Crombie REIT Announces Fourth Quarter and Year-End Results

Operational excellence and financial strength underpinned by grocery-anchored portfolio drive solid 2023 results

NEW GLASGOW, NS, Feb. 21, 2024 /CNW/ – Crombie Real Estate Investment Trust (“Crombie”) (TSX:CRR) today announced results for its fourth quarter and year ended December 31, 2023. Management will host a conference call to discuss the results at 12:00 p.m. (EST), February 22, 2024.

“Our operating and financial results for the quarter and year continue to demonstrate our team’s ability to drive growth and create value. Our deliberate focus on operational excellence and the strength of our grocery-anchored portfolio resulted in healthy same-asset property cash NOI growth and steady occupancy,” said Mark Holly, President and Chief Executive Officer. “During the year, we advanced several key priorities including the commencement of a major development project, the acceleration of entitlements, and unlocked a new revenue platform from management and development services. We are entering 2024 on solid footing, with a robust balance sheet, ample liquidity, and access to multiple sources of capital. It is our commitment to financial strength and flexibility, paired with prudent capital allocation that positions us well for sustained long-term value creation.”

FOURTH QUARTER SUMMARY

(In thousands of Canadian dollars, except per Unit amounts and square feet and as otherwise noted)

Operational Highlights

Committed occupancy 96.5% and economic occupancy 96.0%; a 40 basis point decrease and a 120 basis point increase, respectively, compared to 2022
Renewals of 246,000 square feet at rents 8.4% above expiring rental rates (an increase of 8.9% using the weighted average rent during the renewal term)
Crombie paid $20,700 to a subsidiary of Empire in connection with a right-to-develop agreement at our existing asset, Kingsway and Tyne in Vancouver, British Columbia. Commencing in 2024, Crombie will receive revenue from development services for advancing entitlement work at the site.

Financial Highlights

Property revenue(1) of $114,299, a 3.9% increase from $110,061 in the fourth quarter of 2022
Revenue from management and development services of $1,087 for the fourth quarter of 2023, a new revenue source in 2023
Operating income attributable to Unitholders of $26,295, a decrease of 70.0% compared to the fourth quarter of 2022
FFO(2) of $0.30 per Unit compared to $0.29 per Unit in the fourth quarter of 2022
AFFO(2) of $0.26 per Unit compared to $0.25 per Unit in the fourth quarter of 2022
Same-asset property cash NOI(2) increased 4.0% compared to the fourth quarter of 2022
Debt to gross fair value(2)(3) of 43.0%, compared to 41.8% for the same period last year
Debt to trailing 12 months adjusted EBITDA(2)(3) of 8.03x compared to 8.02x at the fourth quarter of 2022
Available liquidity of $583,770, a 0.1% increase from $583,003 in the fourth quarter of 2022
Crombie closed on a 5.28% mortgage loan of $72,000 for a retail-related industrial asset, maturing January 1, 2031

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 year ended December 31, 2023 and Consolidated Financial Statements and Notes for the years ended December 31, 2023, and December 31, 2022. Full details on our results can be found at www.crombie.ca and www.sedarplus.ca.

Financial Results

Crombie’s key financial metrics for the three months ended December 31, 2023 are as follows:

Operating income attributable to Unitholders decreased by $61,423, or 70.0%, primarily due to a gain on disposal of investment properties of $62,584 in the fourth quarter of 2022. Higher interest rates combined with higher average loan balances compared to the same period in 2022 resulted in increased interest on floating rate debt of $2,421, and interest on senior unsecured notes increased by $1,800 from the issuance of Series K notes in the first quarter of 2023 and the redemption of Series D notes in the fourth quarter of 2022. Additionally, depreciation and amortization increased by $1,096 due to completed developments, acquisitions, and accelerated depreciation on properties scheduled for redevelopment. Property revenue was reduced by $1,031 related to dispositions in 2022. The decrease in operating income was offset in part by growth in property revenue of $2,257 from new developments, $1,597 from renewals and new leasing, and reduced mortgage interest expense of $1,208 from mortgage repayments. The decrease in operating income was further offset by revenue from management and development services, earned from co-owners, related parties, and third parties, of $1,087.

Same-asset property cash NOI increased by $2,952, or 4.0%, compared to the fourth quarter of 2022 primarily due to renewals, new leasing, and lease termination income.

The increase in FFO of $2,486 was primarily due to growth in property revenue of $2,257 from new developments, $1,597 from renewals and new leasing, reduced mortgage interest expense of $1,208 from mortgage repayments, and revenue from management and development services of $1,087. This was partially offset by increased interest on floating rate debt of $2,421 resulting from higher interest rates combined with higher average loan balances compared to the same period in 2022, and higher interest on senior unsecured notes of $1,800 from the issuance of Series K notes in the first quarter of 2023 and the redemption of Series D notes in the fourth quarter of 2022. The growth in FFO in the quarter was further offset by reduced property revenue of $1,031 related to dispositions in 2022.

The increase in AFFO was primarily due to the same factors impacting FFO for the quarter.

Crombie’s key financial metrics for the year ended December 31, 2023 are as follows:

Operating income attributable to Unitholders decreased by $68,979, or 41.1%, on an annual basis primarily due to lower gain on disposal of investment properties of $80,216, higher general and administrative expenses resulting from employee transition costs of $7,386 in the second quarter of 2023, increased interest on floating rate debt of $4,922 due to higher interest rates and higher average loan balances compared to 2022, reduced property revenue of $3,827 related to dispositions in 2022, and increased tenant incentive amortization of $3,527 primarily from modernizations and accelerated amortization related to lease amendments as a result of the assignment of subleases to Crombie from a subsidiary of Empire. Also contributing to the variance year over year was a gain on distribution from equity-accounted investments of $2,933 in 2022 as a result of cash distributions received from 1600 Davie Limited Partnership in excess of our investment in the joint venture. Interest on senior unsecured notes increased by $2,515 from the issuance of Series K notes in the first quarter of 2023 and the redemption of Series D notes in the fourth quarter of 2022. The decrease in operating income was offset in part by $10,400 in impairment of investment properties in 2022, and growth in income from equity-accounted investments of $5,098, of which the main driver was the sale of land at our Opal Ridge joint venture in Dartmouth, Nova Scotia in 2023. Further offsetting the decrease in operating income was a reduction in mortgage interest of $4,977 from mortgage repayments and dispositions, growth in property revenue from new developments of $4,864, renewals and new leasing of $3,966, higher property revenue of $2,003 from acquisitions, $1,394 from lease terminations, and $1,387 in supplemental rent from modernization investments. Revenue from management and development services of $3,430 also contributed to the offset. A reduction in depreciation and amortization of $1,001 was due to accelerated depreciation recorded in the third quarter of 2022 on a property that was demolished, net of depreciation on completed developments and acquisitions in 2023.

On an annual basis, same-asset property cash NOI increased by $8,331, or 3.0%, compared to the same period in 2022, primarily due to renewals, new leasing, increased lease termination income of $1,394, and higher supplemental rent of $1,364 from modernizations and capital improvements.

The increase in FFO of $6,266 was primarily driven by growth in income from equity-accounted investments of $5,098, of which the main driver was the sale of land at our Opal Ridge joint venture in Dartmouth, Nova Scotia in 2023, and a reduction in mortgage interest of $4,977 from mortgage repayments and dispositions. Growth in property revenue from new developments of $4,864, renewals and new leasing of $3,966, higher property revenue of $2,003 from acquisitions, $1,394 from lease terminations, and $1,387 in supplemental rent from modernization investments further contributed to the increase in FFO. Additionally, revenue from management and development services increased FFO by $3,430. FFO growth was offset in part by higher general and administrative expenses resulting from employee transition costs of $7,386 in the second quarter of 2023, increased interest on floating rate debt of $4,922 due to higher interest rates and higher average loan balances compared to 2022, and reduced property revenue of $3,827 related to dispositions in 2022. Further offsetting the increase in FFO year over year was an increase in interest on senior unsecured notes of $2,515 from the issuance of Series K notes in the first quarter of 2023 and the redemption of Series D notes in the fourth quarter of 2022. FFO excluding employee transition costs of $7,386 was $217,389 or $1.21 per Unit.

The improvement in AFFO, on an annual basis, was driven primarily by the same factors impacting FFO. Additionally, it was offset in part 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 $1,887 for the period. AFFO excluding employee transition costs of $7,386 was $188,486 or $1.05 per Unit.

Operating Results

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