STELLARTON, NS, Nov. 13, 2012 /CNW/ – Crombie Real Estate Investment
Trust ("Crombie") (TSX: CRR.UN) is pleased to report its results for
the third quarter ended September 30, 2012.
2012 Highlights
-
Funds from operations ("FFO") for the quarter ended September 30, 2012
was $0.25 per unit (payout ratio 90.7%) compared to $0.27 per unit
(payout ratio 84.2%) for the same period in 2011. Excluding the impact
of the approximately $3.0 million expense relating to the Refinanced
Mortgages (see Finance Costs – Operations below), FFO for the quarter
ended September 30, 2012 would have been $0.28 (payout ratio 79.5%). -
FFO for the nine months ended September 30, 2012 was $0.78 per unit
(payout ratio 87.2%) compared to $0.82 per unit (payout ratio 81.7%)
for the same period in 2011. Excluding the approximately $3.0 million
Refinanced Mortgages impact, FFO for the nine months ended September
30, 2012 would have been $0.81 (payout ratio 83.3%). -
Adjusted funds from operations ("AFFO") for the quarter ended September
30, 2012 was $0.21 per unit (payout ratio 106.1%) compared to $0.22 per
unit (payout ratio 101.9%) for the same period in 2011. Excluding the
impact of the approximately $3.0 million expense relating to the
Refinanced Mortgages, AFFO for the quarter ended September 30, 2012
would have been $0.24 (payout ratio 94.3%). -
AFFO for the nine months ended September 30, 2012 was $0.65 per unit
(payout ratio 103.9%) compared to $0.65 per unit (payout ratio 102.7%)
for the same period in 2011. Excluding the approximately $3.0 million
Refinanced Mortgages impact, AFFO for the nine months ended September
30, 2012 would have been $0.68 (payout ratio 99.6%). -
Crombie completed the acquisition of two properties in the quarter ended
September 30, 2012 totalling $29.6 million; 30 retail properties
totalling $340.8 million have been acquired year to date which
increases total assets in excess of $2.0 billion. -
Property revenue for the quarter ended September 30, 2012 of $64.5
million; an increase of $9.7 million or 17.7% over the $54.8 million
for the quarter ended September 30, 2011. -
Same-asset cash net operating income ("NOI") for the quarter ended
September 30, 2012 of $33.3 million; an increase of $1.5 million or
4.7%, compared to $31.8 million for the quarter ended September 30,
2011 and for the nine months ended September 30, 2012, same-asset cash
NOI of $99.2 million; an increase of $2.5 million or 2.5% over the same
period in 2011. -
Occupancy on a committed basis was 93.5% at September 30, 2012 compared
with 93.5% at June 30, 2012, and 94.7% at December 31, 2011. Actual
occupied space at September 30, 2012 was 92.2% compared with 91.8% at
June 30, 2012, and 93.3% at December 31, 2011. -
Crombie completed leasing activity on 864,000 square feet of GLA during
the nine months ended September 30, 2012, which represents
approximately 83.8% of its 2012 expiring lease square footage. -
Crombie's 2012 leasing activity included lease renewals during the first
nine months on 371,000 square feet at an average rate of $14.27 per
square foot; an increase of 8.3% over the expiring lease rate.
Crombie's new leasing activity during the first nine months was
completed at an average rate of $13.24 per square foot.
Commenting on the third quarter results, Donald E. Clow, FCA, President
and Chief Executive Officer stated: "The refinancing of a portfolio of
mortgages on 23 properties in September is a tremendous win for Crombie
and its stakeholders. While expenses of $3.0 million were realized in
the quarter, the payback on this transaction is short and significant.
At current interest rates, the interest savings in less than one year
should offset the costs incurred. The immediate remortgaging of these
properties in the coming few quarters should provide additional funds
to further our continued development, redevelopment and property
acquisitions. Our strong year to date acquisitions growth is aligned
with 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
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 nine months ended September 30, 2012 compared to the same
period in fiscal 2011.
| (In millions of CAD dollars, except per unit amounts) | Three months ended Sep. 30, 2012 |
Three months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2012 |
Nine months ended Sep. 30, 2011 |
|
| Property revenue | $64.459 | $54.781 | $187.552 | $167.456 | |
| Property operating expenses | 21.731 | 19.611 | 67.368 | 61.674 | |
| Property NOI | 42.728 | 35.170 | 120.184 | 105.782 | |
| NOI margin percentage | 66.3% | 64.2% | 64.1% | 63.2% | |
| Other items: | |||||
| Lease terminations | 0.273 | — | 0.386 | 0.163 | |
| Depreciation and amortization | (12.200) | (7.718) | (32.077) | (23.085) | |
| General and administrative expenses | (3.105) | (2.487) | (9.213) | (7.848) | |
| Operating income before finance costs and income taxes | 27.696 | 24.965 | 79.280 | 75.012 | |
| Finance costs – operations | (20.285) | (16.075) | (52.770) | (47.170) | |
| Operating income before income taxes | 7.411 | 8.890 | 26.510 | 27.842 | |
| Taxes – deferred | 0.500 | 0.200 | 1.400 | (0.300) | |
| Operating income attributable to Unitholders | 7.911 | 9.090 | 27.910 | 27.542 | |
| Finance costs – distributions to Unitholders | (19.343) | (15.132) | (55.270) | (44.753) | |
| Decrease in net assets attributable to Unitholders | $(11.432) | $(6.042) | $(27.360) | $(17.211) | |
| Operating income attributable to Unitholders per Unit, Basic and Diluted |
$0.09 | $0.13 | $0.34 | $0.41 | |
| Property NOI – Cash Basis | |||||
| (In millions of CAD dollars) | Three months ended Sep. 30, 2012 |
Three months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2012 |
Nine months ended Sep. 30, 2011 |
|
| Property NOI | $42.728 | $35.170 | $120.184 | $105.782 | |
| Non-cash tenant incentive amortization | 1.727 | 1.369 | 4.799 | 3.836 | |
| Non-cash straight-line rent | (1.249) | (0.800) | (3.564) | (2.615) | |
| Property cash NOI | 43.206 | 35.739 | 121.419 | 107.003 | |
| Acquisition, disposition and redevelopment property cash NOI | 9.850 | 3.895 | 22.179 | 10.216 | |
| Same-asset property cash NOI | $33.356 | $31.844 | $99.240 | $96.787 | |
Property NOI, on a cash basis, excludes straight-line rent recognition
and tenant incentive amortization amounts. The 4.7% and 2.5% increases
in same-asset cash NOI for the quarter ended and nine months ended
September 30, 2012 respectively are primarily the result of increased
average rent per square foot from leasing activity during the past 12
months, completed land use intensification development projects 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 Sep. 30, 2012 |
Three months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2012 |
Nine months ended Sep. 30, 2011 |
| Same-asset property revenue | $50.355 | $48.468 | $152.704 | $149.229 |
| Same-asset property operating expenses | 17.483 | 16.969 | 54.588 | 53.128 |
| Same-asset property NOI | $32.872 | $31.499 | $98.116 | $96.101 |
| Same-asset NOI margin % | 65.3% | 65.0% | 64.3% | 64.4% |
Same-asset property NOI for the quarter grew 4.4% over Q3 of 2011.
Same-asset property revenue of $50.4 million for the quarter ended
September 30, 2012 increased by 3.9% compared to the same quarter in
2011. Same-asset property revenue of $152.7 million for the nine
months ended September 30, 2012 was 2.3% higher than the nine months
ended September 30, 2011 due to increased base rent driven by lease
renewal activity, completed land use intensification development
projects at several properties and recoveries as a result of higher
recoverable property expenses.
Same-asset property operating expenses of $17.5 million for the quarter
ended September 30, 2012 were 3.0% higher than the quarter ended
September 30, 2011 due primarily to higher recoverable property
expenses. Same-asset property expenses of $54.6 million for the nine
months ended September 30, 2012 increased by 2.7% from the nine months
ended September 30, 2011 due primarily to higher recoverable property
expenses.
| Acquisition, Disposition and Redevelopment Property NOI | ||||
| (In millions of CAD dollars) | Three months ended Sep. 30, 2012 |
Three months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2012 |
Nine months ended Sep. 30, 2011 |
| Property revenue | $14.104 | $6.313 | $34.848 | $18.227 |
| Property operating expenses | 4.248 | 2.642 | 12.780 | 8.546 |
| Property NOI | $9.856 | $3.671 | $22.068 | $9.681 |
| NOI margin % | 69.9% | 58.1% | 63.3% | 53.1% |
For the quarter ended and nine months ended September 30, 2012, the
acquisition, disposition and redevelopment property results have
significantly increased over the same periods in 2011. The growth is
impacted by the significant acquisition activity during 2011 and 2012
as well as the increased focus on property redevelopment over that same
period.
General and Administrative Expenses
General and administrative expenses for the quarter ended September 30,
2012 increased by 0.3% from 4.5% to 4.8% 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 public company costs.
General and administrative expenses as a percentage of property revenue
increased by 0.2% from 4.7% to 4.9% as a percentage of revenue for the
nine months ended September 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 public company costs and costs
associated with due diligence on potential property acquisitions.
| Finance Costs – Operations | |||||
|
(In millions of CAD dollars) |
Three months ended Sep. 30, 2012 |
Three months ended Sep. 30, 2011 |
Nine months ended Sep. 30, 2012 |
Nine months ended Sep. 30, 2011 |
|
| Same-asset finance costs(1) | $12.324 | $12.723 | $35.913 | $38.251 | |
| Acquisition, disposition and redevelopment finance costs | 3.752 | 1.324 | 8.994 | 3.303 | |
| Amortization of effective swaps and deferred financing charges(1) | 4.209 | 2.028 | 7.863 | 5.616 | |
| Finance costs – operations | $20.285 | $16.075 | $52.770 | $47.170 | |
| (1) |
In September 2012, Crombie assigned a portfolio of mortgages on 23 investment properties (the "Refinanced Mortgages") to a new lender. Concurrent with the assignment of the mortgages to the new lender, Crombie renegotiated the terms of the debt, refinancing them with a 30 month floating rate term credit facility. Included in finance costs for the quarter are expenses of approximately $3.0 million associated with this transaction (approximately $1.5 million in cash costs related to legal fees, term loan set up fees and a repayment fee paid to the mortgage lender are included in same-asset finance costs and approximately $1.5 million representing the unamortized balance of deferred financing and other costs previously paid in respect of the 2008 mortgage financing are included in Amortization of effective swaps and deferred financing charges). The mortgages, with a weighted average interest rate of 5.91% and terms to maturity from 2013 to 2017, totalled $92.4 million, while the floating rate term credit facility of $92.7 million had an interest rate of 3.07% at September 30, 2012. The floating rate is based on Bankers' Acceptance rates plus a spread or Prime Rates plus a spread. |
Excluding the additional costs associated with the Refinanced Mortgages,
same-asset finance costs for the nine months ended September 30, 2012
would have decreased by approximately $3.8 million compared to the nine
months ended September 30, 2011 and same-asset finance costs for the
three months ended September 30, 2012 would have decreased by
approximately $1.9 million compared to the three months ended September
30, 2011. The savings are primarily due to greater utilization of
lower cost floating rate debt, mortgage refinancings 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 third quarter
ended September 30, 2012 and 2011:
|
Three months ended Sep. 30, |
Variance | ||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | |
| FFO | $21.338 | $17.977 | $3.361 | 18.7% | |
| FFO Per Unit – Basic | $0.25 | $0.27 | $(0.02) | (7.4)% | |
| FFO Per Unit – Diluted | $0.24 | $0.26 | $(0.02) | (7.7)% | |
| FFO Payout ratio | 90.7% | 84.2% | (6.5)% | ||
| Excluding the impact of $3.0 million of costs on Refinanced Mortgages:(1) | |||||
| FFO Per Unit – Basic | $0.28 | $0.27 | $0.01 | 3.7% | |
| FFO Per Unit – Diluted | $0.27 | $0.26 | $0.01 | 3.8% | |
| FFO Payout ratio | 79.5% | 84.2% | 4.7% | ||
| AFFO | $18.237 | $14.851 | $3.386 | 22.8% | |
| AFFO Per Unit – Basic | $0.21 | $0.22 | $(0.01) | (4.5)% | |
| AFFO Per Unit – Diluted | $0.21 | $0.22 | $(0.01) | (4.5)% | |
| AFFO Payout ratio | 106.1% | 101.9% | (4.2)% | ||
| Excluding the impact of $3.0 million of costs on Refinanced Mortgages:(1) | |||||
| AFFO Per Unit – Basic | $0.24 | $0.22 | $0.02 | 9.1% | |
| AFFO Per Unit – Diluted | $0.23 | $0.22 | $0.01 | 4.5% | |
| AFFO Payout ratio | 94.3% | 101.9% | 7.6% | ||
| (1) |
During the third quarter of 2012, Crombie refinanced $92.4 million of mortgages with a floating rate term credit facility. Refinancing expenses of approximately $3.0 million were incurred. |
The increase in FFO for the quarter ended September 30, 2012 was
primarily due to the significant acquisition activity during 2011 and
2012.
AFFO for the quarter ended September 30, 2012 was $18.2 million, an
increase of $3.4 million or 22.8% over the same period in 2011, due
primarily to the improved FFO results as previously discussed.
|
Nine months ended Sep. 30, |
Variance | ||||
| (In millions of CAD dollars, except per unit amounts) | 2012 | 2011 | $ | % | |
| FFO | $63.386 | $54.763 | $8.623 | 15.7% | |
| FFO Per Unit – Basic | $0.78 | $0.82 | $(0.04) | (4.9)% | |
| FFO Per Unit – Diluted | $0.76 | $0.78 | $(0.02) | (2.6)% | |
| FFO Payout ratio | 87.2% | 81.7% | (5.5)% | ||
| Excluding the impact of $3.0 million of costs on Refinanced Mortgages:(1) | |||||
| FFO Per Unit – Basic | $0.81 | $0.82 | $(0.01) | (1.2)% | |
| FFO Per Unit – Diluted | $0.79 | $0.78 | $0.01 | 1.3% | |
| FFO Payout ratio | 83.3% | 81.7% | (1.6)% | ||
| AFFO | $53.198 | $43.566 | $9.632 | 22.1% | |
| AFFO Per Unit – Basic | $0.65 | $0.65 | — | — | |
| AFFO Per Unit – Diluted | $0.64 | $0.64 | — | — | |
| AFFO Payout ratio | 103.9% | 102.7% | (1.2)% | ||
| Excluding the impact of $3.0 million of costs on Refinanced Mortgages:(1) | |||||
| AFFO Per Unit – Basic | $0.68 | $0.65 | $0.03 | 4.6% | |
| AFFO Per Unit – Diluted | $0.67 | $0.64 | $0.03 | 4.7% | |
| AFFO Payout ratio | 99.6% | 102.7% | 3.1% | ||
| (1) |
During the third quarter of 2012, Crombie refinanced $92.4 million of mortgages with a floating rate term credit facility. Refinancing expenses of approximately $3.0 million were incurred. |
The increase in FFO for the nine months ended September 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 nine months ended September 30, 2012 was $53.2 million, an
increase of $9.6 million or 22.1% 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 nine months ended September
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 $62.6 million was drawn as at September 30,
2012, and an additional $11.4 million encumbered by outstanding letters
of credit, resulting in significant available liquidity.
Debt to gross book value is 51.6% (including convertible debentures) at
September 30, 2012 compared to 52.4% at June 30, 2012, 52.5% at
December 31, 2011 and 54.8% at September 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 nine months ended
September 30, 2012 were 2.58 times EBITDA and 1.75 times EBITDA
respectively. This compares to 2.45 times EBITDA and 1.73 times EBITDA
respectively for the nine months ended September 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.
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 13, 2012.
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 170 investment
properties in nine provinces, comprising approximately 14.0 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 the realization of
any benefits from refinancing the portfolio of mortgages, future
development and acquisition of properties and other pending growth
opportunities and expected pace of growth, all of which could be
impacted by financing market conditions, 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, 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 third quarter
ended September 30, 2012 results on a conference call to be held
Tuesday, November 13, 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 November 27, 2012, by dialling
(416) 849-0833 or (855) 859-2056 and entering pass code 49536472, or on
the Crombie website for 90 days after the meeting.