Crombie REIT Announces First Quarter 2020 Results and COVID-19 Update
First Quarter Summary(In thousands of CAD dollars, except per unit amounts and as otherwise noted)
-- Operating income of $21,324 -- Property revenue of $102,252 -- Debt to gross book value (net of cash) - fair value of 48.8% -- Available liquidity of $449,898 -- Unencumbered asset pool of $1,479,211 -- Completed $100,012 equity raise at $16 per unit -- Repaid $157,630 in mortgages at a weighted average interest rate of 5.61% -- Same-asset property cash NOI growth of 1.7% -- Renewals of 156,000 square feet at rents 4.5% above expiring rates -- Record committed occupancy of 96.2%
Crombie Real Estate Investment Trust ("Crombie") (TSX:CRR-UN.TO) today announced results for its first quarter ended March 31, 2020. Management will host a conference call to discuss the results at 11:30 a.m. (EDT), May 7, 2020.
"The COVID-19 pandemic and its impacts on Canadian society and our economy are unprecedented. Throughout this time, our team has worked relentlessly to prioritize the health, safety and wellbeing of our employees, tenants, communities and our business," said Don Clow, President and CEO of Crombie. "Crombie is well positioned to respond to these challenges with approximately $450 million of liquidity, $1.5 billion in unencumbered assets, a strong balance sheet, solid operating fundamentals, and a talented team prudently guiding us forward."
"It is during these uncertain economic times that the resilience of our high-quality grocery and pharmacy-anchored portfolio stands out. Approximately 75% of Crombie's annual minimum rent is generated from grocery and pharmacy-anchored properties, while only 6% of Crombie's annual minimum rent is generated by small business tenants."
"We will continue to be resilient and nimble in the face of a fast-changing environment and will continue to work diligently to ensure Crombie's commitment to our stakeholders remains steadfast."
Crombie is well positioned with respect to the defensiveness of its annual minimum rent (AMR):
-- 75% of AMR generated from grocery and pharmacy-anchored properties -- 67% of AMR generated from essential services tenants -- 6% of AMR generated by small business tenants
The vast majority of space within Crombie's high-quality grocery and pharmacy-anchored properties remains open, and most of our tenancies have been deemed essential services (approximately 67%). Crombie's finance teams have secured increased liquidity and have worked tirelessly with our operations and leasing teams to build and implement our rent deferral program, Crombie Values Small Business, for small business tenants who have been impacted by business closures.
During the month of April 2020, 87% of gross rent was collected by Crombie. In addition, Crombie continues to work through deferral arrangements with both small business and national tenants. Deferral arrangements have been finalized on 2% of April gross rents. 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 are uncertain at this time. Rent collection by segments is as follows:
% of April Approximate 2020 % of Gross Gross Rent Rent, Total Collected Portfolio Retail and Commercial 86% 91% Office 94% 6% Retail-Related Industrial 100% 3% --- Total 87% 100% ---
Due to the shutdown of nonessential construction in Quebec, Le Duke and the Montreal CFC developments are currently on hold with expected reopening scheduled for May 11th. British Columbia and Ontario have deemed construction essential, therefore our active developments at Davie Street in Vancouver, and Bronte Village in the GTA continue, however at a slower pace, ensuring the safety of all individuals on site. Belmont Market in British Columbia is experiencing minimal delays.
Crombie ended the quarter with $449,898 in available liquidity, bolstered by the addition of a $120,000 unsecured, floating rate short-term credit facility, maturing on March 31, 2021.
Full details on our results can be found at www.crombiereit.com and www.sedar.com.
FINANCIAL RESULTS Crombie's key financial metrics for the three months ended March 31, 2020 are as follows: Three months ended March 31, (In thousands of CAD dollars, except per unit amounts and as otherwise noted) 2020 2019 Change Change (%) --- --- Property revenue $ 102,252 $ 105,240 $ (2,988) (2.8) % Property operating expenses 35,237 32,366 (2,871) (8.9) % --- Property net operating income ("NOI") $ 67,015 $ 72,874 $ (5,859) (8.0) % --- --- Operating income attributable to Unitholders $ 21,324 $ 48,228 $ (26,904) (55.8) % --- --- Same-asset property cash NOI (1) $ 61,279 $ 60,240 $ 1,039 1.7 % Funds from operations ("FFO") (1) Basic $ 45,661 $ 45,460 $ 201 0.4 % Per unit - Basic $ 0.29 $ 0.30 $ (0.01) (3.3) % Payout ratio 76.0 % 74.2 % 1.8 % Adjusted funds from operations ("AFFO") (1) Basic $ 39,683 $ 38,660 $ 1,023 2.6 % Per unit - Basic $ 0.26 $ 0.26 $ % Payout ratio 87.4 % 87.3 % 0.1 % --- (1) Same-asset property cash NOI, FFO and AFFO are non-GAAP financial measures used by management to evaluate Crombie's business performance. See "Cautionary Statements" below and refer to Crombie's March 31, 2020 MD&A for a reconciliation of same-asset property cash NOI, FFO and AFFO.
Same-asset property cash NOI increased by $1,039 or 1.7% compared to the first quarter of 2019 primarily due to rate increases on existing tenant leases, new leasing activity and revenues from modernization investments.
Same-asset property cash NOI was impacted by an increase in the allowance for doubtful accounts of $497 over the same period in 2019 as a result of management's estimations as to the potential impacts of COVID-19 on collection of receivable balances outstanding at March 31, 2020. Same-asset property cash NOI restated for the removal of this additional allowance is $61,776, an increase of 2.6% compared to the first quarter of 2019.
Operating income attributable to Unitholders decreased by $26,904 or 55.8% compared to the first quarter of 2019 primarily due to the disposition of investment properties in 2019, resulting in a quarter-over-quarter decrease of $27,458 in gain on disposal of investment properties and a $5,859 decrease in property NOI. This is offset in part by a decrease of $3,027 in finance costs from operations due to repayments of debt and a reduction in general and administrative expenses of $2,765, primarily related to the impact of decreased unit price on unit-based compensation expense.
FFO per unit was driven by lower finance costs resulting from the disposition of properties in 2019 and the repayment of mortgages in the first quarter of 2020, decreased general and administrative expenses primarily due to reduced salaries and benefits costs, offset in part by reduced property NOI as a result of property dispositions in 2019 and the increased unit count as a result of the Q1 2020 equity issuance.
AFFO per unit was driven by reduced straight-line rent and lower maintenance expenditures as a result of property dispositions in 2019, partially offset by increased unit count as a result of the Q1 2020 equity issuance. FFO and AFFO were impacted by significant dispositions in 2019 and by our investment in major development projects that will commence income generation and fuel FFO/AFFO growth in the next 12 to 24 months.
OPERATING RESULTS March 31, December 31, September 30, June 30, March 31, 2020 2019 2019 2019 2019 --- Number of investment properties (1) 285 285 284 284 285 Gross leasable area (2) 17,583,000 17,558,000 17,732,000 17,746,000 18,604,000 Economic occupancy % % % % % (3) 95.5 95.4 95.6 95.2 95.0 Committed occupancy % % % % % (4) 96.2 96.1 96.1 95.9 95.7 --- ---
(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. (4) Represents current economic occupancy plus completed lease contracts for future occupancy of currently available space.
March 31, December 31, September 30, June 30, March 31, 2020 2019 2019 2019 2019 Investment properties, fair value $ 4,519,000 $ 4,605,000 $ 4,626,000 $ 4,592,000 $ 4,755,000 Unencumbered investment properties (1) $ 1,479,211 $ 1,223,452 $ 960,275 $ 953,738 $ 1,012,707 Available liquidity (2) $ 449,898 $ 449,016 $ 450,967 $ 413,087 $ 346,347 Debt to gross book value (net of cash) - fair value (3) 48.8 % 48.9 % 48.9 % 49.1 % 50.3 % Weighted average interest rate (4) 4.06 % 4.17 % 4.22 % 4.19 % 4.20 % Debt to trailing 12 months EBITDA (net of cash) (5) 8.44x 8.52x 8.35x 8.21x 8.56x Interest coverage ratio (5) 3.18x 2.99x 2.90x 3.00x 2.93x ---
(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 Debt to Gross Book Value - Fair Value Basis section in the MD&A. The debt to gross book value (net of cash) on a fair value basis applies cash and cash equivalents to debt. (4) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. (5) See Coverage Ratios section in the MD&A.
Operations and Leasing
During the quarter, economic occupancy was 95.5% along with committed occupancy of 96.2%. Crombie renewed 156,000 square feet with an increase of 4.5% over expiring rents. New leases and expansions increased occupancy by 44,000 square feet at an average first year rate of $22.87 per square foot.
Crombie expects to invest, in total, approximately $609,000 in its first six active mixed-use major developments, with an estimated yield on cost of 5.5%-6.0%, at Crombie's share. Upon completion, these projects will total 759,000 square feet of commercial gross leasable area ("GLA") and 961,000 square feet of residential rental GLA and are broken out geographically as follows: 520,000 in the Greater Toronto Area, 308,000 in Vancouver, 567,000 in Montreal, 165,000 in St. John's and 160,000 in Langford, near Victoria.
Once complete, Crombie's major developments will increase our presence in Canada's top urban markets, diversify and improve our overall portfolio quality, and are expected to create significant NAV and AFFO growth. Crombie estimates its remaining capital outlay to complete these six projects is approximately $201,500 and will be incurred over the next two years. These estimates are subject to changes in construction costs and time to completion arising from COVID-19 as well as other development risks described in Crombie's 2019 annual MD&A under "Risk Management".
Highlighted Subsequent Events
On April 30, 2020, Crombie closed on a 3.878% mortgage loan of $118,000 for a retail-related industrial property, maturing on June 1, 2036. Installments of principal and interest are to be paid on the first day of each month. Upon receipt of proceeds, Crombie repaid $45,000 on the non-revolving short-term credit facility, maturing March 31, 2021, resulting in $75,000 remaining on the credit facility.
Conference Call Invitation
Crombie will provide additional details concerning its period ended March 31, 2020 results on a conference call to be held Thursday, May 7, 2020, beginning at 11:30 a.m. Eastern Time. Accompanying the conference call will be a presentation which 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 Crombie's website located at www.crombiereit.com on the Investor Relations section of our website. Replay will be available until midnight May 21, 2020 by dialing (416) 764-8677 or (888) 390-0541 and entering pass code 351777 #, or on the Crombie website for 90 days after the meeting.
NOI, same-asset property cash NOI, FFO, AFFO, EBITDA, available liquidity and unencumbered investment properties 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 months ended March 31, 2020.
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 2019 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:
(i) general growth and development opportunities and expansion across Canada including the expected impact of such growth from our mixed-use development pipeline, 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;
(ii) overall indebtedness levels and terms and expectations relating to refinancing, which could be impacted by the level of acquisition and disposition activity that Crombie is able to achieve, future financing opportunities, future interest rates and market conditions; and,
(iii) expected timing and costs of development projects currently underway and planned into the future.
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 are uncertain at this time.
About Crombie REIT
Crombie Real Estate Investment Trust ("Crombie") is an unincorporated, open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. Crombie is one of the country's leading national retail property landlords with a strategy to own, operate and develop a portfolio of high-quality grocery- and pharmacy-anchored shopping centres, freestanding stores and mixed-use developments primarily in Canada's top urban and suburban markets. More information about Crombie can be found at www.crombiereit.com.
SOURCE Crombie REIT
View original content: http://www.newswire.ca/en/releases/archive/May2020/06/c6992.html
SOURCE: Crombie REIT
Media Contact, Clinton Keay, CPA, CA, Chief Financial Officer and Secretary, Crombie REIT, (902) 755-8100; Claire Mahaney Lyon, CFA, MFM, Manager, Investor Relations, Crombie REIT, (902) 474-6670