Crombie Reit reports fourth quarter and fiscal 2014 results

Crombie REIT (TSX:CRR.UN)

STELLARTON, NS, Feb. 26, 2015 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) is pleased to report its financial results for the three months and year ended December 31, 2014.

Fourth Quarter 2014 Highlights (In thousands of CAD dollars, except per unit amounts and as otherwise noted).

• Portfolio fair value of $3.9 billion.
• Funds From Operations ("FFO"):
  • FFO for the year ended December 31, 2014 increased 31.1% to $142,052; or $1.10 per unit Diluted, unchanged per unit from the same period in 2013.
  • FFO for the three months ended December 31, 2014 increased 19.9% to $36,363; or $0.28 per unit Diluted, an increase of $0.01 per unit from the three months ended December 31, 2013.
  • FFO payout ratio of 80.2% for the year ended December 31, 2014 compared to 79.9% for the same period in 2013.
  • FFO payout ratio of 79.9% for the three months ended December 31, 2014 compared to 83.0% for the same period in 2013.
• Adjusted Funds From Operations ("AFFO"):
  • AFFO for the year ended December 31, 2014 increased 29.1% to $118,176; or $0.93 per unit Diluted, a decrease of $0.01 per unit from the same period in 2013.
  • AFFO for the three months ended December 31, 2014 increased 18.5% to $30,211; or $0.23 per unit Diluted, unchanged per unit from the three months ended December 31, 2013.
  • AFFO payout ratio of 96.4% for the year ended December 31, 2014 compared to 94.7% for the same period in 2013.
  • AFFO payout ratio of 96.2% for the three months ended December 31, 2014 compared to 98.8% for the same period in 2013.
• Same-asset Cash Net Operating Income ("NOI") for the year end December 31, 2014 showed solid growth of 1.4% compared to the year ended December 31, 2013. Increase in same-asset cash NOI of 0.8% for the three months ended December 31, 2014 compared to the same period in 2013.
• Property revenue for the year ended December 31, 2014 of $358,319, an increase of $61,276 or 20.6% over the year ended December 31, 2013. Property revenue of $90,602 for Q4 2014 increased $6,572 or 7.8% over Q4 2013.
• Occupancy, on a committed basis, was 94.0% at December 31, 2014 compared with 93.6% at September 30, 2014 and 93.2% at December 31, 2013.
• Crombie's leasing activity during the year ended December 31, 2014, included:
  • Renewals on 377,000 square feet of 2014 expiring leases at an average rate of $18.60 per square foot, an increase of 13.8% over the expiring lease rate;
  • Renewals on 316,000 square feet of 2015 and later expiring leases at an average rate of $11.47 per square foot, an increase of 6.5% over the expiring lease rate;
  • New leases on 299,000 square feet replacing vacant or expiring space in 2014 at an average rate of $17.26 per square foot; and
  • Documents have been executed for 2015 leasing on 113,000 square feet of new leases at an average rate of $14.15 per square foot and expansions of current tenants on 31,000 square feet at an average rate of $11.83.
• Weighted average lease term of 11.8 years and weighted average mortgage term of 7.4 years; amongst the longest and most defensive in the Canadian REIT industry.
• Strong 2.58 times interest coverage. Weighted average interest rate on mortgages reduced to 4.77% from 4.82% at December 31, 2013. Weighted average overall interest rate reduced to 4.58% from 4.68% at December 31, 2013.
• Debt to Gross Book Value (fair value basis) of 52.8%, compared to 53.0% at December 31, 2013.

Donald E. Clow, FCA, President and CEO commented: "During 2014 we continued to improve the quality of our portfolio and platform to enhance the long term stability and growth of the trust. We successfully integrated the Safeway transaction as well as completed $154 million of acquisition and $65 million of disposition activity in 2014. These operating, acquisition and capital recycling transactions advanced Crombie's strategy of strengthening our portfolio through increased investment in Canada's top 36 markets, geographic diversification across the Country and increased emphasis on grocery and drug store anchored retail properties. For 2014, we completed over $115 million in total acquisitions from Sobeys, in keeping with our stated objective of acquiring approximately $100 million annually from this strategic relationship. We also furthered planning, design and partnership work on seven major development projects, including five in Western Canada. Since year end we have continued to lower our overall cost of capital and strengthen our liquidity with the issuance of $125 million of five (5) year 2.775% senior unsecured notes and the redemption of $45 million of 5.75% convertible debentures."

Financial Highlights

Crombie's key financial metrics for the three months and year ended December, 2014 are as follows:

The increase in FFO and AFFO for the three months and year ended December 31, 2014 was primarily due to the 70 property Sobeys / Safeway acquisition during the fourth quarter of 2013 and completed development and land use intensification projects during 2013 and 2014, resulting in significant growth in property NOI, offset in part by higher finance costs - operations.

The table below presents a summary of financial performance for the three months and year ended December 31, 2014 compared to the same period in fiscal 2013.

Growth Highlights

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

Property NOI, on a cash basis, excludes straight-line rent recognition and amortization of tenant incentive amounts. The +0.8% and +1.4% increases in same-asset property cash NOI for the three months and year ended December 31, 2014 is primarily the result of increased average rent per square foot from leasing activity and rental rate increases in existing leases as well as improved recovery rates and revenues from land use intensifications at several properties.

During 2014 Crombie classified five investment properties as held for sale. The operating results for these properties are included in acquisitions, dispositions and development for the current and comparative periods. Four of these properties were sold during Q4 2014.

Crombie believes that cash NOI is a better measure of AFFO sustainability and same-asset property performance.

Acquisitions, dispositions and development property cash NOI is as follows:

The significant growth in acquisitions and dispositions property cash NOI was primarily due to the 70 property Sobeys / Safeway acquisition during the fourth quarter of 2013.

Capital Highlights

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 $300,000, subject to available borrowing base, of which $145,000 was drawn as at December 31, 2014, and an additional $979 encumbered by outstanding letters of credit, resulting in significant available liquidity.

Debt to gross book value on a fair value basis is 52.8% (including convertible debentures) at December 31, 2014, compared to 53.0% at December 31, 2013.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2014, as a percentage of property revenue, decreased by 0.5% from 4.6% to 4.1%, when compared to the year ended December 31, 2013. For the three months ended December 31, 2014, general and administrative expenses as a percentage of property revenue, decreased by 1.3% from 5.0% to 3.7% when compared to the same period in 2013.

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 operating 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, senior unsecured notes 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 operating 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, plus depreciation and amortization expense, deferred income taxes, finance costs - distributions to Unitholders, impairment charges and recoveries and change in fair value of financial instruments.
• 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.

For additional information on these non-GAAP measures see our Management's Discussion and Analysis for the period ended December 31, 2014.

Crombie's consolidated financial statements and management's discussion and analysis for the three months and year ended December 31, 2014 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.

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 256 retail and office properties across Canada, comprising approximately 17.4 million square feet with a strategy to own and operate a portfolio of high quality grocery and drug store anchored shopping centres and freestanding stores primarily in Canada's 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 2013 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.

Specifically, this document includes, but is not limited to, forward-looking statements regarding:

Conference Call Invitation

Crombie will provide additional details concerning its year ended December 31, 2014 results on a conference call to be held Thursday, February 26, 2015, 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 March 12, 2015 by dialing (416) 849-0833 or (855) 859-2056 and entering pass code 78715427, or on the Crombie website for 90 days after the meeting.

SOURCE Crombie REIT

Related Links

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