Strong fair value and AFFO growth with significant
deleveraging in 2021
NEW GLASGOW, NS, Feb. 23, 2022 /CNW/ - Crombie Real Estate
Investment Trust ("Crombie") (TSX: CRR.UN) today announced results
for its fourth quarter and year ended December 31, 2021. Management will host a
conference call to discuss the results at 12:00 p.m. (EST), February 24, 2022.
"I am incredibly proud of Crombie's achievements during the
fourth quarter and throughout 2021. Very strong fundamentals drove
solid operational and financial performance, while our capital
allocation to Empire-related investments and development activities
generated solid fair value and AFFO growth in 2021," said
Don Clow, President and CEO. "We
enhanced our portfolio quality, which is becoming increasingly
urban and diversified, through the addition of urban residential
assets to our primarily grocery-anchored and retail-related
industrial portfolio. Crombie continued to improve its financial
condition with ample liquidity of over $500
million, an increase of our unencumbered assets to
$1.8 billion and a lower cost of
capital. All of these accomplishments were achieved while
navigating a global pandemic with health and safety implications,
supply chain disruptions, labor shortages and capital markets
volatility."
FOURTH QUARTER SUMMARY
(In thousands of CAD dollars,
except per unit amounts and as otherwise noted)
Operational Highlights
- Committed and economic occupancy of 96.2% and 95.6%,
respectively
- Renewals of 97,000 square feet at rents 5.0% above expiring
rates
- Rent collected 99%
- Gross proceeds of $152,218 from
dispositions totalling 372,000 square feet
Financial Highlights
- Property revenue of $103,832
- Operating income of $78,730
- FFO(1) $0.29 per unit;
FFO(1) payout ratio 78.0%
- AFFO(1) $0.25 per
unit; AFFO(1) payout ratio 90.5%
- Same-asset property cash NOI(1) increase of 2.4%
(SANOI 1.2% growth for the quarter adjusting for what management
estimates to be the impacts of COVID-19)
- Debt to gross fair value(1) of 42.9%
- Debt to trailing 12 months adjusted EBITDA(1) of
8.25x
- Available liquidity of $507,777
(1)
|
Non-GAAP financial
measures used by management to evaluate Crombie's business
performance. See "Cautionary Statements and Non-GAAP Measures"
below for a reconciliation of FFO, FFO payout ratio, AFFO, AFFO
payout ratio, same-asset property cash NOI, debt to gross fair
value, and debt to trailing 12 months adjusted EBITDA.
|
COVID-19 Impact
Crombie is well-positioned with respect to the defensiveness of
annual minimum rent (AMR):
- 78% of AMR is generated from grocery-anchored properties,
inclusive of retail-related industrial properties
- 69% of AMR is generated from essential services tenants
- 7% of AMR is generated from small business tenants
During the three months ended December
31, 2021, 99% of gross rent was collected; with only parking
revenue depressed as compared to pre-pandemic levels. Continuing
uncertainty with respect to the severity, duration and overall
impacts of the pandemic mean that forward-looking forecasts of
operating and financial results remain uncertain at this time.
Information in this press release is a select summary of
results. This press release should be read in conjunction with
Crombie's MD&A for the year ended December 31, 2021 and Consolidated Financial
Statements and Notes for the years ended December 31, 2021, and December 31, 2020. Full details on our results
can be found at www.crombie.ca and www.sedar.com.
Financial Results
Crombie's key financial metrics for the three months ended
December 31, 2021 are as follows:
|
Three months
ended December 31,
|
(In thousands of CAD
dollars, except per unit amounts and as otherwise noted)
|
2021
|
2020
|
Variance
|
%
|
Property
revenue
|
$
|
103,832
|
$
|
97,060
|
$
|
6,772
|
7.0 %
|
Property operating
expenses
|
32,430
|
29,245
|
(3,185)
|
(10.9)%
|
Net property
income
|
$
|
71,402
|
$
|
67,815
|
$
|
3,587
|
5.3 %
|
Operating income
attributable to Unitholders
|
$
|
78,730
|
$
|
17,157
|
$
|
61,573
|
358.9 %
|
Same-asset property
cash NOI (1)
|
$
|
64,442
|
$
|
62,935
|
$
|
1,507
|
2.4 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
|
46,948
|
$
|
42,305
|
$
|
4,643
|
11.0 %
|
Per unit -
Basic
|
$
|
0.29
|
$
|
0.27
|
$
|
0.02
|
7.4 %
|
Payout
ratio(1)
|
78.0 %
|
83.2 %
|
|
(5.2)%
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
|
40,468
|
$
|
35,679
|
$
|
4,789
|
13.4 %
|
Per unit -
Basic
|
$
|
0.25
|
$
|
0.23
|
$
|
0.02
|
8.7 %
|
Payout
ratio(1)
|
90.5 %
|
98.7 %
|
|
(8.2)%
|
(1)
|
Same-asset property
cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio are
non-GAAP financial measures used by management to evaluate
Crombie's business performance. See "Cautionary Statements and
Non-GAAP Measures" below for a reconciliation of same-asset
property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout
ratio.
|
Operating income attributable to Unitholders increased by
$61,573, or 358.9%, compared to the
fourth quarter of 2020 primarily due to gain on disposal of
investment properties of $42,762,
including $27,904 from the sale of a
50% non-managing interest in the Pointe-Claire Customer Fulfillment
Centre ("CFC"), gain from equity accounted investments of
$15,525 resulting from distributions
received from 1600 Davie Limited Partnership in excess of our
investment in the joint venture, increased income of $1,963 from completed developments, $1,000 from renewals and new leasing, and
$913 from lease terminations.
Additionally, an impairment of $1,300
was recognized on one retail property during the quarter, which was
$3,200 lower than the impairment
related to four retail properties in the fourth quarter of 2020.
Finance costs from operations was lower by $2,273 primarily due to the early partial
redemption of Series B senior unsecured notes in 2020. The growth
in operating income was offset in part by increased general and
administrative expenses of $1,874
primarily as a result of an increase of $940 in salaries and benefits resulting from
higher annual incentive plan amounts, and an increase in Unit price
and its impact on Unit-based compensation plans of $813.
Same-asset property cash NOI increased by $1,507, or 2.4%, compared to the fourth quarter
of 2020 primarily due to $994 from
lease terminations, $599 in tenant
recoveries related to a property tax reassessment, an increase of
supplemental rents of $305 from
modernizations and capital improvements, and strong occupancy,
offset in part by increased bad debt expense of $292 (expense of $260 on same-asset properties in the fourth
quarter of 2021 compared to recovery of $32 in the same quarter of 2020). Same-asset
property cash NOI adjusted for the removal of what management
estimates to be the impacts of COVID-19 increased 1.2% compared to
the same period in 2020.
The increase in FFO of $4,643 is
primarily due to increased net property income (an increase of
$3,587 compared to the fourth quarter
of 2020) which resulted from increased income of $1,963 from completed developments, strong
occupancy, and $913 from lease
terminations. Additionally, finance costs from operations was lower
by $2,273 primarily due to the early
partial redemption of Series B senior unsecured notes in 2020. The
improved net property income is offset in part by increased general
and administrative expenses of $1,874
primarily as a result of an increase of $940 in salaries and benefits resulting from
higher annual incentive plan amounts, and increase in Unit price
and its impact on Unit-based compensation plans of $813.
The increase in AFFO is largely due to the impacts on FFO as
described above.
Crombie's key financial metrics for the twelve months ended
December 31, 2021 are as follows:
|
Twelve months ended
December 31, 2021
|
(In thousands of CAD
dollars, except per unit amounts and as otherwise noted)
|
2021
|
2020
|
Variance
|
%
|
Property
revenue
|
$
|
408,892
|
$
|
388,733
|
$
|
20,159
|
5.2 %
|
Property operating
expenses
|
125,861
|
129,872
|
4,011
|
3.1 %
|
Net property
income
|
$
|
283,031
|
$
|
258,861
|
$
|
24,170
|
9.3 %
|
Operating income
attributable to Unitholders
|
$
|
155,401
|
$
|
67,608
|
$
|
87,793
|
129.9 %
|
Same-asset property
cash NOI (1)
|
$
|
253,162
|
$
|
241,203
|
$
|
11,959
|
5.0 %
|
Funds from operations
("FFO") (1)
|
|
|
|
|
Basic
|
$
|
185,032
|
$
|
165,850
|
$
|
19,182
|
11.6 %
|
Per unit -
Basic
|
$
|
1.14
|
$
|
1.05
|
$
|
0.09
|
8.6 %
|
Payout
ratio(1)
|
78.1 %
|
84.6 %
|
|
(6.5)%
|
Adjusted funds from
operations ("AFFO") (1)
|
|
|
|
|
Basic
|
$
|
157,532
|
$
|
138,963
|
$
|
18,569
|
13.4 %
|
Per unit -
Basic
|
$
|
0.97
|
$
|
0.88
|
$
|
0.09
|
10.2 %
|
Payout
ratio(1)
|
91.8 %
|
101.0 %
|
|
(9.2)%
|
(1)
|
Same-asset property
cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio are
non-GAAP financial measures used by management to evaluate
Crombie's business performance. See "Cautionary Statements and
Non-GAAP Measures" below for a reconciliation of same-asset
property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout
ratio.
|
Operating income attributable to Unitholders increased by
$87,793, or 129.9%, on an annual
basis. Gain on disposal of investment properties increased by
$53,190, including $27,904 from the sale of a 50% non-managing
interest in the Pointe-Claire CFC in the fourth quarter of 2021.
Net property income increased $24,170
due to a reduction in bad debt expense of $10,082 as a result of decreased collection risk
in 2021; new income from completed developments of $7,700; $3,346 from
lease terminations; $2,100 from
renewals and new leasing; an increase in modernization income of
$2,100 offset by higher tenant
incentive amortization of $1,961; and
increased percentage rent of $1,284
resulting from tenants converting to percentage rent leases. During
the fourth quarter of 2021, Crombie received a distribution of
$25,000 from 1600 Davie Limited
Partnership, of which $15,525 was
treated as a gain from equity accounted investments as a result of
this distribution exceeding our investment in the joint venture.
Additionally, impairments of $2,539
were recognized on two retail properties during the year which was
$4,061 lower than the impairments
related to six properties in the prior year. The improved operating
income for the period was offset in part by increased general and
administrative expenses of $4,950,
primarily the result of an increase in Unit price and its impact on
Unit-based compensation plans of $5,764, offset in part by decreased salaries of
$1,121 and higher severance costs in
2020. Additionally, losses from equity accounted investments were
$2,941 for 2021 compared to
$72 for the year ended December 31, 2020, as residential development
projects move toward revenue stabilization, when revenue earned
will exceed expenses. Finance costs from operations increased by
$980 due primarily to lower
capitalized interest on developments of $1,738 and increased interest on long term debt
of $705 from the addition of new
mortgages and unsecured debt, offset in part by decreased interest
on credit facilities of $1,557
resulting from lower average outstanding balances in the year.
On an annual basis, same-asset property cash NOI increased
5.0% compared to 2020 primarily due to a reduction in bad debt
expense on same-asset properties of $5,388 as a result of decreased collection risk
in 2021, increased lease termination income of $2,638, strong occupancy, an increase in
supplemental rents of $1,927 from
modernizations and capital improvements, and $615 in tenant recoveries related to property tax
reassessments. Same-asset property cash NOI adjusted for the
removal of what management estimates to be the impacts of
COVID-19 increased by 1.4% compared to the adjusted results
for the year ended December 31,
2020.
On an annual basis, FFO increased $19,182 primarily due to improved net property
income (an increase of $24,170 year
over year) due to a significant reduction in bad debt expense of
$10,082 resulting from decreased
collection risk in 2021, increased income of $7,700 from completed developments, and an
increase of $3,346 in lease
termination income, $2,100 from
renewals and new leasing, and an increase in modernization income
of $2,100. The growth in net property
income is partially offset by increased general and administrative
expenses of $4,950 primarily related
to the impact of increased Unit price on Unit-based compensation
plans of $5,764, offset in part by
$1,509 of severance costs in the
second quarter of 2020. Additionally, losses from equity accounted
investments were $2,941 for the
period compared to $72 for the year
ended December 31, 2020, resulting
from operating results from residential development projects as
they move towards revenue stabilization, when revenue earned will
exceed expenses, and finance costs from operations increased by
$980 due primarily to lower
capitalized interest on developments of $1,738 and an increased interest on long term
debt of $705 from the addition of new
mortgages and unsecured debt, offset in part by decreased interest
on credit facilities of $1,557 due to
a lower average balance outstanding compared to the prior year.
The improvement in AFFO is primarily due to the same factors
impacting FFO as described above.
Operating Results
|
December 31,
2021
|
September 30,
2021
|
June 30,
2021
|
March 31,
2021
|
December
31,
2020
|
Number of investment
properties (1)
|
284
|
287
|
287
|
287
|
284
|
Gross leasable area
(2)
|
17,861,000
|
18,232,000
|
18,235,000
|
18,229,000
|
18,000,000
|
Economic occupancy
(3)
|
95.6 %
|
95.8 %
|
95.6 %
|
95.5 %
|
94.0 %
|
Committed occupancy
(4)
|
96.2 %
|
96.5 %
|
96.2 %
|
96.3 %
|
96.4 %
|
(1)
|
This includes
properties owned at full and partial interests.
|
(2)
|
Gross leasable area
is adjusted to reflect Crombie's proportionate interest in
partially-owned properties.
|
(3)
|
Represents space
currently under lease contract and rent has commenced.
|
(4)
|
Represents current
economic occupancy plus completed lease contracts for future
occupancy of currently available space.
|
|
December 31,
2021
|
September 30,
2021
|
June 30,
2021
|
March 31,
2021
|
December
31,
2020
|
Investment
properties, fair value
|
$
|
5,026,000
|
$
|
5,096,000
|
$
|
5,053,000
|
$
|
4,877,000
|
$
|
4,815,000
|
Unencumbered
investment properties (1)
|
$
|
1,752,927
|
$
|
1,461,775
|
$
|
1,445,423
|
$
|
1,388,141
|
$
|
1,366,258
|
Available liquidity
(2)
|
$
|
507,777
|
$
|
512,168
|
$
|
368,483
|
$
|
469,548
|
$
|
471,708
|
Debt to gross book
value - cost basis (3)
|
46.5 %
|
49.3 %
|
49.4 %
|
50.9 %
|
50.9 %
|
Debt to gross fair
value (4)(5)
|
42.9 %
|
45.5 %
|
46.0 %
|
48.9 %
|
49.4 %
|
Weighted average
interest rate (6)
|
3.8 %
|
3.8 %
|
3.9 %
|
3.9 %
|
3.9 %
|
Debt to trailing 12
months adjusted EBITDA (4)(5)
|
8.25x
|
8.95x
|
9.12x
|
9.80x
|
9.73x
|
Interest coverage
ratio (4)(5)
|
3.13x
|
3.13x
|
2.94x
|
3.04x
|
2.77x
|
(1)
|
Represents fair value
of unencumbered properties.
|
(2)
|
Represents the
undrawn portion on the credit facilities, excluding joint
facilities with joint operation partners.
|
(3)
|
See Capital
Management note in the Financial Statements.
|
(4)
|
Non-GAAP financial
measures used by management to evaluate Crombie's business
performance. See "Cautionary Statements and Non-GAAP Measures"
below for a reconciliation of debt to gross fair value, debt to
trailing 12 months adjusted EBITDA, and interest coverage
ratio.
|
(5)
|
See Debt Metrics
section in the MD&A.
|
(6)
|
Weighted average
interest rate is calculated based on interest rates for all
outstanding fixed rate debt.
|
Operations and Leasing
During the quarter, Crombie maintained strong economic occupancy
and committed occupancy of 95.6% and 96.2%, respectively. Crombie
renewed 97,000 square feet with an increase of 5.0% over expiring
rents during the quarter. New leases and expansions increased
occupancy by 710,000 square feet at an average first year rate of
$20.92 per square foot.
Development
Crombie segregates its development pipeline by expected timing.
Near-term projects are financially committed or expected to be
committed within the next two years. Currently, Crombie has six
developments classified as near-term projects. Upon completion,
these projects will total approximately 178,000 square feet of
commercial GLA, 300,000 square feet of retail-related industrial
GLA, 1,228,000 square feet of residential GLA or 1,611 residential
units. The geographical breakdown of GLA in square feet is as
follows: 553,000 in Vancouver;
145,000 in Victoria; 300,000 in
Calgary; 520,000 in the
Greater Toronto Area and 188,000
in Halifax.
Subsequent to the fourth quarter, at our Bronte Village
development in the Greater Toronto
Area, the occupancy permit was received for the second
tower, which contains 241 units. As a result, Crombie adjusted
substantial completion from Q4 2021 to Q1 2022, with a remaining
investment to complete of approximately $8,900. Property development is a strategic
priority for Crombie, as it is expected to drive fair value growth,
cash flow growth and Unitholder value, while increasing our
presence in Canada's top urban
markets and diversifying and improving overall portfolio
quality.
These timing and cost estimates are subject to changes, as well
as other development risks described in Crombie's fourth quarter
MD&A under "Development" and "Risk Management".
Dispositions
During the fourth quarter, Crombie had gross proceeds of
$152,218 from dispositions of five
retail asset properties and a 50% non-managing interest in the
Pointe-Claire CFC asset totalling 372,000 square feet. Two of the
five assets represent partial dispositions of retail assets as
certain CRU space was sold and grocery retail space retained. The
sales were transacted in line with IFRS fair values and is part of
Crombie's funding strategy, which redirects capital into
Empire-related investments and developments that have the potential
to deliver higher AFFO and fair value returns while at the same
time improving portfolio quality.
Highlighted Subsequent Events
In January 2022, Crombie acquired
100% interest in eight retail properties, seven from a subsidiary
of Empire, totalling approximately 290,000 square feet for
$41,902, excluding closing and
transaction costs.
On January 25, 2022, Crombie
acquired the remaining 50% interest in a retail-related industrial
property from a subsidiary of Empire totalling 235,000 square feet
for $38,050, excluding closing and
transaction
costs.
On January 31, 2022, Crombie
closed on an offering, on a bought deal basis, of approximately
$117,000 of Units at a price of
$17.45 per Unit to a syndicate of
underwriters co-led by Scotiabank and BMO Capital Markets. In
addition, a subsidiary of Empire purchased, on a private placement
basis, approximately $83,000 of Class
B LP Units of a subsidiary of Crombie, together with the attached
Special Voting Units of Crombie, at a price per Class B Unit. After
the closing of the public offering and the private placement,
Empire continues to hold a 41.5% economic and voting interest in
Crombie.
Empire Appoints Michael Vels as Trustee
Crombie is pleased to announce the appointment of Michael Vels to its Board of Trustees, effective
February 1, 2022. Mr. Vels is the
Chief Development Officer at Empire Company Limited ("Empire") and
Sobeys Inc. ("Sobeys"). He joined Sobeys in 2017 as Chief Financial
Officer where his leadership has been key to the successful
execution of the Company's strategy. In 2021, Michael transitioned
to his current role, where he focuses his leadership talents
towards Sobeys' growth targets, improvement in internal execution,
and leading the business' real estate, technology and enterprise
project management teams, and the Company's merger and acquisition
activities.
Prior to joining Empire, Michael was Chief Financial Officer of
Hydro One where he led that organization's Initial Public Offering
in 2015. Before that he was Chief Financial Officer at Maple Leaf
Foods where he supported the successful transformation of Maple
Leaf as it implemented new systems and transformed its
manufacturing and supply chains. He was educated and earned his
Chartered Accountant designation in South
Africa and worked in public accounting and mergers and
acquisitions in South Africa and
the United Kingdom prior to
joining Maple Leaf. He has also earned his ICD.D designation. Mr.
Vels serves as a Director and Treasurer of Canada's National Ballet School.
Mr. Vels was appointed pursuant to ECL Developments Limited's
("ECL") right under Section 3.8 of Crombie's Amended and Restated
Declaration of Trust to appoint up to five trustees. ECL is a
wholly owned subsidiary of Empire, which indirectly owns 41.5% of
the outstanding Units and special voting units of Crombie.
Conference Call Invitation
Crombie will provide additional details concerning its period
ended December 31, 2021 results on a
conference call to be held Thursday, February 24, 2022,
beginning at 12:00 p.m. Eastern Time.
Accompanying the conference call will be a presentation that will
be available on Crombie's website. To join this conference call,
you may dial (416) 764-8688 or (888) 390-0546. You may also listen
to a live audio webcast of the conference call by visiting the
Investor section of Crombie's website located at www.crombie.ca.
Replay will be available until midnight March 3, 2022 by dialing (416) 764-8677 or (888)
390-0541 and entering pass code 464825 #, or on the Crombie website
for 90 days after the meeting.
Cautionary Statements and Non-GAAP Measures
Same-asset property cash NOI (SANOI), FFO, AFFO, FFO payout
ratio, AFFO payout ratio, debt to trailing 12 months adjusted
EBITDA, debt to gross fair value, and interest coverage ratio are
non-GAAP financial measures that do not have a standardized meaning
under International Financial Reporting Standards ("IFRS"). These
measures as computed by Crombie may differ from similar
computations as reported by other entities and, accordingly, may
not be comparable to other such entities. Management includes these
measures as they represent key performance indicators to
management, and it believes certain investors use these measures as
a means of assessing Crombie's financial performance. For
additional information on these non-GAAP measures see our
Management's Discussion and Analysis for the three and twelve
months ended December 31, 2021.
The reconciliations for each non-GAAP measure included in this
news release are outlined as follows:
Same-Asset Property Cash NOI
Crombie measures certain performance and operating metrics on a
same-asset basis to evaluate the period-over-period performance of
those properties owned and operated by Crombie. "Same-asset" refers
to those properties that were owned and operated by Crombie for the
current and comparative reporting periods. Properties that will be
undergoing a redevelopment in a future period, including adjacent
parcels of land, and those having planning activities underway are
also in this category until such development activities commence
and/or tenant leasing/renewal activity is suspended. Same–asset
property cash NOI reflects Crombie's proportionate ownership of
jointly operated properties (and excludes any properties held in
joint ventures).
Management uses net property income on a cash basis (property
cash NOI) as a measure of performance as it reflects the cash
generated by properties period-over-period.
Net property income on a cash basis, which excludes non-cash
straight-line rent recognition and amortization of tenant incentive
amounts, is as follows:
|
Three months ended
December 31,
|
|
|
Year ended December
31,
|
|
2021
|
2020
|
Variance
|
|
|
2021
|
2020
|
Variance
|
Net property
income
|
$
|
71,402
|
$
|
67,815
|
$
|
3,587
|
|
|
$
|
283,031
|
$
|
258,861
|
$
|
24,170
|
Non-cash
straight-line rent
|
(1,998)
|
(2,036)
|
38
|
|
|
(9,486)
|
(9,112)
|
(374)
|
Non-cash tenant
incentive amortization(1)
|
5,249
|
4,859
|
390
|
|
|
19,811
|
17,849
|
1,962
|
Property cash
NOI
|
74,653
|
70,638
|
4,015
|
|
|
293,356
|
267,598
|
25,758
|
Acquisitions and
dispositions property cash NOI
|
2,204
|
1,878
|
326
|
|
|
10,635
|
7,286
|
3,349
|
Development property
cash NOI
|
8,007
|
5,825
|
2,182
|
|
|
29,559
|
19,109
|
10,450
|
Acquisitions,
dispositions and development
property cash NOI
|
10,211
|
7,703
|
2,508
|
|
|
40,194
|
26,395
|
13,799
|
Same-asset property
cash NOI
|
$
|
64,442
|
$
|
62,935
|
$
|
1,507
|
|
|
$
|
253,162
|
$
|
241,203
|
$
|
11,959
|
Adjusted for
management's estimate of the
material impacts of COVID-19:
|
|
|
|
|
|
|
|
|
Decrease in parking
revenue
|
—
|
854
|
(854)
|
|
|
789
|
2,715
|
(1,926)
|
Rent
abatements
|
—
|
178
|
(178)
|
|
|
—
|
1,465
|
(1,465)
|
Bad debt
expense
|
260
|
(32)
|
292
|
|
|
420
|
5,353
|
(4,933)
|
Same-asset property
cash NOI, adjusted for
COVID-19
|
$
|
64,702
|
$
|
63,935
|
$
|
767
|
|
|
$
|
254,371
|
$
|
250,736
|
$
|
3,635
|
Funds from Operations (FFO)
Crombie follows the recommendations of the Real Property
Association of Canada
("REALPAC")'s January 2022 guidance
in calculating FFO. This update from the February 2019 white paper had no impact on
Crombie's FFO calculation.
The reconciliation of FFO for the three and year ended
December 31, 2021 and 2020 is as
follows:
|
Three months ended
December 31,
|
|
|
Year ended December
31,
|
|
2021
|
2020
|
Variance
|
|
|
2021
|
2020
|
Variance
|
Increase (decrease)
in net assets attributable to Unitholders
|
$
|
41,075
|
$
|
(18,779)
|
$
|
59,854
|
|
|
$
|
7,870
|
$
|
(71,889)
|
$
|
79,759
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Amortization of
tenant incentives
|
5,249
|
4,859
|
390
|
|
|
19,811
|
17,849
|
1,962
|
Gain on disposal of
investment properties
|
(42,762)
|
(4,164)
|
(38,598)
|
|
|
(56,525)
|
(3,335)
|
(53,190)
|
Gain from equity
accounted investments
|
(15,525)
|
—
|
(15,525)
|
|
|
(15,525)
|
—
|
(15,525)
|
Impairment of
investment properties
|
1,300
|
4,500
|
(3,200)
|
|
|
2,539
|
6,600
|
(4,061)
|
Depreciation and
amortization of investment
properties
|
18,437
|
19,183
|
(746)
|
|
|
74,359
|
74,316
|
43
|
Adjustments for
equity accounted investments
|
841
|
109
|
732
|
|
|
2,267
|
176
|
2,091
|
Principal payments on
right of use assets
|
58
|
57
|
1
|
|
|
225
|
220
|
5
|
Internal leasing
costs
|
620
|
604
|
16
|
|
|
2,480
|
2,416
|
64
|
Finance costs -
distributions to Unitholders
|
36,637
|
35,211
|
1,426
|
|
|
144,559
|
140,302
|
4,257
|
Finance costs
(income) - change in fair value of
financial instruments
|
1,018
|
725
|
293
|
|
|
2,972
|
(805)
|
3,777
|
FFO as calculated
based on REALPAC
recommendations
|
$
|
46,948
|
$
|
42,305
|
$
|
4,643
|
|
|
$
|
185,032
|
$
|
165,850
|
$
|
19,182
|
Basic weighted
average Units (in 000's)
|
164,592
|
158,239
|
6,353
|
|
|
162,130
|
157,448
|
4,682
|
FFO per Unit -
basic
|
$
|
0.29
|
$
|
0.27
|
$
|
0.02
|
|
|
$
|
1.14
|
$
|
1.05
|
$
|
0.09
|
FFO payout ratio
(%)
|
78.0 %
|
83.2 %
|
(5.2)%
|
|
|
78.1 %
|
84.6 %
|
(6.5)%
|
Adjusted Funds from Operations (AFFO)
Crombie follows the recommendations of REALPAC's January 2022 guidance in calculating AFFO and has
applied these recommendations to the AFFO amounts included in this
MD&A. The new guidance resulted in no impact to Crombie's AFFO
calculation.
The reconciliation of AFFO for the three months and year ended
December 31, 2021 and 2020 is as
follows:
|
Three months ended
December 31,
|
|
|
Year ended December
31,
|
|
2021
|
2020
|
Variance
|
|
|
2021
|
2020
|
Variance
|
FFO as calculated
based on REALPAC
recommendations
|
$
|
46,948
|
$
|
42,305
|
$
|
4,643
|
|
|
$
|
185,032
|
$
|
165,850
|
$
|
19,182
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
Amortization of
effective swap agreements
|
—
|
—
|
—
|
|
|
—
|
510
|
(510)
|
Straight-line rent
adjustment
|
(1,998)
|
(2,036)
|
38
|
|
|
(9,486)
|
(9,112)
|
(374)
|
Straight-line rent
adjustment included in
Income from equity accounted investments
|
144
|
—
|
144
|
|
|
509
|
—
|
509
|
Internal leasing
costs
|
(620)
|
(604)
|
(16)
|
|
|
(2,480)
|
(2,416)
|
(64)
|
Maintenance
expenditures on a square footage
basis
|
(4,006)
|
(3,986)
|
(20)
|
|
|
(16,043)
|
(15,869)
|
(174)
|
AFFO as calculated
based on REALPAC
recommendations
|
$
|
40,468
|
$
|
35,679
|
$
|
4,789
|
|
|
$
|
157,532
|
$
|
138,963
|
$
|
18,569
|
Basic weighted
average Units (in 000's)
|
164,592
|
158,239
|
6,353
|
|
|
162,130
|
157,448
|
4,682
|
AFFO per Unit -
basic
|
$
|
0.25
|
$
|
0.23
|
$
|
0.02
|
|
|
$
|
0.97
|
$
|
0.88
|
$
|
0.09
|
AFFO payout ratio
(%)
|
90.5 %
|
98.7 %
|
(8.2)%
|
|
|
91.8 %
|
101.0 %
|
(9.2)%
|
Debt Metrics
When calculating debt to gross fair value, debt is defined under
the terms of the Declaration of Trust as obligations for borrowed
money including obligations incurred in connection with
acquisitions, excluding specific deferred taxes payable, trade
payables, and accruals in the ordinary course of business and
distributions payable.
Debt to gross fair value includes investment properties measured
at fair value, including those held within joint ventures.
Crombie's investment in joint ventures, accounted for at cost under
the equity method, is adjusted to reflect investment properties
measured at fair value for this calculation. All other components
of gross fair value are measured at the carrying value included in
Crombie's financial statements. Crombie's methodology for
determining the fair value of investment properties includes
capitalization of trailing 12 months net property income using
biannual capitalization rates from external property valuators. The
majority of investment properties are also subject to external,
independent appraisals on a rotational basis over a period of not
more than four years. Valuation techniques are more fully described
in Crombie's year end audited financial statements.
The fair value included in this calculation reflects the fair
value of the properties as at December 31,
2021 and December 31, 2020,
respectively, based on each property's current use as a revenue
generating investment property. During the year ended December 31, 2021, Crombie's weighted average
capitalization rate used in the determination of the fair value of
its investment properties decreased 0.21% to 5.65% from 5.86%. For
an explanation of how Crombie determines capitalization rates, see
the "Other Disclosures" section of Crombie's fourth quarter
MD&A, under "Investment Property Valuation" in the "Use of
Estimates and Judgments" section.
|
December
31, 2021
|
|
December 31,
2020
|
Fixed rate
mortgages
|
$
|
1,073,895
|
|
$
|
1,274,304
|
Senior unsecured
notes
|
1,125,000
|
|
1,125,000
|
Revolving credit
facility
|
9,220
|
|
17,712
|
Joint operation
credit facility
|
9,904
|
|
9,544
|
Bilateral credit
facility
|
10,000
|
|
35,000
|
Lease
liabilities
|
35,352
|
|
29,914
|
Total debt
outstanding
|
2,263,371
|
|
2,491,474
|
Less: Applicable fair
value debt adjustment
|
(53)
|
|
(283)
|
Adjusted
debt
|
$
|
2,263,318
|
|
$
|
2,491,191
|
|
|
|
|
Investment
properties, fair value
|
$
|
5,026,000
|
|
$
|
4,815,000
|
Other assets, cost
(1)
|
103,318
|
|
100,206
|
Cash and cash
equivalents
|
3,915
|
|
63,293
|
Deferred financing
charges
|
9,769
|
|
10,972
|
Investment in joint
ventures, fair value (2)
|
130,103
|
|
51,043
|
Interest rate
subsidy
|
(53)
|
|
(283)
|
Gross fair
value
|
$
|
5,273,052
|
|
$
|
5,040,231
|
Debt to gross fair
value
|
42.9 %
|
|
49.4 %
|
(1)
|
Other assets exclude
tenant incentives and accumulated amortization, and accrued
straight-line rent receivable.
|
(2)
|
Investment in joint
ventures, fair value reflects Crombie's investments in joint
ventures using equity accounting with investment properties
measured at fair value. Fair value of these investment properties
totalled $387,000 (December 31, 2020 - $225,127) and replaces their
value at cost of $288,114 (December 31, 2020 -
$225,127).
|
The following table presents a reconciliation of property
revenue to adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure
and should not be considered an alternative to operating income
attributable to Unitholders and may not be comparable to that used
by other entities.
|
Three months
ended
|
|
December 31,
2021
|
September 30,
2021
|
June 30,
2021
|
March 31,
2021
|
December
31,
2020
|
Property
revenue
|
$
|
103,832
|
$
|
101,517
|
$
|
100,006
|
$
|
103,537
|
$
|
97,060
|
Amortization of
tenant incentives
|
5,249
|
5,187
|
4,840
|
4,535
|
4,859
|
Adjusted property
revenue
|
109,081
|
106,704
|
104,846
|
108,072
|
101,919
|
Property operating
expenses
|
(32,430)
|
(30,216)
|
(29,814)
|
(33,401)
|
(29,245)
|
General and
administrative expenses
|
(7,367)
|
(5,728)
|
(7,351)
|
(5,038)
|
(5,493)
|
Income (loss) from
equity accounted investments
|
(685)
|
(923)
|
(562)
|
(771)
|
(411)
|
Adjusted EBITDA
(1)
|
$
|
68,599
|
$
|
69,837
|
$
|
67,119
|
$
|
68,862
|
$
|
66,770
|
Trailing 12 months
adjusted EBITDA (3)
|
$
|
274,417
|
$
|
272,588
|
$
|
267,959
|
$
|
257,036
|
$
|
256,104
|
|
|
|
|
|
|
Finance costs -
operations
|
$
|
22,639
|
$
|
23,070
|
$
|
23,618
|
$
|
23,461
|
$
|
24,912
|
Amortization of
deferred financing charges
|
(742)
|
(759)
|
(764)
|
(802)
|
(835)
|
Amortization of
effective swap agreements
|
—
|
—
|
—
|
—
|
—
|
Adjusted interest
expense (2)
|
$
|
21,897
|
$
|
22,311
|
$
|
22,854
|
$
|
22,659
|
$
|
24,077
|
|
|
|
|
|
|
Debt outstanding (see
Debt to Gross Fair Value) (4)
|
$
|
2,263,318
|
$
|
2,439,738
|
$
|
2,444,629
|
$
|
2,519,200
|
$
|
2,491,191
|
|
|
|
|
|
|
Interest service
coverage ratio {(1)/(2)}
|
3.13x
|
3.13x
|
2.94x
|
3.04x
|
2.77x
|
Debt to trailing 12
months adjusted EBITDA {(4)/(3)}
|
8.25x
|
8.95x
|
9.12x
|
9.80x
|
9.73x
|
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 2021 annual Management
Discussion and Analysis under "Risk Management" and the Annual
Information Form for the year ended December
31, 2020 under "Risks", 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.
Specifically, this document includes, but is not limited to,
forward-looking statements regarding expected timing and costs of
development and expected impact on NAV and AFFO growth for projects
currently underway and planned into the future, which could be
impacted by the economic impact of the COVID-19 crisis, ordinary
real estate market cycles, the availability of labour, financing
and the cost of any such financing, capital resource allocation
decisions and general economic conditions, as well as development
activities undertaken by related parties not under the direct
control of Crombie.
Continuing uncertainty with respect to the severity, duration
and overall impacts of the pandemic mean that forward-looking
forecasts of operating and financial results for Crombie remain
uncertain at this time.
About Crombie REIT
Crombie Real Estate Investment Trust ("Crombie") invests in real
estate that enriches local communities and enables long-term
sustainable growth. As one of the country's leading owner,
operator, and developer of quality real estate, Crombie's portfolio
primarily includes grocery-anchored retail, retail-related
industrial, and mixed-used residential properties in Canada's top urban and suburban markets. As at
December 31, 2021, our portfolio
contains 284 income-producing properties comprising approximately
17.9 million square feet, and a significant pipeline of future
development projects. Learn more at www.crombie.ca.
SOURCE Crombie REIT