Crombie Announces First Quarter 2024 Results

Solid first quarter, strong balance sheet, achieved stabilized occupancy at The Village at Bronte Harbour

NEW GLASGOW, NS, May 8, 2024 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) today announced results for its first quarter ended March 31, 2024. Management will host a conference call to discuss the results at 12:00 p.m. (EDT), May 9, 2024.

"Crombie's unwavering focus on operational excellence and financial strength, once again, guided us to deliver solid and consistent quarterly results," said Mark Holly, President and CEO. "In the first quarter, our residential asset, The Village at Bronte Harbour, reached occupancy stabilization and secured CMHC financing. We also advanced key priorities including the substantial completion of our 52,000 square foot retail-related industrial asset in Calgary, Alberta, co-owned with Empire. It is our dedication to pursuing strategic initiatives, paired with a strong financial condition, that position us well for sustained growth and value creation."

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

Operational Highlights

• Committed occupancy 96.2% and economic occupancy 95.7%; a 50 basis point decrease and a 120 basis point increase, respectively, compared to the first quarter of 2023
• Renewals of 249,000 square feet at rents 10.1% above expiring rental rates (an increase of 10.6% using the weighted average rent during the renewal term)
• The Village at Bronte Harbour reached occupancy stabilization in the first quarter of 2024, ending the quarter with committed occupancy of 93.3%

Financial Highlights

• Completed offering of $200,000 Series L senior unsecured notes maturing March 29, 2030, bearing an interest rate of 5.14% per annum
• Closed on a 4.35% mortgage loan of $243,457, with our joint venture partner, for a residential property held within an equity-accounted investment maturing June 1, 2029

	Three months ended March 31,
	2024		2023		Variance	%
Property revenue ^(1)	$            118,609		$            112,449		$                6,160	5.5 %
Revenue from management and development services	$                  749		$                     —		$                   749	100.0 %
Operating income attributable to Unitholders	$              26,205		$              25,173		$                1,032	4.1 %
FFO ^(2) per Unit - basic	$                  0.30		$                  0.30		$                     —	— %
AFFO ^(2) per Unit - basic	$                  0.26		$                  0.26		$                     —	— %
Same-asset property cash NOI ^(2)	$              76,532		$              74,141		$                2,391	3.2 %
Available Liquidity	$            736,990		$            735,877		$                1,113	0.2 %
Debt to gross fair value ^(2)(3)	42.9 %		41.9 %			1.0 %
Debt to trailing 12 months adjusted EBITDA ^(2)(3)	7.97x		7.96x		0.01x	0.1 %

(1)	Property revenue for the three months ended March 31, 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 March 31, 2024 and Consolidated Financial Statements and Notes for the quarters ended March 31, 2024, and March 31, 2023. Full details on our results can be found at www.crombie.ca and www.sedarplus.ca.

Operational Metrics

	March 31, 2024	March 31, 2023
Number of investment properties ^(1)	295	291
Gross leasable area^(2)	18,709,000	18,550,000
Economic occupancy ^(3)	95.7 %	94.5 %
Committed occupancy ^(4)	96.2 %	96.7 %
Total properties ^(5)	304	303
Gross leasable area inclusive of joint ventures	19,239,000	19,080,000

(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 and properties owned in joint ventures.

Committed occupancy of 96.2% included 94,000 square feet of space committed in the quarter. Approximately 67,000 square feet of committed space was in VECTOM and Major Markets, including 31,000 square feet in Burlington, Ontario and 27,000 square feet in Calgary, Alberta. The decrease in committed occupancy compared to March 31, 2023 is due to natural lease expiries and attrition including early lease terminations and tenants downsizing.

New leases increased occupancy by 64,000 square feet at March 31, 2024, at an average first year rate of $23.04 per square foot.

Renewal activity for the first quarter of 2024 consisted of 249,000 square feet with an increase of 10.1% over expiring rental rates. The primary driver of renewal growth in the quarter was 228,000 square feet of retail renewals with an increase of 11.6% 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 10.6% for the three months ended March 31, 2024.

Financial Metrics

	Three months ended March 31,
	2024	2023	Variance	%
Net property income ^(1)	$              73,641	$              68,648	$                4,993	7.3 %
Operating income attributable to Unitholders	$              26,205	$              25,173	$                1,032	4.1 %
Same-asset property cash NOI ^(1)	$              76,532	$              74,141	$                2,391	3.2 %
Funds from operations ("FFO") ^(1)
Basic	$              54,868	$              52,835	$                2,033	3.8 %
Per Unit - Basic	$                  0.30	$                  0.30	$                     —	— %
Payout ratio ^(1)	73.6 %	75.3 %		(1.7) %
Adjusted funds from operations ("AFFO") ^(1)
Basic	$              46,947	$              45,909	$                1,038	2.3 %
Per Unit - Basic	$                  0.26	$                  0.26	$                     —	— %
Payout ratio ^(1)	86.1 %	86.6 %		(0.5) %

(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.

First Quarter 2024 Results

Operating income attributable to Unitholders

The increase in operating income in the quarter resulted mainly from growth in property revenue from recently completed developments, renewals, new leasing activity, lower interest expense on floating rate debt, revenue from management and development services, and increased capitalized interest. This was offset in part by higher interest expense on senior unsecured notes and a decrease in income from equity-accounted investments related to the sale of land within a joint venture in the first quarter of 2023.

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 and new leasing.

FFO

The increase in total FFO was driven primarily by higher property revenue from recently completed developments, renewals, and new leasing. Reduced interest expense on floating rate debt, revenue from management and development services, and higher capitalized interest further contributed to FFO growth. This was offset in part by an increase in interest expense on senior unsecured notes and a decrease in income from equity-accounted investments related to the sale of land within a joint venture in the first quarter of 2023.

AFFO

Total AFFO increased in the quarter primarily due to higher property revenue from recently completed developments, renewals, and new leasing, reduced interest expense on floating rate debt, revenue from management and development services, and higher capitalized interest. This was partially offset by increased interest expense on senior unsecured notes and decreased income from equity-accounted investments related to the sale of land within a joint venture in the first quarter of 2023.

Financial Condition Metrics

	March 31, 2024	December 31, 2023	March 31, 2023
Unencumbered investment properties ^(1)	$                2,771,000	$                2,608,000	$                2,291,000
Available liquidity ^(2)	$                   736,990	$                   583,770	$                   735,877
Debt to gross book value - cost basis ^(3)	45.1 %	45.2 %	44.9 %
Debt to gross fair value^(4)(5)	42.9 %	43.0 %	41.9 %
Weighted average interest rate ^(6)	4.2 %	4.1 %	4.0 %
Debt to trailing 12 months adjusted EBITDA ^(4)(5)	7.97x	8.03x	7.96x
Interest coverage ratio ^(4)(5)	3.23x	3.06x	3.24x

(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 Capital Management note in the Financial Statements.
(4)	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.
(5)	See Debt Metrics section in the Management's Discussion and Analysis.
(6)	Calculated based on interest rates for all outstanding fixed rate debt.

Portfolio Optimization

Our development program is divided into major development; projects with a total estimated cost greater than $50,000, and non-major development; projects with a total estimate cost below $50,000.

Major Development

Crombie currently has one active major development, The Marlstone, a 291-unit residential rental project in Halifax, Nova Scotia, under construction. Demolition and existing building upgrades commenced in May 2023 and construction continues to progress well. Completion is expected in the first half of 2026.

Non-major Development

Non-major developments are accretive with shorter project durations and less overall risk than our major development projects. These projects have the ability to create value while enhancing the overall quality of the portfolio.

Non-major development added 26,000 square feet of gross leasable area to the portfolio in the first quarter of 2024.

Asset Class	Location	Market Class	March 31, 2024	Tenant
Retail-related industrial	Calgary	VECTOM	26,000	Empire

The below table summarizes active non-major developments within Crombie's portfolio at March 31, 2024.

		At Crombie's Share
Type	GLA on Completion	Estimated Total Cost	Estimated Cost to Complete
Land-use intensification	52,000	$                         18,000	$               16,000
Modernizations^(1), Redevelopments, and Other	—	8,000	2,000
Total Non-major Developments	52,000	$                         26,000	$               18,000

(1)	Modernizations are a capital investment to modernize/renovate Crombie-owned grocery store properties in exchange for a defined return and potential extended lease term. The first quarter spend on modernizations totals $1,500 (March 31, 2023: $6,907).

Highlighted Subsequent Event

On April 30, 2024, Crombie disposed of its 50% interest in a co-owned retail property totalling 15,000 square feet. Total proceeds, before closing adjustments and transaction costs, were $13,000, half of which will be in the form of a vendor take-back financing for six months at 5.0% interest.    

Conference Call and Webcast

Crombie will provide additional details regarding its period ended March 31, 2024 results on a conference call to be held Thursday, May 9, 2024, beginning at 12:00 p.m. (EDT). Accompanying the conference call will be a presentation that will be available on the Investors section of Crombie's website. To join this conference call, you may dial [phone] or [phone]. To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3IUOHFd to receive an instant automated call back. You may also listen to a live audio webcast of the conference call by visiting the Investors section of Crombie's website at www.crombie.ca.

Replay will be available until midnight May 16, 2024 by dialing [phone] or [phone] and entering passcode 158216 #, 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, 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 months March 31, 2024.

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 March 31,
	2024		2023	^(1)	Variance
Property revenue	$             118,609		$             112,449		$                6,160
Property operating expenses	(44,968)		(43,801)		(1,167)
Net property income	$               73,641		$               68,648		$                4,993

(1)	Property revenue and property operating expenses for the three months ended March 31, 2023 have 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.

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 March 31,
	2024	2023	Variance
Net property income	$                 73,641	$                 68,648	$                  4,993
Non-cash straight-line rent	(1,497)	(1,305)	(192)
Non-cash tenant incentive amortization ^(1)	6,718	6,792	(74)
Property cash NOI	78,862	74,135	4,727
Acquisitions and dispositions property cash NOI	338	17	321
Development property cash NOI	1,992	(23)	2,015
Acquisitions, dispositions, and development property cash NOI	2,330	(6)	2,336
Same-asset property cash NOI	$                 76,532	$                 74,141	$                  2,391

(1)	Refer to "Amortization of Tenant Incentives" in the Management's Discussion and Analysis for a 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 months ended March 31, 2024 and 2023 is as follows:

	Three months ended March 31,
	2024	2023	Variance
Decrease in net assets attributable to Unitholders	$             (14,072)	$             (13,999)	$                   (73)
Add (deduct):
Amortization of tenant incentives	6,718	6,792	(74)
Gain on disposal of investment properties	—	(111)	111
Depreciation and amortization of investment properties	19,638	19,069	569
Adjustments for equity-accounted investments	1,263	1,257	6
Principal payments on right-of-use assets	59	57	2
Internal leasing costs	985	598	387
Finance costs - distributions to Unitholders	40,399	39,775	624
Change in fair value of financial instruments ^(1)	(122)	(603)	481
FFO as calculated based on REALPAC recommendations	$              54,868	$              52,835	$                2,033
Basic weighted average Units (in 000's)	181,450	178,669	2,781
FFO per Unit - basic	$                  0.30	$                  0.30	$                     —
FFO payout ratio (%)	73.6 %	75.3 %	(1.7) %

(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 months ended March 31, 2024 and 2023 is as follows:

	Three months ended March 31,
	2024	2023	Variance
FFO as calculated based on REALPAC recommendations	$                54,868	$                52,835	$                2,033
Add (deduct):
Straight-line rent adjustment	(1,497)	(1,305)	(192)
Straight-line rent adjustment included in income (loss) from equity-accounted investments	79	120	(41)
Internal leasing costs	(985)	(598)	(387)
Maintenance expenditures on a square footage basis	(5,518)	(5,143)	(375)
AFFO as calculated based on REALPAC recommendations	$               46,947	$               45,909	$                1,038
Basic weighted average Units (in 000's)	181,450	178,669	2,781
AFFO per Unit - basic	$                  0.26	$                  0.26	$                     —
AFFO payout ratio (%)	86.1 %	86.6 %	(0.5) %

Debt Metrics

When calculating debt to gross fair value, debt is defined 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 equity-accounted 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 March 31, 2024 and December 31, 2023, respectively, based on each property's current use as a revenue-generating investment property. Additionally, as properties are prepared for redevelopment, Crombie considers each property's progress through entitlement in determining the fair value of a property.

	March 31, 2024	December 31, 2023	March 31, 2023
Fixed rate mortgages	$                     781,352	$                     838,957	$                     892,734
Senior unsecured notes	1,375,000	1,175,000	1,175,000
Unsecured non-revolving credit facility	—	93,297	—
Revolving credit facility	—	47,591	—
Joint operation credit facility	3,430	3,503	10,370
Debt held in joint ventures, at Crombie's share ^(1) (2)	279,452	274,115	270,145
Lease liabilities	36,109	36,292	34,982
Adjusted debt	$                   2,475,343	$                   2,468,755	$                  2,383,231
Investment properties, fair value	$                   5,174,000	$                   5,096,000	$                  5,097,000
Investment properties held in joint ventures, fair value, at Crombie's share ^(2)	470,000	472,500	447,000
Other assets, cost ^(3)	76,723	136,081	93,235
Other assets, cost, held in joint ventures, at Crombie's share ^(2) (3) (4)	29,028	26,214	26,304
Cash and cash equivalents	12,276	—	9,050
Cash and cash equivalents held in joint ventures, at Crombie's share ^(2)	3,631	3,004	5,612
Deferred financing charges	8,121	7,560	8,293
Gross fair value	$                   5,773,779	$                   5,741,359	$                  5,686,494
Debt to gross fair value	42.9 %	43.0 %	41.9 %

(1)	Includes Crombie's share of fixed rate mortgages, floating rate 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)	Excludes tenant incentives, accumulated amortization, and accrued straight-line rent receivable.
(4)	Includes deferred financing charges.

The following table presents a reconciliation of operating income attributable to Unitholders 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.

In calculating adjusted EBITDA, Crombie includes its share of revenue, operating expenses, and general and administrative expenses in joint ventures, and excludes its share of amortization of tenant incentives in joint ventures. Interest coverage calculations also include Crombie's share of finance costs - operations and debt repayments in joint ventures.

	Three months ended
	March 31, 2024	December 31, 2023	March 31, 2023
Operating income attributable to Unitholders	$                       26,205	$                       26,295	$                       25,173
Amortization of tenant incentives	6,718	6,529	6,792
Gain on disposal of investment properties	—	—	(111)
Depreciation and amortization	20,014	20,087	19,420
Finance costs - operations	22,283	23,839	20,764
(Income) loss from equity-accounted investments	1,141	980	(1,673)
Property revenue in joint ventures, at Crombie's share	4,918	7,222	11,269
Amortization of tenant incentives in joint ventures, at Crombie's share	75	—	—
Property operating expenses in joint ventures, at Crombie's share	(1,617)	(3,684)	(5,170)
General and administrative expenses in joint ventures, at Crombie's share	(55)	(23)	(107)
Taxes - current	—	6	—
Adjusted EBITDA [1]	$                       79,682	$                       81,251	$                       76,357
Trailing 12 months adjusted EBITDA [3]	$                     310,681	$                     307,356	$                     299,271
Finance costs - operations	$                       22,283	$                       23,839	$                       20,764
Finance costs - operations in joint ventures, at Crombie's share	3,228	3,279	3,430
Amortization of deferred financing charges	(554)	(588)	(622)
Amortization of deferred financing charges in joint ventures, at Crombie's share	(316)	—	—
Adjusted interest expense [2]	$                       24,641	$                       26,530	$                       23,572
Debt outstanding (see Debt to Gross Fair Value) ^(1) [4]	$                   2,475,343	$                   2,468,755	$                   2,383,231
Interest coverage ratio {[1]/[2]}	3.23x	3.06x	3.24x
Debt to trailing 12 months adjusted EBITDA {[4]/[3]}	7.97x	8.03x	7.96x

(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 2023 annual Management's Discussion and Analysis under "Risk Management" and the Annual Information Form for the year ended December 31, 2023 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 and cost of development, which may be impacted by ordinary real estate market cycles, the availability of labour, ability to attract tenants, estimated GLA, tenant rents, building sizes, 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 with a vision of enriching communities together by building spaces and value today that leave a positive impact on tomorrow. As one of the country's leading owners, operators, and developers of quality real estate assets, Crombie's portfolio primarily includes grocery-anchored retail, retail-related industrial, and mixed-use residential properties. As at March 31, 2024, our portfolio contains 304 properties comprising approximately 19.2 million square feet, inclusive of joint ventures at Crombie's share, and a significant pipeline of future development projects. Learn more at www.crombie.ca.

SOURCE Crombie REIT

Media Contacts, Kara Cameron, CPA, CA, Interim Chief Financial Officer, Crombie REIT, [phone], Ruth Martin, CPA, CA, CPIR, Senior Director, Investor Relations and Financial Analysis, Crombie REIT, [phone]