Crombie REIT Announces Third Quarter 2024 Results
Advancing strategic initiatives to drive long-term growth
NEW GLASGOW, NS, Nov. 6, 2024 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX:CRR) today announced results for its third quarter ended September 30, 2024. Management will host a conference call to discuss the results at 11:00 a.m. (EST), November 7, 2024.
"Crombie's performance demonstrates the resilience of our coast-to-coast, necessity-based portfolio, and our focus on our value creation strategy of delivering consistent healthy operational and financial results. In addition to adding two grocery retail locations and disposing of two non-core assets, we purchased the remaining 50% of Zephyr, our mixed-use rental residential asset in downtown Vancouver," said Mark Holly, President and CEO. "It is our solid foundation, including our strong financial condition and dedicated team, that allows us to seize opportunities and advance key priorities to create long-term sustainable growth for our Unitholders."
THIRD QUARTER SUMMARY(In thousands of Canadian dollars, except per Unit amounts and square feet and as otherwise noted)
Operational Highlights
Committed occupancy of 96.1% and economic occupancy of 95.9%; a 30 basis point decrease and a 10 basis point decrease, respectively, compared to the third quarter of 2023
Renewals of 359,000 square feet at rents 9.7% above expiring rental rates
An increase of 11.8% using the weighted average rent during the renewal term
Acquisition of one freestanding grocery retail property added 14,000 square feet of gross leasable area for a purchase price of $3,760 excluding transaction and closing costs
Announced the strategic acquisition of the remaining 50% of Zephyr residential, in Vancouver, British Columbia, from its partner, Westbank Corp., for a purchase price of $133,000 excluding transaction and closing costs
The purchase price included $44,000 in cash, financed through a new unsecured credit facility, and the assumption of $89,071 of debt
The acquisition closed subsequent to the quarter on October 15, 2024
Completed two non-major development projects, in addition to investing $4,719 in our modernization program
Received 2-Star GRESB ratings for both the Standing Investments and Development benchmark assessments
Financial Highlights
Three months ended September 30,
2024
2023
Variance
%
Property revenue (1)
$ 114,460
$ 109,389
$ 5,071
4.6 %
Revenue from management and development services
$ 1,083
$ 297
$ 786
264.6 %
Operating income attributable to Unitholders
$ 26,570
$ 27,796
$ (1,226)
(4.4) %
FFO (2) per Unit - basic
$ 0.31
$ 0.31
$ ,
— %
AFFO (2) per Unit - basic
$ 0.27
$ 0.28
$ (0.01)
(3.6) %
Same-asset property cash NOI (2)
$ 78,707
$ 76,721
$ 1,986
2.6 %
Available Liquidity
$ 676,649
$ 564,903
$ 111,746
19.8 %
Debt to gross fair value (2)(3)
42.9 %
42.4 %
0.5 %
Debt to trailing 12 months adjusted EBITDA (2)(3)
7.72x
8.13x
-0.41x
(5.0) %
(1)
Property revenue for the three months ended September 30, 2023 has been increased by $4,898 as a result of a change in the presentation of recoverable property taxes for certain properties where a tenant pays the property taxes on Crombie's behalf.
(2)
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, AFFO, same-asset property cash NOI, debt to gross fair value, and debt to trailing 12 months adjusted EBITDA.
(3)
At Crombie's proportionate share including joint ventures.
Information in this press release is a select summary of results. This press release should be read in conjunction with Crombie's Management's Discussion and Analysis for the quarter ended September 30, 2024 and Consolidated Financial Statements and Notes for the quarters ended September 30, 2024, and September 30, 2023. Full details on our results can be found at www.crombie.ca and www.sedarplus.ca.
Operational Metrics
September 30, 2024
September 30, 2023
Number of investment properties (1)
296
294
Gross leasable area (2)
18,766,000
18,652,000
Economic occupancy (3)
95.9 %
96.0 %
Committed occupancy (4)
96.1 %
96.4 %
Total properties inclusive of joint ventures (5)
305
304
Gross leasable area inclusive of joint ventures
19,297,000
19,182,000
(1)
This includes properties owned at full and partial interests, excluding joint ventures.
(2)
Gross leasable area is adjusted to reflect Crombie's proportionate interest in partially owned properties, excluding joint ventures.
(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.
(5)
Inclusive of properties under development properties.
Committed occupancy of 96.1% included 42,000 square feet of space committed in the quarter. VECTOM and Major Markets represent 22,000 square feet of committed space. The decrease in committed occupancy compared to September 30, 2023 is primarily due to natural lease expiries, early terminations, and tenant downsizing, partially offset by new leasing activity.
New leases increased occupancy by 187,000 square feet at September 30, 2024, at an average first year rate of $24.00 per square foot.
Renewal activity for the third quarter of 2024 consisted of 359,000 square feet with an increase of 9.7% over expiring rental rates. The primary driver of renewal growth in the quarter was 348,000 square feet of retail renewals with an increase of 9.8% over expiring rental rates.
When comparing the expiring rental rates to the weighted average rental rate for the renewal term, Crombie achieved an increase of 11.8% for the three months ended September 30, 2024.
Financial Metrics
Three months ended September 30,
Nine months ended September 30,
2024
2023
Variance
%
2024
2023
Variance
%
Net property income (1)
$ 75,006
$ 71,453
$ 3,553
5.0 %
$ 223,535
$ 211,543
$ 11,992
5.7 %
Operating income attributable to Unitholders
$ 26,570
$ 27,796
$ (1,226)
(4.4) %
$ 82,122
$ 72,526
$ 9,596
13.2 %
Same-asset property cash NOI (1)
$ 78,707
$ 76,721
$ 1,986
2.6 %
$ 233,542
$ 226,555
$ 6,987
3.1 %
Funds from operations ("FFO") (1)
Basic
$ 56,170
$ 56,510
$ (340)
(0.6) %
$ 168,918
$ 155,413
$ 13,505
8.7 %
Per Unit - Basic
$ 0.31
$ 0.31
$ ,
— %
$ 0.93
$ 0.87
$ 0.06
6.9 %
Payout ratio (1)
72.5 %
70.9 %
1.6 %
72.0 %
77.1 %
(5.1) %
Adjusted funds from operations ("AFFO") (1)
Basic
$ 48,742
$ 49,962
$ (1,220)
(2.4) %
$ 146,006
$ 134,989
$ 11,017
8.2 %
Per Unit - Basic
$ 0.27
$ 0.28
$ (0.01)
(3.6) %
$ 0.80
$ 0.75
$ 0.05
6.7 %
Payout ratio (1)
83.6 %
80.2 %
3.4 %
83.4 %
88.7 %
(5.3) %
(1)
Net property income, 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 net property income, same-asset property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio.
Third Quarter and Year-to-Date 2024 Results
Operating income attributable to Unitholders
The decrease in operating income in the third quarter was mainly due to higher Unit-based compensation costs resulting from an increase in Crombie's Unit price, higher interest expense, and reduced income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023. This was offset in part by growth in property revenue from new developments, renewals, new leasing activity, and higher supplemental rent from modernization investments.
The year-to-date increase was driven primarily by reduced general and administrative expenses due to lower employee transition costs compared to the same period in 2023 and organizational changes in 2024. Further contributing to the increase was growth in property revenue due to the factors discussed above, increased revenue from management and development services, and higher gain on disposal of investment properties. The increase was partially offset year to date by increased interest expense and lower income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023. Further offsetting the increase in operating income was impairment of an investment property in the second quarter of 2024, an increase in depreciation and amortization, and higher tenant incentive amortization primarily from modernizations.
Same-asset property cash NOI
The increase in same-asset property cash NOI for the quarter was primarily driven by increased property revenue from renewals, contractual rent step-ups, and new leasing.
The year-to-date increase was due to the factors discussed above and by higher supplemental revenue from modernization investments.
FFO
Without impacting FFO per Unit, total FFO decreased in the quarter, driven primarily by higher Unit-based compensation costs resulting from an increase in Crombie's Unit price, higher interest expense, and reduced income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in the third quarter of 2023. This was offset in part by higher property revenue from new developments, renewals, new leasing activity, and supplemental rent from modernization investments.
The year-to-date increase in FFO per Unit was driven by reduced general and administrative expenses due to lower employee transition costs compared to the same period in 2023 and organizational changes in 2024. Further contributing to the increase was growth in property revenue from new developments, renewals, new leasing activity, supplemental rent from modernization investments, and increased revenue from management and development services. The increase was partially offset by increased interest expense and lower income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023.
FFO per Unit, excluding employee transition costs of $784 in the second quarter of 2024, was $0.93 year to date, an increase of 2.2% over 2023 ($0.91 year to date excluding employee transition costs of $7,172 in the second quarter of 2023).
AFFO
Total AFFO decreased in the quarter primarily due to higher Unit-based compensation costs resulting from an increase in Crombie's Unit price, higher interest expense, and reduced income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in the third quarter of 2023. This was partially offset by higher property revenue from new developments, renewals, contractual rent step-ups, new leasing activity, and supplemental rent from modernization investments.
On a year-to-date basis, the growth in total AFFO was primarily driven by reduced general and administrative expenses due to lower employee transition costs compared to the same period in 2023 and organizational changes in 2024. Growth in property revenue due to the factors discussed above and increased revenue from management and development services further contributed to the year-to-date increase in AFFO. This was partially offset by higher interest expense and reduced income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023.
AFFO per Unit, excluding employee transition costs of $784 in the second quarter of 2024, was $0.81 year to date, an increase of 2.5% over 2023 ($0.79 year to date excluding employee transition costs of $7,172 in the second quarter of 2023).
Financial Condition Metrics
September 30, 2024
December 31, 2023
September 30, 2023
Unencumbered investment properties (1)
$ 2,651,000
$ 2,608,000
$ 2,582,000
Available liquidity (2)
$ 676,649
$ 583,770
$ 564,903
Debt to gross book value - cost basis (3)
45.2 %
45.2 %
45.3 %
