Crombie REIT Announces Second Quarter 2023 Results
Solid fundamentals with continued focus on value creation as Voilà CFC 3 enters economic occupancy and The Marlstone breaks ground
NEW GLASGOW, NS, Aug. 9, 2023 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) today announced results for its second quarter ended June 30, 2023. Management will host a conference call to discuss the results at 12:00 p.m. (EDT), August 10, 2023.
"Crombie's stable portfolio delivered solid results this quarter, with strong occupancy and consistent, healthy same-asset NOI growth. We continue leveraging our strengths, creating value on a sustainable basis," said Mark Holly, President and CEO. "In the second quarter, we announced and broke ground on our major development, The Marlstone, advanced entitlements at key properties in highly-desirable markets, and Voilà CFC 3, our second industrial customer fulfillment centre, moved into economic occupancy in early June. We are also pleased to announce that we received validation and approval from the Science Based Targets initiative in support of our Climate Action Plan."
SECOND QUARTER SUMMARY
(In thousands of Canadian dollars, except per Unit amounts and square feet and as otherwise noted)
Operational Highlights
Committed occupancy 96.4% and economic occupancy 95.9%; a 10 basis point increase in committed occupancy and economic occupancy remained constant compared to the second quarter of 2022
Renewals of 245,000 square feet at rents 3.3% above expiring rental rates (an increase of 5.8% using the weighted average rent during the renewal term)
Acquisition of one investment property added 58,000 square feet of GLA at a total aggregate purchase price of $9,760
Construction commenced at our 291-unit residential rental development, The Marlstone, in Halifax, Nova Scotia
The Science Based Targets initiative ("SBTi") has validated and approved Crombie's plan to reduce greenhouse gas ("GHG") emissions as part of its Climate Action Plan
Financial Highlights
Property revenue of $107,967, a 4.8% increase from $103,064 in the second quarter of 2022
Operating income attributable to Unitholders of $19,557, a decrease of 31.2% compared to the second quarter of 2022 of $28,424 (operating income attributable to Unitholders excluding employee transition costs was $26,729 for the quarter)
Net property income(1) of $71,442, a 1.9% increase from $70,097 in the second quarter of 2022
FFO(1) of $46,068 or $0.26 per Unit compared to $49,877 or $0.28 per Unit in the second quarter of 2022 (FFO per Unit excluding employee transition costs was $0.30 for the quarter)
FFO(1) payout ratio of 86.7% for the second quarter of 2023 compared to 79.0% for the same period last year
AFFO(1) of $39,118 or $0.22 per Unit compared to $43,551 or $0.25 per Unit in the second quarter of 2022 (AFFO per Unit excluding employee transition costs was $0.26 for the quarter)
AFFO(1) payout ratio of 102.1% for the second quarter of 2023 compared to 90.5% for the same period last year
Same-asset property cash NOI(1) increased 2.7% compared to the second quarter of 2022
Debt to gross fair value(1)(2) of 42.3%, an improvement from 42.7% for the same period last year
Debt to trailing 12 months adjusted EBITDA(1)(2) of 8.17x compared to the second quarter of 2022 at 8.75x
Fair value of unencumbered investment properties of $2,488,359, a 15.5% increase from $2,155,326 for the same period last year
Available liquidity of $614,072, a 38.2% increase from $444,262 in the second quarter of 2022
(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 net property income, 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. |
(2) | 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 June 30, 2023 and Consolidated Financial Statements and Notes for the quarters ended June 30, 2023, and June 30, 2022. 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 June 30, 2023 are as follows:
Three months ended June 30, | ||||
(In thousands of Canadian dollars, except per Unit amounts and as otherwise noted | 2023 | 2022 | Variance | % |
Net property income(1) | $ 71,442 | $ 70,097 | $ 1,345 | 1.9 % |
Operating income attributable to Unitholders | $ 19,557 | $ 28,424 | $ (8,867) | (31.2) % |
Same-asset property cash NOI (1) | $ 71,491 | $ 69,585 | $ 1,906 | 2.7 % |
Funds from operations ("FFO") (1) | ||||
Basic | $ 46,068 | $ 49,877 | $ (3,809) | (7.6) % |
Per Unit - Basic | $ 0.26 | $ 0.28 | $ (0.02) | (7.1) % |
Payout ratio(1) | 86.7 % | 79.0 % | 7.7 % | |
Adjusted funds from operations ("AFFO") (1) | ||||
Basic | $ 39,118 | $ 43,551 | $ (4,433) | (10.2) % |
Per Unit - Basic | $ 0.22 | $ 0.25 | $ (0.03) | (12.0) % |
Payout ratio(1) | 102.1 % | 90.5 % | 11.6 % | |
(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 same-asset property cash NOI, FFO, FFO payout ratio, AFFO, and AFFO payout ratio. |
Operating income attributable to Unitholders decreased by $8,867, or 31.2%, primarily due to increased general and administrative expenses of $7,087 resulting from employee transition costs of $7,172 in the second quarter of 2023 and gain on disposal of investment properties of $4,863 in the second quarter of 2022. Total estimated costs related to these employee transitions have been captured in the quarter. The reduction in operating income was offset in part by revenue from management and development services of $2,046, consisting primarily of fees from a related party for work on our customer fulfillment centres, and increased net property income of $1,345.
Same-asset property cash NOI increased by $1,906, or 2.7%, compared to the second quarter of 2022 primarily due to renewals and new leasing, and higher supplemental rent of $271 from modernizations and capital improvements.
The decrease in FFO of $3,809 was primarily due to increased general and administrative expenses of $7,087 resulting from employee transition costs of $7,172 in the second quarter of 2023. This was offset in part by revenue from management and development services of $2,046, consisting mainly of fees from a related party for work on our customer fulfillment centres. Additionally, rental revenue increased $1,084 from renewals, new leasing, and acquisitions, and $504 from new developments, partially offset by $456 due to dispositions. FFO excluding employee transition costs of $7,172 was $53,240 for the quarter or $0.30 per Unit.
The reduction in AFFO was primarily due to the same factors impacting FFO as described above. It was further impacted by the increase in the maintenance expenditure charge for 2023 from $1.00 to $1.10 per square foot of weighted average GLA, an increased charge of $471 for the quarter. AFFO excluding employee transition costs of $7,172 was $46,290 for the quarter or $0.26 per Unit.
Crombie's key financial metrics for the six months ended June 30, 2023 are as follows:
Six months ended June 30, | ||||
(In thousands of Canadian dollars, except per Unit amounts and as otherwise noted) | 2023 | 2022 | Variance | % |
Net property income(1) | $ 140,090 | $ 139,428 | $ 662 | 0.5 % |
Operating income attributable to Unitholders | $ 44,730 | $ 53,672 | $ (8,942) | (16.7) % |
Same-asset property cash NOI (1) | $ 139,650 | $ 136,123 | $ 3,527 | 2.6 % |
Funds from operations ("FFO") (1) | ||||
Basic | $ 98,903 | $ 98,968 | $ (65) | (0.1) % |
Per Unit - Basic | $ 0.55 | $ 0.57 | $ (0.02) | (3.5) % |
Payout ratio(1) | 80.6 % | 79.5 % | 1.1 % | |
Adjusted funds from operations ("AFFO") (1) | ||||
Basic | $ 85,027 | $ 85,449 | $ (422) | (0.5) % |
Per Unit - Basic | $ 0.48 | $ 0.49 | $ (0.01) | (2.0) % |
Payout ratio(1) | 93.7 % | 92.0 % | 1.7 % | |
(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. |
Operating income attributable to Unitholders decreased by $8,942, or 16.7%, on a year to date basis primarily driven by higher general and administrative expenses resulting from employee transition costs of $7,172 in the second quarter of 2023 and lower gain on disposal of investment properties of $4,752 compared to the same period in 2022. Total estimated costs related to these employee transitions have been captured in the second quarter of 2023. Also leading to the variance year over year was a gain on distribution from equity-accounted investments of $1,933 in the first quarter of 2022 as a result of cash distributions received from 1600 Davie Limited Partnership in excess of our investment in the joint venture. The decrease was offset in part by growth in income from equity-accounted investments of $3,414 resulting from the sale of two parcels of land at our Opal Ridge property in Dartmouth, Nova Scotia in the first quarter of 2023 and by revenue from management and development services of $2,046, consisting primarily of fees from a related party for work on our customer fulfillment centres.
On a year to date basis, same-asset property cash NOI increased by $3,527, or 2.6%, compared to the same period in 2022 primarily due to renewals and new leasing, improved parking revenue of $787, and an increase in supplemental rent of $712 from modernizations and capital improvements. Additionally, lease termination income increased by $454 resulting from tenant surrenders. The increase in same-asset property cash NOI was offset in part by an increase in bad debt expense of $343.
For the six months ended June 30, 2023, FFO decreased $65 primarily driven by higher general and administrative expenses resulting from employee transition costs of $7,172 in the second quarter of 2023 and a decrease of $2,099 in rental revenue from properties that were disposed. This was offset in part by growth in income from equity-accounted investments of $3,414 resulting from the sale of two parcels of land at our Opal Ridge property in Dartmouth, Nova Scotia in the first quarter of 2023 and by revenue from management and development services of $2,046, consisting primarily of fees from a related party for work on our customer fulfillment centres. Increased income of $2,175 from renewals and new leasing, $1,016 from acquisitions, $830 in supplemental rent from modernizations investments, improved parking revenue of $787, and increased rental revenue from new developments of $661 further offset the decrease in FFO. FFO excluding employee transition costs of $7,172 was $106,075 or $0.59 per Unit.
The reduction in AFFO on a year to date basis was driven primarily by the increase in the maintenance expenditure charge for 2023 from $1.00 to $1.10 per square foot of weighted average GLA, an increased charge of $939 for the period. This was offset in part by the factors impacting FFO as described above. AFFO excluding employee transition costs of $7,172 was $92,199 or $0.52 per Unit.
Operating Results
June 30, 2023 | March 31, 2023 | December 31, | September 30, | June 30, 2022 | |
Number of investment properties (1) | 293 | 291 | 289 | 290 | 294 |
Gross leasable area (2) | 18,625,000 | 18,550,000 | 18,445,000 | 18,331,000 | 18,500,000 |
Economic occupancy (3) | 95.9 % | 94.5 % | 94.8 % | 96.2 % | 95.9 % |
Committed occupancy (4) | 96.4 % | 96.7 % | 96.9 % | 96.8 % | 96.3 % |
(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. |
June 30, 2023 | March 31, 2023 | December 31, | September 30, 2022 | June 30, 2022 | |
Investment properties, fair value | $ 5,123,000 | $ 5,097,000 | $ 5,050,000 | $ 5,265,000 | $ 5,273,000 |
Investment properties held in joint ventures, fair value, at Crombie's share(1) | $ 447,500 | $ 447,000 | $ 454,000 | $ 453,000 | $ 445,500 |
Unencumbered investment properties (2) | $ 2,488,359 | $ 2,291,396 | $ 2,154,468 | $ 2,200,890 | $ 2,155,326 |
Available liquidity (3) | $ 614,072 | $ 735,877 | $ 583,003 | $ 445,372 | $ 444,262 |
Debt to gross book value - cost basis (4) | 45.2 % | 44.9 % | 44.6 % | 46.2 % | 46.8 % |
Debt to gross fair value (5)(6) | 42.3 % | 41.9 % | 41.8 % | 42.0 % | 42.7 % |
Weighted average interest rate (7) | 4.0 % | 4.0 % | 3.8 % | 3.8 % | 3.8 % |
Debt to trailing 12 months adjusted EBITDA(5)(6) | 8.17x | 7.96x | 8.02x | 8.50x | 8.75x |
Interest coverage ratio (5)(6) | 2.95x | 3.24x | 3.26x | 3.32x | 3.26x |
(1) | See Joint Ventures section in the Management's Discussion and Analysis. |
(2) | Represents fair value of unencumbered properties. |
(3) | Represents the undrawn portion on the credit facilities, excluding joint facilities with joint operation partners. |
(4) | See Capital Management note in the Financial Statements. |
(5) | 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. |
(6) | See Debt Metrics section in the Management's Discussion and Analysis. |
(7) | Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt. |
Operations and Leasing
During the quarter, Crombie achieved economic occupancy of 95.9% and committed occupancy of 96.4%. Crombie renewed 245,000 square feet with an increase of 3.3% over expiring rents during the quarter. Year to date, new leases increased occupancy by 419,000 square feet at an average first year rate of $19.86 per square foot. In the second quarter, Voilà CFC 3, in Calgary, Alberta, moved into economic occupancy and is included in year to date new leases.
Development
Crombie segregates its development pipeline by expected timing. Near-term projects indicate that a decision to commit financially is expected to be determined within the next two years. Currently, Crombie has three developments classified as near-term projects. Upon completion, these projects will total approximately 1,083,000 square feet of residential GLA (1,451 residential units) and 104,000 square feet of commercial GLA. The geographical breakdown of GLA in square feet is as follows: 854,000 in Vancouver; 145,000 in Victoria and 188,000 in Halifax.
The Marlstone, a 291-unit residential rental project in the heart of downtown Halifax, is under active development. Construction commenced in May 2023 and is expected to be completed in the second quarter of 2026.
Timing estimates are subject to change, as well as other development risks described in Crombie's second quarter Management's Discussion and Analysis under "Development" and "Risk Management".
Climate Action
In the second quarter of 2023, Crombie announced the advancement of its environmental commitments through its newly created Climate Action Plan. Through this plan, Crombie is committed to achieve net zero by 2050 for scopes 1, 2, and 3. In the near term, Crombie is committed to reducing scope 1 and 2 emissions by a minimum of 50% by 2030 from its 2019 base year. All targets were submitted to SBTi and validation and approval was received subsequent to the second quarter of 2023.
SBTi is an internationally recognized body that defines and promotes best practice in emissions reductions and net zero targets in line with climate science. Scope 1 refers to an entity's direct emissions, while Scope 2 is an entity's indirect emissions through its energy use. Scope 3 emissions are the result of activities not controlled by the entity, but indirectly related to its value chain.
Subsequent Event
On July 31, 2023, Crombie paid an amount of $16,361, excluding transaction costs, to a subsidiary of Empire in connection with the assignment to Crombie of 24 subleases for retail fuel sites in Western Canada owned by Crombie, following the completion of Empire's previously announced transaction with a subsidiary of Shell Canada.
Conference Call Invitation
Crombie will provide additional details concerning its period ended June 30, 2023 results on a conference call to be held Thursday, August 10, 2023, beginning at 12:00 p.m. (EDT). 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. To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3PaJVI2 to receive an instant automated call back. You may also listen to a live audio webcast of the conference call by visiting the Investor section of Crombie's website at www.crombie.ca.
Replay will be available until midnight August 17, 2023 by dialing (416) 764-8677 or (888) 390-0541 and entering passcode 585088 #, or on the Crombie website for 90 days following the conference call.
Cautionary Statements and Non-GAAP Measures
Net property income, 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 six months ended June 30, 2023.
The reconciliations for each non-GAAP measure included in this press release are outlined as follows:
Net Property Income
Management uses net property income as a measure of performance of properties period-over-period.
Net property income, which excludes revenue from management and development services and certain expenses such as interest expense and indirect operating expenses, is as follows:
Three months ended June 30, | Six months ended June 30, | |||||||||||
2023 | 2022 | Variance | 2023 | 2022 | Variance | |||||||
Property revenue | $ 107,967 | $ 103,064 | $ 4,903 | $ 215,518 | $ 208,010 | $ 7,508 | ||||||
Property operating expenses | (36,525) | (32,967) | (3,558) | (75,428) | (68,582) | (6,846) | ||||||
Net property income | $ 71,442 | $ 70,097 | $ 1,345 | $ 140,090 | $ 139,428 | $ 662 | ||||||
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, and those for which planning activities are 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 June 30, | Six months ended June 30, | ||||||
2023 | 2022 | Variance | 2023 | 2022 | Variance | ||
Net property income | $ 71,442 | $ 70,097 | $ 1,345 | $ 140,090 | $ 139,428 | $ 662 | |
Non-cash straight-line rent | (838) | (1,133) | 295 | (2,143) | (3,212) | 1,069 | |
Non-cash tenant incentive amortization(1) | 5,357 | 5,690 | (333) | 12,149 | 11,254 | 895 | |
Property cash NOI | 75,961 | 74,654 | 1,307 | 150,096 | 147,470 | 2,626 | |
Acquisitions and dispositions property cash NOI | 540 | 1,443 | (903) | 1,534 | 3,233 | (1,699) | |
Development property cash NOI | 3,930 | 3,626 | 304 | 8,912 | 8,114 | 798 | |
Acquisitions, dispositions and development property cash NOI | 4,470 | 5,069 | (599) | 10,446 | 11,347 | (901) | |
Same-asset property cash NOI | $ 71,491 | $ 69,585 | $ 1,906 | $ 139,650 | $ 136,123 | $ 3,527 | |
(1) Refer to "Amortization of Tenant Incentives" in the Management's Discussion and Analysis for the breakdown of tenant incentive amortization.
Funds from Operations (FFO)
Crombie follows the recommendations of the January 2022 guidance of the Real Property Association of Canada ("REALPAC") in calculating FFO.
The reconciliation of FFO for the three and six months ended June 30, 2023 and 2022 is as follows:
Three months ended June 30, | Six months ended June 30, | ||||||
2023 | 2022 | Variance | 2023 | 2022 | Variance | ||
Decrease in net assets attributable to Unitholders | $ (18,847) | $ (8,936) | $ (9,911) | $ (32,846) | $ (22,713) | $ (10,133) | |
Add (deduct): | |||||||
Amortization of tenant incentives | 5,357 | 5,690 | (333) | 12,149 | 11,254 | 895 | |
Gain on disposal of investment properties | — | (4,863) | 4,863 | (111) | (4,863) | 4,752 | |
Gain on distribution from equity-accounted investments | — | — | — | — | (1,933) | 1,933 | |
Depreciation and amortization of investment properties | 19,115 | 18,842 | 273 | 38,184 | 37,366 | 818 | |
Adjustments for equity-accounted investments | 1,015 | 1,081 | (66) | 2,272 | 2,023 | 249 | |
Principal payments on right-of-use assets | 58 | 57 | 1 | 115 | 113 | 2 | |
Internal leasing costs | 966 | 646 | 320 | 1,564 | 1,336 | 228 | |
Finance costs - distributions to Unitholders | 39,921 | 39,394 | 527 | 79,696 | 78,630 | 1,066 | |
Finance costs (income) - change in fair value of financial instruments(1) | (1,517) | (2,034) | 517 | (2,120) | (2,245) | 125 | |
FFO as calculated based on REALPAC recommendations | $ 46,068 | $ 49,877 | $ (3,809) | $ 98,903 | $ 98,968 | $ (65) | |
Basic weighted average Units (in 000's) | 179,309 | 176,976 | 2,333 | 178,991 | 174,832 | 4,159 | |
FFO per Unit - basic | $ 0.26 | $ 0.28 | $ (0.02) | $ 0.55 | $ 0.57 | $ (0.02) | |
FFO payout ratio (%) | 86.7 % | 79.0 % | 7.7 % | 80.6 % | 79.5 % | 1.1 % | |
(1) | Includes the fair value changes of Crombie's deferred unit plan. |
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 press release and Management's Discussion and Analysis.
The reconciliation of AFFO for the three and six months ended June 30, 2023 and 2022 is as follows:
Three months ended June 30, | Six months ended June 30, | ||||||
2023 | 2022 | Variance | 2023 | 2022 | Variance | ||
FFO as calculated based on REALPAC recommendations | $ 46,068 | $ 49,877 | $ (3,809) | $ 98,903 | $ 98,968 | $ (65) | |
Add (deduct): | |||||||
Straight-line rent adjustment | (838) | (1,133) | 295 | (2,143) | (3,212) | 1,069 | |
Straight-line rent adjustment included in income (loss) from equity-accounted investments | 36 | 112 | (76) | 156 | 273 | (117) | |
Internal leasing costs | (966) | (646) | (320) | (1,564) | (1,336) | (228) | |
Maintenance expenditures on a square footage basis | (5,182) | (4,659) | (523) | (10,325) | (9,244) | (1,081) | |
AFFO as calculated based on REALPAC recommendations | $ 39,118 | $ 43,551 | $ (4,433) | $ 85,027 | $ 85,449 | $ (422) | |
Basic weighted average Units (in 000's) | 179,309 | 176,976 | 2,333 | 178,991 | 174,832 | 4,159 | |
AFFO per Unit - basic | $ 0.22 | $ 0.25 | $ (0.03) | $ 0.48 | $ 0.49 | $ (0.01) | |
AFFO payout ratio (%) | 102.1 % | 90.5 % | 11.6 % | 93.7 % | 92.0 % | 1.7 % | |
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 trade payables and accruals in the ordinary course of business, and distributions payable. Debt includes Crombie's share of debt held in equity-accounted joint ventures.
Gross fair value includes investment properties measured at fair value, including Crombie's share of those held within joint ventures. 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 June 30, 2023 and December 31, 2022, respectively, based on each property's current use as a revenue-generating investment property. As at June 30, 2023, Crombie's weighted average capitalization rate used in the determination of the fair value of its investment properties was 5.96%, an increase of two basis points from December 31, 2022. Crombie's weighted average capitalization rate used in the determination of the fair value of its share of investment properties held in equity-accounted joint ventures was 3.51% as at June 30, 2023, an increase of four basis points from December 31, 2022. For an explanation of how Crombie determines capitalization rates, see the "Other Disclosures" section of the Management's Discussion and Analysis, under "Investment Property Valuation" in the "Use of Estimates and Judgments" section.
June 30, 2023 | December 31, 2022 | ||
Fixed rate mortgages | $ 823,462 | $ 918,552 | |
Senior unsecured notes | 1,175,000 | 975,000 | |
Unsecured non-revolving credit facility | 61,020 | 150,000 | |
Revolving credit facility | 52,491 | — | |
Joint operation credit facility | 3,292 | 10,264 | |
Debt held in joint ventures, at Crombie's share (1) (2) | 270,985 | 270,642 | |
Lease liabilities | 34,990 | 35,000 | |
Adjusted debt | $ 2,421,240 | $ 2,359,458 | |
Investment properties, fair value | $ 5,123,000 | $ 5,050,000 | |
Investment properties held in joint ventures, fair value, at Crombie's share (2) | 447,500 | 454,000 | |
Other assets, cost (3) | 114,223 | 99,728 | |
Other assets, cost, held in joint ventures, at Crombie's share (2) (3) (4) | 27,633 | 26,974 | |
Cash and cash equivalents | 231 | 6,117 | |
Cash and cash equivalents held in joint ventures, at Crombie's share (2) | 1,213 | 2,487 | |
Deferred financing charges | 7,930 | 7,843 | |
Gross fair value | $ 5,721,730 | $ 5,647,149 | |
Debt to gross fair value | 42.3 % | 41.8 % |
(1) | Includes Crombie's share of fixed and floating rate mortgages, construction loans, revolving credit facility, and lease liabilities held in joint ventures. |
(2) | See the "Joint Ventures" section in the Management's Discussion and Analysis. |
(3) | Other assets exclude tenant incentives, accumulated amortization, and accrued straight-line rent receivable. |
(4) | Other assets held in joint ventures include deferred financing charges. |
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 | |||||
June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | |
Operating income attributable to Unitholders | $ 19,557 | $ 25,173 | $ 87,718 | $ 26,410 | $ 28,424 |
Amortization of tenant incentives | 5,357 | 6,792 | 5,940 | 5,795 | 5,690 |
Gain on disposal of investment properties | — | (111) | (62,584) | (13,357) | (4,863) |
Gain on distribution from equity-accounted investments | — | — | — | (1,000) | — |
Impairment of investment properties | — | — | — | 10,400 | — |
Depreciation and amortization | 19,494 | 19,420 | 18,991 | 22,744 | 19,222 |
Finance costs - operations | 21,000 | 20,764 | 20,623 | 20,884 | 20,762 |
(Income) loss from equity-accounted investments | 1,425 | (1,673) | 1 | 1,787 | 1,627 |
Property revenue in joint ventures, at Crombie's share | 4,144 | 11,269 | 7,271 | 3,258 | 2,616 |
Property operating expenses in joint ventures, at Crombie's share | (1,231) | (5,170) | (3,022) | (1,296) | (1,002) |
General and administrative expenses in joint ventures, at Crombie's share | (54) | (107) | (77) | (31) | (21) |
Taxes - current | — | — | 4 | — | — |
Adjusted EBITDA [1] | $ 69,692 | $ 76,357 | $ 74,865 | $ 75,594 | $ 72,455 |
Trailing 12 months adjusted EBITDA [3] | $ 296,508 | $ 299,271 | $ 294,259 | $ 290,022 | $ 286,024 |
Finance costs - operations | $ 21,000 | $ 20,764 | $ 20,623 | $ 20,884 | $ 20,762 |
Finance costs - operations in joint ventures, at Crombie's share | 3,293 | 3,430 | 2,961 | 2,564 | 2,157 |
Amortization of deferred financing charges | (641) | (622) | (654) | (675) | (668) |
Adjusted interest expense [2] | $ 23,652 | $ 23,572 | $ 22,930 | $ 22,773 | $ 22,251 |
Debt outstanding (see Debt to Gross Fair Value)(1) [4] | $ 2,421,240 | $ 2,383,231 | $ 2,359,458 | $ 2,463,882 | $ 2,502,845 |
Interest service coverage ratio {[1]/[2]} | 2.95x | 3.24x | 3.26x | 3.32x | 3.26x |
Debt to trailing 12 months adjusted EBITDA {[4]/[3]} | 8.17x | 7.96x | 8.02x | 8.50x | 8.75x |
(1) | Includes debt held in joint ventures, at Crombie's share. |
This press 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 2022 annual Management's Discussion and Analysis under "Risk Management" and the Annual Information Form for the year ended December 31, 2022 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, and 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 of development, each of which may be impacted by 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.
About Crombie REIT
Crombie invests in real estate that enriches local communities and enables long-term sustainable growth. As one of the country's leading owners, operators, and developers 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 June 30, 2023, our portfolio contains 293 income-producing properties comprising approximately 18.6 million square feet, and a significant pipeline of future development projects. Learn more at www.crombie.ca.
SOURCE Crombie REIT
View original content to download multimedia: http://www.newswire.ca/en/releases/archive/August2023/09/c9265.html
