | 77.456 | 70.612 | ||||
| NOI margin percentage | 64.5% | 63.4% | 62.9% | 62.7% | ||||
| Other items: | ||||||||
| Lease terminations | — | 0.163 | 0.113 | 0.163 | ||||
| Depreciation and amortization | (11.352) | (7.610) | (19.877) | (15.367) | ||||
| General and administrative expenses | (3.138) | (2.861) | (6.108) | (5.361) | ||||
| Operating income before finance costs and income taxes | 26.571 | 25.410 | 51.584 | 50.047 | ||||
| Finance costs – operations | (16.735) | (15.684) | (32.485) | (31.095) | ||||
| Operating income before income taxes | 9.836 | 9.726 | 19.099 | 18.952 | ||||
| Taxes – deferred | 0.600 | (0.600) | 0.900 | (0.500) | ||||
| Operating income attributable to Unitholders | 10.436 | 9.126 | 19.999 | 18.452 | ||||
| Finance costs – distributions to Unitholders | (18.760) | (14.870) | (35.927) | (29.621) | ||||
| Decrease in net assets attributable to Unitholders | $(8.324) | $(5.744) | $(15.928) | $(11.169) | ||||
| Operating income attributable to Unitholders per Unit, Basic and Diluted | $0.12 | $0.14 | $0.25 | $0.28 | ||||
| Property NOI – Cash Basis | ||||||||
| (In millions of CAD dollars) | Three months ended June 30, 2012 |
Three months ended June 30, 2011 |
Six months ended June 30, 2012 |
Six months ended June 30, 2011 |
||||
| Property NOI | $41.061 | $35.718 | $77.456 | $70.612 | ||||
| Non-cash tenant incentive amortization | 1.559 | 1.121 | 3.072 | 2.467 | ||||
| Non-cash straight-line rent | (1.294) | (0.987) | (2.315) | (1.815) | ||||
| Property cash NOI | 41.326 | 35.852 | 78.213 | 71.264 | ||||
| Acquisition, disposition and redevelopment property cash NOI | 8.011 | 3.051 | 11.730 | 5.619 | ||||
| Same-asset property cash NOI | $33.315 | $32.801 | $66.483 | $65.645 | ||||
Property NOI, on a cash basis, excludes straight-line rent recognition
and tenant incentive amortization amounts. The 1.6% and 1.3% increases
in same-asset cash NOI for the quarter ended and six months ended June
30, 2012 respectively are primarily the result of increased average
rent per square foot from leasing activity during the past 12 months
and improved recovery rates.
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 June 30, 2012 |
Three months ended June 30, 2011 |
Six months ended June 30, 2012 |
Six months ended June 30, 2011 |
||||
| Same-asset property revenue | $51.259 | $50.709 | $103.427 | $102.015 | ||||
| Same-asset property operating expenses | 18.290 | 17.971 | 37.754 | 36.789 | ||||
| Same-asset property NOI | $32.969 | $32.738 | $65.673 | $65.226 | ||||
| Same-asset NOI margin % | 64.3% | 64.6% | 63.5% | 63.9% | ||||
Same-asset property NOI increased slightly over Q2 of 2011. Same-asset
property revenue of $51.3 million for the quarter ended June 30, 2012
increased by 1.1% compared to the same quarter in 2011. Same-asset
property revenue of $103.4 million for the six months ended June 30,
2012 was 1.4% higher than the six months ended June 30, 2011 due to
increased base rent driven by lease renewal activity and recoveries as
a result of higher recoverable property expenses.
Same-asset property operating expenses of $18.3 million for the quarter
ended June 30, 2012 were 1.8% higher than the quarter ended June 30,
2011 due primarily to higher recoverable property expenses. Same-asset
property expenses of $37.8 million for the six months ended June 30,
2012 increased by 2.6% from the six months ended June 30, 2011 due
primarily to higher recoverable property expenses.
| Acquisition, Disposition and Redevelopment Property NOI | ||||||||
| (In millions of CAD dollars) | Three months ended June 30, 2012 |
Three months ended June 30, 2011 |
Six months ended June 30, 2012 |
Six months ended June 30, 2011 |
||||
| Property revenue | $12.387 | $5.648 | $19.666 | $10.660 | ||||
| Property operating expenses | 4.295 | 2.668 | 7.883 | 5.274 | ||||
| Property NOI | $8.092 | $2.980 | $11.783 | $5.386 | ||||
| NOI margin % | 65.3% | 52.8% | 59.9% | 50.5% | ||||
For the quarter ended and six months ended June 30, 2012, the
acquisition, disposition and redevelopment property results have
significantly increased over the same periods in 2011. The growth is
impacted by the properties acquired in March, April and June 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 June 30, 2012
decreased by 0.2% from 5.1% to 4.9% 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 accruals. Other increases are
primarily due to higher travel costs, training and development,
increased Trustee fees and costs associated with due diligence on
potential property acquisitions. The 2012 percentages are impacted by
the significant growth in property revenue.
General and administrative expenses as a percentage of property revenue
increased by 0.2% from 4.8% to 5.0% for the six months ended June 30,
2012 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, increased Trustee
fees and costs associated with due diligence on potential property
acquisitions. The 2012 percentages are impacted by the significant
growth in property revenue.
| Finance Costs – Operations | ||||||||
|
(In millions of CAD dollars) |
Three months ended June 30, 2012 |
Three months ended June 30, 2011 |
Six months ended June 30, 2012 |
Six months ended June 30, 2011 |
||||
| Same-asset finance costs | $11.620 | $12.861 | $23.711 | $25.678 | ||||
| Acquisition, disposition and redevelopment finance costs | 3.198 | 0.974 | 5.120 | 1.829 | ||||
| Amortization of effective swaps and deferred financing charges | 1.917 | 1.849 | 3.654 | 3.588 | ||||
| Finance costs – operations | $16.735 | $15.684 | $32.485 | $31.095 | ||||
Same-asset finance costs for the six months ended June 30, 2012
decreased by $2.0 million or 7.7% compared to the six months ended June
30, 2011. Same-asset finance costs for the three months ended June 30,
2012 decreased by $1.2 million or 9.6% compared to the three months
ended June 30, 2011. The savings are primarily due to the maturity of
the interest rate swap agreement in July 2011 resulting in greater
utilization of lower cost floating rate debt and interest savings from
conversions of Convertible Debentures. Growth in acquisition,
disposition and redevelopment finance costs is consistent with
Crombie's significant acquisition activity in 2012 and 2011.
FFO and AFFO
Crombie's FFO and AFFO had the following results for the second quarter
ended June 30, 2012 and 2011:
|
Three months ended June 30, |
Variance | ||||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | |||
| FFO | $22.747 | $18.457 | $4.290 | 23.2% | |||
| FFO Per Unit – Basic | $0.27 | $0.28 | $(0.01) | (3.6)% | |||
| FFO Per Unit – Diluted | $0.26 | $0.26 | — | –% | |||
| FFO Payout ratio | 82.5% | 80.6% | (1.9%) | ||||
| AFFO | $18.954 | $13.456 | $5.498 | 40.9% | |||
| AFFO Per Unit – Basic | $0.23 | $0.20 | $0.03 | 15.0% | |||
| AFFO Per Unit – Diluted | $0.22 | $0.20 | $0.02 | 10.0% | |||
| AFFO Payout ratio | 99.0% | 110.5% | 11.5% | ||||
The increase in FFO for the quarter ended June 30, 2012 was primarily
due to the significant acquisition activity during 2011 and 2012.
AFFO for the quarter ended June 30, 2012 was $19.0 million, an increase
of $5.5 million or 40.9% over the same period in 2011, due primarily to
the improved FFO results and the unfavourable swap agreement settlement
of $1.7 million in the quarter ended June 30, 2011.
|
Six months ended June 30, |
Variance | |||||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | ||||
| FFO | $42.048 | $36.786 | $5.262 | 14.3% | ||||
| FFO Per Unit – Basic | $0.53 | $0.56 | $(0.03) | (5.4)% | ||||
| FFO Per Unit – Diluted | $0.51 | $0.53 | $(0.02) | (3.8)% | ||||
| FFO Payout ratio | 85.4% | 80.5% | (4.9)% | |||||
| AFFO | $34.961 | $28.715 | $6.246 | 21.8% | ||||
| AFFO Per Unit – Basic | $0.44 | $0.43 | $0.01 | 2.3% | ||||
| AFFO Per Unit – Diluted | $0.43 | $0.42 | $0.01 | 2.4% | ||||
| AFFO Payout ratio | 102.8% | 103.2% | 0.4% | |||||
The increase in FFO for the six months ended June 30, 2012 was due
primarily to significant acquisition activity which resulted in
improved NOI results offset in part by increased operations finance
costs related to the acquisitions.
AFFO for the six months ended June 30, 2012 was $35.0 million, an
increase of $6.2 million or 21.8% over the same period in 2011, due
primarily to the improved FFO results and the unfavourable swap
agreement settlement of $1.7 million in the six months ended June 30,
2011.
Liquidity and Financings
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 $200 million, subject to available
borrowing base of which $109.0 million was drawn as at June 30, 2012,
and an additional $13.4 million encumbered by outstanding letters of
credit, resulting in significant available liquidity.
Debt to gross book value is 52.4% (including convertible debentures) at
June 30, 2012 compared to 49.1% at March 31, 2012, 52.5% at December
31, 2011 and 55.4% at June 30, 2011. 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 six months ended
June 30, 2012 were 2.58 times EBITDA and 1.75 times EBITDA
respectively. This compares to 2.46 times EBITDA and 1.74 times EBITDA
respectively for the six months ended June 30, 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 grocery-anchored and drug store-anchored retail
properties. Crombie currently owns a portfolio of 166 investment
properties in nine provinces, comprising approximately 13.7 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 period ended June 30, 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 second quarter
ended June 30, 2012 results on a conference call to be held Wednesday,
August 8, 2012, at 1:00 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 August 22, 2012, by dialling
(416) 849-0833 or (855) 859-2056 and entering pass code 14206742, or on
the Crombie website for 90 days after the meeting.