CRR.UN Crombie Real Estate Investment Trust

Driving strong performance with the stability and growth of our necessity-based portfolio

NEW GLASGOW, NS, Feb. 19, 2025 /CNW/ - Crombie Real Estate Investment Trust ("Crombie") (TSX: CRR.UN) today announced results for its fourth quarter and year ended December 31, 2024. Management will host a conference call to discuss the results at 10:00 a.m. (EST), February 20, 2025.

"Driven by a clear emphasis on operational excellence, we reached occupancy levels amongst the highest in our history, grew same-asset property cash NOI by 2.9%, and increased AFFO per unit by 6.9%," said Mark Holly, President and CEO. "Most importantly, we achieved these results while preserving the strength and flexibility of our balance sheet, positioning us to deliver consistent cash flow growth and create long-term value for our Unitholders."

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

Operational Highlights

• Committed occupancy of 96.8% and economic occupancy of 96.5%; a 30 basis point increase and a 50 basis point increase, respectively, compared to the fourth quarter of 2023
• Renewals of 171,000 square feet at rents 10.0% above expiring rental rates
  • An increase of 12.3% using the weighted average rent during the renewal term
• Strategic acquisition of the remaining 50% of Zephyr residential, in Vancouver, British Columbia, 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 with a blended interest rate of 3.5%
• Acquisition of an underlying land parcel at an existing freestanding grocery property for a purchase price of $2,000 excluding transaction and closing costs
• Disposition of two retail assets, in Rest of Canada markets, totalling 338,000 square feet for gross proceeds of $6,000
  • Half of the proceeds will be in the form of interest free vendor take-back financing for three years
  • As part of this transaction, Crombie will retain the grocery component at one location through a long term land lease
• Invested $7,067 in non-major development modernization program

Financial Highlights

• Completed offering of $300,000 Series M senior unsecured notes maturing January 15, 2032, bearing an interest rate of 4.73% per annum
  • Redeemed $175,000 principal amount of Series E senior unsecured notes, bearing an interest rate of 4.80% per annum, which were originally scheduled to mature on January 31, 2025
• Converted the secured revolving credit facility to an unsecured revolving credit facility, increasing the maximum principal amount to $550,000 and extending the maturity date to December 23, 2028
  • The existing unsecured non-revolving credit facility I has been closed in conjunction with the amendment to the revolving credit facility

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 December 31, 2024 and Consolidated Financial Statements and Notes for the quarters ended December 31, 2024, and December 31, 2023. Full details on our results can be found at www.crombie.ca and www.sedarplus.ca.

Operational Metrics

Committed occupancy of 96.8% included 59,000 square feet of space committed in the quarter. VECTOM and Major Markets represent 32,000 square feet of committed space. The increase in committed occupancy compared to December 31, 2023 is primarily due to new leasing activity and the sale of two low-occupancy retail properties.

New commercial leases increased occupancy by 225,000 square feet at December 31, 2024, at an average first year rate of $23.65 per square foot.

Renewal activity for the fourth quarter of 2024 consisted of 171,000 square feet with an increase of 10.0% over expiring rental rates. The primary driver of renewal growth in the quarter was 170,000 square feet of retail renewals with an increase of 10.0% 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 12.3% for the three months ended December 31, 2024.

Financial Metrics

Fourth Quarter and Year End 2024 Results

Operating income attributable to Unitholders

The increase in operating income in the fourth quarter was mainly due to a gain recognized on the acquisition of the remaining 50% interest in the Davie Street joint venture. The gain was the result of remeasuring Crombie's previously held interest in the joint venture to fair value. Growth in property revenue from acquisitions, renewals, and new leasing also contributed to the increase in operating income. This was offset in part by impairment of investment properties, higher interest expense, increased tenant incentive amortization from modernizations, and higher depreciation and amortization.

In addition to the items discussed for the quarter, the annual increase was further driven by growth in property revenue from recently completed developments, supplemental rent from modernization investments, increased revenue from management and development services, and reduced general and administrative expenses resulting from lower employee transition costs and organizational changes. This increase was partially offset by lower income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023, and decreased property revenue from dispositions.

Same-asset property cash NOI

The increase in same-asset property cash NOI for both the quarter and the year was primarily driven by increased property revenue from renewals, contractual rent step-ups, new leasing, and supplemental rent from modernization investments.

Funds from operations

The increase in FFO in the quarter was driven primarily by higher property revenue from acquisitions, renewals, and new leasing activity. This was offset in part by higher interest expense.

In addition to the items discussed above for the quarter, the annual increase in FFO was driven by growth in property revenue from recently completed developments, supplemental rent from modernization investments, increased revenue from management and development services, and reduced general and administrative expenses resulting from lower employee transition costs and organizational changes. The annual increase was partially offset by increased interest expense, lower income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023, and decreased property revenue from dispositions.

FFO per Unit, excluding employee transition costs of $979 in 2024, was $1.25, an increase of 3.3% over 2023 ($1.21 excluding employee transition costs of $7,386 in 2023).

Adjusted funds from operations

AFFO increased in the quarter primarily due to higher property revenue from acquisitions, renewals, and new leasing activity. This was offset in part by higher interest expense.

In addition to the items discussed above for the quarter, the annual growth in AFFO was driven by growth in property revenue from recently completed developments, supplemental rent from modernization investments, increased revenue from management and development services, and reduced general and administrative expenses resulting from lower employee transition costs and organizational changes. This was partially offset by higher interest expense, reduced income from equity-accounted investments resulting from the sale of land at Crombie's Opal Ridge joint venture in 2023, and decreased property revenue from dispositions.

AFFO per Unit, excluding employee transition costs of $979 in 2024, was $1.09, an increase of 3.8% over 2023 ($1.05 excluding employee transition costs of $7,386 in 2023).

Financial Condition Metrics

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 shorter in duration and thus boast less overall risk as compared to Crombie's major development pipeline. These projects have the ability to create value while enhancing the overall quality of the portfolio.

In the fourth quarter of 2024, non-major development, via land-use intensification, added 5,000 square feet of gross leasable area to the portfolio. Additionally, Crombie invested $7,067 into its modernization program.

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

Highlighted Subsequent Event

On February 14, 2025, Crombie disposed of a 100% interest in a retail property totalling 188,000 square feet of gross leasable area. Total proceeds, before closing adjustments and transaction costs, were approximately $3,300.

Conference Call and Webcast

Crombie will provide additional details regarding its fourth quarter ended December 31, 2024 results on a conference call to be held Thursday, February 20, 2025, beginning at 10:00 a.m. (EST). 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 (437) 900-0527 or (888) 510-2154. To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3ZSlh2E 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 February 27, 2025 by dialing (289) 819-1450 or (888) 660-6345 and entering passcode 42167 #, or on the Crombie website for 90 days following the conference call.

Non-GAAP Measures and Cautionary Statements

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 and year ended December 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:

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:

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 and year ended December 31, 2024 and 2023 is as follows:

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 and year ended December 31, 2024 and 2023 is as follows:

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 December 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.

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 calculation also include Crombie's share of finance costs - operations.

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 2024 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 December 31, 2024, our portfolio contains 304 properties comprising approximately 19.1 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