Crombie REIT (TSX:CRR.UN) STELLARTON, NS, Nov. 8, 2013 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report strong results for the three months and nine months ended September 30, 2013. Year to Date and Third Quarter 2013 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted) -- Strong 10.2% growth in Funds From Operations ("FFO") per unit for the nine months ended September 30, 2013, as FFO per unit fully diluted ("FD") was $0.83 per unit compared to $0.76 per unit FD for the same period in 2012. FFO grew 23.1% over the same period in 2012 ($78,052 vs $63,386) with the FFO payout ratio 78.7% compared to 87.2% for the same period in 2012. -- 13.2% growth in FFO per unit for the three months ended September 30, 2013 ("Q3") as FFO per unit FD was $0.28 compared to $0.24 for the same period in 2012. Q3 FFO grew 21.1% over the same period in 2012 ($25,841 vs $21,338) with the FFO payout ratio of 79.5% compared to 90.7% for the same period in 2012. -- Strong 10.9% growth in Adjusted Funds From Operations ("AFFO") per unit for the nine months ended September 30, 2013, as AFFO per unit FD was $0.71 per unit compared to $0.64 per unit FD for the same period in 2012. AFFO grew 24.1% over the same period in 2012 ($66,032 vs $53,198) for the nine months ended September 30, 2013 with the AFFO payout ratio of 93.1% compared to 103.9% for the same period in 2012. -- 13.2% growth in Q3 AFFO per unit as AFFO per unit FD was $0.24 compared to $0.21 for the same period in 2012. Q3 AFFO grew 20.6% over the same period in 2012 ($21,993 vs $18,237) with the AFFO payout ratio of 93.4% compared to 106.1% for the same period in 2012. -- Crombie was assigned an investment grade credit rating of BBB (low) with a Stable trend by DBRS. -- Acquisition of four drug store anchored freestanding properties in four different provinces totaling $44 million during Q3. -- Portfolio fair value of $2.9 billion; $3.9 billion including the subsequent acquisition. -- Solid growth of 1.6% in Same-Asset Cash Net Operating Income ("NOI") for the nine months ended September 30, 2013 over the nine months ended September 30, 2012. Slight reduction in Same-Asset Cash NOI of 0.3% for the three months ended September 30, 2013 compared to the same period in 2012. -- Property revenue of $213,044 for the nine months ended September 30, 2013, an increase of $25,492 or 13.6% over the $187,552 for the nine months ended September 30, 2012. Q3 property revenue of $70,850, increased $6,391 or 9.9% over Q3 2012. -- Solid occupancy on a committed basis of 92.2% at September 30, 2013, compared with 93.5% at September 30, 2012. The September 30, 2013 leased space is impacted by the leasing expiry of three Zellers since September 30, 2012, totalling 262,000 square feet. -- Crombie completed leasing activity on a total of 995,000 square feet during the nine months ended September 30, 2013, including: o Renewals on 472,000 square feet of 2013 expiring leases at an average rate of $12.78 per square foot, an increase of 7.7% over the expiring lease rate. This represents a renewal rate of 56% of the 2013 year to date expired lease space; excluding the expiry of three Zellers leases, renewals represent 82% of the expiring lease space; o Renewals on 154,000 square feet of 2014 and later expiring leases at an average rate of $15.03 per square foot, an increase of 12.1% over the expiring lease rate; and o New leases on 369,000 square feet of space, at an average rate of $16.00 per square foot. -- Weighted average lease term of 10.4 years and weighted average mortgage term of 7.5 years; amongst the longest and most defensive in the REIT industry. -- Weighted average interest rate on mortgages reduced to 4.99% from 5.21% at December 31, 2012 and 5.27% at September 30, 2012. Strong 2.72 times interest coverage. -- Debt to Gross Book Value (fair value basis) of 49.8% (53.9% on a cost basis). Subsequent Events Effective November 3, 2013, Crombie acquired a portfolio of 70 retail properties (the "Properties") representing approximately 3.0 million square feet of gross leaseable area. The Properties were acquired from a wholly-owned subsidiary of Sobeys Inc., a related party, for an aggregate purchase price of $991,300, excluding closing adjustments and transaction costs. As a condition to the closing, a wholly-owned subsidiary of Sobeys Inc. entered into leases for each of the Properties on a fully net basis. The Properties are among the assets acquired by a wholly-owned subsidiary of Sobeys Inc. from Canada Safeway Limited. A summary of the acquisition and related financing is as follows (in millions of CAD dollars): Purchase price $ 991.3 Net proceeds from Subscription Receipts issued in August 213.9 2013 Proceeds from Series E Debentures issued in August 2013 75.0 Net proceeds from Series A Notes issued October 31, 2013 174.2 Proceeds from Class B LP Units issued upon closing the 150.0 acquisition Mortgage proceeds received since the closing 297.6 Customary closing adjustments 4.6 Utilization of bridge credit facility 76.0 $ 991.3 Further financing details are: -- In August 2013, Crombie issued 17,720,000 Subscription Receipts at a price of $12.70 each for gross proceeds of $225 million. On closing of the acquisition, the Subscription Receipts were automatically exchanged for REIT Units on a one-for-one basis. -- In August 2013, Crombie issued $75 million of Series E convertible, extendible, unsecured subordinated debentures with a maturity date that automatically extended to March 31, 2021 on completion of the acquisition. -- On October 31 2013, Crombie issued $175 million of 3.986% Series A Notes (Senior Unsecured) due October 31, 2018 with a rating of BBB(low) stable trend from DBRS. -- On closing of the acquisition, Crombie issued 11,811,024 Class B LP Units at a price of $12.70 each for gross proceeds of $150 million to ECL Developments Limited, a wholly-owned subsidiary of Empire Company Limited. -- Fixed rate mortgage proceeds of $297.6 million have an average term of 9.5 years, an average interest rate of 4.31% and 25 year amortizations. Donald E. Clow, FCA, President and CEO commented: "We are successfully executing on our growth strategy of accretively acquiring primarily grocery and drug store anchored retail properties in the top 36 markets in Canada. This focus has resulted in strong funds from operations growth and improved payout ratios in spite of the loss of four Zellers locations. Our disciplined approach and strong balance sheet are evident in our ability to complete over $1 billion in year to date acquisitions and attain an investment grade credit rating, which enhances Crombie's financial flexibility and liquidity options. This is demonstrated by Crombie having quickly completed permanent financing for the Canada Safeway acquisition as $297.6 million of long term mortgages with an average duration of 9.5 years and average interest rate of 4.31% has been completed since the November 3(rd )closing date." Financial Highlights Crombie's key financial metrics for the three months and nine months ended September 30, 2013 are as follows: (In thousands of CAD dollars, except per unit amounts and as otherwise Three months ended Nine months ended September noted) September 30, 30, 2013 2012 2013 2012 Property 64,459 revenue $ 70,850 $ $ 213,044 $ 187,552 Operating 7,911 income attributable to Unitholders $ 11,504 $ $ 37,044 $ 27,910 Operating 0.09 income attributable to Unitholders per unit - basic $ 0.13 $ $ 0.40 $ 0.34 Operating 0.09 income attributable to Unitholders per unit - diluted $ 0.12 $ $ 0.40 $ 0.34 FFO $ 25,841 $ 21,338 $ 78,052 $ 63,386 FFO per unit 0.25 - basic $ 0.28 $ $ 0.85 $ 0.78 FFO per unit 0.24 - diluted $ 0.28 $ $ 0.83 $ 0.76 FFO payout 90.7% ratio (%) 79.5% 78.7% 87.2% AFFO $ 21,993 $ 18,237 $ 66,032 $ 53,198 AFFO per unit 0.21 - basic $ 0.24 $ $ 0.72 $ 0.65 AFFO per unit 0.21 - diluted $ 0.24 $ $ 0.71 $ 0.64 Distributions 0.22 per unit $ 0.22 $ $ 0.67 $ 0.67 AFFO payout 106.1% ratio (%) 93.4% 93.1% 103.9% The increase in FFO and AFFO for the three months and nine months ended September 30, 2013 was primarily due to acquisition and redevelopment activity during 2013 and 2012. The three months ended September 30, 2013 was also impacted by lower finance costs related to refinancing activity. The table below presents a summary of financial performance for the three months and nine months ended September 30, 2013 compared to the same period in fiscal 2012. Three Months Ended Nine Months Ended September September 30, 30, (In thousands 2013 2012 2013 2012 of CAD dollars) (As (As Restated) Restated) Property 70,850 64,459 213,044 187,552 revenue $ $ $ $ Property 25,596 22,181 78,110 68,718 operating expenses Property NOI 45,254 42,278 134,934 118,834 NOI margin 63.9% 65.6% 63.3% 63.4% percentage Other items: Lease 311 273 405 386 terminations Depreciation (11,876) (12,200) (34,983) (32,077) and amortization General and (2,851) (2,655) (9,423) (7,863) administrative expenses Operating 30,838 27,696 90,933 79,280 income before finance costs and taxes Finance costs (18,834) (20,285) (53,289) (52,770) - operations Operating 12,004 7,411 37,644 26,510 income before taxes Taxes - (500) 500 (600) 1,400 deferred Operating 11,504 7,911 37,044 27,910 income attributable to Unitholders Finance costs (20,545) (19,343) (61,463) (55,270) - distributions to Unitholders Finance costs (151) (4,047) 2,051 (5,862) - change in fair value of financial instruments Decrease in (9,192) (15,479) (22,368) (33,222) net assets attributable to Unitholders $ $ $ $ Growth Highlights Initial Occupancy Purchase Key GLA Price Rate Tenants Acquisitions in Q1 Clearwater Fort McMurray $ Sobeys, Landing The Brick, Mark's Work Wearhouse, AB 143,000 62,757 100% Sport Chek West Lethbridge Lethbridge Safeway Towne Centre AB 105,000 37,869 100% Namao Centre Edmonton Shoppers AB 34,000 14,544 85% Drug Mart West Highland Lethbridge Shoppers Towne Centre AB 29,000 16,720 95% Drug Mart Dartmouth Halifax Empire Crossing NS 45,000 15,450 100% Theatres Findlay Blvd. Riverview NB 66,000 14,650 100% Sobeys Rivière-du-Loup Rivière-du-Loup Société des alcools du QC 9,000 2,455 100% Québec Acquisition in Q2 Beaumont Beaumont Sobeys Shopping Centre AB 59,000 20,875 100% Acquisitions in Q3 Whyte Avenue Edmonton Shoppers AB 21,000 20,565 100% Drug Mart Saskatchewan Portage La Shoppers Avenue East Prairie MB 20,000 7,362 100% Drug Mart Weston Road Toronto Shoppers ON 15,000 6,758 100% Drug Mart Westminister Montreal Shoppers Avenue North QC 21,000 9,685 100% Drug Mart Completed to $ date in 2013 567,000 229,690 These acquisitions continue Crombie's growth strategy of acquiring high quality grocery or drug store anchored retail properties in the top 36 markets in Canada. Operating Highlights Three months ended Nine months ended September September 30, 30, (In thousands 2013 2012 of CAD dollars) 2013 2012 Property NOI $ 45,254 $ 42,278 $ 134,934 $ 118,834 Non-cash (3,550) (3,564) straight-line rent (983) (1,249) Non-cash 5,861 4,799 tenant incentive amortization 1,961 1,727 Property cash 137,245 120,069 NOI 46,232 42,756 Acquisition, 30,545 15,018 disposition and redevelopment property cash NOI 10,849 7,274 Same-asset $ 106,700 105,051 property cash NOI $ 35,383 $ 35,482 $ Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The 1.6% increase in same- asset cash NOI for the nine months ended September 30, 2013 is primarily the result of increased average rent per square foot from leasing activity, improved recovery rates and land use intensifications at several properties. The 0.3% decrease in same-asset cash NOI for the three months ended September 30, 2013 is primarily the result of slightly lower occupancy rates and related higher non-recoverable costs. Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance. Three Months Ended Nine Months Ended September September 30, 30, (In thousands of CAD dollars) 2013 2012 2013 2012 Acquisition, disposition and redevelopment property revenue $ 16,220 $ 10,894 $ 46,610 $ 25,607 Acquisition, disposition and redevelopment property operating expenses 5,378 3,669 15,934 11,006 Acquisition, disposition and redevelopment property NOI $ 10,842 $ 7,225 $ 30,676 $ 14,601 Margin % 66.8% 66.3% 65.8% 57.0% Capital Highlights Nine months ended September 30, 2013 2012 Weighted Average Mortgage Term 7.5 years 7.6 years Weighted Average Interest Rate 4.99% 5.27% Debt to Gross Book Value (Fair Value) 49.8% 48.8% Debt to Gross Book Value (Cost) 53.9% 51.6% Interest Coverage 2.72 2.58 Debt Service Coverage 1.77 1.75 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 $285,000, subject to available borrowing base, of which $81,134 was drawn as at September 30, 2013, and an additional $4,129 encumbered by outstanding letters of credit, resulting in significant available liquidity. Debt to gross book value on a fair value basis is 49.8% (including convertible debentures) at September 30, 2013, compared to 48.8% at September 30, 2012. General and Administrative Expenses General and administrative expenses for the nine months ended September 30, 2013 as a percentage of property revenue, increased by 0.2% from 4.2% to 4.4%, when compared to the same period in 2012. For the three months ended September 30, 2013, general and administrative expenses as a percentage of property revenue, decreased by 0.1% from 4.1% to 4.0%, when compared to the same period in 2012. Definition of Non-GAAP 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 investment 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; (ii) subscription receipts held in trust; and (iii) the amount of deferred income tax liability arising out of the fair value adjustment in respect of the indirect acquisitions of certain properties. Gross book value (fair value basis) differs from gross book value as defined above in that it includes Crombie's investment properties at fair value and excludes the book value of investment properties and related accumulated depreciation and amortization as well as intangible assets, tenant incentives and accumulated straight-line rent receivable. -- 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. Crombie currently owns a portfolio of 250 retail and office properties across Canada, comprising approximately 17.6 million square feet with a strategy to own and operate a portfolio of primarily high quality grocery and drug store anchored shopping centres and freestanding stores in the top 36 markets. 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 2012 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. 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 three months and nine months ended September 30, 2013 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 September 30, 2013 third quarter and year to date results on a conference call to be held Friday, November 8, 2013, at 12:30 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 22, 2013 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 92977150, or on the Crombie website for 90 days after the meeting. SOURCE Crombie REIT Glenn Hynes, FCA Chief Financial Officer and Secretary Crombie REIT (902) 755-8100 To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/November2013/08/c9246.html CO: Crombie REIT ST: Nova Scotia NI: ERN FIN -0- Nov/08/2013 13:30 GMT
Crombie REIT reports solid third quarter results
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