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 QUARTERSUMMARY
(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

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

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

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

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.

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

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 (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/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 (416) 764-8677 or (888) 390-0541 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:

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 ended March 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 ended March 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 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.

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.

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

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