ANNUAL REPORT 2020
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About Crombie REIT
For decades, Crombie REIT and its
predecessors have invested in high-
quality, sustainable real estate where
people live, work, shop, and play. While
our name has changed in the 60+ years
we’ve been operating, our commitment to
our communities, tenants, investors, and
team has never wavered.
With 284 investment properties
nationwide, Crombie’s portfolio of
approximately 18.0 million square feet,
with an additional nine properties
under development or owned in a joint
venture, enhances local communities and
is adaptable to long-term growth. We
are focused on steady income growth
and asset value creation through the
ownership, operation, and development
of high-quality grocery-anchored retail,
shopping centres, industrial, and mixed-
use developments in Canada’s top urban
and suburban markets.
About the Cover
Davie Street, located in one of Canada’s great
neighbourhoods, the West End of Vancouver, is Crombie’s
first major mixed-use development. The approximately
54,000 square feet of wholly owned commercial space is
anchored by a Safeway. The residential building, named
Zephyr, is owned in partnership with Westbank and contains
approximately 330 residential rental units. This community
of homes sets a new standard for urban, green and
sustainable living.
Inside
This Report
Crombie At-A-Glance
COVID-19 Impact
Message from the President
and CEO
Our Business
Our Purpose
Crombie’s Priorities
1
3
4
6
7
9
1. Stable and Growing Portfolio 10
2. Strategtic Partnership
with Empire
3. Strong Development Pipeline
4. Strong Financial Condition
5. Highly Skilled Team
and Caring Culture
ESG Initiatives
Message from the Chair
Board of Trustees
Financial Review
Table of Contents
Management’s Discussion
& Analysis
Management’s Statement of
Responsibility for Financial
Reporting
Independent Auditor’s Report
Consolidated Financial
Statements
Notes to the Consolidated
Financial Statements
Property Portfolio
Unitholders’ Information
Top 20 Tenants
12
14
16
18
20
24
25
26
27
89
90
95
99
130
132
133
ABOUT FORWARD-LOOKING STATEMENTS
This document includes statements about our objectives, plans, goals, strategies, future growth, financial condition, results of operations, cash flows, performance, business
prospects and opportunities. These statements are forward-looking because they are based on management’s expectations about the future – they are not historical facts.
Forward-looking statements include statements regarding our development pipeline size, timing and costs, net asset value (NAV) creation, yield on investment of development,
and statements containing words like anticipates, expects, believes, estimates, could, intends, may, plans, predicts, projects, will, would, foresees and other similar expressions, or
the negative of these words. For more information and a caution about using forward-looking information, see the Forward-Looking Information section in the MD&A on page 87.
ABOUT NON-GAAP MEASURES
Certain financial measures in this document, including FFO, AFFO, NAV, NOI, SANOI, EBITDA, D/GFV, interest coverage, and yield on cost are not defined terms under GAAP,
therefore are not a reliable way to compare us to other companies. See the Non-GAAP Financial Measures section in the MD&A on page 84.
Proven Stability and
Sustainable Growth
2020 was a year filled with uncertainty, yet Crombie’s
solid foundation and its long-term strategy remained
fully intact. Our grocery-anchored portfolio stood
up to the unique challenges presented, and key
milestones were achieved on our major mixed-use
developments. We are confident in the future we are
building at Crombie.
Crombie
At-A-Glance
Retailer-
Related
REIT
Empire owns 41.5% interest
293
Properties
including properties under
development and 4 properties
owned in joint ventures
$4.8b
fair value of investment
properties
$4.3– 6.1b
development pipeline future
investment potential
Davie Street
Vancouver, British Columbia
Proven Stability and Sustainable Growth
Delivering Value
01
01
Broadway and Commercial
Rendering
Vancouver, British Columbia
02
CROMBIE REIT | Annual Report 2020
COVID-19 Impact
In the first quarter of 2020, the outbreak of the novel strain of
coronavirus, COVID‑19, was declared a worldwide pandemic.
States of emergency with varying degrees of mandatory business
closures and operating restrictions were declared repeatedly in
2020 across Canada, resulting in a national economic recession.
The duration and impact of these emergency measures and their
impact on Crombie’s financial results into the future are not fully
known. Approximately 77% of Crombie’s annual minimum rent
is generated from essential grocery and pharmacy‑anchored
properties and to date, Crombie has collected approximately 96%
of its contractual rents for the year ended December 31, 2020.
Crombie is committed to the health of communities in which we
operate, which includes the health, safety, and well‑being of our
employees, tenants, and customers. Our pandemic planning team,
comprised of cross‑functional leaders from across the organization,
has been actively managing our ongoing response to the COVID‑19
pandemic. We continuously review business needs and empower all
employees to take appropriate precautions, and to respond to all
confirmed or suspected COVID‑19 cases in any of our properties or
offices across the country. We implemented, and regularly update,
Business Continuity Plans with guidance from trusted sources
(primarily the World Health Organization and Public Health Agency
of Canada).
COVID‑19 related impacts are further discussed in the following
sections in the MD&A: “COVID‑19 Impact ‑ Operations”, “COVID‑19
Impact ‑ Financial”, “Financial Performance Review”, “Development”,
“Capital Management”, “Risk Management” and “Other Disclosures”.
Proven Stability and Sustainable Growth
Delivering Value
03 03
Message from the President & CEO
Relentless Commitment
As I think back to this time last year, when we were
preparing to release our year‑end results and
actively planning for the year ahead, I marvel at the
unexpected turmoil that we were about to experience.
As we prepared for 2020, we focused on
our strategic pillars: Real Estate, Financial
Condition, People, and Risk. We took
none of those things for granted, and we
were looking ahead to a year of growth
and achievement. Our unit price was at
an all-time high, the market was valuing
our potential, our real estate was thriving
with our strong strategic partnership
with Empire, low vacancy rates, and
exciting development completions on the
horizon, and we knew we had a highly
skilled team. What we may have taken for
granted was the remarkable resilience
and dedication of that team. When the
pandemic was declared a month later,
our real estate remained strong and our
team proved to be incredible. In 2020,
this team solidified the foundation of all
our strategic pillars. In a year when many
other real estate companies struggled to
adapt to the ever-changing marketplace,
Crombie achieved a top-quartile unit
price performance in the REIT space.
The theme of this year’s annual report
is Proven Stability and Sustainable
Growth. We’ve proven ourselves on
these measures this year. Our team has
kept our balance sheet and liquidity
stable, and our business on track. We
continued to improve our strategic and
mutually advantageous relationship with
Empire through long-term planning and
commitments to growth, including $133
million in modernizations, conversions,
and related investments. We are excited
about the further diversification of our
portfolio with the completion of the Voilà
par IGA Customer Fulfilment Centre, in
Montreal, in late 2020. Effectively, major
developments remained on time and
on budget, despite numerous lockdown
requests in those regions where we
are under construction. We remained
committed to doing what is right in the
long term, even if it seems difficult in
the short term. That commitment has
resulted in significant reductions in
energy and water consumption in many
of our properties, in our ongoing effort to
reduce our impact on the environment.
2020 was a year of disruption nonetheless.
The COVID-19 pandemic is beyond
anyone’s imagination. There was a
high level of uncertainty, economies
around the world shut down, businesses
struggled to keep afloat, and there
was no rule book for what we were
experiencing. We quickly decided to rely
on our values to guide us through this
unprecedented situation. From Trustees
to individual contributors, all members
of Crombie’s team annually commit
to our Code of Conduct and Ethics,
and this guides our behavior across
the organization. We are committed
to excellence, value relationships, and
have a strong sense of integrity. Given
that, we acted quickly to send home all
employees who could work remotely,
and worked diligently to ensure that our
Operations team, tenants, and visitors
were safe through enhanced cleaning
protocols and a commitment to follow
all public health regulations. Once our
people were safe, our Finance team
went to work on ensuring that we had
the financial strength to succeed through
the pandemic, and a collaborative
multi-functional team developed the
Crombie Values Small Business program,
to help those tenants who would be most
impacted by the lockdowns. This team
worked tirelessly to answer questions,
provide support and assist tenants in their
need for rent assistance and more. We
communicated weekly with all employees
and tenants, and held regular company-
wide check-in calls to ensure our team
stayed safe and was kept updated on our
business activities.
As we look ahead to 2021, the challenge
of COVID-19 remains. As we continue to
work our way through the pandemic, the
safety and well-being of our stakeholders
remains a priority. Our strategy remains
unchanged, and we look forward to
the exciting completion of several of
our major developments. Residents are
now living in Zephyr (our Davie Street JV
partnership with WestBank featured on
the cover of this report), and residential
leasing is now underway for our Bronte
Village location (JV partnership with
Prince Dev). Our relationship with Empire
04
CROMBIE REIT | Annual Report 2020
Building the Crombie of Tomorrow
Donald Clow
President & CEO
HALIFAX, NS
Clinton Keay
Chief Financial Officer
and Secretary
NEW GLASGOW, NS
Glenn Hynes
EVP & Chief Operating Officer
NEW GLASGOW, NS
Cheryl Fraser
Chief Talent Officer &
VP, Communications
NEW GLASGOW, NS
John Barnoski
EVP, Corporate Development
Arie Bitton
SVP, Leasing & Operations
TORONTO, ON
TORONTO, ON
Trevor Lee
SVP, Development
& Construction
CALGARY, AB
Kara Dort
VP, Accounting
& Financial Reporting
Jelena Plecas
VP, Corporate
Development Strategy
NEW GLASGOW, NS
TORONTO, ON
Fred Santini
General Counsel
TORONTO, ON
Andrew Watt
VP, Leasing
TORONTO, ON
Brady Landry
VP, Financial Analysis
& Treasury
NEW GLASGOW, NS
Jennifer Sieber
VP, Investments
TORONTO, ON
Sid Schraeder
VP, Construction West
Terry Doran
VP, Office Properties
CALGARY, AB
HALIFAX, NS
Aaron Bryant
VP, Construction East
Matt Craig
VP, Operations
NEW GLASGOW, NS
NEW GLASGOW, NS
Proven Stability and Sustainable Growth
Delivering Value
05 05
continues to strengthen, and we are
committed to an investment of $100
million - $200 million in 2021.
Empire had a very successful year
serving Canadians in 2020, and we are
proud to work with them on further
enhancing the quality of their customers’
experiences in-store and online. We
have recently begun the work of
reporting on our commitment to ESG.
We’ve been practicing the principles
of ESG for many years, and now we’re
pleased to be taking the steps to submit
to GRESB in 2021. Crombie leads by our
values, and our goal has always been to
enhance communities through long-term
sustainable growth. This translates well to
our ESG work, including maintaining our
commitment to ethical operations, gold
standard governance, sustainable design
and building maintenance, and building
welcoming spaces for all employees,
tenants, and visitors.
Sincerely,
Donald Clow FCPA, FCA
President & Chief Executive Officer
Our Business
Our Business
OUR GOAL
To enrich communities
through long‑term
sustainable growth.
OUR VALUES
• Commitment
• Collaboration
• Innovation
• Integrity
• Relationships
• Excellence and Quality
OUR CULTURE
• One Team
• Vibrant
• Energetic
• Thought Leadership
Learning at all levels
of the organization
1
18.0m sq. ft.
ASSET TYPE
83.7%
retail (15.0m sq.ft.)
5.3%
office (1.0m sq.ft.)
11.0%
retail-related industrial
(2.0m sq.ft.)
30 projects
3 active
3 with zoning approvals
[1] Includes partially-owned properties
subject to proportionate consolidation
06
CROMBIE REIT | Annual Report 2020
Davie Street
Vancouver, British Columbia
Our Purpose
We own and operate high‑quality, sustainable real estate
where people live, work, shop and play.
WHO WE DELIVER FOR
Our Tenants
and Customers
Our
Partners
Our
Unitholders
Our
People
Our
Communities
WHAT WE HAVE
WHAT WE DO
VALUE WE CREATE
Strong, stable
portfolio
Effective and efficient property
management
Strategic acquisitions / dispositions
Resilient grocery-anchored needs-based
properties that meet the needs of our
tenants, their customers and communities
Stable and growing cash flow
Strategic
partnership
Strategically engage with Empire to
complete conversions, modernizations,
expansions, customer fulfilment centres
and more, as well as collaborate on
developments
Accretively optimized portfolio designed
to meet Empire and Crombie’s current
and future needs, including unlocking
development opportunities
Development
pipeline
Planning and zoning of land
Design and execution of projects
High-quality real estate that enhances
communities and provides sustainable
long-term growth
UNDERPINNED BY
Strong financial
condition
Reasonable and balanced debt ladder
with multiple sources of capital and
ample liquidity
Disciplined and innovative capital
funding and management
Strong balance sheet
Optimize cost of capital
Available capital sources
Minimized financial risk
A highly skilled
team that
generates
strong returns
by executing on
strategy and
caring about
our properties,
tenants, and
communities
Attract, develop and retain talented
people who can execute our strategy and
think innovatively
Prioritize employee engagement,
development, and community outreach
Focus on environmental, social and
governance (“ESG”) footprint including
a commitment to the long-term
sustainability of our properties and
communities
Diverse and inclusive team of skilled real
estate professionals
Experienced and focused leadership
Address the needs of our employees and
care for our communities
Minimized environmental impact of our
buildings and operations
Strong governance
Strong risk management and risk
appetitie framework
Supported communities
Proven Stability and Sustainable Growth
Delivering Value
07 07
Avalon Mall
St. John’s, Newfoundland and Labrador
08
CROMBIE REIT | Annual Report 2020
Crombie’s
Priorities
1
2
3
4
5
Page
10
12
14
16
18
Stable and
Growing
Portfolio
Strategtic
Partnership
with Empire
Strong
Development
Pipeline
Strong
Financial
Condition
Highly Skilled
Team and
Caring Culture
Proven Stability and Sustainable Growth
09 09
Broadway and Commercial Rendering
Vancouver, British Columbia
Crombie’s Priorities
1
Stable and
Growing Portfolio
We build and own a high‑quality, resilient,
and diversified portfolio, anchored
primarily by grocery and pharmacy
tenants that provide stable and growing
long‑term earnings, cash flow, and Net
Asset Value (“NAV”).
Over the last decade, Crombie has grown and optimized
the quality of our grocery-anchored portfolio by developing
and acquiring assets in Canada’s top markets, as well as
recycling properties, mostly in secondary and tertiary markets.
Crombie’s 284 investment property portfolio is built on strong
fundamentals, driven by record high committed occupancy of
96.4% and a lengthy weighted average lease term of 9.5 years.
Rent collections throughout 2020 were strong highlighting the
quality of our portfolio. However, not all tenants have been
able to weather the recession caused by the pandemic. Our
leasing and operations teams have worked very closely with
our tenants to maintain strong relationships and provide
appropriate levels of financial assistance.
TOTAL
18.0m sq.ft.
96.4% Committed
Occupancy
Major Markets 4.6m sq.ft.
96.1% Committed Occupancy
VECTOM 5.6m sq.ft.
99.0% Committed Occupancy
Rest of Canada 7.8m sq.ft.
94.7% Committed Occupancy
10
CROMBIE REIT | Annual Report 2020
0.8m sq. ft.
leases renewed
4.1%
renewal leasing spread
9.5 years
weighted average lease term
$258,861
net property income
(1.1)%
SANOI
+2.8% excluding impact
of COVID-19
$0.88
AFFO/unit
$1.05
FFO/unit
Pointe-Claire CFC
Montreal, Quebec
Crombie’s Priorities
2
Strategic Partnership
with Empire
Our relationship with Empire is our
sustainable competitive advantage. We
collaborate to deliver the best solutions
and work together to execute projects of
mutual interest that enable operational
stability, resilience, and growth.
Empire has achieved great momentum with improved
operating and financial performance, and market share
growth. Supporting this momentum is the recent launch
of Voilà by Sobeys in the Greater Toronto Area. Empire
recently announced their new three-year strategy, Project
Horizon, which focuses on core business expansion and the
acceleration of their e-commerce network.
Aligning our strategy with that of Empire enables Crombie to
expand and diversify our real estate portfolio with solid risk-
adjusted returns. We work closely with Empire to collectively
drive high quality and defensive low-risk growth through
strategic and accretive transactions such as:
• Modernization and expansion of grocery stores;
• Store conversions;
• Accelerating Empire’s build-out of their Voilà online grocery
home delivery service through investments in their network;
• Land-use intensifications; and,
• Unlocking of major urban developments.
12
CROMBIE REIT | Annual Report 2020
54.9%
of annual minimum rent
generated by Empire
57.2%
(10.3m sq. ft.) of occupied
portfolio GLA
12.5 years
weighted average remaining
Empire lease term
$133m
capital spend in 2020 to support
Empire-related projects
Crombie’s Priorities
3
Broadway and Commercial Rendering
Vancouver, British Columbia
Timeline
Belmont Market Q1 2020
Avalon Mall
Phase 1 Q3 2020 / Phase 2 Q4 2020
Strong Development
Pipeline
Pointe-Claire Q4 2020
Davie Street
Retail Q2 2020 / Residential Q1 2021
By merging residential, retail, office, and
retail‑related industrial properties, our
development projects are a cornerstone
for our vision of creating thriving
communities where people live, work,
shop, and play.
Our value-enhancing major development pipeline consists of
30 properties, including three active developments. Many of
these sites are strategically located within walking distance
of existing and future transit corridors/nodes within growing
census metropolitan areas. Four projects, with total costs of
approximately $334 million, reached substantial completion
in 2020. The remaining three active developments are
expected to reach substantial completion in 2021. This is truly
a transformational time for Crombie as a material number of
development projects have reached or will reach substantial
completion. These properties are expected to enhance
communities, provide long-term sustainable growth, and
increase our presence in the country’s top urban markets,
while diversifying and improving our overall portfolio quality
and income stream.
Crombie expects to invest $150 million to $250 million in
our development pipeline program annually. As our active
developments approach completion, Crombie continues its
work to entitle an additional ten projects across Canada.
Crombie is committed to unlocking the significant land value
embedded in our major urban market grocery stores and
generate opportunities to continue our development program.
14
CROMBIE REIT | Annual Report 2020
Le Duke Q3 2021
Bronte Village Q4 2021
Spotlight on
Davie Street Residential
• Crombie’s first residential rental property,
tenants began taking occupancy in November
• Partner: Westbank
254,000 sq. ft. residential GLA
330 units
Zephyr is a community of homes that set a new
standard for urban, green and sustainable living
in one of Canada’s great neighbourhoods, the
West End. Zephyr is attempting to create a culture
that is focused on living locally – the West End is
Vancouver’s most walkable neighbourhood.
$4.3– 6.1b
development pipeline future
investment potential
4 Completed
679,000 sq. ft. commercial GLA
$334m total project cost
3 Active
5.3% - 5.8% estimated yield on cost1
80,000 sq. ft. commercial GLA
961,000 sq. ft. residential GLA
27 Future
1.3m sq. ft. commercial GLA
9.4m sq. ft. residential GLA
11% with zoning approvals
7% zoning application submitted
[1] Please see the development section of
the MD&A for disclosure on assumptions
and risks.
Scotia Square
Halifax, Nova Scotia
Crombie’s Priorities
4
Strong Financial
Condition
We continue to de‑risk our business and
build financial strength by strategically
managing our capital structure, accessing
capital in a timely and cost‑effective
manner, and optimizing capital allocation.
Crombie improves its cost of capital through disciplined and
innovative capital sourcing and strategic allocation to support
NAV and AFFO growth. Historically, Crombie has funded its
business with traditional equity issuances and commercial
debt. Over the past few years, Crombie has achieved a more
balanced approach to funding through our capital recycling
program, including both full and partial interest dispositions,
and unsecured notes. Recycling of capital provides organic
equity funding which enables us to both lower/maintain our
leverage and enhance our asset portfolio.
Over many decades, a very solid foundation was built to
support our business. Despite the ongoing challenges due to
the COVID-19 pandemic, Crombie remains in good financial
health with a strong, flexible balance sheet, and ample
liquidity. The year began with an equity issuance at a price
of $16.00 per unit, the highest issue price to date. Crombie
issued two tranches of $150 million each of unsecured notes,
achieving both the longest duration and lowest coupon in
Crombie’s history, and secured two long-term mortgage
financings at attractive interest rates. Both financing activities
aligned with our debt strategy to increase our weighted
average term to maturity and harvest interest savings.
16
CROMBIE REIT | Annual Report 2020
$1.4b
fair value of
unencumbered assets
5.3 years
weighted average term
to maturity
$472m
available liquidity
49.4%
D/GFV
48.8% net of cash
Crombie’s Priorities
5
Highly Skilled Team
and Caring Culture
We are proud of the smart, engaged
people who enable Crombie to live up to
our promise of enriching the communities
in which we operate.
Our Operations teams keep our properties safe and our
tenants supported, and our office teams maintain a focused
commitment to keeping our strategy on track. Even in the
midst of a global pandemic, our people showed remarkable
resilience and a continued commitment to our core values of
integrity, collaboration, excellence, and relationships. These
are just a few of the many people who strengthen Crombie’s
foundation through their fine work every day.
18
CROMBIE REIT | Annual Report 2020
Michael Glynn
Project Manager
Thehani Guruge
Lawyer
“Crombie’s culture creates a
sense of family, and I work
with a really great team
who make me feel like a
part of that family. This sets
the organization apart from
other places I’ve worked
in the past, and really
inspires me to work hard
and contribute to Crombie’s
ongoing success.”
“As part of the construction
team, Crombie’s pipeline
of development projects
is very exciting to me. I’m
enabled to contribute to the
success of the organization
by driving projects with the
skills I’ve acquired through
experience, continued
learning, and personal
development opportunities.
I learn from my colleagues,
and that pushes me to
set ambitious goals and
continually work toward
achieving them.”
Carla Quigley
Senior Manager,
Internal Reporting
Kaitlyn Siddall
Communications
Specialist
“In my work, I love to
challenge and improve
current processes, and
Crombie empowers
me to do what I do
best. My colleagues are
passionate about what
they do and understand
the value of teamwork.
As an organization, we
collaborate together as
one team which is a
strong contributor to the
company’s success.”
“Crombie understands
that its people are at the
center of its success, and
it shows. The company
culture encourages
personal development,
prioritizes employee
well-being, and promotes
continual growth. When
I joined the organization
in 2019, I realized very
quickly that Crombie is
the right fit for me to build
a fulfilling career.”
Patrick Langille
Analyst, Corporate
Realty Tax
Ian MacDonald
Manager,
Development
Rebecca MacNeil
Ruth Martin
Manager, Recruitment and
Employee Engagement
Director, Investor Relations
and Financial Analysis
“Crombie has constantly
progressed over the course of
my four years with the company.
Its evolution to a national REIT
and developer of large mixed-
use properties is what inspires
me about Crombie’s future.”
“Sustainable design and
construction is embedded
in Crombie’s development
process, and I love being
a part of an organization
that considers building an
environmentally sustainable
future a key focus. Working
directly on Crombie’s
developments that are
enriching the communities
where we live and work, is
something that fuels me to
continue to build my career
with Crombie.”
“Although we are spread
out across Canada, we are
a tight-knit, dedicated, and
strong team, all working
toward common goals. My
job is to help find the right
people to build an engaged,
skillful team that not only
contributes to Crombie’s
success today, but ensures
we have a talented team
to support Crombie’s future.
My colleagues are some of
the best in the industry.”
“From my perspective,
the most important of
Crombie’s guiding values are
commitment, collaboration,
integrity, and relationships. I
feel that these values drive a
business, and without them,
it’s challenging to make
forward progress or have
a healthy culture. Crombie
lives these values every day
through its commitment
to enriching communities,
supporting its tenants, and
empowering employees.
This dedication makes me a
proud member of the team.”
Annie Smith
Analyst, Corporate
Development
“I’m proud of how resilient
Crombie has proven to be
over the past year, navigating
through the COVID-19
pandemic. The team has
demonstrated great agility
and adaptability through
strong communication and
collaboration.”
Karen Solursh-Smith
Director, Leasing
Ryan Sun
Property Accountant
“Crombie has evolved its
portfolio to include mixed-use,
larger scale developments.
This evolution and quality of
our portfolio is an exciting
transformation toward the
future success of the company.
Crombie’s strong relationship
with Empire, our preferred
partner, builds on this success
and helps establish us as a
leader in Canadian real estate.”
“Crombie is an engaging,
motivating, and supportive
workplace. Senior leadership
keeps us involved with strategic
goals of the company, cares
about employee career
development, and we’re offered
a flexible and supportive work
environment. My colleagues are
some of the most hard-working,
dedicated, and inspiring people
I have worked with. They make
me a proud member of the
team and Crombie family.”
Mike Verge
Director, Information
Systems and Technology
“As a large, successful
organization, it’s important to set
ambitious goals and focus on
the future; but it’s also important
to stay true to company roots
and values. Crombie does an
excellent job of balancing future
plans and aspirations with
the foundational culture that’s
helped to build its success.”
ESG Initiatives
ESG Initiatives
Since our earliest days, Crombie has been committed to the
well‑being of communities. The locations of many of our
properties allow our visitors to access essential needs close
to their homes, reducing transportation time and, therefore,
environmental impact.
Crombie has been and remains committed to embedding sustainability principles into
the way we do business, our decision-making processes, and everyday activities. In
order to better understand sustainability performance at Crombie, we are committed
to improving the measurement of our baseline performance in all three categories of
sustainability (environmental, social, and governance). We are developing the policies
and procedures that will set the targets and actionable processes necessary to achieve
our short- and long-term ESG goals. Our sustainability agenda is a critical component
of our culture.
Environmental Performance
Corporate Governance
Good governance is about having a skilled and
diverse Board of Trustees and implementing
best practices of Board governance. Good
governance must be implemented by
talented people who have the integrity,
knowledge and experience to set and
support achieving the goals of the company.
Crombie understands that we have a
responsibility to consider the impacts of
our activities and we commit to manage
those impacts, mitigate risks, and identify
value-add opportunities. We also commit
to future collaborations with stakeholders to
determine material issues for consideration
in our sustainability journey.
We have recently conducted an internal
materiality analysis of key ESG topics that are
important to Crombie and, we believe, to our
stakeholders. From this analysis, we will focus
on the following material ESG topics:
• Sustainable Design and Construction
• Energy Consumption
• Building and Attracting Talent
• Diversity, Equity and Inclusion
• Health, Safety and Wellness
• Risk Management
• Board Composition and Governance
As a real estate company, we understand
that our properties can have a significant
impact on our environment, both through
construction and operations. Crombie is
increasing our commitment to:
• Enhancing our inclusion of environmental
considerations in the design of all new
projects;
• Increasing opportunities for efficiencies at
existing buildings; and
• Continuing operation of our properties and
business in ways that minimize our impact
on the environment.
Social Impact
Recognizing that building stronger communities
requires an investment of additional
resources, Crombie is committed to:
• offering our employees a safe, welcoming,
diverse and inclusive workplace that
actively encourages continued well-being,
development, growth, and a positive
overall work experience;
• prioritizing our people and promoting a
culture where our employees share in our
company’s sustainability vision; and
• supporting charitable organizations that
play a role in improving the health and
well-being of their communities through
donations of money, time, and space.
20
CROMBIE REIT | Annual Report 2020
Avalon Mall
received the BOMA
Newfoundland and
Labrador Earth
Award – Retail
Crombie was named
BOMA NL’s Company
of the Year in 2019
Looking ahead: ESG
Program Advancement –
2021 Goals
2021 will be transformational
for our ESG program. We
will report publicly our ESG
strategy and operating model,
our priority ESG objectives,
and we will publish an ESG
Report with commitments
that authentically reflect our
values. We will report our
performance in alignment with
the GRESB framework, which
is an investor-grade, industry-
recognized tool specifically
designed to measure ESG
performance in real estate.
We are currently collecting and
reviewing relevant information,
which will be used to highlight
existing best practices, which
are significant but unreported,
and identify areas where we
have opportunity to improve
our performance. We look
forward to continuing work
with our Board of Trustees to
develop comprehensive ESG
measurement and reporting.
In collaboration with Sobeys, there have been
LED retrofits at 147 properties across Canada.
Case Study: Avalon Mall
Avalon Mall has received several environmental
awards since its major redevelopment
commenced in 2018. Clean St. John’s awarded
Avalon the Golden Broom Corporate Award
in 2020 for its efforts to reduce waste through
the implementation of multi-stream waste
bins and installation of an industrial composter
which, to date, has helped divert nearly
20,000kgs of organic waste from the landfill.
Avalon Mall received the BOMA Newfoundland
and Labrador Earth Award – Retail, and
Crombie was named BOMA NL’s Company
of the Year in 2019. Several energy-saving
projects contributed to these awards,
including the completion of upgrades to the
NOVAR Building Management System, which
allowed for better control of heating and
cooling set points and time control for lighting.
Installing occupancy sensors in all secondary
corridors and upgrading all common area
lighting to LED further controls and reduces
overall energy consumption at the property.
Energy Consumption
As we evolve, so too does our commitment
to our communities, and to the planet
at large. Across the country, Crombie
continues to implement initiatives to
improve our environmental impact on
the communities in which we operate.
Avalon Mall
St. John’s, Newfoundland and Labrador
Proven Stability and Sustainable Growth
Delivering Value
21
21
ESG Initiatives
Sustainable Design and Construction
Building and Attracting Talent
Major Developments offer us the opportunity
to start protecting the environment from the
onset of a project. For all new builds, we start
with a project visioning exercise that looks at
the micro market in which we are building to
determine the best way to further enhance that
community for the future. It is important to us to
understand what matters to each community,
and provide the right space and amenities
as we move forward. In addition, we closely
examine the impact we will have on the
planet and build for the betterment of all.
Davie Street, Vancouver,
British Columbia
• Public art feature “Zephyr” to
enhance the streetscape.
Over the past several years, Crombie has
consistently won Atlantic Canadian and
Nova Scotian Employer of the Year awards
because of our commitment to our people
and culture. In 2020, we also won a Top
Canadian Small and Medium Enterprise
award. These awards are recognition of
the work we do to engage our people in
building a strong, caring culture. We actively
recruit smart people who have diverse ways
of thinking, are passionate about learning,
thrive at solving problems, and are highly
committed to our core values. We focus on
true engagement metrics, identifying and
addressing when there are opportunities to
further enhance people’s sense of purpose
in their work. We support professional
development and learning opportunities and
encourage our employees to develop their
unique skills and talents for future growth.
• LEED Gold Equivalent project.
Health, Safety and Wellness
• 6 Shared Vehicle Stalls on site.
• 409 bicycle stalls (1.25 per
residential unit).
• 18 short term bicycle parking stalls
for public use.
• Public bike share facility on
Cardero Street.
• Designed to be able to connect to
a Neighbourhood Energy System
when it becomes available in the
future.
• Electric vehicle charging stations
provided for Residential and
Commercial use.
Like so many others, Crombie’s office
employees moved to home offices last
year, and most still work remotely at
the time of this writing. Our Operations
employees maintained our properties’ high
health and safety standards throughout
the pandemic, upholding Crombie’s
commitment to the communities in which
we operate. Our people’s health, safety,
and well-being were our highest priority
during the most significant pandemic our
world has experienced in a century. We
took every precaution to protect them from
COVID-19, and we all worked diligently to
adhere to public health advice. With much
of the country in lockdown, we knew that
mental health was also suffering, so we
provided increased communications and
resources to our employees to keep them
well. Our leaders met weekly to discuss
how to best support their teams, we held
regular company-wide check-in calls, and
our CEO sent weekly emails and met with
employees virtually to answer questions
and provide guidance.
Diversity, Equity and
Inclusion at Crombie
Building and maintaining a
diverse, equitable and inclusive
culture that is reflective of
the communities in which we
operate is instrumental to
Crombie’s continued success.
Our commitment to workforce
diversity means we will create
an inclusive culture and a sense
of belonging for everyone.
Through leadership and
action, Crombie’s diversity,
equity, and inclusion goals
are intended to ensure that
Crombie is reflective of the
diversity inherent across all
levels of our communities and
Canadian society, and that
Crombie benefits from the
range of perspectives, ideas
and experiences that diversity
provides.
2020 Actions:
• Updated our Diversity,
Equity and Inclusion
Policy to include goals,
accountabilities, and
commitments.
• Launched a Diversity
Advisory Group that
includes diverse employee
representation from across
the organization.
• Held Virtual Inclusion
Conversations.
• CEO signed BlackNorth
Pledge.
22
CROMBIE REIT | Annual Report 2020
Le Duke
Montreal, Quebec
Board Composition and Governance
Crombie has always taken a conservative approach to
governance and ethics. While we have a strategic relationship
with Empire, who owns a 41.5% interest in Crombie, we take
every effort to ensure our independence. All “related party”
transactions must be voted on by our elected Trustees only,
while Empire-appointed Trustees abstain.
We are committed to engaging with our stakeholders through
quarterly conference calls, our annual general meeting and
regular investor relations meetings. In addition, unitholders can
contact the Chair of our Board via email at chair@crombie.ca.
Risk Management
To monitor and mitigate risk, an extensive risk management
framework is in place, and is reviewed annually by the Board
and its individual committees.
At Crombie, we are guided by our values and commitments,
and “doing right while doing good” is ingrained in our culture.
Each year, our Trustees and all employees at Crombie sign
an extensive Code of Conduct and Business Ethics. From the
Chair of the Board to our operations and office staff, everyone
at Crombie is expected to act with integrity and the upmost
regard for ethical decision making. Included in the code is an
ethics “whistleblower” line that is available for any employee to
report a breach of our Code.
Proven Stability and Sustainable Growth
Delivering Value
23 23
Message from the Chair
Message from the Chair
The commitment of Crombie’s Board of Trustees is to serve
in the best interest of our unitholders, regardless of the
daily challenges the business may face. To say 2020 was an
unusual and challenging year is an understatement. The
pandemic played a huge role in how organizations around
the world operated, and Crombie was no exception.
The disruptive impact of COVID-19 was
significant for the retail REIT sector
in Canada, and many retailers faced
incredibly difficult conditions during the
ongoing national lockdowns. Crombie is
fortunate to hold the most resilient asset
class, essential needs retail, including
our largest tenant Empire, whose
business thrived in these challenging
conditions. Our relationship with Empire
strengthened in 2020, as everyone
worked together to prioritize the safety
and well-being of employees and
customers across the country.
The Board has supported management
through their response to COVID-19.
Our Trustees have been supportive of
the major development projects that are
underway and of those in the pipeline.
The pandemic didn’t affect that
support; we didn’t make any changes
that would impact the long-term
strategic direction of the organization.
Crombie continues to offer a
sustainable return to our unitholders.
Management worked diligently this
year to strengthen the business and
get things done in a way that would
ensure our performance remained
strong. They were quick on their feet
in reacting to the changing business
requirements, kept our employees and
business safe, and diligently maintained
our properties. The company remains
strong and committed to its strategic
growth path.
In 2020, we welcomed Karen Weaver
to our Board. In addition to her robust
financial leadership experience, Karen’s
wealth of knowledge in governance has
been invaluable. One of the key priority
areas of focus for the Board and the
company over the next year is creating
a full ESG plan along with a strategy for
implementation. Crombie has been built
on a foundation of sustainable long-
term commitment to its stakeholders,
and this work will allow the company to
plan for and measure its successes in
this important work.
24
CROMBIE REIT | Annual Report 2020
I thank all our Trustees for their
commitment and dedication in 2020
and commend the Management team
for a successful year.
Sincerely,
J. Michael Knowlton
Chair
“Management worked
diligently this year to
strengthen the business
and get things done in
a way that would ensure
our performance
remained strong. They
were quick on their
feet in reacting to the
changing business
requirements, kept
our employees and
business safe, and
diligently maintained
our properties.”
J. MICHAEL KNOWLTON
CHAIR
Board of Trustees
J. Michael Knowlton
Independent Trustee
& Chair
Paul Beesley
Independent Trustee
Donald E. Clow
Trustee
Jim M. Dickson
Independent Trustee*
John C. Eby
Independent Trustee
Barbara Palk
Independent Trustee
Jason P. Shannon
Independent Trustee
Jana Sobey
Independent Trustee*
Paul D. Sobey
Independent Trustee*
Karen Weaver
Independent Trustee
*Empire appointed Trustee
Bronte Village
Oakville (Toronto), Ontario
Proven Stability and Sustainable Growth
Delivering Value
25 25
Key
Highlights
Management’s Discussion and Analysis
Key Performance Indicators
COVID-19 Impact – Operations
COVID-19 Impact – Financial
Glossary of Terms
Portfolio Review
Market Class
Asset Type
Tenant Profile
Acquisitions and Dispositions
Operational Performance Review
Occupancy and Leasing Activity
Lease Maturities
Financial Performance Review
Development
Capital Management
Capital Management Framework
Capital Structure
Debt Metrics
Cash Flows
Liquidity
Financial Instruments
Risk Management
Other Disclosures
Related Party Transactions
Use of Estimates and Judgments
Controls and Procedures
Non-GAAP Financial Measures
Forward-Looking Information
Consolidated Financial Statements
Management’s Statement of Responsibility for Financial Reporting
Independent Auditor’s Report
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Property Portfolio
Unitholders’ Information
Top 20 Tenants
27
30
32
35
36
36
38
39
41
43
43
46
47
55
61
61
62
63
69
71
73
74
79
79
79
81
84
87
89
90
95
99
130
132
133
The following Management’s Discussion and Analysis
(“MD&A”) of the consolidated financial condition
and financial performance of Crombie Real Estate
Investment Trust (“Crombie”) should be read in
conjunction with Crombie’s audited consolidated
financial statements as at and for the years ended
December 31, 2020 and 2019.
Except for per unit, gross leasable area (“GLA”) and square footage
(“sq. ft.”) amounts and where otherwise noted, all amounts in this
MD&A are reported in thousands of Canadian dollars.
The information contained in the MD&A, including forward-looking
statements, is based on information available to management as of
February 24, 2021, except as otherwise noted.
Additional information relating to Crombie, including its latest
Annual Information Form, can be found on the SEDAR website for
Canadian regulatory filings at www.sedar.com.
For definitions of certain acronyms and specialized terms we use in this
document, refer to the “Glossary of Terms” on page 35.
FOOTNOTES
(*) NON-GAAP FINANCIAL MEASURES
Some of the financial measures we provide in this
document are non-GAAP financial measures that
have no standardized meaning under International
Financial Reporting Standards (IFRS) and therefore
may not be comparable to similar measures presented
by other companies. See “Non-GAAP Financial
Measures”, starting on page 84, for more information
on Crombie’s non-GAAP financial measures and
reconciliations thereof.
FORWARD-LOOKING STATEMENTS
Some of the information we provide in this document
is forward-looking and therefore could change over
time to reflect changes in the environment in which
we operate and compete. See “Forward-looking
Information”, starting on page 87, for more information.
27
Message from the Chair
KEY PERFORMANCE INDICATORS
KEY HIGHLIGHTS
We use financial, operational, and growth metrics to measure our performance.
These key metrics are highlighted below:
FINANCIAL METRICS
(in thousands except GLA and per unit amounts)
Property revenue
Q4 2020
Year 2020
$97,060
$388,733
Q4 2019 $96,823 +0.24%
Year 2019 $398,741 -2.51%
Property revenue on a quarterly basis has increased slightly compared to the fourth
quarter of 2019. The decrease in property revenue of 2.51% on an annual basis is
primarily due to property dispositions in 2019. Due to COVID-19, parking revenue
has been negatively impacted by reduced demand and rental revenue has been
decreased by abatements primarily resulting from the implementation of the federal
government’s Canada Emergency Commercial Rent Assistance (“CECRA”) program.
In addition, tenant incentive amortization increased as a result of modernizations
and energy upgrades.
Operating income attributable to Unitholders
Q4 2020
$17,157
Year 2020
$67,608
Q4 2019 $44,149 -61.14%
Year 2019 $161,875 -58.23%
The quarterly and annual decrease in operating income attributable to Unitholders is
driven primarily by a gain on disposal of $81,803 from property dispositions in 2019, as
well as 2020 increased rent abatements, and increased bad debt expense as a result
of estimates for credit losses on rents receivable as a result of COVID-19. This is offset
slightly by reduced general and administrative expenses and, on an annual basis, by
lower finance costs due to the repayment of mortgages related to 2019 asset sales.
Same-asset property cash NOI*
Q4 2020
+1.85%
Year 2020
-1.14%
Q4 2020 $61,805
Year 2020 $237,522
Q4 2019 $60,680
Year 2019 $240,250
FFO* per unit
Q4 2020
$0.27
Year 2020
$1.05
Q4 2019 $0.28 -3.57%
Year 2019 $1.16 -8.99%
FFO* payout ratio
Q4 2020
83.2%
Year 2020
84.6%
Q4 2019 80.1% +3.10%
Year 2019 76.9% +7.69%
The quarterly increase in same-asset property cash NOI of $1,125 or 1.85% compared
to the fourth quarter of 2019 is primarily due to higher supplemental rents from
modernizations and capital improvements, offset in part by the impact of COVID-19
on parking revenue and rent abatements. On an annual basis, in addition to
decreased parking revenue and rent abatement increases resulting from the impact
of COVID-19, bad debt expense increased significantly on same-asset properties
compared to 2019.
FFO per unit for both the quarter and on an annual basis was impacted by the
increase in the number of Units outstanding from the Unit issuance in Q1 2020.
On an annual basis, the decrease in FFO is driven by bad debts and rent abatements
related to the impact of COVID-19, reduced net property income resulting from the
disposition of properties in 2019, and severance costs in the second quarter of 2020.
This is offset in part by a decrease in general and administrative expenses and the
impact of decreased unit price on unit-based compensation plans.
Higher FFO payout ratios for the quarter and on an annual basis are a direct result
of the combined effects of decreased FFO and higher total distributions due to an
increase in the number of Units outstanding from the Unit issuance in Q1 2020.
27
Proven Stability and Sustainable Growth KEY PERFORMANCE INDICATORS
FINANCIAL METRICS (CONTINUED)
AFFO* per Unit
Q4 2020
$0.23
Year 2020
$0.88
Q4 2019 $0.24 -4.17%
Year 2019 $0.98 -10.20%
AFFO* payout ratio
Q4 2020
98.7%
Year 2020
101.0%
Q4 2019 93.8% +4.92%
Year 2019 90.8% +10.20%
OPERATIONAL METRICS
Renewals (GLA)
Q4 2020
Year 2020
200,000
758,000
Q4 2019 699,000 -499,000
Year 2019 1,626,000 -868,000
Renewal spreads
Q4 2020
4.5%
Year 2020
4.1%
Q4 2019 3.9% +0.57%
Year 2019 3.9% +0.24%
Committed
Occupancy
Economic
Occupancy
Year 2020
96.4%
Year 2020
94.0%
Year 2019 96.1% +0.30%
Year 2019 95.4% -1.40%
28
The quarterly decrease in AFFO per unit is primarily due to the higher number
of units outstanding and the conclusion of the amortization of effective swap
agreements resulting from mortgage maturities, in addition to items affecting FFO.
On an annual basis, AFFO decreased primarily due to lower FFO, partially offset by
a decrease in maintenance expenditures on a square footage basis resulting from
property dispositions.
The increased number of Units outstanding from the Unit issuance in Q1 2020 resulted
in higher total distributions. This, combined with the reduction in AFFO, resulted in an
increase to payout ratios.
The decreased 2020 renewal variances on a quarterly and annual basis are
primarily related to 684,000 square feet of Empire leases executed in 2019. During
2020, 758,000 square feet was renewed at rents 4.1% over the expiring rental rate.
The primary driver of the renewal growth in the quarter was retail enclosed renewals
on approximately 81,000 square feet, at an increase of 6.8% over expiring rental
rates. On an annual basis, growth was a result of strong renewal activity in the retail
plaza portfolio with approximately 404,000 square feet of renewals, at an increase of
5.0% over expiring rental rates.
Economic occupancy was negatively impacted by the addition of approximately
345,000 square feet of vacant development GLA at Avalon Mall and Pointe-Claire
CFC with economic occupancy expected in early 2021. This was partially offset by
new leases of 248,000 square feet, outpacing lease expiries by 181,000 square feet.
Notable new leases include H&M at Avalon Mall, The Brick at Woodgate Plaza, and
Giant Tiger at North Bay.
432,000 square feet of committed space at year end led to record high committed
occupancy of 96.4%. Approximately 350,000 square feet of committed space is at
Avalon Mall, Belmont Market and Pointe-Claire CFC. Additionally, approximately
49,000 square feet is in our office portfolio.
CROMBIE REIT | Annual Report 2020 KEY PERFORMANCE INDICATORS
FINANCIAL CONDITION METRICS
Interest coverage ratio*
Q4 2020
2.77x
Year 2020
2.90x
Q4 2019 2.99x -0.22x
Year 2019 2.95x -0.05x
Debt to gross fair value* (D/GFV)
Q4 2020
49.4%
Q4 2019
48.9%
Q4 2019 48.9% -0.50%
Q4 2017 51.0% +2.11%
The quarterly reduction in interest coverage ratio is due to the increase in finance
costs primarily resulting from the premium paid relating to partial early redemption
of unsecured notes. On an annual basis, reduced EBITDA resulting from lower
property revenue from 2019 dispositions and the impacts of COVID-19 described
above is the main driver in the reduction of the ratio.
The increase in D/GFV is due to spending on major developments, offset in part by
increased cash equivalents of $63,293 related to a mortgage at our Pointe-Claire
development and increased value in investment properties from development.
Debt to gross fair value*, applying cash and cash equivalents to reduce debt, is 48.8% at Q4 2020.
Debt to trailing 12 EBITDA* (D/EBITDA) months
Q4 2020
9.73x
Q4 2019 8.52x -1.21x
D/EBITDA increased on an annual basis due to spending on major developments,
and reduced EBITDA resulting from property dispositions in 2019 and the impacts of
COVID-19 on parking revenue, rent abatements, and bad debt expense in 2020.
Debt to trailing 12 months EBITDA*, applying cash and cash equivalents to reduce debt, is 9.48x at Q4 2020.
Available liquidity – unutilized credit facilities
Q4 2020
$471,708
Q4 2019 $449,016
Available liquidity improved over 2019 primarily as a result of increasing the
maximum principal amount of the unsecured bilateral credit facility to $130,000
from $100,000.
29
Proven Stability and Sustainable Growth COVID-19 IMPACT – OPERATIONS
In the first quarter of 2020, an outbreak of the novel strain of coronavirus, COVID‑19,
was declared a worldwide pandemic. States of emergency with varying degrees of
mandatory business closures and operating restrictions were declared repeatedly
in 2020 across Canada, resulting in a national economic slowdown. The duration
and impact of these emergency measures and their impact on Crombie’s financial
results into the future are not fully known. Approximately 77% of Crombie’s annual
minimum rent is generated from essential grocery and pharmacy‑anchored
properties and to date, Crombie has collected approximately 96% of its contractual
rents for the year ended December 31, 2020.
Crombie is committed to enriching the neighbourhoods in which
we operate, which includes the health, safety, and well-being of our
employees, tenants, customers and communities. Our pandemic
planning team, comprised of cross-functional leaders from across
the organization, has been actively managing our ongoing response
to the COVID-19 pandemic. We continuously review business needs
and empower all employees to take appropriate precautions, and to
respond to all confirmed or suspected COVID-19 cases in any of our
properties or offices across the country. We implemented, and regularly
update, Business Continuity Plans with guidance from trusted sources
(primarily the World Health Organization and Public Health Agency of
Canada).
OUR EMPLOYEES
In early March, following guidelines provided by these trusted sources,
we asked our employees to cancel all work-related travel, reinforced the
need to practice good sanitation/handwashing techniques, and to stay
home and consult a physician if ill. In keeping with guidelines to facilitate
physical distancing, we implemented a work-from-home program in
mid-March for most of our workforce, ensuring technology solutions
were in place with little to no disruption to business operations. These
same protocols remain in place today, and many of our employees
continue to work productively and safely from home. We continue to
pay close attention to our employee engagement and culture data, and
have committed to increased regular two-way communications with
our teams.
We maintain these open lines of communication across the organization
through effective leveraging of technology and coaching our people
leaders to have regular contact with their remote team(s). Continued
wellness is a priority, so we share information from federal and
provincial authorities about the importance of following public health
guidelines to keep our communities safe. We also care deeply about
our employees’ mental health, so we ensure that all employees have
access to mental health resources and supports. The continued level of
uncertainty around how the COVID-19 situation will evolve may require
us to take further, longer-term decisions to ensure the well-being of our
people, as well as that of our tenants, customers, and suppliers, and
we will always do our part to support the objectives of leading health
organizations.
Crombie is extremely proud of the efforts made by our team. While
most office employees continue to work from home, our Operations
teams ensure our properties are operational, clean and safe, and their
work helps ensure that goods and services are readily accessible to the
communities we serve.
OUR TENANTS AND CUSTOMERS
During this time, we have continued to maintain and proactively
augment health and safety protocols at all our properties. Our regular
cleaning activities remain of utmost importance as a protective measure
against the virus in our offices and at each of our properties. Public
health authorities have advised that regular cleaning practices should
be increased, and we have done so by increasing the frequency of our
cleaning efforts and ensuring a focus on touch points. Hand sanitizer
dispensers are available in all common areas. Our on-site Operations
employees are asked to wear masks and maintain physical distancing
at all times.
We also maintain open lines of communication with our tenants. We
provide regular updates and have established clear expectations
around sharing known presumptive or confirmed cases on our
properties, so we can take the necessary steps to inform and protect all
tenants, employees, customers and service providers.
Many tenants are faced with substantial changes to the way they serve
their customers, and we have supported them with physical distancing
protocols and site signage. We have a comprehensive communication
plan that connects Operations, Talent Management and Executive
teams, ensuring immediate awareness of any concerns. The health and
safety of tenants, visitors and employees at our sites remains a priority
to our team.
Our Business Continuity Plan contains steps to mitigate the risk of
business interruption and ensure that we continue to deliver the
same level of service and experience to which our tenants and
customers are accustomed. We implemented a Crombie Values Small
Business (“CVSB”) program in March, as a way of supporting our
small business tenants throughout the pandemic. We have provided
additional assistance to tenants requiring rent relief through the
federal government’s Canada Emergency Commercial Rent Assistance
(“CECRA”) program and Canada Emergency Rent Subsidy (“CERS”).
We continue to support tenants through the pandemic’s ongoing and
changing economic impacts. As of the end of January 2021, 97% of
leased GLA was open for business.
30
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020
Davie Street
Vancouver, British Columbia
OUR MAJOR DEVELOPMENTS
Although not significant, COVID-19-related inefficiencies and
delays have increased risk around date and cost completion
as well as future residential lease-up schedules on our major
development program.
The shutdown of nonessential construction in Quebec from
March 24th to May 11th extended the completion date of
the Le Duke development to Q3 2021. Despite this shutdown,
Pointe-Claire achieved substantial completion of the base
building construction in the fourth quarter of 2020.
COVID-19-related measures and procedures caused slight delays
in other major developments in British Columbia and Ontario.
The 160,000 square foot Belmont Market development achieved
substantial completion in 2020, with the remaining 17,000 square
feet of construction delayed due to pre-leasing disruption, to be
completed by Q4 2021. Davie Street retail development achieved
substantial completion in 2020 with the residential development
projected to be substantially complete in early 2021.
Please refer to the “Active Major Developments” section of this
MD&A for further details on each project.
OTHER CONSTITUENTS
Crombie’s Business Continuity Plan contains mechanisms to ensure
we complete all public company filings on a timely basis, maintain
key internal and disclosure controls and continue to meet all other
ordinary course business obligations.
COVID-19 related impacts are further discussed in the following
sections of this MD&A: “COVID-19 Impact – Financial”, “Financial
Performance Review”, “Development”, “Capital Management”,
“Risk Management” and “Other Disclosures”.
31
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth COVID-19 IMPACT – FINANCIAL
COVID-19 IMPACT – FINANCIAL
Crombie has provided relief to qualifying small business tenants impacted by the
COVID‑19 pandemic through our own CVSB assistance program and the federal
government’s CECRA and CERS programs.
On March 27, 2020, Crombie announced the launch of CVSB, our small
business support program, which included relief that deferred rent
payments to assist small businesses during this unprecedented time.
Effective April 1, 2020, small businesses within Crombie’s portfolio that
demonstrated a need for assistance qualified to defer a portion or all of
their rent for two months. A team was established to deal with the needs
of our tenants and assess eligibility of tenants who requested rent relief.
In order to ensure Crombie is doing its part to contribute to the
survivability of its tenants during the pandemic, management has been
actively working with tenants seeking rental concessions or who have
stated that they are not going to pay their rent during the pandemic. To
address certain needs, Crombie deferred amounts for qualifying tenants
which are due to be repaid over a 12-month period. As of December 31,
2020, there was approximately $188 or 0.2% of the quarter's contractual
rent deferred. This amount also includes rent deferral arrangements
with our larger tenants who have been adversely affected by COVID-19.
Most of Crombie’s leases require that rent be paid on the first day of
each month. During the three months and year ended December 31,
2020 and for the month of January, we have collected or expect to
collect the following approximate contractual rents:
Three months ended
December 31, 2020
Year ended
December 31, 2020
January 2021
% of Gross
Rent Collected
% of Gross Rent,
Total Portfolio
% of Gross
Rent Collected
% of Gross Rent,
Total Portfolio
% of Gross Rent
Collected
% of Gross Rent,
Total Portfolio
Retail
Office
Retail-related industrial
Total
98%
99%
100%
98%1
91%
6%
3%
100%
96%
99%
100%
96%1
91%
6%
3%
100%
98%
99%
100%
98%1
91%
6%
3%
100%
(1) Avalon Mall was significantly impacted by the pandemic. Since reopening on June 8th, we continue to see improvements at Avalon Mall. As of the end of January 2021, close to 100% of leased GLA is
open for business, traffic counts continue to improve, rent collection has improved from 38% in May to 94% in January and approximately 90% of the new expansion space is now leased.
Crombie assesses, on a tenant-by-tenant basis, losses expected with
its rent receivables in determining the provision for doubtful accounts.
Crombie takes into account the payment history and future expectations
of likely default events (i.e., tenant requests for rental concessions/
abatements, applications for rental relief through government programs
such as the CECRA and CERS programs, or stating they will not be
making rental payments on the due date) based on actual or expected
insolvency filings or company voluntary arrangements and likely
deferrals of payments due, and potential abatements to be granted by
the landlord through tenant negotiations or under CECRA. Crombie’s
assessment is subjective due to the forward-looking nature of the
situation. As a result, the provision for doubtful accounts is subject to a
high degree of uncertainty and is made based on assumptions which
may not prove to be accurate with the unprecedented uncertainty
caused by COVID-19.
In April, the federal government, in cooperation with all 10 provinces,
unveiled the Canada Emergency Commercial Rent Assistance (“CECRA”)
program, which subsidized 50% of small and medium-sized business
rent for six months for qualifying businesses and required landlords to
reduce their rent receivable by 25%, effectively reducing rent payments
for the tenants by 75%. Crombie actively supported its tenants in the
application for rent relief through the CECRA program, which ended as
of September 2020. Crombie filed 286 tenant applications under the
program, representing approximately 5% of gross monthly rent.
Crombie elected to treat the 25% reduction in rent receivable under the
CECRA program as a credit loss under IFRS 9, where qualifying tenants
had accounts receivable balances. Where no balance exists, the 25%
reduction was considered a lease modification in accordance with IFRS
16 and averaged over the life of the lease as straight-line rent.
The Canada Emergency Rent Subsidy (“CERS”) was announced in
October by the federal government to replace the CECRA program by
providing support for commercial rent and property expenses to small
businesses affected by COVID-19. It subsidizes a percentage of eligible
expenses, on a sliding scale, up to a maximum of 65% until June 2021.
As application for CERS is the responsibility of the tenant, Crombie has
reached out to those small business tenants who would qualify in order
to gauge interest in the program. Management is currently reviewing
the potential impacts, if any, of CERS.
32
CROMBIE REIT | Annual Report 2020 COVID-19 IMPACT – FINANCIAL
Based on its review, Crombie recorded a bad debt expense of $10,894 in 2020, reducing property operating income for the year ended December 31,
2020. The following table further outlines total bad debt expense for the three months and year ended December 31, 2020.
(In thousands of CAD dollars)
Total tenant billings1
Less: amounts received and deferrals repaid to date
Less: CECRA collections
Balance outstanding
Total rents expected to be collected
as per rent deferral arrangements
Total rents to be collected excluding collectible deferrals
Less: bad debt expense
Balance expected to be recovered
Three months ended
December 31, 2020
% of total
tenant billings
Year ended
December 31, 2020
% of total
tenant billings
$
$
101,883
(100,012)
—
1,871
445
2,316
(67)
2,249
100.0%
$
(98.2)%
—%
1.8%
0.5%
2.3%
(0.1)%
2.2%
$
410,179
(384,231)
(7,958)
17,990
(2,452)
15,538
(10,894)
4,644
100.0%
(93.7)%
(1.9)%
4.4%
(0.6)%
3.8%
(2.7)%
1.1%
(1) Total tenant billings is the amount billed to tenants for the period per their contractual obligations. It does not include other components of property revenue, such as accrued recovery revenue,
contingent rental revenue, straight-line rent recognition, tenant incentive amortization, lease termination income, or parking revenue.
(In thousands of CAD dollars)
Expense recognized for CECRA-eligible tenants (25% landlord share)
Expense recognized for tenants with negotiated rent abatements
Expense recognized for additional expected credit losses
Bad debt expense
Three months ended
December 31, 2020
Year ended
December 31, 2020
$
$
— $
473
(540)
(67)
$
(1,696)
(3,002)
(6,196)
(10,894)
The following table further outlines what management estimates to be the material impacts of COVID-19 on Crombie’s operating performance for the
three months ended December 31, 2020:
(In thousands of CAD dollars, except per unit
amounts and as otherwise noted)
FFO*
AFFO*
Same-asset
property
cash NOI*
Same-asset property
cash NOI* growth
$
Per unit
$
Per unit
$
$
%
Actual results – Q4 2020
$
42,305
$
0.27
$
35,679
$
0.23
$
61,805
$
1,125
1.9%
Adjusted for:
Bad debt expense
Rent abatements1
Parking revenue2
67
365
854
Adjusted results – Q4 2020
Q4 2019
$
$
43,591
42,132
$
$
—
—
0.01
0.28
0.28
67
377
854
$
$
36,977
36,006
$
$
—
—
0.01
0.24
0.24
30
178
854
30
178
854
$
$
62,867
$
2,187
60,680
—%
0.3%
1.4%
3.6%
(1) Total amount of rent abatements recognized for AFFO* purposes was $377. Where qualifying tenants had accounts receivable balances, Crombie has elected to treat the abatements as a credit loss
under IFRS 9. In cases where insufficient accounts receivable balances exist, Crombie has applied IFRS 16 and treated the abatement as a lease modification which is averaged over the life of the
lease as straight-line rent. For purposes of FFO*, the abatements are partially offset by the straight-line rent impact of $(12).
(2) Parking revenue is calculated as the decrease in parking revenue from the same quarter in 2019, which Crombie has attributed to the impact of COVID-19.
33
Proven Stability and Sustainable Growth COVID-19 IMPACT – FINANCIAL
The following table further outlines what management estimates to be the material impacts of COVID-19 on Crombie’s operating performance for the
year ended December 31, 2020:
For further information on these impacts, see the “COVID-19 Impact – Operations” section of this MD&A.
(In thousands of CAD dollars, except per unit
amounts and as otherwise noted)
FFO*
AFFO*
Same-asset
property
cash NOI*
Same-asset
property cash NOI* growth
$
Per unit
$
Per unit
$
$
%
$
165,850
$
1.05
$
138,963
$
0.88
$
237,522
$
(2,728)
(1.1)%
Actual results
Adjusted for:
Bad debt expense1
Rent abatements2
Parking revenue3
Organizational realignment severance costs
Adjusted results – Year 2020
Year 2019
$
$
180,893
175,539
$
$
9,807
1,012
2,715
1,509
0.06
0.01
0.02
0.01
1.15
1.16
9,807
2,315
2,715
1,509
$
$
155,309
148,632
$
$
0.06
0.01
0.02
0.01
0.98
0.98
$
$
5,228
1,490
2,715
—
5,228
1,490
2,715
—
246,955
$
6,705
240,250
2.2%
0.6%
1.1%
—%
2.8%
(1) Crombie considers bad debt expense for Q2 to Q4 2020 only to be attributed to the impact of COVID-19.
(2) Total amount of rent abatements recognized for AFFO* purposes, primarily related to CECRA, was $2,315. Where qualifying tenants had accounts receivable balances, Crombie has elected to treat
the abatements as a credit loss under IFRS 9. In cases where insufficient accounts receivable balances exist, Crombie has applied IFRS 16 and treated the abatement as a lease modification which is
averaged over the life of the lease as straight-line rent. For purposes of FFO*, the abatements are partially offset by the straight-line rent impact of $(1,303).
(3) Parking revenue is calculated as the decrease in parking revenue for Q2 to Q4 2020 from the same period in 2019, which Crombie has attributed to the impact of COVID-19.
34
CROMBIE REIT | Annual Report 2020 GLOSSARY OF TERMS
AFFO*
AMR
CFC
CMA
Adjusted Funds from Operations. Crombie follows the recommendations of REALPAC’s February 2019 white paper in
determining AFFO.
Annual Minimum Rent.
Customer Fulfilment Centre.
Census Metropolitan Area.
Committed occupancy
Represents current economic occupancy plus future occupancy of currently vacant space for which lease contracts are
currently in place.
CRU
D/GFV*
EBITDA*
Commercial Rental Units.
Debt to gross fair value.
Represents Earnings Before Interest, Taxes, Depreciation and Amortization excluding certain items such as
amortization of tenant incentives, impairment of investment properties and gain (loss) on disposal of investment
properties. EBITDA is a non-GAAP measure that is used as an input in several of our debt metrics.
Economic occupancy
Represents space currently occupied (excluding residential).
ESG
Fair value
FFO*
Future Estimated Density
GHG
GLA
IFRS
Major Markets
Environmental, Social and Governance.
The amount at which an asset or liability could be exchanged between two knowledgeable, willing and unconnected
parties in an arm’s length transaction.
Funds from Operations. Crombie follows the recommendations of REALPAC’s February 2019 white paper in
determining FFO.
Estimated buildable areas or site area multiples based on general community plans, guidelines, or management
estimates of same based on area precedents which have not yet been officially approved or endorsed by municipal
authorities.
Greenhouse Gas Emissions.
Gross Leasable Area.
International Financial Reporting Standards.
A Crombie-specific definition that includes Abbotsford-Mission, Barrie, Chilliwack, Halifax, Hamilton, Kitchener-
Cambridge-Waterloo, Oshawa, Quebec City, Regina, Saskatoon, Victoria, and Winnipeg, as defined by Statistics
Canada 2016 CMA/CA boundaries.
Modernization Income
Income earned from a capital investment to modernize/renovate Crombie owned grocery store properties in
exchange for a defined return and potential extended lease term.
NAV
Net Asset Value.
Net property income
Property revenue less property operating expenses, which excludes certain expenses such as interest expense and
indirect operating expenses.
Pre-leased space
Refers to GLA of properties under development reserved by prospective tenants for a future rental period.
Property cash NOI*
Property NOI on a cash basis, excluding non-cash straight-line rent recognition and non-cash tenant incentive
amortization.
Proportionate share basis Represents Crombie’s proportionate interest in the financial position and results of operations of its entire portfolio,
REALPAC
taking into account the difference in accounting for joint ventures using proportionate consolidation versus equity
accounting.
Real Property Association of Canada.
Rest of Canada (“RoC”)
A Crombie-specific definition that includes all remaining geographies outside of VECTOM and Major Markets.
Retail
Includes our substantial retail portfolio with commercial reflecting certain few additional properties which comprise
both retail and office space. These properties have been consistently included in our retail category.
Retail-related Industrial
Retail-related Industrial includes retail distribution centres and Customer Fulfilment Centres (CFC) owned in major
urban markets.
Same-asset properties*
Properties owned and operated throughout the current and comparative reporting periods, excluding any property
that was designated for redevelopment during either the current or comparative period.
Sq. ft.
Square footage.
Unencumbered assets
Represents assets that have not been pledged as security or collateral under a credit agreement or mortgage.
VECTOM
WATM
Zoning Applications
Submitted
Zoning Approved
Vancouver, Edmonton, Calgary, Toronto, Ottawa-Gatineau, Montreal, as defined by Statistics Canada 2016 CMA/CA
boundaries.
Weighted Average Term to Maturity.
A formal municipal re-zoning application has been submitted for the purpose of achieving a new land use (ie.
residential, mixed-use) and generally to obtain higher levels of density and height.
Property has received municipal approval for a new land use designation which generally permits different uses
(ie. residential, mixed-use) and higher levels of density and height.
* See “Non-GAAP Financial Measures”, starting on page 84, for more information on Crombie’s non-GAAP financial measures and reconciliations thereof.
35
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth PORTFOLIO REVIEW
As at December 31, 2020, Crombie’s property portfolio consisted of full
ownership interests in 225 investment properties, and partial ownership
interests in 59 investment properties. The partial ownership interests are
subject to proportionate consolidation, the results of which are reflected
in our consolidated balance sheet and income statement, based on
our proportionate interest in such joint operations. Together these 284
properties contain, at Crombie’s share, approximately 18.0 million
square feet of GLA in all 10 provinces.
Crombie also holds partial ownership interests in four joint venture
properties that are subject to equity-accounting. As such, the results of
these equity-accounted investments are not included in certain financial
metrics, such as net property income, property cash NOI* and same-
asset property NOI*, nor in operating metrics such as occupancy and
GLA, unless specifically indicated that such metrics are presented on a
proportionate consolidation basis.
MARKET CLASS
We are increasing Crombie’s presence in high-growth VECTOM and
Major Markets through acquisitions and large-scale, mixed-use
development, to strategically elevate our portfolio quality and strength.
PORTFOLIO GLA BY MARKET CLASS (SQ. FT.)
PORTFOLIO FAIR VALUE BY MARKET CLASS (%)
as at December 31, 2020
as at December 31, 2020
7,793,000
43.3%
5,588,000
31.0%
35.3%
41.5%
4,619,000
25.7%
23.2%
VECTOM
Major Market
Rest of Canada
VECTOM
Major Market
Rest of Canada
36
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Crombie’s portfolio diversification by market class as at December 31, 2020 and 2019 is as follows:
GLA (sq. ft.)
January 1,
2020
Acquisitions
(Dispositions)
Other1
December 31,
2020
VECTOM
5,295,000
2,000
291,000
5,588,000
Major Markets
4,597,000
Rest of Canada
7,666,000
(17,000)
46,000
39,000
81,000
4,619,000
7,793,000
Total
17,558,000
31,000
411,000
18,000,000
Number of
Investment
Properties
89
59
136
284
% of AMR
32.3%
26.3%
41.4%
% NOI
33.1%
26.7%
40.2%
100.0%
100.0%
Economic
Occupancy
Committed
Occupancy
93.5%
94.8%
93.8%
94.0%
99.0%
96.1%
94.7%
96.4%
GLA (sq. ft.)
January 1,
2019
Acquisitions
(Dispositions)
Other1
December 31,
2019
VECTOM
5,231,000
69,000
(5,000)
5,295,000
Major Markets
4,993,000
(371,000)
(25,000)
4,597,000
Rest of Canada
8,672,000
(1,096,000)
90,000
7,666,000
Total
18,896,000
(1,398,000)
60,000
17,558,000
Number of
Investment
Properties
89
60
136
285
% of AMR
% NOI
32.1%
26.5%
41.4%
30.9%
27.0%
42.1%
100.0%
100.0%
Economic
Occupancy
Committed
Occupancy
98.9%
96.3%
92.5%
95.4%
99.0%
96.7%
93.7 %
96.1%
(1) Changes in GLA included in Other include increases for completed developments and additions/expansions to GLA on existing properties, and decreases primarily related to GLA removals in
preparation for property redevelopment.
When compared to December 31, 2019, the percentage of total annual
minimum rent generated from VECTOM increased by 20 basis points,
while Major Market total annual minimum rent decreased by 20 basis
points. The increase in VECTOM is primarily due to the opening of CRU
tenants at Davie Street retail, modernization and new leasing activity
at West Broadway, both located in Vancouver, and the acquisition of a
retail plaza in Montreal.
As at December 31, 2020, committed and economic occupancy stand
at 96.4% and 94.0% respectively. Committed occupancy increased by
30 basis points when compared to December 31, 2019, which marked
record committed occupancy levels for Crombie. Economic occupancy
decreased by 140 basis points. The decrease is primarily driven by the
addition of development GLA in the fourth quarter with the tenant not
yet entering economic occupancy. Strong leasing throughout the year
resulted in 248,000 square feet of new leases at an average rate of
$18.04 per square foot. Approximately 81.0% of Crombie’s committed
leases are at active or completed major development properties,
demonstrating continued progress in leasing our development space.
37
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth ASSET TYPE
Retail properties represent 83.7% of Crombie’s GLA and 91.8% of annual minimum rent at December 31, 2020 compared to 84.9% of GLA and 91.7% of
annual minimum rent at December 31, 2019. The main driver of the decrease is due to the addition of 300,000 square feet of GLA to retail-related
industrial. This is partially offset by additions to retail GLA as a result of development (46,000 square feet at Woodgate Plaza and 45,000 square feet
at Avalon Mall, both located in St. John’s, Newfoundland and Labrador), and 31,000 net square feet of retail acquisition activity.
PORTFOLIO GLA BY ASSET TYPE (SQ. FT.)
PORTFOLIO FAIR VALUE BY ASSET TYPE (%)
as at December 31, 2020
as at December 31, 2020
15,064,000
83.7%
1.0%
8.5%
3.2%
87.3%
1,983,000
11.0%
953,000
5.3%
Retail
Office
Retail-related industrial
Retail
Office
Retail-related industrial
Other1
(1) Other includes Properties Under Development (PUD) and Land.
Crombie’s portfolio diversification by asset type as at December 31, 2020 and 2019 is as follows:
GLA (sq. ft.)
January 1,
2020
Acquisitions
(Dispositions)
December 31,
2020
Other1
Number of
properties
% of AMR
Economic
Occupancy
Committed
Occupancy
Retail
Office
14,910,000
31,000
123,000
15,064,000
Retail-related industrial
1,683,000
965,000
—
—
(12,000)
953,000
300,000
1,983,000
275
5
4
91.8%
4.0%
4.2%
95.5%
89.1%
84.9%
94.0%
96.0%
94.2%
100.0 %
96.4%
Total
17,558,000
31,000
411,000
18,000,000
284
100.0%
GLA (sq. ft.)
January 1,
2019
Acquisitions
(Dispositions)
Other1
December 31,
2019
Number of
properties
% of AMR
Economic
Occupancy
Committed
Occupancy
Retail
Office
16,609,000
(1,795,000)
96,000
14,910,000
1,000,000
—
(35,000)
965,000
Retail-related industrial
1,287,000
397,000
(1,000)
1,683,000
277
5
3
91.7%
4.2%
4.1%
Total
18,896,000
(1,398,000)
60,000
17,558,000
285
100.0%
95.2%
91.6%
100.0%
95.4%
95.8 %
93.1 %
100.0 %
96.1 %
(1) Changes in GLA included in Other include increases for additions/expansions to GLA on existing properties and decreases primarily related to GLA removals in preparation for property
redevelopment.
During 2020, economic occupancy decreased, while committed occupancy increased compared to December 31, 2019. The main driver of the decrease
in economic occupancy relates to the addition of 300,000 square feet of retail-related industrial GLA at Crombie’s major development in Pointe-
Claire, outside of Montreal, Quebec. The lease for this space is included in committed occupancy. Economic and committed occupancy in our retail
38
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 portfolio increased as the result of strong leasing activity, including
the development space at Avalon Mall. Committed occupancy in our
office portfolio increased to 94.2% primarily due to the execution of an
approximate 49,000 square foot lease with one tenant, signed in the
fourth quarter of 2020.
Our mixed-use development strategy enables Crombie to evolve from
defensive grocery-anchored retail to a balance of grocery-anchored
retail and industrial, as well as large-scale mixed-use properties,
creating long-term value for retail tenants, residential tenants, and local
communities. Over the next year, we expect to see a further evolution
in our portfolio. Grocery-anchored retail will continue to grow and,
as a result of our development strategy, we expect our residential
and retail-related industrial asset types will make up an even greater
percentage of our total portfolio.
TENANT PROFILE
We build and own a high-quality, resilient, and diversified portfolio,
backed primarily by grocery and pharmacy tenants, that deliver
consistent long-term earnings and cash flow stability. As at
December 31, 2020, 77% of our annual minimum rent was generated
from grocery and pharmacy-anchored properties compared to 76% at
December 31, 2019. The increase is primarily due to the acquisition of
two Empire properties in 2020, as well as modernization income and
contractual rental step-ups on other grocery properties. This is partially
offset by the disposition of five properties in 2020 containing Shoppers
Drug Marts. This highlights the quality and resilience of Crombie’s
portfolio and the stability of underlying cash flows and income as
necessity-based tenants are more resilient to changes in economic
cycles and evolving retail trends, and form a solid foundation for
organic same-asset property cash NOI* and AFFO* growth.
TENANTS BY INDUSTRY (% OF AMR)
1.7%
1.5%
2.0%
3.0%
3.5%
4.1%
4.2%
4.4%
5.1%
1.8%
4.1%
6.4%
58.2%
Necessity-Based
Retailers1
Office & Hotel
Tenants
Restaurants —
Quick Service & Cafe
Restaurants —
Full Service
Medical, Professional
& Personal Services
Bank and
Financial Services
Industrial
Tenants
Apparel &
Accessories
Value-Focused
Retailers
Entertainment,
Sporting Goods &
Stationary Retails
Home Improvement,
Furniture &
Auto Supplies
Fitness Facilities
& Supplements
Other
(1) Necessity-based retailers include tenants that provide essential products and services, and predominantly fall into the following categories: grocery, pharmacy, liquor, cannabis, convenience store,
gasoline and pet supplies.
39
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth The following table illustrates the 20 largest tenants in Crombie’s portfolio of investment properties, as measured by their percentage contribution to
total annual minimum rent, as at December 31, 2020.
% of AMR
54.9%
3.3%
1.5%
1.4%
1.2%
1.2%
1.1%
1.1%
1.1%
1.0%
1.0%
0.7%
0.7%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
0.4%
74.0%
Average Remaining
Lease Term
12.5 years
7.5 years
7.1 years
5.6 years
3.2 years
12.0 years
2.4 years
8.1 years
9.4 years
6.8 years
4.0 years
7.3 years
5.3 years
2.8 years
4.2 years
6.6 years
5.8 years
4.3 years
7.6 years
3.0 years
DBRS
Credit Rating
BBB (low)
BBB
A (high)
BBB
AAA
AA
AA
AA
BBB
AA (high)
BBB (high)
BBB
AA (low)
Same‑asset properties
Same-asset properties are properties owned and operated by Crombie
throughout the current and comparative reporting periods, excluding
any property that was designated for redevelopment during either
the current or comparative period. Same-asset property NOI* reflects
Crombie’s proportionate ownership of jointly-operated properties
(excludes any properties held in joint ventures).
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 since January 1,
2019, inclusive. “Same-asset” refers to those properties that were owned
and operated by Crombie for the entire two years ended December 31,
2020. Development properties are included in same-asset after
completion and once a full year of post-development comparative
data is available. Properties that will be undergoing a redevelopment
in a future period, including adjacent parcels of land, and those
having planning activities underway are also in this category until such
development activities commence and/or tenant leasing/renewal
activity is suspended.
Tenant
Empire Company Limited1
Shoppers Drug Mart
Province of Nova Scotia
Dollarama
Government of Canada
CIBC
Bank of Nova Scotia
Goodlife Fitness
Cineplex
Bank of Montreal
Canadian Tire Corporation
Leon’s Furniture
Restaurant Brands International
Royal Bank of Canada
Bell Canada
Metro
SAQ/Province of Quebec
Giant Tiger
TJX Canada2
Staples
Total
(1) Includes Sobeys and all other subsidiaries under Empire Company Limited.
(2) TJX Canada’s parent company, The TJX Companies, Inc., is rated A2 by Moody’s.
Other than Empire, which accounts for 54.9% of annual minimum rent
and Shoppers Drug Mart, which accounts for 3.3% of annual minimum
rent, no other tenant accounts for more than 1.5% of Crombie’s annual
minimum rent.
For the year ended December 31, 2020, Empire also represents 54.0%
of total property revenue. Total property revenue includes annual
minimum rent, as well as operating and realty tax cost recovery income
and percentage rent. These additional amounts can vary by property
type, specific tenant leases and where tenants may directly incur and
pay operating and realty tax costs.
Crombie continues to work in partnership with Empire to align our
strategies to maximize value creation through modernizations, store
conversions (including the FreshCo discount format in Western Canada
and Farm Boy in Ontario), participation in the build-out of Empire’s
Voilà e-commerce home delivery hub-and-spoke network, land-use
intensifications, and the unlocking of major developments. Crombie
acknowledges that not all retail is created equal. Recognizing that,
Crombie is focused on fostering relationships in our needs-based
properties that are performing very well in the evolving retail landscape
and are poised for future growth.
The weighted average remaining term of all Crombie leases is
approximately 9.5 years, which decreased by 0.7 years as compared
to December 31, 2019. This remaining lease term is influenced by the
average Empire remaining lease term of 12.5 years, which decreased by
0.9 years from December 31, 2019.
40
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Same-asset properties
Adjustments
Acquisitions – 2020
Acquisitions – 2019
Other1
Active and Completed Major Developments2
Total
Crombie Owned Properties
Investment
Properties (“IP”)
Properties Under
Development
(“PUD”)
270
3
2
5
4
14
284
—
2
—
3
—
5
5
Additional
Properties in Joint
Ventures (“JV”)
—
—
—
1
3
4
4
Sub-total
270
5
2
8
4
19
289
Total
270
5
2
9
7
23
293
(1) Other includes investment properties that have been designated for repositioning, land parcels included in PUD, or non-active major developments within a JV.
(2) Active and Completed Major Development includes:
Davie Street retail (IP)
Avalon Mall retail (IP)
Belmont Market retail and Office (IP)
Pointe-Claire (IP)
Davie Street residential (JV)
Le Duke (JV)
Bronte Village (JV)
Davie Street is being developed as both a commercial (Crombie
owned) and residential (Joint Venture owned) development. Davie
Street is treated as two properties, one Crombie owned Investment
Property (retail) and a separate Active Major Development (residential
rental property) within the 1600 Davie Limited Partnership Joint Venture
(Additional Properties in Joint Ventures – Active and Completed Major
Developments).
In the fourth quarter of 2020, Crombie’s major development in Pointe-
Claire, outside of Montreal, Quebec, reached substantial completion
and was transferred from Properties Under Development to Investment
Properties. Therefore, the corresponding property count is now
included under Investment Properties – Active and Completed Major
Developments (previously included in Properties Under Development –
Active and Completed Major Developments).
STRATEGIC ACQUISITIONS AND DISPOSITIONS
As at December 31, 2020, GLA at Crombie’s interest was 18.0 million square feet compared to 17.6 million square feet as at December 31, 2019.
The increase in GLA of approximately 400,000 was driven by 363,000 of development square footage entering GLA and 125,000 square feet of
acquisitions. This was partially offset by 94,000 square feet of dispositions.
ACQUIRED GLA BY MARKET CLASS (SQ. FT.)
DISPOSED GLA BY MARKET CLASS (SQ. FT.)
year ended December 31, 2020
year ended December 31, 2020
84,000
67.2%
41,000
32.8%
39,000
41.5%
38,000
40.4%
VECTOM
Rest of Canada
VECTOM
Major Market
Rest of Canada
17,000
18.1%
41
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth
STRATEGIC ACQUISITIONS
Through strategic and selective acquisitions of high-quality assets, Crombie intends to continue to enhance overall portfolio quality in urban and top
tier markets. Crombie’s acquisitions are intended to add strategic value to the portfolio, while leading to strong AFFO* accretion and NAV growth.
During the year ended December 31, 2020, Crombie completed acquisitions of three income-producing properties, one land addition to an existing
income-producing property and two development (PUD) properties for a total aggregate purchase price of $40,790. These acquisitions added
125,000 square feet of income-producing properties and potential for future density to be added to Crombie’s GLA. Through these acquisitions,
Crombie strengthened its presence in VECTOM and Major Markets in line with our urbanization strategy.
Date
Property
Location
Vendor
Strategy
Ownership
Number of
Investment
Properties
Interest
Sq. ft.
Price1
Antigonish, NS
Third Party
Income-producing
—
100%
—
$
280
2020 First Quarter
January 9, 2020
2020 Second Quarter
Antigonish Land
Addition
May 28, 2020
Williams Lake
2020 Third Quarter
Williams Lake,
BC
Empire
Income-producing
July 7, 2020
Development Land
Toronto, ON
Third Party
Development
2020 Fourth Quarter
October 5, 2020
Notre-Dame Street Montreal, QC
Third Party
Income-producing
November 4, 2020
Don Reid Drive
Ottawa, ON
Third Party
Development
December 15, 2020
Cliffe Avenue
Courtenay, BC
Empire
Income-producing
Total acquisitions for the year ended December 31, 2020
Total acquisitions for the year ended December 31, 2019
(1) Prices are stated before transaction and closing costs
STRATEGIC DISPOSITIONS
1
—
1
—
1
2
3
2
100%
30,000
4,535
100%
—
4,575
100%
100%
100%
41,000
—
54,000
95,000
11,000
3,300
17,100
31,400
125,000
$ 40,790
481,000
$ 156,433
Over the past two years, Crombie has worked to optimize our portfolio through traditional dispositions of non-core assets and innovative partnerships
totaling approximately 1,973,000 square feet of recycled area. In line with our strategy of recycling capital through dispositions at or above IFRS
values, we used the proceeds raised to fund active and completed major development projects, increasing Crombie’s concentration in VECTOM
and Major Markets, as well as other higher-value opportunities, including support of Empire’s growth into urban markets, e-commerce, and major
mixed-use development. This disposition strategy resulted in a reduction of our in-place mortgage debt, which enabled growth in our unencumbered
asset pool.
Crombie continues as property manager for the properties in which it retains a partial ownership interest.
Date
2020 First Quarter
Property
Number of
properties
Interest
Sq. ft.
Ownership
Net Property
Income1
Total dispositions at 100% interest
Excess Land
—
100%
2020 Fourth Quarter
Total dispositions at 100% interest
SDM Properties
5
100%
$
—
—
$
—
—
94,000
94,000
2,156
2,156
Price
1,000
1,000
37,010
37,010
Total dispositions for the year ended
December 31, 2020
Total dispositions for the year ended
December 31, 2019
5
5
94,000
$
2,156
$
38,010
1,879,000
$
22,514
$
536,471
(1) Reflects actual net property income earned for the year as reflected in our consolidated results, prior to disposition.
42
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 OPERATIONAL PERFORMANCE REVIEW
OCCUPANCY AND LEASING ACTIVITY
The portfolio occupancy and committed activity by market class and asset type for the year ended December 31, 2020 was as follows:
January 1,
2020
Acquisitions
(Dispositions)
New
Leases1
Lease
Expiries
Other
Changes2
December 31,
2020
Economic
Occupancy
Committed
Space
(sq. ft.)3
Total
Committed
Space (sq. ft.)
Committed
Occupancy
Occupied space (sq. ft.)
VECTOM
5,239,000
2,000
26,000
(11,000)
(31,000)
Major Markets
4,426,000
(17,000)
50,000
(27,000)
(51,000)
Rest of Canada
7,090,000
44,000
172,000
(29,000)
33,000
Total
16,755,000
29,000
248,000
(67,000)
(49,000)
5,225,000
4,381,000
7,310,000
16,916,000
93.5%
94.8%
93.8%
94.0%
305,000
5,530,000
57,000
4,438,000
70,000
7,380,000
432,000
17,348,000
99.0%
96.1%
94.7%
96.4%
Occupied space (sq. ft.)
January 1,
2020
Acquisitions
(Dispositions)
New
Leases1
Lease
Expiries
Other
Changes2
December 31,
2020
Economic
Occupancy
Retail
Office
Retail-related
industrial
14,187,000
29,000
228,000
(36,000)
(24,000)
14,384,000
885,000
1,683,000
—
—
20,000
(31,000)
(25,000)
849,000
—
—
—
1,683,000
Total
16,755,000
29,000
248,000
(67,000)
(49,000)
16,916,000
95.5%
89.1%
84.9%
94.0%
Committed
Space
(sq. ft.)3
Total
Committed
Space (sq. ft.)
Committed
Occupancy
83,000
14,467,000
49,000
898,000
96.0%
94.2%
300,000
1,983,000
100.0%
432,000
17,348,000
96.4%
(1) New leases include new lease and expansions to existing properties.
(2) Other changes include amendments to existing leases; lease terminations and surrenders; bankruptcies; and space certifications.
(3) Committed space represents lease contacts for future occupancy of currently vacant space. Management believes such reporting, along with reported lease maturities, provides more balanced
reporting of overall vacant space.
Overall leased space (occupied plus committed) has increased from
96.1% at December 31, 2019 to 96.4% at December 31, 2020. During 2020,
Crombie had a net increase from acquisitions of 29,000 square feet and
had new leases outpace lease expiries by 181,000 square feet.
Leasing activity at major developments continued throughout the year,
with approximately 42,000 square feet of new leases in economic
occupancy at Avalon Mall, Belmont Market, and Davie Street retail.
Economic occupancy at December 31, 2020 was 85.6%, 90.0%, and 96.0%
respectively for these retail developments.
Leased space in our retail properties portfolio was 96.0% at
December 31, 2020, an increase from 95.8% at December 31, 2019. This
was driven by approximately 228,000 square feet of new leases in the
year. The Brick opened a 45,000 square foot location at Woodgate
Plaza and H&M opened a 22,000 square foot store at Avalon Mall.
These are the first locations in Newfoundland and Labrador for both of
these tenants.
Leased space in office properties of 94.2% at December 31, 2020,
increased from 93.1% at December 31, 2019. This was primarily due
to approximately 20,000 square feet of new leases in economic
occupancy, and an additional 49,000 square feet committed.
Leased space in retail-related industrial properties of 100.0% at
December 31, 2020, remained constant from 100.0% at December 31,
2019. Retail-related industrial provides stability with solid NOI growth
and long lease terms, and also provides growth opportunities through
an increased presence in the e-commerce hub-and-spoke network.
The portfolio weighted average annual minimum rent per occupied
square foot for our income producing properties was $16.74 as at
December 31, 2020 compared to $16.61 as at December 31, 2019. The
0.8% increase in average annual minimum rent per occupied square
foot was due to Crombie’s strong leasing, which consisted of new leases,
contractual rent increases within existing leases, and modernization
income. The increase also reflects strategic commitment to portfolio
quality improvement through both dispositions of non-core, low growth
assets, and a positive return from the participation in modernizations
with Empire.
43
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth New Leasing Activity
NEW LEASING BY MARKET CLASS (SQ. FT.)
year ended December 31, 2020
NEW LEASING BY ASSET TYPE (SQ. FT.)
year ended December 31, 2020
50,000
20.2%
26,000
10.5%
172,000
69.4%
20,000
8.1%
228,000
91.9%
VECTOM
Major Market
Rest of Canada
Retail
Office
New leases and expansions increased occupancy by 248,000 square
feet at December 31, 2020, at an average first year rate of $18.04 per
square foot. New leases totaled 238,000 square feet, at an average first
year rate of $17.65 per square foot. Expansions totaled 10,000 square
feet, at an average first year rate of $27.03 per square foot.
Crombie is focused on increasing its presence in VECTOM and Major
Markets. In 2020, 30.6% of new leases, equivalent to 76,000 square feet,
were completed in these markets. Strong rental rates were achieved
with an average first year rate of $19.82 per square foot on 50,000
square feet in Major Markets. In VECTOM, 26,000 square feet of new
leases, at an average first year rate of $39.73 per square foot, were
completed. Growth in Major Markets was driven by Belmont Market, in
Langford, British Columbia (one of our completed major developments)
and a land-use intensification at Beauport Plaza, in Beauport, Quebec.
172,000 square feet of new leases occurred in Rest of Canada markets,
with an average first year rate of $14.29 per square foot. The vast
majority of the portfolio’s vacancy is within this market and Crombie is
pleased with the new leasing activity throughout 2020. Included in the
activity were Giant Tiger in North Bay, Ontario, Cloud 5 at Loch Lomond
in Saint John, New Brunswick, The Brick at Woodgate Plaza, and H&M in
the development space at Avalon Mall in St. John’s, Newfoundland and
Labrador.
432,000 square feet of space at an average first year rate of $19.66
was committed at December 31, 2020 with tenants expected to
take possession throughout 2021. A 49,000 square foot office lease
is committed at our Scotia Square complex in Halifax, Nova Scotia.
Leasing on our major developments continues to progress as
approximately 350,000 square feet of committed space is at Pointe-
Claire, Avalon Mall, and Belmont Market. 300,000 square feet of this
committed space is the future home of Voilà par IGA in Montreal,
Empire’s Customer Fulfilment Centre for its online grocery home delivery
service. Also included is a 26,000 square foot Sport Chek and a 16,000
square foot Old Navy at Avalon Mall. Additionally, there is approximately
34,000 square feet of development space with executed leases that has
not yet been added to GLA at Avalon Mall. It is expected to be added to
GLA in early 2021.
44
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Renewal Activity
RENEWAL BY MARKET CLASS (SQ. FT.)
year ended December 31, 2020
RENEWAL BY ASSET TYPE (SQ. FT.)
year ended December 31, 2020
)
s
0
0
0
’
(
.
t
f
.
q
S
800
600
400
200
0
)
s
0
0
0
’
(
.
t
f
.
q
S
800
400
0
VECTOM
Major
Markets
Rest of
Canada
2020 Renewals
Early renewals completed
Retail
Office
2020 Renewals
Early renewals completed
For 2020, renewal activity for our portfolio was as follows:
2020 Renewals
Early Renewals Completed
Total
Three months ended December 31, 2020
Year ended December 31, 2020
Sq. ft.
33,000
167,000
200,000
$
$
$
Rate PSF
Growth %
26.59
15.70
17.48
0.3%
5.9%
4.5%
Sq. ft.
341,000
417,000
758,000
$
$
$
Rate PSF
Growth %
17.03
17.27
17.16
4.0%
4.3%
4.1%
Crombie’s renewal activity for the year ended December 31, 2020 included retail renewals of 747,000 square feet with an increase of 4.2% over expiring
rental rates. Driving this growth was 404,000 square feet of renewals at retail plazas, with an increase of 5.0% over expiring rental rates. Office
renewals of 11,000 square feet were completed with a decrease of 4.1% over expiring rental rates. The decrease is a result of one lease executed in the
fourth quarter with negative growth. Additionally, three other executions completed throughout 2020 remained flat. Renewal spreads are based on
the first year rate and do not factor in any additional rental step-ups that may take place throughout the lease term.
During the year ended December 31, 2020, Crombie demonstrated portfolio stability with approximately 46.0% of renewals occurring in VECTOM
and Major Markets. Total renewal growth was positively impacted by the 71,000 square feet of renewals in VECTOM at an average first year rate of
$35.25 per square foot, an increase of 5.1% over expiring rental rates. Major Markets saw renewals of 278,000 square feet, with an increase of 3.7% over
expiring rental rates or an average first year rate of $16.80 per square foot. The remaining 409,000 square feet of renewals was in the Rest of Canada
at an average first year rate of $14.27, which is an increase of 4.1% over expiring rental rates.
45
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth
LEASE MATURITIES
The following table sets out, as at December 31, 2020, the number of leases maturing during the periods indicated, the renewal area, the percentage
of the total GLA of the properties represented by such maturities and the estimated average rent per square foot at the time of expiry.
Year
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Thereafter
Total
Number of Leases1
Renewal Area (sq. ft.)
% of Total GLA
Average Rent
per sq. ft. at Expiry
290
194
143
160
131
79
77
60
94
47
272
1,547
1,225,000
857,000
652,000
887,000
1,098,000
771,000
816,000
770,000
1,097,000
600,000
8,575,000
17,348,000
$
6.9%
4.8%
3.7%
5.0%
6.2%
4.4%
4.6%
4.3%
6.2%
3.4%
47.6%
97.1%
$
16.42
17.87
19.52
17.78
15.63
16.18
18.89
16.90
19.41
18.14
20.02
18.79
(1) Assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights.
The following table sets out, as at December 31, 2020, the number of Empire leases maturing during the periods indicated, the renewal area, the
percentage of the total GLA of the properties represented by such maturities, and the estimated average rent per square foot at the time of expiry.
Year
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Thereafter
Total
Number of Leases1
Renewal Area (sq. ft.)
% of Total GLA
Average Rent
per sq. ft. at Expiry
13
6
3
2
8
12
10
10
17
8
196
285
210,000
95,000
8,000
68,000
301,000
339,000
335,000
353,000
596,000
294,000
7,663,000
10,262,000
$
1.2%
0.5%
0.1%
0.4%
1.7%
1.9%
1.9%
2.0%
3.3%
1.6%
42.6%
57.2%
$
9.50
10.59
32.12
12.59
13.44
13.27
14.09
15.94
16.40
13.62
19.84
18.40
(1) Assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights.
Crombie proactively manages its lease maturities, taking advantage of opportunities to renew tenants prior to expiration. In 2020, approximately
417,000 square feet of renewals related to future year expiries. Crombie’s partnership with Empire provides strategic alignment, maximizing value
through accretive transactions.
46
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 FINANCIAL PERFORMANCE REVIEW
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
2018
Property revenue
$ 97,060
$
96,823
$
237
$ 388,733
$ 398,741
$
(10,008)
$
414,649
Property operating expenses
Net property income
Net property income margin percentage
Other items:
Gain on disposal of investment properties
Impairment of investment properties
29,245
67,815
69.9%
4,164
(4,500)
29,852
66,971
69.2%
607
844
0.7%
129,872
258,861
66.6%
117,645
(12,227)
121,306
281,096
(22,235)
293,343
70.5%
(3.9)%
70.7%
30,198
(26,034)
(6,000)
1,500
3,335
(6,600)
81,803
(78,468)
50,023
(6,000)
(600)
(15,000)
Depreciation and amortization
(19,506)
(18,347)
(1,159)
(75,567)
(74,313)
(1,254)
(96,353)
General and administrative expenses
(5,493)
(5,855)
362
(20,534)
(23,721)
3,187
(19,226)
Finance costs – operations
(24,912)
(22,810)
(2,102)
(91,808)
(97,316)
5,508
(105,631)
Income from equity accounted investments
Operating income before taxes
Taxes – current
(411)
17,157
—
(8)
(403)
(72)
334
(406)
254
44,149
(26,992)
67,615
161,883
(94,268)
107,410
—
—
(7)
(8)
1
(3)
Operating income attributable to Unitholders
17,157
44,149
(26,992)
67,608
161,875
(94,267)
107,407
Finance costs – distributions to Unitholders
(35,211)
(48,936)
13,725
(140,302)
(150,169)
9,867
(134,729)
(725)
(70)
(655)
805
(1,337)
2,142
402
Finance (costs) income – change in fair value
of financial instruments
Increase (decrease) in net assets attributable
to Unitholders
Operating income attributable to Unitholders per
Unit, Basic
$ (18,779)
$
0.11
Basic weighted average Units outstanding (in 000’s)
158,239
Distributions per Unit to Unitholders (excluding
special distribution in 2019)
$
0.22
(4,857)
$
(13,922)
$ (71,889)
$
$
$
10,369
$
(82,258)
1.07
151,666
0.89
$
$
0.43
157,448
0.89
$
$
$
$
$
$
$
$
0.29
151,723
0.22
60,680
42,132
0.28
80.1%
36,006
0.24
$
$
$
$
$
$
$
$
(26,920)
0.71
151,214
0.89
231,642
184,034
1.22
73.2%
15,594
1.03
$ 61,805
$ 42,305
$
0.27
83.2%
$ 35,679
$
0.23
$
$
$
$
$
1,125
$ 237,522
$ 240,250
173
$ 165,850
$ 175,539
(0.01)
$
1.05
$
1.16
3.1%
84.6%
76.9%
(327)
$ 138,963
$ 148,632
(0.01)
$
0.88
$
0.98
$
$
$
$
$
(2,728)
(9,689)
(0.11)
7.7%
(9,669)
(0.10)
98.7%
93.8%
4.9%
101.0%
90.8%
10.2%
86.5%
47
Other Non-GAAP Performance Metrics
Same-asset property cash NOI*
FFO*
FFO* per unit – basic
FFO* payout ratio, excluding 2019 special
distribution (%)
AFFO*
AFFO* per unit – basic
AFFO* payout ratio, excluding 2019
special distribution (%)
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Operating income attributable to Unitholders
For the three months ended:
For the year ended:
Operating income attributable to Unitholders decreased by $26,992,
or 61.1%, compared to the fourth quarter of 2019 primarily due to the
disposition of investment properties in 2019 with a gain on sale of
$30,198. Additionally, tenant incentive amortization increased $1,261
due to modernizations, parking revenue decreased by $854 as a result
of reduced demand due to COVID-19, and rent abatements increased
by $365 in the quarter due to COVID-19. Finance costs from operations
increased $2,102 primarily due to the premium paid related to partial
early redemption of Series B unsecured notes. In the fourth quarter of
2020, an impairment of $4,500 was recognized on four retail properties,
which was $1,500 lower than the impairment related to three retail
properties in the fourth quarter of 2019. The impairment was the result
of the fair value impact of tenant lease expiries, slower-than-expected
leasing activity, and the ongoing impacts of COVID-19.
Operating income attributable to Unitholders decreased by $94,267, or
58.2%, on an annual basis. Gain on disposal of investment properties
decreased by $78,468 and net property income decreased $22,235 due
to property dispositions and the factors noted for the quarter, including
increased bad debt expense of $10,717 as a result of COVID-19-related
collection risk, increased tenant incentive amortization of $3,710,
decreased parking revenue of $2,715 due to COVID-19, and increased
rent abatements of $1,012. The reduced net property income for the year
was offset in part by a decrease of $3,187 in general and administrative
expenses resulting primarily from reduced salaries, and a decrease of
$5,508 in finance costs from operations due to a reduction in mortgage
interest resulting from disposition activity and maturing mortgages,
partially offset by the premium paid related to partial early redemption
of unsecured notes.
Net Property Income
Management uses net property income on a cash basis (property cash NOI*) as a measure of performance as it reflects the cash generated by the
properties period-over-period. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for a more detailed discussion
on property cash NOI*.
Net property income on a cash basis*, which excludes non-cash straight-line rent recognition and amortization of tenant incentive amounts,
is as follows:
Net Property Income
Non-cash straight-line rent
Non-cash tenant incentive amortization
Property cash NOI*
Acquisitions and dispositions property cash NOI*
Development property cash NOI*
Acquisitions, dispositions and development
property cash NOI*
Same-asset property cash NOI*
Adjusted for management’s estimate of the
material impacts of COVID-19:
Decrease in parking revenue
Rent abatements
Bad debt expense
Same-asset property cash NOI*,
adjusted for COVID-19
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
$
67,815
$
66,971
$
844
$
258,861
$
281,096
$
(22,235)
(2,036)
4,859
70,638
1,930
6,903
8,833
61,805
854
178
30
(2,080)
3,598
68,489
738
7,071
7,809
60,680
—
—
—
44
1,261
2,149
1,192
(168)
1,024
1,125
854
178
30
(9,112)
17,849
267,598
7,537
22,539
(10,287)
14,139
284,948
16,360
28,338
30,076
44,698
237,522
240,250
2,715
1,490
5,228
—
—
—
1,175
3,710
(17,350)
(8,823)
(5,799)
(14,622)
(2,728)
2,715
1,490
5,228
$
62,867
$
60,680
$
2,187
$
246,955
$
240,250
$
6,705
48
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Development properties include properties earning cash NOI that are: currently being developed, have recently completed development, and are
scheduled for development. Change in cash NOI from development properties period-over-period is impacted by the timing of commencement and
completion of each development project. The nature and extent of development projects results in operations being impacted minimally in some
instances, and more significantly in others. Consequently, comparison of period-over-period development operating results may not be meaningful.
Avalon Mall is currently under development and its NOI inclusive of COVID-19 impact is reflected in the above table.
Same-asset property cash NOI* by asset type and market class is as follows:
Retail1
Office
Retail-related industrial2
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
%
2020
2019
Variance
%
$ 57,064
$ 55,360
$
1,704
3.1%
$ 218,321
$ 219,854
$
(1,533)
(0.7)%
2,798
1,943
3,221
2,099
(423)
(13.1)%
11,462
12,563
(156)
(7.4)%
7,739
7,833
(1,101)
(94)
(8.8)%
(1.2)%
(1.1)%
Same-asset property cash NOI*
$ 61,805
$ 60,680
$
1,125
1.9%
$ 237,522
$ 240,250
$
(2,728)
(1) Retail includes our substantial retail portfolio with commercial reflecting certain few additional properties which comprise both retail and office space. These properties have been consistently included
in our retail category.
(2) Retail-related industrial includes retail distribution centres owned in Toronto (50%), Montreal (50%), and Calgary (50%).
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
%
2020
2019
Variance
%
VECTOM
Major Markets
Rest of Canada
$ 20,776
$ 20,478
$
17,606
23,423
17,734
22,468
298
(128)
955
Same-asset property cash NOI*
$ 61,805
$ 60,680
$
1,125
1.5%
$ 81,942
$ 80,882
$
1,060
1.3%
(0.7)%
4.3%
1.9%
66,379
89,201
70,943
88,425
(4,564)
(6.4)%
776
0.9%
$ 237,522
$ 240,250
$
(2,728)
(1.1)%
For the three months ended:
For the year ended:
Same-asset property cash NOI increased by $1,125, or 1.9%, compared
to the fourth quarter of 2019 primarily due to higher supplemental rents
from modernizations and capital improvements. This was partially
offset by a decrease in parking revenue of $854 as a result of reduced
demand due to COVID-19 and an increase in rent abatements of
$178. Same-asset property cash NOI restated for bad debt expense,
rent abatements and the decrease in parking revenue is $62,867, an
increase of 3.6% compared to the fourth quarter of 2019.
On an annual basis, same-asset property cash NOI decreased 1.1%
compared to the same period in 2019 primarily due to the impacts
of COVID-19, which resulted in an increase in bad debt expense for
the year of $5,228 on same-asset properties over the same period in
2019, a decrease in parking revenue of $2,715 and an increase in rent
abatements of $1,490. Same-asset property cash NOI restated for the
removal of these items is $246,955, an increase of 2.8% compared to the
year ended December 31, 2019.
Compared to the fourth quarter of 2019, net property income increased
by $844 and property cash NOI increased by $2,149, primarily due to the
same factors affecting same-asset property cash NOI.
On an annual basis, net property income decreased by $22,235. and
property cash NOI decreased by $17,350 compared to the same period
in 2019, primarily for the same reasons affecting same-asset property
cash NOI.
49
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth
Funds from Operations (FFO)*
Crombie follows the recommendations of the Real Property Association of Canada (“REALPAC”)’s February 2019 white paper in calculating FFO*. Refer
to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for a more detailed discussion on FFO.
The reconciliation of FFO for the three months and year ended December 31, 2020 and 2019 is as follows:
Increase (decrease) in net assets attributable
to Unitholders
Add (deduct):
Amortization of tenant incentives
Gain on disposal of investment properties
Impairment of investment properties
Depreciation and amortization of investment
properties
Depreciation of investment properties included
in Income from equity accounted investments
Principal payments on right of use assets
Internal leasing costs
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
$
(18,779)
$
(4,857)
$
(13,922)
$
(71,889)
$
10,369
$
(82,258)
4,859
(4,164)
4,500
3,598
(30,198)
6,000
1,261
26,034
(1,500)
17,849
(3,335)
6,600
14,139
(81,803)
6,000
3,710
78,468
600
19,183
18,041
1,142
74,316
73,138
1,178
109
57
604
41
(24)
525
68
81
79
176
220
2,416
102
(96)
2,184
74
316
232
Finance costs – distributions to Unitholders
35,211
48,936
(13,725)
140,302
150,169
(9,867)
Finance costs (income) – change in fair value
of financial instruments
FFO* as calculated based on REALPAC
recommendations
Basic weighted average Units (in 000’s)
FFO* per unit – basic
FFO* payout ratio, excluding special distribution (%)
725
70
655
(805)
1,337
(2,142)
$
$
42,305
158,239
0.27
83.2%
$
$
42,132
151,723
0.28
80.1%
$
$
173
$
165,850
157,448
(0.01)
$
1.05
3.1%
84.6%
$
$
175,539
151,666
1.16
76.9%
$
$
(9,689)
(0.11)
7.7%
For the three months ended:
For the year ended:
The slight increase in FFO is primarily due to increased net property
income (an increase of $844 for the quarter), which resulted from
acquisitions and modernizations, and lower general and administrative
costs of $362 for the quarter. Acquisitions include retail properties in the
fourth quarter of 2020 and 2019 and the acquisition of the remaining
50% interest in a pre-existing retail-related industrial property in the
fourth quarter of 2019. This is offset in part by increased finance costs
from operations of $2,102, resulting from the premium paid relating to
partial early redemption of unsecured notes.
FFO per unit was reduced by the increased number of Units outstanding
as a result of the issuance of REIT Units and Class B LP Units in the first
quarter of 2020.
On an annual basis, FFO decreased primarily due to reduced net
property income (a decrease of $22,235 year-over-year) resulting from
the disposition of properties in 2019, lower parking revenue (a decrease
of $2,715 year-over-year due to COVID-19), and significant increases
in bad debt expense of $10,717 and rent abatements of $1,012 over the
same period in 2019. The increased bad debt expense was a result of
higher allowance for the potential impacts of COVID-19 on collection of
receivable balances outstanding, write-off of specific bad debts, and
the impact of the federal government’s CECRA program. This is partially
offset by a decrease in finance costs from operations of $5,508, and a
decrease in general and administrative expenses of $3,187 compared
to the same period in 2019. The decrease in finance costs is due to a
reduction in mortgage interest resulting from disposition activity and
maturing mortgages, partially offset by the premium paid related to
partial early redemption of unsecured notes. The decline in general and
administrative expenses is primarily related to the impact of decreased
unit price on unit-based compensation plans, and lower salaries and
benefits related to the organizational realignment in the second quarter
of 2020, offset in part by the $1,509 of severance costs in the second
quarter of 2020.
FFO per unit for the year ended December 31, 2020 would have been
$1.10 per unit without the issuance of additional Units in the first quarter.
50
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Adjusted Funds from Operations (AFFO)*
Crombie follows the recommendations of REALPAC’s February 2019 white paper in calculating AFFO* and has applied these recommendations to the
AFFO amounts included in this MD&A. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 84, for a more detailed
discussion.
The reconciliation of AFFO for the three months and year ended December 31, 2020 and 2019 is as follows:
FFO* as calculated based on REALPAC
recommendations
Add (deduct):
Amortization of effective swap agreements
Straight-line rent adjustment
Internal leasing costs
Maintenance expenditures on a square footage
basis
AFFO* as calculated based on REALPAC
recommendations
Basic weighted average Units (in 000’s)
AFFO* per unit – basic
AFFO* payout ratio, excluding special
distribution (%)
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
$
42,305
$
42,132
$
173
$
165,850
$
175,539
$
(9,689)
—
(2,036)
(604)
356
(2,080)
(525)
(356)
44
(79)
510
(9,112)
(2,416)
1,677
(10,287)
(2,184)
(1,167)
1,175
(232)
(3,986)
(3,877)
(109)
(15,869)
(16,113)
244
$
$
35,679
158,239
0.23
$
$
36,006
151,723
0.24
$
$
(327)
$
138,963
157,448
(0.01)
$
0.88
$
$
148,632
151,666
0.98
$
$
(9,669)
(0.10)
98.7%
93.8%
4.9%
101.0%
90.8%
10.2%
For further details on Crombie’s maintenance expenditures, refer to the Non-GAAP Financial Measures section of this MD&A.
For the three months ended:
For the year ended:
The decrease in AFFO in the quarter is primarily due to the conclusion of
the amortization of effective swap agreements resulting from mortgage
maturities, a decrease of $356 from the same period in 2019. This is
offset in part by the items affecting FFO in the quarter.
AFFO per unit was reduced by the increased number of Units outstanding
as a result of the issuance of Units in the first quarter of 2020.
The decline in AFFO is primarily due to the disposition of properties
in the current and prior quarters impacting FFO as described above,
partially offset by the resulting decrease in maintenance expenditures
on a square footage basis (a decrease of $244 for the year ended
December 31, 2020 compared to the respective period in 2019).
51
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Distributions to Unitholders
A trust that satisfies the criteria of a REIT throughout its taxation year will not be subject to income tax in respect of distributions to its Unitholders that
would otherwise apply to trusts classified as specified investment flow-through entities (“SIFTs”).
Crombie has organized its assets and operations to satisfy the criteria contained in the Income Tax Act (Canada) in regard to the definition of a
REIT. Crombie’s management and its advisors have completed an extensive review of Crombie’s organizational structure and operations to support
Crombie’s assertion that it met the REIT criteria throughout 2020 and continues to do so. The relevant tests apply throughout the taxation year and as
such the actual status of Crombie for any particular taxation year can only be ascertained at the end of the year.
Pursuant to Crombie’s Declaration of Trust, cash distributions are to be determined by the Trustees at their discretion. Crombie intends, subject to
approval of the Board of Trustees, to make distributions to Unitholders of not less than the amount equal to the net income and net realized capital
gains of Crombie, to ensure that Crombie will not be liable for income taxes.
Details of distributions to Unitholders are as follows:
Distributions to Unitholders
Distributions to Class B Voting Unitholder1
Total distributions
FFO* payout ratio, excluding 2019 special distribution
AFFO* payout ratio, excluding 2019 special distribution
FFO* payout ratio
AFFO* payout ratio
Three months ended December 31,
Year ended December 31,
$
$
$
$
2020
20,810
14,401
35,211
83.2%
98.7%
83.2%
98.7%
$
$
2019
28,927
20,009
48,936
80.1%
93.8%
116.1%
135.9%
$
$
2020
82,917
57,385
140,302
84.6%
101.0%
84.6%
101.0%
2019
88,766
61,403
150,169
76.9%
90.8%
85.5%
101.0%
(1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued Class B LP Units. These Class B LP Units accompany the Special Voting Units, are the economic equivalent of a Unit, and are
exchangeable for Units on a one-for-one basis.
The higher annual FFO* and AFFO* payout ratios (excluding the 2019 special distribution) are a direct result of the lower FFO in 2020. The decrease
in FFO is primarily impacted by property dispositions in 2019 which resulted in reduced net property income as well as the impacts of COVID-19 on
parking revenue, bad debt expense and rent abatements as discussed in the FFO* and AFFO* sections above.
Pursuant to the requirement of National Policy 41-201, Income Trusts and Other Indirect Offerings, the table below outlines the differences between
cash flow from operating activities and cash distributions as well as the differences between operating income attributable to Unitholders and cash
distributions, in accordance with the policy guidelines.
Three months ended December 31,
Year ended December 31,
2020
2019
2020
2019
Operating income attributable to Unitholders
$
17,157
$
44,149
$
67,608
$
161,875
Monthly distributions paid and payable
Special distribution payable in cash
(35,211)
—
(33,762)
(15,174)
(140,302)
(134,995)
—
(15,174)
Operating income attributable to Unitholders shortfall of distributions paid
and payable
$
(18,054)
$
(4,787)
$
(72,694)
$
11,706
Monthly distributions paid for the three months and year ended December 31, 2020 and 2019 were funded with cash flows from operating activities
and borrowing on the revolving credit facility. The special distribution paid in cash on January 15, 2020 was funded from the revolving credit facility.
On January 18, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from January 1, 2021 to and including January 31, 2021.
The distributions were paid on February 15, 2021, to Unitholders of record as of January 31, 2021.
On February 16, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from February 1, 2021 to and including February 28, 2021.
The distributions will be paid on March 15, 2021, to Unitholders of record as of February 28, 2021.
52
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 General and Administrative Expenses
The following table outlines the major categories of general and administrative expenses:
Salaries and benefits
Professional fees
Public company costs
Rent and occupancy
Travel
Other
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
$
4,292
$
4,604
$
312
$
14,774
$
16,874
$
2,100
442
237
133
(43)
432
351
408
159
160
173
(91)
171
26
203
(259)
1,676
1,616
569
29
1,870
1,336
2,196
612
573
2,130
(340)
580
43
544
260
General and administrative expenses
$
5,493
$
5,855
$
362
$
20,534
$
23,721
$
3,187
As a percentage of property revenue
5.7%
6.0%
0.3%
5.3%
5.9%
0.7%
For the three months ended:
For the year ended:
The decrease in expenses in the quarter is primarily due to reduced
salaries and benefits of $312 related to organizational realignment in the
second quarter of 2020.
On an annual basis, the reduction in expenses is due to reduced
salaries and benefits of $2,100 related to the decrease in Crombie’s
unit price and its impact on unit-based compensation plans, and to
the organizational realignment in the second quarter of 2020. These
decreases are offset in part by $1,509 of severance in the second
quarter related to the realignment. Additionally, travel costs in 2020
decreased by $544 compared to 2019.
Finance Costs – Operations
Finance costs
Amortization of deferred financing charges
Finance costs – operations
Three months ended December 31,
Year ended December 31,
2020
24,077
835
24,912
$
$
2019
Variance
$
$
21,983
827
22,810
$
$
(2,094)
(8)
(2,102)
$
$
2020
88,802
3,006
91,808
2019
Variance
$
$
93,742
3,574
97,316
$
$
4,940
568
5,508
For the three‑months ended:
For the year ended:
Finance costs increased by $2,094 primarily due to the premium paid
relating to partial early redemption of Series B unsecured notes in the
quarter of $2,025.
Finance costs decreased by $4,940 primarily due to a reduction in
mortgage interest resulting from disposition activity and maturing
mortgages, partially offset by the premium paid related to partial early
redemption of unsecured notes.
53
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Depreciation, Amortization and Impairment
Crombie’s total fair value of investment properties exceeds carrying value by $921,974 at December 31, 2020 (December 31, 2019 – $808,674). Crombie
uses the cost method for accounting for investment properties, and increases in fair value over carrying value are not recognized until realized
through disposition or derecognition of properties, while impairment, if any, is recognized on a property by property basis when circumstances
indicate that the carrying value may not be recoverable.
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
Same-asset* depreciation and amortization
$
15,871 $
16,198
$
327
$
63,888
$
64,656
$
768
Acquisitions, dispositions and development
depreciation/amortization
Depreciation and amortization
Impairment
3,635
2,149
$
$
19,506 $
18,347
4,500 $
6,000
$
$
(1,486)
(1,159)
1,500
$
$
11,679
75,567
6,600
$
$
9,657
74,313
6,000
$
$
(2,022)
(1,254)
(600)
For the three‑months ended:
For the year ended:
The increase in depreciation and amortization is due to additions, most
notably the 50% acquisition of Vaughan Distribution Centre, an existing
retail-related industrial property in December 2019, and the completed
developments of Avalon Mall and Davie Street retail. This is offset in
part by disposition of properties in 2019 and classification of certain
investment properties as assets held for sale in the third quarter of 2020,
for which depreciation is not recorded.
The increase in depreciation and amortization on an annual basis
is due to the additions and developments noted for the quarter and
accelerated depreciation due to the partial demolition of a building at
the Avalon Mall site in the first quarter of 2020. It is partially offset by the
dispositions of properties in 2019.
During the year ended December 31, 2020, Crombie recorded impairments totalling $6,600 on six properties. The impairments were the result of the
fair value impact of tenant lease expiries, slower-than-expected leasing activity, and the ongoing impacts of COVID-19. Impairment was measured on
a per property basis and was determined as the amount by which carrying value, using the cost method, exceeded the recoverable amount for that
property. The recoverable amount was determined to be each property’s fair value defined as the higher of the economic benefit of the continued
use of the asset or the selling price less costs to sell. To calculate the benefit of the continued use of the asset, Crombie utilized the present value of the
estimated future cash flows, discounted using a discount rate based on the risk associated with the property.
Selected Balance Sheet Information
Total Assets
Investment properties, carrying value
Investment properties, fair value
Total Debt
Total non-current financial liabilities
Number of Units outstanding (in 000’s)
$
$
$
$
$
2020
5,040,231
3,893,026
4,815,000
2,637,712
2,192,047
158,258
As at December 31,
2019
Variance
$
$
$
$
$
4,739,334
3,796,326
4,605,000
2,473,773
2,073,212
151,743
$
$
$
$
$
300,897
96,700
210,000
163,939
118,835
6,515
$
$
$
$
$
2018
4,875,912
3,978,912
4,776,000
2,634,916
2,318,933
151,419
Total assets include investment properties measured at fair value with all other components, including investment in joint ventures, measured at the
carrying value included in Crombie’s financial statements. Total debt consists of all payables in Crombie’s financial statements excluding the financial
liabilities to REIT Unitholders and to holders of Class B LP Units, as shown on the balance sheet as Net assets attributable to Unitholders.
54
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 DEVELOPMENT
Property Development is a strategic priority for Crombie to improve NAV,
cash flow growth and Unitholder value. With urban intensification an
important reality across the country, Crombie is focused on evaluating
and undertaking major developments at certain properties, where
incremental costs to develop are greater than $50,000 and where
development may include retail-related industrial, commercial, and/
or residential uses (“Major Developments”). This discussion of Crombie’s
development activities contains forward-looking information. Refer to
the “Forward-Looking Information” section of this MD&A starting on
page 87 for additional information regarding such statements and the
related risks and uncertainties.
Crombie has the potential to unlock significant value within its
current pipeline of 30 Major Development properties (three Active
(December 31, 2019 – six) and 27 Potential Major Developments
(December 31, 2019 – 27)) over the next decade or longer. Crombie
benefits from having solid income (FFO and AFFO) generated by these
properties while working through the various approvals, entitlements,
and advance preparations required before each Major Development
can commence. In aggregate, Crombie currently achieves an in-place
NOI yield of approximately 5.0% on existing asset cost for our potential
development pipeline of properties.
Crombie has a strategic relationship with Empire. The majority of our
development properties have Empire as an anchor tenant; our strategic
relationship should enable us to unlock value and transition from
existing property/store operations to construction/development of these
sites on mutually agreeable terms.
Our Major Developments will be planned and executed either alone
or with partners to complete development of mixed-use properties
with a focus on grocery-anchored retail and, wherever practical,
primarily purpose-built residential rental accommodations that provide
revenue, diversification and growth to Crombie. We view this approach
as the optimal way to drive both NAV and AFFO growth. In certain
cases, residential condominium uses may also be considered, as will
certain other uses, to satisfy municipal requirements and/or market
opportunities. Crombie may also have the option, if desired, to monetize
our density value by selling certain air rights, or purpose-built rental
properties to third parties in lieu of, or after, development.
Completed Developments
The table below summarizes projects that have reached substantial
completion during the fiscal year. Crombie recognizes substantial
completion when key project milestones are met and/or project
spending has reached over 90% of total project costs.
As at December 31, 2020, Crombie has reached substantial completion
on the following major development projects:
CMA
Use
Ownership
Substantial
Completion
Date
Completed
Commercial
GLA
Completed
Residential
GLA
Major
Tenant(s)1
Estimated Total
Project Cost
($ in Millions)
Estimated
Annual NOI
($ in Millions)
Estimated
Yield on
Cost
Victoria
Retail,
Office
100%
Q1 2020
160,000
—
Thrifty Foods
$
93.0
$
5.4-5.7
5.8%-6.1%
Vancouver
Retail
100%
Q2 2020
54,000
St. John’s
Retail
100%
Q3 2020
—
St. John’s
Retail
100%
Q4 2020
165,000
Pointe-Claire
Montreal
Total Completed
Retail-
related
industrial
100%
Q4 2020
300,000
679,000
—
—
—
—
—
Safeway
N/A
29.2
54.5
1.8-1.9
6.2%-6.5%
—
—
Various
56.8
5.3-5.8
9.3%-10.2%
Empire
100.0
6.1-6.4
6.1%-6.4%
$
333.5
$
18.6-19.8
(1) A tenant leasing over 15,000 square feet is considered to be a Major Tenant
(2) There are 17,000 square feet left to be developed and the project is expected to be complete by Q4 2021 – timing dependent on pre-leasing effort
(3) Avalon Mall total GLA is expected to be 593,000 square feet when Phase II is completed. 165,000 square feet relates to the expected square footage of the redeveloped portion of the mall
(4) Tenants leasing over 15,000 square feet at Avalon Mall include Winners, H&M, Old Navy, GAP and Sport Chek
Estimated GLA on completion is based on applicable standards of area
measurement determined through internal site plans and drawings,
and using external massing studies, where applicable.
Estimated annual NOI is calculated using first year stabilized annual
rent for each tenant, assuming 100% occupancy. These estimates are
established by using contracted rents, Crombie’s market knowledge,
and/or using externally generated market studies for any current
vacant space.
These projects have reached substantial completion, thereby reducing
the amount of risk remaining in the development. The remaining risk is
primarily related to achieving successful lease-up of vacant space at
estimated rent per square foot.
Estimated total project cost includes the current carrying costs of
development lands, where applicable, net of any reductions from
land and air rights dispositions. Total estimated project costs include
land costs measured at fair value on existing Income Producing
Properties upon transfer to the development, soft and hard construction
55
Property
Belmont
Market2
Davie Street –
retail
Avalon Mall –
Phase I
Avalon Mall –
Phase II3, 4
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth costs, tenant inducements, external leasing costs, finance costs, and
capitalized interest and other carrying costs, such as capitalized
construction and development staff and property taxes. These costs
are determined by using internal knowledge and external professional
resources, where applicable. There is no additional allocation of land
cost included in the estimated total cost of Avalon Mall.
Development Pipeline
In the sections that follow (Active Major Developments and Potential
Major Developments), Crombie has identified 30 Major Development
projects as at December 31, 2020 (December 31, 2019 – 33), with a total
projected cost to develop these properties of $4,300,000 to $6,100,000
(December 31, 2019 – $4,000,000 to $5,800,000). Crombie may enter
joint venture or other partnership arrangements for these properties
to share cost, revenue, risk, and development expertise, depending
upon the nature of each project. Each future project remains subject to
normal development approvals, achieving required economic hurdles,
and Board of Trustees’ approval.
Number of
Projects
Total Projected
Cost Range
CAD $ millions1
Commercial
GLA on
Completion2
Commercial
Incremental GLA2
Residential GLA on
Completion2
Residential
# of Units2
Active projects
Future potential projects
Total Development Pipeline
3
27
30
$
300
80,000
4,000 – 5,800
1,300,000
$
4,300 – 6,100
1,380,000
50,000
740,000
790,000
961,000
9,400,000
10,361,000
1,197
11,000
12,197
(1) The total projected cost range shown in development pipeline is rounded to the nearest hundredth
(2) GLA and Units reflective of upper projected cost range
In conjunction with our strategic partner Empire, Crombie management continuously reviews and prioritizes development opportunities that drive
NAV and AFFO, including high-density urban re-development, new grocery-anchored retail, retail-related e-commerce facilities, and land-use
intensification.
Active Major Developments
ACTIVE PROJECT GLA BY CITY
as at December 31, 2020
ACTIVE PROJECT GLA BY ASSET TYPE (SQ. FT.)
as at December 31, 2020
80,000
7.7%
961,000
92.3%
Vancouver
Toronto
Montreal
Commercial GLA
Residential GLA
Retail
Residential
)
s
0
0
0
’
(
.
t
f
.
q
S
600
400
200
0
56
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020
The below table provides additional detail into Crombie’s Active Major Developments by property type.
Commercial
GLA on
Completion
Residential
GLA on
Completion
Residential
Units
Estimated
Final
Completion
Date
Estimated
Annual NOI
Estimated
Total Cost
Estimated
Yield on
Cost
Estimated
Cost to
Complete
At Crombie’s Share ($ in millions)
Property
CMA
Residential Properties1
Davie St –
residential
Vancouver
Total – Residential
Retail and Residential
Properties1
—
—
254,000
254,000
Le Duke
Montreal
26,000
241,000
Bronte Village
Toronto
54,000
466,000
Total – Retail and Residential
80,000
707,000
Total Joint Ventures
80,000
961,000
1,197
Total – Active Major
Developments
80,000
961,000
1,197
(1) These properties are held in joint venture agreements in which Crombie owns a 50% interest
Q1 2021
Q3 2021
Q4 2021
330
330
387
480
867
$
$
$
$
$
$
4.0-4.4
4.0-4.4
3.2-3.4
7.5-8.3
10.7-11.7
14.7-16.1
14.7-16.1
$
$
$
$
$
$
80
80
5.0%-5.5%
5.0%-5.5%
59
5.4%-5.8%
139
198
278
5.4%-6.0%
5.4%-5.9%
5.3%-5.8%
278
5.3%-5.8%
$
$
$
$
$
$
2
2
18
39
57
59
59
Estimated GLA on completion is based on applicable standards of area
measurement determined through internal site plans and drawings and
using external massing studies, where applicable.
Estimated annual NOI is calculated using first year stabilized annual
rent for each tenant, assuming 100% occupancy. These estimates are
established by using contracted rents, Crombie’s market knowledge,
and/or determined using externally generated market studies. Revenue
assumptions are subject to uncertainty and proformas contain provision
for revenue risk and/or timing of revenue achieving stabilization.
Revenue risk in the 5% range is reasonable for typical projects and
typical valuation appraisals contain provision for vacancy.
For joint venture projects, our partners may provide estimates which
Crombie reviews and analyzes to determine final estimates.
Estimated total cost includes the current carrying costs of development
lands, net of any proceeds from land and air rights dispositions. Total
estimated costs include land cost measured at fair value on existing
Income Producing Properties upon transfer to the development, soft
and hard construction costs, tenant inducements, external leasing
costs, finance costs, and capitalized interest and other carrying costs,
such as capitalized construction and development staff, and property
taxes. These costs are determined by using internal knowledge and
external professional resources, where applicable. Project capital cost
uncertainty exists and project proformas contain contingency for capital
cost exceedances in the ordinary course. Capital cost exceedances in
the 5% – 10% range are reflective of such contingencies.
These major development projects have received Board of Trustees’
approval. Ongoing reporting to the Board of Trustees continues
throughout the duration of each project.
These estimates and assumptions are reviewed and updated regularly
and are subject to changes, which could be material. Estimated GLA,
estimated completion dates, estimated total costs, and estimated
annual NOI are based on assumptions that are updated regularly,
based on revised site plans, cost tendering processes, market studies
and continuing tenant negotiations. These assumptions are based on
access to job sites, supplies and labour availability, ability to attract
tenants, estimated GLA, and tenant mix among rental, air rights sale,
tenant rents, building sizes, and availability and cost of construction
financing. Within specific projects, scheduling and/or completion timing
uncertainty exists and project economics can handle reasonable delays
in the range of 10%. Estimations included in the chart are believed to be
reasonable, but there can be no assurance that actual results will be
consistent with these projections.
As previously disclosed, COVID-19 has affected project timelines, cost,
and future lease-up schedules. Due to the shutdown of non-essential
construction in Quebec during COVID-19, Le Duke and the Pointe-Claire
developments were shutdown from March 24th to May 11th, 2020. Le
57
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Duke’s completion date moved from Q2 2021 to Q3 2021. Davie Street’s
residential completion date moved from Q3 2020 to Q1 2021 and project
cost was increased in Q2 by $1,800 due to increased construction costs
and financing costs from delays. As a result, estimated NOI yields on
cost decreased to 5.0%- 5.5% from 5.1% – 5.6%.
1641 DAVIE STREET, VANCOUVER, BRITISH COLUMBIA
Type: Mixed-Use Retail / Residential Rental
Ownership: 50% residential, 100% Crombie ownership of commercial
Construction Status: The construction of the commercial portion of the
development is now complete as Safeway opened in Q2 2020, while
Scotiabank and a government liquor store opened in Q4 2020. Rental
residential space will total 254,000 square feet (330 rental units) in two
residential towers at completion. The West Tower was completed in
Q4 2020 with initial tenant move-ins beginning in November 2020.
The East Tower will be completed in Q1 2021 with move-ins beginning
in February.
Potential Major Developments
LE DUKE, 297 RUE DUKE, MONTREAL, QUEBEC
Type: Retail / Residential
Ownership: 50%
Construction Status: Development of Le Duke began late in 2017 and
the residential structure is completed. This development is expected to
be fully complete in Q3 2021 inclusive of COVID-19-related impacts with
initial residential leasing commencing in Q3 2021.
BRONTE VILLAGE, 2441 LAKESHORE ROAD WEST, OAKVILLE
(TORONTO), ONTARIO
Type: Retail / Residential
Ownership: 50%
Construction Status: The structure, pre-cast, and glazing are complete
on both Building A (west) and Building B (east). Pre-leasing marketing
is currently underway and interior finishing work is progressing well with
substantial completion scheduled for Q4 2021.
Future Projects by City
As at December 31, 2020
6,000
4,000
2,000
)
s
0
0
0
'
(
.
t
f
.
q
S
Vancouver Victoria Calgary
Edmonton Toronto
Halifax Hamilton
Transit-oriented
Non-transit
Crombie’s current Potential Major Developments have the ability to
add up to 740,000 square feet (December 31, 2019 – 540,000 square
feet) of commercial GLA and up to 9,400,000 square feet (up to 11,000
units) (December 31, 2019 – 7,500,000 square feet and 9,000 units)
of residential GLA (which may include a combination of rental or
condominium units).
Based on Crombie’s current estimates, total costs to develop these
properties could reach $4,000,000 to $5,800,000 over 10 to 15 years.
Crombie may develop some or all of these properties independently
or may enter joint venture or other partnership arrangements for these
properties to share cost, revenue, risk, and development expertise,
depending upon the nature of each project. Each project remains
subject to normal development approvals, achieving required economic
hurdles (including financial NAV and AFFO accretion analysis), and
Board of Trustees’ approval.
As at December 31, 2020, Crombie has identified 27 Potential Major
Development locations as having potential to become Active
Major Developments. Development of each property is subject to
management completing full due diligence on the opportunity, including
commercial and residential components, and seeking all necessary
Board, municipal/provincial entitlements, and tenant approvals prior
to proceeding. The precise timing of each project is not determinable
at present. The time horizon of these projects may change, project
scope may change, and/or Crombie may choose to not proceed with
development on some properties after further review, entitlement
assessment, and completion of financial projections.
58
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020
Projects described as having a “pre-planning” status include projects
where Crombie has undertaken potential development planning,
which could include seeking municipal approvals for zoning, density,
developing image renderings, seeking potential commercial and/or
residential development partners, evaluation of financing options, and
other activities required to determine viability of the opportunity.
An important part of creating a sustainable development program is a
systematic approach to proactively moving potential development lands
through the entitlement process to obtain zoning approvals. Crombie
currently has 5 of these 27 potential major projects identified for near-
term re-zoning and is currently in various stages of entitlement pursuit
as noted in the following chart:
Number of
Projects
Estimated
Commercial Sq. ft.1
Estimated
Residential Sq. ft.1
Estimated Total
Sq. ft.1
% of
Entitlement of
Sq. ft. Residential Units1
Crombie’s Entitled Projects
Zoned
Application Submitted
Total
3
2
5
20
130
150
940
560
1,500
960
690
58.2%
41.8%
1,650
100.0%
1,040
690
1,730
(1) Square footage and unit information presented in the table are estimates only and are subject to change. Design, municipal approvals and market conditions may influence estimates provided
Zoning is in place for the following development sites: Westhill on Duke
(Halifax), Belmont Market – Phase II (Victoria), and Triangle Lands
(Halifax). Rezoning applications have been submitted and are in
process for Broadway and Commercial (Vancouver) and Penhorn Lands
(Halifax).
59
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth The following table lists the 27 identified Potential Major Development locations and certain key features of each property. Potential developments in
the table following are organized in order of potential construction commencement:
Potential Major Development Pipeline
Site Size
(acres)
Transit
Oriented
Existing
Tenants
Potential
Commercial
Expansion
Potential
Residential
Expansion
1
2
3
4
5
6
7
8
9
11
12
13
14
15
16
17
18
19
20
21
Existing Property
Penhorn Lands
Westhill on Duke1
Belmont Market – Phase II
1780 East Broadway
(Broadway and Commercial)
10355 King George Boulevard
Park West
CMA
Halifax
Halifax
Victoria
Vancouver
Vancouver
Halifax
1170 East 27 Street (Lynn Valley)
Vancouver
Triangle Lands
McCowan & Ellesmere
10
1818 Centre Street
3130 Danforth
2733 West Broadway
Centennial Parkway
Halifax
Toronto
Calgary
Toronto
Vancouver
Hamilton
990 West 25 Avenue (King Edward)
Vancouver
524 Elbow Drive SW (Mission)
Fleetwood
Brunswick Place
Robson Street
Port Coquitlum
410 10 Street NW (Kensington)
813 11 Avenue SW (Beltline)
Calgary
Vancouver
Halifax
Vancouver
Vancouver
Calgary
Calgary
22
3410 Kingsway (Kingsway +Tyne)
Vancouver
23
East Hastings
24
25
26
27
10930 82 Avenue (Whyte Ave)
5235 Kingsway (Royal Oak)
New Westminster
Brampton Mall
Vancouver
Edmonton
Vancouver
Vancouver
Toronto
26.12
0.462
1.70
2.43
5.07
6.44
2.82
0.68
4.48
2.18
0.79
1.95
2.75
1.80
1.60
4.45
0.753
1.15
5.31
1.73
2.59
3.74
3.30
2.44
2.76
2.82
8.74
No
Yes
No
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Yes
No
No
Land
n/a
Land
Safeway
Safeway
Retail
Safeway
Land
FreshCo/
Other tenants
Safeway
The Beer
Store
Safeway
Retail
Safeway
Safeway
Safeway
n/a
Safeway
Safeway
Safeway
Safeway
Safeway/
Other tenants
Safeway/
Other tenants
Safeway/
Other tenants
Safeway
Safeway
Office/Retail
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Entitlement
Status
Application
Submitted
Zoned
Zoned
Application
Submitted
Yes
Yes
Yes
Yes
Yes Pre-Planning
Yes Pre-Planning
Yes Pre-Planning
Yes
Zoned
Yes Pre-Planning
Yes
Future
Yes Pre-Planning
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
(1) Westhill on Duke was formerly referred to as Westhill and Scotia Square residential
(2) Westhill on Duke can be developed through densification on 0.46 acres of the existing 9.05 acre Scotia Square site
(3) Brunswick Place can be developed through densification on the existing 0.75 acre Brunswick Place Parkade
60
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 CAPITAL MANAGEMENT
We continue to reduce risk and build financial strength by strategically
managing our capital structure and optimizing capital allocation to
generate long-term value for our stakeholders. Our continued success
is underpinned by a strong balance sheet and more than adequate
liquidity, and an investment-grade credit profile providing the company
with a solid financial foundation and great financial flexibility.
CAPITAL MANAGEMENT FRAMEWORK
The real estate industry is highly capital intensive.
Crombie’s strategic capital management objective consists of three
main priorities:
1. to maintain multiple sources of both debt and equity financing;
2. to reduce risk by pre-funding its capital commitments; and
3. to source capital with the lowest cost on a long-term basis and to
maintain overall indebtedness at reasonable levels, utilize staggered
debt maturities, minimize long-term exposure to excessive levels of
floating rate debt, and maintain conservative payout ratios.
At a minimum, Crombie’s capital structure is managed to ensure that
it complies with the limitations pursuant to its Declaration of Trust, the
criteria contained in the Income Tax Act (Canada) in regard to the
definition of a REIT and existing debt covenants.
Crombie’s Declaration of Trust sets out the investment guidelines for
Crombie’s capital deployment. The Declaration of Trust outlines the
minimum amount of due diligence that must be completed prior to
a project being approved by the Board. Crombie’s Board ensures
Our guiding principles for managing capital are as follows:
continued compliance with the Declaration of Trust through the
review and approval of the annual operating and capital budgets,
annual confirmation of Crombie’s strategic plan, and through the
approval of individual projects. The annual budget will detail the level
of projected capital spend for a given year and how the required
capital will be funded, as well as various key performance indicators
and impacts on debt covenants. The Board monitors performance
quarterly or on a more frequent basis, if needed. In addition, the
Board and Management regularly review unspent committed capital
(i.e., unfunded capital requirements of partially completed projects)
with a lens towards Crombie’s available liquidity, leverage metrics and
sources of financing.
Crombie expects to be able to satisfy all of its financing requirements
through the use of some or all of the following:
• Cash on hand;
• Cash flow generated from operating the property portfolio;
• Bank credit facilities;
• Proceeds from partial or full disposition of select non-core investment
properties;
• Traditional construction financing;
• CMHC insured mortgages on residential properties;
• Secured mortgages and term debt on unencumbered properties;
•
Issuance of senior unsecured notes;
• The issuance of new units; and
• The issuance of units under its distribution reinvestment plan (“DRIP”).
Guiding Principles
Current Status
Target D/GFV below 50% and reduce total leverage over the medium/
long-term
D/GFV* (net of cash) is 48.8% at December 31, 2020.
Maintain minimum of $250 million liquidity
Increased liquidity to $472M, up $23M from 2019.
Increase weighted average term to maturity
Lower cost of capital through equity raises and/or innovative funding
solutions, such as capital recycling
Take advantage of current low interest rates
Increase unencumbered asset pool
Increased weighted average term to maturity by 1.2 years from 4.1 years
to 5.3 years since December 31, 2019.
During 2020, Crombie raised equity at a record net price of $16.00 per unit.
Continue to harvest interest rate savings by refinancing high coupon debt
in current low rate environment.
Expanded unencumbered asset pool by approximately 12% to $1.4B since
December 31, 2019.
We have become a more dynamic, analytically focused organization,
which allows us to constantly review the cause and effect to our base
business as we evaluate key capital allocation and funding decisions
that shape our business for the future.
Investment‑Grade Credit Rating
Crombie’s ability to raise debt financing and the cost associated with that
debt financing depends on its ability to access the public debt
capital markets as well as the bank credit market, both of which depend
on assigned credit ratings. A credit rating generally indicates the rating
agency’s assessment of the relative risk that the borrower will not fulfill its
obligations in a timely manner with respect to both interest and principal
commitments. In 2013, Crombie successfully applied to DBRS for a
credit rating in order to access the unsecured note markets. At this time,
Crombie is assigned a credit rating of BBB(low) with stable trend.11
(1) The credit ratings are not recommendations to buy, sell or hold any of the securities referred to, and they may be revised or withdrawn at any time by the assigning rating agency. Ratings are
determined by the rating agencies based on criteria established from time to time by them, and they do not comment on market price or suitability for a particular investor. Each credit rating should be
evaluated independently of any other credit rating.
61
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth STRONG CAPITAL STRUCTURE
CAPITAL STRUCTURE
as at December 31, 2020
Equity Units
$1,478,306
Mortgages
$1,267,044
Unsecured Notes
$1,121,398
Bank Credit Facilities
and Lease Liabilities
$92,170
Mortgages
Bank Credit Facilities
and Lease Liabilities
Unsecured Notes
Equity Units
Crombie’s capital structure consists of the following carrying values, net of deferred financing costs where applicable:
Fixed rate mortgages
Drawn credit facilities
Senior unsecured notes
Lease liabilities
Crombie REIT Unitholders (Equity Units)
Special Voting Units and Class B Limited Partnership Unitholders
(Equity Units)
December 31, 2020
December 31, 2019
$
1,267,044
32.0%
$
1,302,510
62,256
1,121,398
29,914
881,511
1.6%
28.3%
0.7%
22.3%
54,308
922,479
29,419
870,792
596,795
15.1%
584,251
$
3,958,918
100.0%
$
3,763,759
34.6%
1.5%
24.5%
0.8%
23.1%
15.5%
100.0%
In 2019, asset recycling through full or partial dispositions provided the equity capital required to fund our capital investments at a time when our unit
price was trading materially below our NAV. In aggregate, all dispositions were completed at or above our IFRS fair value, which resulted in material
value preservation compared to raising equity at prices well below NAV. At the same time, Crombie continued to harvest interest rate savings by
refinancing higher coupon debt at lower current interest rates.
62
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020
DEBT METRICS
We monitor our debt by utilizing a number of key metrics, including the following:
Unencumbered investment properties1
Unencumbered investment properties1 as a % of unsecured debt
Debt to gross fair value*
Weighted average interest rate2
Debt to trailing 12 months EBITDA*
Interest coverage ratio*
(1) Represents fair value of unencumbered properties.
(2) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.
December 31, 2020
December 31, 2019
$
1,366,258
$
1,223,452
117.8%
49.4%
3.9%
9.73x
2.77x
128.1%
48.9%
4.2%
8.52x
2.99x
Crombie has continued to grow its unencumbered asset pool, increasing
it from fair value of $1,223,452 as at December 31, 2019 to $1,366,258
as at December 31, 2020. This increase is primarily due to mortgage
maturities, mortgage repayments as a result of capital recycling activity
in 2019, and increased unsecured note balances.
Debt to Gross Fair Value*
The debt to gross fair value* was 49.4% at December 31, 2020 (48.8%
after applying cash and cash equivalents to reduce debt) compared to
48.9% at December 31, 2019. This leverage ratio is below the maximum
60%, or 65% including convertible debentures, as permitted by Crombie’s
Declaration of Trust.
The increase in leverage ratio during the year was due to:
•
increased senior unsecured notes due to issuance of Series H and
Series I;
offset in part by:
• partial redemption of Series B unsecured notes;
•
•
increased value in investment properties due to higher net assets
from development progress;
increased cash and cash equivalents related to construction
financing at our Pointe-Claire development; and
•
increased investment in joint ventures.
When calculating debt to gross fair value, debt is defined under the
terms of the Declaration of Trust as obligations for borrowed money
including obligations incurred in connection with acquisitions, excluding
specific deferred taxes payable, trade payables, and accruals in the
ordinary course of business and distributions payable.
Debt to gross fair value includes investment properties measured at
fair value with all other components of gross fair value measured at the
carrying value included in Crombie’s financial statements. Crombie’s
methodology for determining fair value includes capitalization of 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. The valuation techniques are more
fully described in Crombie’s year end audited financial statements.
During the year, Crombie made assumptions when determining the
fair value of its investment properties as to the short and potential
long-term impacts of COVID-19. Crombie adjusted net property income
for expected impacts related to COVID-19, by looking at potential bad
debts or other lost income at each property and applying probability to
several potential scenarios. Crombie also completed discounted cash
flow models to support its fair value of investment properties. These
assumptions are subject to change as the full impact of COVID-19 is yet
to be determined.
The fair value included in this calculation reflects the fair value of the
properties as at December 31, 2020 and 2019, respectively, based
on each property’s current use as a revenue generating investment
property. During the year ended December 31, 2020, Crombie’s
weighted average capitalization rate used in the determination of the
fair value of its investment properties decreased 0.13% to 5.86%.
63
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Fixed rate mortgages
Senior unsecured notes
Revolving credit facility
Joint operation credit facility
Bilateral credit facility
Lease liabilities
Total debt outstanding
Less: Applicable fair value debt adjustment
Debt
Investment properties, at fair value
Other assets, cost1
Cash and cash equivalents
Deferred financing charges
Investment in joint ventures
Interest rate subsidy
Gross fair value
Debt to gross fair value*
December 31,
2020
December 31,
2019
$
1,274,304
$
1,309,077
1,125,000
925,000
17,712
9,544
35,000
29,914
15,339
8,969
30,000
29,419
2,491,474
2,317,804
$
$
$
$
(283)
2,491,191
4,815,000
100,206
63,293
10,972
51,043
(283)
(539)
2,317,265
4,605,000
80,035
—
9,715
45,123
(539)
$
5,040,231
$
4,739,334
49.4%
48.9%
(1) Other assets exclude tenant incentives and accrued straight-line rent receivable.
The debt to gross fair value*, applying cash and cash equivalents to
reduce debt, is 48.8% at December 31, 2020.
Debt to EBITDA* and Interest Coverage* Ratios:
Crombie’s debt to EBITDA* increased to 9.73x for the trailing 12 months
ended December 31, 2020 from 8.52x for the trailing 12 months ended
December 31, 2019. The increase was primarily due to increased debt
from the issuance of Series H and Series I senior unsecured notes
and mortgages, and reduced EBITDA. (Debt to EBITDA* is 9.48x after
applying cash and cash equivalents to reduce debt.) The decreased
EBITDA resulted from property dispositions in 2019 and the impacts
of COVID-19, including decreased parking revenue due to reduced
demand, increased rent abatements and a significant increase in
bad debt expense in 2020. After adjusting EBITDA for the impacts of
COVID-19 on bad debt expense, rent abatements, parking revenue, and
organizational realignment severance costs, the debt to EBITDA* ratio
for the trailing 12 months ended December 31, 2020 was 9.19x.
EBITDA* decreased by $15,744 over the trailing 12 months ended
December 31, 2020 when compared to the trailing 12 months ended
December 31, 2019, as a result of property dispositions in 2019 and the
impacts of COVID-19 in 2020 as discussed above.
The interest coverage* ratio for the quarter ended December 31, 2020
declined to 2.77x compared to 2.99x for the quarter ended December 31,
2019 due to reduced EBITDA resulting from lower property revenue and
the impacts of COVID-19 described above. Finance costs decreased
by $4,940 primarily due to a reduction in mortgage interest resulting
from disposition activity and maturing mortgages, partially offset by
the premium paid related to partial early redemption of unsecured
notes. After adjusting EBITDA for the impacts of COVID-19 on bad
debt expense, rent abatements, parking revenue, and organizational
realignment severance costs, the interest coverage* ratio for the quarter
ended December 31, 2020 was 2.83x.
Crombie’s debt service coverage* increased slightly to 1.92x for the
quarter ended December 31, 2020 from 1.91x for the quarter ended
December 31, 2019 due to the decrease in EBITDA.
64
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 The following table presents a reconciliation of property revenue to EBITDA. 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. Refer to the “Non-GAAP
Financial Measures” section of this MD&A, starting on page 84, for more information.
Dec. 31,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Mar. 31,
2019
Three months ended
Property revenue
$
97,060
$
92,920
$
96,501
$
102,252
$
96,823
$
97,346
$
99,332
$
105,240
Amortization of tenant incentives
4,859
4,752
4,419
3,819
3,598
3,515
3,411
3,615
Adjusted property revenue
101,919
97,672
100,920
106,071
100,421
100,861
102,743
108,855
Property operating expenses
(29,245)
(27,503)
(37,887)
(35,237)
(29,852)
(27,205)
(28,222)
(32,366)
General and administrative expenses
(5,493)
(5,062)
(6,960)
(3,019)
(5,855)
(6,112)
(5,970)
(5,784)
Income (loss) from equity accounted
investments
EBITDA*1
Trailing 12 months EBITDA*4
Finance costs – operations
Amortization of deferred financing
charges
Amortization of effective swap
agreements
Adjusted interest expense2
Debt principal repayments3
Debt outstanding (see Debt to Gross
Fair Value*)5
Interest service coverage* ratio
{(1)/(2)}
Debt service coverage* ratio
{(1)/((2)+(3))}
Debt to trailing 12 months EBITDA*
{(5)/(4)}
(411)
101
123
66,770
256,104
$
$
65,208
254,040
$
$
56,196
256,501
$
$
115
67,930
268,979
24,912
$
22,250
$
22,006
$
22,640
(835)
(737)
(683)
(751)
—
—
—
(510)
24,077
$
21,513
$
21,323
$
21,379
10,715
$
10,786
$
10,395
$
10,790
(8)
64,706
271,848
22,810
(827)
(356)
21,627
12,167
$
$
$
$
$
125
67,669
278,999
24,504
(922)
(226)
23,356
12,773
$
$
$
$
$
123
68,674
282,653
24,335
(913)
(544)
22,878
12,917
$
$
$
$
$
94
70,799
286,078
25,667
(912)
(551)
24,204
13,647
$
$
$
$
$
$
$
$
$
$
$ 2,491,191
$ 2,373,623
$ 2,338,288
$ 2,383,451
$ 2,317,265
$ 2,329,039
$ 2,319,410
$ 2,449,331
2.77x
3.03x
2.64x
3.18x
2.99x
2.90x
3.00x
2.93x
1.92x
2.02x
1.77x
2.11x
1.91x
1.87x
1.92x
1.87x
9.73x
9.34x
9.12x
8.86x
8.52x
8.35x
8.21x
8.56x
65
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Debt Profile
A continuity of Crombie’s fixed-rate mortgages, senior unsecured notes, and credit facilities for the year ended December 31, 2020 is as follows:
Opening balance at January 1, 2020
$
1,308,147
$
925,000
$
54,308
Mortgages
Senior Unsecured
Notes
Credit Facilities
Additions to existing mortgages
New borrowings or issuances
Principal repayments
Repayments on maturity
Early redemption
Net advances
5,125
218,000
(42,686)
(214,912)
—
—
—
300,000
—
—
(100,000)
—
Closing balance at December 31, 2020
$
1,273,674
$
1,125,000
$
—
—
—
—
—
7,948
62,256
Mortgages
Crombie had outstanding fixed rate mortgages consisting of:
Fixed rate mortgages
Unamortized fair value debt adjustment and interest rate subsidy
Deferred financing charges on fixed rate mortgages
Total mortgage debt
Long-term portion
Current portion
Weighted average interest rate
Weighted average term to maturity
$
$
$
$
December 31, 2020
December 31, 2019
1,273,674
$
1,308,147
630
1,274,304
(7,260)
1,267,044
1,139,798
127,246
3.98%
5.7 years
$
$
$
930
1,309,077
(6,567)
1,302,510
1,045,015
257,495
4.25%
3.9 years
• Crombie has a mortgage payable of $25,526 in settlement of an amount payable to 1600 Davie Limited Partnership. This mortgage, bearing
interest at 3.22%, relates to the commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements.
• During the year ended December 31, 2020, Crombie successfully closed on two mortgages totalling $218,000 at retail-related industrial properties.
The proceeds of one of the mortgages were placed in escrow and will be drawn down once certain conditions have been met. As of December 31,
Crombie has received $36,753 of the total commitment. Given that Crombie controls the total proceeds, the full remaining proceeds have been
reflected as long-term debt and cash at December 31, 2020.
From time to time, Crombie has entered into interest rate swap agreements to manage the interest rate profile of its current or future debts without an
exchange of the underlying principal amount (see “Interest Rate Risk”). Crombie currently has interest rate swap agreements in place on $112,510 of
floating rate debt.
66
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020
Senior Unsecured Notes
The following series of senior unsecured debentures were outstanding as at December 31, 2020 and 2019:
Maturity Date
Interest Rate
December 31, 2020
December 31, 2019
Series B
Series D
Series E
Series F
Series G
Series H
Series I
Unamortized Series B issue premium
Deferred financing charges
Total senior unsecured notes
Long-term portion
Current portion
Weighted average interest rate
Weighted average term to maturity
June 1, 2021
3.962%
$
150,000
$
November 21, 2022
January 31, 2025
August 26, 2026
June 21, 2027
March 31, 2028
October 9, 2030
4.066%
4.802%
3.677%
3.917%
2.686%
3.211%
150,000
175,000
200,000
150,000
150,000
150,000
110
(3,712)
1,121,398
971,398
150,000
3.78%
5.1 years
$
$
$
$
$
$
250,000
150,000
175,000
200,000
150,000
—
—
627
(3,148)
922,479
922,479
—
4.07%
4.5 years
• On October 9, 2020, Crombie issued on a private placement basis, $150,000 Series H notes (senior unsecured) maturing March 31, 2028. The net
proceeds were used to repay existing indebtedness, including repayment of outstanding credit facilities and partial repayment of the Series B
unsecured notes. Crombie called for early redemption of $100,000 of the Series B unsecured notes on October 21, 2020 in conjunction with the
offering of the Series H notes. The Series H notes were priced with an effective yield to maturity of 2.686% and sold at a price of $1,000.00 per
$1,000.00 principal amount. Interest is payable in equal semi-annual instalments on March 31 and September 30.
• On the same date, Crombie issued on a private placement basis, $150,000 Series I notes (senior unsecured) maturing October 9, 2030. The
proceeds were used for the same purposes as the Series H notes. The notes were priced with an effective yield to maturity of 3.211% and sold at a
price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on April 9 and October 9.
There are no required periodic principal payments, with the full face value of the notes due on their respective maturity dates.
Credit Facilities
The following floating-rate credit facilities had balances drawn as at December 31, 2020 and 2019:
Revolving credit facility
Unsecured bilateral credit facility
Joint operation credit facility I
Joint operation credit facility II
Total credit facilities
REVOLVING CREDIT FACILITY
Available
Facility
400,000
130,000
68,050
32,000
$
$
$
$
Weighted average
term to maturity
December 31, 2020
December 31, 2019
0.3 years
$
17,712
$
0.7 years
3.3 years
3.8 years
35,000
7,188
2,356
$
62,256
$
15,339
30,000
6,978
1,991
54,308
Crombie has in place an authorized floating rate revolving credit facility of up to $400,000 (the “revolving credit facility”), with a maturity date of
June 30, 2023, of which $17,712 ($23,292 including outstanding letters of credit) was drawn as at December 31, 2020. The revolving credit facility is
secured by a pool of first mortgages on certain properties. Borrowings under the revolving credit facility can be by way of Bankers’ Acceptance or
prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread
or margin may change depending on Crombie’s unsecured bond rating with DBRS and whether the facility remains secured or migrates to an
unsecured status.
67
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth UNSECURED BILATERAL CREDIT FACILITY
The unsecured bilateral credit facility has a maximum principal amount of $130,000, increased from $100,000 in the third quarter of 2020 with the
maturity date extended to September 1, 2021, of which $35,000 was drawn as at December 31, 2020. The facility is used by Crombie for working capital
purposes and to provide temporary financing for acquisitions and development activity. Borrowings under the bilateral credit facility can be by way of
Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin.
The respective spread or margin may change depending on Crombie’s unsecured bond rating with DBRS.
JOINT OPERATION CREDIT FACILITIES
In conjunction with the 89% sale of a portfolio of assets in the second quarter of 2019, Crombie and its co-owner entered into a credit agreement with
a Canadian chartered bank for a $62,250 term loan facility and a $5,800 revolving credit facility. Both facilities are secured by first mortgages on
select properties and have a term of five years maturing on April 25, 2024. Borrowings under both facilities can be by way of Bankers’ Acceptance or
prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. Concurrent with entering
into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest rate on both facilities at
3.58%. At December 31, 2020, Crombie‘s portion of the term and revolving credit facilities was $6,847 and $341, respectively.
In conjunction with the 89% sale of a portfolio of assets in the fourth quarter of 2019, Crombie and its co-owner entered into a credit agreement
with a Canadian chartered bank for a $16,500 term loan facility and a $15,500 revolving credit facility. Both facilities are secured by first and second
mortgages on select properties and have a term of five years maturing on October 7, 2024. Borrowings under both facilities can be by way of
Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin.
Concurrent with entering into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest
rate on both facilities at 3.27%. At December 31, 2020, Crombie’s portion of the term and revolving credit facilities was $1,815 and $541, respectively.
Debt Maturities
Principal repayments of the fixed rate mortgages and credit facilities are scheduled as follows:
Maturing Debt Balances
12 Months Ending
Mortgages
Senior
Unsecured
Notes
Credit
Facilities
Total
% of Total
Payments of
Principal
Total Required
Payments
% of Total
December 31, 2021
$
84,985
$
150,000
$
35,000
$
269,985
12.3%
$
42,261
$
312,246
December 31, 2022
159,451
150,000
—
309,451
December 31, 2023
December 31, 2024
238,384
226,268
—
—
December 31, 2025
30,596
175,000
279,991
650,000
17,712
9,544
—
—
256,096
235,812
205,596
929,991
14.0%
11.6%
10.7%
9.3%
42.1%
39,418
32,838
21,033
17,131
348,869
288,934
256,845
222,727
101,318
1,031,309
12.7%
14.2%
11.7%
10.4%
9.1%
41.9%
$ 1,019,675
$ 1,125,000
$
62,256
$ 2,206,931
100.0%
$
253,999
$ 2,460,930
100.0%
Thereafter
Total1
(1) Excludes fair value debt adjustment and deferred financing charges.
Outstanding Unit Data
REIT UNITS AND CLASS B LP UNITS AND THE ATTACHED SPECIAL VOTING UNITS
On February 11, 2020, Crombie closed a public offering, on a bought deal basis, of 3,657,000 Units, at a price of $16.00 per Unit for proceeds of $55,848
net of issue costs. On the same date, concurrently with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECL Developments (ECLD),
a wholly owned subsidiary of Empire, purchased 2,593,750 Class B LP Units and the attached Special Voting Units at a price of $16.00 per Class B LP
Unit for proceeds of $41,425 net of issue costs, on a private placement basis. After the closing of the public offering and the private placement, Empire
continues to hold a 41.5% economic and voting interest in Crombie.
For the year ended December 31, 2020, Crombie issued 120,533 REIT Units and 85,433 Class B LP Units under its DRIP. Units issued under the DRIP
are issued at a price equal to 100% of the volume-weighted average trading price of the REIT Units on the TSX for the five trading days immediately
preceding the relevant distribution payment date.
Throughout the year, Crombie issued 58,090 REIT Units under its unit based compensation plan.
Total units outstanding at January 31, 2021, were as follows:
Units
Special Voting Units1
93,541,132
64,730,503
(1) Crombie Limited Partnership, a subsidiary of Crombie, has also issued 64,730,503 Class B LP Units. These Class B LP Units accompany the Special Voting Units, are the economic equivalent of a Unit,
and are exchangeable for Units on a one-for-one basis
68
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 CASH FLOWS
The following shows the major sources and uses of cash for the year ended December 31, 2020:
Major Sources and Uses of Cash
$300,000
$97,273
$218,000
$66,406
$0
$(100,000)
$(42,687)
$37,832
$63,293
$(109,668)
$(13,911)
$(140,302)
$7,948
$(257,598)
Opening
cash
Operating
cash flow
before
distributions
Distributions
Issue of
mortgages
Mortgage
payments
Credit
facility
net
repayments
Issue of
notes
Notes
redemption
Unit
issue
Acquisitions Additions
to
investment
properties
Proceeds on
disposition
Other,
net
Closing
cash
Cash provided by (used in):
Operating activities
Financing activities
Investing activities
Source of cash
Use of cash
Three months ended December 31,
Year ended December 31,
2020
2019
Variance
2020
2019
Variance
$
(2,289)
$
(9,236)
$
6,947
$ (73,896)
$ (35,869)
$
(38,027)
114,356
47,452
66,904
261,469
(63,487)
324,956
(48,774)
(38,216)
(10,558)
(124,280)
99,356
(223,636)
Net change during the period
$ 63,293
$
—
$
63,293
$ 63,293
$
—
$
63,293
69
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Operating Activities
For the three months ended:
For the year ended:
The decrease in cash used in operating activities in the quarter
compared to the same quarter in 2019 is primarily due to additions to
tenant incentives in 2019, including modernizations of $15,297.
The increase in cash used in operating activities on an annual
basis is largely due to reduced net property income of $22,235 as a
result of property dispositions and the impacts of COVID-19. These
impacts include decreased parking revenue of $2,715, increased rent
abatements of $1,012 and increased bad debt expense of $10,717 as
a result of COVID-19-related collection risk. The reduced net property
income for the year was offset in part by a decrease of $3,187 in general
and administrative expenses resulting primarily from reduced salaries,
and a decrease of $5,508 in finance costs from operations due to a
reduction in mortgage interest resulting from disposition activity and
maturing mortgages. Additionally, modernizations for energy upgrades
of $14,489, payment of the special cash distribution of $14,857 on
January 15, 2020, and higher distributions during the year compared to
2019 as a result of the Unit issuance in Q1 2020 contributed to the use
of cash.
Financing Activities
For the three months ended:
For the year ended:
The increase in cash provided by financing activities is primarily
generated from the $100,000 mortgage at our Pointe-Claire
development and issuance of senior unsecured notes of $300,000, offset
in part by early redemption of Series B unsecured notes of $100,000 and
repayment of credit facilities of $140,070.
The increase in cash provided by financing activities on an annual basis
is due to $300,000 issuance of unsecured notes, mortgage issues of
$218,000, and the Unit issuance of $97,273 net of costs. This is partially
offset by repayment of mortgages of $257,598.
Investing Activities
For the three months ended:
For the year ended:
The increase in cash used in investing activities results primarily from
the additions to investment properties of $49,797 compared to $37,799
in the fourth quarter of 2019.
Annually, the decrease in cash provided by investing activities is due
to the proceeds from disposition of properties of $37,832 compared
to $339,391 in 2019, offset in part by the acquisition of properties of
$42,687 ($152,507 in 2019).
70
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 AVAILABLE CREDIT LINE LIQUIDITY
Available liquidity is the net amount available on Crombie’s credit facilities, excluding joint facilities with joint operation partners, calculated as follows:
Revolving credit facility
$
400,000
$
364,558
$
369,785
$
400,000
$
400,000
December 31,
2020
September 30,
2020
June 30,
2020
March 31,
2020
December 31,
2019
Amount drawn
Outstanding letters of credit
Available liquidity
Unsecured revolving bilateral credit facility
Amount drawn
Available liquidity
Unsecured short-term non-revolving credit
facility
Amount drawn
Available liquidity
Cash
(17,712)
(5,580)
376,708
130,000
(35,000)
95,000
—
—
—
—
(18,927)
(5,746)
339,885
130,000
(99,000)
31,000
75,000
(75,000)
—
—
(20,736)
(5,746)
343,303
100,000
(37,000)
63,000
75,000
(75,000)
—
—
(117,000)
(5,759)
277,241
100,000
(40,000)
60,000
120,000
(120,000)
—
112,657
(15,339)
(5,645)
379,016
100,000
(30,000)
70,000
—
—
—
—
Total available liquidity
$
471,708
$
370,885
$
406,303
$
449,898
$
449,016
Cash and cash equivalents on the balance sheet of $63,293 consists of restricted cash related to a mortgage on a retail-related industrial property
and is therefore not included in available liquidity.
Under the amended terms governing the revolving credit facility, Crombie is entitled to borrow a maximum of 70% of the fair market value of assets
subject to a first security position and 60% of the excess of fair market value over first mortgage financing of assets subject to a second security
position or a negative pledge (the “Borrowing Base”). The revolving credit facility provides Crombie with flexibility to add or remove properties from
the Borrowing Base, subject to compliance with certain conditions. The terms of the revolving credit facility also require that Crombie must maintain
certain covenants:
• annualized NOI for the prescribed properties must be a minimum of 1.4 times the coverage of the related annualized debt service requirements;
• annualized NOI on all properties must be a minimum of 1.4 times the coverage of all annualized debt service requirements; and
• cash distributions to Unitholders are limited to 100% of funds from operations.
The revolving credit facility also contains a covenant limiting the amount which may be utilized under the revolving credit facility at any time. This
covenant provides that the aggregate of amounts drawn under the revolving credit facility plus any outstanding letters of credit, may not exceed the
“Aggregate Borrowing Base”, which is based on a modified calculation of the Borrowing Base, as defined in the revolving credit facility.
At December 31, 2020, the remaining amount available under the revolving credit facility was approximately $382,000 (prior to reduction for standby
letters of credit outstanding of $5,580) and was not limited by the Aggregate Borrowing Base. At December 31, 2020, Crombie remained in compliance
with all debt covenants.
The terms of the unsecured bilateral revolving credit facility and the unsecured non-revolving short-term credit facility also require annualized NOI on
all properties to be a minimum of 1.4 times the coverage of all annualized debt service requirements and cash distributions to Unitholders to be limited
to 100% of funds from operations as defined in the credit facilities.
71
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Our liquidity is impacted by contractual debt commitments. Our contractual debt commitments for the next five years are as follows:
Fixed rate mortgages – principal and interest2
$
487,879
$ 91,305
$ 80,391
$ 70,992
$ 35,820
$ 32,327 $
177,044
Twelve months ending December 31,
Contractual
Cash Flows1
2021
2022
2023
2024
2025
Thereafter
Fixed rate mortgages – maturities
1,019,674
84,985
159,451
238,384
226,268
30,596
Senior unsecured notes
Trade and other payables
Lease liabilities
Credit facilities
Total
1,326,040
189,051
185,899
30,476
30,476
197,776
124,853
108,878
148,115
2,537
2,953
2,476
1,714
2,390
964
2,254
964
2,267
3,106,561
476,756
431,170
343,956
295,782
263,930
1,294,967
64,811
36,176
672
18,215
9,748
—
—
$
3,171,372
$ 512,932
$ 431,842
$ 362,171
$ 305,530
$ 263,930 $
1,294,967
279,990
692,362
9,380
136,191
(1) Contractual cash flows include principal and interest and exclude extension options.
(2) Reduced by the interest rate subsidy payments to be received from Empire.
Crombie’s contractual debt obligations and projected development
expenditures can be funded from the following financing sources:
• secured and unsecured short-term financing subject to available
borrowing base;
• recycling capital through the disposition of select investment
properties;
• secured mortgage and term debt on unencumbered properties;
•
•
the issuance of additional senior unsecured notes;
the issuance of new units; and
• entering into new joint arrangements.
Off‑Balance Sheet Commitments and Guarantees
There are claims and litigation in which Crombie is involved, arising
out of the ordinary course of business operations. In the opinion of
management, any liability that would arise from such contingencies
would not have a significant adverse effect on these operating results.
Crombie has agreed to indemnify its trustees and officers, and
particular employees, in accordance with Crombie’s policies. Crombie
maintains insurance policies that may provide coverage against
certain claims.
Crombie obtains standby letters of credit to support its obligations with
respect to construction work on its investment properties and satisfying
mortgage financing requirements. As at December 31, 2020, Crombie
has a total of $5,580 in outstanding letters of credit related to:
Construction work being performed on investment properties
Mortgage lenders primarily to satisfy mortgage financings on redevelopment properties
Total outstanding letters of credit
December 31, 2020
December 31, 2019
$
$
3,740
1,840
5,580
$
$
3,805
1,840
5,645
Crombie does not believe that any of these standby letters of credit are
likely to be drawn upon.
As at December 31, 2020, Crombie had signed construction contracts
totaling $358,813 of which $288,183 has been paid. This includes
contracts signed within joint ventures at Crombie’s ownership
percentage.
Crombie has 100% guarantees on mortgages related to properties in
which it has less than a 100% interest. The mortgages payable related
to these guarantees are secured by specific charges against the
properties. As at December 31, 2020, Crombie has provided guarantees
of approximately $140,577 (December 31, 2019 – $145,713) on mortgages
in excess of their ownership interest in the properties. Responsibility
for ongoing payments of principal and interest on these mortgages
remains with the joint owners of the properties. The mortgages have a
weighted average term to maturity of 3.8 years.
Crombie signed an indemnity for a bond on a several basis at 1600
Davie Limited Partnership for $1,337. This indemnity was related to
removal of a lien issued from a third-party supplier. Subsequent to year
end, the lien and bond were removed.
72
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Under the terms of head leases with certain of Crombie’s joint operation partners, Crombie guarantees its joint operation partners their portion of any
uncollected rent receivable from the sub-tenant.
FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the estimated amount that Crombie would receive to sell a financial asset or pay to transfer a financial
liability in an orderly transaction between market participants at the measurement date.
Fair value determination is classified within a three-level hierarchy, based on observability of significant inputs, as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – unobservable inputs for the asset or liability.
There were no transfers between levels of the fair value during the year ended December 31, 2020.
Due to their short-term nature, the carrying value of the following financial instruments approximates their fair value at the balance sheet date:
• Cash and cash equivalents
• Trade receivables
• Trade and other payables.
The fair value of other financial instruments is based on discounted cash flows using discount rates that reflect current market conditions for
instruments with similar terms and risks. The following table summarizes the estimated fair value of other financial instruments which have a fair value
different from their carrying value:
Financial assets
Long-term receivables1
Financial liabilities
Investment property debt
Senior unsecured notes
Total other financial liabilities
December 31, 2020
December 31, 2019
Fair Value
$
$
$
25,042
1,427,367
1,206,285
2,633,652
$
$
$
Carrying
Value
25,051
1,336,560
1,125,000
2,461,560
Fair Value
23,911
1,400,821
946,700
2,347,521
$
$
$
$
$
$
Carrying
Value
24,120
1,363,385
925,000
2,288,385
(1) Long-term receivables include amounts in other assets for the capital expenditure program, interest rate subsidy and receivable from related parties.
Financial assets are derecognized when the contractual rights to benefits from the financial asset expire. The difference between the asset’s carrying
value and the consideration received or receivable is recognized as a charge to the statement of comprehensive income.
The fair value of the long-term receivables, investment property debt and senior unsecured notes are Level 2 measurements.
73
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth
RISK MANAGEMENT
Risk Management Framework
Management of the REIT is vested in the Board of Trustees, subject
to the provisions of applicable statutes and the Declaration of Trust.
The Board of Trustees of the REIT shall have explicit responsibility for
the stewardship of the REIT including the strategic planning process,
approval of the strategic plan, the identification of principal risks and
implementation of systems to manage these risks, succession planning,
operations, communications and reporting, and the integrity of the
REIT’s internal control and management information systems. The
Board discharges certain of its responsibilities through delegation to its
committees as more particularly set out in the committee mandates.
Risk Factors Related to the Business of Crombie
In the normal course of business, Crombie is exposed to a number
of financial risks that can affect its operating performance. The more
significant risks, and the action taken to manage them, are as follows:
ENTERPRISE RISK MANAGEMENT
Markets have been negatively impacted by COVID-19, which was
declared a pandemic by the World Health Organization (“WHO”) on
March 11, 2020. The continued spread of COVID-19 and the actions
being taken by governments, businesses and individuals to limit this
pandemic, including business closures and physical distancing, and
the effects of resulting layoffs and other job losses on the available
income of retail customers, may adversely impact our operations
and development activities including, among others, increasing the
credit risk associated with our receivables, limiting our ability to quickly
respond to changes in credit risk, extending the time to completion
and occupancy of our major developments, and limiting our ability to
serve our tenants. There is also increased risk as to the extent of the
impact of COVID-19 on leasing, occupancy, tenant inducements, land
use intensifications, market rents, and capital expenditures if the current
economic slowdown continues long-term, potentially impacting future
operational expectations and valuation of assets. This has resulted
in significant economic uncertainty, of which the potential impact on
Crombie’s future financial results is difficult to reliably measure.
REAL PROPERTY OWNERSHIP AND TENANT RISKS
All real property investments are subject to elements of risk. The value
of real property and any improvements thereto depend on the credit
and financial stability of tenants and upon the vacancy rates of the
properties. In addition, certain significant expenditures, including
property taxes, ground rent, mortgage payments, insurance costs, and
related charges must be made throughout the period of ownership of
real property regardless of whether a property is producing any income.
Cash available for distribution will be adversely affected if a significant
number of tenants are unable to meet their obligations under their
leases or if a significant amount of available space in the properties
becomes vacant and cannot be leased on economically favourable
lease terms.
Upon the expiry of any lease, there can be no assurance that the lease
will be renewed or the tenant replaced. The terms of any subsequent
lease may be less favourable to Crombie than those of an existing lease.
The ability to rent unleased space in the properties in which Crombie
has an interest will be affected by many factors, including general
economic conditions, local real estate markets, changing demographics,
supply and demand for leased premises, competition from other
available premises, and various other factors. Management utilizes
staggered lease maturities so that Crombie is not required to lease
unusually large amounts of space in any given year. In addition, the
diversification of our property portfolio by geographic location, tenant
mix, and asset type also help to mitigate this risk.
COMPETITION
The real estate business is competitive. Numerous other developers,
managers, and owners of properties compete with Crombie in seeking
tenants. Some of the properties located in the same markets as
Crombie’s properties may be newer, better located, less levered, or
have stronger anchor tenants than Crombie’s properties. Some property
owners with properties located in the same markets as Crombie’s
properties may be better capitalized and may be stronger financially
and hence better able to withstand an economic downturn. Competitive
pressures in such markets could have a negative effect on Crombie’s
ability to lease space in its properties and on the rents charged or
concessions granted.
DEVELOPMENT RISK
Crombie owns a number of investment properties at varying stages
of development as well as a significant pipeline of potential future
development properties.
Development risk associated with development projects underway
include: construction delays and their impact on financing and related
costs as well as commitments from tenants for occupancy; cost overruns
which could impact the profitability and/or financial viability of a
project; and the inability to meet revenue projections upon completion,
which could be impacted by unmet leasing assumptions on timing
of tenant occupancy or rent per square foot. Management strives
to mitigate these risks by undertaking certain projects with partners
(see Joint Arrangement Risk); entering into fixed cost construction
contracts with reputable contractors; entering into long-term financing
at the most appropriate stage possible; and entering into long-
term leases with reputable commercial tenants prior to construction
wherever possible.
Development risks associated with potential future development
properties include all of the above as well as the risks associated with
the ability to develop the property at all. This may include waiting for
all current leases to expire or negotiating favourable terms with current
tenants which could include costs associated with lease interruptions
to permit development, and inability to receive various required
municipal/provincial approvals for site plan, development, zoning,
construction, etc.
74
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 JOINT ARRANGEMENT RISK
Crombie has entered into joint arrangements or partnerships with other
third party entities. Risks associated with these arrangements include
risk of default by a partner on financing obligations or non-performance
of a partner’s obligations on a project, which may include development,
construction, management or leasing. Crombie attempts to mitigate
these risks by entering into arrangements with financially stable,
reputable partners with a proven track record and by negotiating
contractual rights in the event of a default.
SIGNIFICANT RELATIONSHIP
As at December 31, 2020, Empire, through its wholly-owned subsidiary
ECLD, holds a 41.5% indirect interest in Crombie. Crombie’s anchor
tenants are concentrated in a relatively small number of retail operators.
Specifically, 54.9% of the annual minimum rent and 54.0% of total
property revenue generated from Crombie’s properties is derived from
anchor tenants that are owned and/or operated by Empire (including
Sobeys and all other subsidiaries of Empire). Therefore, Crombie is
reliant on the sustainable operation by Empire in these locations.
POTENTIAL CONFLICTS OF INTEREST
The trustees will, from time to time, in their individual capacities, deal
with parties with whom Crombie may be dealing, or may be seeking
investments similar to those desired by Crombie. The interests of these
persons could conflict with those of Crombie. The Declaration of Trust
and Code of Conduct contain conflict of interest provisions requiring the
trustees to disclose their interests in certain contracts and transactions
and to refrain from voting on those matters. In addition, certain
decisions regarding matters that may give rise to a conflict of interest
must be made by a majority of independent elected trustees only.
Conflicts may exist due to the fact that certain trustees, senior officers,
and employees of Crombie are directors and/or senior officers of
Empire and/or its affiliates or will provide management or other services
to Empire and its affiliates. Empire and its affiliates are engaged in a
wide variety of real estate and other business activities. Crombie may
become involved in transactions that conflict with the interests of the
foregoing. The interests of these persons could conflict with those of
Crombie. To mitigate these potential conflicts, Crombie and Empire
have entered into a number of agreements to outline how potential
conflicts of interest will be dealt with, including a Non-Competition
Agreement, Management Agreement, and Development Agreement. As
well, the Declaration of Trust contains a number of provisions to manage
potential conflicts of interest including setting limits to the number of
Empire appointees to the Board, “conflict of interest” guidelines, as
well as outlining which matters require the approval of a majority of
the independent elected trustees such as any property acquisitions or
dispositions between Crombie and Empire or another related party.
RELIANCE ON KEY PERSONNEL
The management of Crombie depends on the services of certain key
personnel. The loss of the services of any key personnel could have an
adverse effect on Crombie and adversely impact Crombie’s financial
condition. Crombie does not have key person insurance on any of its key
employees.
RETAIL AND GEOGRAPHIC CONCENTRATION
Crombie’s portfolio of properties is heavily weighted in retail properties.
Consequently, changes in the retail environment and general consumer
spending, including the growing trend in e-commerce, could adversely
impact Crombie’s financial condition. Crombie’s portfolio of properties
was historically heavily concentrated in Atlantic Canada. Through
property acquisitions and dispositions over the last eight years, Crombie
has reduced its geographic concentration in Atlantic Canada, and
thereby reduced the adverse impact an economic downturn in any
one specific geographic region in Canada could have on Crombie’s
financial condition.
CYBER SECURITY RISK
A cyber security incident includes any material adverse event that
threatens the confidentiality, integrity and/or availability of Crombie’s
information resources. Such events, intentional or unintentional, could
include malicious software attacks, unauthorized access to confidential
data or information systems, or security breaches and could lead to
a disruption of operations or unauthorized access to, and release of,
confidential information. The results could include reputational damage
with tenants and suppliers, financial costs, or a disruption to Crombie’s
business. Crombie has implemented processes, procedures and
controls to help mitigate these risks, but these measures, as well as its
increased awareness of a risk of a cyber incident, do not guarantee that
its financial results will not be negatively impacted by the occurrence of
any such event.
ENVIRONMENTAL MATTERS
Environmental legislation and regulations have become increasingly
important in recent years. As an owner of interests in real property in
Canada, Crombie is subject to various Canadian federal, provincial, and
municipal laws relating to environmental matters.
Such laws provide that Crombie could become liable for environmental
harm, damage, or costs, including with respect to the release of
hazardous, toxic, or other regulated substances into the environment,
and the removal or other remediation of hazardous, toxic, or other
regulated substances that may be present at or under its properties.
The failure to remove or otherwise address such substances, if any,
may adversely affect Crombie’s ability to sell such property, realize the
full value of such property or borrow using such property as collateral
security, and could potentially result in claims against Crombie by public
or private parties by way of civil action.
Crombie’s operating policy is to obtain a Phase I environmental
site assessment, conducted by an independent and experienced
environmental consultant, prior to acquiring a property and to have
Phase II environmental site assessment work completed where
recommended in a Phase I environmental site assessment.
Crombie is not aware of any material non-compliance with
environmental laws at any of its properties, and is not aware of any
pending or threatened investigations or actions by environmental
regulatory authorities in connection with any of its properties. Crombie
has implemented policies and procedures to assess, manage and
monitor environmental conditions at its properties to manage exposure
to liability.
CLIMATE CHANGE RISK
Crombie has properties located in areas that are subject to natural
disasters and severe weather conditions such as hurricanes, ice
storms, floods, and fires, and the frequency of these natural disasters
and severe weather conditions may increase due to climate change.
The occurrence of natural disasters, severe weather conditions,
and the effects of climate change can delay new development or
redevelopment projects, increase investment costs to repair or replace
75
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth damaged properties, increase operation costs, including the cost of
energy at our properties, increase costs for future property insurance,
negatively impact the tenant demand for lease space, and cause
substantial damages or losses to our properties which could exceed
any applicable insurance coverage. The incurrence of any of these
losses, costs or business interruptions may adversely affect our financial
condition, results of operations and cash flows. In addition, changes in
government legislation and regulation on climate change could result
in increased capital expenditures to improve the energy efficiency of
our existing properties and could also require us to spend more on
our development or redevelopment projects without a corresponding
increase in revenues, which may adversely affect our financial condition,
results of operations and cash flows.
RELIANCE ON EMPIRE, SOBEYS, AND OTHER EMPIRE
AFFILIATES
A significant portion of Crombie’s rental income will be received
from tenants that are affiliates of Empire. In addition, Empire has
obligations to indemnify Crombie in respect to the cost of environmental
remediation of certain properties acquired by Crombie from Empire
to a maximum permitted amount under an omnibus environmental
indemnity agreement entered into as part of the closing of the
acquisition of certain properties. There is no certainty that Empire
will be able to perform its obligations to Crombie in connection
with these agreements. Empire and specific subsidiaries have not
provided any security to guarantee these obligations. If Empire,
Sobeys or such affiliates are unable or otherwise fail to fulfill their
obligations to Crombie, such failure could adversely impact Crombie’s
financial condition.
Financial Risk Management
The following table outlines our financial risks, how we manage these risks, and whether there was a change in risk exposure compared to the
prior year.
CREDIT RISK
Risk Description
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease
commitments. A provision for doubtful accounts and other adjustments to net property income are taken for all anticipated
collectability risks.
Risk Management
Crombie mitigates credit risk by geographical diversification, diversifying both its tenant mix and asset mix and conducting credit
assessments for new and renewing tenants.
In measuring tenant concentration, Crombie considers both the annual minimum rent and total property revenue of
major tenants.
• Crombie’s largest tenant, Empire (including Sobeys and all other subsidiaries of Empire), represents 54.9% of annual
minimum rent. No other tenant accounts for more than 3.3% of Crombie’s total minimum rent; and
• Total property revenue includes operating and realty tax cost recovery income and percentage rent. These amounts can
vary by property type, specific tenant leases, and where tenants may directly incur and pay operating and realty tax
costs. Crombie earned total property revenue of $56,889 and $209,780 respectively for the three months and year ended
December 31, 2020 (three months and year ended December 31, 2019 – $51,032 and $207,948 respectively) from Sobeys Inc.
and other subsidiaries of Empire.
Receivables are substantially comprised of current balances due from tenants and past due receivables since the start of
the pandemic, primarily July to September. The balance of accounts receivable past due is usually not significant; however,
historically low receivable balances have increased significantly during the year as a result of the impacts of the COVID-19
pandemic. Generally, rents are due the first of each month and other tenant billings are due 30 days after invoicing, and in
general, balances over 30 days are considered past due.
Crombie determines the expected credit loss in accordance with IFRS 9’s simplified approach for amounts receivable where
its loss allowance is measured at initial recognition and throughout the life of the receivable. Trade receivables are written off
when there is no reasonable expectation of recovery. Crombie assesses, on a forward-looking basis, the expected credit losses
associated with its rent receivables. In determining the expected credit losses, Crombie takes into account, on a tenant-by-tenant
basis, the payment history, future expectations, and knowledge gathered through discussions for rental concessions, applications
for rental relief through government programs, and ongoing discussions with tenants.
Crombie’s assessment of expected credit losses is subjective and, due to the impacts of COVID-19, the degree of uncertainty in
our assessments has increased. During the year ended December 31, 2020, Crombie has recorded bad debt expense of $10,894,
with the corresponding amount recorded as an expected credit loss against our accounts receivable balance.
Our trade receivables and allowance for doubtful accounts balances at December 31, 2020 were $42,211 and $(7,955),
respectively (December 31, 2019 – $21,017 and $(340), respectively).
Crombie manages its residual risk in its investment properties through an active capital expenditure program and actively
leasing any vacant spaces. The residual risk throughout Crombie’s portfolio is not considered significant although a prolonged
state of economic shutdown can impact Crombie’s ability to execute on its capital expenditure program and leasing activity.
76
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Liquidity Risk
Risk Description
Risk Management
Liquidity risk is the risk that Crombie may not have access to sufficient debt and equity capital to fund its growth program,
refinance debt obligations as they mature, or meet its ongoing obligations as they arise.
Cash flow generated from operating the property portfolio represents the primary source of liquidity used to service the interest
on debt, fund general and administrative expenses, reinvest in the portfolio through capital expenditures, as well as fund tenant
incentive costs and make distributions to Unitholders. Debt repayment requirements are primarily funded from refinancing
Crombie’s maturing debt obligations. Property acquisition funding requirements are funded through a combination of accessing
the debt and equity capital markets and recycling capital from property dispositions.
There is a risk that the debt capital markets may not refinance maturing fixed rate and floating rate debt on terms and
conditions acceptable to Crombie or at any terms at all. Crombie seeks to mitigate this risk by staggering its debt maturity dates.
There is also a risk that the equity capital markets may not be receptive to a REIT unit offering issue from Crombie with financial
terms acceptable to Crombie. Access to debt and equity capital markets may also be affected by national and international
events, and economic conditions beyond Crombie’s control. Crombie mitigates its exposure to liquidity risk utilizing a disciplined
approach to capital management.
Access to the $400,000 floating rate revolving credit facility is limited by the amount utilized under the facility and the amount of
any outstanding letters of credit, and cannot exceed the borrowing base security provided by Crombie.
The maximum principal amount of the unsecured bilateral revolving credit facility was increased from $100,000 to $130,000 in
the third quarter of 2020 and the maturity date was extended to September 1, 2021.
Refer to section “Available Credit Line Liquidity” of this MD&A for a maturity analysis of our recognized financial liabilities and
purchase obligations.
Interest Rate Risk
Risk Description
Interest rate risk is the potential for financial loss arising from increases in interest rates.
Risk Management
Crombie mitigates this risk by utilizing staggered debt maturities and limiting the use of permanent floating rate debt and, on
occasion, utilizing interest rate swap agreements. Crombie does not enter into interest rate swaps on a speculative basis.
As at December 31, 2020:
• Crombie’s weighted average term to maturity of its fixed rate mortgages is 5.7 years;
• Crombie’s weighted average term to maturity of its unsecured notes was 5.1 years;
• Crombie has a floating rate revolving credit facility available to a maximum of $400,000, subject to available Borrowing
Base, with a balance of $17,712 at December 31, 2020;
• Crombie has a floating rate bilateral credit facility available to a maximum of $130,000 with a balance of $35,000 at
December 31, 2020; and
• Crombie has interest rate swap agreements in place on $112,510 of floating rate debt.
A fluctuation in interest rates would have had an impact on Crombie’s operating income related to the use of floating rate debt.
The following table looks at the impacts of selected interest rate moves on operating income:
Three months ended
December 31, 2020
Year ended
December 31, 2020
Impact on operating income attributable to
Unitholders of interest rate changes on the floating
rate revolving credit facility
Decrease in rate
Increase in rate Decrease in rate
Increase in rate
Impact of a 0.5% interest rate change
Impact of a 1.0% interest rate change
$
$
103
207
$
$
(103)
(207)
$
$
648
1,296
$
$
(648)
(1,296)
Risk Factors Related to the Units
CASH DISTRIBUTIONS ARE NOT GUARANTEED
There can be no assurance regarding the amount of income to be
generated by Crombie’s properties. The ability of Crombie to make cash
distributions and the actual amount distributed are entirely dependent
on the operations and assets of Crombie and its subsidiaries, and are
subject to various factors including financial performance, obligations
under applicable credit facilities, the sustainability of income derived
from anchor tenants, and capital expenditure requirements. Cash
available to Crombie to fund distributions may be limited from time to
time because of items such as principal repayments, tenant allowances,
leasing commissions, capital expenditures, and redemptions of Units,
if any. Crombie may be required to use part of its debt capacity or to
reduce distributions in order to accommodate such items. The market
value of the Units will deteriorate if Crombie is unable to maintain its
distribution in the future, and that deterioration may be significant. In
addition, the composition of cash distributions for tax purposes may
change over time and may affect the after-tax return for investors.
77
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Crombie and its advisors underwent an extensive review of Crombie’s
organizational structure and operations to support Crombie’s assertion
that it meets the REIT technical tests contained in the Act through the
2020 fiscal year. The relevant tests apply throughout the taxation year
of Crombie and, as such, the actual status of Crombie for any particular
taxation year can only be ascertained at the end of the year.
Notwithstanding that Crombie may meet the criteria for a REIT and thus
be exempt from the distribution tax, there can be no assurance that the
Department of Finance (Canada) or other governmental authority will
not undertake initiatives which have an adverse impact on Crombie or
its Unitholders.
INDIRECT OWNERSHIP OF UNITS BY EMPIRE
Empire holds a 41.5% economic interest in Crombie through the
ownership of REIT and Class B LP Units. Pursuant to the Exchange
Agreement, each Class B LP Unit will be exchangeable at the option
of the holder for one Unit of Crombie and will be attached to a
Special Voting Unit of Crombie, providing for voting rights in Crombie.
Furthermore, pursuant to the Declaration of Trust, Empire is entitled to
appoint a certain number of Trustees based on the percentage of Units
held by it. Thus, Empire is in a position to exercise a certain influence
with respect to the affairs of Crombie. If Empire sells substantial
amounts of its Class B LP Units or exchanges such units for Units and
sells these Units in the public market, the market price of the Units could
fall. The perception among the public that these sales will occur could
also produce such effect.
OWNERSHIP OF SENIOR UNSECURED NOTES (“NOTES”)
There is no public market through which the notes may be sold.
Crombie does not intend to list the notes on any securities exchange or
include the notes in any automated quotation system.
Therefore, an active market for the notes may not develop or be
maintained, which would adversely affect the market price and liquidity
of the notes. In such case, the holders of the notes may not be able to
sell their notes at a particular time or at a favourable price. If a public
trading market were to develop, future trading prices of the notes may
be volatile and will depend on many factors, including:
•
the number of holders of notes;
• prevailing interest rates;
• Crombie’s operating performance and financial condition;
• Crombie’s credit rating;
•
•
the interest of securities dealers in making a market for them; and
the market for similar securities.
Even if an active trading market for the notes does develop, there is no
guarantee that it will continue. The notes may trade at a discount from
their initial offering price, depending upon prevailing interest rates, the
market for similar notes, Crombie’s performance, and other factors.
RESTRICTIONS ON REDEMPTIONS
It is anticipated that the redemption of Units will not be the primary
mechanism for holders of Units to liquidate their investments. The
entitlement of Unitholders to receive cash upon the redemption of their
Units is subject to the following limitations: (i) the total amount payable
by Crombie in respect of such Units and all other Units tendered for
redemption in the same calendar month must not exceed $50 (provided
that such limitation may be waived at the discretion of the Trustees);
(ii) at the time such Units are tendered for redemption, the outstanding
Units must be listed for trading on a stock exchange or traded or quoted
on another market which the Trustees consider, in their sole discretion,
provides fair market value prices for the Units; and (iii) the trading of
Units is not suspended or halted on any stock exchange on which the
Units are listed (or, if not listed on a stock exchange, on any market on
which the Units are quoted for trading) on the redemption date for more
than five trading days during the 10-day trading period commencing
immediately after the redemption date.
POTENTIAL VOLATILITY OF UNIT PRICES
One of the factors that may influence the market price of the Units is the
annual yield on the Units. An increase in market interest rates may lead
purchasers of Units to demand a higher annual yield, which accordingly
could adversely affect the market price of the Units. In addition, the
market price of the Units may be affected by changes in general
market conditions, fluctuations in the markets for equity securities, and
numerous other factors beyond the control of Crombie.
TAX-RELATED RISK FACTORS
Crombie intends to make distributions not less than the amount
necessary to eliminate Crombie’s liability for tax under Part I of the
Income Tax Act (Canada). Where the amount of net income and net
realized capital gains of Crombie in a taxation year exceeds the cash
distributions in the year, such excess net income and net realized capital
gains will be distributed to Unitholders and such additional distributions
may be in the form of cash and/or additional Units. Unitholders will
generally be required to include an amount equal to the fair market
value of any additional Units in their taxable income, notwithstanding
that they do not directly receive a cash distribution.
Certain properties have been acquired by Crombie on a tax deferred
basis, whereby the tax cost of these properties is less than their fair
market value. Accordingly if one or more of such properties are
disposed of, the gain for tax purposes recognized by Crombie will be in
excess of that which it would have been if it had acquired the properties
at a tax cost equal to their fair market values.
Publicly traded income trusts, or specified investment flow-through
entities (“SIFTs”), are subject to income taxation at corporate tax rates,
subject to an exemption for real estate investment trusts (“REITs”). The
exemption for REITs was provided to “recognize the unique history
and role of collective real estate investment vehicles,” which are well-
established structures throughout the world. A trust that satisfies the
criteria of a REIT throughout its taxation year will not be subject to
income tax in respect of distributions to its unitholders or be subject to
the restrictions on its growth that would apply to SIFTs.
While REITs were exempted from the SIFT taxation, a number of
technical tests apply to determine which entities would qualify as a REIT.
These technical tests did not fully accommodate the business structures
used by many Canadian REITs.
78
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 OTHER DISCLOSURES
RELATED PARTY TRANSACTIONS
As at December 31, 2020, Empire, through its wholly-owned subsidiary
ECLD, holds a 41.5% indirect interest in Crombie. Related party
transactions primarily include transactions with entities associated with
Crombie through Empire’s indirect interest. Related party transactions
also include transactions with joint venture entities in which Crombie has
a 50% interest, as well as transactions with key management personnel
and post-employment benefit plans.
Related party transactions are measured at the amount of
consideration established and agreed by the related parties.
Crombie’s transactions with related parties are as follows:
Property revenue
Property revenue
Head lease income
Lease termination income
Property operating expenses
General and administrative expenses
Property management services recovered
Other general and administrative expenses
Finance costs – operations
Interest rate subsidy
Finance costs – distributions to Unitholders
Three months ended December 31,
Year ended December 31,
2020
2019
2020
2019
(a)
(b)
(c)
$
$
$
$
$
$
$
$
56,889
456
34
(18)
243
(64)
62
(14,603)
$
$
$
$
$
$
$
$
51,032
178
33
(19)
177
(59)
68
(20,302)
$
$
$
$
$
$
$
$
209,780
1,162
136
(58)
594
(258)
256
(58,194)
$
$
$
$
$
$
$
$
207,948
856
521
(60)
602
(240)
279
(62,303)
(a) Crombie earned property revenue from Empire (including Sobeys
and all other subsidiaries of Empire).
(b) Certain executive management individuals and other employees
of Crombie provide general management, financial, leasing,
administrative, and other administration support services to
certain subsidiaries of Empire on a cost sharing basis pursuant to a
Management Agreement effective January 1, 2016.
(c) Crombie provides property management, leasing services and
environmental management to specific properties owned by certain
subsidiaries of Empire on a fee for service basis pursuant to a
Management Agreement. Revenue generated from the Management
Agreement is being recognized as a reduction of general and
administrative expenses.
Included in the above, during the year ended December 31, 2020,
Crombie issued 85,433 (December 31, 2019 – 65,721) Class B LP Units to
ECLD under the DRIP.
On February 11, 2020, ECLD purchased 2,593,750 Class B LP Units and
the attached Special Voting Units at a price of $16.00 per Class B LP Unit
for proceeds of $41,425, net of issue costs, on a private placement basis.
On May 28, 2020, Crombie purchased a property from a subsidiary of
Empire for a total purchase price of $4,535 before transaction costs.
On December 15, 2020, Crombie purchased a property from a
subsidiary of Empire for a total purchase price of $17,100 before closing
and transaction costs.
During the year ended December 31, 2020, Crombie invested $40,554
in properties anchored by subsidiaries of Empire, which resulted in
amended lease terms. These amounts have been included in tenant
incentive additions or income property additions depending on the
nature of the work completed. The costs are being amortized over the
amended lease terms or the useful life of the projects, as applicable.
Crombie has a mortgage payable of $25,526 (December 31, 2019 –
$20,401) due to 1600 Davie Limited Partnership. This mortgage relates
to the commercial component of the Davie Street development, 100% of
which is included in Crombie’s financial statements.
Amounts due from related parties include $15,533 (December 31, 2019
– $15,533) in 6% subordinated notes receivable due from Bronte Village
Limited Partnership and The Duke Limited Partnership.
USE OF ESTIMATES AND JUDGMENTS
The preparation of consolidated financial information requires
management to make judgments, estimates, and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income, and expenses. Significant judgment, estimate,
and assumption items include impairment, employee future benefits,
investment properties, purchase price allocations, and fair value
of financial instruments. These estimates are based on historical
experience and management’s best knowledge of current events and
actions that Crombie may undertake in the future.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revisions affect only that period, or in
the period of the revision and future periods if the revision affects both
current and future periods.
79
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Critical Accounting Estimates and Assumptions
INVESTMENT PROPERTY VALUATION
FAIR VALUE MEASUREMENT
A number of assets and liabilities included in Crombie’s consolidated
financial statements require measurement at, and/or disclosure of, fair
value. In estimating the fair value of an asset or a liability, Crombie uses
market-observable data to the extent it is available. Where market-
observable data is not available, Crombie estimates the fair value
based on discounted future cash flows using discount rates that reflect
current market conditions for instruments with similar terms and risks.
INVESTMENT PROPERTY ACQUISITIONS
Upon acquisition, Crombie performs an assessment of the investment
properties being acquired to determine whether the acquisition is to
be accounted for as an asset acquisition or a business combination. A
transaction is considered to be a business combination if the acquired
property meets the definition of a business under IFRS 3 – “Business
Combinations”: being an integrated set of activities and assets that
are capable of being managed for the purpose of providing a return
to the Unitholders. Crombie performs an assessment of the fair value
of the properties’ related tangible and intangible assets and liabilities
and allocates the purchase price to the acquired assets and liabilities.
Crombie assesses and considers fair value based on cash flow
projections that take into account relevant discount and capitalization
rates and any other relevant sources of market information available.
Estimates of future cash flow are based on factors that include historical
operating results, if available, and anticipated trends, local markets and
underlying economic conditions.
Crombie allocates the purchase price based on the following:
• Land – The amount allocated to land is based on an appraisal
estimate of its fair value.
• Buildings – Buildings are recorded at the estimated fair value of the
building and its components and significant parts.
•
Intangible Assets – Intangible assets are recorded for tenant
relationships, based on estimated costs avoided should the
respective tenants renew their leases at the end of the initial lease
term, adjusted for the estimated probability of renewal.
• Fair value of debt – Values ascribed to fair value of debt are
determined based on the differential between contractual and
market interest rates on long-term liabilities assumed at acquisition.
INVESTMENT PROPERTIES
Investment properties are properties which are held to earn rental
income. Investment properties include land, buildings and intangible
assets. Investment properties are carried at cost less accumulated
depreciation and are reviewed periodically for impairment.
Depreciation of buildings is calculated using the straight-line method
with reference to each property’s cost, the estimated useful life of the
building (not exceeding 40 years) and its components, significant parts
and residual value.
Repairs and maintenance improvements are expensed as incurred or,
in the case of major items that constitute a capital asset, are capitalized
to the building and amortized on a straight-line basis over the expected
useful life of the improvement.
80
External, independent valuation companies, having appropriate
recognized professional qualifications and recent experience in the
location and category of properties being valued, value substantially
all of Crombie’s investment property portfolio on a rotating basis over
a maximum period of four years. On a periodic basis, Crombie obtains
independent appraisals such that approximately 85% of our properties,
by value, will be externally appraised over a four year period. The fair
values, based on the measurement date, represent the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Internal quarterly valuations are performed using internally generated
valuation models prepared by considering the aggregate trailing
annual net property income recognized from leasing the property, that
is stabilized for any major tenant movement. Crombie has adjusted net
property income for expected impacts related to COVID-19 by looking
at potential bad debts or other income implications at each property,
and applying probability to several potential scenarios and, where
appropriate, normalized the COVID-19 impact on net operating income.
Biannual yields are obtained from an independent valuation company,
which reflects the specific risks inherent in the net property income, to
arrive at property valuations. As at December 31, 2020, management’s
determination of fair value was updated for current market
assumptions, informed by property income, market capitalization rates
and recent appraisals provided by independent appraisal professionals.
CHANGE IN USEFUL LIFE OF INVESTMENT PROPERTIES
The estimated useful lives of significant investment properties are
reviewed whenever events or circumstances indicate a change in useful
life. Estimated useful lives of significant investment properties are based
on management’s best estimate and the actual useful lives may be
different. Revisions to the estimated useful lives of investment properties
constitute a change in accounting estimate and are accounted for
prospectively by amortizing the cumulative changes over the remaining
estimated useful life of the related assets.
REVENUE RECOGNITION
Property revenue includes rents earned from tenants under lease
agreements, percentage rent, realty tax and operating cost recoveries,
and other incidental income. Certain leases have rental payments that
change over their term due to changes in rates. Crombie records the
rental revenue from leases on a straight-line basis over the term of
the lease. Accordingly, an accrued rent receivable is recorded for the
difference between the straight-line rent recorded as property revenue
and the rent that is contractually due from the tenants. In addition,
tenant incentives are amortized on a straight-line basis over the term of
existing leases and the amortization is shown as a reduction in property
revenue. Percentage rents are recognized when tenants are obligated
to pay such rent under the terms of the related lease agreements. Realty
tax and operating cost recoveries, and other incidental income, are
recognized on an accrual basis.
LEASE MODIFICATIONS
From time to time, Crombie may agree with tenants to modify the
terms of lease agreements, including changes to the consideration
under the lease. When the changes result in a reduction in amounts
receivable relating to past lease periods, Crombie applies IFRS 9 in
determining whether to partially or fully derecognize those receivables.
Other changes to the terms and conditions of the lease are treated
as lease modifications in accordance with IFRS 16, and the modified
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 lease is accounted for as a new lease from the effective date of the
modification, with any prepaid or accrued lease payments relating
to the original lease included as part of the lease payments for the
new lease.
EXPECTED CREDIT LOSS
Crombie assesses, on a tenant-by-tenant basis, losses expected with
its rent receivables. In determining the provision for doubtful accounts,
Crombie takes into account the payment history and future expectations
of likely default events (tenants asking for rental concessions/
abatements, applications for rental relief through government programs
such as CECRA and CERS, or stating they will not be making rental
payments on the due date) based on actual or expected insolvency
filings or company voluntary arrangements and likely deferrals of
payments due, and potential abatements to be granted by the landlord
through tenant negotiations or under CECRA. Crombie’s assessment
is subjective due to the forward-looking nature of the situation. As a
result, the provision for doubtful accounts is subject to a degree of
uncertainty and is made based on assumptions which may not prove
to be accurate with the unprecedented uncertainty caused by COVID-19.
Critical Judgments
Judgments made by management in the preparation of the
consolidated financial statements that have significant effect and
estimates with a significant risk of material adjustment to the carrying
amount of assets and liabilities are as follows:
IMPAIRMENT OF LONG-LIVED TANGIBLE AND
DEFINITE LIFE INTANGIBLE ASSETS
Long-lived tangible and definite life intangible assets are reviewed
for impairment at each reporting period for events or changes in
circumstances that indicate that the carrying value of the assets may
not be recoverable. If such an indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of impairment
loss (if any). The recoverable amount is the higher of fair value less
costs to sell and value in use. Where the asset does not generate cash
flows that are independent from other assets, Crombie estimates
the recoverable amount of the cash generating unit(s) to which the
asset belongs. When the recoverable amount of an asset (or cash
generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash generating unit) is reduced to the
recoverable amount. An impairment loss is recognized as an expense
immediately in operating income.
Where an impairment loss subsequently reverses, the carrying amount
of the asset (or cash generating unit) is increased to the revised
estimate, but is limited to the carrying amount that would have been
determined if no impairment loss had been recognized in prior
periods. A reversal of impairment loss is recognized immediately in
operating income.
DEFINED BENEFIT LIABILITY
Management estimates the defined benefit liability annually with the
assistance of independent actuaries; however, the actual outcome
may vary due to estimation uncertainties. The estimate of Crombie’s
defined benefit liability is based on standard rates of inflation, medical
cost trends and mortality. It also takes into account Crombie’s specific
anticipation of future salary increases. Discount factors are determined
each reporting period by reference to high-quality corporate bonds
that are denominated in the currency in which the benefits will be paid
and that have terms to maturity approximating the terms of the related
pension liability. Estimation uncertainties exist particularly with regard to
medical cost trends, which may vary significantly in future appraisals of
Crombie’s defined benefit obligations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of marketable financial instruments is the estimated
amount for which an instrument could be exchanged, or a liability
settled, by Crombie and a knowledgeable, willing party in an arm’s
length transaction.
The fair value of other financial instruments is based upon discounted
future cash flows using discount rates that reflect current market
conditions for instruments with similar terms and risks.
CONTROLS AND PROCEDURES
Crombie maintains a set of disclosure controls and procedures
designed to ensure that information required to be disclosed by
Crombie in its annual filings, interim filings, or other reports filed or
submitted by it under securities legislation is recorded, processed,
summarized, and reported within the time periods specified in the
securities legislation. Controls and procedures are designed to ensure
that information required to be disclosed by Crombie is accumulated
and communicated to Crombie’s management, including its President
and Chief Executive Officer (“CEO”) and Executive Vice President, Chief
Financial Officer and Secretary (“CFO”), as appropriate, to allow timely
decisions regarding disclosure. Our CEO and CFO have evaluated the
design and effectiveness of our disclosure controls and procedures as
of December 31, 2020. They have concluded that our current disclosure
controls and procedures are effective.
In addition, our CEO and CFO have designed, or caused to be designed
under their supervision, internal controls over financial reporting
(“ICFR”) to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes as defined in National Instrument 52-109. The control
framework management used to design and assess the effectiveness
of ICFR is Internal Control-Integrated Framework (2013) issued by The
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Further, our CEO and CFO have evaluated, or caused to be
evaluated under their supervision, the effectiveness of the design
and operation of ICFR as at December 31, 2020, and have concluded
that our current ICFR was effective based on that evaluation. There
have been no material changes to Crombie’s internal controls during
the year.
81
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Quarterly Information
Dec. 31,
2020
Sep.30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Mar. 31,
2019
Three months ended
Property revenue
$
97,060
$
92,920
$
96,501
$
102,252
$
96,823
$
97,346
$
99,332
$
105,240
Property operating expenses
Net property income
Operating income
Finance costs – distributions to
Unitholders
Finance income (costs) – change in
fair value of financial instruments
Increase (decrease) in net assets
attributable to Unitholders
Operating income per unit – Basic
Distributions
Distributions
Per unit
AFFO*
Basic
Per unit – Basic
Payout ratio1
FFO*
Basic
Per unit – Basic
Payout ratio2
Operating information
29,245
67,815
17,157
27,503
65,417
19,734
37,887
58,614
9,393
35,237
67,015
21,324
29,852
66,971
44,149
27,205
70,141
30,049
28,222
71,110
39,449
32,366
72,874
48,228
(35,211)
(35,202)
(35,187)
(34,702)
(48,936)
(33,753)
(33,744)
(33,736)
(725)
(187)
(212)
1,929
(70)
(264)
(332)
(671)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(18,779)
0.11
35,211
0.22
35,679
0.23
98.7%
42,305
0.27
83.2%
$
$
$
$
$
$
$
$
(15,655)
0.12
35,202
0.22
35,494
0.22
99.2%
43,327
0.27
81.2%
$
$
$
$
$
$
$
$
(26,006)
0.06
35,187
0.22
28,107
0.18
125.2%
34,557
0.22
101.8%
$
$
$
$
$
$
$
$
(11,449)
0.14
34,702
0.22
39,683
0.26
87.4%
45,661
0.29
76.0%
$
$
$
$
$
$
$
$
(4,857)
0.29
48,936
0.22
36,006
0.24
93.8%
42,132
0.28
80.1%
$
$
$
$
$
$
$
$
(3,968)
0.20
33,753
0.22
36,417
0.24
92.7%
43,380
0.29
77.8%
$
$
$
$
$
$
$
$
5,373
0.26
33,744
0.22
37,549
0.25
89.9%
44,567
0.29
75.7%
13,821
0.32
33,736
0.22
38,660
0.26
87.3%
45,460
0.30
74.2%
Number of investment properties
284
286
286
285
285
284
284
285
18,000,000
17,684,000
17,614,000
17,583,000
17,558,000
17,732,000
17,746,000
18,604,000
94.0%
96.4%
94.7%
95.3%
95.1%
95.6%
95.5%
96.2%
95.4%
96.1%
95.6%
96.1%
95.2%
95.9%
95.0%
95.7%
Gross leasable area
Economic occupancy
Committed occupancy
Debt metrics
Unencumbered investment
properties3
Available liquidity
$
471,708
$
370,885
$
406,303
$
449,898
$
449,016
$ 1,366,258
$ 1,460,152
$ 1,461,970
$ 1,479,211
$ 1,223,452
$
$
960,275
450,967
$
$
953,738
$ 1,012,707
413,087
$
346,347
Debt to gross fair value*
Weighted average interest rate4
Debt to trailing 12 months EBITDA*
Interest coverage ratio*
49.4%
3.9%
9.73x
2.77x
49.8%
4.1%
9.34x
3.03x
49.2%
4.1%
9.12x
2.64x
50.0%
4.1%
8.86x
3.18x
48.9%
4.2%
8.52x
2.99x
48.9%
4.2%
8.35x
2.90x
49.1%
4.2%
8.21x
3.00x
50.3%
4.2%
8.56x
2.93x
(1) Excludes special distribution December 31, 2019. Payout ratio including total distributions is 135.9%.
(2) Excludes special distribution December 31, 2019. Payout ratio including total distributions is 116.1%.
(3) Represents fair value of unencumbered properties.
(4) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.
82
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Variations in quarterly results over the past eight quarters have been
influenced by the following specific transactions and ongoing events:
• Property acquisitions and dispositions (gross proceeds excluding
closing and transaction costs) for each of the above three month
periods were:
December 31, 2020 – acquisition of two retail properties and one
development property for a total purchase price of $31,400 and
disposition of five retail properties for proceeds of $37,010;
September 30, 2020 – acquisition of one development property for a
total purchase price of $4,575;
June 30, 2020 – acquisition of one retail property for a total purchase
price of $4,535;
March 31, 2020 – acquisition of a parcel of land adjacent to an
existing retail property for a total purchase price of $280 and
disposition of a parcel of land adjacent to an existing retail property
for proceeds of $1,000;
December 31, 2019 – acquisition of one retail property, additions to
one existing retail property and one existing retail-related industrial
property for a total purchase price of $114,933, and disposition of an
89% interest in 15 retail properties for proceeds of $193,333;
• September 30, 2019 – acquisition of a 50% interest in one retail
property for a total purchase price of $9,500, disposition of an 89%
interest in one retail property for proceeds of $9,750, disposition of
100% of one retail property for proceeds of $12,255, disposition of air
rights to a joint venture for proceeds of $27,379, and disposition of
a freestanding building adjacent to a retail property for proceeds
of $175;
June 30, 2019 – disposition of one retail property for proceeds of
$21,500, disposition of residential lands adjacent to a development
property for proceeds of $3,275 and disposition of an 89% interest in
26 retail properties for proceeds of $161,589; and
March 31, 2019 – acquisition of one development property for a total
purchase price of $32,000, disposition of three retail properties for
proceeds of $64,780, disposition of a parcel of land adjacent to a
retail property for proceeds of $821, and disposition of a 50% interest
in seven retail properties for proceeds of $41,614.
• Property revenue and property operating expenses – Crombie’s
business is subject to seasonal fluctuations. Property operating
expenses during winter months include particular expenses such
as snow removal, which is a recoverable expense, thus increasing
property revenue during these same periods. Property operating
expenses during the summer and fall periods include particular
expenses such as paving and roof repairs.
• Per unit amounts for FFO and AFFO are influenced by operating
results as detailed above and by the timing of the issuance of REIT
Units and Class B LP Units.
83
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth
NON-GAAP FINANCIAL MEASURES
There are financial measures included in this MD&A that do not
have a standardized meaning under IFRS as prescribed by the
IASB. 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 relative
financial performance. These measures, as computed by Crombie,
Non-GAAP Measure
Description and Purpose
may differ from similar computations as reported by other entities
and, accordingly, may not be comparable to other such entities. These
measures are defined below and are cross referenced, as applicable,
to a reconciliation elsewhere in this MD&A to the most comparable
IFRS measure.
Reconciliation
“Net Property Income” starting on
page 48
“Net Property Income” starting on
page 48
“Funds from Operations (FFO)*” starting
on page 50
Property NOI on a cash
basis
• Property NOI on a cash basis, which excludes non-cash straight-line rent
recognition and non-cash tenant incentive amortization.
Same-asset property
cash NOI
Funds from Operations
(“FFO”)
• Management believes that Property NOI on a cash basis is an important
measure of operating performance as it reflects the cash generated by the
properties period-over-period.
• Same-asset properties are properties owned and operated by Crombie
throughout the current and comparative reporting periods, excluding any
property that was designated for redevelopment during either the current
or comparative period. Same-asset property cash NOI includes Crombie’s
proportionate ownership of jointly operated properties.
• Management believes this is a useful measure in understanding period-over-
period changes in property cash NOI before considering the changes in NOI
that can be attributed to the certain transactions such as acquisitions and
dispositions.
• The number of same-asset properties was 270 for the year ended
December 31, 2020.
• Crombie follows the recommendations of the Real Property Association of
Canada (“REALPAC”)’s February 2019 white paper in calculating FFO, and
defines FFO as increase (decrease) in net assets attributable to Unitholders
(computed in accordance with IFRS), adjusted for the following applicable
amounts:
- Gain or loss on disposal of investment properties and related income tax;
-
Impairment charges and recoveries;
- Depreciation and amortization expense of investment properties, including
amortization of tenant incentives charged against property revenue;
- Adjustments for equity accounted entities;
- Operational expenses from right of use assets;
-
Incremental internal leasing expenses;
- Finance costs – distributions on Crombie’s REIT and Class B LP Units
classified as financial liabilities; and
- Change in fair value of financial instruments.
• REALPAC provides for other adjustments in determining FFO which are
currently not applicable to Crombie, therefore not included in the above list.
Crombie’s expenditures on tenant incentives are capital in nature and Crombie
considers these costs comparable to other capital costs incurred to earn
property revenue. As a result, where depreciation and amortization of other
capital costs is added back in the calculation of FFO as recommended by
REALPAC, Crombie also adds back the amortization of tenant incentives.
84
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 Non-GAAP Measure
Description and Purpose
Reconciliation
Adjusted Funds from
Operations (“AFFO”)
• Crombie considers AFFO to be a useful measure in evaluating the recurring
economic performance of its operating results which will be used to support
future distribution payments.
“Adjusted Funds from Operations (AFFO)*”
starting on page 51
• Crombie follows the recommendations of REALPAC’s February 2019 white
paper in calculating AFFO.
• AFFO reflects earnings after the adjustments in arriving at FFO (excluding
internal leasing costs) and the provision for non-cash straight-line rent included
in revenue, amortization of effective swap agreements, maintenance capital
expenditures, maintenance tenant incentives and leasing costs, and any
settlement of effective interest rate swap agreements.
Debt to gross fair value • Used to evaluate Crombie’s flexibility to incur additional financial leverage.
“Debt Metrics” starting on page 63
Earnings before interest,
taxes, depreciation and
amortization (“EBITDA”)
• Represents earnings before interest, taxes, depreciation, and amortization
“Debt Metrics” starting on page 63
adjusted for certain items such as amortization of tenant incentives, impairment
of investment properties, and gain (loss) on disposal of investment properties.
• EBITDA is used as an input in several of our debt metrics, providing information
with respect to certain financial ratios that we use in measuring our debt profile
and assessing our ability to satisfy obligations, including servicing our debt.
• Crombie believes EBITDA is an indicative measure of its ability to service debt
requirements, fund capital projects and acquire properties.
Debt to EBITDA
• Used to assess Crombie’s financial leverage, to measure its ability to meet
“Debt Metrics” starting on page 63
financial obligations and measure its balance sheet strength.
Interest service coverage
• These ratios are useful in determining Crombie’s ability to service the interest
“Debt Metrics” starting on page 63
Debt service coverage
requirements of its outstanding debt.
Maintenance Capital Expenditures, Maintenance Tenant Incentives and Leasing Costs (“Maintenance
Expenditures”)
Maintenance expenditures represent costs incurred in sustaining and maintaining existing space and exclude expenditures that are revenue
enhancing. Crombie considers revenue enhancing expenditures to be costs that expand the GLA of a property, increase the net property income by a
minimum threshold, or otherwise enhance the property’s overall value.
Crombie’s policy is to charge AFFO* with maintenance expenditures based on a normalized rate per square foot applied to the weighted average
GLA, as these expenditures are not generally incurred on a consistent basis during the year, or from year to year. Crombie also discloses actual
maintenance expenditures for comparative purposes. The rate per square foot is a proxy for actual historic costs, anticipated future costs, and any
significant changes in the nature and age of the properties in the portfolio as it evolves over time. For 2020, Crombie has maintained the normalized
rate of $0.90 per square foot of weighted average GLA, based on the actual spend for the previous three years and estimated spend for 2020.
Additionally, Crombie combines maintenance capital expenditures with maintenance tenant incentive (“TI”) and deferred leasing costs in arriving
at the normalized per square foot charge to AFFO, based on the fact that in years where TI and leasing expenditures are reduced, spending on
maintenance capital expenditures may be accelerated and vice versa.
85
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth Maintenance Expenditures – Actual
Year ended
Three months ended
Year ended
Three months ended
Dec. 31,
2020
Dec. 31,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Dec. 31,
2019
Dec. 31,
2019
Sep. 30,
2019
Jun. 30,
2019
Mar. 31,
2019
$ 109,668
$ 49,797
$ 30,913
$ 14,819
$ 14,139
$
94,769
$
37,799
$
19,149
$
20,602
$
17,219
(103,982)
(47,692)
(29,887)
(13,890)
(12,513)
(86,807)
(34,322)
(17,195)
(19,951)
(15,339)
5,686
2,105
1,026
929
1,626
7,962
3,477
1,954
651
1,880
64,971
12,716
3,682
23,944
24,629
61,035
21,238
24,853
11,336
3,608
(51,464)
(9,557)
(1,585)
(18,947)
(21,375)
(53,564)
(17,879)
(23,992)
(9,612)
(2,081)
13,507
3,159
2,097
4,997
3,254
7,471
3,359
861
1,724
1,527
$
$
19,193
15,869
$
$
5,264
3,986
$
$
3,123
3,963
$
$
5,926
3,967
$
$
4,880
3,953
$
$
15,433
16,113
$
$
6,836
3,877
$
$
2,815
3,982
$
$
2,375
4,045
$
$
3,407
4,209
Total additions to
investment properties
Less: revenue
enhancing expenditures
Maintenance capital
expenditures
Total additions to TI and
deferred leasing costs
Less: revenue
enhancing expenditures
Maintenance TI and
deferred leasing costs
Total maintenance
expenditures – actual
Reserve amount
charged against AFFO*
Obligations for expenditures for TI’s occur when renewing existing
tenant leases or for new tenants occupying a space. Typically, leasing
costs for existing tenants are lower on a per square foot basis than for
new tenants. However, new tenants may provide more overall cash flow
to Crombie through higher rents or improved traffic to a property. The
timing of such expenditures fluctuates depending on the satisfaction of
contractual terms contained in the leases.
Maintenance TI and deferred leasing costs are the result of both lease
renewals and new leases and are reflective of the leasing activity during
2020 and 2019.
Revenue enhancing expenditures are capitalized and depreciated
or charged against revenue over their useful lives, but not deducted
when calculating AFFO*. Revenue enhancing expenditures during the
year ended December 31, 2020 consisted primarily of development
work, modernization investments, energy upgrades, and land use
intensification.
Crombie uses a normalized rate of $0.90 per square foot of weighted
average GLA for the reserve amount charged against AFFO*.
86
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 FORWARD-LOOKING INFORMATION
This MD&A contains forward-looking statements about expected future
events and the financial and operating performance of Crombie.
These statements, and the related estimates and assumptions used
by management, can be found in several sections of the MD&A,
including, but not limited to, “COVID-19 Impact – Operations”, “COVID-19
Impact – Financial”, “Development”, “Capital Management”, and “Other
Disclosures.” Forward-looking statements include, but are not limited
to, statements concerning management’s beliefs, plans, estimates,
intentions, and similar statements concerning anticipated future events,
results, circumstances, performance or expectations that are not
historical fact. Forward-looking statements generally can be identified
by the use of forward-looking terminology such as “may”, “will”,
“estimate”, “anticipate”, “believe”, “expect”, “intend”, or similar expressions
suggesting future outcomes or events. Such forward-looking statements
reflect management’s current beliefs and are based on information
currently available to management. All forward-looking information in
this MD&A is qualified by the cautionary statements under “Risk Factors
Related to the Business of Crombie” above, as well as the additional
statements in the “Risks” section of Crombie’s Annual Information Form
available at www.sedar.com. Forward-looking statements in this MD&A
and principle related risks include statements regarding:
(i)
anticipated annual spend with Empire for acquisitions and
modernizations, which are based on historical experience, and
may be impacted by the timing of Empire’s development activities
and the availability of Empire properties meeting Crombie’s
acquisition criteria, Empire’s capital needs, and Empire business
developments impacting the need for store modernizations;
(ii)
AFFO accretion and NAV growth from strategic acquisitions, which
may be affected by future occupancy and rental performance,
and/or redevelopment activity of acquired properties;
(x)
(iii) disposition of properties and the anticipated reinvestment of
net proceeds, which could be impacted by the availability of
purchasers, the availability of accretive property acquisitions, the
timing of property development activities or other accretive uses
for net proceeds and real estate market conditions;
(iv)
(v)
fair value of investment properties, which is based on assumptions
regarding the short and potential long-term impacts of COVID-19,
cash flow projections, and estimates of future cash flows and
anticipated trends and economic conditions;
overall indebtedness levels and terms and expectations relating
to refinancing, which could be impacted by the level of acquisition
and disposition activity that Crombie is able to achieve, levels of
indebtedness, Crombie’s ability to maintain and strengthen its
investment grade credit rating, future financing opportunities,
future interest rates, creditworthiness of major tenants and joint
arrangement partners, and market conditions;
(vi)
statements under the heading “Development” including the
locations identified, timing, cost, development size and nature,
and anticipated impact on portfolio quality and diversification,
net asset value, cash flow growth, unitholder value, or other
financial measures, all of which may be impacted by real estate
market cycles, future capitalization rates, the availability of
financing opportunities and labour, actual development costs,
and general economic conditions and factors described under
the “Development” section and which assumes obtaining required
municipal zoning and development approvals and successful
agreements with existing tenants, and where applicable,
successful execution of development activities undertaken by
related parties not under the direct control of Crombie;
(vii) estimated GLA, estimated completion dates, estimated total costs,
and estimated annual NOI cost for Active Major Developments,
which are subject to changes in site plans, cost tendering
processes, and continuing tenant negotiations, as well as access
to job sites, supplies and labour availability, ability to attract
tenants, tenant mix, building sizes, and availability and cost of
construction financing;
(viii) asset growth and reinvesting to develop or otherwise make
improvements to existing properties, which could be impacted
by the availability of labour, capital resource availability and
allocation decisions, as well as actual development costs;
(ix) generating improved rental income and occupancy levels,
including anticipated replacement of expiring tenancies, which
could be impacted by changes in demand for Crombie’s
properties, tenant bankruptcies, the effects of general economic
conditions, e-commerce, and supply of competitive locations in
proximity to Crombie locations;
estimated payments on derivative and non-derivative financial
liabilities, which could be impacted by interest rate subsidy
payments, interest rates on floating rate debt, and fluctuations
in the settlement value and settlement timing of any derivative
financial liabilities;
(xi) pending acquisitions or dispositions, which remain subject to
satisfaction of customary closing conditions;
(xii)
investment in joint ventures and the income contributed by those
investments, which could be impacted by the risk and uncertainty
from dependence on partners that are not under Crombie’s
control, including risk of default by a partner on financing
obligations or non-performance of a partner’s obligations
on a project, which may include development, construction,
management or leasing;
(xiii) tax exempt status, which can be impacted by regulatory changes
enacted by governmental authorities;
(xiv) anticipated distributions and payout ratios, which could be
impacted by results of operations and capital resource allocation
decisions; and
(xv) effect that any contingencies or guarantees would have on
Crombie’s financial statements which could be impacted by their
eventual outcome.
87
MANAGEMENT’S DISCUSSION AND ANALYSISProven Stability and Sustainable Growth These forward-looking statements are presented for the purpose of
assisting Crombie’s Unitholders and financial analysts in understanding
Crombie’s operating environment and may or may not be appropriate
for other purposes. These forward-looking statements are not
guarantees of future events or performance and, by their nature, are
based on Crombie’s current estimates and assumptions. Crombie
can give no assurance that actual results will be consistent with these
forward-looking statements. A number of factors, including those
discussed under “Risk Management” 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.
These forward-looking statements are made as at the date of the
MD&A and Crombie assumes no obligation to update or revise them to
reflect new or current events or circumstances unless otherwise required
by applicable securities legislation.
88
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT | Annual Report 2020 MANAGEMENT’S STATEMENT OF RESPONSIBILITY
MANAGEMENT’S STATEMENT OF RESPONSIBILITY
FOR FINANCIAL REPORTING
The management of Crombie Real Estate Investment Trust (“Crombie”) is responsible for the preparation and fair
presentation of the accompanying annual consolidated financial statements and Management’s Discussion and Analysis
(“MD&A”). The annual consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The annual consolidated financial
statements and information in the MD&A include amounts based on best estimates and judgments by management of the
expected effects of current events and transactions. In preparing this financial information, we make determinations about
the relevancy of information to be included, and estimates and assumptions that affect the reported information. The MD&A
also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources,
operating trends, risks and uncertainties. Actual results in the future may vary materially from our present assessment of this
information as future events and circumstances may not occur as expected.
In meeting our responsibility for the fair presentation of the annual consolidated financial statements and MD&A and for the
accounting systems from which they are derived, management has established internal controls designed to ensure that our
financial records are reliable for preparing consolidated financial statements and other financial information, transactions
are properly authorized and recorded, and assets are safeguarded against unauthorized use or disposition.
As at December 31, 2020, our Chief Executive Officer and Chief Financial Officer evaluated, or caused an evaluation under
their direct supervision, the design and operation of our internal controls over financial reporting and, based on that
assessment, determined that our internal controls over financial reporting were appropriately designed and operating
effectively.
The Board of Trustees oversees management’s responsibility for financial reporting through an Audit Committee. This
committee reviews Crombie’s annual consolidated financial statements and MD&A with both management and the
independent auditor before such statements are approved by the Board of Trustees. The Audit Committee also recommends
the appointment of independent external auditors to the Unitholders. The Audit Committee meets regularly with senior
management and the independent auditor to discuss internal controls, audit activities and financial reporting results. The
independent auditor has full and free access to, and meets regularly with, the Audit Committee to discuss their audits and
related matters.
DONALD E. CLOW, FCPA, FCA
President and Chief Executive Officer
February 24, 2021
CLINTON D. KEAY, CPA, CA
Chief Financial Officer and Secretary
February 24, 2021
Proven Stability and Sustainable Growth
89
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT
AUDITOR’S REPORT
TO THE UNITHOLDERS OF CROMBIE REAL
ESTATE INVESTMENT TRUST
OUR OPINION
BASIS FOR OPINION
In our opinion, the accompanying consolidated financial statements
present fairly, in all material respects, the financial position of Crombie
Real Estate Investment Trust and its subsidiaries (together, the Trust) as
at December 31, 2020 and 2019, and its financial performance and its
cash flows for the years then ended in accordance with International
Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).
We conducted our audit in accordance with Canadian generally
accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the
consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We are independent of the Trust in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial
statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
What we have audited
The Trust’s consolidated financial statements comprise:
•
•
•
•
•
the consolidated balance sheets as at December 31, 2020 and 2019;
the consolidated statements of comprehensive income (loss) for the
years then ended;
the consolidated statements of changes in net assets attributable to
unitholders for the years then ended;
the consolidated statements of cash flows for the years then ended;
and
the notes to the consolidated financial statements, which include
significant accounting policies and other explanatory information.
90
CROMBIE REIT | Annual Report 2020
INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment,
were of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2020. These matters were
addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Key audit matter
Valuation of investment properties
Refer to note 2 – Summary of significant accounting policies and note 3
– Investment properties to the consolidated financial statements
The REIT’s total investment properties as at December 31, 2020
were $3.65 billion. The investment properties are carried at cost less
accumulated depreciation, with their fair value disclosed at each
reporting period. The REIT disclosed a total fair value of $4.7 billion on
December 31, 2020.
In determining the fair value of investment properties to be disclosed,
management used an internally generated capitalized net operating
income method (the method) by applying capitalization rates to trailing
stabilized net operating income (NOI) of each investment property.
To determine the capitalization rate, management receives bi-annual
capitalization rate reports from external, knowledgeable property
valuators that provide a range of rates for various geographic regions
and for various types and qualities of properties within each region.
Management selected the appropriate capitalization rate for each
property from the range provided. Management has adjusted NOI
for expected impacts related to COVID-19, by looking at potential bad
debts or other lost income at each property and applying probability to
several potential scenarios.
The method requires certain key assumptions and estimates, which
include the capitalization rates for each specific property and stabilized
NOI. Significant judgments were made by management in respect of
these key assumptions and estimates.
We considered this a key audit matter due to the significant judgments
made by management when determining the fair values of the
investment properties for disclosure purposes and the high degree of
complexity in assessing audit evidence related to the key assumptions
and estimates made by management. In addition, the audit effort
involved the use of professionals with specialized skill and knowledge in
the field of real estate valuations.
How our audit addressed the key audit matter
Our approach to addressing the matter included the following
procedures, among others:
For a sample of investment properties, tested how management
determined the fair value, which included the following:
• Evaluated the appropriateness of the method.
• Tested the underlying data used in the method.
• Evaluated the reasonableness of capitalization rates by comparing
them to external market and industry data.
• Professionals with specialized skill and knowledge in the field of real
estate valuations further assisted us in assessing the capitalization
rates by (i) comparing them to externally available market data
and (ii) evaluating whether the allocation of capitalization rates to
investment properties is reasonable based on location, current leases
in place and the type of investment property.
• Agreed NOI used in the method to accounting records and evaluated
as applicable whether stabilization is reasonable considering (i) the
current and past leasing activity of the investment properties, (ii) the
comparability with external market and industry data, (iii) potential
bad debts or lost income resulting from COVID-19 and (iv) whether
these assumptions were aligned with evidence obtained in other
areas of the audit.
91
Proven Stability and Sustainable Growth INDEPENDENT AUDITOR’S REPORT
Key audit matter
How our audit addressed the key audit matter
Impairment of certain investment properties
Refer to note 2 – Summary of significant accounting policies and note 3
– Investment properties to the consolidated financial statements
Investment properties have a total carrying value of $3.65 billion at
December 31, 2020. Investment properties are reviewed for impairment
when events or changes in circumstances indicate that the carrying
value of the investment properties may not be recoverable. When such
an indication exists, the recoverable amount of the investment property
is estimated in order to determine the extent of impairment loss (if
any). During the year, management identified circumstances indicating
that the carrying value for certain investment properties may not be
recoverable. As a result, management performed an impairment test
and determined the recoverable amounts of the six properties using one
of the following methods: the capitalized net operating income method,
the discounted cash flow method or obtaining external independent
appraisals for the properties. In applying the capitalized net operating
income method, capitalization rates are applied to trailing stabilized
NOI. In applying the discounted cash flow method, discount rates are
applied to the forecasted cash flows reflecting the initial terms of the
lease or leases for that specific property and assumptions as to renewal
and new leasing activity. The Trust adjusted NOI for expected impacts
related to COVID-19, by looking at potential bad debts or other lost
income at each property and applying probability to several potential
scenarios. For the year ended December 31, 2020, management
recognized an impairment loss related to the six investment properties
of $6.6 million.
The key assumptions and estimates used in the methods were
capitalization rates, discount rates, lease renewals, leasing activity and
stabilized NOI. Significant judgments were made by management in
respect of these key assumptions and estimates.
We considered this a key audit matter due to the subjectivity and
complexity in applying audit procedures to test the valuation methods
used by management and the key assumptions and estimates used in
those methods, which involved significant judgment from management.
In addition, professionals with specialized skill and knowledge in the
field of real estate valuations assisted us in performing our procedures.
Our approach to addressing the matter included the following
procedures, among others:
For the six properties where management identified circumstances
indicating that the carrying value may not be recoverable, tested how
management determined the recoverable amount of the investment
properties, which included the following:
• Evaluated the appropriateness of the methods used by
management.
• Tested the underlying data used in the methods.
Where the capitalized net operating income method was used:
• Agreed NOI figures used in the methods to the accounting
records and evaluated whether stabilization was reasonable
considering (i) the current and past leasing activity of the investment
properties, (ii) the comparability with external market and industry
data,(iii) potential bad debts or lost income resulting from COVID-19
and (iv) whether these assumptions were aligned with evidence
obtained in other areas of the audit.
• Evaluated the reasonableness of capitalization rates by comparing
them to external market and industry data.
• Professionals with specialized skill and knowledge in the field of real
estate valuations further assisted us in assessing the capitalization
rates by (i) comparing them to externally available market data
and (ii) evaluating whether the allocation of capitalization rates to
investment properties is reasonable based on location, current leases
in place and the type of investment property.
Where the discounted cash flow method was used:
• Evaluated the reasonableness of assumptions such as lease renewals
and leasing activities by comparing them to current and past leasing
activity of the investment properties.
• Evaluated the reasonableness of discount rates by comparing them
to external market and industry data.
• Professionals with specialized skill and knowledge in the field of real
estate valuations further assisted us in assessing the reasonability of
the discount and capitalization rate used.
92
CROMBIE REIT | Annual Report 2020 INDEPENDENT AUDITOR’S REPORT
OTHER INFORMATION
Management is responsible for the other information. The other
information comprises the Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover
the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements,
our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND THOSE
CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED
FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of
the consolidated financial statements in accordance with IFRS, and for
such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management
is responsible for assessing the Trust’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless management either
intends to liquidate the Trust or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the
Trust’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with Canadian generally accepted
auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Trust’s internal control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by management.
• Conclude on the appropriateness of management’s use of the
going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Trust’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Trust to cease to continue as a
going concern.
Proven Stability and Sustainable Growth
93
INDEPENDENT AUDITOR’S REPORT
• Evaluate the overall presentation, structure and content of the
consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves
fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Trust to
express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
From the matters communicated with those charged with governance,
we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this independent
auditor’s report is Donald M. Flinn.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
CHARTERED PROFESSIONAL
ACCOUNTANTS
Halifax, Nova Scotia
February 24, 2021
94
CROMBIE REIT | Annual Report 2020
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED
BALANCE SHEETS
(in thousands of CAD dollars)
Assets
Non-current assets
Investment properties
Investment in joint ventures
Other assets
Current assets
Cash and cash equivalents
Other assets
Investment properties held for sale
Total Assets
Liabilities
Non-current liabilities
Fixed rate mortgages
Credit facilities
Senior unsecured notes
Employee future benefits obligation
Trade and other payables
Lease liabilities
Current liabilities
Fixed rate mortgages
Credit facilities
Senior unsecured notes
Employee future benefits obligation
Trade and other payables
Lease liabilities
Total liabilities excluding net assets attributable to Unitholders
Net assets attributable to Unitholders
Net assets attributable to Unitholders represented by:
Crombie REIT Unitholders
Special Voting Units and Class B Limited Partnership Unitholders
Commitments, contingencies and guarantees
Subsequent events
See accompanying notes to the consolidated financial statements.
Approved on behalf of the Board of Trustees
signed (Michael Knowlton)
MICHAEL KNOWLTON
Chair
Note
December 31, 2020
December 31, 2019
$
3,583,939
$
51,043
307,724
3,942,706
63,293
69,540
29,899
162,732
4,105,438
1,139,798
27,256
971,398
8,378
15,975
29,242
2,192,047
127,246
35,000
150,000
279
121,888
672
435,085
2,627,132
1,478,306
881,511
596,795
1,478,306
$
$
$
$
$
$
3
4
5
7
5
6
7
7
8
9
10
20
7
7
8
9
10
20
21
22
signed (Paul Beesley)
PAUL BEESLEY
Audit Committee Chair
3,557,572
45,123
286,947
3,889,642
—
30,625
—
30,625
3,920,267
1,045,015
54,308
922,479
8,122
14,613
28,675
2,073,212
257,495
—
—
289
133,484
744
392,012
2,465,224
1,455,043
870,792
584,251
1,455,043
95
Proven Stability and Sustainable Growth CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(in thousands of CAD dollars)
Note
December 31, 2020
December 31, 2019
Year ended
Property revenue
Property operating expenses
Net property income
Gain on disposal of investment properties
Impairment of investment properties
Depreciation and amortization
General and administrative expenses
Finance costs – operations
Income (loss) from equity accounted investments
Operating income before taxes
Taxes – current
Operating income attributable to Unitholders
Finance costs – other
Distributions to Unitholders
Change in fair value of financial instruments
(Decrease) increase in net assets attributable to Unitholders
Other comprehensive income (loss)
Items that will be subsequently reclassified to (decrease) increase in net assets
attributable to Unitholders:
Costs incurred on derivatives designated as cash flow hedges transferred to finance
costs – operations
Net change in derivatives designated as cash flow hedges
Items that will not be subsequently reclassified to Increase (decrease) in net assets
attributable to Unitholders:
Unamortized actuarial gains in employee future benefits obligation
Other comprehensive (loss) income
Comprehensive (loss) income
See accompanying notes to the consolidated financial statements.
11
$
388,733
$
3
3
3,5
13
14
4
13
129,872
258,861
3,335
(6,600)
(75,567)
(20,534)
(91,808)
(72)
67,615
(7)
67,608
(140,302)
805
(139,497)
(71,889)
510
(6,210)
(61)
(5,761)
$
(77,650)
$
398,741
117,645
281,096
81,803
(6,000)
(74,313)
(23,721)
(97,316)
334
161,883
(8)
161,875
(150,169)
(1,337)
(151,506)
10,369
2,136
(1,893)
1,219
1,462
11,831
96
CROMBIE REIT | Annual Report 2020 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
CONSOLIDATED STATEMENTS OF CHANGES
IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
REIT Units,
Special Voting
Units and Class B
LP Units
Net Liabilities
Attributable to
Unitholders
Accumulated Other
Comprehensive
Income (Loss)
Attributable to
Total
REIT Units
Class B LP
Units
(in thousands of CAD dollars)
(Note 15)
Balance, January 1, 2020
$
1,759,324
$
(304,412)
$
131
$
1,455,043
$
870,792
$
584,251
Adjustments related to EUPP
Comprehensive income (loss)
Units issued under Distribution
Reinvestment Plan
(“DRIP”)
Units issued under unit based
compensation plan
Unit issue proceeds, net of costs
39
—
2,856
745
97,273
—
(71,889)
—
(5,761)
39
39
—
(77,650)
(47,584)
(30,066)
—
—
—
—
—
—
2,856
745
97,273
1,671
1,185
745
55,848
—
41,425
Balance, December 31, 2020
$
1,860,237
$
(376,301)
$
(5,630)
$
1,478,306
$
881,511
$
596,795
REIT Units, Special
Voting Units and
Class B LP Units
Net Assets (Liabilities)
Attributable to
Unitholders
Accumulated Other
Comprehensive
Income (Loss)
Attributable to
Total
REIT Units
Class B LP
Units
(Note 15)
Balance, January 1, 2019
$
1,756,458
$
(312,287)
$
(1,331)
$
1,442,840
$
864,779
$
578,061
Adjustments related to adoption of
IFRS 16
Adjustments related to EUPP
Comprehensive income (loss)
Units issued under DRIP
Units issued under unit based
compensation plan
—
422
—
2,330
114
(2,505)
11
10,369
—
—
—
—
1,462
—
—
(2,505)
433
11,831
2,330
114
(1,501)
(1,004)
433
5,611
1,356
114
—
6,220
974
—
Balance, December 31, 2019
$
1,759,324
$
(304,412)
$
131
$
1,455,043
$
870,792
$
584,251
See accompanying notes to the consolidated financial statements.
97
Proven Stability and Sustainable Growth CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands of CAD dollars)
Cash flows provided by (used in)
Operating Activities
Note
December 31, 2020
December 31, 2019
Year ended
(Decrease) increase in net assets attributable to Unitholders
$
(71,889)
$
Special cash distribution
Additions to tenant incentives
Items not affecting operating cash
Change in other non-cash operating items
Income taxes paid
Cash used in operating activities
Financing Activities
Issue of mortgages
Financing – other
Repayment of mortgages – principal
Repayment of mortgages – maturity
Advance (repayment) of floating rate credit facilities
Advance of joint operation credit facilities
Issue of senior unsecured notes
Redemption of senior unsecured notes
REIT Units and Class B LP Units issued
REIT Units and Class B LP Units issue costs
Payments of lease liabilities
Cash provided by (used in) financing activities
Investing Activities
Acquisition of investment properties and intangible assets
Additions to investment properties
Proceeds on disposal of investment properties
Contributions to joint ventures
Distributions from joint ventures
Additions to fixtures and computer equipment
Additions to deferred leasing costs
Advances on long-term receivables
Cash (used in) provided by investing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See accompanying notes to the consolidated financial statements.
98
16
16
7
7
7
8
8
15
15
3
(14,857)
(63,536)
92,293
(15,900)
(7)
(73,896)
218,000
(3,419)
(42,686)
(214,912)
7,373
575
300,000
(100,000)
100,012
(2,739)
(735)
261,469
(42,687)
(109,668)
37,832
(6,061)
69
(1,399)
(1,435)
(931)
(124,280)
63,293
—
$
63,293
$
10,369
—
(58,919)
24,789
(12,100)
(8)
(35,869)
25,288
(3,308)
(51,504)
(133,759)
(133,504)
8,969
350,000
(125,000)
—
—
(669)
(63,487)
(152,507)
(94,769)
339,391
(2,251)
15,366
(1,520)
(2,116)
(2,238)
99,356
—
—
—
CROMBIE REIT | Annual Report 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of CAD dollars)
1) GENERAL INFORMATION AND NATURE OF OPERATIONS
Crombie Real Estate Investment Trust (“Crombie”) is an unincorporated “open-ended” real estate investment trust created pursuant to the Declaration
of Trust dated January 1, 2006, as amended. The principal business of Crombie is investing in income-producing retail, retail-related industrial,
mixed-use, and office properties in Canada. Crombie is registered in Canada and the address of its registered office is 610 East River Road, Suite 200,
New Glasgow, Nova Scotia, Canada, B2H 3S2. The consolidated financial statements for the year ended December 31, 2020 and December 31, 2019
include the accounts of Crombie and all of its subsidiary entities. The units of Crombie are traded on the Toronto Stock Exchange (“TSX”) under the
symbol “CRR.UN”.
The consolidated financial statements were authorized for issue by the Board of Trustees on February 24, 2021.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
(b) Basis of presentation
These consolidated financial statements are presented in Canadian dollars (“CAD”); Crombie’s functional and reporting currency, rounded to the
nearest thousand. The consolidated financial statements are prepared on a historical cost basis except for any financial assets and liabilities classified
as fair value with changes in fair value either recognized as an increase (decrease) in net assets attributable to Unitholders (“FVTPL” classification) or
fair value through other comprehensive income (“FVOCI” classification).
(c) Presentation of financial statements
When Crombie: (i) applies an accounting policy retrospectively; (ii) makes a retrospective restatement of items in its financial statements; or
(iii) reclassifies items on the balance sheet, it will present an additional balance sheet as at the beginning of the earliest comparative period.
(d) Basis of consolidation
(i) Subsidiaries
Crombie’s financial statements consolidate those of Crombie and all of its subsidiary entities at December 31, 2020. Subsidiaries are all entities over
which Crombie has control. All subsidiaries have a reporting date of December 31, 2020.
All intercompany transactions, balances, income, and expenses are eliminated in preparing the consolidated financial statements. Where unrealized
losses on intercompany asset sales are reversed on consolidation, the underlying asset is also tested for impairment from an entity perspective.
Operating income (loss) and other comprehensive income (loss) of subsidiaries acquired or disposed of during the period are recognized from the
effective date of acquisition, or up to the effective date of disposal, as applicable.
(ii) Joint arrangements
Joint arrangements are business arrangements whereby two or more parties have joint control. Joint control is based on the contractual sharing of
control over the decisions related to the relevant activities. Joint arrangements are classified as either joint operations or joint ventures depending on
the contractual arrangements related to the rights and obligations of the parties to the arrangement.
Joint operations
A joint operation is an arrangement wherein the parties to the arrangement have rights to the assets and obligations for the liabilities related to the
arrangement. For joint operations, Crombie recognizes its share of the assets, liabilities, revenues, and expenses of the joint operation in the relevant
categories of Crombie’s financial statements.
Joint ventures
A joint venture is an entity over which Crombie shares joint control with other parties and where the joint venture parties have rights to the net assets
of the joint venture. Joint control exists where there is a contractual agreement for shared control and wherein decisions about the significant relevant
activities of the arrangement require unanimous consent of the parties sharing control.
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth Investment in joint ventures is accounted for using the equity method. Under the equity method, the investment is initially recorded at cost with
subsequent adjustments for Crombie’s share of the results of operations and any change in net assets. Crombie’s joint venture entities have the
same reporting period as Crombie and adjustments,if any, are made to bring the accounting policies of joint venture entities in line with the policies
of Crombie.
(e) Investment properties
Investment properties are properties which are held to earn rental income. Investment properties include land, buildings, and intangible assets.
Investment properties are carried at cost less accumulated depreciation and are reviewed for impairment as described in Note 2(u).
Depreciation of buildings is calculated using the straight-line method with reference to each property’s cost, the estimated useful life of the building
(not exceeding 40 years) and its components, significant parts, and residual value.
Amortization of intangible assets is calculated using the straight-line method over the term of the tenant lease.
Repairs and maintenance items are expensed as incurred or, in the case of major items that constitute a capital asset, are capitalized to the building
and amortized on a straight-line basis over the estimated useful life of the improvement.
Upon acquisition, Crombie performs an assessment of investment properties being acquired to determine whether the acquisition is to be accounted
for as an asset acquisition or a business combination. A transaction is considered to be a business combination if the acquired property meets the
definition of a business under IFRS 3 – “Business Combinations”; being an integrated set of activities and assets that are capable of being managed
for the purpose of providing a return to the Unitholders.
For asset acquisitions, the total cost is allocated to the identifiable assets and liabilities on the basis of their relative fair values on the acquisition date.
Asset acquisitions do not give rise to goodwill. Fair value of such assets and liabilities is determined based on the following:
Land – the amount allocated to land is based on an appraisal estimate of its fair value.
Buildings – are recorded at the estimated fair value of the building and its components and significant parts.
Intangible assets – are recorded for tenant relationships, based on estimated costs avoided should the respective tenants renew their leases at the
end of the initial lease term, adjusted for the estimated probability of renewal.
Fair value of debt – values ascribed are determined based on the differential between contractual and market interest rates on long-term liabilities
assumed at acquisition.
For business combinations, the acquisition method is used wherein the components of the business combination (assets acquired, liabilities assumed,
consideration transferred and any goodwill or bargain purchase) are recognized and measured. The assets acquired and liabilities assumed from the
acquiree are measured at their fair value on the acquisition date.
Change in useful life of investment properties
The estimated useful lives of significant investment properties are reviewed whenever events or circumstances indicate a change in useful life.
Estimated useful lives of significant investment properties are based on management’s best estimate and the actual useful lives may be different.
Revisions to the estimated useful lives of investment properties constitute a change in accounting estimate and are accounted for prospectively by
amortizing the cumulative changes over the remaining estimated useful life of the related assets.
(f) Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, restricted cash, cash in bank, and guaranteed investments with a maturity less than 90 days
at date of acquisition.
(g) Assets held for sale and discontinued operations
A non-current asset is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than continuing
use. A property is classified as held for sale at the point in time when it is available for immediate sale, management has committed to a plan to sell
the property and is actively locating a purchaser for the property at a sales price that is reasonable in relation to the current estimated fair value of
the property, and the sale is expected to be completed within a one-year period. Properties held for sale are carried at the lower of their carrying
values and estimated fair value less costs to sell. In addition, assets classified as held for sale are not depreciated and amortized. A property that is
subsequently reclassified as held and in use is measured at the lower of its carrying value amount before it was classified as held for sale, adjusted for
any depreciation and amortization expense that would have been recognized had it been continuously classified as held and in use, and its estimated
fair value at the date of the subsequent decision not to sell.
Assets that are classified as held for sale and that constitute a component of Crombie are presented as discontinued operations and their operating
results are presented separately in the Consolidated Statements of Comprehensive Income (Loss). A component of Crombie includes a property type
or geographic area of operations.
(h) Employee future benefits obligation
The cost of Crombie’s pension benefits for defined contribution plans is expensed for employees in respect of the period in which they render services.
The cost of defined benefit pension plans and other benefit plans is accrued based on estimates, using actuarial techniques, of the amount of
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
benefits employees have earned in return for their services in the current and prior periods. The present value of the defined benefit obligation and
current service cost is determined by discounting the estimated benefits using the projected unit credit method to determine the fair value of the
plan assets and total actuarial gains and losses and the proportion thereof which will be recognized. Other factors considered for other benefit plans
include assumptions regarding salary escalation, retirement ages and expected growth rate of health care costs. The fair value of any plan assets
is based on current market values. The present value of the defined benefit obligation is based on the discount rate determined by reference to the
yield of high-quality corporate bonds of similar currency, having terms of maturity which align closely with the period of maturity of the obligation.
The defined benefit plan and post-employment benefit plan are unfunded.
The impact of changes in plan provisions will be recognized in benefit costs on a straight-line basis over a period not exceeding the average period
until the benefit becomes vested. To the extent that the benefits are already vested the past service cost will be recognized immediately.
In measuring its defined benefit liability, Crombie recognizes actuarial gains and losses directly to other comprehensive income (loss).
(i) Unit based compensation plans
(i) Deferred Unit Plan (“DU Plan”)
Crombie provides a voluntary DU Plan whereby eligible trustees, officers, and employees (the “Participants”) may elect to receive all or a portion
of their eligible compensation in deferred units (“DUs”). The Board (or its designated Committee) may determine that special compensation will
be provided in the form of DUs. Unless otherwise determined by the Board (or its designated Committee), DUs are fully vested at the time they are
allocated, with the value of the award recorded as a liability and expensed as general and administrative expenses. DUs are not Crombie REIT Units
and do not entitle a Participant to any Unitholder rights, including voting rights, distribution entitlements (other than those noted below) or rights
on liquidation. During the time that a Participant has outstanding DUs, whenever cash distributions are paid on REIT Units, additional DUs will be
credited to the Participant’s DU account, determined by multiplying the number of DUs in the Participant’s DU account on the REIT distribution record
date by the distribution paid per REIT Unit, and dividing the result by the market value of a Unit as determined in accordance with the DU Plan.
Additional DUs issued as a result of distributions vest on the same basis as noted above and the value of the additional DUs credited is expensed
to general and administrative expenses on allocation. A Participant may redeem their vested DUs in whole or in part by filing a written notice of
redemption; redemption will also occur as the result of specific events such as the retirement of a Participant. Upon redemption, a Participant will
receive the net value of the vested DUs being redeemed, with the net value determined by multiplying the number of DUs redeemed by the REIT
Unit’s market price on redemption date, less applicable withholding taxes. The Participant may elect to receive this net amount as a cash payment or
instead receive Crombie REIT Units for redeemed DU’s after deducting applicable withholding taxes. For fair value measurement purposes, each DU is
measured based on the market value of a REIT Unit.
(ii) Restricted Unit Plan (“RU Plan”)
Crombie has a RU Plan for certain eligible executives and employees (“RU Participants”), whereby the RU Participants will receive all or a portion of
their annual long-term incentive plan awards in restricted units (“RUs”). The RUs are accounted for under IAS 19 “Employee benefits” and the liability
and expense are recognized over the service period which ends on the vesting date. The RUs are subject to vesting conditions including being actively
employed. The number of RUs which fully vest is determined by: (a) the dollar amount of the award divided by the market value of a REIT Unit on the
award grant date, plus (b) deemed distributions on RUs during the vesting period at a rate equivalent to the number of REIT Units that would have
been issued had the vested RUs been treated as a REIT Unit. The value of these additional RUs from deemed distributions are expensed to general
and administrative expenses at the time of allocation. On the vesting date, each participant shall be entitled to receive a cash amount (net of any
applicable withholding taxes) equal to the number of vested RUs held by the RU Participant multiplied by the market value on the vesting date, as
determined by the market value of a REIT Unit. Alternatively, a RU Participant who is an eligible employee on the vesting date may elect to convert
their vested RUs to DUs under Crombie’s DU Plan. No REIT Units or other securities of Crombie will be issued from treasury as settlement of any
obligation under the RU Plan.
(iii) Performance Unit Plan (“PU Plan”)
Crombie has a PU Plan for certain eligible executives and employees (“PU Participants”), whereby the PU Participants may elect each year to
participate in the PU Plan and receive all or a portion of their eligible remuneration in the form of an allocation of performance units (“PUs”). The
PUs are accounted for under IAS 19 “Employee benefits” and the liability and expense are recognized over the service period which ends on the
vesting date. The PUs are subject to vesting conditions including being actively employed. The number of PUs which vest for each participant shall be
determined by: (a) multiplying the number of PUs granted under the award by an adjustment factor applicable to the performance level achieved,
and (b) adding the number of PUs or fractions thereof that would be credited to such participant upon the payment of distributions by Crombie on the
REIT Units, based on the number of additional REIT Units a participant would have received had the vested PUs been treated as REIT Units under a
distribution reinvestment plan during the PU term. Alternatively, a PU Participant who is an eligible employee on the vesting date may elect to convert
their vested PUs to DUs under Crombie’s DU Plan. A PU is not considered to be a REIT Unit or entitle any participant to exercise voting rights or any
other rights or entitlements associated with a REIT Unit. No REIT Units or other securities of Crombie will be issued from treasury as settlement of any
obligation under the PU Plan.
101
Proven Stability and Sustainable Growth (j) Distribution reinvestment plan (“DRIP”)
Crombie has a DRIP which is described in Note 15.
(k) Revenue recognition
(i) Lease revenue
Revenue earned from tenants under lease agreements includes base rent, realty tax recoveries, percentage rent, and other incidental income. Certain
leases have rental payments that change over their term due to changes in rates. Crombie records the rental revenue from leases on a straight-line
basis over the term of the lease. Accordingly, an accrued rent receivable is recorded for the difference between the straight-line rent recorded as
property revenue and the rent that is contractually due from the tenants. In addition, tenant incentives are amortized on a straight-line basis over
the term of existing leases and the amortization is shown as a reduction in property revenue. Percentage rents are recognized when tenants are
obligated to pay such rent under the terms of the related lease agreements. Realty tax recoveries, and other incidental income, are recognized on an
accrual basis as they become due.
(ii) Revenue from contracts with customers
Crombie recognizes revenue in accordance with IFRS 15 “Revenue from Contracts with Customers”. Crombie recognizes revenue from customers that
reflects the consideration to which it expects to be exchanged for. This involves identifying the contract with its customers, identifying the performance
obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract and
recognizing revenue when the entity satisfies its performance obligations.
Where a contract contains elements of variable consideration, Crombie estimates the amount of variable consideration to which it will be entitled
under the contract. Variable consideration can arise from discounts, refunds, credits, and price concessions. This consideration is allocated to all
performance obligations in a contract based on their relative standalone selling prices.
(l) Leases
Crombie as lessor
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All
other leases are classified as operating leases.
Crombie has determined that all of its leases with its tenants are operating leases. Revenue is recorded in accordance with Crombie’s revenue
recognition policy.
Crombie as lessee
Crombie leases include land, office, equipment, and vehicles. Crombie assesses whether a contract is or contains a lease at the inception of the
contract.
Leases are recognized as a right of use asset with a corresponding liability at the date at which the leased asset is available for use by Crombie,
except for short-term leases of 12 months or less or low value leases which are expensed in the consolidated income statement on a straight-line basis
over the lease term.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease; or if not determinable, the lessee’s incremental borrowing rate, specific to the term of the lease. Lease payments
can include fixed payments; variable payments based on an index or a rate known at the commencement date; and extension option payments
or purchase options, if Crombie is reasonably certain to exercise. The lease liability is subsequently measured at amortized cost using the effective
interest rate method and remeasured (with a corresponding adjustment to the related right of use asset) when there is a change in future lease
payments in case of renegotiation, changes of an index or rate or in case of reassessment of options.
At inception of the lease, the right of use asset is measured at cost, comprising initial lease liability, initial direct costs, and any future restoration or
refurbishment costs, less any incentives granted by the lessors. The right of use asset is depreciated over the shorter of the asset’s useful life and
the lease term of the underlying asset on a straight-line basis. The right of use asset is subject to testing for impairment if there is an indicator for
impairment.
Right of use assets are included in Investment Property and Other Assets and the lease liability are presented separately.
(m) Finance costs – operations
Finance costs – operations primarily comprise interest on Crombie’s borrowings. Finance costs directly attributable to the acquisition, redevelopment,
construction, or production of a qualifying asset are capitalized as a component of the cost of the asset to which it is related. All other finance costs –
operations are expensed in the period in which they are incurred using the effective interest rate method.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 (n) Finance costs – distributions to Unitholders
The determination to declare and make payable distributions from Crombie is at the discretion of the Board of Trustees and, until declared payable
by the trustees, Crombie has no contractual obligation to pay cash distributions to Unitholders.
(o) Income taxes
Crombie is taxed as a “mutual fund trust” for income tax purposes. It is the intention of Crombie, subject to approval of the trustees, to make
distributions not less than the amount necessary to ensure that Crombie will not be liable to pay income tax, except for the amounts incurred in its
incorporated subsidiaries.
(p) Hedges
Crombie may use cash flow hedges to manage exposures to increases in variable interest rates. Cash flow hedges are recognized on the balance
sheet at fair value with the effective portion of the hedging relationship recognized in other comprehensive income (loss). Any ineffective portion of
the cash flow hedge is recognized in operating income. Amounts recognized in accumulated other comprehensive income (loss) are reclassified to
operating income in the same periods in which the hedged item is recognized in operating income. Fair value hedges and the related hedged items
are recognized on the balance sheet at fair value with any changes in fair value recognized in operating income. To the extent the fair value hedge is
effective, the changes in the fair value of the hedge and the hedged item will offset each other.
Crombie assesses on an ongoing basis whether any existing derivative financial instrument continues to be effective in offsetting changes in interest
rates on the hedged items.
(q) Comprehensive income (loss)
Comprehensive income (loss) is the change in net assets attributable to Unitholders during a period from transactions and other events and
circumstances from non-Unitholder sources. Crombie reports a consolidated statement of comprehensive income (loss), comprising changes in net
assets attributable to Unitholders and other comprehensive income (loss) for the year. Accumulated other comprehensive income (loss), has been
included in the Consolidated Statements of Changes in Net Assets Attributable to Unitholders.
(r) Provisions
Provisions are recognized when: Crombie has a present obligation (legal or constructive) as a result of a past event; it is probable that Crombie will be
required to settle the obligation; and a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date,
taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows, where the time value of money is material. When some or all of
the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is
virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Provisions reflect Crombie’s best
estimate at the reporting date.
Environmental liabilities are recognized when Crombie has an obligation relating to site closure or rehabilitation. The extent of the work required
and the associated costs are dependent on the requirements of the relevant authorities and Crombie’s environmental policies. Provisions for the cost
of each closure and rehabilitation program are recognized at the time of occurrence and when Crombie has a reliable estimate of the obligation.
Changes in the provision are recognized in the period of the change.
(s) Financial instruments
Crombie classifies financial assets and liabilities according to their characteristics and management’s choices and intentions related thereto for the
purpose of ongoing measurement. Classification choices for financial assets include: a) Amortized cost – recorded at amortized cost with gains and
losses recognized in increase (decrease) in net assets attributable to Unitholders in the period that the asset is derecognized or impaired; b) Fair
value, with two options; (i) FVTOCI – measured at fair value with changes in fair value recognized in other comprehensive income (loss) for the
current period until realized through disposal or impairment; and (ii) FVTPL – measured at fair value with changes in fair value recognized in increase
(decrease) in net assets attributable to Unitholders for the period.
Classification choices for financial liabilities include: a) Amortized cost - recorded at amortized cost with gains and losses recognized in increase
(decrease) in net assets attributable to Unitholders in the period that the asset is derecognized or impaired; and b) FVTPL - measured at fair value
with changes in fair value recognized in increase (decrease) in net assets attributable to Unitholders for the period. Subsequent measurement for
these assets and liabilities is based on either fair value or amortized cost using the effective interest method, depending upon their classification.
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth Crombie’s financial assets and liabilities are generally classified and measured as follows:
Financial Asset/Liability
Cash and cash equivalents
Trade receivables
Restricted cash
Long-term receivables
Marketable securities
Derivative financial assets and liabilities
Category
Assets at amortized cost
Assets at amortized cost
Assets at amortized cost
Assets at amortized cost
FVTPL
FVTPL
Measurement
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
Fair value
Accounts payable and other liabilities (excluding interest rate swaps)
Financial liabilities at amortized cost
Amortized cost
Investment property debt
Senior unsecured notes
Financial liabilities at amortized cost
Amortized cost
Financial liabilities at amortized cost
Amortized cost
Other balance sheet accounts, including, but not limited to, prepaid expenses, accrued straight-line rent receivable, tenant incentives, investment
properties, and employee future benefits obligation are not financial instruments.
Transaction costs, other than those related to financial instruments classified as FVTPL that are expensed as incurred, are added to the fair value of
the financial asset or financial liability on initial recognition and amortized using the effective interest method. Financing costs incurred to establish
revolving credit facilities are deferred and amortized on a straight-line basis over the term of the facilities. In the event any debt is extinguished, the
associated unamortized financing costs are expensed immediately.
Financial assets are derecognized when the contractual rights to benefits from the financial asset expires. The difference between the asset’s carrying
value and the consideration received or receivable is recognized as a charge to the statement of comprehensive income. At each reporting date,
Crombie assesses whether there is objective evidence that a financial asset carried at amortized cost is impaired. If such evidence exists, Crombie
recognizes an impairment loss, as the difference between the carrying value of the instrument and the present value of the estimated future cash
flows, discounted using the instrument’s original effective interest rate or a discount rate based on the risk associated with the financial asset being
tested. The carrying amount of the asset is reduced by this amount through a charge to the statement of comprehensive income.
Crombie determines the expected credit loss in accordance with IFRS 9’s simplified approach for amounts receivable where its loss allowance is
measured at initial recognition and throughout the life of the receivable. Trade receivables are written off when there is no reasonable expectation of
recovery.
(t) Fair value measurement
The fair value of financial instruments is the estimated amount that Crombie would receive to sell a financial asset or pay to transfer a financial liability
in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the
transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability or, in the absence of a principal
market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by Crombie.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.
Crombie uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The fair value of any interest rate swap is estimated
by discounting net cash flows of the swaps using forward interest rates for swaps of the same remaining maturities.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in
its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
When determining the highest and best use of non-financial assets Crombie takes into account the following:
• use of the asset that is physically possible – Crombie assesses the physical characteristics of the asset that market participants would take into
account when pricing the asset;
• use that is legally permissible – Crombie assesses any legal restrictions on the use of the asset that market participants would take into account
when pricing the asset; and
• use that is financially feasible – Crombie assesses whether a use of the asset that is physically possible and legally permissible generates adequate
income or cash flows to produce an investment return that market participants would require from an investment in that asset put to that use.
(u) Impairment of long-lived tangible and definite life intangible assets
Long-lived tangible and definite life intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. When such an indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and value in use. Where the asset does not
generate cash flows that are independent from other assets, Crombie estimates the recoverable amount of the cash generating unit(s) to which
the asset belongs. When the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash generating unit) is reduced to the recoverable amount. An impairment loss is recognized as an expense immediately in
operating income.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate, but is
limited to the carrying amount that would have been determined if no impairment loss had been recognized in prior periods. A reversal of impairment
loss is recognized immediately in operating income.
(v) Net assets attributable to Unitholders
(i) Balance Sheet presentation
In accordance with International Accounting Standard (“IAS”) 32 Financial Instruments: Presentation, puttable instruments are generally classified
as financial liabilities. Crombie’s REIT Units and Class B LP Units with attached Special Voting Units (“SVU”) are both puttable instruments, meeting
the definition of financial liabilities in IAS 32. There are exception tests within IAS 32 which could result in classification as equity; however, Crombie’s
units do not meet the exception requirements. Therefore, Crombie has no instrument qualifying for equity classification on its Balance Sheet pursuant
to IFRS. The classification of all units as financial liabilities with presentation as net assets attributable to Unitholders does not alter the underlying
economic interest of the Unitholders in the net assets and net operating results attributable to Unitholders.
(ii) Balance Sheet measurement
REIT Units and Class B LP Units with attached SVUs are carried on the Balance Sheet at net asset value. Although puttable instruments classified
as financial liabilities are generally required to be remeasured to fair value at each reporting period, the alternative presentation as net assets
attributable to Unitholders reflects that, in total, the interests of the Unitholders are limited to the net assets of Crombie.
(iii) Statement of Comprehensive Income (Loss) presentation
As a result of the classification of all units as financial liabilities, the Statement of Comprehensive Income (Loss) recognizes distributions to Unitholders
as a finance cost. In addition, terminology such as net income has been replaced by Increase (decrease) in net assets attributable to Unitholders to
reflect the absence of an equity component on the Balance Sheet.
(iv) Presentation of per unit measures
As a result of the classification of all units as financial liabilities, Crombie has no equity instrument; therefore, in accordance with IAS 33 Earnings per
Share, there is no denominator for purposes of calculation of per unit measures.
(v) Allocation of comprehensive income (loss)
The components of comprehensive income (loss) are allocated between REIT Units and Class B LP Units as follows:
• Operating income – based on the weighted average number of units outstanding during the reporting period.
• Distributions to Unitholders – based on the actual distributions paid to each separate unit class.
• Accumulated other comprehensive income (loss) – increases are allocated based on the weighted average number of units outstanding during the
reporting period, decreases in previously accumulated amounts are drawn down based on the average accumulation allocation rate.
(w) Critical judgments in applying accounting policies
The following are the critical judgments that have been made in applying Crombie’s accounting policies and that have the most significant effect on
the consolidated financial statements:
(i) Investment properties
Crombie’s accounting policies relating to investment properties are described in Note 2(e). In applying these policies, judgment is applied in
determining whether certain costs are additions to the carrying amount of an investment property and whether properties acquired are considered to
be asset acquisitions or business combinations. Crombie has determined that all properties acquired to date are asset acquisitions.
(ii) Investment in joint ventures
Crombie makes judgments in determining the appropriate accounting for investments in other entities. Such judgments include: determining the
significant relevant activities and assessing the level of influence Crombie has over such activities through agreements and contractual arrangements.
(iii) Classifications of Units as liabilities
Crombie’s accounting policies relating to the classification of Units as liabilities are described in Note 2. The critical judgments inherent in this policy
relate to applying the criteria set out in IAS 32, “Financial Instruments: Presentation”, relating to the puttable instrument exception.
(iv) Investment in joint arrangements
Crombie makes judgments in determining the appropriate accounting for investments in other entities. Such judgments include: determining the
significant relevant activities and assessing the level of control or influence Crombie has over such activities through agreements and contractual
arrangements; and determining whether Crombie’s rights and obligations are directly related to the assets and liabilities of the arrangement or to the
net assets of the joint arrangement.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth (x) Critical accounting estimates and assumptions
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. As of December 31, 2020, there continues to be increased measurement uncertainty
due to the outbreak of the novel strain of coronavirus (“COVID-19”). The estimates and assumptions that are critical to the determination of the
amounts reported in the consolidated financial statements relate to the following:
(i) Fair value measurement
A number of assets and liabilities included in Crombie’s consolidated financial statements require measurement at, and/or disclosure of, fair value. In
estimating the fair value of an asset or a liability, Crombie uses market-observable data to the extent it is available. Where market-observable data
is not available, Crombie estimates the fair value based on discounted future cash flows using discount rates that reflect current market conditions for
instruments with similar terms and risks. The significant methods and assumptions used in estimating fair value are set out in Notes 2(i), 2(t), 3 and 18.
(ii) Investment properties
Investment properties are carried at cost less accumulated depreciation. Crombie estimates the residual value and useful lives of investment
properties and the significant components thereof to calculate depreciation and amortization.
(iii) Impairment of long‑lived tangible and definite life intangible assets
Long-lived tangible and definite life intangible assets are reviewed for impairment when events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. When such an indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of impairment loss (if any). The recoverable amount is the higher of fair value less costs to sell and value in use. Where the asset does not
generate cash flows that are independent from other assets, Crombie estimates the recoverable amount of the cash generating unit(s) to which
the asset belongs. When the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash generating unit) is reduced to the recoverable amount. An impairment loss is recognized as an expense immediately in
operating income.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate, but is
limited to the carrying amount that would have been determined if no impairment loss had been recognized in prior periods. A reversal of impairment
loss is recognized immediately in operating income.
(iv) Investment property valuation
External, independent valuation companies, having appropriate recognized professional qualifications and recent experience in the location and
category of properties being valued, value substantially all of Crombie’s investment property portfolio on a rotating basis over a maximum period of
four years. The fair values, based on the measurement date, represent the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. Internal quarterly valuations are performed using internally generated
valuation models prepared by considering the aggregate trailing annual net property income recognized from leasing the property, that is stabilized
for any major tenant movement. Crombie has adjusted net property income for expected impacts related to COVID-19 by looking at potential bad
debts or other income implications at each property, and applying probability to several potential scenarios and where appropriate, normalized the
COVID-19 impact on net operating income. Biannual yields are obtained from an independent valuation company, which reflects the specific risks
inherent in the net property income, to arrive at property valuations. As at December 31, 2020, management’s determination of fair value was updated
for current market assumptions, informed by property income, market capitalization rates, and recent appraisals provided by independent appraisal
professionals.
(v) Defined benefit liability
Management estimates the defined benefit liability annually with the assistance of independent actuaries; however, the actual outcome may vary
due to estimation uncertainties. The estimate of Crombie’s defined benefit liability is based on standard rates of inflation, medical cost trends, and
mortality. It also takes into account Crombie’s specific anticipation of future salary increases. Discount factors are determined each reporting period
by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability. Estimation uncertainties exist particularly with regard to medical cost trends, which may vary
significantly in future appraisals of Crombie’s defined benefit obligations.
(vi) Purchase price allocation
Investment properties are properties which are held to earn rental income. Investment properties include land, buildings, and intangible assets. Upon
acquisition, management allocates the purchase price of the acquisition as described in Note 2(e). This allocation contains a number of estimates and
underlying assumptions including, but not limited to, highest and best use and fair value of the properties, estimated cash flows, discount rates, lease-
up rates, inflation rates, renewal rates, tenant incentive allowances, cost recoveries, and leasing costs and termination costs.
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 (vii) Lease modifications
From time to time, Crombie may agree with tenants to modify the terms of lease agreements, including changes to the consideration under the
lease. When the changes result in a reduction in amounts receivable relating to past lease periods, Crombie applies IFRS 9 in determining whether
to partially or fully derecognize those receivables. Other changes to the terms and conditions of the lease are treated as lease modifications in
accordance with IFRS 16, and the modified lease is accounted for as a new lease from the effective date of the modification, with any prepaid or
accrued lease payments relating to the original lease included as part of the lease payments for the new lease.
(viii) Risk management
Markets have been negatively impacted by COVID-19, which was declared a pandemic by the World Health Organization (“WHO”) on March 11, 2020.
The continued spread of COVID-19 and the actions being taken by governments, businesses and individuals to limit this pandemic, including business
closures and physical distancing, and the effects of resulting layoffs and other job losses on the available income of retail customers may adversely
impact our operations and development activities including, among others, increasing the credit risk associated with our receivables, limiting our
ability to quickly respond to changes in credit risk, extending the time to completion and occupancy of major developments, and limiting our ability
to serve our tenants. This has resulted in significant economic uncertainty, of which the potential impact on our future financial results is difficult to
reliably measure.
(ix) Expected credit loss
Crombie assesses, on a tenant-by-tenant basis, losses expected with its rent receivables. In determining the provision for doubtful accounts, Crombie
takes into account the payment history and future expectations of likely default events (tenants asking for rental concessions/abatements, applications
for rental relief through government programs such as Canada Emergency Commercial Rent Assistance program (“CECRA”) and Canada Emergency
Rent Subsidy (“CERS”) or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings or company
voluntary arrangements and likely deferrals of payments due, and potential abatements to be granted by the landlord through tenant negotiations
or under CECRA. Crombie’s assessment is subjective due to the forward-looking nature of the situation. As a result, the provision for doubtful accounts
is subject to a degree of uncertainty and is made based on assumptions which may not prove to be accurate with the unprecedented uncertainty
caused by COVID-19.
(y) Application of new IFRS
(i) IFRS 3 Business combinations
Effective January 1, 2020, Crombie has applied the amendments to the requirements of IFRS 3, “Business Combinations” (“IFRS 3”), in relation to
whether a transaction meets the definition of a business combination. The amendments help provide guidance on whether the acquired assets and
activities constitute a business. The change is applied prospectively on or after the effective date and as such there was no impact on the adoption of
this amendment.
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth 3) INVESTMENT PROPERTIES
Income properties
Properties underdevelopment
Income properties
Cost
December 31,
2020
December 31,
2019
$
$
3,520,562
63,377
3,583,939
$
$
3,461,359
96,213
3,557,572
Land
Buildings
Intangibles
Deferred
Leasing
Costs
Total
Opening balance, January 1, 2020
$
1,117,701
$
2,825,447
$
112,313
$
8,853
$
4,064,314
Acquisitions
Additions
Dispositions
Write-off of fully depreciated assets
Transfer to investment properties held for sale (Note 6)
Reclassification from properties under development
12,115
1,054
(7,618)
—
(16,219)
40,575
20,520
49,888
(23,111)
(2,890)
(24,135)
75,586
2,360
—
(440)
(39,982)
(933)
—
—
1,462
—
(237)
—
—
34,995
52,404
(31,169)
(43,109)
(41,287)
116,161
Balance, December 31, 2020
1,147,608
2,921,305
73,318
10,078
4,152,309
Accumulated depreciation, amortization, and
impairment
Opening balance, January 1, 2020
Depreciation and amortization
Dispositions
Impairment
Write-off of fully depreciated assets
Transfer to investment properties held for sale (Note 6)
2,673
317
—
3,300
—
—
530,576
67,565
(4,078)
3,300
(2,890)
(4,107)
Balance, December 31, 2020
6,290
590,366
66,657
5,366
(203)
—
(39,982)
(627)
31,211
3,049
1,068
—
—
(237)
—
3,880
602,955
74,316
(4,281)
6,600
(43,109)
(4,734)
631,747
Net carrying value, December 31, 2020
$
1,141,318
$
2,330,939
$
42,107
$
6,198
$
3,520,562
Included in land are right of use assets of $16,089 net of accumulated depreciation of $633 for land held under lease.
During the year ended December 31, 2020, Crombie recorded impairments totalling $6,600 on six properties. The impairments were the result of the
fair value impact of tenant lease expiries, slower-than-expected leasing activity, and the ongoing impacts of COVID-19. Impairment was measured on
a per property basis and was determined as the amount by which carrying value, using the cost method, exceeded the recoverable amount for that
property. The recoverable amount was determined to be the higher of the economic benefit of the continued use of the asset or the selling price less
costs to sell. To calculate the benefit of the continued use of the asset, Crombie utilized the present value of the estimated future cash flows, discounted
using a discount rate based on the risk associated with the property.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 Land
Buildings
Intangibles
Deferred
Leasing
Costs
Total
Cost
Opening balance, January 1, 2019
$
1,176,745
$
2,968,216
$
121,181
$
7,010
$
4,273,152
Impact of adoption of IFRS 16
Acquisitions
Additions
Dispositions
Transfer to investment properties held for sale (Note 6)
Reclassification from properties under development
16,812
39,408
3,158
(69,672)
(54,693)
5,943
—
84,685
70,118
(185,430)
(124,993)
12,851
—
3,138
—
(7,847)
(4,159)
—
—
—
1,740
(34)
—
137
16,812
127,231
75,016
(262,983)
(183,845)
18,931
Balance, December 31, 2019
1,117,701
2,825,447
112,313
8,853
4,064,314
Accumulated depreciation, amortization,
and impairment
Opening balance, January 1, 2019
Depreciation and amortization
Dispositions
Impairment
Transfer to investment properties held for sale (Note 6)
2,357
320
(4)
—
—
509,304
66,198
(30,514)
6,000
(20,412)
Balance, December 31, 2019
2,673
530,576
65,777
5,812
(3,311)
—
(1,621)
66,657
2,250
808
(9)
—
—
579,688
73,138
(33,838)
6,000
(22,033)
3,049
602,955
Net carrying value, December 31, 2019
$
1,115,028
$
2,294,871
$
45,656
$
5,804
$
3,461,359
Included in land are right of use assets of $16,405 net of accumulated depreciation of $320 for land held under lease.
Properties under development
Opening balance, January 1, 2020
Acquisitions
Additions
Reclassification to income-producing properties
Balance, December 31, 2020
Land
Buildings
76,104
$
20,109
$
7,692
3,004
(40,575)
—
72,629
(75,586)
46,225
$
17,152
$
$
$
Deferred
Leasing Costs
—
—
—
—
—
$
$
As of December 31, 2020, Crombie completed its initial construction phase of a retail-related industrial development.
Land
Buildings
Deferred
Leasing Costs
Opening balance, January 1, 2019
$
49,967
$
16,095
$
117
$
Acquisitions
Additions
Dispositions
Reclassification to income-producing properties
32,439
3,314
(3,673)
(5,943)
—
16,865
—
(12,851)
—
20
—
(137)
Balance, December 31, 2019
$
76,104
$
20,109
$
—
$
Total
96,213
7,692
75,633
(116,161)
63,377
Total
66,179
32,439
20,199
(3,673)
(18,931)
96,213
Fair value
Crombie’s total fair value of investment properties exceeds carrying value by $921,974 at December 31, 2020 (December 31, 2019 – $808,674). Crombie
uses the cost method for accounting for investment properties and increases in fair value over carrying value are not recognized until realized through
disposition or derecognition of properties, while impairment is recognized at the time of impairment. As of December 31, 2020, there continues to be
increased measurement uncertainty around valuation regarding COVID-19. Crombie has disclosed increased sensitivity around capitalization rates
and continues to monitor the ongoing potential impacts on valuation.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth The estimated fair values of Crombie’s investment properties are as follows:
December 31, 2020
December 31, 2019
Carrying value consists of the net carrying value of:
Income properties
Properties under development
Accrued straight-line rent receivable
Tenant incentives
Investment properties held for sale
Total carrying value
$
$
$
$
Note
3
3
5
5
6
Fair Value
Carrying Value
4,815,000
4,605,000
$
$
3,893,026
3,796,326
December 31, 2020
December 31, 2019
3,520,562
$
3,461,359
63,377
88,299
190,889
29,899
96,213
80,268
158,486
—
3,893,026
$
3,796,326
The fair value of investment properties is a Level 3 fair value measurement. The fair value represents the estimated price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value included in this summary reflects the fair value of the properties as at December 31, 2020 and 2019, respectively, based on each
property’s current use as a revenue generating investment property.
The fair value of properties under development is assumed to equal cost until the property is substantially completed, and at that point in time, the
property is moved to income producing and valued according to Crombie’s policies described below.
The valuation techniques and significant unobservable inputs used in determining the fair value of investment properties are set out below:
(i)
(ii)
The capitalized net operating income method – Under this method, capitalization rates are applied to trailing stabilized net operating income
(property revenue less property operating expenses). The key assumption is the capitalization rates for each specific property. Crombie receives
biannual capitalization rate reports from external, knowledgeable property valuators. The capitalization rate reports provide a range of rates
for various geographic regions and for various types and qualities of properties within each region. Management selects the appropriate rate
for each property from the range provided. Crombie employs this method to determine fair value.
The discounted cash flow method – Under this method, discount rates are applied to the forecasted cash flows reflecting the initial terms of the
lease or leases for that specific property and assumptions as to renewal and new leasing activity. The key assumptions are the discount rate
applied over the initial term of the lease, as well as lease renewals and new leasing activity. Crombie employs this method when the capitalized
net operating income method indicates a risk of impairment or when a property is, or will be, undergoing redevelopment.
(iii) External appraisals – Crombie has external, independent appraisals performed on substantially all properties on a rotational basis over a
maximum period of four years.
On a periodic basis, Crombie obtains independent appraisals such that approximately 85% of its properties, by value, will be externally appraised over
a four-year period.
Crombie has utilized the following weighted average capitalization rates on its income properties. Related to the growth in properties under
development, Crombie reports the weighted average capitalization rate excluding the value of properties under development with the comparative
rates adjusted to reflect this change.
Weighted average capitalization rate
December 31, 2020
December 31, 2019
5.86%
5.99%
Crombie has determined that an increase (decrease) in this applied capitalization rate at December 31, 2020 would result in an increase (decrease) in
the fair value of the investment properties as follows:
Capitalization Rate Sensitivity
December 31, 2020
110
Increase in Rate
Decrease in Rate
0.25% $
(202,000) $
0.50% $
0.75% $
(383,000) $
(550,000) $
214,000
454,000
720,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 Property Acquisitions and Dispositions
The operating results of acquired properties are included from the respective date of acquisition and for disposed properties up to the date of
disposition.
2020
Transaction Date
January 9, 20201
February 4, 20202
May 28, 2020
July 7, 2020
October 5, 2020
October 26, 2020
November 4, 2020
December 8, 2020
December 9, 2020
December 15, 2020
December 22, 2020
(1) Acquisition of a parcel of land adjacent to an existing retail property.
(2) Disposal of a parcel of land adjacent to an existing retail property.
2019
Transaction Date
January 7, 2019
January 29, 2019
February 5, 20191
February 8, 2019
February 14, 2019
March 25, 2019
April 25, 20192
April 29, 2019
June 3, 2019
July 3, 20193
July 4, 2019
August 1, 20194
August 2, 20195
September 25, 20196
October 7, 20197
October 29, 20198
November 28, 2019
December 16, 20199
Vendor/Purchaser
Properties Acquired
(Disposed)
Approximate Square
Footage
Initial Acquisition
(Disposition) Price
Third Party
Third Party
Related Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Related Party
Third Party
—
—
1
1
1
(1)
1
(1)
(1)
1
(2)
$
—
—
30,000
—
41,000
(18,000)
—
(15,000)
(20,000)
54,000
(41,000)
280
(1,000)
4,535
4,575
11,000
(7,510)
3,300
(7,414)
(7,112)
17,100
(14,974)
Vendor/Purchaser
Properties Acquired
(Disposed)
Approximate Square
Footage
Initial Acquisition
(Disposition) Price
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Empire
Joint Venture
Third Party
Third Party
Third Party
Empire
Empire
—
(1)
(7)
(1)
(1)
1
(26)
(1)
—
(1)
(1)
1
(1)
—
(15)
—
1
—
—
$
(114,000)
(148,000)
(50,000)
(19,000)
—
(785,000)
(39,000)
—
(44,000)
(36,000)
15,000
—
(3,000)
(641,000)
29,000
40,000
397,000
(1) Disposal of 50% interest in seven retail properties to a third party.
(2) Disposal of an 89% interest in 26 retail properties to a third party.
(3) Disposal of an 89% interest in one retail property to a third party.
(4) Acquisition of a 50% interest in one retail property from a related party.
(5) Disposal of air rights to a joint venture.
(6) Disposal of a freestanding building adjacent to a retail property.
(7) Disposal of an 89% interest in 15 properties to a third party.
(8) Additions to an existing property.
(9) Acquisition of the remaining 50% interest in one retail-related industrial property from a related party.
(821)
(35,180)
(41,614)
(19,925)
(9,675)
32,000
(161,589)
(21,500)
(3,275)
(9,750)
(12,255)
9,500
(27,379)
(175)
(193,333)
6,611
12,422
95,900
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth The initial acquisition (disposition) prices stated above exclude closing and transaction costs.
Investment property disposals
Gross proceeds
Selling costs
Carrying values derecognized
Land
Buildings
Intangibles
Deferred leasing costs
Tenant Incentives
Accrued straight-line rent
Provisions
Gain (loss) on disposal
Proceeds
Mortgages assumed by buyer
Non-cash consideration, addition to investment in joint venture
Cash proceeds
4) INVESTMENT IN JOINT VENTURES
The following represents Crombie’s interest in its equity accounted investments:
1600 Davie Limited Partnership
Bronte Village Limited Partnership
The Duke Limited Partnership
140 CPN Limited
Year ended December 31
2020
38,010
$
(178)
37,832
(8,690)
(24,521)
(330)
—
—
(1,081)
125
3,335
$
Year ended December 31
2020
37,832
$
—
—
37,832
$
2019
536,471
(8,229)
528,242
(128,034)
(259,496)
(7,073)
(25)
(31,565)
(11,706)
(8,540)
81,803
2019
528,242
(161,472)
(27,379)
339,391
$
$
$
$
December 31, 2020
December 31, 2019
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
The following table represents 100% of the financial position and financial results of the equity accounted entities:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Crombie’s investment in joint ventures
Revenue
Property operating expenses
General and administrative expenses
Depreciation and amortization
Finance costs -operations
Net (loss) income
Crombie’s (loss) income from equity accounted investments
112
December 31, 2020
December 31, 2019
475,780
$
7,987
(144,841)
(237,490)
101,436
51,043
$
$
Year ended
297,598
31,287
(111,845)
(127,444)
89,596
45,123
December 31, 2020
December 31, 2019
1,830
$
(495)
(310)
(351)
(818)
(144)
(72)
$
$
1,708
(434)
(2)
(203)
(401)
668
334
$
$
$
$
$
$
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 The following table shows the changes in the total carrying value of Crombie’s investment in joint ventures for the year ended:
Opening balance
Contributions
Distributions
Deferred gain
Share of (loss) income
Closing balance
5) OTHER ASSETS
December 31, 2020
December 31, 2019
45,123
$
6,061
(69)
—
(72)
51,043
$
39,485
28,111
(15,366)
(7,441)
334
45,123
$
$
December 31, 2020
December 31, 2019
Current
Non-current
Total
Current
Non-current
Total
Trade receivables
$
42,211
$
$
42,211
$
14,976
$
6,041
$
21,017
Provision for doubtful accounts
Net trade receivables
Prepaid expenses and deposits
Other fixed assets1, 2
Finance lease receivable
Accrued straight-line rent
receivable
Tenant incentives
Other
Amounts receivable from
related parties
(7,955)
34,256
19,271
—
391
—
—
89
—
—
—
—
11,373
7,734
88,299
190,889
127
(7,955)
34,256
19,271
11,373
8,125
88,299
190,889
216
15,533
9,302
24,835
(340)
14,636
15,533
—
363
—
—
93
—
—
6,041
—
10,000
8,125
80,268
158,486
215
(340)
20,677
15,533
10,000
8,488
80,268
158,486
308
23,812
23,812
(1) For the year ended December 31, 2020, depreciation of other fixed assets was $1,251 (December 31, 2019 – $1,175).
(2) Other fixed assets include right of use assets of $2,136 (December 31, 2019 – $1,493) net of accumulated depreciation of $818 (December 31, 2019 – $574) relating to office and vehicle leases.
$
69,540
$
307,724
$
377,364
$
30,625
$
286,947
$
317,572
Tenant Incentives
Balance, January 1, 2020
Additions
Amortization
Write-off fully depreciated assets
Balance, December 31, 2020
Tenant Incentives
Balance, January 1, 2019
Additions
Amortization
Disposition
Transfer to investment properties held for sale (Note 6)
$
$
$
Cost
Accumulated
Amortization
Net
Carrying Value
236,071
$
77,585
$
158,486
50,252
—
(11,129)
—
17,849
(11,129)
50,252
(17,849)
—
275,194
$
84,305
$
190,889
Cost
Accumulated
Amortization
Net
Carrying Value
204,250
$
66,670
$
60,379
—
(19,914)
(8,644)
—
14,139
(1,977)
(1,247)
137,580
60,379
(14,139)
(17,937)
(7,397)
Balance, December 31, 2019
$
236,071
$
77,585
$
158,486
Bad debt expense, recognized in property operating expenses, has been the following in each of the past four quarters:
Three months ended December 31, 2020
Three months ended September 30, 2020
Three months ended June 30, 2020
Three months ended March 31, 2020
$
$
67
1,018
8,722
1,087
10,894
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth 6) INVESTMENT PROPERTIES HELD FOR SALE
2020
Assets transferred to held for sale
Derecognition through disposition
Net carrying value, December 31, 2020
2019
Assets transferred to held for sale
Additions to assets held for sale
Derecognition through disposition
Net carrying value, December 31, 2019
Land
16,219
(1,072)
15,147
$
$
Buildings
Intangibles
20,028
(5,489)
14,539
$
$
306
(93)
213
$
$
Tenant
Incentives
—
—
—
$
$
Total
36,553
(6,654)
29,899
Land
Buildings
Intangibles
Tenant
Incentives
Total
54,693
$
104,581
$
2,538
$
7,397
$
169,209
—
—
(54,693)
(104,581)
—
(2,538)
6,230
(13,627)
6,230
(175,439)
—
$
—
$
—
$
—
$
—
$
$
$
$
Crombie has determined that three of its investment properties meet the criteria for classification as held for sale as at December 31, 2020 based on
the current status of the sale process.
Prior to the classification as held for sale, the properties were assessed for impairment, which, at that time, is the amount by which the carrying
amount exceeds its recoverable amount, if any. No depreciation or amortization will be recorded while the properties are classified as held for sale.
Crombie expects to complete the sale of the properties during the next 12 months.
7) INVESTMENT PROPERTY DEBT
Fixed rate mortgages
2.35 – 6.80%
3.98%
5.7 years
$
1,274,304
$
1,309,077
Weighted
Average
Interest Rate
Average
Term to
Maturity
Range
December 31,
2020
December 31,
2019
Floating rate revolving credit facility
Joint operation credit facility I
Joint operation credit facility II
Unsecured bilateral credit facility
Deferred financing charges on fixed rate mortgages
Mortgages
Non-current
Current
Credit facilities
Non-current
Current
2.5 years
3.3 years
3.8 years
0.7 years
17,712
7,188
2,356
35,000
(7,260)
$
$
1,329,300
1,139,798
127,246
$
$
27,256
35,000
15,339
6,978
1,991
30,000
(6,567)
1,356,818
1,045,015
257,495
54,308
—
$
1,329,300
$
1,356,818
Specific investment properties with a carrying value of $2,743,270 as at December 31, 2020 (December 31, 2019 – $2,705,625) are currently pledged as
security for mortgages or provided as security for the floating rate revolving credit facility. Carrying value includes investment properties, as well as
accrued straight-line rent receivable and tenant incentives which are included in other assets.
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 Mortgage Activity
For the year ended:
December 31, 2020
Weighted Average
Number of
Mortgages
Rates
Terms in Years
Amortization
Period in
Years
—
2
12
3.22%
3.42%
5.02%
15.9
30.0
Type
Addition
New
Repaid
Proceeds
(Repayments)
5,125
218,000
(214,912)
8,213
$
$
During the year ended December 31, 2020, Crombie recognized an addition to a mortgage payable of $5,125 in settlement of an amount payable to
1600 Davie Limited Partnership. This mortgage relates to the commercial component of the Davie Street development, 100% of which is included in
Crombie’s financial statements.
During the year ended December 31, 2020, Crombie successfully closed on two mortgages totalling $218,000 at retail-related industrial properties.
The proceeds of one of the mortgages were placed in escrow and will be drawn down once certain conditions have been met. As of December 31,
Crombie has received $36,753 of the total $100,000 commitment. Given that Crombie controls the total proceeds, the remaining proceeds of $63,247
have been reflected as cash at December 31, 2020.
For the year ended:
December 31, 2019
Type
New
Repaid
Disposition
Weighted Average
Number of
Mortgages
Rates
Terms in Years
Amortization
Period in
Years
7
17
27
3.43%
4.43%
4.33%
6.2
31.7
$
$
Proceeds
(Repayments)
45,689
(133,759)
(161,472)
(249,542)
During the year ended December 31, 2019, Crombie recognized a mortgage payable of $20,401 in settlement of an amount payable to 1600 Davie
Limited Partnership. This mortgage, bearing interest at 3.22%, relates to the commercial component of the Davie Street development, 100% of which is
included in Crombie’s financial statements.
The repayments of $161,472 represent disposition of interests in mortgages related to partial dispositions of a portfolio of properties.
Floating Rate Revolving Credit Facility
The floating rate revolving credit facility has a maximum principal amount of $400,000 (December 31, 2019 – $400,000) and matures June 30,
2023. The facility is used by Crombie for working capital purposes and to provide temporary financing for acquisitions and development activity.
It is secured by a pool of first mortgages on certain properties and the maximum principal amount is subject to an available borrowing base
(December 31, 2020 – borrowing base of $400,000). Borrowings under the revolving credit facility can be by way of Bankers’ Acceptance or prime rate
advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread or margin
may change depending on Crombie’s unsecured bond rating with DBRS Morningstar and whether the facility remains secured or migrates to an
unsecured status.
Joint Operation Credit Facilities
In conjunction with the 89% sale of a portfolio of assets in the second quarter of 2019, Crombie and its co-owner entered into a credit agreement with
a Canadian chartered bank for a $62,250 term loan facility and a $5,800 revolving credit facility. Both facilities are secured by first mortgages on
select properties and have a term of five years maturing on April 25, 2024. Borrowings under both facilities can be by way of Bankers’ Acceptance or
prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. Concurrent with entering
into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest rate on both facilities at
3.58%. At December 31, 2020, Crombie’s portion of the term and revolving credit facilities was $6,847 and $341, respectively.
In conjunction with the 89% sale of a portfolio of assets in the fourth quarter of 2019, Crombie and its co-owner entered into a credit agreement
with a Canadian chartered bank for a $16,500 term loan facility and a $15,500 revolving credit facility. Both facilities are secured by first and second
mortgages on select properties and have a term of five years maturing on October 7, 2024. Borrowings under both facilities can be by way of
Bankers’ Acceptance or prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin.
Concurrent with entering into these facilities, Crombie and its co-owner entered into a fixed for floating interest rate swap, effectively fixing the interest
rate on both facilities at 3.27%. At December 31, 2020, Crombie’s portion of the term and revolving credit facilities was $1,815 and $541, respectively.
Unsecured Bilateral Credit Facility
The unsecured bilateral credit facility agreement was extended and increased in the third quarter of 2020. The unsecured bilateral credit facility has a
maximum principal amount of $130,000 and matures September 1, 2021. The facility is used by Crombie for working capital purposes and to provide
temporary financing for acquisitions and development activity. Borrowings under the bilateral credit facility can be by way of Bankers’ Acceptance or
prime rate advance, and the floating interest rate is contingent on the type of advance plus the applicable spread or margin. The respective spread or
margin may change depending on Crombie’s unsecured bond rating with DBRS Morningstar.
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth 8) SENIOR UNSECURED NOTES
Maturity Date1
Interest Rate
December 31, 2020
December 31, 2019
June 1, 2021
3.962%
$
150,000
$
Series B
Series D
Series E
Series F
Series G
Series H
Series I
Unamortized Series B issue premium
Deferred financing charges
November 21, 2022
January 31, 2025
August 26, 2026
June 21, 2027
March 31, 2028
October 9, 2030
4.066%
4.800%
3.677%
3.917%
2.686%
3.211%
(1) For the year ended December 31, 2020, the weighted average term to maturity was 5.1years.
Senior unsecured notes are presented in the consolidated balance sheet as follows:
Non-current
Current
Total
A continuity of Crombie’s senior unsecured notes is as follows:
$
$
$
Opening balance at January 1, 2020
New borrowings or issuances
Early redemption
Closing balance at December 31, 2020
Opening balance at January 1, 2019
New borrowings or issuances
Early redemption
Closing balance at December 31, 2019
2020
150,000
175,000
200,000
150,000
150,000
150,000
110
(3,712)
1,121,398
$
250,000
150,000
175,000
200,000
150,000
—
—
627
(3,148)
922,479
December 31, 2020
December 31, 2019
971,398
150,000
1,121,398
$
$
$
$
$
$
922,479
—
922,479
Senior Unsecured Notes
925,000
300,000
(100,000)
1,125,000
Senior Unsecured Notes
700,000
350,000
(125,000)
925,000
On October 9, 2020, Crombie issued on a private placement basis, $150,000 Series H notes (senior unsecured) maturing March 31, 2028. The net
proceeds of the offering were used to repay existing debt; this included partial repayment of Series B unsecured notes, which Crombie called for early
redemption in conjunction with this offering, and repayment of outstanding credit facilities. The notes were priced with an effective yield to maturity
of 2.686% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on March 31 and
September 30.
On October 9, 2020, Crombie issued on a private placement basis, $150,000 Series I notes (senior unsecured) maturing October 9, 2030. The net
proceeds of the offering were used to repay existing debt; this included partial repayment of Series B unsecured notes, which Crombie called for early
redemption in conjunction with this offering, and repayment of outstanding facilities. The notes were priced with an effective yield to maturity of 3.211%
and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on April 9 and October 9.
2019
On December 20, 2019, Crombie issued on a private placement basis, $150,000 Series G notes (senior unsecured) maturing June 21, 2027. The
proceeds were used to fund the repayment of upcoming secured mortgage maturities. The notes were priced with an effective yield to maturity
of 3.917% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on June 21 and
December 21.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 On August 26, 2019, Crombie issued, on a private placement basis, $200,000 Series F notes (senior unsecured) maturing August 26, 2026. The
proceeds were used to fund the early repayment of the Series C notes and repay bank indebtedness. The notes were priced with an effective
yield to maturity of 3.677% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual instalments on
February 26 and August 26.
9) EMPLOYEE FUTURE BENEFITS
Crombie has a number of defined benefit and defined contribution plans providing pension and other retirement benefits to most of its employees.
Defined contribution pension plans
The contributions required by the employee and the employer are specified. The employee’s pension depends on what level of retirement income (for
example, annuity purchase) can be achieved with the combined total of employee and employer contributions and investment returns over the period
of plan membership, and the annuity purchase rates at the time of the employee’s retirement.
Defined benefit plans
The retirement benefit provides pension benefits to members designated in writing by the Board of Trustees based on a formula recognizing length
of service and final average earnings. The annual pension payable at age 65 is equal to 2% of the final average base earnings multiplied by years
of credited service (to a maximum of 30 years), offset by the deemed retirement income provided under the defined contribution pension plan and
deferred profit sharing plan. For the purpose of calculating the deemed retirement income provided under the defined contribution pension plan and
deferred profit sharing plan, the assumptions stipulated in the SERP plan text are used, including an assumed annuity conversion discount rate of 7.0%.
The final average earnings are 12 times the average of the 60 highest months of eligible earnings. Employee contributions, if required, pay for part of
the cost of the benefit, and the employer contributions fund the balance. The employer contributions are not specified or defined within the plan text;
they are based on the result of actuarial valuations which determine the level of funding required to meet the total obligation as estimated at the time
of the valuation. Crombie’s defined benefit plans are unfunded.
Once participants attain age 55 and 5 years of continuous service, they can retire. The total pension payable is reduced by 5/12% for each month
by which the early retirement precedes age 60 (62 for a member who was designated as a member on or after June 25, 2009). The normal form of
pension payment is a 60% joint and survivor pension.
The post-employment benefits program offered to Crombie employees and retirees in Canada is an open plan that provides life and medical benefits
for grandfathered employees and employees retired prior to May 1, 2011 as well as critical illness coverage for other employees. Full-time employees
must be over age 55 to be eligible for the post-employment benefits program.
The total defined benefit cost related to pension plans and post-employment benefit plans for the year ended December 31, 2020 was $473 (year
ended December 31, 2019 – $816).
The plan typically exposes Crombie to actuarial risks such as: interest rate risk, mortality risk, and salary risk.
(i) Interest rate risk – The present value of the defined benefit liability is calculated using discount rates that reflect the average yield, as at the
measurement date, on high-quality corporate bonds of similar duration to the plans’ liabilities. A decrease in the market yield on high-quality
corporate bonds will increase Crombie’s defined benefit liability.
(ii) Mortality risk – The present value of the defined benefit plan is calculated by reference to the best estimate of the mortality of plan participants
both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
(iii) Salary risk – The present value of the defined benefit plan liability is calculated by reference to the anticipated future salary of the plan
participants. As such, an increase in the salary of plan participants over that anticipated will increase the plan’s liability.
Senior Management Pension Plan
Post-Employment Benefit Plans
Most recent
valuation date
Next required
valuation date
December 31, 2020
December 31, 2021
January 1, 2019
January 1, 2022
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations and pension costs are as follows:
December 31, 2020
December 31, 2019
Senior Management
Pension Plan
Post-Employment
Benefit Plans
Senior Management
Pension Plan
Post-Employment
Benefit Plans
Discount rate – accrued benefit obligation
Rate of compensation increase
2.50%
3.00%
2.40%
N/A
3.00%
3.00%
3.00%
N/A
For measurement purposes, a 4.75% (2019 – 5.00%) annual rate increase in the per capita cost of covered health care benefits was assumed.
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth These assumptions were developed by management with the assistance of independent actuaries. Discount factors are determined close to year-end
by reference to market yields of high-quality corporate bonds that have a maturity approximating the terms of the related pension obligation. Other
assumptions are based on current actuarial benchmarks and management’s historical experience.
The projected unit credit method is used to determine the present value of the defined benefit obligation and the related current service cost for all
active members.
Crombie uses December 31 as a measurement date for accounting purposes for its defined benefit pension plans.
Information about Crombie’s defined benefit plans are as follows:
December 31, 2020
December 31, 2019
Senior
Management
Pension Plan
Post-Employment
Benefit Plans
Senior
Management
Pension Plan
Total
Post-Employment
Benefit Plans
Total
Accrued benefit obligation
Balance, beginning of year
$
5,646
$
2,765
$
8,411
$
4,918
$
4,202
$
9,120
Current service cost
Past service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Balance, end of year
Plan assets
Fair value, beginning of year
Employer contributions
Benefits paid
Fair value, end of year
Funded status – deficit
Current portion
Non-current portion
Accrued benefit obligation
recorded as a liability
Net expense
Current service cost
Interest cost
Net expense
200
—
172
279
(200)
6,097
—
200
(200)
—
6,097
200
5,897
6,097
200
172
372
$
$
$
$
$
$
19
—
82
(218)
(88)
2,560
—
88
(88)
—
2,560
79
2,481
2,560
19
82
101
$
$
$
219
—
254
61
(288)
8,657
—
288
(288)
—
8,657
279
8,378
8,657
219
254
473
$
$
$
211
235
178
304
(200)
5,646
—
200
(200)
—
5,646
200
5,446
5,646
211
178
389
$
$
$
37
—
155
(1,523)
(106)
2,765
—
106
(106)
—
2,765
89
2,676
2,765
37
155
192
$
$
$
248
235
333
(1,219)
(306)
8,411
—
306
(306)
—
8,411
289
8,122
8,411
248
333
581
The table below outlines the sensitivity of the fiscal 2020 key economic assumptions used in measuring the accrued benefit plan obligations and
related expenses of Crombie’s pension and other benefit plans. The sensitivity of each key assumption has been calculated independently. Changes to
more than one assumption simultaneously may amplify or reduce the impact on the accrued benefit obligation or benefit plan expenses. There was
no change to the method and assumptions used in preparing the sensitivity analysis from prior years.
Senior Management Pension Plan
Post-Employment Benefit Plans
Benefit Obligations
Benefit Cost1
Benefit Obligations
Benefit Cost1
Discount rate
Impact of:
Growth rate of health costs
Impact of:
1% increase
1% decrease
1% increase
1% decrease
2.50%
(717)
876
2.50%
—
(3)
2.40%
(305)
371
4.75%
188
(161)
2.40%
8
(12)
4.75%
5
(4)
(1) Reflects the impact of the current service costs, the interest cost, and the expected return on assets.
For the year ended December 31, 2020, the net defined contribution pension plans expense was $983 (year ended December 31, 2019 – $975).
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 10) TRADE AND OTHER PAYABLES
December 31, 2020
December 31, 2019
Current
Non-current
Total
Current
Non-current
Total
$
51,960
$
19,548
15,938
13,010
1,008
5,263
11,738
3,165
258
—
—
—
—
—
—
—
11,575
4,400
$
51,960
$
51,751
$
19,548
15,938
13,010
1,008
5,263
11,738
14,740
4,658
29,932
9,665
11,913
—
(947)
26,429
4,671
70
—
—
—
—
—
—
—
9,793
4,820
$
51,751
29,932
9,665
11,913
—
(947)
26,429
14,464
4,890
$
121,888
$
15,975
$
137,863
$
133,484
$
14,613
$
148,097
Tenant incentives and capital
expenditures
Property operating costs
Prepaid rents
Finance costs on investment property
debt and notes
Amounts payable to related party
Fair value of interest rate swap
agreements
Distributions payable
Unit-based compensation plans
Deferred revenue
Deferred Revenue
During 2014, Crombie completed a sale-leaseback of the land component of an investment property. The proceeds received in excess of fair value
of the land have been deferred and is being recognized as a reduction in property operating expenses over the term of the land lease. In addition,
Crombie received a prepayment, from a related party, of their future obligation under a land sub-lease. This prepayment has also been deferred and
is being recognized as a reduction in property operating expenses over the term of the land lease.
11) PROPERTY REVENUE
Operating lease revenue
Rental revenue contractually due from tenants1
Contingent rental revenue
Straight-line rent recognition
Tenant incentive amortization
Lease termination income
Revenue from contracts with customers
Common area cost recoveries
Parking revenue
(1) Includes reimbursement of Crombie’s property tax expense.
Year ended
December 31, 2020
December 31, 2019
$
$
343,113
$
1,048
9,112
(17,849)
405
50,021
2,883
388,733
$
344,803
1,843
10,287
(14,139)
1,670
48,722
5,555
398,741
The following table sets out tenants that contributed in excess of 10% of total property revenue:
Sobeys Inc. (including all subsidiaries of Empire)
$
209,780
54.0%
$
207,948
52.2%
Year ended
December 31, 2020
December 31, 2019
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth
12) OPERATING LEASES
Crombie as a Lessor
Crombie’s operations include leasing commercial real estate. Future minimum rental income under non-cancellable tenant leases as at December 31,
2020, is as follows:
Future minimum rental income $
268,874
$
257,782 $
245,040 $
234,208
$
218,560
$
1,497,941
$
2,722,405
2021
2022
2023
2024
2025
Thereafter
Total
Year ending December 31,
Crombie manages its residual risk in its investment properties through an active capital expenditure program and actively leasing any vacant spaces.
The residual risk throughout Crombie’s portfolio is not considered significant.
13) GENERAL AND ADMINISTRATION EXPENSES AND CHANGE IN FAIR VALUE OF
FINANCIAL INSTRUMENTS
(a) General and administrative expenses
Salaries and benefits
Professional and public company costs
Occupancy and other
(b) Decrease (increase) in fair value of financial instruments
Deferred Unit (“DU”) Plan
14) FINANCE COSTS — OPERATIONS
Fixed rate mortgages
Floating rate term, revolving, and demand facilities
Capitalized interest
Senior unsecured notes
Interest income on finance lease receivable
Interest on lease liability
Finance costs – operations, expense
Amortization of fair value debt adjustment and accretion income
Change in accrued finance costs
Amortization of effective swap agreements
Capitalized interest1
Amortization of issue premium on senior unsecured notes
Amortization of deferred financing charges
Finance costs – operations, paid
Year ended
December 31, 2020
December 31, 2019
14,774
$
3,292
2,468
20,534
$
16,874
3,532
3,315
23,721
Year ended
December 31, 2020
December 31, 2019
805
$
(1,337)
Year ended
December 31, 2020
December 31, 2019
$
$
$
$
50,540
$
3,791
(5,331)
41,333
(387)
1,862
91,808
312
(1,097)
(510)
5,331
517
(3,006)
66,458
3,950
(4,759)
30,216
(401)
1,852
97,316
534
(2,352)
(1,677)
4,759
442
(3,574)
95,448
$
93,355
$
(1) As at December 31, 2020, interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.47% (December 31, 2019 – 3.88%).
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 15) UNITS OUTSTANDING
Crombie REIT Units
Class B LP Units and
attached Special Voting Units
Total
Number of
Units
Amount
Number of
Units
Amount
Number of
Units
Amount
Balance, January 1, 2020
89,697,623
$
1,042,696
62,045,732
$
716,628
151,743,355
$
1,759,324
Net change in EUPP loans receivable
Units issued under DRIP
Units issued under unit based
compensation plan
Units issued (proceeds are net
of issue costs)
—
120,533
58,090
39
1,671
745
—
85,433
—
—
—
1,185
205,966
—
58,090
39
2,856
745
3,657,000
55,848
2,593,750
41,425
6,250,750
97,273
Balance, December 31, 2020
93,533,246
$
1,100,999
64,724,915
$
759,238
158,258,161
$
1,860,237
Crombie REIT Units
Class B LP Units and
attached Special Voting Units
Total
Number of
Units
Amount
Number of
Units
Amount
Number of
Units
Amount
Balance, January 1, 2019
89,597,604
$
1,040,804
61,980,011
$
715,654
151,577,615
$
1,756,458
Net change in EUPP loans receivable
Units issued under DRIP
Units issued under unit based
compensation plan
—
92,685
7,334
422
1,356
114
—
65,721
—
—
974
—
—
158,406
7,334
422
2,330
114
Balance, December 31, 2019
89,697,623
$
1,042,696
62,045,732
$
716,628
151,743,355
$
1,759,324
Crombie REIT Units
Crombie is authorized to issue an unlimited number of REIT Units and an unlimited number of SVU and Class B LP Units. Issued and outstanding REIT
Units may be subdivided or consolidated from time to time by the Trustees without the approval of the Unitholders. REIT Units are redeemable at any
time on demand by the holders at a price per REIT Unit equal to the lesser of: (i) 90% of the weighted average price per Crombie REIT Unit during
the period of the last ten days during which Crombie’s REIT Units traded; and (ii) an amount equal to the price of Crombie’s REIT Units on the date of
redemption, as defined in the Declaration of Trust.
The aggregate redemption price payable by Crombie in respect of any REIT Units surrendered for redemption during any calendar month will be
satisfied by way of a cash payment in Canadian dollars within 30 days after the end of the calendar month in which the REIT Units were tendered for
redemption, provided that the entitlement of Unitholders to receive cash upon the redemption of their REIT Units is subject to the limitation that:
(i)
(ii)
(iii)
the total amount payable by Crombie in respect of such REIT Units and all other REIT Units tendered for redemption, in the same calendar
month must not exceed $50 (provided that such limitation may be waived at the discretion of the Trustees);
at the time such REIT Units are tendered for redemption, the outstanding REIT Units must be listed for trading on the TSX or traded or quoted on
any other stock exchange or market which the Trustees consider, in their sole discretion, provides representative fair market value prices for the
REIT Units; and
the normal trading of REIT Units is not suspended or halted on any stock exchange on which the REIT Units are listed (or if not listed on a stock
exchange, in any market where the REIT Units are quoted for trading) on the redemption date or for more than five trading days during the
10-day trading period commencing immediately after the redemption date.
On February 11, 2020, Crombie closed a public offering, on a bought deal basis, of 3,657,000 Units, at a price of $16.00 per Unit for proceeds of $55,848
net of issue costs.
Crombie REIT Special Voting Units (“SVU”) and Class B LP Units
The Declaration of Trust and the Exchange Agreement provide for the issuance of SVUs to the holders of Class B LP Units used solely for providing
voting rights proportionate to the votes of Crombie’s REIT Units. The SVUs are not transferable separately from the Class B LP Units to which they are
attached and will be automatically transferred upon the transfer of such Class B LP Unit. If the Class B LP Units are exchanged in accordance with the
Exchange Agreement, a like number of SVUs will be redeemed and cancelled for no consideration by Crombie.
The Class B LP Units issued by a subsidiary of Crombie to ECL Developments Limited (“ECLD”) are indirectly exchangeable on a one-for-one basis for
Crombie’s REIT Units at the option of the holder, under the terms of the Exchange Agreement.
Each Class B LP Unit entitles the holder to receive distributions from Crombie, pro rata with distributions made by Crombie on REIT Units.
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth
On February 11, 2020, concurrently with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECL Developments purchased 2,593,750
Class B LP Units and the attached SVUs at a price of $16.00 per Class B LP Unit for proceeds of $41,425 net of issue costs, on a private placement basis.
Employee Unit Purchase Plan (“EUPP”)
Crombie previously provided for REIT Unit purchase entitlements under the EUPP for certain senior executives. As at December 31, 2014, the EUPP was
replaced with an RU Plan with a specific vesting period and no employee loans.
As at December 31, 2020, there are loans receivable from executives of $1,207 under Crombie’s EUPP, representing 78,697 REIT Units, which are
classified as a reduction to net assets attributable to Unitholders. The loans are being repaid through the application of the after-tax amounts of
all distributions received on the REIT Units, as payments on interest and principal. The loans are required to be repaid by December 31, 2022. Loan
repayments will result in a corresponding increase to net assets attributable to Unitholders. Market value of the REIT Units held as collateral at
December 31, 2020 was $1,129.
Distribution Reinvestment Plan (“DRIP”)
Crombie has a DRIP whereby Canadian resident REIT Unitholders may elect to automatically have their distributions reinvested in additional REIT
units. Units issued under the DRIP will be issued directly from the treasury of Crombie REIT at a price equal to the volume-weighted average trading
price of the REIT units on the TSX for the five trading days immediately preceding the relevant distribution payment date, which is typically on or about
the 15th day of the month following the declaration. Crombie recognizes the net proceeds in Net assets attributable to Unitholders.
16) SUPPLEMENTARY CASH FLOW INFORMATION
(a) Items not affecting operating cash
Year ended
December 31, 2020
December 31, 2019
$
(9,112)
$
(10,287)
14,139
(81,803)
6,000
74,313
11
4,809
(334)
2,330
15,174
8
(908)
1,337
24,789
17,849
(3,335)
6,600
75,567
—
2,999
72
2,856
—
7
(405)
(805)
92,293
$
Year ended
$
$
$
December 31, 2020
December 31, 2019
(13,579)
$
(3,514)
1,193
(15,900)
$
(12,340)
(3,756)
3,996
(12,100)
Items not affecting operating cash:
Straight-line rent recognition
Amortization of tenant incentives
Gain on disposal of investment properties
Impairment of investment properties
Depreciation and amortization
Unit-based compensation
Amortization of effective swap agreements, financing charges, and other
Loss (income) from equity accounted investments
Non-cash distributions to Unitholders in the form of DRIP Units
Non-cash accrued special distribution to Unitholders
Income tax expense
Non-cash lease termination income
Change in fair value of financial instruments
b) Change in other non-cash operating items
Cash provided by (used in):
Trade receivables
Prepaid expenses and deposits and other assets
Payables and other liabilities
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 17) RELATED PARTY TRANSACTIONS
As at December 31, 2020, Empire, through its wholly-owned subsidiary ECLD, holds a 41.5% indirect interest in Crombie. Related party transactions
primarily include transactions with entities associated with Crombie through Empire’s indirect interest. Related party transactions also include
transactions with joint venture entities in which Crombie has a 50% interest, as well as transactions with key management personnel and post-
employment benefit plans.
Related party transactions are measured at the amount of consideration established and agreed by the related parties.
Crombie’s revenue (expense) transactions with related parties are as follows:
Property revenue
Property revenue
Head lease income
Lease termination income
Property operating expenses
General and administrative expenses
Property management services recovered
Other general and administrative expenses
Finance costs – operations
Interest rate subsidy
Finance costs – distributions to Unitholders
Year ended
December 31, 2020
December 31, 2019
$
$
$
$
$
$
$
$
209,780
1,162
136
(58)
594
(258)
256
(58,194)
$
$
$
$
$
$
$
$
207,948
856
521
(60)
602
(240)
279
(62,303)
Crombie provides property management, leasing services and environmental management to specific properties owned by certain subsidiaries of
Empire on a fee for service basis pursuant to a Management Agreement. Revenue generated from the Management Agreement is being recognized
as a reduction of general and administrative expenses.
During the year ended December 31, 2020, Crombie issued 85,433 (December 31, 2019 – 65,721) Class B LP Units to ECLD under the DRIP (Note 15).
On May 28, 2020, Crombie purchased a property from a subsidiary of Empire for a total purchase price of $4,535 before transaction costs.
On December 15, 2020, Crombie purchased a property from a subsidiary of Empire for a total purchase price of $17,100 before transaction costs.
During the year ended December 31, 2020, Crombie invested $40,554 in properties anchored by subsidiaries of Empire, which resulted in amended
lease terms. These amounts have been included in tenant incentive additions or income property additions depending on the nature of the work
completed. The costs are being amortized over the amended lease terms or the useful life of the projects, as applicable.
Amounts due from related parties include $15,533 (December 31, 2019 – $15,533) in 6% subordinated notes receivable due from Bronte Village Limited
Partnership and The Duke Limited Partnership.
Crombie has a mortgage payable due to 1600 Davie Limited Partnership of $25,526 (December 31, 2019 – $20,401). This mortgage relates to the
commercial component of the Davie Street development, 100% of which is included in Crombie’s financial statements.
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of Crombie. The
following are considered to be Crombie’s key management personnel: the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer and
the two other highest compensated executives.
The remuneration of members of key management during the year was approximately as follows:
Year ended
December 31, 2020
December 31, 2019
Salary, bonus, and other short-term employee benefits
Total compensation paid to Trustees
Other long-term benefits
$
$
6,193
$
865
122
7,180
$
5,899
894
109
6,902
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth 18) FINANCIAL INSTRUMENTS
(a) Fair Value of Financial Instruments
The fair value of a financial instrument is the estimated amount that Crombie would receive to sell a financial asset or pay to transfer a financial
liability in an orderly transaction between market participants at the measurement date.
Fair value determination is classified within a three-level hierarchy, based on observability of significant inputs, as follows:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 – unobservable inputs for the asset or liability.
There were no transfers between levels of the fair value hierarchy during the period ended December 31, 2020.
The fair value of other financial instruments is based on discounted cash flows using discount rates that reflect current market conditions for
instruments with similar terms and risks. The following table summarizes the estimated fair value of other financial instruments which have a fair value
different from their carrying value:
Financial assets
Long-term receivables1
Financial liabilities
Investment property debt
Senior unsecured notes
Total other financial liabilities
December 31, 2020
December 31, 2019
Fair Value
Carrying Value
Fair Value
Carrying Value
$
$
$
25,042
1,427,367
1,206,285
$
$
25,051
1,336,560
1,125,000
2,633,652
$
2,461,560
$
$
$
23,911
1,400,821
946,700
2,347,521
$
$
$
24,120
1,363,385
925,000
2,288,385
(1) Long-term receivables include amounts in other assets for the capital expenditure program, interest rate subsidy, and receivable from related parties.
The fair value of the long-term receivables, investment property debt, and senior unsecured notes are Level 2.
Due to their short-term nature, the carrying value of the following financial instruments approximates their fair value at the balance sheet date:
• Cash and cash equivalents
• Trade receivables
• Trade and other payables (excluding any embedded derivatives).
(b) Risk Management
In the normal course of business, Crombie is exposed to a number of financial risks that can affect its operating performance. The more significant
risks, and the actions taken to manage them, are as follows:
Credit Risk
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfil their lease commitments. A provision for
doubtful accounts and other NOI adjustments are taken for all anticipated collectability risks.
Crombie mitigates credit risk by geographical diversification, diversifying both its tenant mix and asset mix, and conducting credit assessments for
new and renewing tenants.
In measuring tenant concentration, Crombie considers both the annual minimum rent and total property revenue of major tenants:
• Crombie’s largest tenant, Empire (including Sobeys and all other subsidiaries of Empire), represents 54.9% of annual minimum rent; no other tenant
accounts for more than 3.3% of Crombie’s minimum rent.
• Total property revenue includes operating and realty tax cost recovery income and percentage rent. These amounts can vary by property type,
specific tenant leases and where tenants may directly incur and pay operating and realty tax costs. For the year ended December 31, 2020,
Empire (including Sobeys and all other subsidiaries of Empire) represents 54.0% of total property revenue. Excluding these tenants, no other tenant
accounts for more than 4.1% of Crombie’s total property revenue.
• Over the next five years, leases on no more than 6.2% of the gross leasable area of Crombie will expire in any one year.
Receivables are substantially comprised of current balances due from tenants and past due receivables. The balance of accounts receivable past
due is usually not significant; however, historically low receivable balances have increased significantly during the year as a result of the impacts of
the COVID-19 pandemic. Generally, rents are due the first of each month and other tenant billings are due 30 days after invoiced, and in general,
balances over 30 days are considered past due. The total provision for doubtful accounts is reviewed at each balance sheet date and current and
long-term accounts receivable are reviewed on a regular basis.
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 Provision for doubtful accounts, beginning of year
Additional provision
Recoveries
Write-offs
Provision for doubtful accounts, end of year
Year ended
December 31, 2020
December 31, 2019
$
$
340
$
8,751
(749)
(387)
7,955
$
345
284
(62)
(227)
340
Crombie assesses, on a forward-looking basis, the expected credit losses associated with its rent receivables. In determining the expected credit
losses, Crombie takes into account, on a tenant-by-tenant basis, the payment history, future expectations, and knowledge gathered through
discussions for rental concessions, applications for rental relief through government programs, and ongoing discussions with tenants.
Crombie’s assessment of expected credit losses is subjective and, due to the impacts of COVID-19, the degree of uncertainty in our assessments
has increased. During the year ended December 31, 2020, Crombie has recorded a bad debt expense of $10,894, with the corresponding amount
recorded as an expected credit loss against our accounts receivable balance.
Interest Rate Risk
Interest rate risk is the potential for financial loss arising from increases in interest rates. Crombie mitigates this risk by utilizing staggered debt
maturities and limiting the use of permanent floating rate debt and, on occasion, utilizing interest rate swap agreements. Crombie does not enter into
interest rate swaps on a speculative basis.
As at December 31, 2020
• Crombie’s weighted average term to maturity of its fixed rate mortgages was 5.7 years.
• Crombie’s weighted average term to maturity of its unsecured notes was 5.1 years.
• Crombie has a floating rate revolving credit facility available to a maximum of $400,000 subject to available borrowing base, with a balance of
$17,712 at December 31, 2020; and
• Crombie has an unsecured bilateral credit facility available to a maximum of $130,000 with a balance of $35,000 at December 31, 2020.
Crombie has interest rate swap agreements in place on $112,510 of floating rate mortgage debt.
A fluctuation in interest rates would have had an impact on Crombie’s operating income related to the use of floating rate debt. The following table
looks at the impacts of selected interest rate moves on operating income:
Impact on operating income attributable to Unitholders of interest rate changes on the
floating rate revolving credit facility
Impact of a 0.5% interest rate change
Impact of a 1.0% interest rate change
Liquidity Risk
Year ended December 31, 2020
Decrease in rate
Increase in rate
$
648
$
1,296
(648)
(1,296)
The real estate industry is highly capital intensive. Liquidity risk is the risk that Crombie may not have access to sufficient debt and equity capital
to fund its growth program, refinance debt obligations as they mature, or meet its ongoing obligations as they arise. Cash flow generated from
operating the property portfolio represents the primary source of liquidity used to service the interest on debt, fund general and administrative
expenses, reinvest in the portfolio through capital expenditures, as well as fund tenant incentive costs and make distributions to Unitholders. Debt
repayment requirements are primarily funded from refinancing Crombie’s maturing debt obligations. Property acquisition funding requirements are
funded through a combination of accessing the debt and equity capital markets and recycling capital from property dispositions.
There is a risk that the debt capital markets may not refinance maturing fixed rate and floating rate debt on terms and conditions acceptable to
Crombie or at any terms at all. Crombie seeks to mitigate this risk by staggering its debt maturity dates. There is also a risk that the equity capital
markets may not be receptive to a REIT unit offering issue from Crombie with financial terms acceptable to Crombie. Crombie mitigates its exposure
to liquidity risk utilizing a conservative approach to capital management (see Note 19). Access to the $400,000 floating rate revolving credit facility is
limited by the amount utilized under the facility and the amount of any outstanding letters of credit, and cannot exceed the borrowing base security
provided by Crombie.
125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth The estimated payments, including principal and interest, on financial liabilities to maturity date are as follows:
Contractual
Cash Flows1
2021
2022
2023
2024
2025
Thereafter
Twelve months ending December 31,
Fixed rate mortgages2
$ 1,507,553
$
176,290 $
239,842
$
309,376 $
262,088
$
62,923
$
457,034
Senior unsecured notes
1,326,040
189,051
185,899
30,476
30,476
197,776
Trade and other payables
124,853
108,878
Lease liabilities
148,115
2,537
2,953
2,476
1,714
2,390
964
2,254
964
2,267
692,362
9,380
136,191
Credit facilities
Total
3,106,561
476,756
431,170
343,956
295,782
263,930
1,294,967
64,811
36,176
672
18,215
9,748
—
—
$ 3,171,372 $
512,932 $
431,842 $
362,171 $
305,530
$
263,930
$
1,294,967
(1) Contractual cash flows include principal and interest and ignore extension options.
(2) Reduced by the interest rate subsidy payments to be received from Empire.
19) CAPITAL MANAGEMENT
Crombie’s objective when managing capital on a long-term basis is to maintain overall indebtedness, at reasonable levels, utilize staggered debt
maturities, minimize long-term exposure to excessive levels of floating rate debt and maintain conservative payout ratios.
Crombie’s capital structure consists of the following:
Fixed rate mortgages
Credit facilities
Senior unsecured notes
Crombie REIT Unitholders
SVU and Class B LP Unitholders
Lease liabilities
December 31, 2020
December 31, 2019
1,267,044
$
1,302,510
62,256
1,121,398
881,511
596,795
29,914
54,308
922,479
870,792
584,251
29,419
3,958,918
$
3,763,759
$
$
At a minimum, Crombie’s capital structure is managed to ensure that it complies with the limitations pursuant to Crombie’s Declaration of Trust, the
criteria contained in the Income Tax Act (Canada) in regard to the definition of a REIT and existing debt covenants. Some of the restrictions pursuant to
Crombie’s Declaration of Trust would include, among other items:
• A restriction that Crombie shall not incur indebtedness (other than by the assumption of existing indebtedness) where the indebtedness would
exceed 75% of the market value of an individual property; and
• A restriction that Crombie shall not incur indebtedness of more than 60% of gross book value.
126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020
For debt to gross book value calculation, Crombie does not include in total debt the financial liabilities to REIT Unitholders and to holders of Class B
LP Units, as shown on the balance sheet as Net assets attributable to Unitholders. Crombie’s debt to gross book value as defined in Crombie’s
Declaration of Trust is as follows:
Year ended
December 31, 2020
December 31, 2019
Fixed rate mortgages
Senior unsecured notes
Floating rate revolving credit facility
Joint operation credit facilities
Bilateral credit facility
Lease liabilities
Total debt outstanding
Less: Applicable fair value debt adjustment
Debt
Income properties, cost1
Properties under development, cost
Below-market lease component, cost2
Investment in joint ventures
Other assets, cost
Cash and cash equivalents
Deferred financing charges
Investment properties held for sale, cost
Interest rate subsidy
Gross book value
Debt to gross book value – cost basis
$
1,274,304
$
$
$
1,125,000
17,712
9,544
35,000
29,914
2,491,474
(283)
2,491,191
4,146,652
$
$
63,377
64,873
51,043
463,699
63,293
10,972
33,263
(283)
$
4,896,889
$
50.9%
1,309,077
925,000
15,339
8,969
30,000
29,419
2,317,804
(539)
2,317,265
4,061,957
96,213
64,754
45,123
396,374
—
9,715
—
(539)
4,673,597
49.6%
(1) Includes impairments on land of $5,657.
(2) Below-market lease component is included in the carrying value of investment properties.
Under the amended terms governing the floating rate revolving credit facility, Crombie is entitled to borrow a maximum of 70% of the fair market
value of assets subject to a first security position and 60% of the excess fair market value over first mortgage financing of assets subject to a second
security position or a negative pledge. The terms of the revolving credit facility also require that Crombie must maintain certain covenants:
• annualized net operating income for the prescribed properties must be a minimum of 1.4 times the coverage of the related annualized debt service
requirements;
• annualized net operating income on all properties must be a minimum of 1.4 times the coverage of all annualized debt service requirements;
• access to the revolving credit facility is limited by the amount utilized under the facility and the amount of any outstanding letters of credit not to
exceed the borrowing base security provided by Crombie; and
• cash distributions to Unitholders are limited to 100% of funds from operations.
As at December 31, 2020, Crombie is in compliance with all externally imposed capital requirements and all covenants relating to its debt facilities.
20) LEASE LIABILITIES
Crombie’s future minimum lease payments as a lessee are as follows:
Twelve months ending December 31,
Total
Future minimum lease payments
$ 148,115
Finance charges
(118,201)
Present value of lease payments
$
29,914
2021
2,537
(1,865)
672
$
$
2022
2,476
(1,847)
629
2023
2,390
(1,832)
558
$
$
2024
2,254
(1,823)
431
$
$
$
$
2025
Thereafter
$
$
2,267
(1,815)
452
$
$
136,191
(109,019)
27,172
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth Lease liabilities are presented in the consolidated balance sheet as follows:
Current
Non-current
Total
December 31, 2020
December 31, 2019
$
$
672
29,242
29,914
$
$
744
28,675
29,419
Some of Crombie’s lease agreements contain contingent rent clauses. Contingent rental payments are recognized in the consolidated statements of
comprehensive income as required when contingent criteria are met. The lease agreements contain renewal options and purchase options. For the
year ended December 31, 2020, minimum lease payments of $2,598 were paid by Crombie.
21) COMMITMENTS, CONTINGENCIES, AND GUARANTEES
There are various claims and litigation in which Crombie is involved, arising out of the ordinary course of business operations. In the opinion of
management, any liability that would arise from such contingencies in excess of existing accruals would not have a significant adverse effect on these
financial statements.
Crombie obtains letters of credit to support its obligations with respect to construction work on its investment properties and satisfying mortgage
financing requirements. As at December 31, 2020, Crombie has a total of $5,580 in outstanding letters of credit related to:
Construction work being performed on investment properties
Mortgage lenders primarily to satisfy mortgage financings on redevelopment properties
Total outstanding letters of credit
December 31, 2020
December 31, 2019
$
$
3,740
1,840
5,580
$
$
3,805
1,840
5,645
As at December 31, 2020, Crombie had signed construction contracts totalling $358,813 of which $288,183 has been paid. This includes contracts signed
within joint ventures at Crombie’s ownership percentage.
Crombie has 100% guarantees on mortgages related to properties in which it has less than a 100% interest. The mortgages payable related to these
guarantees are secured by specific charges against the properties. As at December 31, 2020, Crombie has provided guarantees of approximately
$140,577 (December 31, 2019 – $145,713) on mortgages in excess of their ownership interest in the properties. Responsibility for ongoing payments of
principal and interest on these mortgages remains with the joint owners of the properties. The mortgages have a weighted average term to maturity
of 3.8 years.
Under the terms of head leases with certain of Crombie’s joint operation partners, Crombie guarantees its joint operation partners their portion of any
uncollected rent receivable from the sub-tenant.
128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT | Annual Report 2020 22) SUBSEQUENT EVENTS
(a)
On January 18, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from January 1, 2021 to and including January 31, 2021.
The distributions were paid on February 15, 2021, to Unitholders of record as of January 31, 2021.
(b) On January 29, 2021, Crombie disposed of a 100% interest in two retail properties totalling 29,000 square feet of gross leasable area. Total
proceeds, before closing adjustments and transactions costs, were approximately $17,600.
(c) On February 10, 2021, Crombie acquired a 100% interest in a retail property from a subsidiary of Empire totalling 26,000 square feet for $3,242,
excluding closing and transaction costs.
(d) On February 16, 2021, Crombie declared distributions of 7.417 cents per Unit for the period from February 1, 2021 to and including February 28,
2021. The distributions will be paid on March 15, 2021, to Unitholders of record as of February 28, 2021.
23) SEGMENT DISCLOSURE
Crombie owns and operates primarily retail, retail-related industrial, office, and mixed-use real estate assets located in Canada. Management, in
measuring Crombie’s performance or making operating decisions, does not distinguish or group its operations on a geographical or other basis.
Accordingly, Crombie has a single reportable segment.
24) INDEMNITIES
Crombie has agreed to indemnify its trustees and officers, and particular employees, in accordance with Crombie’s policies. Crombie maintains
insurance policies that may provide coverage against certain claims.
Crombie signed an indemnity for a bond on a several basis for $1,337 related to a lien registered by a third-party supplier at our 1600 Davie Limited
Partnership. Subsequent to year-end, the lien and bond were removed.
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSProven Stability and Sustainable Growth PROPERTY PORTFOLIO
Property
Location
Description
Clarenville
Conception Bay
Deer Lake
NEWFOUNDLAND & LABRADOR
Random Square
Conception Bay Plaza
2A Commerce Street
71 Grandview Boulevard Grand Bank
Grand Falls
21 Cromer Avenue
Placentia
69 Blockhouse Road
St. John’s
10 Elizabeth Avenue
St. John’s
45 Ropewalk Lane
St. John’s
Avalon Mall
St. John’s
Hamlyn Road Plaza
St. John’s
Kenmount Woodgate
St. John’s
Topsail Road Plaza
St. John’s
Torbay Road Plaza
Retail – Enclosed
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Enclosed
Retail – Plaza
Mixed Use
Retail – Plaza
Retail – Plaza
PRINCE EDWARD ISLAND
400 University Avenue
Kinlock Plaza
Charlottetown
Stratford
Retail – Freestanding
Retail – Plaza
NOVA SCOTIA
Amherst Centre
Amherst Plaza
151 Church Street
Hemlock Square
Mill Cove Plaza
2 Forest Hills Parkway
Dartmouth Crossing —
Amherst
Amherst
Antigonish
Bedford
Bedford
Cole Harbour
Cineplex
Dartmouth
Dartmouth
Panavista Drive
Dartmouth
Penhorn Plaza
Dartmouth
Russell Lake
Elmsdale
Elmsdale Plaza
Fall River
Fall River Plaza
Halifax
North & Windsor Street
Halifax
Park West Plaza
Halifax
Queen Street Plaza
Lower Sackville
Downsview Mall
Downsview Plaza
Lower Sackville
Aberdeen Business Centre New Glasgow
New Glasgow
Highland Square
New Glasgow
West Side Plaza
New Minas
County Fair Mall
New Waterford
75 Emerald Street
Pictou
Blink Bonnie Plaza
Port Hawkesbury
622 Reeves Street
22579 Highway 7
Sheet Harbour
279, 289 & 303 Herring
Sydney Mines
Tatamagouche
Timberlea
Truro
Upper Tantallon
Cove Road
Spryfield
Stellarton
293 Foord Street
Prince Street Plaza
Sydney
Sydney Shopping Centre Sydney
39 Pitt Street
North Shore Centre
70 Marketway Lane
Fundy Trail Centre
Tantallon Plaza
Scotia Square Properties
Barrington Place
Barrington Tower
Brunswick Place
CIBC Building
Cogswell Tower
Duke Tower
Scotia Square
Scotia Square Parkade
Halifax
Halifax
Halifax
Halifax
Halifax
Halifax
Halifax
Halifax
NEW BRUNSWICK
850 Saint Peters Avenue Bathurst
477 Paul Street
501 Regis Street
Edmundston
Brookside Mall
Prospect Street Plaza
Uptown Centre
1234 Main Street
Elmwood Drive
Mountain Road
Northwest Centre,
Mountain Road
Dieppe
Dieppe
Edmundston
Fredericton
Fredericton
Fredericton
Moncton
Moncton
Moncton
Moncton
Vaughan Harvey Plaza Moncton
273 Pleasant Street
Newcastle
Riverview — Findlay
Retail – Enclosed
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Mixed Use
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Mixed Use
Retail – Enclosed
Retail – Plaza
Retail – Enclosed
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail - Freestanding
Retail – Plaza
Retail – Plaza
Mixed Use
Office
Mixed Use
Office
Office
Office
Mixed Use
Mixed Use
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Office
Retail – Plaza
Retail – Plaza
228,000
24,000
6,000
184,000
150,000
22,000
45,000
5,000
145,000
31,000
147,000
101,000
50,000
143,000
55,000
79,000
226,000
389,000
200,000
71,000
241,000
3,000
51,000
34,000
1,000
73,000
24,000
71,000
189,000
18,000
17,000
41,000
127,000
157,000
191,000
186,000
255,000
206,000
204,000
217,000
216,000
-
4,823,000
18,000
52,000
25,000
42,000
43,000
22,000
262,000
140,000
95,000
17,000
81.8
100.0
100.0
96.0
100.0
100.0
100.0
100.0
94.0
100.0
99.3
98.7
100.0
95.4
100.0
98.5
97.5
100.0
100.0
94.3
56.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
93.9
100.0
100.0
100.0
97.9
98.7
98.5
99.7
92.4
90.0
94.3
94.8
92.9
-
94.2
100.0
100.0
100.0
100.0
100.0
100.0
87.8
89.9
100.0
100.0
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
52,000
103,000
20,000
100.0
100.0
100.0
Boulevard
Riverview Place
Fairvale Plaza
Riverview
Riverview
Rothesay
Retail – Plaza
Mixed Use
Retail – Freestanding
66,000
149,000
52,000
94.8
80.7
100.0
130
GLA
(approx.
sq. ft.)
%
Occu-
pancy
108,000
65,000
29,000
19,000
3,000
2,000
80,000
6,000
552,000
38,000
86,000
158,000
139,000
1,285,000
96.1
89.9
100.0
100.0
100.0
100.0
100.0
100.0
94.1
83.4
100.0
98.5
82.7
94.1
5,000
84,000
89,000
100.0
100.0
100.0
Property
Catherwood Street
Loch Lomond Place
Charlotte Mall
Tracadie
Location
Saint John
Saint John
St. Stephen
Tracadie
Description
Retail – Freestanding
Mixed Use
Retail – Plaza
Retail – Plaza
GLA
(approx.
sq. ft.)
%
Occu-
pancy
5,000
193,000
116,000
40,000
1,512,000
100.0
75.9
97.8
83.8
91.3
QUÉBEC
1500 rue de Bretagne
1020 boul. Monseigneur-
de-Laval
Beauport Plaza
50 rue Bourgeoys
3260 boul. Lapiniere &
3305 Broadway
645 boul. Thibeau
80-90 boul. D’Anjou
Marché St-Charles-de-
Drummond
1205 rue de Neuville
1248 boul. de la Verendrye
Baie Comeau
Retail – Freestanding
50,000
100.0
Baie Saint Paul
Beauport
Bromptonville
Retail – Plaza
Retail – Plaza
Retail – Plaza
65,000
78,000
7,000
100.0
97.0
37.7
Brossard
Cap-de-la-
Madeleine
Chateauguay
Retail – Plaza
Retail – Freestanding
48,000
49,000
96.2
100.0
Retail – Plaza
91,000
100.0
Drummondville
Gatineau
Retail – Plaza
Retail – Plaza
48,000
31,000
100.0
100.0
Est
Retail – Plaza
Gatineau
Havre-Saint-Pierre Retail – Freestanding
1298 rue de la Digue
Retail – Freestanding
Huntingdon
2195 chemin Ridge
Retail – Plaza
Lavaltrie
Centre Lavaltrie
Retail – Plaza
Lavaltrie
Marché Lavaltrie
Retail – Plaza
Les Saules
Les Saules
Retail – Freestanding
714 boul. Saint-Laurent O Louiseville
Retail – Plaza
1450 & 1454 rue Royale Malartic
Retail – Freestanding
551 avenue du Phare E Matane
McMasterville
Retail – Plaza
McMasterville
Retail – Plaza
Mercier
Mercier
Retail – Plaza
Marché St-Augustin
Mirabel
Retail – Freestanding
1 avenue Westminster N Montreal
Retail – Plaza
3964 Notre Dame St W Montreal
Retail – Freestanding
Montreal
5651 rue de Verdun
Industrial
Montreal
Pointe-Claire
Retail – Plaza
Paspebiac
Paspebiac Plaza
Retail – Freestanding
Quebec City
Lebourgneuf
Retail – Freestanding
Rimouski
395 avenue Sirois
Retail – Freestanding
375 boul. Jessop
Rimouski
Retail – Plaza
254 boul. de l’Hotel de Ville Riviere du Loup
Retail – Freestanding
Rouyn-Noranda
680 avenue Chausse
Retail – Plaza
Saint-Amable
Carrefour Bourgeois
Retail – Plaza
Saint-Apollinaire
Saint-Apollinaire Plaza
Retail – Freestanding
Saint-Donat
867-871 rue Principale
Retail – Freestanding
Saint-Georges-
8980 boul. Lacroix
de-Beauce
71,000
26,000
19,000
43,000
52,000
69,000
3,000
28,000
3,000
55,000
58,000
38,000
10,000
41,000
6,000
300,000
73,000
6,000
11,000
41,000
72,000
5,000
64,000
62,000
34,000
5,000
92.1
100.0
100.0
100.0
97.8
100.0
100.0
100.0
100.0
98.6
100.0
100.0
100.0
100.0
100.0
100.0
91.7
100.0
100.0
100.0
100.0
100.0
93.1
100.0
100.0
100.0
131-A avenue Sainte-
Cecile
Saint Romuald Plaza
10505 boul. Sainte-Anne Sainte-Anne-de-
Saint-Pie
Saint Romuald
Beaupré
Shawinigan
Shawinigan
Sherbrooke
2959 rue King O
Sherbrooke
3950 rue King O
411 boul. Poliquin
Sorel-Tracy
1101 boul. de la Piniere O Terrebonne
ONTARIO
Ancaster
977 Golf Links Road
Barrie
409 Bayfield Street
Bowmanville
680 Longworth Avenue
Bradford
20 Melbourne Drive
Brampton
Brampton Mall
Brampton
Brampton Plaza
Burlington
Burlington Plaza
Milltowne Plaza
Burlington
142 Dundas Street South Cambridge
Cambridge
807 King Street
Chatham
215 Park Avenue W
Dorchester
Village Centre
Fenelon Falls
Lindsay Street Centre
Fort Frances
417 Scott Street
Georgetown
Sinclair Place
Grimbsy
44 Livingston Avenue
Grimsby
Grimsby Centre
Havelock
Havelock Centre
Kenora
400 First Avenue S
London
London Pine Valley
Niagara Falls
5931 Kalar Road
Niagara Falls
Niagara Plaza
Nepean
Village Square Mall
North Bay
Algonquin Avenue Mall
Orangeville
500 Riddell Road
Orleans
5150 Innes Road
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
14,000
76,000
4,000
100.0
94.8
100.0
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Industrial
67,000
13,000
6,000
40,000
235,000
2,117,000
100.0
100.0
100.0
100.0
100.0
98.6
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
32,000
24,000
42,000
4,000
103,000
38,000
70,000
11,000
4,000
9,000
5,000
32,000
4,000
43,000
28,000
36,000
29,000
2,000
4,000
39,000
6,000
64,000
91,000
163,000
5,000
63,000
100.0
100.0
100.0
100.0
95.8
100.0
76.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
94.0
100.0
100.0
CROMBIE REIT | Annual Report 2020 Property
Location
Description
GLA
(approx.
sq. ft.)
%
Occu-
pancy
Parry Sound
Peterborough
Scarborough
Scarborough
St. Catharines
Stittsville
Stoney Creek
Thornbury
Taunton and Wilson Plaza Oshawa
Parry Sound
Rockhaven Plaza
3130 Danforth Avenue
McCowan Square
Mountain Locks Plaza
Stittsville Corner
Stoney Creek Plaza
105 Arthur Street W
1099 Broadview Avenue Toronto
3362-3370 Yonge Street Toronto
Toronto
Queensway Plaza
8265 Huntington Road
Vaughan
385 Springbank Avenue Woodstock
MANITOBA
East St. Paul
3156 Bird’s Hill Road E
Neepawa
498 Mountain Avenue
Selkirk
318 Manitoba Avenue
285 Marion Street
Winnipeg
469-499 River Avenue Winnipeg
594 Mountain Avenue Winnipeg
Winnipeg
654 Kildare Avenue
Winnipeg
655 Osborne Street
920 Jefferson Avenue
Winnipeg
1305-1321 Pembina
Highway
Winnipeg
2155 Pembina Highway Winnipeg
3381 & 3393 Portage
Avenue
Kildonan Green
River East Plaza
Winnipeg
Winnipeg
Winnipeg
Moose Jaw
North Battleford
Prince Albert
SASKATCHEWAN
200 1st Avenue NW
9801 Territorial Drive
2895 2nd Avenue W
2231 East Quance Street Regina
Regina
2915 13th Avenue
Regina
4250 Albert Street
Saskatoon
1860 McOrmond Drive
Saskatoon
River City Centre
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Industrial
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
107,000
46,000
60,000
3,000
61,000
85,000
111,000
12,000
40,000
15,000
29,000
67,000
793,000
55,000
2,435,000
4,000
2,000
5,000
38,000
59,000
18,000
43,000
20,000
55,000
98.0
100.0
100.0
100.0
100.0
96.8
99.1
100.0
100.0
100.0
100.0
54.3
100.0
97.8
97.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Retail – Plaza
Retail – Freestanding
39,000
46,000
100.0
100.0
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
55,000
74,000
84,000
542,000
39,000
30,000
56,000
19,000
20,000
41,000
58,000
160,000
423,000
100.0
96.7
100.0
99.5
100.0
100.0
100.0
100.0
100.0
97.6
100.0
82.7
93.2
ALBERTA
318 Marten Street
5700 50th Street
Beaumont Shopping
Centre
550 Cassils Road & 4
Street W
55 Castleridge Boulevard
Banff
Beaumont
Retail – Freestanding
Retail – Plaza
19,000
21,000
100.0
100.0
Beaumont
Retail – Plaza
58,000
100.0
Brooks
Retail – Plaza
61,000
100.0
NE
Calgary
99 Crowfoot Crescent NW Calgary
101 Crowfoot Way
Calgary
110-620 McKenzie Towne
Gate SE
Calgary
Calgary
410 10 Street NW
511 17 Avenue SE
Calgary
504 & 524 Elbow Drive SW Calgary
813 11 Avenue SW
Calgary
850 Saddletowne Circle
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
6,000
75,000
10,000
100.0
100.0
100.0
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
9,000
38,000
42,000
25,000
40,000
100.0
100.0
100.0
100.0
100.0
NE
Calgary
Retail – Freestanding
6,000
100.0
1818 Centre Street NE & 134
17 Avenue NE
2425 34 Avenue SW
3550 32 Avenue NE
5048 16 Avenue NW
5607 4 Street NW
South Trail Plaza
Strathcona Square
1200 Railway Avenue
135 Chestermere Station
Way
304 5 Avenue W
400 & 500 Manning
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Canmore
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
36,000
48,000
69,000
21,000
51,000
79,000
81,000
53,000
100.0
100.0
100.0
100.0
94.1
100.0
98.6
100.0
Chestermere
Cochrane
Retail – Freestanding
Retail – Freestanding
43,000
54,000
100.0
100.0
Crossing N
Edmonton
2304 109 Street NW
Edmonton
2534 Guardian Road NW Edmonton
Edmonton
5119 167 Avenue NW
Edmonton
5309 Ellerslie Road
Edmonton
8118 118 Avenue NW
Edmonton
8204 109 Street NW
Edmonton
9611 167 Avenue NW
Edmonton
10907 82 Avenue NW
Edmonton
12950 137 Avenue NW
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
49,000
48,000
49,000
30,000
50,000
22,000
34,000
37,000
21,000
55,000
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Property
Location
Description
13550 Victoria Trail
Millwood Commons
Namao Centre
304 54 Street
9601 Franklin Avenue
Clearwater Landing
8100-8300 100 Street
9925 114 Avenue
Leduc Centre
606 4 Avenue S
1760 23 Street
2750 Fairway Plaza
Edmonton
Edmonton
Edmonton
Edson
Fort McMurray
Fort McMurray
Grand Prairie
Grand Prairie
Leduc
Lethbridge
Lethbridge
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
GLA
(approx.
sq. ft.)
%
Occu-
pancy
37,000
29,000
34,000
33,000
4,000
143,000
67,000
62,000
138,000
20,000
45,000
100.0
100.0
100.0
100.0
100.0
96.5
100.0
100.0
100.0
100.0
100.0
Road S
Lethbridge
Retail – Plaza
7,000
100.0
West Highlands Towne
Centre
Lethbridge
Retail – Plaza
29,000
100.0
West Lethbridge Towne
Centre
615 Division Avenue S
410 & 610 Big Rock Lane Okotoks
Gaetz South Plaza
260199 High Plains
Red Deer
Lethbridge
Medicine Hat
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
104,000
43,000
5,000
74,000
99.1
100.0
100.0
97.8
Rocky View
Sherwood Park
Industrial
Retail – Freestanding
655,000
23,000
100.0
100.0
Boulevard
688 Wye Road
1109 James Mowatt
Trail SW
94 McLeod Avenue
395 St. Albert Trail
4607 50 Street
100 Ranch Market
4202 South Park Drive
Southbrook
Spruce Grove
St. Albert
Stettler
Strathmore
Stony Plain
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
23,000
6,000
53,000
31,000
35,000
5,000
3,045,000
100 Mile House
BRITISH COLUMBIA
575 Alder Avenue
4454 East Hastings Street Burnaby
Burnaby
Burnaby Heights
Castlegar
1721 Columbia Avenue
Chilliwack
45850 Yale Road
1551 Cliffe Avenue
Courtenay
Crown Isle Shopping
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Centre
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Courtenay
934 Baker Street
Cranbrook
1200 Baker Street
Cranbrook
11200 8 Street
Dawson Creek
9123 100 Street
Fort St. John
Kamloops
750 Fortune Drive
945 Columbia Street W Kamloops
Kelowna
294 Bernard Avenue
Kelowna
697 Bernard Avenue
Langford
Belmont Market
Langley
20871 Fraser Highway
27566 Fraser Highway
Langley
32520 Lougheed Highway Mission
800 McBride Boulevard New Westminster Retail – Freestanding
Retail – Freestanding
1170 27 Street E
North Vancouver
Retail – Freestanding
1175 Mount Seymour Road North Vancouver
Retail – Plaza
801-1301 Main Street
Retail – Freestanding
2850 Shaughnessy Street Port Coquitlam
Prince Rupert
Retail – Plaza
200 2 Avenue W
Quesnel
Retail – Freestanding
445 Reid Street
Retail – Freestanding
6140 Blundell Road
Richmond
Retail – Freestanding
3664 Yellowhead Highway Smithers
Retail – Plaza
7450 120 Street
8860 152 Street
Retail – Freestanding
10355 King George
Surrey
Surrey
Penticton
8,000
4,000
61,000
3,000
6,000
54,000
97,000
9,000
48,000
5,000
66,000
56,000
5,000
19,000
30,000
137,000
48,000
45,000
55,000
43,000
37,000
36,000
59,000
49,000
50,000
3,000
28,000
5,000
60,000
56,000
Boulevard
Surrey
Terrace
Trail
4655 Lakelse Avenue
1599 Second Avenue
990 King Edward Avenue W Vancouver
1641 & 1653 Davie Street Vancouver
Vancouver
1766 Robson Street
Vancouver
1780 East Broadway
Vancouver
2733 West Broadway
Vancouver
3410 Kingsway
Vancouver
8475 Granville Street
Vernon
3417 30 Avenue
Vernon
4300 32 Street
Williams Lake
451 Oliver Street
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
62,000
43,000
32,000
28,000
54,000
42,000
42,000
55,000
51,000
24,000
29,000
56,000
29,000
1,729,000
100.0
100.0
100.0
100.0
100.0
100.0
99.6
26.6
100.0
96.7
100.0
100.0
96.9
98.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
92.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
96.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.6
TOTAL
18,000,000
96.4
Proven Stability and Sustainable Growth
131
UNITHOLDERS’ INFORMATION
BOARD OF TRUSTEES
J. Michael Knowlton
Independent Trustee and Chair
John Eby
Independent Trustee
Donald E. Clow
Trustee, President and Chief Executive Officer
Paul V. Beesley
Independent Trustee
James M. Dickson
Independent Trustee
Barbara Palk
Independent Trustee
Jason P. Shannon
Independent Trustee
Jana Sobey
Independent Trustee
Paul D. Sobey
Independent Trustee
Karen Weaver
Independent Trustee
OFFICERS
J. Michael Knowlton
Chair
Donald E. Clow
President and Chief Executive Officer
Clinton D. Keay
Chief Financial Officer and Secretary
Glenn R. Hynes
Executive Vice President and Chief Operating Officer
Cheryl Fraser
Chief Talent Officer and Vice President Communications
John Barnoski
Executive Vice President Corporate Development
Trevor Lee
Senior Vice President Construction and Development
Arie Bitton
Senior Vice President Leasing and Operations
Fred Santini
General Counsel
132
CROMBIE REIT | Annual Report 2020
CROMBIE REIT
Head Office:
610 East River Road, Suite 200
New Glasgow, Nova Scotia
B2H 3S2
Telephone: (902) 755-8100
Fax: (902) 755-6477
Internet: www.crombiereit.com
INVESTOR RELATIONS AND INQUIRIES
Unitholders, analysts, and investors should direct their financial
inquiries or request to:
Clinton D. Keay, CPA, CA
Chief Financial Officer and Secretary
Email: investing@crombie.ca
Communication regarding investor records, including changes
of address or ownership, lost certificates or tax forms, should be
directed to the company’s transfer agent and registrar, AST Trust
Company (Canada).
UNIT SYMBOL
REIT Trust Units — CRR.UN
STOCK EXCHANGE LISTING
Toronto Stock Exchange
TRANSFER AGENT
AST Trust Company (Canada)
Investor Correspondence
P.O. Box 700
Montreal, Quebec
H3B 3K3
Telephone: (800) 387-0825
Email: inquiries@astfinancial.com
Website: www.astfinancial.com/ca
COUNSEL
Stewart McKelvey
Halifax, Nova Scotia
AUDITORS
PricewaterhouseCoopers, LLP
Halifax, Nova Scotia
MULTIPLE MAILINGS
If you have more than one account, you may receive a separate
mailing for each.
If this occurs, please contact AST Trust Company (Canada) at (800)
387-0825 or (416) 682-3860 to eliminate multiple mailings.
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D
Davie Street
Vancouver, British Columbia
Top 20 Tenants
Crombie builds and owns a high-quality, resilient, and
diversified portfolio backed by a diverse group of national
and regional tenants, that deliver consistent long-term
earnings and cash flow stability.
% of Annual
Minimum Rent
Average
Remaining
Lease Term
DBRS
Credit Rating
54.9%
3.3%
1.5%
1.4%
1.2%
1.2%
1.1%
1.1%
1.1%
1.0%
1.0%
0.7%
0.7%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
0.4%
74.0%
12.5 years
BBB (low)
7.5 years
BBB
7.1 years
A (high)
BBB
AAA
AA
AA
AA
BBB
5.6 years
3.2 years
12.0 years
2.4 years
8.1 years
9.4 years
6.8 years
4.0 years
7.3 years
5.3 years
2.8 years
AA (high)
4.2 years
BBB (high)
6.6 years
BBB
5.8 years
AA (low)
4.3 years
7.6 years
3.0 years
Tenant
Empire Company Limited1
Shoppers Drug Mart
Province of Nova Scotia
Dollarama
Government of Canada
CIBC
Bank of Nova Scotia
GoodLife Fitness
Cineplex
Bank of Montreal
Canadian Tire Corporation
Leon’s Furniture
Restaurant Brands International
Royal Bank of Canada
Bell Canada
Metro
SAQ/Province of Quebec
Giant Tiger
TJX Canada2
Staples
TOTAL
(1) Includes Sobeys and all other subsidiaries under Empire Company Limited.
(2) TJX Canada’s parent company, The TJX Companies, Inc., is rated A2 by Moody’s.
Crombie REIT
crombie.ca