Stability in focus at Crombie REIT

Trust expects Penhorn development within two years

Crombie REIT remains committed to optimizing its portfolio of grocery-anchored properties with the goal of providing stability, sustainability and growth, Don Clow, president and CEO, said during a conference call with industry analysts.

Management at the New Glasgow-based real estate investment trust, which has a close association with Empire Co. Ltd., parent company of the Sobeys grocery chain, released results Thursday for the first quarter, which ended March 31.

Clow, sounding every bit the former Acadia University football star he once was, said the Crombie team is continuing to execute its plan of developing major projects in Canada's largest cities, while at the same time improving its balance sheet and overall financial condition.

“In other words, playing good defence and good offence at the same time.”

Crombie is positioned to continue to grow well, Clow said.

“We have built a very solid foundation for our business. Grocery-anchored retail, retail-related industrial and, for the first time in Crombie's history, residential rental units continue to be the best classes of real estate in Canada.”

Although the subject of development of the company's Penhorn property in Dartmouth did not come up during the conference call, Clow stated in an email that Crombie is continuing to work with its partner, Clayton Developments, on planning and entitlements for the site.

"We do not have a timeline for the (Penhorn) development set at this moment," he said.

"But are targeting starting in the next two years."

The REIT reported strong committed rental occupancy of 96.3 per cent and strong leasing performance in the first quarter, Clow said. More than 55 per cent of Crombie's annual minimum rent comes from Empire, which is Canada's second-largest food retailer.

During the three months ended March 31, 98 per cent of gross rent was collected, with rent collections for the month of April remaining constant at 98 per cent.

Crombie has actively supported its tenants during the pandemic, management stated, through its Crombie Values Small Business program, the federal government's Canada Emergency Commercial Rent Assistance program, the Canada Emergency Rent Subsidy and mutually beneficial agreements with other tenants.

REVENUE PICTURE

Crombie reported property revenue of $103.5 million, compared to revenue of $102.2 million in the same quarter last year. Net operating income of $70.1 million in the first quarter compared to $67 million net operating income in the same quarter last year.

Although Crombie is still a grocery-anchored REIT, the company is encouraged by its first mixed-use development with residential units, to reach completion in a high-density residential area of downtown Vancouver.

Crombie has been working with Vancouver-based development partner Westbank Corp. to redevelop the site at 1661 Davie St., in that city's west end, to include two rental residential towers with 330 units totalling 253,000 square feet and a total project cost of about $180 million.

The site is anchored by a renovated Safeway grocery store, a Scotiabank and B.C. Liquor, according to the REIT.

Asked whether Crombie and Westbank had lower rents on the Davie Street residential units in order to speed up the lease of the project, Clow indicated the rents charged for the units are higher than what the partners had forecast before the start of construction.

The decision took into account British Columbia's implementation of rent controls. They prevent rents from being increased beyond a certain annual amount. Therefore, he said, it was decided to start with a higher rent to lessen pressure to raise rents to cover costs later on.

Crombie reported net operating income attributable to unitholders of $33.2 million in the first quarter 2021. In the same three months last year, Crombie reported net operating income of $21.3 million attributable to unitholders.

Same-asset property cash, net operating income, increased by 2.2 per cent in the quarter when compared to the same period in 2020.

Operating income attributable to unitholders increased by $11.9 million, or 55.8 per cent, compared to the first quarter of 2020, which REIT management indicated was primarily due to the disposition of investment properties in 2021 with an increased gain on sale of $11.97 million.