Mr. Mark Holly reports

CROMBIE REIT ANNOUNCES THIRD QUARTER 2023 RESULTS

Crombie Real Estate Investment Trust today released its results for its third quarter ended Sept. 30, 2023. Management will host a conference call to discuss the results at 12 p.m. ET, Nov. 9, 2023.

"The strength of our portfolio and our operational excellence delivered another consistent and solid quarter, including healthy same-asset property cash NOI and renewal growth," said Mark Holly, president and chief executive officer. "We continue to remain focused on stability and growth. The team's dedication to our fundamentals, our financial condition and the prudent allocation of capital allows us to advance near- and long-term strategic initiatives."

Third quarter summary

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

Operational highlights

• Committed occupancy 96.4 per cent and economic occupancy 96.0 per cent; a 40-basis-point decrease and a 20-basis-point decrease, respectively, compared with the third quarter of 2022.
• Renewals of 238,000 square feet at rents 6.5 per cent above expiring rental rates (an increase of 7.9 per cent using the weighted average rent during the renewal term).
• Crombie paid $29,961 to subsidiaries of Empire in connection with the assignment of 24 subleases and the right to develop at an existing asset.
• 2023 GRESB Standing Investment and Development benchmark scores increased 45 per cent and 25 per cent from 2022, respectively.

Financial highlights

• Property revenue of $104,491, a 0.8-per-cent increase from $103,642 in the third quarter of 2022.
• Operating income attributable to unitholders of $27,796, an increase of 5.2 per cent compared with the third quarter of 2022.
• Net property income of $71,453, a 0.2-per-cent decrease from $71,574 in the third quarter of 2022.
• FFO (funds from operations) of $56,510 or 31 cents per unit compared with $52,665 or 30 cents per unit in the third quarter of 2022.
• FFO payout ratio of 70.9 per cent for the third quarter of 2023 compared with 75.0 per cent for the same period last year.
• AFFO (adjusted funds from operations) of $49,962 or 28 cents per unit compared with $46,787 or 26 cents per unit in the third quarter of 2022.
• AFFO payout ratio of 80.2 per cent for the third quarter of 2023 compared with 84.5 per cent for the same period last year.
• Same-asset property cash NOI (net operating income) increased 2.8 per cent compared with the third quarter of 2022.
• Debt to gross fair value of 42.4 per cent, compared with 42.0 per cent for the same period last year.
• Debt to trailing 12 months adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of 8.13 times compared with 8.50 times at the third quarter of 2022.
• Fair value of unencumbered investment properties of $2,581,919, a 17.3-per-cent increase from $2,200,890 for the same period last year.
• Available liquidity of $564,903, a 26.8-per-cent increase from $445,372 in the third quarter of 2022.

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 Sept. 30, 2023, and consolidated financial statements and notes for the quarters ended Sept. 30, 2023, and Sept. 30, 2022. Full details on our results can be found on the trust's website and on SEDAR+.

Financial results

Crombie's key financial metrics for the three months ended Sept. 30, 2023, are as shown in the attached table.

Operating income attributable to unitholders increased by $1,386, or 5.2 per cent, primarily due to a decrease of $10,400 in impairment of investment properties, and lower depreciation and amortization of $2,910 due to accelerated depreciation recorded in the third quarter of 2022 on a property scheduled for demolition. Income from equity-accounted investments increased $2,663, of which $2,345 resulted from the sale of land at our Opal Ridge joint venture in Dartmouth, N.S. The growth in operating income was offset in part by gain on disposal of investment properties of $13,357 in the third quarter of 2022 and increased general and administrative expenses of $1,102 due to higher consulting costs, salaries and benefits, and unit-based compensation costs in the third quarter of 2023. Operating income growth was further offset by gain on distribution from equity-accounted investments of $1,000 in the third quarter of 2022, resulting from cash distributions received from 1600 Davie LP in excess of the trust's investment in the joint venture.

Same-asset property cash NOI increased by $1,921, or 2.8 per cent, compared with the third quarter of 2022 primarily due to renewals and new leasing, higher supplemental rent of $467 from modernizations and capital improvements, and increased lease termination income of $463 resulting from a tenant surrender.

The increase in FFO of $3,845 was primarily due to growth in income from equity-accounted investments of $2,663, of which $2,345 resulted from the sale of land at the trust's Opal Ridge joint venture in Dartmouth, N.S., in the third quarter of 2023, increased rental revenue of $1,914 from new developments, and $1,586 from renewals and new leasing. This was partially offset by increased general and administrative expenses of $1,102 due to higher consulting costs, salaries and benefits, and unit-based compensation costs in the third quarter of 2023. The growth in FFO in the quarter was further offset by reduced revenue of $720 related to dispositions, and decreased percentage rent of $509.

The increase in AFFO was primarily due to the same factors impacting FFO, offset in part by an 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 $472 for the quarter.

Crombie's key financial metrics for the nine months ended Sept. 30, 2023, are as shown in the attached table.

Operating income attributable to unitholders decreased by $7,556, or 9.4 per cent, on a year-to-date basis, primarily due to lower gain on disposal of investment properties of $17,632, and higher general and administrative expenses resulting from employee transition costs of $7,172 in the second quarter of 2023. Also contributing to the variance year over year was a gain on distribution from equity-accounted investments of $2,933 in the first nine months of 2022 as a result of cash distributions received from 1600 Davie LP in excess of the trust's investment in the joint venture. The decrease was offset in part by a reduction of $10,400 in impairment of investment properties and growth in income from equity-accounted investments of $6,077, of which $5,722 resulted from the sale of land at the trust's Opal Ridge joint venture in Dartmouth, N.S., in the first nine months of 2023. Further offsetting the decrease in operating income was revenue from management and development services of $2,343, and reduced depreciation and amortization of $2,097 due to accelerated depreciation recorded in the third quarter of 2022 on a property scheduled for demolition.

On a year-to-date basis, same-asset property cash NOI increased by $5,379, or 2.6 per cent, compared with the same period in 2022 primarily due to renewals and new leasing, and an increase in supplemental rent of $1,274 from modernizations and capital improvements. Additionally, lease termination income increased by $917 resulting from tenant surrenders and parking revenue increased by $899 compared with the same period in 2022. The increase in same-asset property cash NOI was offset in part by an increase in bad debt expense of $494.

For the nine months ended Sept. 30, 2023, FFO increased by $3,780 primarily driven by growth in income from equity-accounted investments of $6,077, of which $5,722 resulted from the sale of land at the trust's Opal Ridge joint venture in Dartmouth, N.S., in the first nine months of 2023, and revenue from management and development services of $2,343. Higher rental revenue of $2,607 from new developments, $2,478 from renewals and new leasing, $1,603 from acquisitions, and $1,297 in supplemental rent from modernization investments further contributed to the increase in FFO. Additionally, lease termination income increased $917 and parking revenue improved $899 compared with the same period in 2022. FFO growth was offset in part by higher general and administrative expenses resulting from employee transition costs of $7,172 in the second quarter of 2023, a decrease of $2,816 in rental revenue from dispositions and lower percentage rent of $711. FFO excluding employee transition costs of $7,172 was $162,585, or 91 cents per unit.

The growth in AFFO on a year-to-date basis was driven primarily by the same factors impacting FFO. 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 $1,411 for the period. AFFO excluding employee transition costs of $7,172 was $142,161, or 79 cents per unit.

Operations and leasing

During the quarter, Crombie achieved economic occupancy of 96.0 per cent and committed occupancy of 96.4 per cent. Crombie renewed 238,000 square feet with an increase of 6.5 per cent over expiring rents during the quarter. Year to date, new leases increased occupancy by 457,000 square feet at an average first year rate of $22.24 per square foot.

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 960,000 square feet of residential GLA (1,461 residential units) and 105,000 square feet of commercial GLA. The geographical breakdown of GLA in square feet is as follows: 731,000 in Vancouver; 145,000 in Victoria; and 189,000 in Halifax.

The Marlstone, a 291-unit residential rental project in the heart of downtown Halifax, is under active development, with an estimated total cost of $134,000 and an estimated yield on cost of 4.5 per cent to 5.5 per cent. Demolition and existing building upgrades commenced in May, 2023, and the residential tower construction will commence in December, 2023. Completion is expected in the first quarter of 2026.

Timing, total project cost and yield on cost are estimates and assumptions and subject to change, as well as other development risks described in Crombie's third quarter management's discussion and analysis under "development" and "risk management."

Empire transactions

During the third quarter of 2023, Crombie paid $16,361 to a subsidiary of Empire in connection with the assignment of 24 subleases to Crombie for retail sites in Western Canada. This payment was allocated to either deferred leasing costs or tenant incentive additions, based on each component's relative fair value.

Crombie paid an initial right-to-develop fee of $13,600 to a subsidiary of Empire, which resulted in the existing lease being modified. The right to develop will allow Crombie flexibility as it works through the entitlement and future development of an existing property in which a subsidiary of Empire is currently a tenant.

2023 GRESB submission

Crombie completed its third annual submission to GRESB, for the Standing Investments and Development benchmarks. GRESB awarded Crombie with a Green Star for excellence in both Standing Investments and Development. Crombie improved its score by 45 per cent for the Standing Investments benchmark compared with last year, through enhanced energy, water and waste data coverage. Crombie's development benchmark score improved 25 per cent, over last year.

Changes to the board of trustees

Michael Knowlton, chair of the board, has announced his intention to retire from his role as board chair and from the board of trustees following Crombie's annual general meeting in May, 2024. Mr. Knowlton was appointed as board chair in May, 2019, and has served as a trustee since 2011. His leadership has left a tremendous mark on Crombie and he retires leaving the company well positioned for continued success.

To ensure an orderly transition, Crombie's board of trustees formed a special subcommittee to identify Crombie's next board chair. After conducting a thorough process, the board is announcing Jason Shannon as chair of the board of trustees upon Mr. Knowlton's retirement. Mr. Shannon joined the Crombie board in 2016, has been chair of Crombie's investment committee since 2019 and brings a wealth of experience to this role. He is president of Shannex Incorporated, a home care, retirement, and assisted living and long-term care organization.

Highlighted subsequent event

On Nov. 3, 2023, Crombie entered into a right-to-develop agreement with a subsidiary of Empire with an initial fee payable of $20,700 which resulted in an existing lease being modified. The right to develop will allow Crombie flexibility as it works through the entitlement and future development of an existing property in which a subsidiary of Empire is currently a tenant.

Conference call invitation

Crombie will provide additional details concerning its period ended Sept. 30, 2023, results on a conference call to be held Thursday, Nov. 9, 2023, beginning at 12 p.m. ET. 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 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.

Replay will be available until midnight Nov. 16, 2023, by dialling 416-764-8677 or 888-390-0541 and entering pass code 370472 followed by the pound key, or on the Crombie website for 90 days following the conference call.

About Crombie Real Estate Investment Trust

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 Sept. 30, 2023, Crombie's portfolio contains 294 income-producing properties, comprising approximately 18.7 million square feet, and a significant pipeline of future development projects.

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