Proven Stability and
Sustainable Growth
ANNUAL REPORT 2021
Inside this report
Crombie at a Glance
Message from the Chair
Letter from the CEO
Who We Are
Our Purpose
Crombie’s Priorities
Stable and Growing Portfolio
Strategic Partnership with Empire
Strong Development Pipeline
Spotlight on Le Duke
Strong Financial Condition
Highly Skilled Team and Caring Culture
ESG Initiatives
Our Sustainability Commitment
Financial Review
Table of Contents
Management’s Discussion and 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
Tenant Profile
IFC
2
4
6
7
8
10
12
14
16
18
20
22
24
25
84
85
89
93
126
128
IBC
ABOUT THE COVER
Le Duke, nestled between the blossoming Griffintown neighbourhood
and the charming Old Port of Montreal, reached substantial
completion in the third quarter of 2021. Le Duke, owned in partnership
with Prince Developments, is anchored by an IGA grocery store and
contains 387 residential rental units. Live at Le Duke and have the city
at your doorstep!
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, and 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 82.
NON-GAAP MEASURES
Certain financial measures in this document, including FFO, AFFO,
SANOI, debt to trailing 12 months adjusted EBITDA, and D/GFV, are
not defined terms under GAAP; therefore, they are not a reliable
way to compare us to other companies. See the Non-GAAP Financial
Measures section in the MD&A on page 79.
Crombie at a Glance
Retailer-Related REIT
Empire owns 41.5%
$5.4b
fair value including properties
held in joint ventures
$5.3b–$7.5b
development pipeline future
investment potential
295 Properties
including properties under
development and 4 properties
owned in joint ventures
96.2%
committed occupancy
About Crombie
Crombie invests in real estate that enriches local communities and
enables long-term sustainable growth. As one of the country’s
leading owners, operators, and developers of quality real estate,
Crombie’s portfolio primarily includes grocery-anchored retail,
retail-related industrial, and mixed-use residential properties in
Canada’s top urban and suburban markets.
■
■
■
VECTOM
Major Markets
Rest of Canada
Portfolio GLA by Market Class (sq. ft.)
as of December 31, 2021
Portfolio Fair Value by Market Class (%)
as of December 31, 2021
Annual Minimum Rent (“AMR”)
by Market Class (%)
as of December 31, 2021
43.2%
32.9%
39.5%
30.3%
40.7%
33.9%
26.5%
26.4%
26.6%
*
Metrics noted above do not include
properties held in joint ventures.
Proven Stability and Sustainable Growth
1
Message from the Chair
Crombie’s Board is entrusted with the
strategic direction of the organization,
and Trustees advise and support
Management in achieving key strategic
objectives. Five years ago, upon
evaluating the opportunities ahead of us,
we decided to pursue a growth strategy
that was a significant departure from
our then-current state. I am proud to say
Crombie achieved its five-year strategic
objectives with very positive results.
Despite the pandemic, Crombie has performed in a stellar
fashion. The unit price performance was excellent, as the
market recognized the value inherent in the business.
Crombie’s earnings multiple has improved significantly
over time, moving to the top of the retail REIT space.
This is due, in large part, to the recognition that Crombie
remains committed to its long-term strategy, even during
extraordinarily challenging times.
Management operated the business very efficiently in 2021,
especially considering the constraints that impacted so
much of the commercial real estate industry over the last
two years. Importantly, the team remained healthy with
very low levels of COVID-19 infection, and the health,
well-being, and safe productivity of employees was
prioritized by Management. Crombie’s overall performance
has been fantastic, with strong fundamentals, including
record occupancy levels and consistent leasing activity.
Major developments have been successful, coming in on
time and on budget, which gives the Board confidence to
pursue this ongoing strategic direction for the company.
We are grateful for the hard work of the Crombie team
that made these results possible.
Our Trustees are a dedicated, committed group who
want success for Crombie. The primary role of Trustees
is to oversee strategy, and we take our governance
role very seriously. Our committees meet regularly with
Management, focusing on human resources, succession,
audit, investment, governance, and risk management.
2
CROMBIE REIT Annual Report 2021
Empire appointed Jane Craighead and Michael Vels to
the Board and we are pleased to welcome them as they
both bring valuable experience and credentials. Jane has
extensive and diverse corporate expertise and her in-depth
background in human resources has been invaluable
to the team, and we are grateful for her contributions.
Michael Vels brings his strong financial background as
a former Chief Financial Officer of Empire as well as his
knowledge of the inner working of Empire which is valuable.
John Eby will be retiring after our May annual general
meeting, and I wanted to take this opportunity to thank him
for his important contributions to Crombie. He has been a
Trustee since 2008, and has been a valuable member of the
Board for that entire period. His wisdom and guidance will
be missed. On behalf of all Trustees, I wish John all the best
in his retirement.
I thank all our Trustees for their commitment and dedication
in 2021 and commend the Management team for a
successful year.
Sincerely,
J. Michael Knowlton
Chair
View from Le Duke
Montreal, Quebec
Board of
Trustees
*Empire appointed Trustee
J. Michael Knowlton
Independent Trustee & Chair
Paul Beesley
Independent Trustee
Don Clow
Trustee
Jane Craighead
Independent Trustee*
Jim Dickson
Independent Trustee*
John Eby
Independent Trustee
Barbara Palk
Independent Trustee
Jason Shannon
Independent Trustee
Jana Sobey
Independent Trustee*
Paul Sobey
Independent Trustee*
Michael Vels
Trustee*
Karen Weaver
Independent Trustee
Proven Stability and Sustainable Growth
3
Letter from the CEO
Built the
Crombie Way
We entered 2021 with a sense of optimism as vaccines rolled
out across the country and we envisioned an end to the
COVID-19 pandemic. The despair of 2020 was replaced
with hope, and despite waves of illness and lockdowns,
many of us returned to our offices and resumed a certain
normalcy for months at a time. At Crombie, our team was
extraordinarily resilient, remaining steadfastly committed
to our strategy. This commitment is the primary reason
Crombie’s total unitholder returns over the last three, five
and 10 years have been sector-leading, and is evident
in our strong financial results and the exceptional fair
value created through the long-term curation of a stellar
Canadian and primarily grocery-anchored portfolio.
Crombie’s portfolio is becoming increasingly appreciated
for its combination of cash flow stability and extraordinary
growth opportunities, including investments in Empire-
related initiatives and major development projects, that are
adding diversification from exceptional urban residential to
industrial properties.
I’m thrilled to say that we did what we said we would do
when we embarked on our growth strategy to focus on
Empire, and development properties five years ago.
Our team’s execution has been first class as we have
accelerated the benefits of sharing intelligence and planning
with Empire and delivered our first six development projects
on time and on budget despite working through a global
pandemic for the last two years. We are pleased many
of our stakeholders have recognized our commitment
to strategic growth while maintaining strong operating
performance and sensible balance sheet fundamentals.
In 2021, we took big strides in improving our business and
our overall portfolio quality. Grocery-anchored retail is the
foundation of our business, and it was among the most
desirable and valuable asset types for the year. In addition,
residential and retail-related industrial properties are
4
CROMBIE REIT Annual Report 2021
increasingly important in our asset mix, and represent
an area of significant growth for Crombie in the future.
Our Leasing and Operations teams achieved record
occupancy during 2021, including new leases with strong
covenant tenants and healthy rental growth on renewals.
Our Development and Construction teams completed
several successful projects across Canada in 2021, including
major developments, land-use intensifications, and
investments in Empire-related modernizations, expansions
and conversions in their store network. We reached
many milestones, including the completion of two of
our major mixed-use residential developments, Zephyr,
in Vancouver and Le Duke, in Montreal. Zephyr is a an
exceptional property that was developed in partnership
with Westbank, arguably the best developer in the
Vancouver market, who led the joint venture partnership
to deliver the construction on time and on budget, and to
lease-up quickly at rents materially above pro-forma.
In addition, high rents and cap rate compression in the
Vancouver market produced a better-than-expected
result. Le Duke is nestled in the heart of Montreal and was
developed in partnership with a very strong Montreal
developer, Prince Developments. This development was also
completed on time and on budget. Leasing commenced in
late 2021 and is progressing at or above pro-forma rents
with a projected strong fair value creation.
Our relationship with Empire remains Crombie’s
sustainable competitive advantage. We invested
approximately $200 million in Empire-related initiatives
in 2021, including conversions to Farm Boy and FreshCo
banners, modernizations, and began construction of the
approximately 300,000 square foot Customer Fulfillment
Centre 3 (i.e., CFC3), in Calgary, as part of the Voilà hub
and spoke network. We completed CFC2, a 310,000 square
foot industrial complex in Montreal, in Q4 2020 and
commenced occupancy in Q1 2021. These industry-leading facilities are part
of the Ocado-driven, high tech e-commerce solutions to deliver groceries
to home and grocery store pick-up across Canada. We are proud to work
alongside one of Canada’s leading grocers as they successfully adapt their
business to thrill customers in a multitude of ways.
Crombie has always maintained strong financial condition, as that ensures we
can weather a financial crisis like we saw in 2020-2021, and enables prudent
future growth for the long term. Our finance teams were fiercely committed to
strengthening and improving our balance sheet in 2021. We achieved increases
in liquidity, a lower cost of capital, and an increase in unencumbered assets
to $1.8 billion. Significant deleveraging took place throughout the year, with
a substantial reduction in Debt to Gross Fair Value and Debt to EBITDA. It is
worth noting that, despite deleveraging, which is dilutive to earnings, we still
achieved strong financial results, a feat that is not easy to accomplish.
2021 was a big year for Crombie in formalizing our sustainability journey.
We achieved many firsts, including our inaugural sustainability report and
first GRESB submission. We’re very proud of the work we’ve done to focus on
Environmental, Social and Governance priorities, and we are now pleased
to focus on measuring, reporting and improving on those efforts. With that
in mind, we created a new leadership position in January 2022 to oversee
this important work. Our newly appointed Vice President of Sustainability,
Dan Bourque, will guide us on this journey with solid leadership, and you can
read more about Dan on page 22 of this report.
Our success over the last five years would not be possible without our
team’s dedication to Crombie and our stakeholders. Crombie is built on high
performance, an entrepreneurial vision, and a commitment to collaboration.
We work hard to ensure that Crombie is an equitable, gratifying, and innovative
workplace. A continued focus on learning and development, and employee-
defined guiding values, which drive our culture, are critical components of our
employee value proposition. In 2021, our team embarked on an employee-led
process to update and formalize the values that guide our behaviour. You can
read how we demonstrate these values in our daily work in the People & Culture
section of this report. They truly speak to the culture we’ve built at Crombie,
which serves as the foundation for the strategic work we do everyday.
We are confident in Crombie’s future, and our engaged, highly skilled, and
high-performing team will ensure our success well into the future.
Lastly, Crombie and its predecessors have been in business for more than
60 years. Our long-term journey and our continued success with industry
sector leading returns would not be possible without the unwavering support
of our Board of Trustees. We truly appreciate their strong counsel, especially
over the last two years with the unprecedented global crisis presented by
COVID-19 and the follow-on repercussions of the volatility in the capital
markets, supply chain disruptions, and labour shortages.
Thank you for your continued support of Crombie.
Sincerely,
Don Clow FCPA, FCA
President & Chief Executive Officer
Senior
Leadership
Team
Don Clow
President &
Chief Executive Officer
Clinton Keay
Chief Financial Officer &
Secretary
Glenn Hynes
Executive Vice President &
Chief Operating Officer
Cheryl Fraser
Chief Talent Officer &
Vice President, Communications
John Barnoski
Executive Vice President,
Corporate Development
Proven Stability and Sustainable Growth
5
Who We Are
We build and operate
spaces that people
want to be part of.
Our thoughtful designs are
created to help the people
who live, work, and play
there. Functional, smart,
attractive, and built to a
high standard.
We think long term.
From our developments
to our investments, to our
relationships with partners
and stakeholders, we take
the long view. It’s not enough
to be good today, we want
to build for the future. The
people we work with need to
know that we’re committed.
We make communities
even better.
Our properties must make
a positive impact on the
community and the people
who live there. Anyone can
construct a building; we
build and operate spaces
where people thrive.
We live our values.
Truth, respect, reliability,
and accountability aren’t
just words, they’re actions.
Though our roots are
Atlantic Canadian, our
values are universal.
We demonstrate our
commitment to them every
day, in everything we do.
Asset Type (% of Fair Value)
In addition to the $5.0 billion fair value
of investment properties, Crombie
holds, at our share, $0.4 billion
fair value of mixed-use residential
properties owned in joint ventures
$5.4B
81.1%
2.0%
7.2%
2.8%
6.9%
Retail
Office
Retail-related industrial
Mixed-use residential properties
owned in joint ventures
Other1
■
■
■
■
■
1 Other includes Properties Under Development
(PUD) and Land.
6
CROMBIE REIT Annual Report 2021
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
Strategic
partnership
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
Strategically engage with Empire to complete
accretive investments such as conversions,
modernizations, expansions, and e-commerce
customer fulfillment centres, as well as
unlocking major 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
Reasonable and balanced debt ladder with
multiple sources of capital and ample liquidity
Strong financial
condition
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 the sustainability
of our properties,
tenants, communities,
and environment
Attract, develop, and retain a talented team
who are committed to advancing our purpose,
values, and overall business strategy
Prioritize employee engagement,
development, and community outreach
Focus on environmental, social, and
governance (“ESG”) footprint, including a
sustainability strategy centred on creating
value by developing and operating our
properties in a way that enhances local
communities and protects our environment
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 appetite framework
Supported communities
Proven Stability and Sustainable Growth
7
Farm Boy Nepean
Ottawa, Ontario
Crombie’s Priorities
1
Stable and
Stable and
Growing Portfolio
Growing Portfolio
8
CROMBIE REIT Annual Report 2021
Arie Bitton
Senior Vice President,
Leasing & Operations
“At Crombie, we fulfill our brand
promise by providing the communities
in which we operate the tenant mix
that ensures they will grow and thrive
well into the future. Our deep and
meaningful relationships with our
tenants and strategic partners allow
us to truly understand and meet their
needs, and those of their customers
and communities.”
Crombie has continued to curate an optimal
portfolio, which is becoming increasingly urban
and diversified. Grocery-anchored retail is the
foundation of our business, and it is among the
most desirable and valuable asset classes.
The strength of grocery-anchored retail assets has been highlighted throughout the
pandemic for several reasons, including the resilience of everyday needs retailers,
and the importance of lease term and financial covenant. In addition, residential and
industrial properties are gaining space in our asset mix and they represent a significant
growth opportunity in the future.
The fundamentals of Crombie’s portfolio of 284 active investment properties remain
solid and our experienced property management team contributes to high occupancy
rates, tenant satisfaction, consistent renewal rates, and increasing renewal spreads.
Crombie remains committed to further optimizing our portfolio through modernizations
and developments, acquisitions of grocery assets, and dispositions of low-growth
assets, while continuing to advance the quality of our grocery-anchored properties.
Antonella Talarico
Associate General Counsel
“By providing comprehensive advice
beyond the legal scope, we ensure
that both legal and business priorities
are aligned with sound solutions.
This national consistency in our
approach facilitates timely resolutions
and continues to build the trust
and confidence that Crombie has
established in the industry.”
$283m
net property income
$1.14
FFO/unit1
85%
+5.0%
SANOI1
$0.97
AFFO/unit1
9.3 years
grocery-anchored properties,
inclusive of retail-related industrial
weighted average
lease term
0.9m sq. ft.
leases renewed
+3.4%
renewal leasing spread
1 Non-GAAP measure; for additional information, please reference Non-GAAP Financial Measures section in the MD&A.
Proven Stability and Sustainable Growth
9
Farm Boy Nepean
Ottawa, Ontario
2
Strategic Partnership
Strategic Partnership
with Empire
with Empire
10
CROMBIE REIT Annual Report 2021
Jelena Plecas
Vice President, Corporate
Development Strategy
“Our ongoing strategic partnership
with Empire enables us to optimize
various transactions for both the
near and long term, to maximize
value creation, and reach AFFO and
growth targets. We support, and are
in alignment with, Empire’s innovative
strategies, such as e-grocery through
Voilà, and it is these innovative
approaches that improve Crombie’s
overall performance.”
Ray Zhang
Director, Market Strategies &
Analytics, Corporate Development
“Through in-depth market intelligence
sharing, we maintain consistent
communication and collaboration
with the team at Empire to gain
alignment on each other’s strategies.
This unlocks and delivers synergistic
value between both organizations.”
Grocery-anchored real estate has historically
been considered stable with slow growth. We are
determined to continue to prove that Crombie is not
only stable during crisis, but is also strong during
periods of higher economic growth. As the retail
landscape changes, the needs of the communities
that Empire serves continue to evolve.
Our relationship and strategic alignment with Empire offer us the ability to continuously
drive high-quality, risk-adjusted growth. We remain committed to investing $100 million
to $200 million annually in Empire-related initiatives.
Strategic and accretive transactions:
• Modernization, acquisition, and expansion of grocery stores;
• Store conversions;
• Land-use intensifications;
• Facilitating Empire’s build-out of their Voilà online grocery home delivery service
through investments in their network; and
• Unlocking of major urban developments.
Empire represents:
10.2m sq. ft.
of occupied portfolio GLA
12.2 years
weighted average lease term
56.7%
$202m
of annual minimum rent
spent in 2021 to support Empire-related initatives
Voilà CFC3 Rendering
Calgary, Alberta
Voilà hub and spoke network
Davie Street
Vancouver, British Columbia
Major urban development
Proven Stability and Sustainable Growth
11
Westhill on Duke Rendering
Halifax, Nova Scotia
3 Strong Development
Strong Development
Pipeline
Pipeline
12
CROMBIE REIT Annual Report 2021
Major Developments:
31
development projects
6
near-term projects
• 178,000 sq. ft. commercial GLA
• 300,000 sq. ft. retail-related
industrial GLA
• 1,228,000 sq. ft. residential GLA
• 1,611 residential units
25
medium/long-term projects
• 1,150,000 sq. ft. commercial GLA
• 9,852,000 sq. ft. residential GLA
• 11,100 residential units
2020 Completions
689,000 sq. ft.
2021 Completions
521,000 sq. ft.
2022 Expected Completions
820,000 sq. ft.
Crombie recognizes the key role major developments
play in our long-term strategy of accelerating fair
value and AFFO growth, and we have built a first-
class development program of mixed-use real estate.
Our development pipeline spans from coast to coast, and is comprised of different
asset opportunities, such as large scale, mixed-use residential and retail-related
industrial developments, all with varying project durations. Crombie is committed to
investing $150 million to $250 million annually in our development program, including
non-major developments.
Our development program has hit its stride as two more projects reached substantial
completion in 2021. Zephyr, located on Davie Street in the West End of Vancouver,
achieved substantial completion in the first quarter of 2021 with lease-up in record time,
reaching full occupancy in the fall. Leasing momentum continues at Le Duke, in Montreal,
with 28% leased as of December 31, 2021 (40% as of March 15, 2022), after reaching
substantial completion in the third quarter of 2021.
Our dedicated team continues to work on entitling land across the country for major
development projects. Currently, Crombie has six projects that are fully entitled, two other
near-term projects where zoning applications have been submitted, and a number of
additional medium- to long-term projects where entitlement work is actively underway.
There is a significant opportunity for Crombie to supplement the value creation from
completed developments with material value creation through the entitlement process,
a very complementary two-prong approach.
$5.3b–$7.5b
development pipeline future
investment potential
Kelowna
1
1
5
Edmonton
Calgary
Victoria
11
1
Vancouver
Halifax
$0.9b–$1.3b
5
Kelowna,
Vancouver &
Victoria
$2.5b–$3.9b
Calgary & Edmonton
$0.6b–$0.9b
6
1
Toronto & Hamilton
$1.3b–$1.4b
Proven Stability and Sustainable Growth
13
Kevin Pritchard, Vice President,
Development, Western Canada,
Sid Schraeder, Vice President, Design
and Construction, Western Canada,
and Trevor Lee, Senior Vice President,
Development and Construction,
were onsite observing the progress
of our Voilà CFC3 development in
Calgary, Alberta.
Le Duke
Montreal, Quebec
14
CROMBIE REIT Annual Report 2021
Le Duke
Grocery stores in urban and suburban markets offer
significant development opportunities. Le Duke was
built to include an IGA and incorporates elements
of an old financial institution previously on site, with
387 luxury rental apartments overhead. This creative
approach to design adds value for the retailer and
the residents, building a neighbourhood in the heart
of the city.
Proven Stability and Sustainable Growth
15
Davie Street
Vancouver, British Columbia
4
Strong Financial
Strong Financial
Condition
Condition
16
CROMBIE REIT Annual Report 2021
Kara Cameron
Vice President, Accounting &
Financial Reporting
“The Accounting and Financial
Reporting team works diligently to
deliver clear, concise, and timely
reporting for internal and external
stakeholders. In addition to our
financial reporting requirements, we
collaborate with individuals across
the organization on critical decision-
making and strategic transactions to
pursue future growth initiatives.”
Brady Landry
Vice President,
Financial Analysis & Treasury
“Real estate is a capital intensive
business that requires robust
financial analysis. Accurate and
timely forecasting is critical to
ensuring we access the most
efficient sources of capital on a
timely basis to maximize returns,
while also strengthening our
balance sheet and improving our
overall financial condition.”
Achieving optimal portfolio quality is enabled by
an ongoing focus on strengthening our financial
condition. It is critically important to maintain a
strong balance sheet in order to successfully fulfill
our strategic objectives.
We have significantly de-risked our business through maintaining ample liquidity,
improved leverage and cost of capital, and a record-high unencumbered asset pool.
While we are committed to balance sheet improvement, Crombie recognizes the
importance of retaining flexibility to pursue strategic growth initiatives. A key component to
that flexibility is access to multiple sources of capital to fund investments in Empire-related
initiatives and our development program. Examples of these sources of capital are:
• Dispositions – full or partial interests
• Equity issuance
• Unsecured notes
• Mortgages – commercial & residential
• Distribution reinvestment plan (DRIP)
• Free cash flow
$508m
available liquidity
42.9%
debt/GFV1
$1.8b
fair value of unencumbered assets
8.25x
debt to adjusted EBITDA (TTM)1
5.1 years
weighted average term to debt maturity
1 Non-GAAP measure; for additional information, please reference Non-GAAP Financial Measures section in the MD&A.
Proven Stability and Sustainable Growth
17
Elizabeth Engram
Manager, Marketing &
Public Relations
“Crombie leads with powerful
guiding values that leave no
question as to how we approach
business every day, and these
are not entirely new to us. I have
witnessed our team live up to these
values countless times throughout
my career. Our commitment to
delivering excellence together
resonates with me most, as it calls
for an understanding of each
others’ needs and motivations,
along with an appreciation of
our talents and strengths. We
often collaborate across many
departments to support business
and community needs. The
outcomes of these cross-functional
efforts are usually innovative, often
hugely impactful, and always make
me proud to work and practice
public relations for Crombie.”
Courtney Hall
Systems Analyst
Matthew March
Director, External Reporting
Dukhee Nam
Director, Development Analytics
“In my role, the work is different
from day to day, and I love that I’m
learning with each new challenge
and opportunity I’m given. Crombie
provides me with the resources
and support to continually grow on
both a professional and personal
level. I know that my strengths are
valued, and I am empowered and
encouraged to continually raise the
bar with empathy and integrity. I’m
driven to succeed with a company
that is built on high performance
and a commitment to collaboration,
along with a culture that’s inviting,
friendly, and flexible.”
“Our guiding values truly capture
and reflect Crombie’s unique
culture, and doing what’s right
is at the foundation of each
decision. This has been especially
evident throughout the COVID-19
pandemic, where Crombie
provided many forms of ongoing
support not only to our tenants,
but also to our team. Personally,
Crombie has actively encouraged
and supported my community
involvement with various charities
and business groups throughout
my career. This speaks volumes to
the type of culture and workplace
that is fostered, and I’m proud
to work for an organization that
prides itself on creating these
positive impacts.”
“Crombie is driven by a collective
goal, focused on positively
impacting communities across
Canada with high-quality,
sustainable real estate. This shared
objective allows the team to
collaborate effectively and deliver
strong results together, while
staying inherently true to who we
are. In planning and executing
many exciting project opportunities
at Crombie, I work with highly
experienced and supportive
colleagues who continually
empower me to grow and excel.”
Kyle Quigley
Manager, Financial Analysis
Jennifer Sieber
Vice President, Investments
Parthiv Trivedi
Manager, Estimating
“I am proud to be part of an
organization that is driven by a
people-oriented, sustainable
culture. This foundation, combined
with the support, resources, and
exposure that Crombie provides,
allows me to thrive within the
industry. Crombie’s team is
dedicated to achieving success
together, through staying true to
our roots and building a space that
is empowering and inclusive. My
work is a rewarding challenge, and
I feel valued in the contributions
that I bring to the organization.”
“Early in my time at Crombie, it
was truly moving to see how the
organization gathered to mourn
the loss of a cherished colleague
and friend to many. It was so
touching to see how deeply my
colleagues care for each other and
the sense of family that’s woven
into Crombie’s culture. I’ve never
witnessed such compassion and
empathy in a business environment,
and in a manner that resonates
through the whole organization.
I observed this same compassion
and caring repeatedly throughout
the COVID-19 pandemic, as
supporting the health and well-being
of our team is Crombie’s priority.”
“At Crombie, we embody an
entrepreneurial spirit that values
collaboration and diligence to
pursue new opportunities and
challenges together. The sense
of family that permeates
throughout Crombie is central
to our culture, and this is what
I noticed immediately upon joining
the company. Our leadership
team routinely advocates that
Crombie’s success is defined by
our team. Everyone is considered
a valued team member, goes
above and beyond to help
one another, and hard work is
well recognized. I’m excited for
Crombie’s continued growth and
being part of this journey with a
great team.”
Natcha Wannaklang
Financial Analyst, Financial
Analysis & Treasury
“My team is one of the most
hardworking, supportive, smart,
and kind groups of people I have
worked with in my career.
Through sharing knowledge and
experiences, and supporting and
caring for one another, we work
together to deliver each project
successfully in order to help
reach organizational goals and
objectives. Crombie’s values guide
the way we approach our work
and interact with each other, and
I see these values demonstrated
across the organization every day.”
5 Highly Skilled Team
and Caring Culture
18
CROMBIE REIT Annual Report 2021
Ashley Harrison
Vice President, People & Culture
“There has been a lot of change
at Crombie over the past several
years. In addition to living through
a global pandemic, our growth
strategy is in action and delivering
strong results, and our team
has been evolving and growing.
With this in mind, we knew that
we wanted to update Crombie’s
guiding values, and input from
our team would be instrumental
in doing this well. We issued a
call for volunteers from across the
organization to participate, and
as is typical at Crombie, we were
flooded with team members who
were eager to be a part of this
process. It is this engagement and
collaboration that led the way
for capturing the values that will
ensure we collectively achieve our
goals and deliver results.”
Fariche Alleyne
Property Manager
“Contributing to the development
of Crombie’s refreshed guiding
values has been a valuable
experience. The process was
intentional in gathering diverse
perspectives, and equally as
intentional in ensuring it was a
supportive space to share those
perspectives. When I began at
Crombie, one thing that quickly
stood out in my interactions with
my colleagues was a true sense
of authenticity. The signifier in
each interaction was honest,
transparent communication,
and I believe this authenticity
is apparent in each one of the
guiding values we developed.”
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 guiding values. These are just a few of the many
people who strengthen Crombie’s foundation through their fine work every day.
Crombie is built on high performance, an entrepreneurial vision, and a
commitment to collaboration. The following values guide our behaviour
to ensure that we collectively achieve our goals and deliver results.
Embody Integrity
Doing what’s right is at the foundation of everything we do.
Being responsible, accountable, transparent, and honest is part
of who we are and what we accomplish.
Care Passionately
We pride ourselves on our commitment to create positive and sustainable
impact for our clients, partners, team members, and the environment.
Our team stays true to our roots and leads by example through active
community engagement.
Deliver Excellence Together
We lead with empathy and strive to truly understand each other in
a way that maximizes collaboration, quality, and high performance.
We are at our best when we value each other’s strengths and use our
one-team approach to have fun while pursuing our common goals.
Empower One Another
Everyone is encouraged to bring their unique and authentic self to work.
We are dedicated to achieving success through building a space where
everyone is accepted, respected, and celebrated.
Outperform Expectations
We are proud of the results we achieve, honour our learnings, and continually
raise the bar. Our team members are reliable, knowledgeable, and can
quickly switch gears to face challenges head on.
Proven Stability and Sustainable Growth
19
ESG Initiatives
At Crombie, we strive to improve communities for the benefit of future generations,
not just our own. We know that our investments today must enable a better tomorrow.
We are determined to do the right thing for the long-term
health of our business, our tenants, and for the
communities in which we operate. In 2021, we brought
new focus and energy to our sustainability program
and advanced a number of environmental, social, and
governance (ESG) priorities.
Crombie’s Sustainability Committee is charged with
developing a roadmap that expands our sustainability
strategy and identifies key actions, milestones and targets
that will drive performance improvements across all seven
of our material topics. Our goal is to make decisions that are
authentic to our business, core to our culture, and practical
to achieve in the short, medium, and long term.
Lynn Valley Rendering
Vancouver, British Columbia
20
CROMBIE REIT Annual Report 2021
~2m sq. ft. of BOMA
BEST certifications
48%
average waste diversion rate
across the portfolio in 2021
Ecopilot® savings at
Scotia Square Complex
since installation in 2019
HVAC energy savings of 19%
HVAC cost savings of 17%
CO2e reduction of 1,215 metric tonnes
26%
of hires in the year were
diverse candidates
54%
of leadership development
program participants
are women
Environmental Performance
We strengthened our environmental leadership structure, enhanced our ability to
track and disclose our sustainability performance, and took actions to reduce our
environmental footprint.
Our sustainability team is dedicated to lowering our environmental impact by integrating
sustainable design and construction considerations into new developments. For our
existing properties, we are employing smart technologies that support waste diversion,
and energy and water use reduction for our tenants. In order to reduce our carbon
footprint, we are also pursuing new energy conservation initiatives that will reduce
energy consumption across the Crombie portfolio.
We have implemented an industry-leading ESG software platform – built exclusively for
the global commercial real estate sector – to better track, measure, and report on our
performance. This baseline has allowed us to assess our performance, which enabled us
to make our first submission to GRESB1 and to publish our inaugural sustainability report.
Social Impact
Crombie’s caring culture is a sustainable competitive advantage and core to our success.
We are particularly proud that our industry-leading response has kept our employees,
customers, and tenants safe throughout COVID-19. Our commitment to creating positive
social impact included helping our small business tenants access federal funding for rent
relief2, 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.
Our team has worked diligently to increase the diversity of our workforce, improve equity
for all, and build an inclusive culture. In addition to advancing our BlackNorth Pledge,
we launched an internal Diversity, Equity and Inclusion (DE&I) Advisory Committee
to ensure a welcoming workplace for all employees and tenants. We also conducted
unconscious bias training to make hiring and promotion fairer, and to improve our
interactions with customers and among colleagues. Our culture of inclusiveness has kept
employees fully engaged and productive, and helped us attract new talent to our team.
Board Diversity
Corporate Governance
33%
female directors
100%
independent Board Chair and
Committee Chairs
Our Board of Trustees helps steward Crombie’s approach to environmental, social,
and governance matter for the short- and long-term health and sustainability of
the company. In 2021, the Board strengthened its governance oversight and risk
management practices to ensure accountability at all levels of the organization.
We welcomed Jane Craighead to the Board. Jane is highly qualified with a strong
understanding of corporate governance and board effectiveness, and a deep expertise
in executive compensation. In early 2022, Michael Vels was appointed to the Board.
Michael has a robust financial background, leadership experience, and valuable
knowledge of our strategic partner, Empire. The board will continue to provide valuable
guidance to the Executive Leadership team as we enhance the transparency of our ESG
and climate-related financial disclosures.
1 GRESB is the global ESG benchmark for financial markets, which helps companies assess their ESG performance
through a standardized and globally recognized framework and allows them to act on ESG data and insights.
2 In 2020 and 2021, the Crombie Values Small Business team helped tenants receive funding through the Canada
Emergency Commercial Rent Assistance (“CECRA”) program and Canada Emergency Rent Subsidy (“CERS”) program.
Proven Stability and Sustainable Growth
21
View from Bronte Village
Oakville, Ontario
Crombie is committed to embedding sustainability
principles into the way we do business, our decision-
making processes, and everyday activities. As part of this
commitment, we introduced a new leadership role: Vice
President, Sustainability. We were very pleased to promote
Dan Bourque, former Director of Operations for Crombie,
to this key position. In his previous roles on Crombie’s
Operations team, Dan led significant environmental
initiatives, including achieving national and provincial
BOMA (Building Owners & Managers Association) awards,
and overseeing BOMA BEST certified properties within
Crombie’s portfolio.
Dan is currently in his fourth year as President of BOMA
Nova Scotia, whose mandate is to provide commercial
real estate leadership and support to its members. He also
serves as a Director on BOMA Canada’s Board of Directors
to facilitate national initiatives and the exchange of ideas
that support member associations. Both positions provide
valuable industry connections and a deep understanding
of the challenges and opportunities for Crombie’s
sustainability journey.
As Vice President, Sustainability, Dan, in collaboration
across the organization, will work to address Crombie’s
actions for ESG responsibility, with a priority focus on
the Environment, to gain a better understanding of our
sustainability efforts and set targets for improvement
across our portfolio.
22
CROMBIE REIT Annual Report 2021
Dan Bourque
Vice President, Sustainability
“With the release of our inaugural
sustainability report in 2021, our
entire team is responsible to
continue with this work, identify
opportunities where we can make
a difference, and strive to ensure
sustainability practices are at the
forefront of everything we do.”
Our Sustainable
Development
Policy
In 2021, Crombie formalized
and published its Sustainable
Development Policy, which
requires all major development
and re-development projects
to undergo a comprehensive
sustainability evaluation.
This policy is a key driver of our
approach to developing existing
and future real estate assets.
Sustainability considerations
are incorporated into all
aspects of the development
process to meet key stakeholder
and community objectives
and position our portfolio for
long-term value creation.
Joint ventures, development
partners and employees are
strongly encouraged to adopt
sustainable practices throughout
the development process.
Where people want to
live, work, shop and play
SUSTAINABILIT Y REPORT 2021
Crombie 2021
Sustainability Report
Available for download
May 2022
Our Sustainability
Commitment
Crombie continues to be committed to the well-being of our
communities. We have embedded sustainability principles
into the way we do business since our inception. To better
understand Crombie’s sustainability performance, we are
improving the measurement of our baseline performance
and sustainability impact. We are developing policies and
procedures that will enable us to set targets and implement
actionable processes necessary to achieve our short- and
long-term sustainability goals.
Some of the related policies we updated and implemented in 2021 include:
• Crombie’s Code of Business Conduct and Ethics
• COVID-19 Vaccination Policy
• Flexible Work Arrangement Policy
• Hybrid Workplace Policy
• Time Away from Work Policy
• Diversity, Equity and Inclusion Policy
• Sustainable Development Policy
OUR MATERIAL TOPICS
Pillars
Key Topics
Environmental
Sustainable design and construction
Energy consumption
Social
Talent attraction, development, and retention
Diversity, equity, and inclusion (DE&I)
Health, safety, and well-being
Governance
Board composition and governance
Risk management
Proven Stability and Sustainable Growth
23
Financial Review
Management’s Discussion and Analysis
25
Risk Management
Key Highlights
COVID-19 Impact
Glossary of Terms
Portfolio Review
Market Class
Asset Type
Tenant Profile
Same-Asset Properties
Strategic Acquisitions and Dispositions
Operational Performance Review
Occupancy and Leasing Activity
New Leasing Activity
Renewal Activity
Lease Maturities
Financial Performance Review
Operating Income Attributable to Unitholders
Net Property Income
Funds from Operations (FFO)
Adjusted Funds from Operations (AFFO)
Distributions to Unitholders
Amortization of Tenant Incentives
General and Administrative Expenses
Finance Costs – Operations
Depreciation, Amortization, and Impairment
Selected Balance Sheet Information
Development
Completed Developments
Development Pipeline
Near-Term Projects
Capital Management
Capital Management Framework
Investment Grade Credit Rating
Strong Capital Structure
Debt Metrics
Debt Profile
Debt Maturities
Outstanding Unit Data
Cash Flows
Available Credit Line Liquidity
Off-Balance Sheet Commitments and Guarantees
Financial Instruments
24
CROMBIE REIT Annual Report 2021
25
29
31
32
32
34
35
36
37
39
39
40
40
41
42
43
43
45
46
46
47
47
48
48
49
50
50
51
51
57
57
57
58
58
61
63
63
64
65
66
67
Risk Management Framework
Risk Factors Related to the Business of Crombie
Financial Risk Management
Risk Factors Related to the Units
Ownership of Senior Unsecured Notes
Other Disclosures
Related Party Transactions
Use of Estimates and Judgments
Controls and Procedures
Quarterly Information
Non-GAAP Financial Measures
Forward-looking Information
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
Tenant Profile
68
68
68
71
72
73
74
74
74
76
77
79
82
84
85
89
93
126
128
IBC
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, 2021 and 2020.
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 23, 2022,
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 31.
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 79, 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 82, for more information.
MANAGEMENT’S DISCUSSION AND ANALYSIS
KEY HIGHLIGHTS
We use financial and operational metrics to measure our performance.
These key metrics are highlighted below:
FINANCIAL METRICS
(in thousands except GLA and per Unit amounts)
Property revenue
Q4 2021
Year 2021
$103,832
$408,892
Q4 2020 $97,060 +6.98%
Year 2020 $388,733 +5.19%
The increase in property revenue in the quarter and on an annual basis is
due primarily to increased rental revenue from development activity, strong
occupancy, and modernizations. Lease termination income contributed
additionally to the increase, offset in part by increased tenant incentive
amortization from modernizations.
Operating income attributable to Unitholders
Q4 2021
Year 2021
$78,730
$155,401
Q4 2020 $17,157 +358.88%
Year 2020 $67,608 +129.86%
The increase in operating income attributable to Unitholders in the quarter is driven
primarily by gain on disposal of investment properties, gain from equity accounted
investments, income from completed developments, strong occupancy, and lease
terminations. Additional contributing factors were lower impairments recognized
on retail properties compared to the same period in 2020, and reduced finance
costs from operations due to the early partial redemption of senior unsecured
notes in 2020. The increase is offset in part by higher general and administrative
expenses caused primarily by increased annual incentive amounts, and a higher
Unit price and its impact on Unit-based compensation plans, and loss from equity
accounted investments.
On an annual basis, the growth in operating income is a result of gain on disposal
of investment properties, a reduction in bad debt expense as a result of decreased
collection risk in 2021, gain from equity accounted investments, and increased income
and lower impairments as noted for the quarter. This is offset in part by higher
general and administrative expenses resulting from increased Unit price, loss from
equity accounted investments resulting from residential development projects as they
move toward revenue stabilization when revenue earned will exceed expenses, and
by increased finance costs from operations due to reduced capitalized interest.
Net property income
Q4 2021
Year 2021
$71,402
$283,031
Q4 2020 $67,815 +5.29%
Year 2020 $258,861 +9.34%
The growth in net property income for the quarter compared to the same period in
2020 is primarily due to income from completed developments, lease termination
income, strong occupancy, and higher supplemental rents from modernizations and
capital improvements.
On an annual basis, the primary driver of the increase is reduced bad debt
expense resulting from decreased collection risk in 2021, as well as the factors
impacting the quarter.
Proven Stability and Sustainable Growth
25
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL METRICS (CONTINUED)
Same-asset property cash NOI*
Q4 2021 $64,442
Year 2021 $253,162
+2.40%
+4.96%
Q4 2020 $62,935
Year 2020 $241,203
FFO* per Unit
Q4 2021
$0.29
Year 2021
$1.14
Q4 2020 $0.27 +7.41%
Year 2020 $1.05 +8.57%
FFO* payout ratio
Q4 2021
78.0%
Year 2021
78.1%
Q4 2020 83.2% -5.2%
Year 2020 84.6% -6.5%
AFFO* per Unit
Q4 2021
$0.25
Year 2021
$0.97
Q4 2020 $0.23 +8.70%
Year 2020 $0.88 +10.23%
26
CROMBIE REIT Annual Report 2021
The increase in same-asset property cash NOI for the quarter compared to the
same period in 2020 is primarily due to lease termination income, strong occupancy,
and higher supplemental rents from modernizations and capital improvements.
On an annual basis, the primary driver of the increase is reduced bad debt
expense resulting from decreased collection risk in 2021, as well as the factors
impacting the quarter.
FFO per Unit increased for the quarter from the same period in 2020 primarily due
to increased net property income from development completions, strong occupancy,
and lease terminations. Reduced finance costs from operations resulting from the early
partial redemption of unsecured notes in the fourth quarter of 2020 also contributed to
the increase in FFO per Unit. This is offset in part by higher general and administrative
costs which were primarily the result of increased annual incentive plan amounts, and
the impact Unit price on Unit-based compensation plans.
On an annual basis, the primary drivers of the increase are reduced bad debt
expense resulting from decreased collection risk in 2021, increased income from
retail-related industrial developments, lease terminations, strong occupancy,
and modernizations. This is offset in part by increased general and administrative
costs resulting from the impact of Unit price on Unit-based compensation plans,
loss from equity accounted investments due to operating results from residential
development projects as they move toward revenue stabilization when revenue
earned will exceed expenses, and higher finance costs from operations.
The improved payout ratios for the quarter and year resulted from higher FFO, offset
in part by higher total distributions due to increased number of Units outstanding
from the issuance of 6,025,000 Units in the second quarter of 2021.
The increase in AFFO per Unit for the quarter is primarily due to income from completed
developments, strong occupancy, and lease terminations, as well as reduced finance
costs from operations. This is offset in part by higher general and administrative costs,
primarily the result of increased annual incentive plan amounts, and the impact of an
increased Unit price on Unit-based compensation plans in 2021.
On an annual basis, reduced bad debt expense resulting from decreased collection
risk in 2021 is the primary cause of the increased FFO, with increased income from
modernizations and the sources noted for the quarter. This is offset by increased
general and administrative costs due to the impact of Unit price on Unit-based
compensation plans, loss from equity accounted investments resulting from operating
results from residential development projects as they move toward revenue stabilization
when revenue earned will exceed expenses, and higher finance costs from operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL METRICS (CONTINUED)
AFFO* payout ratio
Q4 2021
90.5%
Year 2021
91.8%
Q4 2020 98.7% -8.2%
Year 2020 101.0% -9.2%
OPERATIONAL METRICS
Renewals (GLA)
Q4 2021
Year 2021
97,000
905,000
Q4 2020 200,000 -103,000
Year 2020 758,000 +147,000
Renewal spreads
Q4 2021
5.0%
Year 2021
3.4%
Q4 2020 4.5% +0.5%
Year 2020 4.1% -0.7%
Committed occupancy
Year 2021
96.2%
Year 2020 96.4% -0.2%
Economic occupancy
Year 2021
95.6%
Year 2020 94.0% +1.6%
The increased AFFO described above resulted in an improvement in both the quarter
and annual payout ratios, offset in part by higher total distributions due to the
increased number of Units outstanding from the issuance of 6,025,000 Units in the
second quarter of 2021.
Renewal activity in the quarter consisted of 61,000 square feet in Rest of Canada,
23,000 square feet in Major Markets, and 13,000 square feet in VECTOM.
Year to date, renewal activity consisted of 478,000 square feet in Rest of Canada,
225,000 square feet in VECTOM, and 202,000 square feet in Major Markets.
The primary driver of the renewal growth in the quarter and year to date was retail
plaza renewals at an increase of 6.1% and 3.9% over expiring rental rates, respectively.
Crombie’s committed occupancy of 96.2% included 114,000 square feet of committed
space in the quarter. Approximately 90,000 square feet of committed space is in
VECTOM and Major Markets, including 42,000 square feet at our Scotia Square
complex in downtown Halifax.
Strong economic occupancy is primarily due to new leases of 710,000 square
feet, largely at our major retail and retail-related industrial development projects,
outpacing lease expiries and other changes by 371,000 square feet. Notable new
leases include Empire’s Voilà par IGA Customer Fulfillment Centre (“CFC”) in Montreal
and the Voilà by Sobeys spoke at The Queensway Commons.
Proven Stability and Sustainable Growth
27
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION METRICS
Interest coverage ratio*
Q4 2021
3.13x
Year 2021
3.06x
Q4 2020 2.77x +0.36x
Year 2020 2.90x +0.16x
Debt to gross fair value* (D/GFV)
Q4 2021
42.9%
Q4 2020 49.4% -6.5%
Q4 2020
49.4%
Q4 2019 48.9% +0.5%
The improvement in interest coverage ratio for the quarter compared to the same
period in 2020 is due to reduced interest on unsecured notes, and the increase
in property revenue resulting primarily from completed developments, strong
occupancy, and lease terminations.
On an annual basis, increased property revenue is the driver of the improved ratio,
offset in part by increased finance costs from operations from new mortgages and
unsecured debt and reduced capitalized interest on completed developments.
Since the fourth quarter of 2020, fair value of investment properties increased
by $211,000 primarily from lower capitalization rates, acquisitions, and completed
developments. This increase, along with higher fair value of investment in
joint ventures resulting from the completion of multi-use residential properties
at Davie Street and Le Duke, and reduced outstanding debt, resulted in the
improvement in D/GFV compared to the prior year.
Debt to gross fair value*, applying cash and cash equivalents to reduce debt, is 42.9% at Q4 2021 (Q4 2020 – 48.8%).
Debt to trailing 12 months adjusted EBITDA* (D/EBITDA)
Q4 2021
8.25x
Q4 2020 9.73x -1.48x
The improvement in D/EBITDA ratio compared to the same period in 2020 is due
to lower outstanding debt at the fourth quarter of 2021 resulting from mortgage
maturities, lower outstanding balances drawn on credit facilities, and increased
property revenue resulting primarily from completed developments, strong
occupancy, and lease terminations.
Debt to trailing 12 months adjusted EBITDA*, applying cash and cash equivalents to reduce debt, is 8.23x (Q4 2020 – 9.48x).
Available liquidity – unutilized credit facilities
Q4 2021
$507,777
Q4 2020 $471,708 +7.65%
The increase in available liquidity from the fourth quarter of 2020 is primarily due to
lower outstanding balances drawn on credit facilities resulting from proceeds from
the issuance of unsecured notes in the third quarter of 2021.
28
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
COVID-19 IMPACT
OPERATIONS
COVID-19 was declared a global pandemic in early 2020, and persisted
throughout 2021. With essential grocery-anchored properties accounting
for approximately 78% of Crombie’s annual minimum rent, our portfolio
is proving resilient through successive waves of COVID-19. Crombie
has responded to the crisis to ensure the health and safety of our
employees, tenants, and customers, while minimizing the impact on
our earnings and cash flow. Crombie’s tenants have largely remained
operational and, as a result, we have collected approximately 99%
of our contractual rents for the year ended December 31, 2021. Our
major development program, while slightly impacted by supply chain
challenges and COVID-19 related delays, had a successful year.
Vancouver’s Davie Street residential project reached completion and
full occupancy, Montreal’s Le Duke reached substantial completion (and
began leasing), Oakville’s Bronte Village neared substantial completion
(and began leasing), and the Voilà CFC3 in Calgary began construction.
(Please refer to the “Development” section of this MD&A for further
details on each project.)
to any employees who test positive for the virus. We are aware that
this will impact some of our tenants as well and we will continue
discussions to determine their needs. We remain committed to the safety
of our employees, tenants, and communities. Although not significant,
COVID-19 related inefficiencies and delays have increased risk around
date and cost of project completions, as well as pace of residential
lease-up stabilization, on our major development program. We have
focused on strengthening our balance sheet and have secured ample
liquidity to ensure stability over the long-term.
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: “Financial Performance Review”, “Risk
Management”, “Other Disclosures”, and “Forward-looking Information”.
OMICRON VARIANT
The Omicron variant of COVID-19 appeared in Canada in November
2021. The variant’s high level of transmissibility has led to record
numbers of infections across the country, and the reintroduction of
lockdown measures in many provinces. While it is too early to determine
the full impact this will have, Crombie has acted swiftly to ensure the
safety of employees by asking those who can, to work from home,
giving time as needed for vaccine booster shots, and providing support
FINANCIAL
In order to ensure Crombie is doing its part to contribute to the
resilience of its tenants during the pandemic, management continues
to actively work with tenants who are seeking rental concessions. 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, 2021,
we have collected the following approximate contractual rents:
Retail
Office
Retail-related industrial
Total
Three months ended
December 31, 2021
Year ended
December 31, 2021
% of Gross
Rent Collected
% of Gross Rent,
Total Portfolio
% of Gross
Rent Collected
% of Gross Rent,
Total Portfolio
99%
100%
100%
99%
90%
5%
5%
100%
99%
100%
100%
99%
90%
6%
4%
100%
Crombie assesses, on a tenant-by-tenant basis, losses expected with its rent receivable in determining its provision for doubtful accounts. 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.
Based on its review, Crombie recorded a bad debt expense of $811 for the year ended December 31, 2021 compared to $10,894 for the same period in
2020, of which Crombie considers $9,807 to be attributed to the impact of COVID-19.
Crombie continues to navigate the effects of COVID-19. Although parking revenue remains depressed as compared to pre-pandemic levels, there has
been significant improvement in bad debt expense.
Proven Stability and Sustainable Growth
29
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following tables further outline what management estimates to be the material impacts of COVID-19 on Crombie’s operating performance.
For the year ended December 31, 2021:
(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
Actual results – year ended December 31, 2021
$ 185,032
$
1.14
$ 157,532
$
0.97
$ 253,162
$ 11,959
4.8%
$
Per Unit
$
Per Unit
$
$
%
Adjusted for:
Bad debt expense
Rent abatements
Parking revenue1
811
—
789
0.01
—
—
811
—
789
0.01
—
—
420
—
789
(4,933)
(1,465)
(1,926)
(2.0)%
(0.6)%
(0.8)%
Adjusted results – year ended December 31, 2021
$ 186,632
Adjusted results – year ended December 31, 2020
$ $180,893
$
$
1.15
$ 159,132
1.15
$ 155,309
$
$
0.98
$ 254,371
$
3,635
1.4%
0.98
$ 250,736
(1) Parking revenue is calculated as the decrease in parking revenue from the same period in the prior year, which Crombie has attributed to the impact of COVID-19.
For the year 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 – year ended December 31, 2020
$ 165,850
$
1.05
$ 138,963
$
0.88
$ 241,203
$
(10,217)
(4.1)%
Adjusted for:
Bad debt expense1
Rent abatements2
Parking revenue3
Organizational realignment severance costs
9,807
1,012
2,715
1,509
0.06
0.01
0.02
0.01
9,807
2,315
2,715
1,509
Adjusted results – year ended December 31, 2020
$ 180,893
Actual results – year ended December 31, 2019
$ 175,539
$
$
1.15
$ 155,309
1.16
$ 148,632
$
$
0.06
0.01
0.02
0.01
5,353
1,465
2,715
—
5,353
1,465
2,715
—
2.1%
0.6%
1.1%
—%
0.98
$ 250,736
$
(684)
(0.3)%
0.98
$ 251,420
(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 the Canada Emergency Commercial Rent Assistance program (“CECRA”), was $2,315. Where qualifying tenants
had accounts receivable balances, Crombie elected to treat the abatements as a credit loss under IFRS 9. In cases where insufficient accounts receivable balances existed, Crombie applied IFRS 16 and
treated the abatements as a lease modification, which was averaged over the life of the lease as straight-line rent. For purposes of FFO*, the abatements were partially offset by the straight-line rent
impact of $(1,303).
(3) Parking revenue is calculated as the decrease in parking revenue from the same period in the prior year, which Crombie has attributed to the impact of COVID-19.
30
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
GLOSSARY OF TERMS
Adjusted debt*
Adjusted EBITDA*
AFFO*
AMR
CFC
CMA
Represents debt excluding transaction costs, which Crombie feels is a more relevant presentation of indebtedness.
Adjusted debt is a non-GAAP measure that is used in the calculation of our 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. Adjusted
EBITDA is a non-GAAP measure that is used as an input in several of our debt metrics.
Adjusted funds from operations. Crombie follows the recommendations of REALPAC’s February 2019 white paper
in determining AFFO.
Annual minimum rent. This represents fixed minimum rent in the annual amount payable by the tenant pursuant to the
terms of the lease.
Customer fulfillment 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.
D/GFV*
Debt to gross fair value.
Economic occupancy
Represents space currently occupied (excluding residential).
ESG
Fair value
FFO*
GLA
IFRS
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.
Gross leasable area (excluding residential).
International Financial Reporting Standards.
Investment in joint
ventures, fair value*
Investment in joint ventures, accounted for at cost under the equity method, adjusted to reflect Investment properties
measured at fair value for calculation of D/GFV*.
Lease termination income Revenue derived from fees resulting from the early termination of a lease. Lease termination occurs when a tenant
desires to end occupancy prior to the end date in the lease terms.
Major Markets
Modernization
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.
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.
Property cash NOI*
Property NOI on a cash basis, excluding non-cash straight-line rent recognition and non-cash tenant incentive amortization.
Proportionate ownership
Represents Crombie’s proportionate interest in the financial position and results of operations of its entire portfolio, taking
into account the difference in accounting for joint ventures using proportionate consolidation versus equity accounting.
REALPAC
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 fulfillment 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, or was subject to disposition of a portion of its GLA 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
Vancouver, Edmonton, Calgary, Toronto, Ottawa-Gatineau, Montreal, as defined by Statistics Canada 2016
CMA/CA boundaries.
Weighted average term to maturity.
Zoning applications
submitted
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.
* See “Non-GAAP Financial Measures”, starting on page 79, for more information on Crombie’s non-GAAP financial measures and reconciliations thereof.
Proven Stability and Sustainable Growth
31
MANAGEMENT’S DISCUSSION AND ANALYSIS
PORTFOLIO REVIEW
As at December 31, 2021, Crombie’s property portfolio consisted of full
ownership interests in 224 investment properties, and partial ownership
interests in 60 investment properties held in joint operations. The partial
ownership interests are reflected in our consolidated balance sheet and
income statement, based on our proportionate ownership in such joint
operations. Together these 284 properties contain, at Crombie’s share,
approximately 17.9 million square feet of GLA in all 10 provinces.
Crombie also holds partial ownership interests in seven joint ventures,
four of which currently hold properties. These joint ventures are all
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*, same-asset property NOI*,
or in operating metrics such as occupancy and GLA, unless specifically
indicated that such metrics are presented on a proportionate
consolidation basis.
MARKET CLASS
Crombie’s presence in high-growth VECTOM and Major Markets has
been increasing through acquisitions and large-scale, mixed-use
developments, to strategically elevate portfolio quality and strength.
PORTFOLIO GLA BY MARKET CLASS (SQ. FT.)
PORTFOLIO FAIR VALUE BY MARKET CLASS (%)
as of December 31, 2021
as of December 31, 2021
43.2%
30.3%
32.9%
40.7%
26.5%
26.4%
VECTOM
Major Market
Rest of Canada
VECTOM
Major Market
Rest of Canada
The table below provides details of the average capitalization rate (weighted by stabilized 12-month trailing NOI) by market class:
VECTOM
Major Markets
Rest of Canada
Weighted average portfolio capitalization rate
December 31, 2021
December 31, 2020
4.73%
5.91%
6.55%
5.65%
4.92%
6.07%
6.73%
5.86%
Throughout the year, capital recycling, development completions, and
strong demand for grocery-anchored assets all helped to compress our
weighted average capitalization rate by 21 basis points.
For an explanation of the determination of capitalization rates, see the
“Other Disclosures” section of this MD&A, under “Investment Property
Valuation” in the “Use of Estimates and Judgments” section.
32
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Crombie’s portfolio diversification by market class as at December 31, 2021 and 2020 is as follows:
GLA (sq. ft.)
January 1,
2021
Net
Acquisitions
(Dispositions)
VECTOM
5,588,000
Major Markets
4,619,000
Rest of Canada
7,793,000
(176,000)
112,000
(138,000)
Other1
December 31,
2021
6,000
5,418,000
(8,000)
4,723,000
65,000
7,720,000
Total
18,000,000
(202,000)
63,000
17,861,000
Number of
Investment
Properties
87
62
135
284
% of AMR
33.9%
26.6%
39.5%
% NOI
33.9%
26.4%
39.7%
100.0%
100.0%
Economic
Occupancy
Committed
Occupancy
99.7%
94.2%
93.5%
95.6%
99.7%
96.1%
93.8%
96.2%
GLA (sq. ft.)
January 1,
2020
Net
Acquisitions
(Dispositions)
Other1
December 31,
2020
Number of
Investment
Properties
VECTOM
5,295,000
Major Markets
4,597,000
Rest of Canada
7,666,000
2,000
(17,000)
46,000
291,000
5,588,000
39,000
81,000
4,619,000
7,793,000
Total
17,558,000
31,000
411,000
18,000,000
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%
(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 removal in preparation
for property redevelopment.
For the year ended December 31, 2021, three investment properties
at full interest and two investment properties at partial interest were
disposed of in VECTOM and Major Markets. This is partially offset by
the acquisition of four investment properties and two properties under
development in these markets, resulting in a net decrease in GLA of
64,000 square feet. Four investment properties at full interest and one
investment property at partial interest were disposed of in the Rest of
Canada, this is partially offset by the acquisition of three investment
properties, resulting in a net decrease in GLA of 138,000 square feet in
Rest of Canada.
When compared to December 31, 2020, the percentage of total annual
minimum rent generated from VECTOM increased by 160 basis points,
while Major Market total annual minimum rent increased by 30 basis
points and Rest of Canada decreased by 190 basis points. The increase
in VECTOM is primarily due to the completion of the base building for
the Voilà par IGA CFC in Montreal, the opening of the Voilà by Sobeys
spoke at The Queensway Commons in Toronto, and the first quarter
acquisition of a freestanding Sobeys store in Edmonton.
As at December 31, 2021, committed and economic occupancy stand
at 96.2% and 95.6%, respectively. Committed occupancy decreased by
20 basis points compared to December 31, 2020. Economic occupancy
increased 160 basis points compared to December 31, 2020. Throughout
the year, 139,000 net square feet of GLA has been removed from the
portfolio. The net decrease in GLA is due to 430,000 square feet of
dispositions, partially offset by the addition of 228,000 square feet
from acquisitions and 63,000 square feet of other changes throughout
the portfolio, primarily development activity. New leasing activity for
the year ended December 31, 2021 totaled 710,000 square feet at
an average rate of $20.92 per square foot. Approximately 55.6% of
Crombie’s new leases are at completed major development properties,
demonstrating continued progress in leasing our development space.
Proven Stability and Sustainable Growth
33
MANAGEMENT’S DISCUSSION AND ANALYSIS
ASSET TYPE
Retail properties represent 84.3% of Crombie’s GLA and 90.4% of annual minimum rent at December 31, 2021 compared to 83.7% of GLA and 91.8%
of annual minimum rent at December 31, 2020. The main driver of the improved diversification is due to the addition of completed retail-related
industrial developments and new leases for the Voilà hub and spoke network, which increased from 4.2% to 5.7% as a percentage of total annual
minimum rent.
PORTFOLIO GLA BY ASSET TYPE (SQ. FT.)
PORTFOLIO FAIR VALUE BY ASSET TYPE (%)
as of December 31, 2021
as of December 31, 2021
84.3%
2.2%
7.5%
2.9%
87.4%
10.4%
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, 2021 and 2020 is as follows:
GLA (sq. ft.)
January 1,
2021
Net
Acquisitions
(Dispositions)
Other1
December 31,
2021
Number of
Investment
Properties
Retail
Office
15,064,000
(47,000)
35,000
15,052,000
Retail-related industrial
1,983,000
(155,000)
953,000
—
1,000
27,000
954,000
1,855,000
Total
18,000,000
(202,000)
63,000
17,861,000
275
5
4
284
GLA (sq. ft.)
January 1,
2020
Net
Acquisitions
(Dispositions)
Other1
December 31,
2020
Number of
Investment
Properties
Retail
Office
Retail-related industrial
14,910,000
31,000
123,000
15,064,000
965,000
1,683,000
—
—
(12,000)
953,000
300,000
1,983,000
Total
17,558,000
31,000
411,000
18,000,000
275
5
4
284
% of AMR
90.4%
3.9%
5.7%
100.0%
Economic
Occupancy
Committed
Occupancy
95.6%
87.4%
100.0%
95.6%
96.0%
91.8%
100.0%
96.2%
% of AMR
91.8%
4.0%
4.2%
100.0%
Economic
Occupancy
Committed
Occupancy
95.5%
89.1%
84.9%
94.0%
96.0%
94.2%
100.0%
96.4%
(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.
34
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2021, retail GLA had a net decrease of
47,000 square feet due to the disposition of seven investment properties
at full interest and two investment properties at partial interest totalling
275,000 square feet, which was partially offset by the acquisition of
seven investment properties totalling 228,000 square feet. The fourth
quarter disposition of a 50% non-managing interest in the Voilà par
IGA CFC, in Montreal, resulted in a decrease of 155,000 square feet
to retail-related industrial GLA.
Economic occupancy improved by 160 basis points compared to
December 31, 2020 while committed occupancy decreased by 20 basis
points. A significant amount of activity occurred throughout the year
resulting in slight decrease of portfolio GLA due to net disposition activity,
partially offset by development activity. In the first quarter of 2021,
the Voilà par IGA CFC entered economic occupancy from committed
occupancy. This is Crombie’s first CFC completed with Empire, and
it further diversifies our portfolio mix. In the fourth quarter of 2021,
Crombie disposed of a 50% non-managing interest of the Voilà par IGA
CFC to Nexus REIT. Committed occupancy in our office portfolio is at
91.8%, a decrease from 94.2% at December 31, 2020, primarily attributable
to tenants vacating at our five office properties throughout 2021.
Through our mixed-use development strategy, Crombie is evolving from
defensive grocery-anchored retail to a balance of grocery-anchored
retail and retail-related industrial, as well as large-scale mixed-use
properties, creating long-term value for local communities and
Unitholders. 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 to make up a greater percentage of our
total portfolio in the future.
As equity accounted joint ventures are not reflected in this information
the applicable residential square footage, occupancy, and asset mix
details of these joint ventures are not included herein.
TENANT PROFILE
We build and own a high-quality, resilient, and diversified portfolio,
backed primarily by grocery tenants, that delivers consistent long-term
earnings and cash flow stability. As at December 31, 2021, 78% of
our annual minimum rent was generated from grocery-anchored
properties, inclusive of retail-related industrial, compared to 77% at
December 31, 2020. The increase is primarily due to our retail-related
industrial tenants, specifically, the CFC supporting Voilà par IGA in
Montreal and a spoke for Voilà by Sobeys in Toronto. These necessity-
based tenants have stable underlying income and cash flows, 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)
1.4%
1.6%
1.9%
1.9%
3.1%
3.4%
3.5%
3.9%
4.1%
4.7%
5.7%
6.2%
58.6%
Necessity-Based
Retailers1
Office & Hotel
Tenants
Retail-Related
Industrial Tenants
Medical, Professional
& Personal Services
Restaurants —
Quick Service & Cafe
Bank and
Financial Services
Apparel &
Accessories
Value-Focused
Retailers
Entertainment,
Sporting Goods &
Stationary Retailers
Home Improvement,
Furniture &
Auto Supplies
Restaurants —
Full Service
Other
Fitness Facilities
& Supplements
(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.
Proven Stability and Sustainable Growth
35
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2021.
Tenant
Empire Company Limited1
Shoppers Drug Mart
Province of Nova Scotia
Dollarama
Bank of Nova Scotia
GoodLife Fitness
Cineplex
CIBC
Canadian Tire Group
Government of Canada
Leon’s Furniture
Restaurant Brands International
Royal Bank of Canada
Bank of Montreal
SAQ/Province of Quebec
Metro
TJX Companies
Bell Canada
Giant Tiger
Staples
Total
% of AMR
56.7%
2.6%
1.7%
1.5%
1.1%
1.1%
1.0%
1.0%
1.0%
0.9%
0.7%
0.6%
0.6%
0.6%
0.6%
0.5%
0.5%
0.5%
0.5%
0.4%
GLA (sq. ft.)
Average Remaining
Lease Term
DBRS Credit Rating
10,223,000
12.2 years
228,000
366,000
311,000
173,000
210,000
207,000
132,000
158,000
130,000
112,000
63,000
55,000
84,000
65,000
88,000
120,000
85,000
188,000
86,000
6.7 years
5.7 years
5.2 years
2.2 years
7.1 years
9.2 years
14.7 years
5.1 years
2.7 years
9.1 years
4.9 years
2.3 years
4.9 years
7.6 years
5.9 years
6.6 years
3.4 years
3.7 years
2.0 years
BBB(low)
BBB(high)
A(high)
BBB
AA
AA
BBB
AAA
AA(high)
AA
AA(low)
BBB
BBB(high)
74.1%
13,084,000
(1) Includes Sobeys and all other subsidiaries of Empire Company Limited.
Other than Empire, which accounts for 56.7% of annual minimum rent
and Shoppers Drug Mart, which accounts for 2.6% of annual minimum
rent, no other tenant accounts for more than 1.7% of Crombie’s annual
minimum rent.
For the year ended December 31, 2021, Empire also represents 51.3%
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.
The weighted average remaining term of all Crombie leases is
approximately 9.3 years, which decreased 0.2 years as compared
to December 31, 2020. This remaining lease term is influenced by the
average Empire remaining lease term of 12.2 years, which decreased
0.3 years from December 31, 2020.
Crombie continues to work in partnership with Empire, aligning our
strategies to maximize value creation through property acquisitions,
modernizations, store conversions, participation in the build-out of
Empire’s Voilà online grocery home delivery hub and spoke network,
land-use intensifications, and the unlocking of major developments.
Crombie acknowledges that not all retail is performing equally.
Recognizing that, Crombie is focused on fostering relationships in our
needs-based properties that are performing very well and are poised
for future growth.
SAME-ASSET PROPERTIES
Crombie measures certain performance and operating metrics on a
same-asset basis to evaluate the period-over-period performance
of those properties owned and operated by Crombie. “Same-asset”
refers to those properties that were owned and operated by Crombie
for the current and comparative reporting periods. Properties that will
be undergoing a redevelopment in a future period, 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. Same-asset property cash
NOI* reflects Crombie’s proportionate ownership of jointly operated
properties (and excludes any properties held in joint ventures).
36
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Crombie Owned Properties
Investment Properties
(“IP”)
Properties Under
Development (“PUD”)
Same-asset properties
Adjustments
Acquisitions – 2021
Acquisitions – 2020
Other1
Active and Completed Major Developments2
Total
267
7
3
3
4
17
284
—
1
2
3
1
7
7
Sub-total
267
8
5
6
5
24
291
Additional Properties
in Joint Ventures (“JV”)
—
—
—
1
3
4
4
Total
267
8
5
7
8
28
295
(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 CFC (IP)
Calgary CFC (PUD)
Davie Street residential (JV)
Le Duke (JV)
Bronte Village (JV)
Davie Street was 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 Completed Major Development (residential
rental property) within the 1600 Davie Limited Partnership Joint
Venture (Additional Properties in Joint Ventures – Active and Completed
Major Developments).
STRATEGIC ACQUISITIONS AND DISPOSITIONS
As at December 31, 2021, GLA at Crombie’s interest was 17.9 million square feet compared to 18.0 million square feet as at December 31, 2020. The net
decrease in GLA of approximately 100,000 square feet was driven by 430,000 square feet of dispositions, partially offset by 228,000 square feet of
acquisitions and the addition of 60,000 development square footage entering GLA.
ACQUIRED GLA BY MARKET CLASS (SQ. FT.)
DISPOSED GLA BY MARKET CLASS (SQ. FT.)
year ended December 31, 2021
year ended December 31, 2021
22.0%
48.9%
47.5%
52.5%
29.1%
VECTOM
Major Market
Rest of Canada
VECTOM
Rest of Canada
Strategic Acquisitions
Through strategic and selective acquisitions of high quality, primarily
grocery-anchored, 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, 2021, Crombie completed acquisitions of
seven income-producing properties, and two development (PUD)
properties for a total aggregate purchase price of $62,887 excluding
transaction and closing costs. These acquisitions added 228,000 square
feet and potential for future density to be added to Crombie’s GLA.
Six of the nine acquisitions are located in VECTOM and Major Markets
strengthening Crombie’s presence in these markets, in line with our
strategy. The remaining three acquisitions are grocery-anchored assets
in Rest of Canada markets, of which two were acquired from Empire.
Proven Stability and Sustainable Growth
37
MANAGEMENT’S DISCUSSION AND ANALYSIS
Date
Property
Location
Vendor
Strategy
2021 First Quarter
February 10, 2021
Grand Bay Plaza
Grand Bay, NB
Related Party
Income-producing
February 26, 2021
Harvester Road
Burlington, ON
Third Party
Development
March 18, 2021
Henderson Highway Winnipeg, MB
Related Party
Income-producing
March 18, 2021
Sargent Avenue
Winnipeg, MB
Related Party
Income-producing
March 25, 2021
Tamarack
Edmonton, AB
Related Party
Income-producing
March 26, 2021
Alpine Avenue
Winnipeg, MB
Related Party
Income-producing
March 29, 2021
Coldwater Road
Coldwater, ON
Third Party
Income-producing
2021 Second Quarter
June 10, 2021
Calgary CFC
Calgary, AB
Third Party
Development
2021 Third Quarter
July 6, 2021
Highland Street
Haliburton, ON
Related Party
Income-producing
Total acquisitions for the year ended December 31, 2021
Total acquisitions for the year ended December 31, 2020
(1) Prices are stated before transaction and closing costs
Ownership
Number of
Investment
Properties
Interest
Sq. ft.
Price1
1
—
1
1
1
1
1
6
—
1
7
3
100%
100%
100%
100%
100%
100%
100%
26,000
$
—
24,000
33,000
50,000
55,000
16,000
204,000
3,242
6,400
6,300
7,800
5,260
15,600
1,690
46,292
100%
—
11,885
100%
24,000
4,710
228,000
$ 62,887
125,000
$ 40,790
Strategic Dispositions
Over the years, Crombie has worked to optimize its portfolio through
traditional dispositions of non-core and/or low growth assets and
innovative partnerships. In line with our strategy of recycling capital
through dispositions at or above IFRS fair values, we used the proceeds
raised to fund major development projects, increasing Crombie’s
concentration in VECTOM and Major Markets, as well as other higher-
value opportunities. Some of these opportunities include supporting
Empire’s growth into urban markets, acceleration of e-commerce,
and completion of major mixed-use developments. This disposition
strategy has resulted in a reduction of our in-place mortgage debt,
which enabled growth in our unencumbered asset pool. Three
investment properties at full interest and two investment properties
at partial interest were disposed of in VECTOM and Major Markets.
Four investment properties at full interest and one investment property
at partial interest were disposed of in Rest of Canada markets.
Date
2021 First Quarter
Property Type
Total dispositions at 100% interest
Three Retail Assets
2021 Third Quarter
Total dispositions at 100% interest
One Retail Asset
2021 Fourth Quarter
Total dispositions at 100% interest
Five Retail Assets3
Total dispositions at 50% interest
One Retail-related Industrial Asset
Total dispositions for the year ended December 31, 2021
Total dispositions for the year ended December 31, 2020
Number of
Investment
Properties
Interest
Sq. ft.
Ownership
Net
Property
Income1
Price
3
1
3
—
7
5
100%
30,0002
$
937
$
41,970
100%
28,000
872
15,000
100%
217,000
50%
155,000
372,000
430,000
94,000
2,715
—
2,715
54,035
98,183
152,218
$
$
4,524
$ 209,188
2,318 4
$ 38,010
(1) Reflects actual net property income earned for the full year ended December 31, 2020. Total actual net property income earned in 2021 for all disposed properties prior to disposition was $7,268,
as reflected in our consolidated results.
(2) Square footage totalling 33,000 for one of the disposition properties was removed from GLA in the second quarter of 2020 as the property was slated for redevelopment.
(3) Two of the five assets represent partial dispositions of retail assets as certain CRU space was sold and grocery retail space retained.
(4) Reflects actual net property income earned on 2020 dispositions for the full year ended December 31, 2019. Total actual net property income earned in 2020 for all disposed properties prior
to disposition was $2,156, as reflected in our consolidated results.
38
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2021 was as follows:
VECTOM
Major Markets
Rest of Canada
January 1,
2021
5,225,000
4,381,000
7,310,000
Occupied Space (sq. ft.)
Net
Acquisitions
(Dispositions)
New
Leases1
Lease
Expiries
Other
Changes2
December 31,
2021
Economic
Occupancy
Committed
Space
(sq. ft.)3
Total
Committed
Space
(sq. ft.)
Committed
Occupancy
(176,000)
357,000
(5,000)
1,000
5,402,000
99,000
146,000
(37,000)
(138,000)
4,451,000
(138,000)
207,000
(47,000)
(113,000)
7,219,000
99.7%
94.2%
93.5%
95.6%
1,000
5,403,000
89,000
4,540,000
24,000
7,243,000
114,000
17,186,000
99.7%
96.1%
93.8%
96.2%
Total
16,916,000
(215,000) 710,000
(89,000)
(250,000)
17,072,000
Occupied Space (sq. ft.)
January 1,
2021
Net
Acquisitions
(Dispositions)
New
Leases1
Lease
Expiries
Other
Changes2
December 31,
2021
Economic
Occupancy
Committed
Space
(sq. ft.)3
Total
Committed
Space
(sq. ft.)
14,384,000
(60,000)
326,000
(78,000)
(189,000)
14,383,000
849,000
—
53,000
(11,000)
(57,000)
834,000
95.6%
87.4%
72,000 14,455,000
42,000
876,000
Committed
Occupancy
96.0%
91.8%
1,683,000
(155,000)
331,000
—
(4,000)
1,855,000
100.0%
—
1,855,000
100.0%
Retail
Office
Retail-related
industrial
Total
16,916,000
(215,000)
710,000
(89,000)
(250,000)
17,072,000
95.6%
114,000
17,186,000
96.2%
(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 contracts 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 decreased from
96.4% at December 31, 2020 to 96.2% at December 31, 2021. During
2021, Crombie had a net decrease from dispositions of 215,000 square
feet, which is greater than the decrease of 202,000 square feet of
GLA from net dispositions due to a vacancy at one acquisition property.
Additionally, Crombie had new leases outpace lease expiries by
621,000 square feet.
Leasing activity at major developments included in occupancy continued
throughout the year, with approximately 395,000 square feet of new
leases in economic occupancy at Avalon Mall (93.3%), Belmont Market
(91.2%), Davie Street Retail (100.0%) and Voilà par IGA CFC (100.0%). Equity
accounted joint ventures are not included in this reporting.
Leased space in our retail properties portfolio was 96.0% at December 31,
2021, which remained constant from 96.0% at December 31, 2020. Leased
space in office properties was 91.8% at December 31, 2021, decreased
from 94.2% at December 31, 2020. This was primarily due to certain
tenants vacating at our five office properties throughout 2021. Leased
space in retail-related industrial properties of 100.0% at December 31,
2021 remained constant from 100.0% at December 31, 2020. Retail-related
industrial provides stability with solid NOI growth and long lease terms,
and also provides growth opportunities through an increased presence
in e-commerce. During the first quarter of 2021, the Voilà par IGA CFC in
Montreal and the Voilà by Sobeys spoke at The Queensway Commons
in Toronto moved into economic occupancy.
The portfolio weighted average annual minimum rent per occupied
square foot for our income-producing properties was $16.94 as at
December 31, 2021 compared to $16.74 as at December 31, 2020. The
1.2% increase in average annual minimum rent per occupied square foot
was due to new leases (including development space), contractual rent
increases within existing leases, and increased rent from modernizations.
The increase also reflects strategic commitment to portfolio quality
improvement through both dispositions of non-core, low growth assets,
and a positive return from modernizations with Empire.
Proven Stability and Sustainable Growth
39
MANAGEMENT’S DISCUSSION AND ANALYSIS
NEW LEASING ACTIVITY
NEW LEASING BY MARKET CLASS (SQ. FT.)
NEW LEASING BY ASSET TYPE (SQ. FT.)
year ended December 31, 2021
year ended December 31, 2021
29.2%
50.3%
45.9%
20.5%
46.6%
7.5%
VECTOM
Major Markets
Rest of Canada
Retail
Office
Retail-related industrial
New leases increased occupancy by 710,000 square feet at December 31, 2021, at an average first year rate of $20.92 per square foot.
Crombie is focused on increasing its presence in VECTOM and Major Markets. For the year ended December 31, 2021, 70.8% of new leases, equivalent to
503,000 square feet, were completed in these markets. New leases of 207,000 square feet occurred in Rest of Canada markets. The vast majority of the
portfolio’s vacancy is within this market, however, Crombie is pleased with the new leasing activity throughout 2021.
At December 31, 2021, 114,000 square feet of GLA at an average first year rate of $18.76 per square foot was committed with tenants expected to take
possession throughout 2022. VECTOM and Major Markets represent 90,000 square feet of committed space, including 42,000 square feet at our
Scotia Square complex in Halifax, Nova Scotia.
RENEWAL ACTIVITY
RENEWAL BY MARKET CLASS (SQ. FT.)
year ended December 31, 2021
RENEWAL BY ASSET TYPE (SQ. FT.)
year ended December 31, 2021
)
s
0
0
0
’
(
.
t
f
.
q
S
600
400
200
0
)
s
0
0
0
’
(
.
t
f
.
q
S
900
600
300
0
VECTOM
Major
Markets
Rest of
Canada
Retail
Office
2021 Renewals
Early renewals completed
2021 Renewals
Early renewals completed
For the three months and year ended December 31, 2021, renewal activity for our portfolio was as follows:
Three months ended December 31, 2021
Year ended December 31, 2021
Sq. ft.
60,000
37,000
97,000
Rate PSF
Growth %
Sq. ft.
Rate PSF
Growth %
$
$
$
18.00
25.70
20.91
1.3%
9.5%
5.0%
513,000
392,000
905,000
$
$
$
17.56
19.52
18.41
3.4%
3.5%
3.4%
2021 Renewals
Early Renewals Completed
Total
40
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the three months ended December 31, 2021, Crombie renewed
83,000 square feet of retail renewals with an increase of 5.5% over
expiring rental rates. Driving this growth was 58,000 square feet of
renewals at retail plazas, with an increase of 6.1% over expiring rental
rates. 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. When comparing the expiring rental rates to the
average rental rate for the renewal term, Crombie achieved an increase
of 6.8% for the three months ended December 31, 2021.
Crombie’s renewal activity for the year ended December 31, 2021
included retail renewals of 872,000 square feet with an increase of 3.5%
over expiring rental rates. Driving this growth was 684,000 square feet
of renewals at retail plazas, with an increase of 3.9% over expiring rental
rates. Office renewals of 33,000 square feet were completed with an
increase of 1.4% over expiring rental rates.
During the year ended December 31, 2021, Crombie demonstrated
portfolio stability with approximately 47.2% of renewals occurring in
VECTOM and Major Markets. Total renewal growth was positively
impacted by the 225,000 square feet of renewals in VECTOM at an
average first year rate of $26.00 per square foot, an increase of 3.1% over
expiring rental rates. Major Markets saw renewals of 202,000 square
feet, with an increase of 5.5% over expiring rental rates or an average
first year rate of $19.38 per square foot. The remaining 478,000 square
feet of renewals was in the Rest of Canada at an average first year rate
of $14.42, which is an increase of 2.7% over expiring rental rates.
For the year ended December 31, 2021, Crombie achieved an increase
of 6.5% when comparing the expiring rental rates to the average rental
rate for the renewal term versus 3.4% when comparing the expiring
rental rates to the first year of renewal.
Crombie proactively manages its lease maturities, taking advantage
of opportunities to renew tenants prior to expiration. During the year
ended December 31, 2021, approximately 392,000 square feet of
renewals related to future year expiries were completed.
LEASE MATURITIES
The following table sets out, as at December 31, 2021, 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
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Thereafter
Total
Number of Leases1
Renewal Area (sq. ft.)
% of Total GLA
Average Rent
per sq. ft. at Expiry
327
161
177
141
141
96
57
91
47
86
264
1,588
1,275,000
708,000
868,000
1,142,000
962,000
824,000
714,000
1,068,000
625,000
1,096,000
7,904,000
17,186,000
7.1%
4.0%
4.9%
6.4%
5.4%
4.6%
4.0%
6.0%
3.5%
6.1%
44.2%
96.2%
$
15.77
18.80
18.11
16.16
17.11
18.39
17.29
19.06
16.47
19.49
20.18
$
18.80
(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, 2021, 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
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Thereafter
Total
Number of Leases1
Renewal Area (sq. ft.)
% of Total GLA
Average Rent
per sq. ft. at Expiry
17
3
4
7
16
10
9
17
8
13
196
300
235,000
8,000
89,000
255,000
353,000
335,000
307,000
596,000
294,000
508,000
7,243,000
10,223,000
1.3%
—%
0.5%
1.4%
2.0%
1.9%
1.7%
3.3%
1.7%
2.8%
40.6%
57.2%
$
8.95
32.12
10.42
13.34
13.97
14.09
15.68
16.40
13.62
16.61
20.22
$
18.57
(1) Assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights.
Proven Stability and Sustainable Growth
41
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL PERFORMANCE REVIEW
Property revenue
Property operating expenses
Net property income
Net property income margin percentage
Other items:
Gain on disposal of investment properties
Gain from equity accounted investments
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 – distributions to Unitholders
Finance (costs) income – change in fair value
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
2019
$ 103,832
$
97,060
$
6,772
$ 408,892
$ 388,733
$
20,159
$ 398,741
32,430
71,402
68.8%
42,762
15,525
(1,300)
(18,805)
(7,367)
(22,639)
(685)
78,893
(163)
78,730
(36,637)
29,245
67,815
69.9%
4,164
—
(4,500)
(19,506)
(5,493)
(24,912)
(411)
17,157
—
17,157
(35,211)
(3,185)
125,861
129,872
3,587
(1.1)%
283,031
258,861
69.2%
66.6%
38,598
15,525
3,200
701
(1,874)
2,273
56,525
15,525
(2,539)
(75,763)
(25,484)
(92,788)
3,335
—
(6,600)
(75,567)
(20,534)
(91,808)
(274)
(2,941)
(72)
61,736
155,566
67,615
(163)
61,573
(1,426)
(165)
(7)
155,401
67,608
(144,559)
(140,302)
4,011
24,170
2.6%
53,190
15,525
4,061
(196)
(4,950)
(980)
(2,869)
87,951
(158)
87,793
(4,257)
117,645
281,096
70.5%
81,803
—
(6,000)
(74,313)
(23,721)
(97,316)
334
161,883
(8)
161,875
(150,169)
of financial instruments
(1,018)
(725)
(293)
(2,972)
805
(3,777)
(1,337)
Increase (decrease) in net assets attributable
to Unitholders
$ 41,075
$
(18,779)
$ 59,854
7,870
$
(71,889)
$ 79,759
$ 10,369
Operating income attributable to Unitholders
per Unit, Basic
Basic weighted average Units outstanding
(in 000’s)
Distributions per Unit to Unitholders
$
$
0.48
164,592
0.22
$
$
0.11
158,239
0.22
0.37
0.96
6,353
162,130
—
$
0.89
$
$
0.43
157,448
0.89
$
$
0.53
4,682
—
$
$
1.07
151,666
0.89
$
$
$
$
$
$
$
$
$
$ 64,442
$ 62,935
$ 46,948
$ 42,305
$
0.29
$
0.27
78.0%
83.2%
$ 40,468
$ 35,679
$
0.25
$
0.23
1,507
4,643
0.02
(5.2)%
4,789
$ 253,162
$ 241,203
$ 11,959
$ 251,420
$ 185,032
$ 165,850
$
1.14
$
1.05
$
$
19,182
$ 175,539
0.09
$
1.16
78.1%
84.6%
(6.5)%
76.9%
$ 157,532
$ 138,963
$ 18,569
$ 148,632
0.02
$
0.97
$
0.88
$
0.09
$
0.98
90.5%
98.7%
(8.2)%
91.8%
101.0%
(9.2)%
90.8%
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 (%)
42
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
OPERATING INCOME ATTRIBUTABLE TO UNITHOLDERS
For the three months ended:
For the year ended:
Operating income attributable to Unitholders increased by $61,573,
or 358.9%, compared to the fourth quarter of 2020 primarily due to
gain on disposal of investment properties of $42,762, including $27,904
from the sale of a 50% non-managing interest in the Pointe-Claire
CFC, gain from equity accounted investments of $15,525 resulting from
distributions received from 1600 Davie Limited Partnership in excess
of our investment in the joint venture, increased income of $1,963 from
completed developments, $1,000 from renewals and new leasing, and
$913 from lease terminations. Additionally, an impairment of $1,300
was recognized on one retail property during the quarter, which was
$3,200 lower than the impairment related to four retail properties in
the fourth quarter of 2020. Finance costs from operations was lower by
$2,273 primarily due to the early partial redemption of Series B senior
unsecured notes in 2020. The growth in operating income was offset
in part by increased general and administrative expenses of $1,874
primarily as a result of an increase of $940 in salaries and benefits
resulting from higher annual incentive plan amounts, and an increase
in Unit price and its impact on Unit-based compensation plans of $813.
Operating income attributable to Unitholders increased by $87,793, or
129.9%, on an annual basis. Gain on disposal of investment properties
increased by $53,190, including $27,904 from the sale of a 50%
non-managing interest in the Pointe-Claire CFC in the fourth quarter
of 2021. Net property income increased $24,170 due to a reduction in
bad debt expense of $10,082 as a result of decreased collection risk
in 2021; new income from completed developments of $7,700; $3,346
from lease terminations; $2,100 from renewals and new leasing; an
increase in modernization income of $2,100 offset by higher tenant
incentive amortization of $1,961; and increased percentage rent of $1,284
resulting from tenants converting to percentage rent leases. During
the fourth quarter of 2021, Crombie received a distribution of $25,000
from 1600 Davie Limited Partnership, of which $15,525 was treated as
a gain from equity accounted investments as a result of this distribution
exceeding our investment in the joint venture. Additionally, impairments
of $2,539 were recognized on two retail properties during the year which
was $4,061 lower than the impairments related to six properties in the
prior year. The improved operating income for the period was offset
in part by increased general and administrative expenses of $4,950,
primarily the result of an increase in Unit price and its impact on Unit-
based compensation plans of $5,764, offset in part by decreased salaries
of $1,121 and higher severance costs in 2020. Additionally, losses from
equity accounted investments were $2,941 for 2021 compared to $72 for
the year ended December 31, 2020, as residential development projects
move toward revenue stabilization, when revenue earned will exceed
expenses. Finance costs from operations increased by $980 due primarily
to lower capitalized interest on developments of $1,738 and increased
interest on long term debt of $705 from the addition of new mortgages
and unsecured debt, offset in part by decreased interest on credit facilities
of $1,557 resulting from lower average outstanding balances in the year.
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
properties period-over-period. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 79, 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 amortization1
Property cash NOI*
Acquisitions and dispositions property cash NOI*
Development property cash NOI*
Acquisitions, dispositions and development
property cash NOI*
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
$ 71,402
$
67,815
$
3,587
$ 283,031
$ 258,861
$
24,170
(1,998)
5,249
74,653
2,204
8,007
(2,036)
4,859
70,638
1,878
5,825
38
390
4,015
326
2,182
(9,486)
19,811
(9,112)
17,849
293,356
267,598
10,635
29,559
7,286
19,109
(374)
1,962
25,758
3,349
10,450
10,211
7,703
2,508
40,194
26,395
13,799
Same-asset property cash NOI*
$ 64,442
$ 62,935
$
1,507
$ 253,162
$ 241,203
$ 11,959
Adjusted for management’s estimate of the material
impacts of COVID-19:
Decrease in parking revenue
Rent abatements
Bad debt expense
—
—
260
854
178
(32)
Same-asset property cash NOI*, adjusted for COVID-19
$ 64,702
$ 63,935
$
(1) Refer to “Amortization of Tenant Incentives” on page 47 for a breakdown of tenant incentive amortization.
(854)
(178)
292
767
789
—
420
2,715
1,465
5,353
(1,926)
(1,465)
(4,933)
$ 254,371
$ 250,736
$
3,635
Proven Stability and Sustainable Growth
43
MANAGEMENT’S DISCUSSION AND ANALYSIS
Development properties include properties earning cash NOI that are currently being developed and/or have recently completed 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 result 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. The redevelopment
of Avalon Mall was substantially complete in the fourth quarter of 2020 and its NOI inclusive of COVID-19 impact is reflected in the above table in the
“Development” section.
Same-asset property cash NOI* by asset type and market class is as follows:
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
%
2021
2020
Variance
VECTOM
Major Markets
Rest of Canada
$ 23,154
$ 21,394
$
1,760
8.2%
$ 88,750
$ 84,459
$
17,444
23,844
17,571
23,970
(127)
(126)
(0.7)%
(0.5)%
70,843
93,569
66,359
90,385
4,291
4,484
3,184
Same-asset property cash NOI*
$ 64,442
$ 62,935
$
1,507
2.4%
$ 253,162
$ 241,203
$ 11,959
Three months ended December 31,
Year ended December 31,
Retail1
Office
Retail-related industrial2
2021
2020
Variance
$ 58,629
$
57,156
$
1,473
2,815
2,998
2,811
2,968
4
30
Same-asset property cash NOI*
$ 64,442
$ 62,935
$
1,507
%
2.6%
0.1%
1.0%
2.4%
2021
2020
Variance
$ 229,648
$ 217,963
$
11,685
11,583
11,931
11,418
11,822
165
109
$ 253,162
$ 241,203
$ 11,959
%
5.1%
6.8%
3.5%
5.0%
%
5.4%
1.4%
0.9%
5.0%
(1) Retail includes our substantial retail portfolio and reflects certain 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 (100%), Montreal (50%), and Calgary (50%), and a spoke facility owned in Toronto (100%).
For the three months ended:
For the year ended:
Same-asset property cash NOI increased by $1,507, or 2.4%, compared to
the fourth quarter of 2020 primarily due to $994 from lease terminations,
$599 in tenant recoveries related to a property tax reassessment, an
increase of supplemental rents of $305 from modernizations and capital
improvements, and strong occupancy, offset in part by increased bad
debt expense of $292 (expense of $260 on same-asset properties in the
fourth quarter of 2021 compared to recovery of $32 in the same quarter
of 2020). Same-asset property cash NOI adjusted for the removal of what
management estimates to be the impacts of COVID-19 increased 1.2%
compared to the same period in 2020.
On an annual basis, same-asset property cash NOI increased 5.0%
compared to 2020 primarily due to a reduction in bad debt expense on
same-asset properties of $5,388 as a result of decreased collection risk
in 2021, increased lease termination income of $2,638, strong occupancy,
an increase of supplemental rents of $1,927 from modernizations and
capital improvements, and $615 in tenant recoveries related to property
tax reassessments. Same-asset property cash NOI adjusted for the
removal of what management estimates to be the impacts of COVID-19
is $254,371, an increase of 1.4% compared to the adjusted results for the
year ended December 31, 2020.
Compared to the fourth quarter of 2020, net property income increased
by $3,587 and property cash NOI increased by $4,015. In addition to the
factors affecting same-asset property cash NOI, the growth was driven
by increased rent of $1,963 from development activity.
On an annual basis, net property income increased by $24,170 and
property cash NOI increased by $25,758 compared to the same period in
2020, primarily for the same reasons affecting same-asset property cash
NOI, and by increased income of $7,700 from completed developments.
44
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
FUNDS FROM OPERATIONS (FFO)*
Crombie follows the recommendations of the Real Property Association of Canada (“REALPAC”)’s January 2022 guidance in calculating FFO*. This
update from the February 2019 white paper had no impact on Crombie’s FFO calculation. Refer to the “Non-GAAP Financial Measures” section of this
MD&A, starting on page 79, for a more detailed discussion on FFO.
The reconciliation of FFO for the three months and year ended December 31, 2021 and 2020 is as follows:
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
Increase (decrease) in net assets attributable to Unitholders
$ 41,075
$
(18,779)
$ 59,854
$
7,870
$
(71,889)
$ 79,759
Add (deduct):
Amortization of tenant incentives
Gain on disposal of investment properties
Gain from equity accounted investments
Impairment of investment properties
Depreciation and amortization of investment properties
Adjustments for equity accounted investments
Principal payments on right of use assets
Internal leasing costs
5,249
(42,762)
(15,525)
1,300
18,437
841
58
620
4,859
(4,164)
—
4,500
19,183
109
57
604
390
(38,598)
(15,525)
(3,200)
(746)
732
1
16
19,811
(56,525)
(15,525)
2,539
74,359
2,267
225
2,480
17,849
(3,335)
—
6,600
74,316
176
220
2,416
1,962
(53,190)
(15,525)
(4,061)
43
2,091
5
64
Finance costs – distributions to Unitholders
36,637
35,211
1,426
144,559
140,302
4,257
Finance costs (income) – change in fair value
of financial instruments
1,018
725
293
2,972
(805)
FFO* as calculated based on REALPAC recommendations
$ 46,948
$ 42,305
Basic weighted average Units (in 000’s)
FFO* per Unit – basic
FFO* payout ratio (%)
164,592
158,239
$
0.29
78.0%
$
0.27
83.2%
$
$
4,643
$ 185,032
$ 165,850
6,353
0.02
(5.2)%
162,130
157,448
$
1.14
78.1%
$
1.05
84.6%
$
$
3,777
19,182
4,682
0.09
(6.5)%
For the three months ended:
For the year ended:
The increase in FFO of $4,643 is primarily due to increased net property
income (an increase of $3,587 compared to the fourth quarter of
2020) which resulted from increased income of $1,963 from completed
developments, strong occupancy, and $913 from lease terminations.
Additionally, finance costs from operations was lower by $2,273 primarily
due to the early partial redemption of Series B senior unsecured notes
in 2020. The improved net property income is offset in part by increased
general and administrative expenses of $1,874 primarily as a result of an
increase of $940 in salaries and benefits resulting from higher annual
incentive plan amounts, and an increase in Unit price and its impact on
Unit-based compensation plans of $813.
On an annual basis, FFO increased $19,182 primarily due to improved
net property income (an increase of $24,170 year over year) due to
a significant reduction in bad debt expense of $10,082 resulting from
decreased collection risk in 2021, increased income of $7,700 from
completed developments, an increase of $3,346 in lease termination
income, $2,100 from renewals and new leasing, and an increase in
modernization income of $2,100. The growth in net property income
is partially offset by increased general and administrative expenses
of $4,950 primarily related to the impact of increased Unit price on
Unit-based compensation plans of $5,764, offset in part by $1,509 of
severance costs in the second quarter of 2020. Additionally, losses from
equity accounted investments were $2,941 for the period compared to
$72 for the year ended December 31, 2020, resulting from operating
results from residential development projects as they move toward
revenue stabilization, when revenue earned will exceed expenses, and
finance costs from operations increased by $980 due primarily to lower
capitalized interest on developments of $1,738 and increased interest
on long term debt of $705 from the addition of new mortgages and
unsecured debt, offset in part by decreased interest on credit facilities
of $1,557 due to a lower average balance outstanding compared to the
prior year.
Proven Stability and Sustainable Growth
45
MANAGEMENT’S DISCUSSION AND ANALYSIS
ADJUSTED FUNDS FROM OPERATIONS (AFFO)*
Crombie follows the recommendations of REALPAC’s January 2022 guidance in calculating AFFO* and has applied these recommendations to the
AFFO amounts included in this MD&A. The new guidance resulted in no impact to Crombie’s AFFO calculation. Refer to the “Non-GAAP Financial
Measures” section of this MD&A, starting on page 79, for a more detailed discussion.
The reconciliation of AFFO for the three months and year ended December 31, 2021 and 2020 is as follows:
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
FFO* as calculated based on REALPAC recommendations
$ 46,948
$ 42,305
$
4,643
$ 185,032
$ 165,850
$
19,182
Add (deduct):
Amortization of effective swap agreements
Straight-line rent adjustment
Straight-line rent adjustment included in Income from
equity accounted investments
Internal leasing costs
Maintenance expenditures on a square footage basis
—
—
(1,998)
(2,036)
144
(620)
(4,006)
—
(604)
(3,986)
—
38
144
(16)
(20)
—
(9,486)
509
(2,480)
(16,043)
510
(9,112)
—
(2,416)
(15,869)
(510)
(374)
509
(64)
(174)
AFFO* as calculated based on REALPAC recommendations
$ 40,468
$ 35,679
Basic weighted average Units (in 000’s)
AFFO* per Unit – basic
AFFO* payout ratio (%)
164,592
158,239
$
0.25
$
90.5%
0.23
98.7%
$
$
4,789
$ 157,532
$ 138,963
$ 18,569
6,353
0.02
(8.2)%
162,130
157,448
$
0.97
$
0.88
$
91.8%
101.0%
4,682
0.09
(9.2)%
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 increase in AFFO is largely due to the impacts on FFO as
described above.
The improvement in AFFO is primarily due to the same factors
impacting FFO as described above.
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 2021 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
AFFO* payout ratio
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
$ 21,645
$
20,810
14,992
14,401
$ 36,637
$ 35,211
$
$
835
591
$ 85,416
$ 82,917
59,143
57,385
1,426
$ 144,559
$ 140,302
78.0%
90.5%
83.2%
98.7%
(5.2)%
(8.2)%
78.1%
91.8%
84.6%
101.0%
$
$
2,499
1,758
4,257
(6.5)%
(9.2)%
(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.
46
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Pursuant to the requirement of National Policy 41-201, Income Trusts and Other Indirect Offerings, the table below outlines the differences between
operating income attributable to Unitholders and cash distributions, in accordance with the policy guidelines.
Operating income attributable to Unitholders
$ 78,730
$
17,157
$ 61,573
$ 155,401
$
67,608
$
87,793
Monthly distributions paid and payable
(36,637)
(35,211)
(1,426)
(144,559)
(140,302)
(4,257)
Operating income attributable to Unitholders in excess
(shortfall) of distributions paid and payable
$ 42,093
$
(18,054)
$ 60,147
$ 10,842
$
(72,694)
$ 83,536
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
Monthly distributions paid for the three months and year ended
December 31, 2021 and 2020 were funded with cash flows from
operating activities and borrowing on the revolving credit facility.
On January 14, 2022, Crombie declared distributions of 7.417 cents per
Unit for the period from January 1, 2022 to and including January 31,
2022. The distributions were paid on February 15, 2022, to Unitholders
of record as of January 31, 2022.
On February 15, 2022, Crombie declared distributions of 7.417 cents per
Unit for the period from February 1, 2022 to and including February 28,
2022. The distributions will be paid on March 15, 2022, to Unitholders of
record as of February 28, 2022.
AMORTIZATION OF TENANT INCENTIVES
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. From time to time, Crombie invests in value-enhancing property modernizations that result in lease amendments. These investments are
amortized over the lease term and reduce the associated increase in property revenue.
Regular tenant incentive amortization
Modernization tenant incentive amortization
Total amortization of tenant incentives
Three months ended December 31,
Year ended December 31,
2021
2,890
2,359
5,249
$
$
$
$
2020
2,988
1,871
4,859
Variance
2021
2020
Variance
$
$
98
$
11,021
(488)
8,790
(390)
$
19,811
$
$
11,288
6,561
17,849
$
$
267
(2,229)
(1,962)
GENERAL AND ADMINISTRATIVE EXPENSES
The following table outlines the major categories of general and administrative expenses:
Salaries and benefits
Unit-based compensation1
Professional fees
Public company costs
Rent and occupancy
Other
Three months ended December 31,
Year ended December 31,
$
2021
3,555
2,576
323
198
146
569
$
2020
2,615
1,763
442
151
133
389
Variance
2021
2020
Variance
$
(940)
(813)
119
(47)
(13)
(180)
$
11,287
$ 12,408
$
1,121
8,537
1,782
1,154
565
2,159
2,773
1,676
1,209
569
1,899
(5,764)
(106)
55
4
(260)
General and administrative expenses
$
7,367
$
5,493
$
(1,874)
$ 25,484
$ 20,534
$
(4,950)
As a percentage of property revenue
7.1%
5.7%
(1.4)%
6.2%
5.3%
(0.9)%
(1) Unit-based compensation includes both employees and trustees.
For the three months ended:
For the year ended:
The higher expenses in the quarter are primarily due to an increase
of $940 in salaries and benefits resulting from higher annual incentive
plan amounts, and an increase in Crombie’s Unit price and its impact
on Unit-based compensation plans resulting in increased costs of $813.
General and administrative expenses excluding the impact of Unit-
based compensation of $2,576 is 4.6% of property revenue.
On an annual basis, the increase in expenses is primarily due to
an increase in Crombie’s Unit price and its impact on Unit-based
compensation plans, resulting in increased costs of $5,764. This is
offset in part by reduced salaries and benefits of $1,121 due to savings
in 2021 related to organizational realignment in the second quarter of
2020 and the associated $1,509 of severance in that quarter. General
and administrative expenses excluding the impact of Unit-based
compensation of $8,537 is 4.1% of property revenue.
Proven Stability and Sustainable Growth
47
MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCE COSTS – OPERATIONS
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
Fixed rate mortgages
$ 11,833
$ 11,921
$
Floating rate term, revolving, and demand facilities
Capitalized interest
Senior unsecured notes
Interest income on finance lease receivable
Interest on lease liability
Finance costs
Amortization of deferred financing charges
358
(1,037)
10,364
(144)
523
21,897
742
517
(1,287)
12,542
(95)
479
24,077
835
88
159
(250)
2,178
49
(44)
2,180
93
$ 49,169
$ 48,801
$
(368)
1,896
(3,593)
40,741
(548)
2,056
89,721
3,067
3,453
(5,331)
40,404
(387)
1,862
88,802
3,006
1,557
(1,738)
(337)
161
(194)
(919)
(61)
Finance costs – operations
$ 22,639
$ 24,912
$
2,273
$ 92,788
$ 91,808
$
(980)
For the three months ended:
For the year ended:
Finance costs decreased by $2,180 primarily due to reduced interest on
unsecured notes resulting from the early partial redemption of Series B
senior unsecured notes in 2020.
Annually, finance costs increased by $919 primarily due to reduced
capitalized interest on development properties of $1,738, and increased
interest on long term debt of $705 from the addition of new mortgages
and unsecured debt, offset in part by lower interest on credit facilities of
$1,557 resulting from lower average outstanding balances in the year.
DEPRECIATION, AMORTIZATION, AND IMPAIRMENT
Crombie’s total fair value of investment properties exceeds carrying value by $1,150,558 at December 31, 2021 (December 31, 2020 – $921,974).
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,
2021
2020
Variance
2021
2020
Variance
Same-asset* depreciation and amortization
$ 15,994
$
16,137
Acquisitions, dispositions and development
depreciation/amortization
Depreciation and amortization
Impairment
2,811
3,369
$ 18,805
$ 19,506
$
1,300
$
4,500
$
$
$
143
$
64,317
$ 64,966
558
701
11,446
10,601
$ 75,763
$ 75,567
3,200
$
2,539
$
6,600
$
$
$
649
(845)
(196)
4,061
For the three months ended:
For the year ended:
The decrease in depreciation and amortization of $701 is due most
notably to dispositions, offset in part by the commencement of
depreciation in the first quarter of 2021 on the substantially completed
developments at the Pointe-Claire CFC and Avalon Mall, an increase of
$486 over the fourth quarter of 2020, and by acquisitions.
The $196 increase in depreciation and amortization on an annual basis
is due to depreciation on the substantially completed developments at
the Pointe-Claire CFC and Avalon Mall, which resulted in an increase
of $2,282, and acquisitions. This is partially offset by dispositions and by
accelerated depreciation due to the partial demolition of a building at
the Avalon Mall site in the first quarter of 2020.
48
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
During the year ended December 31, 2021, Crombie recorded
impairments totalling $2,539 on two properties, one for $1,239 in the
third quarter as the result of a partial disposition which closed on
December 14, 2021. The fourth quarter impairment of $1,300 was due
to continuing high vacancy rates and the departure of a major tenant
at a retail property in Rest of Canada during the year. Impairment
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 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
Investment properties held in joint ventures, carrying value
Investment properties held in joint ventures, fair value
Total Debt1
Total non-current financial liabilities
Number of Units outstanding (in 000’s)
As at December 31,
2021
2020
$
$
$
$
$
$
4,023,676
3,875,442
5,026,000
288,114
387,000
2,426,184
$
1,960,143
164,803
$
$
$
$
$
$
$
4,105,438
3,893,026
4,815,000
225,127
225,127
2,627,132
2,192,047
158,258
$
$
$
$
$
$
$
Variance
(81,762)
(17,584)
211,000
62,987
161,873
(200,948)
(231,904)
6,545
$
$
$
$
$
$
$
2019
3,920,267
3,796,326
4,605,000
149,299
148,799
2,465,224
2,073,212
151,743
(1) Total debt consists of total liabilities in Crombie’s financial statements excluding the financial liabilities to REIT Unitholders and to holders of Class B LP Units, shown on the balance sheet as net assets
attributable to Unitholders.
The lower total assets (a difference of $81,762 compared to the prior
year) is driven primarily by dispositions of investment properties of
$148,981, offset in part by additions to tenant incentives of $69,704.
The increase of $211,000 in fair value of investment properties resulted
from capitalization rates compression, acquisitions, and completed
developments. Investment properties held in joint ventures increased
in both carrying value (increase of $62,987 over the prior year) and fair
value ($161,873 compared to the prior year) due to the completion of
developments at Davie Residential in the first quarter of 2021 and Le
Duke in the third quarter of 2021. The decrease in total debt of $200,948
is driven by the repayment of mortgages ($163,414) and credit facilities
($33,493) during the year, funded by dispositions and the issuance of
Series J senior unsecured notes in the third quarter of 2021.
Proven Stability and Sustainable Growth
49
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 mixed-use developments at certain properties,
where incremental costs to develop are greater than $50,000 and
where development may include residential, commercial and/or retail-
related industrial (“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 82 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 31 major development properties over the next fifteen
years. Crombie benefits from having solid income (FFO and AFFO)
generated by most of these properties while working through the
various approvals, entitlements, and advance preparations required
before each major development can commence. Crombie currently
achieves in-place NOI on existing assets not yet under construction.
Crombie has a strategic relationship with Empire. The majority of our
development properties currently have Empire as an anchor tenant.
Our strategic relationship enables us to unlock value and transition from
existing operating properties to construction/development of these sites
on mutually-agreeable terms.
Our major developments will be planned and executed 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. From time to time, Crombie may enter into
partnerships to complete developments to share knowledge, risk and
expertise. In certain cases, residential condominium uses may also be
considered, as will certain other uses (e.g. retail-related industrial), 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.
During the year ended, December 31, 2021, Crombie has reached
substantial completion on the following major development projects:
Property
CMA
Use
Ownership
Completion
Quarter
Completed
Commercial
GLA
% of
Commercial
GLA Leased
Completed
Residential
GLA
Residential
Units
Available
for Lease
Residential
Units Leased
% of
Residential
Units Leased
Davie Residential1
Vancouver
Residential
Le Duke2
Montreal
Mixed-use
50%
50%
Q1 2021
Q3 2021
—
26,000
N/A
100%
254,000
241,000
330
387
325
110
98%
28%
(1) Total estimated costs at Davie Residential is $80,000 with expected yields in the 5.5%–6.0% range, exclusive of free rent amortization. All units are available for lease. Project yields have been updated
from 5.0%–5.5% to 5.5%–6.0% as residential rents realized are in excess of initial expectations.
(2) Total estimated costs at Le Duke is $59,000 with expected yields in the 5.4%–5.8% range. All units are available for lease. Project estimates are unchanged from Q3 2021.
These projects have reached substantial completion, thereby reducing
the construction risk remaining in the development. The remaining risk
is primarily related to achieving successful lease-up stabilization of
vacant units at market rents, and potential changes in prevailing market
rents. Any failure to achieve successful lease-up stabilization at current
prevailing market rents could negatively impact expected yields for
these developments.
Completed GLA is based on applicable standards of area measurement
determined through internal site plans and drawings, and using external
massing studies, where applicable. GLA in the above table is shown at
full project density.
Total estimated costs include 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 on existing
income producing properties upon transfer to the development, soft
and hard construction costs, tenant inducements, external leasing costs,
finance costs, capitalized interest and other carrying costs, such as
capitalized construction and development wages and property taxes.
These costs are determined by using internal knowledge and external
professional resources, where applicable.
Estimated annual NOI is calculated using estimated first year stabilized
annual rent for each tenant, assuming 100% occupancy. These estimates
are established using market rents, Crombie’s market knowledge,
and/or using externally generated market studies. The expected yield
for each project is then derived by dividing the estimated annual NOI
by the total estimated cost for the project.
50
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
DEVELOPMENT PIPELINE
Crombie has identified 31 major development projects as at December 31,
2021 (December 31, 2020 – 30). Management uses current project
assumptions to calculate the pipeline cost range, factoring in a degree of
uncertainty that comes with a diverse pipeline that spans fifteen years or
greater. Uncertainty can come in the form of changing project scopes,
moving certain properties in or out of the pipeline, variations in the
entitlement process, the potential of engaging joint ventures partners,
dispositions of pipeline properties, and a variety of external factors
that may affect project costing. Given that some of these projects
may not reach the full potential of the original scope, management
discloses a low and high range to reasonably estimate the pipeline
costs. As of December 31, 2021, total project costs to develop the
pipeline range from $5,300,000 to $7,500,000 (December 31, 2020 –
$4,300,000 to $6,100,000). 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 selected project remains subject to normal development
approvals, achieving required economic hurdles, and Board of Trustees’
approval. In conjunction with our strategic partner Empire, Crombie
management continuously reviews and prioritizes development
opportunities that drive NAV and AFFO growth, including high-density
urban re-development, new grocery-anchored retail, retail-related
industrial e-commerce facilities, and land-use intensification.
NEAR-TERM PROJECTS
As Crombie nears completion on its initial major development projects,
a change in development disclosure was implemented in 2021. To
emphasize the timing of the next wave of developments, Crombie has
shifted from an active/future division of its pipeline to a three-tiered
timing based approach. Near-term projects are financially committed
or expected to be committed within the next two years. Medium-term
projects have a timeline to commitment of two years to five years and
long-term projects are expected to be committed within five to fifteen
years. Crombie has six projects in the near-term category.
NEAR-TERM GLA BY CITY
as at December 31, 2021
NEAR-TERM GLA BY ASSET TYPE (SQ. FT.)
as at December 31, 2021
)
s
0
0
0
’
(
.
t
f
.
q
S
600
400
200
0
1,228,000
72.0%
300,000
17.6%
178,000
10.4%
Victoria
Vancouver
Calgary
Toronto
Halifax
Commercial
Residential
Retail-related industrial
Commercial
Residential
Retail-related industrial
The below table provides additional detail into Crombie’s near-term developments.
Property
Bronte Village1
Voilà CFC 3 (Calgary)1
Westhill on Duke
1780 East Broadway (Broadway and Commercial)
Vancouver
Belmont Market – Phase II
Penhorn Lands3
Total Near-Term Developments
Victoria
Halifax
City
% Ownership
Commercial
GLA
Retail-related
industrial GLA
Residential
GLA
Residential
Units
Full Project Density
Toronto
Calgary
Halifax
50%
100%
100%
50%2
100%
50%
54,000
—
466,000
—
—
124,000
—
—
300,000
—
—
—
—
—
188,000
429,000
145,000
—
481
—
280
650
200
—
178,000
300,000
1,228,000
1,611
(1) These projects are financially committed and under active development
(2) Crombie will own 100% of the commercial portion of this development
(3) Development related to 26 acres of land at Penhorn Mall in Halifax, NS, involves the re-zoning and sale or development of multi-family parceled lots approximating 900 units. Crombie has the option
to participate in development of certain parcels but numbers above based on sale of all land parcels.
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.
Proven Stability and Sustainable Growth
51
WESTHILL ON DUKE, HALIFAX, NOVA SCOTIA
Type: Residential
Ownership: 100%
Project status: Westhill on Duke is a planned 280 unit residential rental
project in the heart of downtown Halifax located within the Scotia
Square mixed-use retail, office and hotel complex. The site is entitled
and a development application has been submitted. The project is
expected to be ready for commencement in late 2022 or early 2023.
1780 EAST BROADWAY (BROADWAY & COMMERCIAL),
VANCOUVER, BRITISH COLUMBIA
Type: Retail/Residential
Ownership: 100% retail, 50% residential and office
Project status: East Broadway is a proposed major mixed-use
re-development on 2.43 acres of land located at the busiest transit
node in Western Canada. A re-zoning application is in process with the
City of Vancouver which comprises a mix of grocery-anchored retail,
rental residential, and market condos. Crombie anticipates completion
of re-zoning in 2022 and construction commencement in 2023.
BELMONT MARKET – PHASE II, VICTORIA,
BRITISH COLUMBIA
Type: Residential
Ownership: 100%
Project status: Belmont Market – Phase II envisions the development of
approximately 200 residential units on the remaining 75,000 square feet
of land within the Belmont Market development area. The lands are fully
entitled and could be ready for construction commencement in 2023.
PENHORN LANDS, HALIFAX, NOVA SCOTIA
Type: Land Development/Residential
Ownership: 50%
Project status: Crombie continues to work with our development
partner, Clayton Developments Limited, to enable a 26 acre mixed-use
development at this prime location. Development approval is anticipated
in mid-2022 with commencement of land sales in late 2022. The potential
exists for approximately 900 units and Crombie and its partner have the
option to participate in developing certain parcels.
MANAGEMENT’S DISCUSSION AND ANALYSIS
Near-Term Project Update
BRONTE VILLAGE, 2441 LAKESHORE ROAD WEST, OAKVILLE
(TORONTO), ONTARIO
Type: Retail/Residential
Ownership: 50%
Project status: Construction at 125 and 133 Bronte Road has progressed
significantly over the last quarter. 125 Bronte, which represents half of
the 481 units available, welcomed its first tenants in the third quarter.
Interior finishing of suites continues at 133 Bronte and has reached
substantial completion in January of 2022. Subsequent to the quarter,
Crombie received the occupancy permit for 133 Bronte Road. As a result,
Crombie adjusted substantial completion from Q4 2021 to Q1 2022.
At Crombie’s share, project cost is $139,000 with estimated yields in the
5.4%–6.0% range. At Crombie’s share, the estimated cost to complete
at Bronte Village is $8,900.
Estimated total cost for Bronte Village includes the current carrying
costs of development lands, net of any proceeds from land and air
rights dispositions. Total estimated costs include land cost transferred
in at cost 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 cost estimates contain
contingency for capital cost exceedances in the ordinary course.
Historically, capital cost exceedances in the 5%–10% range are reflective
of such contingencies.
Estimated annual NOI for Bronte Village 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 estimates
contain provision for revenue risk and/or timing of revenue achieving
stabilization. Historically, revenue risk in the 5% range is reasonable
for typical projects and typical valuation appraisals contain provision
for vacancy.
VOILÀ CFC 3, CALGARY, ALBERTA
Type: Retail-related industrial
Ownership: 100%
Project status: The Calgary Voilà CFC is the third Empire grocery
e-commerce fulfillment hub in Canada powered by Ocado plc’s
industry-leading technology. Crombie closed on the acquisition of
the 25-acre site in June 2021 and site servicing and foundation work
is nearing completion with erection of building steel underway.
Retail-related industrial GLA of this project will total approximately
300,000 square feet.
52
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Total Development Pipeline
In addition to near-term projects Crombie is actively working on its pipeline to ensure a consistent inventory of projects. The following table details
total project cost estimates by category at December 31, 2021:
CROMBIE DEVELOPMENT SPENDING BY PROJECT TIMELINE
as at December 31, 2021
30.7%
58.6%
10.7%
Near-term
Medium-term
Long-term
Project Timeline
Near-term
Medium-term
Long-term
Total Pipeline
(1) Costs include Crombie’s total investment in land at these properties
At Crombie’s Share ($ in millions)
Number of Projects
Total Estimated Costs
Total Spend to Date1
6
7
18
31
$
$
700-800
1,600-2,300
3,000-4,400
5,300-7,500
$
$
210
60
170
440
$
$
Estimated Cost
to Complete
490-590
1,540-2,240
2,830-4,230
4,860-7,060
Crombie continuously monitors and evaluates the potential pipeline to
optimize value creation. With a strong commitment to portfolio growth,
Crombie actively analyzes costs and market opportunities amongst the
potential pipeline in order to maximize NOI and NAV creation. As a result
of scope changes, new opportunities in the pipeline and the addition of
a new pipeline property in Q4 (Broadview-Toronto), the projected cost
range of our total pipeline was refined from $4,600,000 to $6,500,000
in Q3 to $5,300,000 to $7,500,000 in Q4.
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 on the 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 wages, and property taxes. These costs
are determined by using internal knowledge and external professional
resources, where applicable. Project capital cost uncertainty exists, and
project cost estimates contain contingency for capital cost exceedances
in the ordinary course. Historically, capital cost exceedances in the
5%–10% range are reflective of such contingencies.
For joint venture projects, our partners may provide estimates which
Crombie reviews and analyzes to determine final estimates.
These estimates and assumptions are reviewed and updated regularly
and are subject to changes which could be material. Estimated total
costs 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.
Crombie’s current pipeline has the potential to add up to 1,328,000 square
feet of commercial GLA, 300,000 square feet of retail-related industrial
GLA and up to 11,080,000 square feet (up to 12,711 units) of residential GLA
(which may include a combination of rental or condominium units).
Proven Stability and Sustainable Growth
53
MANAGEMENT’S DISCUSSION AND ANALYSIS
TOTAL PIPELINE GLA BY CITY
as at December 31, 2021
)
s
0
0
0
’
(
.
t
f
.
q
S
)
s
0
0
0
’
(
.
t
f
.
q
S
6,000
4,000
2,000
0
6,000
4,000
2,000
0
Victoria
Vancouver
Kelowna
Calgary
Edmonton
Hamilton
Toronto
Halifax
Transit-oriented
Non-transit
TOTAL PIPELINE GLA BY CITY
as at December 31, 2021
Victoria
Vancouver
Kelowna
Calgary
Edmonton
Hamilton
Toronto
Halifax
Near-term
Medium-term
Long-term
54
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Project Timeline
Near-term
Medium-term
Long-term
Total Pipeline
Total Pipeline Density by Project Timeline
Commercial GLA
178,000
187,000
963,000
Retail-Related
Industrial GLA
300,000
—
—
Residential GLA
Residential Units
1,228,000
3,837,000
6,015,000
1,611
4,350
6,750
12,711
1,328,000
300,000
11,080,000
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 8 of these 31 potential major projects identified for imminent
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 Retail-
Related Industrial
Sq. Ft.1
Estimated
Residential
Sq. Ft.1
Estimated Total
Sq. Ft.1
Residential
Units1
Crombie’s Entitled Projects
4
2
6
2
8
54,000
124,000
178,000
47,000
225,000
300,000
—
300,000
—
300,000
799,000
429,000
1,228,000
1,153,000
553,000
1,706,000
1,191,000
2,419,000
1,238,000
2,944,000
961
650
1,611
1,400
3,011
Near-term:
Zoned
Application Submitted2
Total Near-term
Medium/Long-term:
Zoned
Total
(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
(2) Re-zoning application related to 26 acres of land at Penhorn in Halifax, NS, involves the re-zoning and sale or development of multi-family parceled lots
Zoning is in place for the following development sites: Bronte Village (Toronto), Westhill on Duke (Halifax), Belmont Market – Phase II (Victoria), Triangle
Lands (Halifax), Voilà CFC 3 (Calgary), and Brunswick Place (Halifax). Re-zoning applications have been submitted and are in process for Broadway
and Commercial (Vancouver) and Penhorn Lands (Halifax).
Proven Stability and Sustainable Growth
55
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following table lists the 31 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:
Major Development Pipeline
Site Size
(acres)
Transit
Oriented
Existing Tenants
Potential
Commercial
Expansion
Potential
Residential
Expansion
Entitlement Status
Project Timing
Existing Property
Bronte Village
Voilà CFC 3 (Calgary)
1
2
3 Westhill on Duke1
4
5
Belmont Market – Phase II
1780 East Broadway
(Broadway and Commercial)
CMA
Toronto
Calgary
Halifax
Victoria
Vancouver
5.66
25.00
0.462
1.70
2.43
6
Penhorn Lands
Halifax
26.12
7
8
9
Park West
Halifax
1170 East 27 Street (Lynn Valley) Vancouver
Toronto East
10 Brunswick Place
11 Broadview
12 McCowan & Ellesmere
Toronto
Halifax
Toronto
Toronto
13 10355 King George
Vancouver
Boulevard – Multi-phased
14 Triangle Lands
15 1818 Centre Street
16 3130 Danforth
17 2733 West Broadway
18 Centennial Parkway
19 990 West 25 Avenue
(King Edward)
Halifax
Calgary
Toronto
Vancouver
Hamilton
Vancouver
20 524 Elbow Drive SW (Mission)
Calgary
21 Fleetwood
22 Robson Street
23 Port Coquitlam
Vancouver
Vancouver
Vancouver
24 410 10 Street NW (Kensington)
Calgary
25 813 11 Avenue SW (Beltline)
Calgary
26 3410 Kingsway
(Kingsway and Tyne)
Vancouver
6.44
2.82
0.45
0.753
1.43
4.48
5.07
0.68
2.18
0.79
1.95
2.75
1.80
1.60
4.45
1.15
5.31
1.73
2.59
3.74
27 East Hastings
Vancouver
3.30
28 Bernard Ave
Kelowna
29 10930 82 Avenue (Whyte Ave)
Edmonton
30 New Westminster
31 Brampton Mall
Vancouver
Toronto
1.83
2.44
2.82
8.74
No
No
Yes
No
Yes
No
Yes
No
Yes
Yes
Yes
Sobeys
n/a
n/a
Land
Safeway
Land
Retail
Safeway
Foodland
Office
Dollarama
Yes FreshCo/Other
Yes
Yes
Yes
Safeway
Land
Safeway
Yes The Beer Store
Yes
No
No
No
Yes
No
No
Yes
Yes
Yes
No
No
No
No
No
Safeway
Retail
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway/
Other
Safeway/
Other
Safeway
Safeway/
Other
Safeway
Office/Retail
Yes
Yes
Yes
No
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
Yes
No
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
Yes
Yes
Zoned
Zoned
Zoned
Zoned
Application
Submitted
Application
Submitted
Near-term
Near-term
Near-term
Near-term
Near-term
Near-term
Pre-Planning
Medium-term
Pre-Planning
Medium-term
Pre-Planning
Medium-term
Zoned
Medium-term
Pre-Planning
Medium-term
Pre-Planning
Medium-term
Pre-Planning
Zoned
Future
Pre-Planning
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Medium/
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Long-term
Future
Long-term
Future
Future
Future
Future
Long-term
Long-term
Long-term
Long-term
(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
56
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
four main priorities:
1. to maintain multiple sources of both debt and equity financing;
2. to reduce risk by pre-funding its capital commitments;
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
4. 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 due diligence that must be completed prior to a project
Our guiding principles for managing capital are as follows:
being approved by the Board. Crombie’s Board ensures 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
Reduce total leverage over the medium/long term
D/GFV* is 42.9% at December 31, 2021.
Maintain minimum of $250 million liquidity
Increased liquidity to $507.8M, up $36.1M from 2020.
Improve weighted average term to maturity
Minor decrease to 5.1 years at December 31, 2021 versus 5.3 years at December 31, 2020.
Lower cost of capital through equity raises and/or
innovative funding solutions, such as capital recycling
During 2021, Crombie raised equity at a record net price of $16.60 per Unit, and completed
dispositions for proceeds of $205.5M, net of selling costs.
Take advantage of current low interest rates
Continued to harvest interest rate savings by refinancing high coupon debt in current
low rate environment.
Increase unencumbered asset pool
Expanded unencumbered asset pool by approximately 28% to $1.8B.
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, which are reliant on assigned credit ratings, as well
as the bank credit market. 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. In the
second quarter of 2021, Crombie received notice of a downgrade in its
credit rating from “BBB(low)” with a “Stable” trend to “BBB(low)” with a
“Negative” trend.1 Management is focused on restoring and improving
Crombie’s credit rating.
(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.
Proven Stability and Sustainable Growth
57
MANAGEMENT’S DISCUSSION AND ANALYSIS
STRONG CAPITAL STRUCTURE
CAPITAL STRUCTURE
as at December 31, 2021
Net Assets Attributable
to Unitholders
41.5%
Mortgages
27.7%
Unsecured Notes
29.1%
Bank Credit Facilities
and Lease Liabilities
1.7%
Mortgages
Bank Credit Facilities
and Lease Liabilities
Unsecured
Notes
Net Assets Attributable
to Unitholders
Crombie’s capital structure consists of the following carrying values, inclusive of deferred financing costs where applicable:
Fixed rate mortgages
Drawn credit facilities
Senior unsecured notes
Lease liabilities
Net assets attributable to Crombie REIT Unitholders
Net assets attributable to Special Voting Units and Class B Limited Partnership Unitholders
December 31, 2021
December 31, 2020
$
1,067,859
29,124
1,121,267
35,352
950,271
647,221
27.7%
0.8%
29.1%
0.9%
24.7%
16.8%
$
1,267,044
62,256
1,121,398
29,914
881,511
596,795
32.0%
1.6%
28.3%
0.7%
22.3%
15.1%
$
3,851,094
100.0%
$
3,958,918
100.0%
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 adjusted 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, 2021
December 31, 2020
$
1,752,927
$
1,366,258
128.8%
42.9%
3.8%
8.25x
3.13x
117.8%
49.4%
3.9%
9.73x
2.77x
Crombie has continued to grow its unencumbered asset pool, increasing its fair value from $1,366,258 as at December 31, 2020 to $1,752,927 as at
December 31, 2021. This increase is primarily due to mortgage maturities, and increased fair value of properties, in addition to acquisitions, partially
offset by dispositions.
58
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Debt to Gross Fair Value*
Debt to gross fair value* was 42.9% at December 31, 2021 (42.9% after
applying cash and cash equivalents to reduce debt) compared to 49.4%
at December 31, 2020 (48.8% after applying cash and cash equivalents
to reduce debt).
The decrease in the leverage ratio during the year ended December 31,
2021 was primarily the result of lower outstanding debt, a decrease
of $228,103 from December 31, 2020, due to mortgage maturities
and repayment of credit facilities. Increased fair value of investment
properties, slightly offset by disposition activity, and increased fair
value of investment in joint ventures from Davie Street, Le Duke, and
Bronte Village also contributed to the improvement in the ratio. The
increase in fair value excludes additional fair value growth expectations
at stabilization from our first major developments. The fair value of
investment properties increased $211,000, or 4.4%, from December 31,
2020, as a result of acquisitions, completed developments, and
capitalization rates compression of grocery-anchored properties.
The capitalization rate compression was evidenced in our bi-annual
externally provided capitalization rate report.
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, including those held within joint ventures. Crombie’s
investment in joint ventures, accounted for at cost under the equity
method, is adjusted to reflect investment properties measured at fair
value for this calculation. All other components of gross fair value
are measured at the carrying value included in Crombie’s financial
statements. Crombie’s methodology for determining the fair value of
investment properties includes capitalization of trailing 12 months net
property income using biannual capitalization rates from external
property valuators. The majority of investment properties are also
subject to external, independent appraisals on a rotational basis over
a period of not more than four years. Valuation techniques are more
fully described in Crombie’s year end audited financial statements.
The fair value included in this calculation reflects the fair value of the
properties as at December 31, 2021 and December 31, 2020, respectively,
based on each property’s current use as a revenue generating
investment property. During the year ended December 31, 2021,
Crombie’s weighted average capitalization rate used in the
determination of the fair value of its investment properties decreased
0.21% to 5.65% from 5.86%. For an explanation of how Crombie
determines capitalization rates, see the “Other Disclosures” section
of this MD&A, under “Investment Property Valuation” in the “Use of
Estimates and Judgments” section.
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
Adjusted debt*
Investment properties, fair value
Other assets, cost1
Cash and cash equivalents
Deferred financing charges
Investment in joint ventures, fair value*2
Interest rate subsidy
Gross fair value
Debt to gross fair value*
December 31, 2021
December 31, 2020
$
1,073,895
$
1,125,000
9,220
9,904
10,000
35,352
2,263,371
(53)
2,263,318
5,026,000
103,318
3,915
9,769
130,103
(53)
$
$
$
$
1,274,304
1,125,000
17,712
9,544
35,000
29,914
2,491,474
(283)
2,491,191
4,815,000
100,206
63,293
10,972
51,043
(283)
$
5,273,052
$
5,040,231
42.9%
49.4%
(1) Other assets exclude tenant incentives and accumulated amortization, and accrued straight-line rent receivable.
(2) Investment in joint ventures, fair value* reflects Crombie’s investments in joint ventures using equity accounting with investment properties measured at fair value. Fair value of these investment
properties totalled $387,000 (December 31, 2020 - $225,127) and replaces their value at cost of $288,114 (December 31, 2020 - $225,127).
Proven Stability and Sustainable Growth
59
MANAGEMENT’S DISCUSSION AND ANALYSIS
Debt to Adjusted EBITDA* and Interest Coverage* Ratios:
Crombie’s debt to adjusted EBITDA* improved to 8.25x for the trailing
12 months ended December 31, 2021 from 9.73x for the trailing 12 months
ended December 31, 2020. The improvement was primarily due to
decreased outstanding debt of $228,103 resulting from mortgage
maturities and repayment of credit facilities, and higher adjusted
EBITDA. (Debt to adjusted EBITDA* is 8.23x after applying cash and cash
equivalents to reduce debt.) The $18,313 increase in adjusted EBITDA
over the trailing 12 months ended December 31, 2021 when compared
to the trailing 12 months ended December 31, 2020 resulted from
reduced bad debt expense due to lower collection risk, and increased
income from completed developments, renewals and new leasing, and
lease terminations.
The interest coverage* ratio for the quarter ended December 31, 2021
improved to 3.13x compared to 2.77x for the quarter ended
December 31, 2020 due to reduced finance costs from operations
and increased adjusted EBITDA as described above. Finance costs
decreased by $2,180 compared to the fourth quarter of 2020 primarily
due to reduced interest on unsecured notes resulting from the early
partial redemption of Series B senior unsecured notes in 2020.
Crombie’s debt service coverage* increased to 2.07x for the
quarter ended December 31, 2021 from 1.92x for the quarter ended
December 31, 2020 due primarily to reduced interest on unsecured
notes resulting from the early partial redemption of Series B senior
unsecured notes in 2020.
The following table presents a reconciliation of property revenue to adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and should not be
considered an alternative to operating income attributable to Unitholders and may not be comparable to that used by other entities. Refer to the
“Non-GAAP Financial Measures” section of this MD&A, starting on page 79, for more information.
Property revenue
$ 103,832
$ 101,517
$ 100,006
$ 103,537
$
97,060
$
92,920
$
96,501
$ 102,252
Dec. 31, 2021
Sep. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Dec. 31, 2020
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Three months ended
Amortization of tenant
incentives
Adjusted property revenue
Property operating expenses
General and administrative
5,249
5,187
4,840
4,535
4,859
109,081
(32,430)
106,704
(30,216)
104,846
(29,814)
108,072
(33,401)
101,919
(29,245)
4,752
97,672
(27,503)
4,419
3,819
100,920
(37,887)
106,071
(35,237)
expenses
(7,367)
(5,728)
(7,351)
(5,038)
(5,493)
(5,062)
(6,960)
(3,019)
Income (loss) from equity
accounted investments
(685)
(923)
(562)
(771)
(411)
101
123
115
Adjusted EBITDA* (1)
$
68,599
$
69,837
$
67,119
$
68,862
$
66,770
$
65,208
$
56,196
$
67,930
Trailing 12 months adjusted
EBITDA* (4)
$ 274,417
$ 272,588
$ 267,959
$ 257,036
$ 256,104
$ 254,040
$ 256,501
$ 268,979
Finance costs – operations
$
22,639
$
23,070
$
23,618
$
23,461
$
24,912
$
22,250
$
22,006
$
22,640
Amortization of deferred
financing charges
Amortization of effective swap
agreements
Adjusted interest expense (2)
Debt principal repayments (3)
Debt outstanding (see Debt to
(742)
(759)
(764)
(802)
(835)
(737)
(683)
—
—
—
—
—
—
—
(751)
(510)
$
$
21,897
11,304
$
$
22,311
11,343
$
$
22,854
11,229
$
$
22,659
10,548
$
$
24,077
10,715
$
$
21,513
10,786
$
$
21,323
10,395
$
$
21,379
10,790
Gross Fair Value*) (5)
$ 2,263,318
$ 2,439,738
$ 2,444,629
$ 2,519,200
$ 2,491,191
$ 2,373,623
$ 2,338,288
$ 2,383,451
Interest service coverage* ratio
{(1)/(2)}
3.13x
3.13x
2.94x
3.04x
2.77x
3.03x
2.64x
3.18x
Debt service coverage* ratio
{(1)/((2)+(3))}
Debt to trailing 12 months
2.07x
2.08x
1.97x
2.07x
1.92x
2.02x
1.77x
2.11x
adjusted EBITDA* {(5)/(4)}
8.25x
8.95x
9.12x
9.80x
9.73x
9.34x
9.12x
8.86x
60
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
DEBT PROFILE
A continuity of Crombie’s fixed-rate mortgages, senior unsecured notes, and credit facilities for the year ended December 31, 2021 is as follows:
Year ended December 31, 2021
Year ended December 31, 2020
Mortgages
Senior
Unsecured
Notes
Credit Facilities
Mortgages
Senior
Unsecured
Notes
Credit Facilities
Opening balance, beginning of year
$
1,273,674
$
1,125,000
$
62,256
$
1,308,147
$
925,000
$
54,308
Additions to existing mortgages
New borrowings or issuances
Principal repayments
Repayments on maturity
Vendor assumptions on disposition
Redemption
Net (repayments) advances
25,000
550
(44,424)
(119,755)
(61,492)
—
—
—
150,000
—
—
—
(150,000)
—
—
—
—
—
—
—
(33,132)
5,125
218,000
(42,686)
(214,912)
—
—
—
—
300,000
—
—
—
(100,000)
—
—
—
—
—
—
—
7,948
Closing balance, end of year
$
1,073,553
$
1,125,000
$
29,124
$
1,273,674
$
1,125,000
$
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, 2021
December 31, 2020
1,073,553
$
1,273,674
342
1,073,895
(6,036)
1,067,859
893,364
174,495
4.00%
4.9 years
$
$
$
630
1,274,304
(7,260)
1,267,044
1,139,798
127,246
3.98%
5.7 years
•
During the year ended December 31, 2021, Crombie disposed of an interest in a mortgage of $61,492 through a vendor assumption related to the
partial disposition of a retail-related industrial property.
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 $109,535 of
floating rate debt.
Proven Stability and Sustainable Growth
61
MANAGEMENT’S DISCUSSION AND ANALYSIS
Senior Unsecured Notes (“Notes”)
The following series of senior unsecured notes were outstanding as at December 31, 2021 and December 31, 2020:
Series B
Series D
Series E
Series F
Series G
Series H
Series I
Series J
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
Maturity Date
Effective Interest Rate
December 31, 2021
December 31, 2020
June 1, 2021
November 21, 2022
January 31, 2025
August 26, 2026
June 21, 2027
March 31, 2028
October 9, 2030
August 12, 2031
3.962%
4.066%
4.802%
3.677%
3.917%
2.686%
3.211%
3.133%
$
—
$
150,000
175,000
200,000
150,000
150,000
150,000
150,000
—
(3,733)
1,121,267
971,267
150,000
3.67%
5.4 years
$
$
$
$
$
$
150,000
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
On August 12, 2021, Crombie issued, on a private placement basis, $150,000 of Series J notes (senior unsecured) maturing August 12, 2031. The
net proceeds were used to repay existing indebtedness, including repayment of outstanding credit facilities. The Series J notes were priced with
an effective yield to maturity of 3.133% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual
installments on February 12 and August 12.
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, 2021 and December 31, 2020:
Revolving credit facility
Unsecured bilateral credit facility
Joint operation credit facility I
Joint operation credit facility II
Total credit facilities
Available Facility
Weighted Average
Term to Maturity
December 31, 2021
December 31, 2020
$
$
400,000
130,000
7,167
3,520
540,687
3.5 years
$
9,220
$
1.5 years
2.3 years
2.8 years
10,000
7,167
2,737
2.5 years
$
29,124
$
17,712
35,000
7,188
2,356
62,256
REVOLVING CREDIT FACILITY
UNSECURED BILATERAL CREDIT FACILITY
Crombie has in place an authorized floating rate revolving credit
facility of up to $400,000 (the “revolving credit facility”), and has
been amended to extend the maturity date to June 30, 2025, of which
$9,220 ($12,223 including outstanding letters of credit) was drawn at
December 31, 2021. 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.
The unsecured bilateral credit facility has a maximum principal amount
of $130,000 and has been amended to extend the maturity date to
June 30, 2023, of which $10,000 was drawn as at December 31, 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.
62
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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-ownership partner entered into a
credit agreement with a Canadian chartered bank for a $62,250 term
loan facility and a $5,800 revolving credit facility. In the second quarter
of 2021, our co-ownership partner sold its share of the portfolio to a third
party. The revolving credit facility was amended in the second quarter
of 2021 to reduce the maximum principal amount to $2,908. 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-ownership partner entered into a fixed for
floating interest rate swap, effectively fixing the interest rate on both
facilities at 3.58%. At December 31, 2021, Crombie’s portion of the term
and revolving credit facilities was $6,847 and $320 respectively.
In conjunction with the 89% sale of a portfolio of assets in the fourth
quarter of 2019, Crombie and its co-ownership partner 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 the facility, Crombie and its co-ownership partner entered
into a fixed for floating interest rate swap, effectively fixing interest rate
on both facilities at 3.27%. At December 31, 2021, Crombie’s portion of the
term and revolving credit facilities was $1,815 and $922 respectively.
DEBT MATURITIES
Principal repayments of the fixed rate mortgages, unsecured notes, and credit facilities are scheduled as follows:
12 Months Ending
December 31, 2022
December 31, 2023
December 31, 2024
December 31, 2025
December 31, 2026
Thereafter
Total1
Maturing Debt Balances
Senior
Unsecured
Mortgages
Notes Credit Facilities
Total
% of Total
Payments of
Principal
Total Required
Payments
% of Total
$ 136,479
$ 150,000
$
—
$ 286,479
227,405
226,268
30,596
12,401
246,868
—
—
175,000
200,000
600,000
10,000
9,904
9,220
—
—
237,405
236,172
214,816
212,401
846,868
14.1%
11.7%
11.6%
10.6%
10.4%
41.6%
$ 38,016
$ 324,495
31,647
20,178
16,251
14,235
73,209
269,052
256,350
231,067
226,636
920,077
14.5%
12.1%
11.5%
10.4%
10.2%
41.3%
$ 880,017
$1,125,000
$
29,124
$2,034,141
100.0%
$ 193,536
$2,227,677
100.0%
(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 May 19, 2021, Crombie closed a public offering, on a bought deal
basis, of 3,525,000 Units, at a price of $16.60 per Unit for proceeds
of $55,801 net of issue costs. On the same date, concurrent with the
issue of the REIT Units, in satisfaction of its pre-emptive right, ECL
Developments (ECLD), a wholly-owned subsidiary of Empire, purchased
2,500,000 Class B LP Units and the attached Special Voting Units at a
price of $16.60 per Class B LP Unit for proceeds of $41,424 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, 2021, Crombie issued 301,418 REIT
Units and 213,577 Class B LP Units under its DRIP. Prior to August 4, 2021,
Units issued under the DRIP were issued at a price equal to 100% of the
volume-weighted average trading price of the REIT Units on the Toronto
Stock Exchange for the five trading days immediately preceding the
relevant distribution payment date. Effective August 4, 2021, the price
of Units issued under the DRIP was reduced by a discount of 3%.
Throughout the year ended December 31, 2021, Crombie issued
4,817 REIT Units under its Unit-based compensation plans.
In January 2022, Crombie closed on a public offering, on a bought
deal basis, of 6,705,000 Units, and 4,756,446 Class B LP and associated
Special Voting Units to ECLD 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.
Total Units outstanding at January 31, 2022, were as follows:
Units
Special Voting Units1
104,138,848
72,244,090
(1) Crombie Limited Partnership, a subsidiary of Crombie, has issued 72,244,090 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.
Proven Stability and Sustainable Growth
63
MANAGEMENT’S DISCUSSION AND ANALYSIS
CASH FLOWS
The following shows the major sources and uses of cash for the year ended December 31, 2021:
MAJOR SOURCES AND USES OF CASH
$224,844
$63,293
$(144,559)
$25,550
$(92,788)
$150,000
$97,225
$25,070
$144,014
$3,915
$(1,113)
$(163,414)
$(33,132)
$(150,000)
$(64,304)
$(76,771)
Finance
costs –
operations
Issue of
mortgages
Mortgage
payments
Credit
facility
net
repayments
Issue of
notes
Notes
redemption
Unit
issue
Acquisitions Additions
to
investment
properties
Proceeds
on
disposition
Distributions
from joint
ventures
Other,
net
Closing
cash
Source of cash
Use of cash
Three months ended December 31,
Year ended December 31,
2021
2020
Variance
2021
2020
Variance
$
$
84,123
$
(169,305)
80,201
56,424
55,643
(48,774)
(4,981)
$
63,293
$
$
27,699
$
224,844
$
167,209
(224,948)
128,975
(302,712)
18,490
20,364
(124,280)
(68,274)
$
(59,378)
$
63,293
$
$
57,635
(323,076)
142,770
(122,671)
Distributions
Opening
cash
Operating
cash flow
before
distributions
and finance costs
Cash provided by (used in):
Operating activities
Financing activities
Investing activities
Net change during the period
Operating Activities
For the three months ended:
For the year ended:
The increase in cash provided by operating activities in the quarter
compared to the same quarter in 2020 is primarily due to increased
net property income of $3,587 from completed developments, strong
occupancy, and lease terminations, and a positive increase in working
capital of $23,236.
The increase in cash provided by operating activities on an annual
basis is largely due to increased net property income of $24,170 due to
a reduction in bad debt expense of $10,082 as a result of decreased
collection risk in 2021, and income from completed developments, lease
terminations, and strong occupancy, and a positive increase in working
capital of $46,342. The increase in cash provided was offset in part by
higher additions to tenant incentives ($72,542 compared to $63,536
in 2020), and an increase of $4,950 in general and administrative
expenses resulting primarily from an increase in Unit price and its
impact on Unit-based compensation plans, offset in part by higher
severance costs in 2020.
64
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
Financing Activities
For the three months ended:
For the year ended:
The decrease in cash provided by financing activities is due to the
issuance of unsecured notes of $300,000 and $100,000 in mortgage
issues, both in the fourth quarter of 2020, and mortgage repayments
$77,168 lower than in the fourth quarter of 2020. This is partially offset by
net repayments on floating rate credit facilities of $3,118 in the quarter
compared to the net amount drawn on floating rate credit facilities of
$140,070 during the same period in 2020, redemption of unsecured
notes of $100,000 in the fourth quarter of 2020, and increased finance
costs from operations of $2,273 primarily due to reduced interest on
unsecured notes resulting from the early partial redemption of Series B
senior unsecured notes in 2020.
The decrease in cash provided by financing activities on an annual
basis is due to mortgage issuances of $25,550 compared to $218,000
in 2020, the $150,000 issuance of Series J unsecured notes in the third
quarter of 2021 versus the issue of Series H and Series I unsecured notes
totalling $300,000 in the fourth quarter of 2020, $150,000 redemption
of Series B unsecured notes in the second quarter of 2021 compared
to $100,000 early partial redemption of Series B unsecured notes in
the fourth quarter of 2020, and net repayments on floating rate credit
facilities of $33,132 compared to the net amount drawn on floating rate
credit facilities of $7,948 in 2020. This is partially offset by repayment of
mortgages of $163,414 ($257,598 in 2020), and payment of the special
cash distribution of $14,857 on January 15, 2020.
Investing Activities
For the three months ended:
For the year ended:
The increase in cash provided by investing activities in the quarter
results primarily from proceeds of $87,769 from disposition of investment
properties compared to dispositions of $36,931 and acquisitions of
$32,632 in the fourth quarter of 2020, increased distributions from equity
accounted investments of $24,983, and lower additions to investment
properties of $31,735 ($49,797 in 2020).
The annual increase in cash provided by investing activities is primarily
due to proceeds from disposition of properties of $144,014 ($37,832 in
2020), decreased additions to investment properties of $32,897, and an
increase of $25,001 in distributions from equity accounted investments.
This is offset in part by acquisition of properties of $64,304 ($42,687
in 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
Amount drawn
Outstanding letters of credit
Available liquidity
Unsecured revolving bilateral credit facility
Amount drawn
Available liquidity
Cash
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
$
400,000
$
400,000
$
400,000
$
398,846
$
400,000
(9,220)
(3,003)
387,777
130,000
(10,000)
120,000
—
(6,603)
(4,229)
389,168
130,000
(7,000)
123,000
—
(62,228)
(4,289)
333,483
130,000
(95,000)
35,000
—
(35,000)
(6,014)
357,832
130,000
(35,000)
95,000
16,716
(17,712)
(5,580)
376,708
130,000
(35,000)
95,000
—
Total available liquidity
$
507,777
$
512,168
$
368,483
$
469,548
$
471,708
Cash and cash equivalents on the balance sheet of $3,915 consists
of restricted cash related to a mortgage on a retail-related industrial
property and is therefore not included in available liquidity.
• 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
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 1.3 times the coverage of the related annualized
debt service requirements;
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.
Proven Stability and Sustainable Growth
65
MANAGEMENT’S DISCUSSION AND ANALYSIS
At December 31, 2021, the remaining amount available under the
revolving credit facility was approximately $391,000 (prior to reduction
for standby letters of credit outstanding of $3,003) and was not
limited by the Aggregate Borrowing Base. Crombie has remained in
compliance with all debt covenants.
The terms of the unsecured bilateral revolving 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.
Our liquidity is impacted by contractual debt commitments. Our contractual debt commitments for the next five years are as follows:
Contractual
Cash Flows1
2022
2023
2024
2025
2026
Thereafter
Twelve months ending December 31,
Fixed rate mortgages – principal and interest2
$ 364,548
$
77,401
$
63,107
$
39,387
$
30,506
$
26,695
$
127,452
Fixed rate mortgages – maturities
Senior unsecured notes
Trade and other payables
Lease liabilities
Credit facilities
Total
880,017
1,335,356
147,096
154,240
2,881,257
31,050
136,479
190,599
123,258
3,007
530,744
836
227,405
35,176
4,451
2,937
333,076
10,679
226,268
35,176
2,988
2,807
306,626
10,227
30,596
202,476
1,609
2,758
267,945
9,308
12,401
224,220
1,609
2,639
246,868
647,709
13,181
140,092
267,564
1,175,302
—
—
$ 2,912,307
$ 531,580
$ 343,755
$ 316,853
$
277,253
$
267,564
$ 1,175,302
(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 mortgage and term debt on unencumbered properties;
• the issuance of additional senior unsecured notes;
• secured and unsecured short-term financing subject to available
• the issuance of new Units; and
borrowing base;
• entering into new joint arrangements.
• recycling capital through the disposition of select investment properties;
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 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, 2021, Crombie
has a total of $3,003 in outstanding letters of credit related to:
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.
Construction work being performed on investment properties
Mortgage lenders primarily to satisfy mortgage financings on redevelopment properties
Total outstanding letters of credit
December 31, 2021
December 31, 2020
$
$
3,003
—
3,003
$
$
3,740
1,840
5,580
Crombie does not believe that any of these standby letters of credit are
likely to be drawn upon.
As at December 31, 2021, Crombie had signed construction contracts
totaling $359,285 of which $264,927 has been paid. This includes contracts
signed within joint ventures at Crombie’s ownership percentage.
Crombie has provided 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, 2021, Crombie has provided
guarantees of approximately $128,973 (December 31, 2020 – $140,577)
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 3.0 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.
As at December 31, 2021, Crombie has committed to contributing $2,120
to 1700 East Broadway Limited Partnership as part of the ongoing
predevelopment work in the joint venture.
66
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 2021.
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
Accounts receivable1
Financial liabilities
Investment property debt
Senior unsecured notes
Total other financial liabilities
December 31, 2021
December 31, 2020
Fair Value
Carrying Value
Fair Value
Carrying Value
$
$
$
27,737
1,177,814
1,157,820
2,335,634
$
$
$
27,751
1,103,019
1,125,000
2,228,019
$
$
$
25,042
$
25,051
1,427,367
$
1,336,560
1,206,285
1,125,000
2,633,652
$
2,461,560
(1) Accounts receivable 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.
Proven Stability and Sustainable Growth
67
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 lease
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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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
(please see the “Risks” section of Crombie’s 2021 Annual Information
Form available at www.sedar.com for additional information on risks
related to Crombie):
ENTERPRISE RISK MANAGEMENT
Markets have been impacted by COVID-19 since it was declared
a pandemic by the World Health Organization in early 2020, and
throughout 2021. The continued spread of COVID-19, including the
recent Omicron variant, 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. Risks
include, but are not limited to, 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.
COVID-19 has affected the workforce in many businesses through higher
employee turnover and unplanned absences due to illness, especially
since the advent of Omicron, which may hinder Crombie’s capability in
managing our properties. There is also increased risk as to the extent
of the impact of COVID-19 on leasing, occupancy, tenant inducements,
land use intensification, market rents, and capital expenditures. The
pandemic has resulted in moderate economic uncertainty, of which the
potential impact on Crombie’s future financial results and valuation of
assets is difficult to reliably measure.
68
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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, 2021, 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, 56.7% of the annual minimum rent and 51.3% 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 nine 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. Cyber incidents are becoming more frequent and more
sophisticated. Crombie has implemented processes, procedures and
controls to help mitigate these risks, and has made it a priority to better
educate and train all team members on cyber security. These measures,
however, as well as Crombie’s 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.
Proven Stability and Sustainable Growth
69
MANAGEMENT’S DISCUSSION AND ANALYSIS
ENVIRONMENTAL MATTERS
Environmental issues can cover a broad range of topics, including
energy usage, water conservation, pollution, waste management,
green buildings, or climate change, among many others. Each of these
topics comes with their own specific risks including increased energy
costs, the price of carbon, and pollution liability. To effectively manage
environmental risk, it is critical to operate the business in a sustainable
manner. Although we have embedded sustainability principles into the
way we operate since inception, 2021 saw a more formalized approach
to sustainable business operations. This includes measuring, managing,
and reporting on our sustainability performance through the lens of
ESG deliverables.
In 2021, Crombie identified persons responsible for driving ESG
performance and we completed our first materiality assessment
to identify the environmental, social, and governance topics which
are most impactful to Crombie stakeholders. Crombie identified a
sustainability software partner to help collect, measure, and report on
energy, water, waste, and greenhouse gas performance. The adage
of “you can’t manage what you don’t measure” is a true statement,
so we need to have reliable means to collect and manage data.
Crombie made its first submission to GRESB in 2021. GRESB is an
investor grade, industry recognized peer benchmark assessment for
sustainability performance in real estate. In 2021, Crombie published
its first standalone Sustainability Report, which outlines the results of
our materiality assessment and provides insight into our sustainability
strategy, and ongoing projects and performance. With our baseline
sustainability performance data and identification of our material topics,
we can now set goals and chart a path to achieve them. With a more
formal management approach to sustainability, we can better identify
and manage the risks associated within this broad range of topics.
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.
Beyond regulatory compliance, assessing the environmental condition
of a property helps Crombie to become a corporate steward of the
environment. By identifying and understanding the environmental risk at
a property, we can manage it appropriately for the benefit of Crombie,
the community, and the environment. Crombie’s operating policy is to
obtain a Phase I environmental site assessment (“ESA”), conducted by
an independent and experienced environmental consultant, prior to
acquiring a property and to have Phase II ESA work completed where
recommended in a Phase I ESA. A Phase I ESA is an investigation
completed on a site to identify current and historic activities that may
have caused adverse impact to the soil and groundwater at the site.
It is generally conducted as a desk-top study which includes a site visit
to make observations and interview someone who is knowledgeable
about the property. It is non-intrusive in nature and typically the first
step of the process to identify areas of potential environmental concern.
If such an area is identified in the Phase I ESA, then a Phase II ESA
is completed. A Phase II ESA is intrusive in nature and completed to
determine whether or not the potential concern identified in the Phase I
ESA is an actual concern. This assessment includes the sampling and
testing of soil, groundwater and/or soil vapour.
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
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. Crombie is currently evaluating the
Task Force on Climate-Related Financial Disclosures recommendations
to help us identify, manage, and report on these risks in alignment with
industry best practices.
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.
70
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 56.7% of annual
minimum rent. No other tenant accounts for more than 2.6% 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 $53,759 and $209,684 respectively for the three months and year ended
December 31, 2021 (three months and year ended December 31, 2020 – $51,961 and $191,362 respectively1) from Sobeys Inc.
and other subsidiaries of Empire.
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 over the past few years 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.
Due to the impacts of COVID-19, the degree of uncertainty in Crombie’s assessment of expected credit losses remains
elevated. During the three months and year ended December 31, 2021, Crombie has recorded a bad debt expense of
$54 and $811 respectively.
Our trade receivables and allowance for doubtful accounts balances at December 31, 2021 were $27,472 and $(3,031)
respectively (December 31, 2020 – $42,211 and $(7,955) 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.
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 issuance 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.
Liquidity Risk
Risk Description
Risk Management
(1) Related party property revenue for the periods ended December 31, 2020 updated from previously reported figures.
Proven Stability and Sustainable Growth
71
MANAGEMENT’S DISCUSSION AND ANALYSIS
Liquidity Risk
Risk Management
(continued)
There is a risk that credit ratings may change. No ratings agency has issued a credit rating with respect to the Units, and
no credit rating of the Units will be sought or obtained by Crombie. As of December 31, 2021, Crombie’s outstanding senior
unsecured notes maintain a credit rating of “BBB(low)” with a “Negative” trend from DBRS.
Credit ratings may not reflect all risks associated with an investment in Crombie’s securities. Any credit ratings applied to the
notes are an assessment of Crombie’s ability to pay its obligations generally. Consequently, real or anticipated changes in
the credit ratings will generally affect the market value of the notes. The credit ratings, however, may not reflect the potential
impact on the value of the notes of risks related to structure, market or other factors discussed under the heading “Risk Factors”
in Crombie’s Annual Information Form dated March 29, 2021. Crombie is under no obligation to maintain any specified level
of credit rating with credit rating agencies and there is no assurance that any credit rating assigned to the notes will remain in
effect for any given period of time or that any rating will not be lowered or withdrawn entirely by the relevant rating agency.
A lowering, withdrawal or failure to maintain any credit ratings applied to the notes may have an adverse effect on the market
price or value and the liquidity of the notes. Credit ratings are not recommendations to purchase, hold or sell the notes or
other securities of Crombie. Any future lowering of Crombie’s ratings likely would make it more difficult or more expensive for
Crombie to obtain additional debt financing.
Access to the $400,000 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.
Refer to the “Debt Maturities” section 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, 2021:
• Crombie’s weighted average term to maturity of its fixed rate mortgages is 4.9 years;
• Crombie’s weighted average term to maturity of its unsecured notes is 5.4 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 $9,220 outstanding;
• Crombie has a floating rate bilateral credit facility available to a maximum of $130,000 with a balance
of $10,000 outstanding;
• Crombie has joint operation credit facilities available to a maximum of $10,687 at Crombie’s share with
a balance of $9,904; and
• Crombie has interest rate swap agreements in place on $109,535 of floating rate debt.
A fluctuation in interest rates would have 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 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
$
$
62
123
$
$
(62)
(123)
$
$
398
795
$
$
(398)
(795)
Three months ended
December 31, 2021
Year ended
December 31, 2021
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.
72
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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
2021 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
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.
Proven Stability and Sustainable Growth
73
MANAGEMENT’S DISCUSSION AND ANALYSIS
OTHER DISCLOSURES
RELATED PARTY TRANSACTIONS
As at December 31, 2021, 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
Crombie’s transactions with related parties are as follows:
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.
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,
2021
2020
2021
2020
(a)
(b)
(c)
$
$
$
$
$
$
$
$
53,759
206
34
(34)
193
(65)
55
(15,194)
$
$
$
$
$
$
$
$
51,9611
456
34
(18)
243
(64)
62
(14,603)
$
$
$
$
$
$
$
$
209,684
1,001
136
(96)
483
(265)
230
(59,952)
$
$
$
$
$
$
$
$
191,3621
1,162
136
(58)
594
(258)
256
(58,194)
(1) Related party property revenue for the periods ended December 31, 2020 updated from previously reported figures.
(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, 2021,
Crombie issued 213,577 (December 31, 2020 – 85,433) Class B LP Units
to ECLD under the DRIP.
On May 19, 2021, ECLD purchased 2,500,000 Class B LP Units and the
attached Special Voting Units at a price of $16.60 per Class B LP Unit for
proceeds of $41,424 net of issue costs, on a private placement basis.
During the year ended December 31, 2021, Crombie purchased
six properties from a subsidiary of Empire for a total purchase price
of $42,912 before transaction costs.
During the year ended December 31, 2021, Crombie invested $34,119
(December 31, 2020 – $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, 2020 –
$25,526) 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, 2020 –
$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.
74
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
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. Biannual capitalization rates
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, 2021, 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.
• Buildings – Buildings are recorded at the estimated fair value of the
REVENUE RECOGNITION
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.
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 or the useful lives of the projects, as applicable,
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.
Proven Stability and Sustainable Growth
75
MANAGEMENT’S DISCUSSION AND ANALYSIS
LEASE MODIFICATIONS
DEFINED BENEFIT LIABILITY
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.
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, 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. 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.
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 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, 2021. 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, 2021, 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.
76
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
QUARTERLY INFORMATION
Dec. 31,
2021
Sep. 30,
2021
Jun. 30,
2021
Mar. 31,
2021
Dec. 31,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Three months ended
Property revenue
$
103,832
$
101,517
$ 100,006
$
103,537
$
97,060
$
92,920
$
96,501
$
102,252
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
FFO*
Basic
Per Unit – Basic
Payout ratio
AFFO*
Basic
Per Unit – Basic
Payout ratio
Operating information
32,430
71,402
78,730
30,216
71,301
23,851
29,814
70,192
19,605
33,401
70,136
33,215
29,245
67,815
17,157
27,503
65,417
19,734
37,887
58,614
9,393
35,237
67,015
21,324
(36,637)
(36,578)
(36,124)
(35,220)
(35,211)
(35,202)
(35,187)
(34,702)
(1,018)
291
(1,219)
(1,026)
(725)
(187)
(212)
1,929
$
$
$
$
$
$
$
$
41,075
0.48
36,637
0.22
46,948
0.29
78.0%
40,468
0.25
90.5%
$
$
$
$
$
$
$
$
(12,436)
0.15
36,578
0.22
47,830
0.29
76.5%
41,052
0.25
89.1%
$
$
$
$
$
$
$
$
(17,738)
0.12
36,124
0.22
44,201
0.27
81.7%
37,109
0.23
97.3%
$
$
$
$
$
$
$
$
(3,031)
0.21
35,220
0.22
46,103
0.29
76.4%
38,779
0.25
90.8%
$
$
$
$
$
$
$
$
(18,779)
0.11
35,211
0.22
42,305
0.27
83.2%
35,679
0.23
98.7%
$
$
$
$
$
$
$
$
(15,655)
0.12
35,202
0.22
43,327
0.27
81.2%
35,494
0.22
99.2%
$
$
$
$
$
$
$
$
(26,006)
0.06
35,187
0.22
34,557
0.22
101.8%
28,107
0.18
125.2%
$
$
$
$
$
$
$
$
(11,449)
0.14
34,702
0.22
45,661
0.29
76.0%
39,683
0.26
87.4%
Number of investment properties
284
287
287
287
284
286
286
285
Gross leasable area
Economic occupancy
Committed occupancy
Debt metrics
Unencumbered investment
properties1
17,861,000
18,232,000
18,235,000
18,229,000
18,000,000
17,684,000
17,614,000
17,583,000
95.6%
96.2%
95.8%
96.5%
95.6%
96.2%
95.5%
96.3%
94.0%
96.4%
94.7%
95.3%
95.1%
95.6%
95.5%
96.2%
$ 1,752,927
$ 1,461,775
$ 1,445,423
$ 1,388,141
$ 1,366,258
$ 1,460,152
$ 1,461,970
$ 1,479,211
Available liquidity
$
507,777
$
512,168
$ 368,483
$ 469,548
$
471,708
$
370,885
$ 406,303
$ 449,898
Debt to gross fair value*
Weighted average interest rate2
Debt to trailing 12 months
adjusted EBITDA*
Interest coverage ratio*
42.9%
3.8%
8.25x
3.13x
45.5%
3.8%
8.95x
3.13x
46.0%
3.9%
9.12x
2.94x
48.9%
3.9%
9.80x
3.04x
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
(1) Represents fair value of unencumbered properties.
(2) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.
Proven Stability and Sustainable Growth
77
MANAGEMENT’S DISCUSSION AND ANALYSIS
Variations in quarterly results over the past eight quarters have been
influenced by the following specific transactions and ongoing events:
- September 30, 2020 – acquisition of one development property
for a total purchase price of $4,575;
• Property acquisitions and dispositions (gross proceeds excluding
closing and transaction costs) for each of the above three month
periods were:
- December 31, 2021 – disposition of three retail properties,
disposition of portions of two retail properties, and disposition
of a 50% interest in one retail-related industrial property for
proceeds of $152,218;
- September 30, 2021 – acquisition of one retail property for a total
purchase price of $4,710 and disposition of one retail property for
proceeds of $15,000;
- June 30, 2021 – acquisition of one development property for a total
purchase price of $11,885;
- March 31, 2021 – acquisition of six retail properties and one
development property for a total purchase price of $46,292 and
disposition of three retail properties for proceeds of $41,970;
- 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;
- June 30, 2020 – acquisition of one retail property for a total
purchase price of $4,535; and
- 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.
• 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.
78
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, 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.
Non-GAAP Measure
Description and Purpose
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.
Reconciliation
“Net Property Income” starting
on page 43
Same-asset property
cash NOI
• 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, or was subject to disposition
of a portion of its GLA, during either the current or comparative period. Same-
asset property cash NOI includes Crombie’s proportionate ownership of jointly
operated properties but currently excludes properties owned in joint ventures.
• 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 267 as at December 31, 2021.
“Net Property Income” starting
on page 43
Funds from operations
(“FFO”)
Crombie follows the recommendations of the Real Property Association of
Canada (“REALPAC”)’s January 2022 guidance 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:
“Funds from Operations (FFO)*”
starting on page 45
- 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.
• Crombie calculates FFO per Unit using the basic weighted average Units
outstanding for the period. Management believes this is a useful measure
in comparing period-over-period operating results.
Proven Stability and Sustainable Growth
79
MANAGEMENT’S DISCUSSION AND ANALYSIS
Non-GAAP Measure
Description and Purpose
FFO payout ratio
• Shows the proportion of FFO paid to Unitholders in the form of distributions
for the period, expressed as a percentage of FFO.
• FFO payout ratio is calculated by dividing finance costs – distributions to
Unitholders by FFO for the period.
• Management uses this key metric in evaluating the sustainability of Crombie’s
distribution payments to Unitholders.
Reconciliation
“Funds from Operations (FFO)*”
starting on page 45
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 46
• Crombie follows the recommendations of REALPAC’s January 2022 guidance
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.
• Crombie calculates AFFO per Unit using the basic weighted average Units
outstanding for the period. Management believes this is a useful measure
in comparing period-over-period operating results.
AFFO payout ratio
• Shows the proportion of AFFO paid to Unitholders in the form of distributions
for the period, expressed as a percentage of AFFO.
• AFFO payout ratio is calculated by dividing finance costs – distributions to
Unitholders by AFFO for the period.
• Management uses this key metric in evaluating the sustainability of Crombie’s
distribution payments to Unitholders.
“Adjusted Funds from Operations
(AFFO)*” starting on page 46
Debt to gross fair value
•
Used to evaluate Crombie’s flexibility to incur additional financial leverage.
“Debt Metrics” starting on page 58
Adjusted debt
• Represents debt excluding transaction costs, which Crombie feels is a more
“Debt Metrics” starting on page 58
relevant presentation of indebtedness.
• Adjusted debt is used in the calculation of our debt to gross fair value.
Investment in joint
ventures, fair value
• Represents investment in joint ventures adjusted to reflect investment properties
measured at fair value rather than cost as under the equity accounting method.
“Debt Metrics” starting on page 58
Earnings before interest,
taxes, depreciation
and amortization
(“adjusted EBITDA”)
• Investment in joint ventures, fair value is used in the calculation of our debt to
gross fair value.
• Represents earnings before interest, taxes, depreciation, and amortization
“Debt Metrics” starting on page 58
adjusted for certain items such as amortization of tenant incentives, impairment
of investment properties, and gain (loss) on disposal of investment properties.
• Adjusted 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 adjusted EBITDA is an indicative measure of its ability to
service debt requirements, fund capital projects and acquire properties.
Debt to adjusted EBITDA
•
Used to assess Crombie’s financial leverage, to measure its ability to meet
financial obligations and measure its balance sheet strength.
“Debt Metrics” starting on page 58
Interest service coverage
Debt service coverage
•
These ratios are useful in determining the Crombie’s ability to service the
interest requirements of its outstanding debt.
“Debt Metrics” starting on page 58
80
CROMBIE REIT Annual Report 2021
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
obtained. 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 2021, 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 for 2021. 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.
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 excludes
newly constructed and developed properties from its maintenance
charge for the first year until a baseline of actual expenditures is
Maintenance Expenditures – Actual
Year ended
Three months ended
Year ended
Three months ended
Dec. 31,
2021
Dec. 31,
2021
Sep. 30,
2021
Jun. 30,
2021
Mar. 31,
2021
Dec. 31,
2020
Dec. 31,
2020
Sep. 30,
2020
Jun. 30,
2020
Mar. 31,
2020
Total additions to
investment properties
$
76,771
$
31,735
$
29,919
$
6,736
$
8,381
$ 109,668
$
49,797
$
30,913
$
14,819
$
14,139
Less: revenue enhancing
expenditures
(69,051)
(29,005)
(26,173)
(6,641)
(7,232)
(103,982)
(47,692)
(29,887)
(13,890)
(12,513)
Maintenance capital
expenditures
Total additions to TI and
deferred leasing costs
Less: revenue enhancing
7,720
2,730
3,746
95
1,149
5,686
2,105
1,026
929
1,626
73,514
10,058
7,283
26,122
30,051
64,971
12,716
3,682
23,944
24,629
expenditures
(65,086)
(6,778)
(7,168)
(23,875)
(27,265)
(51,464)
(9,557)
(1,585)
(18,947)
(21,375)
Maintenance TI and
deferred leasing costs
8,428
3,280
115
2,247
2,786
13,507
3,159
2,097
4,997
3,254
Total maintenance
expenditures – actual
Reserve amount charged
against AFFO*
$
$
16,148
16,043
$
$
6,010
4,006
$
$
3,861
4,023
$
$
2,342
4,024
$
$
3,935
$
19,193
3,990
$
15,869
$
$
5,264
3,986
$
$
3,123
3,963
$
$
5,926
3,967
$
$
4,880
3,953
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
2021 and 2020.
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, 2021 consisted primarily of development work,
modernization investments, 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*. GLA
related to new developments is excluded for the purpose of this charge
for a period of 12 months as little to no maintenance expense is incurred
in the first year of operation.
Proven Stability and Sustainable Growth
81
MANAGEMENT’S DISCUSSION AND ANALYSIS
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, “Portfolio Review – Strategic Acquisitions”, “Portfolio
Review – Strategic Dispositions”, “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)
annual investment with Empire on investments in the
modernization, acquisition, expansion, and conversion of their
grocery stores, which may be impacted by the development
of Empire’s business and the resulting availability of suitable
investment opportunities for Crombie;
(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;
(iii) disposition of properties and the anticipated reinvestment of net
proceeds (“recycling capital”), 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)
statements under the heading “Development” including the
locations identified, timing, cost, development size and nature,
and anticipated impact on portfolio quality and diversification,
estimated yield on cost, 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,
ability to achieve lease-up stabilization at current market rents,
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;
(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;
82
CROMBIE REIT Annual Report 2021
(vi) 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;
(vii) estimated GLA, estimated completion dates, estimated total
costs, and estimated yields for Near-Term 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;
(x)
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.
MANAGEMENT’S DISCUSSION AND ANALYSIS
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.
Proven Stability and Sustainable Growth
83
MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL REPORTING
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, 2021, 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 23, 2022
CLINTON D. KEAY, CPA, CA
Chief Financial Officer and Secretary
February 23, 2022
84
CROMBIE REIT Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT
AUDITOR’S REPORT
TO THE BOARD OF TRUSTEES 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, 2021 and 2020, 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, 2021 and 2020;
• 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.
Proven Stability and Sustainable Growth
85
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, 2021. 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
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.
- Professionals with specialized skill and knowledge in the field of
real estate valuations 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.
Fair value of investment properties
Refer to note 2 – Summary of significant accounting policies and note 3 –
Investment properties to the consolidated financial statements.
The Trust’s total investment properties as at December 31, 2021 were
$3.875 billion. The investment properties are carried at cost less
accumulated depreciation, with their fair value disclosed at each
reporting period. The Trust disclosed a total fair value of $5.026 billion
on December 31, 2021.
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.
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.
86
CROMBIE REIT Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
OTHER INFORMATION
Management is responsible for the other information. The other
information comprises the Management’s Discussion and Analysis,
which we obtained prior to the date of this auditor’s report and the
information, other than the consolidated financial statements and
our auditor’s report thereon, included in the annual report, which is
expected to be made available to us after that date.
Our opinion on the consolidated financial statements does not cover the
other information and we do not and will not express an opinion or 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 on the other information
that we obtained prior to the date of this auditor’s report, 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. When we read the information, other than the consolidated
financial statements and our auditor’s report thereon, included in the
annual report, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to those charged
with governance.
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
87
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.
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.
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.
Chartered Professional Accountants
Halifax, Nova Scotia
February 23, 2022
88
CROMBIE REIT Annual Report 2021
Consolidated Financial Statements
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, 2021
December 31, 2020
$
3,546,752
$
3,583,939
44,210
362,801
3,953,763
3,915
65,998
—
69,913
4,023,676
893,364
29,124
971,267
8,130
23,838
34,420
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
1,960,143
2,192,047
174,495
—
150,000
284
140,330
932
466,041
2,426,184
1,597,492
950,271
647,221
1,597,492
$
$
$
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
17
5
6
7
7
8
9
10
21
7
7
8
9
10
21
22
23
signed (Paul Beesley)
Paul Beesley
Audit Committee Chair
Proven Stability and Sustainable Growth
89
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(in thousands of CAD dollars)
Property revenue
Property operating expenses
Net property income
Gain on disposal of investment properties
Gain from equity accounted investments
Impairment of investment properties
Depreciation and amortization
General and administrative expenses
Finance costs – operations
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
Increase (decrease) 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 (losses) in employee future benefits obligation
Other comprehensive income (loss)
Comprehensive income (loss)
See accompanying notes to the consolidated financial statements.
Year ended December 31,
Note
2021
11
12
3
4
3
3,5
14
15
4
14
$
408,892
$
125,861
283,031
56,525
15,525
(2,539)
(75,763)
(25,484)
(92,788)
(2,941)
155,566
(165)
155,401
(144,559)
(2,972)
(147,531)
7,870
—
4,628
444
5,072
2020
388,733
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)
$
12,942
$
(77,650)
90
CROMBIE REIT Annual Report 2021
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
ATTRIBUTABLE TO UNITHOLDERS
(In thousands of CAD dollars)
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
Balance, January 1, 2021
$
1,860,237
$
(376,301)
$
(5,630)
$
1,478,306
$
881,511
$
596,795
(Note 16)
Adjustments related to Employee
Unit Purchase Plan (“EUPP”)
Comprehensive income
Units issued under Distribution
Reinvestment Plan (“DRIP”)
Units issued under Unit-based
compensation plan
Unit issue proceeds, net of costs
35
—
8,914
70
97,225
—
7,870
—
—
—
—
5,072
—
—
—
35
12,942
8,914
70
97,225
35
7,637
5,217
70
55,801
—
5,305
3,697
—
41,424
Balance, December 31, 2021
$
1,966,481
$
(368,431)
$
(558)
$
1,597,492
$
950,271
$
647,221
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
Balance, January 1, 2020
$
1,759,324
$
(304,412)
$
(Note 16)
Adjustments related to EUPP
Comprehensive loss
Units issued under DRIP
Units Issued under Unit-based
compensation plan
Unit issue proceeds, net of costs
39
—
2,856
745
97,273
—
(71,889)
—
—
—
131
—
(5,761)
—
—
—
$
1,455,043
$
870,792
$
584,251
39
(77,650)
2,856
745
97,273
39
(47,584)
1,671
745
55,848
—
(30,066)
1,185
—
41,425
Balance, December 31, 2020
$
1,860,237
$
(376,301)
$
(5,630)
$
1,478,306
$
881,511
$
596,795
See accompanying notes to the consolidated financial statements.
Proven Stability and Sustainable Growth
91
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In thousands of CAD dollars)
Cash flows provided by (used in)
Operating Activities
Decrease in net assets attributable to Unitholders
Additions to tenant incentives
Items not affecting operating cash
Change in other non-cash operating items
Income taxes paid
Finance costs – operations
Distributions to Unitholders
Cash provided by operating activities
Financing Activities
Issuance of mortgages
Financing – other
Repayment of mortgages – principal
Repayment of mortgages – maturity
Finance costs – operations
Advance (repayment) of floating rate credit facilities
Advance of joint operation credit facilities
Issuance of senior unsecured notes
Redemption of senior unsecured notes
Distributions to Unitholders
Special cash distribution
REIT Units and Class B LP Units issued
REIT Units and Class B LP Units issue costs
Payments of lease liabilities
Items not affecting financing cash
Cash (used in) provided by 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 provided by (used in) investing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(1) See Note 2(y) for changes in accounting policy.
See accompanying notes to the consolidated financial statements.
92
CROMBIE REIT Annual Report 2021
Year ended December 31,
Note
2021
20201
$
7,870
$
17
17
15
7
7
15
7
8
8
16
16
17
3,7
4
4
5
(72,542)
21,892
30,442
(165)
92,788
144,559
224,844
25,550
(2,731)
(44,424)
(118,990)
(92,788)
(33,493)
361
150,000
(150,000)
(144,559)
—
100,015
(2,790)
(844)
11,981
(302,712)
(64,304)
(76,771)
144,014
(5,653)
25,070
(194)
(972)
(2,700)
18,490
(59,378)
63,293
$
3,915
$
(71,889)
(63,536)
86,431
(15,900)
(7)
91,808
140,302
167,209
218,000
(3,419)
(42,686)
(214,912)
(91,808)
7,373
575
300,000
(100,000)
(140,302)
(14,857)
100,012
(2,739)
(735)
5,862
20,364
(42,687)
(109,668)
37,832
(6,061)
69
(1,399)
(1,435)
(931)
(124,280)
63,293
—
63,293
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 years ended December 31, 2021 and December 31, 2020 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 23, 2022.
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, 2021. Subsidiaries are all entities over
which Crombie has control. All subsidiaries have a reporting date of December 31, 2021.
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.
Proven Stability and Sustainable Growth
93
NOTES TO THE CONSOLIDATED 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.
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.
94
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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 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.
Proven Stability and Sustainable Growth
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(j) Distribution reinvestment plan (“DRIP”)
Crombie has a DRIP which is described in Note 16.
(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.
96
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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. Crombie currently hedges six variable mortgages and both joint credit facilities.
(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.
Proven Stability and Sustainable Growth
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
Accounts payable and other liabilities (excluding interest rate swaps)
Financial liabilities at amortized cost
Investment property debt
Senior unsecured notes
Financial liabilities at amortized cost
Financial liabilities at amortized cost
Measurement
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Fair value
Fair value
Amortized cost
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.
98
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating units) 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 is 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.
Proven Stability and Sustainable Growth
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(iii) Classifications of Units as liabilities
Crombie’s accounting policies relating to the classification of Units as liabilities are described in Note 2(v). 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.
(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. Critical estimates and judgments disclosed in the annual financial statements also
apply to these financial statements. As of December 31, 2021, there continues to be 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.
(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 units) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash generating units) 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 units) 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. Biannual capitalization rates/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, 2021, 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.
100
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(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.
(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 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 moderate 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, 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. 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) Changes in accounting policies
Crombie has amended its accounting policy for the presentation of finance costs on debt and distributions to Unitholders in the consolidated
statements of cash flows. Effective January 1, 2021, Crombie has elected to present these items as cash flows arising from financing activities, where
they were previously included in cash flows from operating activities. Crombie has made this change in order to better reflect cash flows related to
debt transactions. As a result of this change in presentation, cash flows provided by (used in) operating activities for the year ended December 31, 2021
have increased by $225,366 (December 31, 2020 – $241,105) with a corresponding reduction to cash flows provided by (used in) financing activities.
(z) Future changes in accounting standards
The IASB has issued a number of standards and interpretations with an effective date after the date of these financial statements. Set out below are
only those standards that may have a material impact on the consolidated financial statements in future periods. Management is currently evaluating
the impact of these future policies on its consolidated financial statements.
(i) IAS 1 – Presentation of Financial Statements
The IASB has issued amendments to IAS 1, “Presentation of Financial Statements” (“IAS 1”). The amendments clarify how to classify debt and other
liabilities as current or non-current. The amendments to IAS 1 apply to annual reporting periods beginning on or after January 1, 2023.
(ii) IAS 37 – Provisions, contingent liabilities and contingent assets
The IASB has issued amendments to IAS 37, “Provisions, contingent liabilities and contingent assets” (“IAS 37”) to clarify (i) the meaning of “costs to fulfil
a contract”, and (ii) that, before a separate provision for an onerous contract is established, an entity recognizes any impairment loss has occurred on
assets used in fulfilling the contract, rather than on assets dedicated to the contract. The amendments to IAS 37 applies to annual reporting periods
beginning on or after January 1, 2022.
Proven Stability and Sustainable Growth
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3) INVESTMENT PROPERTIES
Income properties
Properties under development
Income properties
Cost
December 31, 2021
December 31, 2020
$
$
3,436,965
109,787
3,546,752
$
$
3,520,562
63,377
3,583,939
Land
Buildings
Intangibles
Deferred
Leasing Costs
Total
Opening balance, January 1, 2021
$
1,147,608
$
2,921,305
$
73,318
$
10,078
$
4,152,309
Acquisitions
Additions
Dispositions
Write-off of fully depreciated assets
Transfer to investment properties held for sale (Note 6)
Reclassification from properties under development
12,364
1,089
(21,127)
—
(10,289)
—
30,831
39,729
(38,786)
(5,646)
(37,737)
2,372
Balance, December 31, 2021
1,129,645
2,912,068
Accumulated depreciation, amortization,
and impairment
Opening balance, January 1, 2021
Depreciation and amortization
Dispositions
Impairment
Write-off of fully depreciated assets
Transfer to investment properties held for sale (Note 6)
Balance, December 31, 2021
6,290
316
—
1,599
—
(299)
7,906
590,366
68,128
(3,134)
940
(5,646)
(8,343)
642,311
2,621
—
(377)
(2,992)
(812)
—
71,758
31,211
4,774
(171)
—
(2,992)
(515)
32,307
—
978
(13)
(695)
(19)
—
45,816
41,796
(60,303)
(9,333)
(48,857)
2,372
10,329
4,123,800
3,880
1,141
(9)
—
(695)
(6)
4,311
631,747
74,359
(3,314)
2,539
(9,333)
(9,163)
686,835
Net carrying value, December 31, 2021
$
1,121,739
$
2,269,757
$
39,451
$
6,018
$
3,436,965
Included in land are right of use assets of $15,772 net of accumulated depreciation of $949 for land held under lease.
During the year ended December 31, 2021, Crombie recorded impairments totalling $2,539 on two properties, one for $1,239 in the third quarter as a
result of a partial disposition which closed on December 14, 2021. The fourth quarter impairment of $1,300 was due to continuing high vacancy rates and
the departure of a major tenant during the year. Impairment was measured on a per property basis and was determined as the amount by which the
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.
102
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Cost
Opening balance, January 1, 2020
$
1,117,701
$
2,825,447
$
112,313
$
8,853
$
4,064,314
Land
Buildings
Intangibles
Deferred
Leasing Costs
Total
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
Balance, December 31, 2020
1,147,608
2,921,305
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
2,360
—
(440)
(39,982)
(933)
—
73,318
66,657
5,366
(203)
—
(39,982)
(627)
31,211
—
1,462
—
(237)
—
—
34,995
52,404
(31,169)
(43,109)
(41,287)
116,161
10,078
4,152,309
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 $16,809 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 the 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.
Properties under development
Opening balance, January 1, 2021
Acquisitions
Additions
Reclassification to income-producing properties1
Balance, December 31, 2021
$
Land
46,225
18,622
2,216
—
Buildings
$
17,152
$
—
39,325
(13,753)
Total
63,377
18,622
41,541
(13,753)
$
67,063
$
42,724
$
109,787
(1) During the year ended December 31, 2021, $11,381 was moved out of properties under development and into tenant incentives. Refer to Note 5 of the financial statements.
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)
Total
96,213
7,692
75,633
(116,161)
46,225
$
17,152
$
63,377
$
$
Fair value
Crombie’s total fair value of investment properties exceeds carrying value by $1,150,558 at December 31, 2021 (December 31, 2020 – $921,974). 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, 2021, 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.
Proven Stability and Sustainable Growth
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair values of Crombie’s investment properties are as follows:
December 31, 2021
December 31, 2020
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
Fair Value
Carrying Value
$
$
5,026,000
4,815,000
$
$
3,875,442
3,893,026
Note
December 31, 2021
December 31, 2020
3
3
5
5
6
$
$
3,436,965
$
3,520,562
109,787
94,896
233,794
—
63,377
88,299
190,889
29,899
3,875,442
$
3,893,026
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, 2021 and 2020, 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 are the capitalization rates for each specific property and stabilized
net income. 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 all significant properties on a rotational basis over a maximum
period of four years.
On a periodic bases, 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 rate 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 comparative rates
adjusted to reflect this change.
Weighted average capitalization rate
December 31, 2021
December 31, 2020
5.65%
5.86%
Crombie has determined that an increase (decrease) in this applied capitalization rate at December 31, 2021 would result in an increase (decrease)
in the fair value of the investment properties as follows:
Capitalization Rate Sensitivity
December 31, 2021
104
CROMBIE REIT Annual Report 2021
Increase in Rate
Decrease in Rate
0.25%
0.50%
0.75%
$
$
$
(215,000)
(408,000)
(585,000)
$
$
$
229,000
487,000
775,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
2021
Transaction Date
January 29, 2021
February 10, 2021
February 26, 2021
March 18, 2021
March 25, 2021
March 26, 2021
March 29, 2021
March 31, 2021
June 10, 2021
July 6, 2021
July 9, 2021
October 15, 2021
November 19, 20211
December 9, 2021
December 9, 20212
December 14, 20211
December 15, 2021
(1) Disposal of a partial interest in one retail property to a third party.
(2) Disposal of a 50% interest in one retail-related industrial property to a third party.
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
Vendor/Purchaser
Properties Acquired
(Disposed)
Approximate Square
Footage
Initial Acquisition
(Disposition) Price
Third Party
Related Party
Third Party
Related Party
Related Party
Related Party
Third Party
Third Party
Third Party
Related Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
(2)
1
—
2
1
1
1
(1)
—
1
(1)
(1)
—
(1)
—
—
(1)
(30,000)
$
(17,570)
26,000
—
57,000
50,000
55,000
16,000
(33,000)
—
24,000
(28,000)
(29,000)
(33,000)
(60,000)
(155,000)
(73,000)
(22,000)
3,242
6,400
14,100
5,260
15,600
1,690
(24,400)
11,885
4,710
(15,000)
(16,910)
(5,750)
(22,500)
(98,183)
(575)
(8,300)
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)
(1) Acquisition of a parcel of land adjacent to an existing retail property.
(2) Disposal of a parcel of land adjacent of an existing retail property.
The initial acquisition (disposition) prices stated above exclude closing and transaction costs.
Proven Stability and Sustainable Growth
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Investment property disposals
Gross proceeds
Selling costs
Carrying values derecognized
Land
Buildings
Intangibles
Deferred leasing costs
Tenant Incentives
Accrued straight-line rent
Provisions
Gain on disposal
Proceeds
Mortgages assumed by buyer
Cash proceeds
Year ended December 31,
2021
2020
$
209,188
$
38,010
(3,682)
205,506
(46,264)
(79,585)
(716)
(17)
(18,369)
(2,889)
(1,141)
$
56,525
$
(178)
37,832
(8,690)
(24,521)
(330)
—
—
(1,081)
125
3,335
Year ended December 31,
2021
205,506
(61,492)
144,014
$
$
$
$
2020
37,832
—
37,832
Co-owned properties
Crombie owns partial interests in a number of properties. These co-owned properties are subject to proportionate consolidation, the results of which
are reflected in Crombie’s consolidated financial statements, based on the proportionate interest in such joint operations.
Retail
Industrial
Total co-owned properties
Year ended
December 31, 2021
December 31, 2020
Number of
co-owned properties
Ownership
co-owned properties
Number of
58
2
60
11%–50%
50%
58
1
59
Ownership
11%–50%
50%
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
Penhorn Residential Holdings Limited Partnership
140 CPN Limited
1700 East Broadway Limited Partnership
King George Development (I) Limited Partnership
December 31, 2021
December 31, 2020
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
—
—
106
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following tables 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 share at 50%
Reconciling items:
Deferred gain
Partnership loans
Gain
December 31, 2021
December 31, 2020
Davie LP
Other
Total
Davie LP
Other
Total
$
185,530
$
416,544
$
602,074
$
187,100
$
288,680
$
475,780
18,720
(206,141)
(5,142)
(7,033)
(3,516)
(7,441)
(4,500)
15,525
2,455
(30,077)
(314,049)
74,873
37,436
—
6,706
—
21,175
(236,218)
(319,191)
67,840
33,920
(7,441)
2,206
15,525
7,187
(141,362)
(18,057)
34,868
17,434
(7,441)
—
—
800
(3,479)
(219,433)
66,568
33,284
—
7,766
—
7,987
(144,841)
(237,490)
101,436
50,718
(7,441)
7,766
—
Crombie’s investment in joint ventures
$
68
$
44,142
$
44,210
$
9,993
$
41,050
$
51,043
Revenue
$
6,624
$
3,549
$
10,173
$
$
1,790
$
December 31, 2021
December 31, 2020
Davie LP
Other
Total
Davie LP
Other
Year ended
Property Operating expenses
General and administrative expenses
Depreciation and amortization
Finance costs – operations
Net (loss) income
Crombie’s (loss) income from equity
accounted investments
$
$
(1,939)
(511)
(2,801)
(4,275)
(2,902)
(1,451)
$
$
(2,268)
(57)
(1,877)
(2,327)
(2,980)
(1,490)
$
$
(4,207)
(568)
(4,678)
(6,602)
(5,882)
(2,941)
40
(66)
(305)
(169)
(620)
$
$
(1,120)
(560)
$
$
(429)
(5)
(182)
(198)
976
488
$
$
Total
1,830
(495)
(310)
(351)
(818)
(144)
(72)
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
Gain
Share of (loss) income
Closing balance
December 31, 2021
December 31, 2020
$
$
51,043
$
5,653
(25,070)
15,525
(2,941)
45,123
6,061
(69)
—
(72)
44,210
$
51,043
During the year ended December 31, 2021, Crombie received a distribution of $25,000 from 1600 Davie Limited Partnership. As a result of this
distribution exceeding Crombie’s investment in the joint venture, $15,525 was treated as a gain from equity accounted investments.
Fair Value
The estimated fair value of the investment properties in Crombie’s equity accounted joint ventures at 100% is as follows:
December 31, 2021
December 31, 2020
$
$
Fair Value
774,000
450,253
$
$
Carrying Value
576,228
450,253
The fair value of joint venture 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, 2021 and December 31, 2020, respectively, based
on each property’s current use as a revenue generating property or property under development. The fair value of properties under development
is assumed to equal cost until the property is substantially completed. As at December 31, 2021, 1600 Davie Limited Partnership, The Duke Limited
Partnership, and 140 CPN Limited are substantially complete.
Proven Stability and Sustainable Growth
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Crombie has utilized the following weighted average capitalization rates on its joint venture properties.
Weighted average capitalization rate
5) OTHER ASSETS
December 31, 2021
December 31, 2020
3.30%
—%
December 31, 2021
December 31, 2020
Current
Non-current
Total
Current
Non-current
Trade receivables
$
27,472
$
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
(3,031)
24,441
23,827
—
571
—
—
21
Amounts receivable from related parties
17,138
—
—
—
—
10,974
12,545
94,896
233,794
105
10,487
$
27,472
$
42,211
$
(3,031)
24,441
23,827
10,974
13,116
94,896
233,794
126
27,625
(7,955)
34,256
19,271
—
391
—
—
89
15,533
$
—
—
—
—
11,373
7,734
88,299
190,889
127
9,302
Total
42,211
(7,955)
34,256
19,271
11,373
8,125
88,299
190,889
216
24,835
(1) For the year ended December 31, 2021, depreciation of other fixed assets was $1,404 (December 31, 2020 – $1,251).
(2) Other fixed assets include right of use assets of $2,334 (December 31, 2020 – $2,136) net of accumulated depreciation of $1,106 (December 31, 2020 – $818) relating to office and vehicle leases.
$
65,998
$
362,801
$
428,799
$
69,540
$
307,724
$
377,264
Cost
Accumulated
Amortization
Net Carrying
Value
$
275,194
$
84,305
$
190,889
69,704
—
(17,752)
(10,178)
(2,293)
11,381
—
19,811
(659)
(10,178)
(1,017)
—
69,704
(19,811)
(17,093)
—
(1,276)
11,381
$
326,056
$
92,262
$
233,794
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
Tenant Incentives
Balance, January 1, 2021
Additions
Amortization
Disposition
Write-off fully depreciated assets
Transfer to investment properties held for sale
Transfer from properties under development
Balance, December 31, 2021
Tenant Incentives
Balance, January 1, 2020
Additions
Amortization
Write-off fully depreciated assets
Balance, December 31, 2020
108
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6) INVESTMENT PROPERTIES HELD FOR SALE
Balance, January 1, 2021
$
15,147
$
Assets transferred to held for sale
Derecognition through disposition
9,990
(25,137)
$
14,539
29,394
(43,933)
$
213
297
(510)
—
13
(13)
$
—
$
1,276
(1,276)
Land
Buildings
Intangibles
Deferred
Leasing Costs
Tenant
Incentives
Total
29,899
40,970
(70,869)
Net carrying value, December 31, 2021
$
—
$
—
$
—
$
—
$
—
$
—
Assets transferred to held for sale
Derecognition through disposition
Net carrying value, December 31, 2020
Land
16,219
(1,072)
15,147
$
$
$
$
Buildings
Intangibles
Deferred
Leasing Costs
Tenant
Incentives
20,028
(5,489)
14,539
$
$
306
(93)
213
$
$
—
—
—
$
$
—
—
—
$
$
Total
36,553
(6,654)
29,899
7) INVESTMENT PROPERTY DEBT
Fixed rate mortgages
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
Weighted
Average
Interest Rate
Weighted
Average Term
to Maturity
Range
December 31, 2021
December 31, 2020
2.70–6.44%
4.00%
4.9 years
$
1,073,895
$
1,274,304
3.5 years
2.3 years
2.8 years
1.5 years
9,220
7,167
2,737
10,000
(6,036)
1,096,983
893,364
174,495
29,124
—
$
$
17,712
7,188
2,356
35,000
(7,260)
1,329,300
1,139,798
127,246
27,256
35,000
1,096,983
$
1,329,300
$
$
$
Specific investment properties with a carrying value of $2,459,912 as at December 31, 2021 (December 31, 2020 – $2,743,270) are currently pledged
as security for mortgages or provided as security for the 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.
Mortgage Activity
For the year ended
December 31, 2021
Type
Addition
New
Repaid
Disposition
Weighted Average
Number of
Mortgages
Rates
Terms in Years
Amortization
Period in Years
Proceeds
(Repayments)
—
1
14
1
2.87%
2.70%
4.02%
2.87%
5.0
25.0
$
$
25,000
550
(119,755)
(61,492)
(155,697)
The repayment of $61,492 is due to a disposition of an interest in a mortgage related to a partial disposition of a retail-related industrial property.
Proven Stability and Sustainable Growth
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In 2020, Crombie closed on a construction mortgage in which the proceeds were placed in escrow and drawn down as conditions were satisfied. As
of December 31 2021, Crombie had received $96,085 of the total $100,000 commitment. Given that Crombie controls the total proceeds, the remaining
proceeds of $3,915 have been reflected as cash at December 31, 2021 (December 31, 2020 – $63,247).
For the year ended
December 31, 2020
Type
Addition
New
Repaid
Number of
Mortgages
Rates
Terms in Years
Amortization
Period in Years
Proceeds
(Repayments)
—
2
12
3.22%
3.42%
5.02%
15.9
30
$
$
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. The 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 drawn down as conditions were satisfied.
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-ownership partner entered into a credit
agreement with a Canadian chartered bank for a $62,250 term loan facility and a $5,800 revolving credit facility. In the second quarter of 2021,
Crombie’s co-ownership partner sold its share of the portfolio to a third party. The revolving credit facility was amended in the second quarter of 2021.
The amendment reduced the maximum principal amount of $5,800 to $2,908 and maturity remains unchanged at April 25, 2024. Borrowings under
the joint operation 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. Concurrent with entering into the facility, Crombie and its co-ownership partner entered into a fixed
for floating interest rate swap, effectively fixing the interest rate at 3.58%. At December 31, 2021, Crombie’s portion of the term and revolving credit
facilities was $6,847 and $320 respectively.
In conjunction with the 89% sale of a portfolio of assets in the fourth quarter of 2019, Crombie and its co-ownership partner 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 of 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 the facility, Crombie and its co-ownership partner entered into a fixed for floating interest rate swap,
effectively fixing interest rate on both facilities at 3.27%. At December 31, 2021, Crombie’s portion of the term and revolving credit facilities was $1,815
and $922 respectively.
Revolving Credit Facility
The revolving credit facility agreement was extended in the second quarter of 2021. The revolving credit facility has a maximum principal amount of
$400,000 and matures June 30, 2025. 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, 2021 – 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.
Unsecured Bilateral Credit Facility
The unsecured bilateral credit facility agreement was extended in the first quarter of 2021. The unsecured bilateral credit facility has a maximum
principal amount of $130,000 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. 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.
110
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8) SENIOR UNSECURED NOTES
Series B
Series D
Series E
Series F
Series G
Series H
Series I
Series J
Unamortized Series B issue premium
Deferred financing charges
Maturity Date1
June 1, 2021
November 21, 2022
January 31, 2025
August 26, 2026
June 21, 2027
March 31, 2028
October 9, 2030
August 12, 2031
Contractual
Interest Rate
December 31, 2021
December 31, 2020
3.962%
4.066%
4.800%
3.677%
3.917%
2.686%
3.211%
3.133%
$
—
$
150,000
175,000
200,000
150,000
150,000
150,000
150,000
—
(3,733)
150,000
150,000
175,000
200,000
150,000
150,000
150,000
—
110
(3,712)
$
1,121,267
$
1,121,398
(1) The weighted average term to maturity for the year ended December 31, 2021 was 5.4 years (December 31, 2020 – 5.1 years).
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, 2021
New borrowing or issuances
Redemption
Closing balance at December 31, 2021
December 31, 2021
December 31, 2020
$
$
971,267
150,000
1,121,267
$
$
971,398
150,000
1,121,398
Senior Unsecured Notes
$
$
1,125,000
150,000
(150,000)
1,125,000
On August 12, 2021, Crombie issued on a private placement basis, $150,000 of Series J notes (senior unsecured) maturing August 12, 2031. The net
proceeds of the offering were used to repay existing debt. The notes were priced with a contractual interest rate of 3.133% and sold at a price of
$1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual installments on February 12 and August 12.
Opening balance at January 1, 2020
New borrowings or issuances
Early redemption
Closing balance at December 31, 2020
Senior Unsecured Notes
$
$
925,000
300,000
(100,000)
1,125,000
On October 9, 2020, Crombie offered on a private placement bases, $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 redemption 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 installments on
March 31 and September 30.
On October 9, 2020, Crombie offered on a private placement bases, $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 redemption 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 3.211% and sold at a price of $1,000.00 per $1,000.00 principal amount. Interest is payable in equal semi-annual installments on
April 9 and October 9.
Proven Stability and Sustainable Growth
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021 was $480 (year ended
December 31, 2020 – $473).
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, 2021 December 31, 2022
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, 2021
December 31, 2020
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
2.90%
3.00%
2.90%
N/A
2.50%
3.00%
2.40%
N/A
For measurement purposes, a 4.50% (2020 – 4.75%) annual rate increase in the per capita cost of covered health care benefits was assumed.
112
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, 2021
December 31, 2020
Senior
Management
Pension Plan
Post-Employment
Benefit Plans
Senior
Management
Pension Plan
Post-Employment
Benefit Plans
Total
Total
Accrued benefit obligation
Balance, beginning of year
$
6,097
$
2,560
$
8,657
$
5,646
$
2,765
$
8,411
Current 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
244
156
(276)
(200)
6,021
—
200
(200)
—
6,021
200
5,821
6,021
244
156
400
$
$
$
19
61
(168)
(79)
2,393
—
79
(79)
—
2,393
84
2,309
2,393
19
61
80
$
$
$
263
217
(444)
(279)
8,414
—
279
(279)
—
8,414
284
8,130
8,414
263
217
480
$
$
$
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
$
$
$
The table below outlines the sensitivity of the fiscal 2021 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.
Discount Rate
Impact of:
Growth rate of health costs
Impact of:
1% increase
1% decrease
1% increase
1% decrease
Senior Management Pension Plan
Post-Employment Benefit Plans
Benefit Obligations
Benefit Cost1
Benefit Obligations
Benefit Cost1
2.90%
(670)
813
2.90%
7
(11)
2.90%
(302)
358
4.50%
175
(150)
2.90%
9
(14)
4.50%
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, 2021, the net defined contribution pension plans expense was $1,067 (year ended December 31, 2020 – $983).
Proven Stability and Sustainable Growth
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10) TRADE AND OTHER PAYABLES
December 31, 2021
December 31, 2020
Current
Non-current
Total
Current
Non-current
Total
Tenant incentives and capital expenditures
$
57,161
$
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
34,160
16,983
14,251
71
635
12,223
4,588
258
—
—
—
—
—
—
—
19,631
4,207
$
57,161
$
51,960
$
34,160
16,983
14,251
71
635
12,223
24,219
4,465
19,548
15,938
13,010
1,008
5,263
11,738
3,165
258
—
—
—
—
—
—
—
11,575
4,400
$
51,960
19,548
15,938
13,010
1,008
5,263
11,738
14,740
4,658
$ 140,330
$ 23,838
$ 164,168
$ 121,888
$ 15,975
$ 137,863
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, 2021
December 31, 2020
$
359,322
$
2,332
9,486
(19,811)
3,751
50,942
2,870
$
408,892
$
343,113
1,048
9,112
(17,849)
405
50,021
2,883
388,733
The following table sets out tenants that contributed in excess of 10% of total property revenue:
Sobeys Inc. (including all subsidiaries of Empire)
$
209,684
51.3%
$
191,362
49.2%
(1) Related party property revenue for the year ended December 31, 2020 updated from previously reported figure.
December 31, 2021
December 31, 20201
Year ended
114
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12) PROPERTY OPERATING EXPENSES
Recoverable property taxes
Recoverable operating expenses
Other operating costs
Year ended
December 31, 2021
December 31, 2020
$
$
67,785
52,776
5,300
125,861
$
$
64,087
51,218
14,567
129,872
Bad debt expense recognized in other operating expenses for the year ended December 31, 2021 was $811 (December 31, 2020 – $10,894).
13) 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,
2021, is as follows:
Future minimum rental income
$
275,110
$
262,251
$ 251,029
$ 234,868
$
221,145
$ 1,546,288
$ 2,790,691
Year ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
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.
14) 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
Year ended
December 31, 2021
December 31, 2020
$
$
19,178
3,582
2,724
25,484
$
$
14,774
3,292
2,468
20,534
Year ended
December 31, 2021
December 31, 2020
$
(2,972)
$
805
Proven Stability and Sustainable Growth
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15) 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
Year ended
December 31, 2021
December 31, 2020
$
50,969
$
2,347
(3,593)
41,557
(548)
2,056
92,788
294
(1,241)
—
3,593
110
(3,067)
50,540
3,791
(5,331)
41,333
(387)
1,862
91,808
312
(1,097)
(510)
5,331
517
(3,006)
93,355
Finance costs – operations, paid
$
92,477
$
(1) As at December 31, 2021, interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.36% (December 31, 2020 – 3.47%).
16) 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, 2021
93,533,246
$
1,100,999
64,724,915
$
759,238 158,258,161
$
1,860,237
Net change in EUPP loans receivable
Units issued under DRIP
Units issued under Unit-based compensation plan
—
301,418
4,817
35
5,217
70
—
213,577
—
—
3,697
—
—
514,995
4,817
Units issued (proceeds are net of issue costs)
3,525,000
55,801
2,500,000
41,424
6,025,000
35
8,914
70
97,225
Balance, December 31, 2021
97,364,481
$
1,162,122
67,438,492
$
804,359 164,802,973
$
1,966,481
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
3,657,000
39
1,671
745
—
85,433
—
—
1,185
—
—
205,966
58,090
55,848
2,593,750
41,425
6,250,750
39
2,856
745
97,273
Balance, December 31, 2020
93,533,246
$
1,100,999
64,724,915
$
759,238
158,258,161
$
1,860,237
116
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 May 19, 2021, Crombie closed a public offering, on a bought deal basis, of 3,525,000 Units, at a price of $16.60 per Unit for proceeds of $55,801
net of issue costs.
On February 11, 2020, Crombie closed on 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.
On May 19, 2021, concurrent with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECL Developments purchased 2,500,000 Class B
LP Units and the attached SVUs at a price of $16.60 per Class B LP Unit for proceeds of $41,424 net of issue costs, on a private placement basis.
On February 11, 2020, concurrent 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 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, 2021, there are loans receivable from executives of $1,172 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, 2021 was $1,465.
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 97% 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, 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.
Proven Stability and Sustainable Growth
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17) SUPPLEMENTARY CASH FLOW INFORMATION
(a) Items not affecting operating cash
Items not affecting operating cash:
Straight-line rent recognition
Amortization of tenant incentives
Gain on disposal of investment properties
Gain from equity accounted investments
Impairment of investment properties
Depreciation and amortization
Amortization of effective swap agreements and issue premium
Loss from equity accounted investments
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
(c) Items not affecting financing cash
Amortization of financing charges
Non-cash distributions to Unitholders in the form of DRIP Units
(d) Cash and cash equivalents
Restricted cash1
Year ended
December 31, 2021
December 31, 2020
$
(9,486)
$
19,811
(56,525)
(15,525)
2,539
75,763
(110)
2,941
165
(653)
2,972
(9,112)
17,849
(3,335)
—
6,600
75,567
(7)
72
7
(405)
(805)
$
21,892
$
86,431
Year ended
December 31, 2021
December 31, 2020
9,815
(3,063)
23,690
30,442
$
$
(13,579)
(3,514)
1,193
(15,900)
Year ended
December 31, 2021
December 31, 2020
3,067
8,914
11,981
$
$
3,006
2,856
5,862
December 31, 2021
December 31, 2020
3,915
$
63,293
$
$
$
$
$
(1) In 2020, Crombie closed on a construction mortgage in which the proceeds were placed in escrow and drawn down as conditions were satisfied.
118
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18) RELATED PARTY TRANSACTIONS
As at December 31, 2021, 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, 2021
December 31, 2020
$
$
$
$
$
$
$
$
209,684
1,001
136
(96)
483
(265)
230
(59,952)
$
$
$
$
$
$
$
$
191,3621
1,162
136
(58)
594
(258)
256
(58,194)
(1) Related party property revenue for the year ended December 31, 2020 updated from previously reported figure.
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, 2021, Crombie issued 213,577 (December 31, 2020 – 85,433) Class B LP Units to ECLD under the DRIP (Note 16).
During the year ended December 31, 2021, Crombie purchased six properties from a subsidiary of Empire for a total purchase price of $42,912 before
transaction costs.
During the year ended December 31, 2021, Crombie invested $34,119 (December 31, 2020 – $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, 2020 – $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, 2020 – $25,526). 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:
Salary, bonus, and other short-term employee benefits
Total compensation paid to Trustees
Other long-term benefits
Year ended
December 31, 2021
December 31, 2020
$
$
6,651
963
128
7,742
$
$
6,145
865
122
7,132
Proven Stability and Sustainable Growth
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19) 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 year ended December 31, 2021.
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
Accounts receivable1
Financial liabilities
Investment property debt
Senior unsecured notes
Total other financial liabilities
December 31, 2021
December 31, 2020
Fair Value
Carrying Value
Fair Value
Carrying Value
$
$
$
27,737
1,177,814
1,157,820
2,335,634
$
$
$
27,751
1,103,019
1,125,000
2,228,019
$
$
$
25,042
1,427,367
1,206,285
2,633,652
$
$
$
25,051
1,336,560
1,125,000
2,461,560
(1) Accounts receivable 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 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 fulfill 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 56.7% of annual minimum rent; no other tenant
accounts for more than 2.6% 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, 2021, Empire
(including Sobeys and all other subsidiaries of Empire) represents 51.3% of total property revenue. Excluding these tenants, no other tenant accounts
for more than 3.2% of Crombie’s total property revenue.
• Over the next five years, leases on no more than 7.1% of the gross leasable area of Crombie will expire in any one year.
120
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 over the past few years 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.
Provision for doubtful accounts, beginning of year
Additional provision
Recoveries
Write-offs
Provision for doubtful accounts, end of year
Year ended
December 31, 2021
December 31, 2020
$
$
$
7,955
3,622
(3,498)
(5,048)
3,031
$
340
8,751
(749)
(387)
7,955
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.
Due to the impacts of COVID-19 the degree of uncertainty in Crombie’s assessment of expected credit losses remains elevated. During the year ended
December 31, 2021, Crombie has recorded a bad debt expense of $811.
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, 2021
• Crombie’s weighted average term to maturity of its fixed rate mortgages was 4.9 years.
• Crombie’s weighted average term to maturity of its unsecured notes was 5.4 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 $9,220 at December 31, 2021; and
• Crombie has an unsecured bilateral credit facility available to a maximum of $130,000 with a balance of $10,000 at December 31, 2021.
Crombie has interest rate swap agreements in place on $109,535 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
Year ended December 31, 2021
Decrease in Rate
Increase in Rate
$
$
398
795
$
$
(398)
(795)
Proven Stability and Sustainable Growth
121
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Liquidity Risk
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 issuance from Crombie with financial terms acceptable to Crombie. Subsequent to
December 31, 2021, Crombie closed on a public offering for proceeds of $200,000 (see Note 23(g)). Crombie mitigates its exposure to liquidity risk
utilizing a conservative approach to capital management (see Note 20). Access to the $400,000 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.
As of December 31, 2021, $387,777 was available on this facility.
The estimated payments, including principal and interest, on financial liabilities to maturity date are as follows:
Fixed rate mortgages2
Senior unsecured notes
Trade and other payables
Lease liabilities
Credit facilities
Total
Contractual
Cash Flows1
2022
2023
2024
2025
2026
Thereafter
$ 1,244,565
$
213,880
$
290,512
$
265,655
$
61,102
$
39,096
$
374,320
Twelve months ending December 31,
1,335,356
147,096
154,240
2,881,257
31,050
190,599
123,258
3,007
530,744
836
35,176
4,451
2,937
333,076
10,679
35,176
2,988
2,807
306,626
10,227
202,476
224,220
1,609
2,758
267,945
9,308
1,609
2,639
647,709
13,181
140,092
267,564
1,175,302
—
—
$ 2,912,307
$
531,580
$
343,755
$
316,853
$
277,253
$
267,564
$ 1,175,302
(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.
20) 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 Unitholders1
Lease liabilities
(1) Crombie REIT Special Voting Units (“SVU”) and Class B LP Units
December 31, 2021
December 31, 2020
$
1,067,859
$
29,124
1,121,267
950,271
647,221
35,352
1,267,044
62,256
1,121,398
881,511
596,795
29,914
$
3,851,094
$
3,958,918
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. One of the restrictions pursuant
to Crombie’s Declaration of Trust would include, among other items, a restriction that Crombie shall not incur total indebtedness of more than 60%
of gross book value.
122
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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:
Fixed rate mortgages
Senior unsecured notes
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, cost3
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
December 31, 2021
December 31, 2020
$
1,073,895
$
$
$
1,125,000
9,220
9,904
10,000
35,352
2,263,371
(53)
2,263,318
4,116,843
109,787
63,753
44,210
524,270
3,915
9,769
—
(53)
$
$
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)
$
4,872,494
$
4,896,889
46.5%
50.9%
(1) Includes impairments on land of $6,957 (December 31, 2020 – $5,657).
(2) Below-market lease component is included in the carrying value of investment properties.
(3) Excludes accumulated amortization of tenant incentives and other fixed assets.
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 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 1.3 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
• annual cash distributions to Unitholders are limited to 100% of funds from operations.
As at December 31, 2021, Crombie is in compliance with all externally imposed capital requirements and all covenants relating to its debt facilities.
Proven Stability and Sustainable Growth
123
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21) LEASE LIABILITIES
Crombie’s future minimum lease payments as a lessee are as follows:
Future minimum lease payments
Finance charges
Present value of lease payments
Total
$ 154,240
(118,888)
$ 35,352
2022
3,007
(2,075)
932
$
$
2023
2,937
(2,049)
888
$
$
2024
2,807
(2,027)
780
$
$
2025
2,758
(2,008)
750
$
$
2026
Thereafter
2,639
$ 140,092
(1,991)
(108,738)
648
$
31,354
$
$
Twelve months ending December 31,
Lease liabilities are presented in the consolidated balance sheet as follows:
Non-current
Current
Total
December 31, 2021
December 31, 2020
$
$
34,420
932
35,352
$
$
29,242
672
29,914
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, 2021, minimum lease payments of $2,901 were paid by Crombie.
22) 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, 2021, Crombie has a total of $3,003 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, 2021
December 31, 2020
$
$
3,003
—
3,003
$
$
3,740
1,840
5,580
As at December 31, 2021, Crombie had signed construction contracts totalling $359,285 of which $264,927 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, 2021, Crombie has provided guarantees of approximately
$128,973 (December 31, 2020 – $140,577) 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 3.0 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.
As at December 31, 2021, Crombie has committed to contributing $2,120 to 1700 East Broadway Limited Partnership as part of the ongoing
predevelopment work in the joint venture.
124
CROMBIE REIT Annual Report 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23) SUBSEQUENT EVENTS
(a) On January 6, 2022, Crombie acquired a 100% interest in a retail property from a subsidiary of Empire totalling 31,000 square feet for $3,300,
excluding closing and transaction costs.
(b) On January 7, 2022, Crombie acquired a 100% interest in a retail property from a subsidiary of Empire totalling 44,000 square feet for $2,567,
excluding closing and transaction costs.
(c) On January 14, 2022, Crombie declared distributions of 7.417 cents per Unit for the period from January 1, 2022 to and including January 31, 2022.
The distributions were paid on February 15, 2022, to Unitholders of record as of January 31, 2022.
(d) On January 25, 2022, Crombie acquired the remaining 50% interest in a retail-related industrial property from a subsidiary of Empire totalling
235,000 square feet for $38,050, excluding closing and transaction costs.
(e) On January 27, 2022, Crombie acquired a 100% interest in five retail properties from a subsidiary of Empire totalling 184,000 square feet for
$34,035, excluding closing and transaction costs.
(f) On January 28, 2022, Crombie acquired a 100% interest in one retail property totalling 31,000 square feet for $2,000, excluding closing and
transaction costs.
(g) On January 31, 2022, Crombie closed on an offering, on a bought deal basis, of $117,000 of Units at a price of $17.45 per Unit to a syndicate of
underwriters co-led by Scotiabank and BMO Capital Markets. In addition, a subsidiary of Empire purchased, on a private placement basis,
$83,000 of Class B LP Units of a subsidiary of Crombie, together with the attached Special Voting Units of Crombie, at a price per Class B Unit.
After the closing of the public offering and the private placement, Empire continues to hold a 41.5% economic and voting interest in Crombie.
(h) On February 15, 2022, Crombie declared distributions of 7.417 cents per Unit for the period from February 1, 2022 to and including
February 28, 2022. The distributions will be paid on March 15, 2022, to Unitholders of record as of February 28, 2022.
24) 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.
25) 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.
Proven Stability and Sustainable Growth
125
PROPERTY PORTFOLIO
Property
Location
Description
Actual GLA
(rounded)
Committed
(%)
Property
NEWFOUNDLAND & LABRADOR
Random Square
Conception Bay Plaza
2A Commerce Street
71 Grandview Boulevard
21 Cromer Avenue
69 Blockhouse Road
10 Elizabeth Avenue
45 Ropewalk Lane
Avalon Mall
Hamlyn Road Plaza
Kenmount Woodgate
Topsail Road Plaza
Torbay Road Plaza
Clarenville
Conception Bay
Deer Lake
Grand Bank
Grand Falls
Placentia
St. John’s
St. John’s
St. John’s
St. John’s
St. John’s
St. John’s
St. John’s
Retail – Enclosed
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Enclosed
Retail – Plaza
Commercial
Retail – Plaza
Retail – Plaza
108,000
65,000
29,000
19,000
3,000
2,000
80,000
6,000
596,000
38,000
85,000
158,000
139,000
1,328,000
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
Cineplex
Amherst
Amherst
Antigonish
Bedford
Bedford
Cole Harbour
Retail – Enclosed
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Dartmouth
Dartmouth
Dartmouth
Dartmouth
Panavista Drive
Penhorn Plaza
Russell Lake
Elmsdale Shopping Centre Elmsdale
Fall River
Fall River Plaza
Halifax
North & Windsor Street
Halifax
Park West Centre
Halifax
Queen Street Plaza
Downsview Mall
Lower Sackville
Lower Sackville
Downsview Plaza
Aberdeen Business Centre New Glasgow
New Glasgow
Highland Square Mall
New Glasgow
West Side Plaza
New Minas
County Fair Mall
New Waterford
75 Emerald Street
Pictou
Blink Bonnie Plaza
Port Hawkesbury Retail – Freestanding
622 Reeves Street
22579 Highway 7
Retail – Freestanding
Sheet Harbour
279, 289 & 303 Herring
Retail – Freestanding
Retail – Freestanding
Commercial
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Commercial
Retail – Enclosed
Retail – Plaza
Retail – Enclosed
Retail – Freestanding
Retail – Plaza
Cove Road
293 Foord Street
Prince Street Plaza
Sydney Shopping Centre
39 Pitt Street
North Shore Centre
70 Marketway Lane
Fundy Trail Centre
Tantallon Plaza
Spryfield
Stellarton
Sydney
Sydney
Sydney Mines
Tatamagouche
Timberlea
Truro
Upper Tantallon
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail - Freestanding
Retail – Plaza
Retail – 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
477 Paul Street
501 Regis Street
580 Victoria Street
Brookside Mall
Uptown Centre
Grand Bay Plaza
1234 Main Street
Elmwood Drive
Mountain Road Plaza
Northwest Centre
Vaughan Harvey Plaza
273 Pleasant Street
Riverview – Findlay
Boulevard
Riverview Place
Fairvale Plaza
107 Catherwood Street
Bathurst
Dieppe
Dieppe
Edmundston
Fredericton
Fredericton
Grand Bay
Moncton
Moncton
Moncton
Moncton
Moncton
Newcastle
Riverview
Riverview
Rothesay
Saint John
Commercial
Office
Commercial
Office
Office
Office
Commercial
Commercial
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Office
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Commercial
Retail – Freestanding
Retail – Freestanding
126
CROMBIE REIT Annual Report 2021
5,000
86,000
91,000
228,000
25,000
6,000
184,000
150,000
22,000
45,000
5,000
145,000
34,000
147,000
101,000
50,000
143,000
55,000
79,000
226,000
321,000
200,000
71,000
241,000
3,000
51,000
34,000
1,000
73,000
24,000
71,000
190,000
18,000
17,000
41,000
127,000
157,000
191,000
186,000
251,000
207,000
204,000
217,000
196,000
–
4,737,000
18,000
52,000
25,000
42,000
43,000
262,000
26,000
140,000
95,000
17,000
52,000
103,000
20,000
66,000
149,000
52,000
5,000
Loch Lomond Place
Charlotte Mall
426 du Moulin Street
QUÉBEC
1500 rue de Bretagne
1020 boulevard
Monseigneur-de-Laval
Beauport Plaza
50 rue Bourgeoys
3260 boulevard Lapiniere
& 3305 Broadway
645 boulevard Thibeau
80-90 boulevard d’Anjou
Marché St-Charles-
de-Drummond
1205 rue de Neuville
1248 boulevard de
la Verendrye Est
1298 rue de la Digue
2195 chemin Ridge
Centre Lavaltrie
Marché Lavaltrie
5555 boulevard
des Grandins
5005 boulevard
de l’Ormiere
714 boulevard Saint-
Laurent Ouest
1450 & 1454 rue Royale
551 avenue du Phare Est
20-70 boulevard Sir
Location
Saint John
St. Stephen
Tracadie
Description
Commercial
Retail – Plaza
Retail – Plaza
Actual GLA
(rounded)
Committed
(%)
188,000
116,000
40,000
1,511,000
50.1
97.8
83.7
89.0
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
Retail – Plaza
48,000
96.2
Brossard
Cap-de-la-
Madeleine
Chateauguay
Retail – Freestanding
Retail – Plaza
49,000
58,000
48,000
31,000
100.0
100.0
100.0
100.0
Drummondville
Gatineau
Retail – Plaza
Retail – Plaza
Gatineau
Havre-Saint-
Pierre
Huntingdon
Lavaltrie
Lavaltrie
Retail – Plaza
71,000
96.2
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
26,000
19,000
43,000
52,000
100.0
100.0
100.0
97.8
Lebourgneuf
Retail – Freestanding
6,000
100.0
Les Saules
Retail – Plaza
70,000
100.0
Louiseville
Malartic
Matane
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
3,000
29,000
3,000
100.0
100.0
100.0
Wilfrid Laurier
McMasterville
Retail – Plaza
55,000
98.6
631-665 boulevard Saint
Jean-Baptiste
Mercier
Marché St-Augustin
Mirabel
1 avenue Westminster Nord Montreal
3964 rue Notre-Dame
Ouest
5651 rue de Verdun
Pointe-Claire
Paspebiac Plaza
395 avenue Sirois
375 boulevard Jessop
254 boulevard de
l’Hotel de Ville
680 avenue Chausse
Carrefour Bourgeois
Saint-Apollinaire Plaza
867-871 rue Principale
8980 boulevard Lacroix
Montreal
Montreal
Montreal
Paspebiac
Rimouski
Rimouski
Rivière-du-Loup
Rouyn-Noranda
Saint-Amable
Saint-Apollinaire
Saint-Donat
Saint-Georges-
de-Beauce
131-A avenue Sainte-Cecile Saint-Pie
Saint-Romuald Plaza
10505 boulevard
Sainte-Anne
Saint-Romuald
Sainte-Anne-de-
Beaupré
Shawinigan
Sherbrooke
Sherbrooke
Sorel-Tracy
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Industrial
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
1440-1510 rue Trudel
2959 rue King Ouest
3950 rue King Ouest
411 boulevard Poliquin
1101 boulevard de
la Piniere Ouest
ONTARIO
977 Golf Links Road
409 Bayfield Street
680 Longworth Avenue
20 Melbourne Drive
Brampton Mall
Brampton Plaza
Burlington Plaza
Milltowne Plaza
142 Dundas Street
807 King Street
215 Park Avenue West
77 Coldwater Road
Village Centre
15 Lindsay Street
417 Scott Street
44 Livingston Avenue
Grimsby Centre
188 Highland Street
Havelock Centre
400 First Avenue South
London Pine Valley
5931 Kalar Road
Terrebonne
Industrial
Ancaster
Barrie
Bowmanville
Bradford
Brampton
Brampton
Burlington
Burlington
Cambridge
Cambridge
Chatham
Coldwater
Dorchester
Fenelon Falls
Fort Frances
Grimbsy
Grimsby
Haliburton
Havelock
Kenora
London
Niagara Falls
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
58,000
38,000
10,000
41,000
6,000
155,000
73,000
11,000
41,000
72,000
5,000
64,000
62,000
34,000
5,000
14,000
76,000
4,000
67,000
13,000
6,000
40,000
235,000
1,941,000
32,000
24,000
42,000
4,000
103,000
38,000
70,000
11,000
4,000
9,000
5,000
15,000
32,000
4,000
43,000
36,000
29,000
24,000
2,000
4,000
39,000
6,000
100.0
100.0
100.0
100.0
100.0
100.0
91.7
100.0
100.0
100.0
100.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.9
100.0
100.0
100.0
100.0
99.0
100.0
57.2
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
95.9
84.4
100.0
100.0
100.0
100.0
100.0
100.0
94.5
80.6
100.0
97.5
60.8
91.5
100.0
100.0
100.0
83.2
100.0
100.0
96.0
100.0
100.0
100.0
100.0
98.9
98.0
99.3
100.0
100.0
96.8
100.0
98.5
97.5
100.0
100.0
95.7
59.3
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.9
97.9
96.1
99.7
95.9
85.5
92.1
92.2
89.2
0.0
94.3
100.0
100.0
100.0
100.0
100.0
93.3
100.0
89.3
100.0
100.0
100.0
100.0
100.0
94.8
82.1
100.0
100.0
Property
Location
Description
Actual GLA
(rounded)
Committed
(%)
Property
Location
Description
Actual GLA
(rounded)
Committed
(%)
Niagara Falls
Niagara Falls Plaza
Nepean
Village Square Mall
North Bay
Algonquin Avenue Mall
Orangeville
500 Riddell Road
5150 Innes Road
Orleans
Taunton and Wilson Plaza Oshawa
Parry Sound
25 Pine Drive
Scarborough
3130 Danforth Avenue
Scarborough
McCowan Square
St. Catharines
Mountain Locks Plaza
Stittsville
Stittsville Corner
Stoney Creek
Stoney Creek Plaza
Thornbury
105 Arthur Street West
Toronto
1099 Broadview Avenue
3362-3370 Yonge Street
Toronto
The Queensway Commons Toronto
The Queensway Commons
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Spoke
8265 Huntington Road
385 Springbank Avenue
Toronto
Vaughan
Industrial
Industrial
North
Woodstock
Retail – Plaza
East St. Paul
Neepawa
Selkirk
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
Winnipeg
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 – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Moose Jaw
North Battleford
Prince Albert
Regina
Regina
Regina
Saskatoon
Saskatoon
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail - Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
MANITOBA
3156 Bird’s Hill Road East
498 Mountain Avenue
318 Manitoba Avenue
2 Alpine Ave
285 Marion Street
731 Henderson Highway
469-499 River Avenue
594 Mountain Avenue
600 Sargent Avenue
654 Kildare Avenue
655 Osborne Street
920 Jefferson Avenue
1305-1321 Pembina
Highway
2155 Pembina Highway
3381 & 3393 Portage
Avenue
Kildonan Green
River East Plaza
SASKATCHEWAN
200 1st Avenue NW
9801 Territorial Drive
2895 2nd Avenue West
2231 East Quance Street
2915 13th Avenue
4250 Albert Street
1860 McOrmond Drive
River City Centre
ALBERTA
318 Marten Street
5700 50th Street
Beaumont Shopping
Centre
550 Cassils Road & 654
64,000
92,000
163,000
5,000
65,000
107,000
46,000
3,000
61,000
85,000
111,000
12,000
40,000
15,000
29,000
36,000
17,000
793,000
55,000
2,375,000
4,000
2,000
5,000
57,000
38,000
24,000
59,000
18,000
33,000
43,000
20,000
56,000
38,000
46,000
55,000
74,000
84,000
656,000
39,000
30,000
56,000
19,000
20,000
41,000
58,000
160,000
423,000
100.0
100.0
97.4
100.0
100.0
98.0
100.0
100.0
100.0
100.0
98.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.8
98.3
100.0
100.0
100.0
100.0
100.0
100.0
96.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.0
98.1
100.0
100.0
Banff
Beaumont
Retail – Freestanding
Retail – Plaza
19,000
21,000
Beaumont
Retail – Plaza
58,000
100.0
4th Street West
Brooks
Retail – Plaza
61,000
100.0
55 Castleridge
Boulevard NE
Calgary
99 Crowfoot Crescent NW Calgary
110-620 McKenzie Towne
Gate SE
Calgary
410 10 Street NW
Calgary
Calgary
511 17 Avenue SE
504 & 524 Elbow Drive SW Calgary
813 11 Avenue SW
Calgary
850 Saddletowne Circle NE Calgary
1818 Centre Street NE &
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Canmore
134 17 Avenue NE
2425 34 Street 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 West
17th Street & 23rd Avenue
400 & 500 Manning
Crossing North
2304 109 Street NW
2534 Guardian Road NW
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
6,000
75,000
9,000
38,000
42,000
29,000
40,000
6,000
36,000
48,000
69,000
21,000
50,000
79,000
81,000
53,000
43,000
54,000
52,000
49,000
48,000
49,000
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
98.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Chestermere
Cochrane
Edmonton
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Edmonton
Edmonton
Edmonton
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
5119 167 Avenue NW
5309 Ellerslie Road
8118 118 Avenue NW
8204 109 Street NW
9611 167 Avenue NW
10907 82 Avenue NW
12950 137 Avenue NW
13550 Victoria Trail
Millwood Commons
Namao Centre
304 54 Street
9601 Franklin Avenue
Clearwater Landing
8100-8300 100 Street
9925 114 Avenue
Leduc Centre
1760 23 Street
2750 Fairway Plaza
Road South
West Lethbridge
Towne Centre
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edson
Fort McMurray
Fort McMurray
Grand Prairie
Grand Prairie
Leduc
Lethbridge
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
30,000
50,000
22,000
34,000
37,000
21,000
55,000
37,000
29,000
34,000
33,000
4,000
143,000
67,000
71,000
138,000
45,000
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.6
100.0
100.0
81.6
95.1
100.0
100.0
100.0
Lethbridge
Retail – Plaza
7,000
100.0
Lethbridge
615 Division Avenue South Medicine Hat
410 & 610 Big Rock Lane
Gaetz South Plaza
260199 High Plains
Okotoks
Red Deer
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
104,000
43,000
5,000
74,000
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
Rocky View
Sherwood Park
Industrial
Retail – Freestanding
655,000
23,000
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
3,050,000
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 – Plaza
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 – Plaza
Retail – Plaza
Courtenay
Cranbrook
934 Baker Street
Cranbrook
1200 Baker Street
Dawson Creek
11200 8 Street
Fort St. John
9123 100 Street
750 Fortune Drive
Kamloops
945 Columbia Street West Kamloops
Kelowna
294 Bernard Avenue
Kelowna
697 Bernard Avenue
Langford
Belmont Market
Langley
20871 Fraser Highway
27566 Fraser Highway
Langley
32520 Lougheed Highway Mission
New Westminster Retail – Freestanding
800 McBride Boulevard
Retail – Freestanding
1170 27 Street East
North Vancouver
Retail – Freestanding
1175 Mount Seymour Road North Vancouver
Retail – Plaza
Penticton
801-1301 Main Street
Port Coquitlam
Retail – Freestanding
2850 Shaughnessy Street
Prince Rupert
Retail – Plaza
200 2 Avenue West
Retail – Freestanding
Quesnel
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
Boulevard
4655 Lakelse Avenue
1599 2nd Avenue
990 King Edward
Avenue West
1641 & 1653 Davie Street
1766 Robson Street
1780 East Broadway
2733 West Broadway
3410 Kingsway
8475 Granville Street
3417 30 Avenue
4300 32 Street
451 Oliver Street
Surrey
Terrace
Trail
Vancouver
Vancouver
Vancouver
Vancouver
Vancouver
Vancouver
Vancouver
Vernon
Vernon
Williams Lake
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
8,000
4,000
61,000
3,000
6,000
54,000
109,000
9,000
48,000
5,000
67,000
55,000
5,000
19,000
30,000
143,000
48,000
45,000
57,000
43,000
37,000
36,000
59,000
49,000
50,000
3,000
28,000
5,000
60,000
56,000
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
1,749,000
99.1
100.0
100.0
97.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.9
26.6
100.0
96.7
100.0
100.0
100.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
92.1
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
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.8
17,861,000
96.2
Proven Stability and Sustainable Growth
127
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
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.crombie.ca
Paul V. Beesley
Independent Trustee
Jane Craighead
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
Michael Vels
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
128
CROMBIE REIT Annual Report 2021
INVESTOR RELATIONS AND INQUIRIES
Unitholders, analysts, and investors should direct their financial
inquiries or requests 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, TSX Trust Company.
UNIT SYMBOL
REIT Trust Units – CRR.UN
STOCK EXCHANGE LISTING
Toronto Stock Exchange
TRANSFER AGENT
TSX Trust Company
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 TSX Trust Company at (800) 387-0825
or (416) 682-3860 to eliminate multiple mailings.
Tenant Profile
Tenant Profile
Bronte Village
Oakville, Ontario
Tenants by
Industry
(% of AMR)
Crombie develops and owns a high-quality, resilient, and diversified
portfolio backed by a solid group of national and regional tenants,
that deliver consistent long-term earnings and cash flow stability.
58.6%
Necessity-Based Retailers1
3.4%
Value-Focused Retailers
6.2%
Office & Hotel Tenants
5.7%
Retail-Related Industrial Tenants
4.7%
Medical, Professional &
Personal Services
4.1%
Restaurants – Quick Service & Cafe
3.9%
Bank and Financial Services
3.5%
Apparel & Accessories
3.1%
1.9%
Entertainment, Sporting Goods
& Stationary Retailers
Home Improvement, Furniture
& Auto Supplies
1.9%
Restaurants – Full Service
1.6%
Other
1.4%
Fitness Facilities & Supplements
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.
Crombie REIT
crombie.ca