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Growth-focused.
Resilient.
Sustainable.
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Inside this report
1
About Crombie
2 Message from the Chair
4
Letters from the CEO
6 Our Guiding Values
7 Our Purpose
Crombie’s Priorities
8
Resilient and Growing Portfolio
10 Strategic Partnership with Empire
12
Strong Development Pipeline
14 Spotlight on The Village at
Bronte Harbour
15 Spotlight on Voilà CFC 3
16 Strong Financial Condition
18 Highly Skilled Team and
Caring Culture
20 Our ESG Priorities
Financial Review
24 Table of Contents
25 Management’s Discussion
and Analysis
87 Management’s Statement of
Responsibility for Financial
Reporting
88
Independent Auditor’s Report
92 Consolidated Financial
Statements
96 Notes to the Consolidated
Financial Statements
128 Property Portfolio
130 Unitholders’ Information
IBC Tenant Profile
About the Cover
Le Duke is nestled between the blossoming Griffintown neighbourhood and
the charming Old Port of Montreal. Le Duke, owned in partnership with
Prince Developments, is anchored by an IGA grocery store and contains
387 residential rental units. Key elements of our strategy are represented in this
image including the work we do facilitating the build-out of the Voilà network
with our strategic partner, Empire, the competitiveness of their grocery stores,
and our investment in major mixed-used residential developments.
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 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 85.
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 82.
The Village at Bronte Harbour
Oakville (Toronto), Ontario
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.
Portfolio GLA by Market Class (%)*
as at December 31, 2022
Portfolio Fair Value by Market Class (%)*
as at December 31, 2022
Crombie at a Glance
Retailer-Related
REIT
Empire owns 41.5%
$5.6b
fair value including properties
held in joint ventures
301
properties including properties
under development and 5 properties
owned in joint ventures
34.1%
46.2%
28.7%
96.9%
committed occupancy
■ VECTOM1
■ Major Markets
■ Rest of Canada
40.6%
* Metrics noted above are inclusive of joint ventures at Crombie’s share.
1 Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal
25.3%
25.1%
$5.0b–$6.8b
development pipeline future
investment potential
1
Message from
the Chair
The past twelve months has been a challenging time
globally. We all breathed a collective sigh of relief as
COVID-19 subsided, only to be met with economic
headwinds in 2022. In this environment, management
focused on operations, leasing, completing and
integrating the recent development projects into the
portfolio, while also focusing on improving the balance
sheet, all of which resulted in historic high occupancy
levels, value creation from developments and greatly
improved debt metrics. Management’s focused approach
to improving the balance sheet over the past twelve
months positions Crombie favourably to meet current and
future macro-economic challenges.
Over the past few years Crombie has focused on
expanding its portfolio by adding residential and
industrial properties, further strengthening its asset base.
Crombie’s asset quality continues to improve steadily
through prudent and thoughtful curation, development,
and entitlement processes. In 2022, Crombie also
worked diligently to define and understand the impact
of the portfolio on the environment, with management
committing to set strategic sustainability and ESG metrics
and work towards achieving those targets.
Management nurtures a culture at Crombie that enables
the organization to thrive, by focusing on people and
strengthening the guiding values on which that culture
is built. In 2022, these values showed up in the everyday
actions of employees, as they came together to support
their communities and each other, and it has had a
noticeable impact on Crombie’s success. The impact of
culture on strategic results is well-documented, and the
strength of Crombie’s culture resulted in Don Clow being
named one of Canada’s Most Admired CEOs in 2022.
One of the most important functions of the Board is to
ensure that Crombie has a CEO in place to lead for the
future growth of the business. With this in mind, the Board
began an extensive review of senior management roles,
structure and succession planning in 2021, engaging a
leading talent advisory firm to assist in identifying and
evaluating CEO succession candidates with extensive real
estate experience. Mark Holly was identified, and when
Don Clow retired, effective the end of February 2023,
Mark was named his successor.
Under Don’s leadership over the past 13.5 years, Crombie
has achieved outstanding results and significant growth.
He leaves the REIT in a far stronger position than when
he arrived. On behalf of the entire Board of Trustees,
we would like to thank Don for his many contributions
to Crombie and we wish him well in his retirement. After
the extensive CEO succession process, the Board hired
Mark Holly as Crombie’s new President & CEO, and we are
looking forward to working together. Mark joins Crombie
from Empire, and has a successful track record of over
20 years of leadership in the real estate industry, including
extensive experience in development, and his knowledge
of both Crombie and Empire is a valuable asset. He values
communication, collaboration, and relationships, and
aligns well with Crombie’s guiding values, paving the way
to continue delivering on the successful strategy that has
made Crombie one of Canada’s top-performing REITs.
The role of the Board is to oversee Crombie’s long-
term strategy with white-glove governance, and we are
fortunate to have an extraordinary group of dedicated
Trustees committed to this work. In last year’s report, we
welcomed Michael Vels to our board. Later in 2022, we
welcomed two additions to the Board, Michael Waters,
Chief Executive Officer of the Minto Group, and
Heidi Jamieson-Mills, Senior Vice President of Finance,
Reporting and Treasury at Empire. Michael brings over
25 years of experience in real estate finance, investment
and development, and financial advisory services, while
Empire-appointed Heidi contributes a wealth of financial
knowledge and a deep understanding of Empire to the
Board. I look forward to working with and learning from
both Michael and Heidi and welcome their contributions.
2
CROMBIE REIT Annual Report 2022 Board of Trustees
J. Michael Knowlton
Paul Beesley
Jane Craighead
James Dickson
Mark Holly
Heidi Jamieson-Mills
Independent
Trustee & Chair
Independent
Trustee
Independent
Trustee*
Independent
Trustee*
Trustee
Trustee*
Barbara Palk
Independent
Trustee
Jason Shannon
Paul Sobey
Michael Vels
Michael Waters
Karen Weaver
Independent
Trustee
Independent
Trustee*
Trustee*
Independent
Trustee
Independent
Trustee
The Village at Bronte Harbour
Oakville (Toronto), Ontario
*Empire-appointed Trustee
At our annual general meeting in
May, Barbara Palk will be retiring.
In her time as a Trustee, Barbara
has at different times been Chair of
our Human Resources Committee
and Governance and Nominating
Committee, and a strong contributor
at all levels and aspects of the work
we do. On behalf of all Trustees,
I wanted to take this opportunity to
thank Barbara for her important
contributions to Crombie and wish
her all the best.
I thank our Unitholders for their trust
in Crombie, and our Trustees for
their commitment and dedication
in 2022. The Board commends the
management team for another
successful year of enriching
neighbourhoods through long-term
sustainable growth.
Sincerely,
J. Michael Knowlton
Chair
3
Letter from
Don Clow,
retired CEO
On March 1, 2023 Mark Holly became Crombie’s President and CEO after
Don Clow’s retirement. As CEO for 2022, Don reflects here on the year’s results,
followed by an introduction from Mark.
Growth-Focused: Crombie achieved solid growth in 2022,
while also significantly improving our financial condition
through a strengthened balance sheet, lowered debt
levels, ample liquidity, and increased unencumbered asset
pool. These accomplishments were achieved by delivering
our strategy of outstanding operations, including record
occupancy, responsible investment in grocery-anchored
retail in partnership with Empire, and sustainable
development, with an award-winning engaged workforce.
Our team and culture were recognized as one of Atlantic
Canada’s Top Employers for the seventh time. Crombie has
remained focused on long-term sustainable growth despite
capital market volatility and ongoing macro-economic and
geopolitical pressures.
Development has been a key component of our long-term
strategy over the last several years. In the fourth quarter of
2022, we reached substantial completion at our retail-related
industrial development, Voilà CFC 3, in Calgary. Always
seeking ways to optimize the value of our development
pipeline while balancing capital allocation priorities, we are
particularly proud of the sale of our King George site in
Surrey, British Columbia. This transaction was a great
example of the many opportunities available to Crombie
and the underlying land value held in our portfolio.
Resilient: Crombie’s ability to be agile is underpinned by
our intentionally curated portfolio. Our relationship with
our strategic partner, Empire, continues to be an important
driver of our success, providing many attractive risk-adjusted
opportunities and allowing for stable growth and value
creation for our Unitholders. Our tenants, primarily serving
the everyday needs of Canadians, have proven their
resilience over the difficult last few years as well. In 2022,
multiple tenants moved into our top 20, of which 60% are
now investment grade, demonstrating the attractiveness of
our portfolio and the quality of our cash flow.
Sustainable: Throughout 2022, we formalized our
ESG policies and strategy while continuing to advance
several important initiatives. We updated our Sustainable
Development Policy, introduced portfolio-wide ESG risk
assessments, set internal ESG targets to advance our
impact, gathered an inventory of greenhouse gas (“GHG”)
emissions, and identified reduction pathways. We continue
to uphold white-glove governance and all board
committees have mandates that include ESG oversight.
On the social aspect of ESG, our Diversity, Equity, and
Inclusion Committee works on creating a more welcoming
workplace where people feel a strong sense of belonging,
and we continue to encourage our teams to volunteer
for community organizations across Canada. In 2022,
our employees dedicated over 6,000 hours to volunteer
organizations of their choosing. We are truly committed
to doing our part to build a Canada where everyone can
thrive. Measuring and tracking our progress in how we
impact our environment and society takes time and energy
– but it is absolutely worth it, and I’m proud of our team for
their dedication to this work.
New Leadership: For 13.5 years, I’ve had the privilege of
serving as Crombie’s President and CEO. I feel immense
pride in the organization from which I’m retiring. We’ve
achieved incredible success with top-quartile total
Unitholder return. We evolved from a regional landlord
into a national owner, operator, and developer of great
properties across Canada. Our strategic relationship
with Empire has become a more impactful driver of
growth over the last five years and has empowered many
mutually beneficial opportunities. Our balance sheet is
4
CROMBIE REIT Annual Report 2022 Senior Leadership Team
Mark Holly
President &
Chief Executive
Officer
John Barnoski
Executive
Vice President,
Corporate
Development
strong, as are our fundamentals,
and we are well positioned to
weather any economic storms we
may face over the next few years
or accelerate growth initiatives.
The Crombie team is guided
by a strong set of values, and I
know this team will continue to
enhance neighbourhoods across
Canada through long-term
sustainable growth.
Crombie’s new President & CEO,
Mark Holly, will lead this team
to ongoing growth and success.
Mark joins Crombie from Empire,
where he led the firm’s real estate
business and had the opportunity
to collaborate closely with the
Crombie executive leadership
team on a range of successful
initiatives that have generated
substantial value for both
companies. I have no doubt in
the future of this fantastic team in
Mark’s very capable hands.
Lastly, I would like to thank our
Unitholders for your support over
the last 13.5 years. Your confidence
in our team and the evolution of
our strategy is meaningful and
appreciated.
Sincerely,
Don Clow FCPA, FCA
Former President &
Chief Executive Officer
Clinton Keay
Chief Financial
Officer &
Secretary
Arie Bitton
Executive
Vice President,
Leasing &
Operations
Cheryl Fraser
Chief Talent Officer
& Vice President,
Communications
Trevor Lee
Executive
Vice President,
Development &
Construction
Letter from
the CEO
Moving Forward Together
Over the years Crombie has curated
a best-in-class portfolio, consisting of
the three most desirable asset classes
in real estate: grocery-anchored
commercial centres, industrial, and
residential. Crombie’s asset quality
and mix continue to evolve and grow
through our expansive development
pipeline, which offers significant
value-creation opportunities. This well-
curated portfolio provides the balance
of a resilient and sustainable growth
focused program.
Crombie’s commitment to sustainability
and climate action ensures we do our
part to make a positive impact on the
communities in which we operate. I am
encouraged by Crombie’s dedication to
Environmental, Social, and Governance
advancements, and am committed to
evolving our position in the sustainability
space. I believe businesses have a
critical role to play in addressing global
climate challenges and know that the
Crombie team will follow through on our
commitments to this important work.
This team’s strong culture and solid
relationship with Empire give Crombie a
competitive advantage in the real estate
industry. The results of the business in
2022 are a testament to the amazing
team that has been delivering Crombie’s
strong Total Unitholder Returns over the
past 5, 10, and 15 years. I am inspired by
this resilient team’s many successes and
am excited to work together to continue
to evolve and drive the business forward.
Leading this organization is an
incredible privilege, and I’m honoured
to take on this role. Don and I have
been great partners over the years,
and he guided Crombie’s people and
results with a steady hand. I’d like to
congratulate him on his successful
leadership and wish him all the best on
a well-deserved retirement.
To our Unitholders, I thank you for your
ongoing belief in Crombie and look
forward to the opportunity to meet you
at our Annual General Meeting in May.
Sincerely,
Mark Holly
President & Chief Executive Officer
5
Growth-focused.
Resilient.
Sustainable.
Our Guiding Values
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.
6
Who We Are
• We build and operate spaces of
which people want to be part
• We think long term
• We make communities
even better
• We live our values
Who We Deliver For
• Our Tenants and Customers
• Our Partners
• Our Unitholders
• Our People
• Our Communities
CROMBIE REIT Annual Report 2022 Our Purpose
We own and operate high-quality, sustainable real estate where people live, work, shop and play.
WHAT WE HAVE
WHAT WE DO
VALUE WE CREATE
Resilient
and growing
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 and spoke facilities,
as well as unlocking major developments
• Intentionally curated 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 delivery of projects
• High-quality real estate that enhances communities
and provides sustainable long-term growth
UNDERPINNED BY
Strong
financial
condition
A highly
skilled team
• Reasonable and balanced debt ladder
• Multiple sources of capital and ample liquidity
• Disciplined and innovative capital funding
and management
• Strong balance sheet
• Optimized cost of capital
• Available capital sources
• Minimized financial risk
• Attract, develop, and retain a talented team
that is committed to advancing our purpose,
values, and overall business strategy
• Diverse and inclusive team of skilled real estate
professionals
• Experienced and focused leadership
• Prioritize employee engagement,
• Address the needs of our employees and care for
development, and community outreach
our communities
• Focus on environmental, social, and governance
footprint, including a sustainability strategy
centered on creating value by developing
our properties in a way that enhances local
communities and protects our environment
• Minimized environmental impact of our buildings
and operations
• Strong governance
• Strong risk management and risk appetite framework
• Supported communities
7
Resilient and
Growing Portfolio
Tamarack Chalo! FreshCo
Edmonton, Alberta
8
CROMBIE REIT Annual Report 2022 Crombie remains focused on a long-term strategy that is resilient in nature and has
the ability to drive consistent growth. Our portfolio, through intentional curation,
forms the foundation of our strategy, which includes grocery-anchored retail,
industrial, and residential properties, the three most desirable asset classes in
Canada. The strength of grocery-anchored retail assets was highlighted throughout
the pandemic, and continues to display its stability by guiding the retail recovery.
When the world is facing substantial headwinds on many fronts – geopolitics, the
economy, inflation, rising interest rates and climate change issues – Crombie’s
fundamentals remain strong. Our portfolio of 289 active investment properties
demonstrated record committed occupancy of 96.9%, healthy NOI growth, and
steady new leasing and renewal activity, driven by the hard work of our highly skilled
and experienced team.
We have recognized the strength that comes from owning a defensive portfolio
with significant opportunities for future growth. Crombie will continue to optimize
our portfolio through the acquisition of grocery-anchored assets, modernizations,
conversions, dispositions of low-growth and/or non-core properties, as well as
advancements on our development pipeline.
Asset Type (% of Fair Value)*
77.2%
3.0%
10.1%
8.2%
1.5%
■ Retail
■ Office
■ Retail-related industrial
■ Mixed-use residential
■ Other1
* Metrics noted above are inclusive of joint ventures at Crombie’s share.
$282m
net property income
+1.6%
SANOI2
$1.16
FFO/unit2
$1.01
AFFO/unit2
80%
of AMR from grocery-anchored
properties, inclusive of
retail-related industrial
9.0 years
weighted average lease term
1,056,000
sq. ft. leases renewed
+7.0%
renewal leasing spread
1 Other includes properties under development (“PUD”) and land.
2 Non-GAAP measure; for additional information, please reference the Non-GAAP Financial Measures section in the MD&A.
9
Strategic Partnership
with Empire
Terrebonne Distribution Centre
Terrebonne, Quebec
10
CROMBIE REIT Annual Report 2022 The retail landscape continues to change, and as the needs of the communities that
Empire serves evolve, together we ensure that the footprints of grocery-anchored
properties resonate well with consumer demands.
Our relationship with Empire and our strategic alignment offer us a continuing
opportunity to create value and drive growth for our Unitholders, communities,
and tenants. Through in-depth market intelligence sharing, we consistently
communicate and collaborate with the team at Empire. This supports the
achievement of several strategic objectives for both companies, including
sustainability goals, as we move forward together.
Crombie is committed to an annual investment of $100 million to $200 million
on Empire-related initiatives with attractive risk-adjusted returns and varying
project durations.
Strategic and accretive transactions include:
• Acquisition, modernization, 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
• Major developments.
Empire represents
11.1m sq. ft.
of occupied portfolio GLA
58.0%
of annual minimum rent
11.6 years
weighted average remaining
Empire lease term
$191m
spent in 2022 to support
Empire-related initiatives
Voilà CFC 2
Montreal, Quebec
Voilà hub and spoke network
Marketway Lane
Timberlea (Halifax), Nova Scotia
Acquisition and land-use intensification
Montgomery Safeway
Calgary, Alberta
Modernization
Davie Street
Vancouver, British Columbia
Major development
11
Strong Development
Pipeline
Voilà CFC 2
Montreal, Quebec
12
CROMBIE REIT Annual Report 2022 Development of all sizes remains a foundational pillar of our long-term strategy, as
demonstrated over the last few years. Once income stabilization is achieved, these
projects will ultimately drive NAV and AFFO growth, while importantly expanding our
presence in the country’s top markets, particularly VECTOM.
Our development pipeline contains 27 projects across the country. The Village
at Bronte Harbour reached substantial completion in the first quarter of 2022.
The Village is currently moving through the lease-up phase with 50.5% leased
as of December 31, 2022.
Voilà CFC 3, located in Calgary, Alberta, achieved substantial completion in the
fourth quarter of 2022, with economic occupancy and rent commencement
expected in mid 2023.
We are committed to investing $100 million to $250 million annually in our
development program, including non-major developments, and are steadfastly
focused on unlocking the value embedded within our portfolio. Our dedicated
team continues the hard work of advancing major development projects through
the entitlement process, which creates value and provides optionality of project
size and timing of commencement in some of the most desirable locations in
Canada. Currently, Crombie has four projects with zoning approvals in place,
and two projects with rezoning applications submitted, with the potential to add
approximately 3.3 million square feet of GLA, including 3,700 residential units.
Vancouver
Victoria
1
4
Edmonton
Calgary
10
1
1
Kelowna
$5.0b–$6.8b
4
Halifax
5
1
Toronto
Hamilton
development pipeline future investment potential
27
development projects
3
near-term projects
112,000 sq. ft.
commercial GLA
905,000 sq. ft.
residential GLA
1,380
residential units
24
medium-/long-term projects
1,059,000 sq. ft.
commercial GLA
8,870,000 sq. ft.
residential GLA
10,070
residential units
7
completed projects
459,000
commercial GLA
614,000
retail-related industrial GLA
947,000
residential GLA
1,198
residential units
13
Spotlight on The Village
at Bronte Harbour
Oakville (Toronto), Ontario
Substantial Completion: Q1 2022
The Village at Bronte Harbour is
comprised of two residential rental
towers with 481 units, a Farm Boy
grocery store, and complementary
retail on site. The Village showcases
the beauty of the lakefront and
marina, while in close proximity
to walking trails, everyday
conveniences, and public transit.
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Spotlight on
Voilà CFC 3
Calgary, Alberta
Substantial completion: Q4 2022
Voilà CFC 3 is the third Empire grocery
e-commerce fulfillment hub in Canada,
and the second in Crombie’s portfolio.
This approximately 304,000 square foot
CFC will service the majority of Alberta,
and is powered by industry-leading
technology provided by Ocado. Robots
assemble orders efficiently and safely,
resulting in minimal product handling,
while Voilà teammates deliver orders
directly to customers’ homes.
15
Strong Financial
Condition
Westhill on Duke Rendering
Halifax, Nova Scotia
16
CROMBIE REIT Annual Report 2022 Crombie continues to manage risk and maintain financial strength by improving our
balance sheet and overall financial condition to allow for future growth activities.
Crombie will continue to prudently manage our balance sheet and responsibly
allocate capital, as these actions have led to notable deleveraging, well-laddered
debt maturities with balanced near-term expiries, and a healthy weighted average
term to maturity, all of which are extremely important, especially in challenging
macro-economic environments.
$583m
available liquidity
8.02x
debt to adjusted EBITDA (TTM)1
3.28x
interest coverage ratio1
4.7 years
weighted average term to
debt maturity
BBB(low) with
a stable trend
DBRS rating
Access to multiple sources of capital remains a key component of Crombie’s
financial flexibility and ability to pursue accretive investments with our strategic
partner, Empire, and capitalize on opportunities within our robust development
pipeline. Examples of these sources of capital are:
• Equity issuance
– $200 million issuance in January 2022 at $17.45, the highest issue price to date
• Unsecured notes
• Dispositions – full or partial interests
– Disposed of eight investment properties and one property under development
into a joint venture for total gross proceeds of $176 million throughout 2022.
Included in these dispositions was the sale of our King George development
property in Surrey, British Columbia, which represents one of the many value
creation options for Crombie.
• Mortgages – commercial & residential
• Bank credit facilities
• Distribution reinvestment plan (“DRIP”)
• Free cash flow
Decrease in debt/GBV &
debt/GFV1
Improvement in fair value of
unencumbered assets
51.9%
51.0%
49.6%
48.9%
52.1%
50.7%
48.9%
45.3%
44.6%
41.8%
$2.2B
$1.8B
$1.4B
$1.2B
$1.0B
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
■ Debt to Gross Book Value
■ Debt to Gross Fair Value
1 Non-GAAP measure; for additional information, please reference the Non-GAAP Financial Measures section in the MD&A.
17
Highly Skilled Team
and Caring Culture
People are at the core of our success. We continue to grow our team with the
very best in the industry, attracting people who share in our values, embrace our
culture, and deliver on Crombie’s promise of enriching the communities in which
we operate. These are just a few of the many people who strengthen Crombie’s
sustainable foundation through their fine work every day.
“Despite the challenges that come our way,
our team can always rely on each other
to rise above them. I’m privileged to work
with a group of compassionate, supportive,
hard-working people who are driven
to succeed, lead with integrity, and are
prepared for a sustainable future.”
Karen Charlton, Manager,
External Reporting
“Crombie has made significant strides to
formalize a sustainability program that is
built on trustworthy data and ethical science.
In my role, I have the privilege of working
with teammates of varying functions across
the business and I’m proud to be a part of
an organization where sustainable practices
are prioritized in all levels of decision-
making to deliver on Crombie’s purpose.”
Adam Cochrane, Environmental Manager
“My role allows me to work alongside all
areas of the business, with the goal to
help others improve in their processes and
efficiencies. This requires a high level of
collaboration and a collective commitment
to Crombie’s guiding values. Our team takes
pride in understanding and supporting
each other to ensure all voices are heard
and success is achieved together.”
Campbell DeMont, Business Analyst,
Applications & Analytics
“Crombie’s commitment to collaboration
and inclusive decision-making empowers
me to think carefully about our future, bring
my best ideas forward, and deliver to my
greatest ability. We are a highly experienced
and supportive team, dedicated to
delivering excellence together through
shared objectives that support Crombie’s
long-term vision.”
Kevin Clark, Director, Construction
“Crombie is focused on a sustainable,
long-term strategy, that values an
entrepreneurial spirit and provides
employees with the skills and resources they
need to grow and develop in their career.
I’m driven to succeed with an authentic
and ambitious team that supports and
encourages one another to continually
raise the bar, overcome challenges, and
inclusively achieve our goals.”
Devis Deliallisi, Maintenance Supervisor
“Working collaboratively across the
organization allows me to achieve my focus
of providing the highest level of service
to our tenants. I know that my ideas are
heard and respected, and I’m valued for the
work that I do. I’m proud to be a part of an
organization that thrives on a progressive
culture nurtured by integrity, compassion
and respect, and alongside a team that is
committed to enriching local communities
for the long term.”
Monika Heric, Property Administrator
18
CROMBIE REIT Annual Report 2022 “Since joining Crombie 11 years ago, one thing
that has never changed is the priority placed
on caring for our team, tenants, and the
communities in which we operate. Crombie
has always instilled a compassionate and
nurturing culture in their roots that lays the
foundation to pursue new opportunities
and challenges together with empathy
and integrity.”
Michael Lightfoot, Senior Property Manager
“I believe a successful organization is
underpinned by integrity, strong relationships,
and a people-oriented culture. It is very
rewarding to work with a company that
shares this outlook to ensure we deliver
on our purpose while staying true to our
core values. At Crombie, we leverage our
strengths through a one-team approach
to pursue and achieve common objectives
while empowering one another.”
Ali Lobsiger, Senior Financial Analyst
“Crombie promotes an inclusive, collaborative
culture where our diversity of talents and
experiences are valued and respected.
We have an exceptional team whose
members empower one another to
outperform expectations by maximizing
the impact of our wide-ranging strengths.
We are driven by our guiding values to
achieve common goals and results.”
Chris Millican, Director, Operations
“More than ever, the communities we develop
must embrace sustainable resiliency to meet
the ongoing challenges of climate change,
fluctuating regulatory environments, supply
chain and labour shortages, among other
disruptions. To provide a positive and lasting
impact, innovative thinking, collaboration, and
a clear vision for the future are essential. This
impact is my driver, and Crombie supports
me in my passion to make a difference in
our communities of today and tomorrow.”
Eva Parada, Senior Director,
Design & Construction
Providing
Foundational Support
Crombie’s Executive Assistants provide the foundational
support for leaders across our organization. This foundation
is built upon the guiding values that are core to our business
and success. In many situations, Marie, Tham, and Cathy are
the first people our partners meet at Crombie, and all three
embody our guiding values in who they are and how they
treat others. They set the tone of Crombie’s caring culture,
and lead by example as they work to deliver excellence in
everything they do.
“I believe excellent leadership is about
empowering the people around you
through trust, collaboration, and
effective communication so that the
team is greater than the sum of its parts.
Crombie’s leadership team provides
meaning, integrity, and accountability
in all that they do, with a common
understanding that an engaged, united
team is at the core of our organization’s
success and growth.”
Tham Chau, Executive Assistant
“I witness Crombie’s guiding values
being demonstrated in our business
each day. Our team is committed to
actively engaging with the communities
in which we build and operate to make
a positive, lasting impact. Our leaders
foster a culture of trust, purpose, and
respect that promotes diversity and
belonging, and permeates throughout
the organization.”
Cathy Legaspi, Executive Assistant
“Crombie leads with a uniquely caring
culture and a promise to enrich
neighbourhoods through long-term
sustainable growth. We stay true to who
we are and ensure that doing what’s
right is at the heart of every decision.
This has been especially evident
throughout the challenges faced across
the world in the last three years. We live
by strong values that continue to guide
the way in our path forward.”
Marie MacKay, Executive Assistant
19
Our ESG Priorities
Crombie has always been guided by the value we place on community, which
has helped shape and strengthen our sustainability commitments. We continue
to develop and operate our properties in a way that enhances urban and rural
communities and protects the environment.
We know that taking a sustainable approach to our business is vital to the short-, medium-, and long-term health of
our company. We have embedded sustainability principles into the way we operate since inception.
View from The Village at Bronte Harbour
Oakville (Toronto), Ontario
20
CROMBIE REIT Annual Report 2022 Environmental, Social & Governance (“ESG”) Priorities
In 2022, we continued to advance our environmental, social and governance priorities.
Operating Highlights
$15.2m
invested in LED upgrades
at 155 properties in the last
three years
~2m sq. ft.
of BOMA BEST® certifications
31.3 metric tonnes
of organic matter diverted from the
landfill in 2022 through use of our
on-site composter at Avalon Mall,
in St. John’s, Newfoundland and
Labrador
Environmental & Climate Action
The Board and senior leadership team believe climate change is a real issue that must
be addressed and that Crombie has a part to play. Beginning in late 2022, Crombie
leveraged an ESG software platform, implemented in 2019, to conduct an inventory
of GHG emissions for our portfolio of properties to better understand our scope 1, 2,
and 3 emissions, and their impact on climate change. We have analyzed the resulting
inventory of emissions and conducted scenario analysis of GHG emission reduction
scopes and timelines. As scope 3 emissions, and specifically emissions from our tenant
controlled spaces, make up the majority of our total emissions, Crombie is proactively
working with its strategic partner and largest tenant, Empire, and has started engaging
with our tenants to educate and support GHG emission reductions across our portfolio.
Additionally, we have started a review of our properties’ current resilience to physical
climate risks and, in 2023, will generate an action plan to strengthen the resilience of
our properties with respect to future physical climate events.
BOMA BEST: We continued to earn and upgrade BOMA BEST® green certifications
for our properties, initially focusing on our owned and managed sites in a phased
approach that in 2022, targeted a group of open-air grocery-anchored centres in
Nova Scotia.
Avalon Mall, in St. John’s, Newfoundland and Labrador, achieved BOMA BEST® Gold
certification, and the 2022 BOMA NL Earth Award and Certificate of Excellence –
Retail. Additionally, Avalon Mall won BOMA Canada’s 2022 Outstanding Building of
the Year, “TOBY”, award in the retail category. The TOBY award is the most prestigious
and comprehensive program of its kind in the commercial real estate industry, in
Canada. Judging for this award is based upon building standards, community impact,
tenant relations, energy conservation, environmental and sustainability management,
emergency preparedness and building personnel training.
Environmental Partnerships: We continued to engage with our tenants, suppliers
and other stakeholders on opportunities to reduce our collective environmental
footprint. Avalon Mall was recently named Champion for a Greener Future by the
Multi-Materials Stewardship Board (“MMSB”) of Newfoundland, which is dedicated
to promoting sustainable waste management through public education and waste
diversion programs.
We are exploring opportunities to gain alignment with our strategic partner, Empire,
incorporating their data into our calculations and sharing best practices across
our property portfolio.
21
Social Impact
Our people enable our pathway to enrich sustainability at Crombie. Together,
we have built a values-driven, progressive, inclusive and caring culture that
is key to Crombie’s success and continued growth. Our highest priority is to
ensure we have the right people and platforms in place to successfully deliver
Crombie’s business strategy and achieve our sustainability goals.
Great Place to Work: Crombie was selected as one of Atlantic Canada’s Top
Employers and Nova Scotia’s Top Employers for 2022. These designations
recognize Canadian employers who lead their industries in offering exceptional
places to work. In recognizing our team, the judges highlighted Crombie’s
generous benefits plan and mental health coverage, as well as our well-being
framework focused on employee physical, psychological, professional and
personal wellness.
Employee & Community Engagement: Our goal is to enrich neighbourhoods
through long-term sustainable growth, which includes supporting
organizations that are making a difference in the lives of people in the
communities we serve. In 2022, we continued to support organizations that are
committed to community health and wellness initiatives, including support for
local and diverse businesses. We also advanced our commitment to direct 25%
of our philanthropic contributions between now and 2025 to causes related to
ending social injustice in the communities where we operate.
We give time and money each year to support the causes our employees
believe in. Many of our employees volunteer their time with non-profit
organizations, and in 2022 we began tracking employee volunteer hours to
celebrate our community investments.
Corporate Governance
Our Board of Trustees bears overall responsibility for ESG oversight, providing
valuable guidance to the executive leadership team as we enhance the
transparency of our ESG and climate-related financial disclosures.
Under the Board’s stewardship, we are committed to supporting the Task
Force on Climate-related Financial Disclosures (“TCFD”). We are conducting
a deep dive into our climate-related risks – both physical and transitional –
to understand our portfolio exposure and to align our reporting with the
recommendations of TCFD, as well as with the Sustainability Standards
Accounting Board (“SASB”)/International Sustainability Standards Board (“ISSB”).
In 2022, we continued to enhance the competency of our Board, welcoming
Michael Vels who has a robust financial background, leadership experience,
and valuable knowledge of our strategic partner, Empire. Additionally, we
appointed Michael Waters, Chief Executive Officer of the Minto Group, and
Heidi Jamieson-Mills, Senior Vice President of Finance, Reporting and Treasury
at Empire, to our Board. Michael brings valuable residential development
expertise to our ESG stewardship responsibilities. Heidi contributes a strong
understanding of Empire, and significant financial knowledge.
People & Community
6,000+
hours volunteered by employees
42
community initiatives supported
30%
of hires in the year were
diverse candidates
66%
of leadership development
program participants are women
Board Diversity
33%
female trustees
100%
independent Board chair and
committee chairs
22
CROMBIE REIT Annual Report 2022 In the Spotlight
Crombie’s Operations team
Aberdeen Business Centre Maintenance Team
New Glasgow, Nova Scotia
Unwavering Commitment: Our Operations teams are
dedicated to keeping our properties safe, and our tenants
supported. Hurricane Fiona changed the definition of what
hurricane preparedness looks like across Atlantic Canada, and
our Operations teams demonstrated remarkable diligence
in preparing and protecting our properties. Nova Scotia was
hit especially hard, and through their outstanding efforts,
our Maintenance team in New Glasgow, Nova Scotia, kept
our properties from experiencing what could have been
devastating and costly damage.
“At a time that was personally difficult for everyone, we witnessed
team members voluntarily put their personal lives on hold to be there
for Crombie and the communities in which we operate, to make sure
our properties stayed safe, protected, and operational.”
Brian Dobson, Regional Property Manager
Vibrant Community Living
The Village at Bronte Harbour, which Crombie owns in a
joint venture with Prince Developments, understands the
importance of building community among residents and
with the broader village of Bronte Harbour. The Village’s
amenity spaces include a pool, spa, and fitness rooms,
as well as a large dining room where residents gather
to celebrate seasonal holidays together with potluck or
catered meals. Pets are part of the Bronte family, too, and in
addition to providing them with a “pet spa”, the Village also
includes them in special activities, such as a Halloween dog
costume contest.
The Village also supported the creation of Bronte Market
Square, which is a community space for local residents to
rest, gather and connect – featuring infrastructure that
includes seating areas, a water feature and access to
electrical power. The Square was built to host a variety
of special events like outdoor markets, fitness classes,
holiday-themed activities, and live music. To celebrate the
2022 opening of Market Square, The Village operations
team sponsored a community tree lighting and hosted a
hot chocolate and cookies gathering on-site.
Sustainability is important to the residents and staff of
The Village, as they are surrounded by the beauty of the
natural lakeside environment. The building’s rooftop spaces
include plants and flowers, and also boast urban beehives
managed by Alvéole. These busy “Crombees” contributed
honey to all residents in the fall, while pollinating their
way around the community. We hope they made their
way to the section of Oakville Blooms, a neighbourhood
beautification project, that was sponsored by The Village!
Crombie’s Caring & Inclusive Culture
Crombie is a vibrant community of professionals who are respected for what they do. Our commitment to our workforce includes providing an
inclusive culture where everyone is accepted and feels welcome. In 2022, several teams participated in an inclusive communications training
program, with the goal of creating a space where everyone feels like they belong through the ways in which we communicate.
“At Crombie, our differences are
celebrated, unique perspectives
are supported, and opportunities to
learn more about our teammates are
provided. Each February, I’m proud to
contribute to the team’s learning and
understanding of African Heritage
Month through sharing information and
resources on our organization’s intranet
and, in turn, a space of belonging.”
Holly Boudreau
Customer Service Associate
“Crombie’s communications continue
to proactively evolve as the diversity of
our team grows and prospers. Part of
my role is telling Crombie’s story, both
strategically, and in how our organization
communicates inclusively to all audiences.
Our commitment to inclusive language
reflects not only our increasingly diverse
workforce, but also the breadth of our
properties located across the country.”
Meredith Hynes
Coordinator, Communications
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24
Financial Review
25 MANAGEMENT’S
51 Development
73
Joint Ventures
DISCUSSION AND ANALYSIS
51 Substantially Completed
73
Joint Venture Summary
25 Key Highlights
29 Glossary of Terms
Developments
51 Development Pipeline
30 Portfolio Review
56 Capital Management
30 Total Portfolio Review Inclusive
56 Capital Management Framework
74 Occupancy Metrics
74 Financial Performance
75 Fair Value
76 Debt to Gross Fair Value
76 Debt Profile
77 Other Disclosures
77 Related Party Transactions
78 Use of Estimates and Judgments
79 Controls and Procedures
80 Quarterly Information
56
Investment Grade Credit Rating
57 Strong Capital Structure
57 Debt Metrics
60 Debt Profile
62 Debt Maturities
62 Outstanding Unit Data
62 Cash Flows
of Joint Ventures
30 Market Class
31 Asset Type
32 Portfolio Review – Excluding
Joint Ventures
32 Market Class
34 Asset Type
35 Tenant Profile
36 Same-Asset Properties
37 Strategic Acquisitions and
Dispositions
39 Non-Major Development
40 Operational Performance
Review
40 Occupancy and Leasing Activity
41 New Leasing Activity
41 Renewal Activity
42 Lease Maturities
43 Financial Performance
Review
44 Operating Income Attributable
to Unitholders
44 Same-Asset Property Cash NOI
46 Funds from Operations (FFO)
47 Adjusted Funds from
Operations (AFFO)
47 Distributions to Unitholders
48 Amortization of Tenant
Incentives
49 General and Administrative
Expenses
49 Finance Costs – Operations
50 Depreciation, Amortization,
and Impairment
50 Selected Balance Sheet
Information
64 Available Credit Line Liquidity
82 Non-GAAP Financial Measures
65 Off-Balance Sheet Commitments
85 Forward-looking Information
and Guarantees
65 Financial Instruments
66 Risk Management
66 Risk Management Framework
66 Risk Factors Related to the Business
of Crombie
69 Financial Risk Management
71 Risk Factors Related to the Units
72 Ownership of Senior Unsecured Notes
87 Management’s Statement of
Responsibility for Financial Reporting
88
Independent Auditor’s Report
92 Consolidated Financial Statements
96 Notes to the Consolidated
Financial Statements
128 Property Portfolio
130 Unitholders’ Information
IBC Tenant Profile
* 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 82, 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 85, for more information.
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, 2022 and 2021.
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 22, 2023, 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 29.
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 2022
Year 2022
$107,939
$419,591
Q4 2021 $103,832 +4.0%
Year 2021 $408,892 +2.6%
Operating income attributable to Unitholders
Q4 2022
Year 2022
$87,718
$167,800
Q4 2021 $78,730 +11.4%
Year 2021 $155,401 +8.0%
Net property income
Q4 2022
Year 2022
$70,816
$281,818
Q4 2021 $71,402 -0.8%
Year 2021 $283,031 -0.4%
The increase in property revenue in both the quarter and on an annual basis is due
primarily to increased rental revenue from acquisitions and higher income from
modernization investments. This increase is offset in part by reduced rental revenue
due to dispositions, lower lease termination income, and higher tenant incentive
amortization from leasing activity.
The increase in operating income attributable to Unitholders for the quarter and on
an annual basis is driven primarily by gains on disposal of investment properties
and lower mortgage interest expense from dispositions and mortgage repayments
compared to the same period in 2021. The increase is offset in part by a gain on
distribution from equity-accounted investments in the fourth quarter of 2021 resulting
from cash distributions received from a joint venture in excess of our investment. The
annual increase in operating income was also offset by increased impairments on
investment properties in 2022 compared to the prior year.
Dispositions since December 31, 2021, increased property tax and operating expenses,
higher lease termination income in 2021 due to tenant surrenders, and new leasing
initiatives which increased tenant incentive amortization are the drivers of the
decrease in net property income for both the quarter and year. The reduction is
offset in part by income from acquisitions, higher recoveries of property taxes and
operating costs, and income from modernization investments. The annual decrease
in net property income was also offset by increased parking revenue, renewals,
and new leasing.
Same-asset property cash NOI*
Q4 2022
Year 2022
$67,704
$270,045
Q4 2021 $67,103 +0.9%
Year 2021 $265,900 +1.6%
Strong occupancy, an increase in rent from modernizations and capital
improvements, and increased parking revenue improved same-asset property cash
NOI for the quarter and the year compared to the same periods in 2021. This was
offset in part by a decrease in lease termination income.
Same-asset property cash NOI*, adjusted for the removal of lease termination
income, increased by 2.4% in Q4 2022 compared to Q4 2021 and increased by 2.6%
on an annual basis compared to 2021.
25
MANAGEMENT’S DISCUSSION AND ANALYSIS FFO* per Unit
Q4 2022
$0.29
Year 2022
$1.16
Q4 2021 $0.29 0.0%
Year 2021 $1.14 +1.8%
FFO* payout ratio
Q4 2022
76.2%
Year 2022
77.5%
Q4 2021 78.0% -1.8%
Year 2021 78.1% -0.6%
AFFO* per Unit
Q4 2022
$0.25
Year 2022
$1.01
Q4 2021 $0.25 0.0%
Year 2021 $0.97 +4.1%
AFFO* payout ratio
Q4 2022
88.1%
Year 2022
89.0%
Q4 2021 90.5% -2.4%
Year 2021 91.8% -2.8%
FFO on a dollar basis improved in the quarter primarily due to lower finance costs
from operations arising from lower debt levels, higher recoveries of property taxes
and operating costs, income from acquisitions, higher rent from modernizations
and capital improvements, and decreased general and administrative expenses.
The growth was partially offset by higher property taxes and operating expenses,
reduced rental revenue due to dispositions, and a reduction in lease termination
income. Additionally, on an annual basis, new leasing, renewals, and increased
parking revenue contributed to an increase in FFO.
An increase in the number of Units outstanding from the issuance of Units in the
first quarter of 2022 contributed to offsetting the growth in FFO per Unit.
Items affecting FFO, as stated above, drove the reduction in FFO payout ratio
compared to 2021 in both the quarter and full year. This was offset in part by
an increase in Units outstanding, resulting in higher total distributions.
AFFO on a dollar basis increased in both the quarter and the year primarily as a
result of reduced finance costs from operations arising from lower debt levels, higher
recoveries of property taxes and operating costs, income from acquisitions, higher
rent from modernizations and capital improvements, and decreased general and
administrative expenses. This was offset in part by higher property taxes and operating
expenses, reduced rental revenue due to dispositions, a reduction in lease termination
income, and an increase in the maintenance capital expenditure charge in the first
quarter of 2022. Additionally, on an annual basis, new leasing, renewals, and increased
parking revenue helped increase AFFO.
An increase in the number of Units outstanding from the issuance of Units in the
first quarter of 2022 contributed to offsetting the growth in FFO per Unit.
AFFO payout ratio improved as a result of the improved AFFO due to the factors
stated above. This is partially offset by an increase in Units outstanding, resulting
in higher total distributions.
26
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 OPERATIONAL METRICS
Renewals (GLA sq. ft.)
Q4 2022
Year 2022
374,000
1,056,000
Q4 2021 97,000 +285.6%
Year 2021 905,000 +16.7%
Renewal activity in the quarter consisted of 78,000 square feet in Rest of Canada,
269,000 square feet in Major Markets, and 27,000 square feet in VECTOM.
Full year renewal activity consisted of 452,000 square feet in Rest of Canada,
449,000 square feet in Major Markets, and 155,000 square feet in VECTOM. For the
year ended December 31, 2022, 306,000 square feet of Empire Company Limited
(“Empire”) renewals were completed.
Renewal spreads
Q4 2022
12.9%
Year 2022
7.0%
Q4 2021 5.0% +7.9%
Year 2021 3.4% +3.6%
Renewal activity in the quarter and 2022 includes a large office renewal at a
significant increase over expiring rental rates. Excluding this lease, renewal spreads
for the quarter and 2022 would be 3.3% and 4.2%, respectively. The primary driver
of renewal growth in the quarter and 2022 was office renewals at an increase of
41.0% and 27.1% over expiring rental rates, respectively. Also driving renewal growth
in the quarter and year were retail plaza renewals at increases of 5.6% and 5.8% over
expiring rental rates, respectively.
Committed occupancy
Year 2022
96.9%
Year 2021 96.2% +0.7%
Economic occupancy
Year 2022
94.8%
Year 2021 95.6% -0.8%
Record committed occupancy of 96.9% included 394,000 square feet of space
committed in the quarter. Approximately 373,000 square feet of committed space is in
VECTOM and Major Markets, including Empire leased space of 304,000 square feet
in Calgary, Alberta and 31,000 square feet in Burlington, Ontario.
Economic occupancy was negatively impacted by the addition of approximately
304,000 square feet of development GLA at the Voilà CFC 3 in Calgary, Alberta, with
economic occupancy expected in mid 2023. Excluding the impact of Voilà CFC 3,
economic occupancy would be 96.4%. New leases of 349,000 square feet outpaced
lease expiries and other changes by 152,000 square feet. Notable new leases include
Empire’s Voilà spoke facilities in Ottawa, Ontario and Quebec City, Quebec, six new
Dollarama leases totalling 56,000 square feet and a 42,000 square foot office lease
in Halifax, Nova Scotia.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL CONDITION METRICS
Interest coverage ratio*
Q4 2022
3.26x
Year 2022
3.28x
Q4 2021 3.06x +0.20x
Year 2021 3.01x +0.27x
Debt to gross fair value* (D/GFV)
Q4 2022
41.8%
Q4 2021 45.3% -3.5%
Q4 2021
45.3%
Q4 2020 50.7% -5.4%
The improvement in interest coverage ratio for both the quarter and the year
compared to the same periods in the prior year is due to reduced total leverage
since the fourth quarter of 2021, including lower mortgage interest expense and
increased property revenue resulting primarily from acquisitions and increased
rent from modernization investments.
The improvement in D/GFV since the fourth quarter of 2021 is the result of lower
outstanding debt due to mortgage repayments funded by an equity raise in
January 2022 and dispositions throughout the year.
Debt to trailing 12 months adjusted EBITDA* (D/EBITDA)
Q4 2022
8.02x
Q4 2021 8.99x -0.97x
The improvement in D/EBITDA ratio compared to the same period in 2021 is due
to lower outstanding debt at the fourth quarter of 2022 resulting from mortgage
repayments and dispositions. Increased operating income also contributed to the
improvement in EBITDA.
Available liquidity – unutilized credit facilities
Q4 2022
$583,003
Q4 2021 $507,777 +14.8%
Crombie entered into a credit agreement in the fourth quarter of 2022 for an
unsecured non-revolving credit facility resulting in an increase in available liquidity
compared to the fourth quarter of 2021. Also contributing to this increase was the
repayment of outstanding credit facilities.
28
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 GLOSSARY OF TERMS
Adjusted debt*
Adjusted EBITDA*
Represents debt, including Crombie’s share of debt held in equity-accounted joint ventures, excluding transaction costs, which
Crombie believes 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 and debt to trailing 12 months adjusted EBITDA.
Represents earnings before interest, taxes, depreciation, and amortization, excluding certain items such as amortization of tenant
incentives, impairment of investment properties, gain (loss) on disposal of investment properties, and gain on distribution from
equity-accounted investments. It includes Crombie’s share of revenue, operating expenses, and general and administrative expenses
from equity-accounted joint ventures. Adjusted EBITDA is a non-GAAP measure that is used as an input in several of our debt metrics.
Adjusted interest
expense*
Represents finance costs from operations, including Crombie’s share of interest from equity-accounted joint ventures, excluding
amortization of deferred financing costs. Adjusted interest expense is a non-GAAP measure that is used in the calculation of our
interest service coverage and debt service coverage ratios.
AFFO*
AMR
CFC
CMA
Adjusted funds from operations. Crombie follows the recommendations of REALPAC’s January 2022 guidance in determining AFFO.
Annual minimum rent. This represents annualized fixed minimum rent 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 space held in equity-accounted joint ventures).
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 January 2022 guidance in determining FFO.
Gross leasable area (excluding residential unless noted as proportionately consolidated).
International Financial Reporting Standards.
Joint operations
Properties in which Crombie owns partial interests. These co-owned properties are subject to proportionate consolidation, the results
of which are reflected in Crombie’s operating and financial results, based on the proportionate interest in such joint operations.
Lease termination income Revenue derived from the early termination of a lease. Lease termination occurs when a tenant desires to end occupancy prior to
the lease end date.
LUI
Major Markets
Modernization
Land use intensification. Development of vacant or previously unused land resulting in increased GLA.
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 2021 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 exclude 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 as required under IFRS.
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 a certain few additional properties that 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, customer fulfillment centres (“CFC”), and spokes.
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.
Spokes
Sq. ft.
Spokes are cross dock facilities developed to support CFCs, the hubs of Empire’s hub and spoke network.
Square footage.
Unencumbered assets
Represents assets that have not been pledged as security or collateral under a secured credit agreement or mortgage.
VECTOM
Vancouver, Edmonton, Calgary, Toronto, Ottawa-Gatineau, Montreal, as defined by Statistics Canada 2021 boundaries for census
metropolitan areas and census agglomeration.
WATM
Weighted average term to maturity.
Zoning applications
submitted
A formal municipal rezoning application has been submitted for the purpose of achieving a new land use (i.e. residential, mixed-use)
and generally to obtain higher levels of density and building height.
* See “Non-GAAP Financial Measures”, starting on page 82, for more information on Crombie’s non-GAAP financial measures and reconciliations thereof.
29
MANAGEMENT’S DISCUSSION AND ANALYSIS PORTFOLIO REVIEW
TOTAL PORTFOLIO REVIEW INCLUSIVE OF JOINT VENTURES
Crombie holds partial ownership interests in six joint ventures, five of
which currently hold properties. These joint ventures are all subject to
equity accounting. The results of these equity-accounted investments
are not included in certain financial metrics, such as net property
income, property cash NOI*, or same-asset property NOI*, unless it is
specifically indicated that such metrics are presented on a proportionate
consolidation basis. Below are select operating metrics presented on a
proportionate consolidation basis.
MARKET CLASS
Crombie’s portfolio of GLA and fair value, inclusive of joint ventures at Crombie’s share, consisted of the following as at December 31, 2022:
PORTFOLIO GLA BY MARKET CLASS (SQ. FT.)
PORTFOLIO FAIR VALUE BY MARKET CLASS (%)
as at December 31, 2022
as at December 31, 2022
40.6%
34.1%
46.2%
28.7%
25.3%
25.1%
VECTOM
Major Markets
Rest of Canada
VECTOM
Major Markets
Rest of Canada
The table below provides details of the average capitalization rate (weighted by stabilized trailing NOI including joint ventures) by market class:
VECTOM
Major Markets
Rest of Canada
Weighted average portfolio capitalization rate
December 31, 2022
December 31, 2021
4.75%
6.18%
6.94%
5.74%
4.58%
5.91%
6.55%
5.54%
The recent expansion in Crombie’s weighted average capitalization
rates has been partially offset by development completions, and strong
demand for grocery-anchored assets.
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, and the “Risk
Management” section of this MD&A, under “Capitalization Rate Risk” in
the “Risk Factors Related to the Business of Crombie” section.
30
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 VECTOM
Major Markets
Rest of Canada
Total
GLA (sq. ft.)
December 31, 2022
December 31, 2021
6,470,000
4,810,000
7,695,000
5,693,000
4,739,000
7,720,000
18,975,000
18,152,000
When compared to December 31, 2021, VECTOM GLA increased by
777,000 square feet primarily due to the substantial completion of Bronte
Village, in Oakville, during the first quarter of 2022 and of Voilà CFC 3, in
Calgary, during the fourth quarter of 2022. Major Markets increased by
71,000 square feet and Rest of Canada decreased by 25,000 largely due
to three investment properties changing from Rest of Canada to Major
Markets as a result of changes to census metropolitan area/census
agglomeration boundaries defined by Statistics Canada, partially offset
by acquisition and disposition activity.
ASSET TYPE
Crombie’s portfolio of GLA and fair value, inclusive of joint ventures at Crombie’s share, consisted of the following as at December 31, 2022.
PORTFOLIO GLA BY ASSET TYPE (SQ. FT.)
PORTFOLIO FAIR VALUE BY ASSET TYPE (%)
as at December 31, 2022
as at December 31, 2022
2.7%
12.7%
5.0%
79.6%
1.5%
8.2%
10.1%
3.0%
77.2%
Retail
Office
Retail-related
industrial
Mixed-use
residential
Retail
Office
Retail-related
industrial
Mixed-use
residential
Other1
(1) Other includes properties under development (PUD) and land.
Retail properties represent 79.6% of Crombie’s GLA and 77.2% of fair
value at December 31, 2022, compared to 83.0% of Crombie’s GLA and
81.1% of fair value at December 31, 2021.
Retail
Office
Retail-related industrial
Mixed-use residential
Total
GLA (sq. ft.)
December 31, 2022
December 31, 2021
15,093,000
15,068,000
954,000
2,414,000
514,000
954,000
1,855,000
275,000
18,975,000
18,152,000
When compared to December 31, 2021, mixed-use residential
increased by 239,000 square feet due to Bronte Village, in Oakville,
reaching substantial completion. Retail-related industrial increased
559,000 square feet due to the acquisition of the remaining 50%
interest in a distribution centre, in Terrebonne, Quebec, the substantial
completion of Voilà CFC 3, in Calgary, Alberta in the fourth quarter
of 2022, and the development of two Voilà spoke facilities, located in
Ottawa, Ontario and Quebec City, Quebec.
31
MANAGEMENT’S DISCUSSION AND ANALYSIS PORTFOLIO REVIEW – EXCLUDING JOINT VENTURES
As at December 31, 2022, Crombie’s property portfolio consisted of
full ownership interests in 228 investment properties, and partial
ownership interests in 61 investment properties held in joint operations.
In addition to investment properties, Crombie also has full ownership
interests in five properties under development (“PUD”), and a partial
ownership in two properties under development held in joint operations.
Together, Crombie’s share of these 289 investment properties contains
approximately 18.4 million square feet of GLA in all 10 provinces.
Partial ownership interests are reflected in our consolidated balance
sheet and income statement, based on our proportionate ownership in
such joint operations.
Crombie’s partial ownership interests in six joint ventures, five of
which currently hold investment properties, are not included in the
following sections.
MARKET CLASS
Crombie’s presence in high-growth VECTOM and Major Markets has been increasing through acquisitions and large-scale developments to
strategically elevate portfolio quality and strength.
PORTFOLIO GLA BY MARKET CLASS (SQ. FT.)
PORTFOLIO FAIR VALUE BY MARKET CLASS (%)
as at December 31, 2022
as at December 31, 2022
41.7%
32.3%
31.3%
41.5%
26.0%
27.2%
VECTOM
Major Markets
Rest of Canada
VECTOM
Major Markets
Rest of Canada
The table below provides details of the average capitalization rate (weighted by stabilized trailing NOI) by market class:
VECTOM
Major Markets
Rest of Canada
Weighted average portfolio capitalization rate
December 31, 2022
December 31, 2021
5.03%
6.18%
6.94%
5.94%
4.73%
5.91%
6.55%
5.65%
The recent expansion in Crombie’s weighted average capitalization
rates has been partially offset by development completions, and strong
demand for grocery-anchored assets.
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, and the
“Risk Management” section of this MD&A, under “Capitalization Rate
Risk” in the “Risk Factors Related to the Business of Crombie” section.
32
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Crombie’s portfolio diversification by market class of its investment properties as at December 31, 2022 and 2021 is as follows:
GLA (sq. ft.)
January 1,
2022
Net
Acquisitions
(Dispositions)
Other1
December 31,
2022
Number of
Investment
Properties
VECTOM
5,418,000
Major Markets
4,723,000
Rest of Canada
7,720,000
267,000
(157,000)
140,000
271,000
228,000
5,956,000
4,794,000
(165,000)
7,695,000
Total
17,861,000
250,000
334,000
18,445,000
88
63
138
289
% of AMR
34.0%
27.2%
38.8%
% NOI2
33.5%
28.1%
38.4%
100.0%
100.0%
Economic
Occupancy
Committed
Occupancy
94.2%
96.1%
94.4%
94.8%
99.3%
97.5%
94.7%
96.9%
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%
% NOI2
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%
(1) Changes in GLA include increases for completed developments and additions/expansions to GLA on existing properties, decreases primarily related to GLA removal in preparation for property
redevelopment, and reclassifications within market classes.
(2) Property cash NOI for the year ended December 31.
For the year ended December 31, 2022, three investment properties
at full interest and one investment property at partial interest were
acquired in VECTOM and Major Markets, partially offset by the
dispositions of five investment properties, resulting in a net increase of
110,000 square feet. Crombie also disposed of one 62,000 square foot
investment property at full interest, which had its GLA removed in the
second quarter of 2022 in “Other” changes as the lease was terminated
in anticipation of its disposition. Eight investment properties at full
interest were acquired in the Rest of Canada, partially offset by the
dispositions of two investment properties, resulting in a net increase
in GLA of 140,000 square feet. Crombie also completed the grocery-
anchored retail development of approximately 44,000 square feet at
Cobblestone in Grande Prairie, Alberta, included in “Other” changes.
Additionally, Crombie substantially completed the development of
Voilà CFC 3, totalling 304,000 square feet, and two retail-related
industrial spokes, totalling 20,000 square feet, in VECTOM and Major
Markets. Retail development expansions occurred at four grocery-
anchored properties, adding 3,000 square feet of GLA to VECTOM,
19,000 square feet of GLA to Major Markets, and 17,000 square feet
of GLA to Rest of Canada. These additions to GLA are included in
“Other” changes.
In the first quarter of 2022, three investment properties had a change in
market class as a result of changes to census metropolitan area/census
agglomeration boundaries defined by Statistics Canada. Approximately
210,000 square feet was reclassified as Major Markets from Rest of
Canada, and is captured under “Other” changes.
When compared to December 31, 2021, the percentage of total AMR
generated from VECTOM increased by 10 basis points, while Major
Markets’ total AMR increased by 60 basis points and Rest of Canada
decreased by 70 basis points. The increase in Major Markets is primarily
due to new leasing activity over the last twelve months, and, as noted
above, the reclassification of three investment properties to Major
Markets from Rest of Canada in the first quarter of 2022.
As at December 31, 2022, committed and economic occupancy stand
at 96.9% and 94.8%, respectively. Committed occupancy increased by
70 basis points compared to December 31, 2021. Economic occupancy
decreased by 80 basis points compared to December 31, 2021. Economic
occupancy was negatively impacted by the addition of approximately
304,000 square feet of development GLA at the Voilà CFC 3 in Calgary,
Alberta, with economic occupancy expected in mid 2023. Excluding the
impact of Voilà CFC 3, economic occupancy would be 96.4%.
Over the last twelve months, 584,000 net square feet of GLA was added
to the portfolio. The net increase in GLA is due to 589,000 square feet of
acquisitions, and 334,000 square feet of other changes throughout the
portfolio, primarily from development activity. This is partially offset by
the disposition of 339,000 square feet.
33
MANAGEMENT’S DISCUSSION AND ANALYSIS ASSET TYPE
Retail properties represent 81.7% of Crombie’s GLA and 84.0% of fair value at December 31, 2022, compared to 84.3% of GLA and 87.4% of fair value
at December 31, 2021.
PORTFOLIO GLA BY ASSET TYPE (SQ. FT.)
PORTFOLIO FAIR VALUE BY ASSET TYPE (%)
as at December 31, 2022
as at December 31, 2022
13.1%
81.7%
5.2%
1.6%
11.1%
3.3%
84.0%
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, 2022 and 2021 of its investment properties is as follows:
GLA (sq. ft.)
January 1,
2022
Net
Acquisitions
(Dispositions)
Other1
December 31,
2022
Number of
Investment
Properties
Retail
Office
Retail-related
industrial
15,052,000
15,000
10,000
15,077,000
954,000
—
—
954,000
1,855,000
235,000
324,000
2,414,000
278
5
6
% of AMR
% of NOI2
89.5%
3.9%
89.5%
3.9%
6.6%
6.6%
Total
17,861,000
250,000
334,000
18,445,000
289
100.0%
100.0%
Economic
Occupancy
Committed
Occupancy
96.1%
92.1%
87.4%
94.8%
96.7%
92.5%
100.0%
96.9%
GLA (sq. ft.)
January 1,
2021
Net
Acquisitions
(Dispositions)
Other1
December 31,
2021
Number of
Investment
Properties
% of AMR
% of NOI2
Economic
Occupancy
Committed
Occupancy
Retail
Office
Retail-related
industrial
15,064,000
(47,000)
35,000
15,052,000
953,000
—
1,000
954,000
1,983,000
(155,000)
27,000
1,855,000
Total
18,000,000
(202,000)
63,000
17,861,000
275
5
4
284
90.4%
3.9%
5.7%
100.0%
89.6%
3.8%
6.6%
100.0%
95.6%
87.4%
100.0%
95.6%
96.0%
91.8%
100.0%
96.2%
(1) Changes in GLA include increases for completed developments and additions/expansions to GLA on existing properties, decreases primarily related to GLA removal in preparation for property
redevelopment, and reclassifications within asset types.
(2) Property cash NOI for the year ended December 31.
For the year ended December 31, 2022, retail GLA had a net increase
of 15,000 square feet due to the acquisition of ten investment properties
at full interest, partially offset by the disposition of seven investment
properties at full interest. Crombie also disposed of one 62,000 square
foot investment property at full interest, which had its GLA removed
in the second quarter of 2022 in “Other” changes, as the lease was
terminated in anticipation of its disposition. Additionally, Crombie
completed a grocery-anchored retail development of approximately
44,000 square feet included in “Other” changes at an investment
property acquired in Grande Prairie, Alberta in the first quarter of 2022.
Retail-related industrial GLA increased by 235,000 square feet due
to the acquisition of the remaining partial interest in an investment
property from Empire.
During 2022, Crombie completed retail development expansions
at grocery-anchored plazas in Halifax (Timberlea), Nova Scotia,
Charlottetown (Stratford), Prince Edward Island, East St. Paul,
Manitoba, and Leduc, Alberta totalling 39,000 square feet. Additionally,
development of Voilà CFC 3 in Calgary, Alberta and two retail-related
industrial spokes in Ottawa, Ontario and Quebec City, Quebec, totalling
324,000 square feet, were added to GLA. These additions to GLA are
included in “Other” changes.
Economic occupancy decreased by 80 basis points compared to
December 31, 2021 and committed occupancy increased by 70 basis
points. A significant amount of activity occurred over the last twelve
months, resulting in an increase of portfolio GLA due to net acquisition
34
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 activity and development activity. Economic occupancy was negatively
impacted by the addition of approximately 304,000 square feet of
development GLA at the Voilà CFC 3 in Calgary, Alberta, with economic
occupancy expected in mid 2023. Excluding the impact of Voilà CFC 3,
economic occupancy would be 96.4%. Committed occupancy in our
office portfolio is at 92.5%, an increase from 91.8% at December 31, 2021,
primarily due to new tenants.
Through our development strategy, Crombie continues to evolve from
defensive grocery-anchored retail to a balance of grocery-anchored
retail and retail-related industrial, as well as large-scale mixed-use
residential properties, creating long-term value for local communities
and Unitholders. Grocery-anchored retail will continue to grow; however,
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 reflected in the “Total Portfolio Review
Inclusive of Joint Ventures” section of this MD&A on page 30.
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, 2022, 80% of our
AMR was generated from grocery-anchored properties, inclusive of
retail-related industrial, compared to 78% at December 31, 2021. The
increase is primarily due to the acquisition of grocery-anchored assets,
contractual rent step-ups, and new leasing. 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)
1.3%
1.4%
1.5%
1.8%
2.8%
3.4%
3.6%
3.6%
4.4%
4.5%
5.7%
6.6%
59.4%
Necessity-Based
Retailers1
Retail-Related
Industrial Tenants
Office & Hotel
Tenants
Medical, Professional
& Personal Services
Restaurants —
Quick Service & Cafe
Bank and
Financial Services
Apparel &
Accessories
Value-Focused
Retailers
Entertainment,
Sporting Goods &
Stationery Retailers
Restaurants —
Full Service
Fitness Facilities
& Supplements
Other
Home Improvement,
Furniture &
Auto Supplies
(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.
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 AMR, as at December 31, 2022.
Tenant
Empire Company Limited1
Shoppers Drug Mart
Dollarama
Province of Nova Scotia
Bank of Nova Scotia
Cineplex
Goodlife Fitness
Canadian Tire Corporation
Canadian Imperial Bank of Commerce
Government of Canada
Restaurant Brands International
Royal Bank of Canada
SAQ/Province of Quebec
Halifax Regional Municipality
Metro
TJX Companies
Pet Valu
Toronto Dominion Bank
Giant Tiger
Staples
Total
% of AMR
58.0%
GLA (sq. ft.)
Weighted Average
Remaining
Lease Term
10,784,000
11.6 years
2.5%
1.8%
1.6%
1.1%
1.0%
1.0%
1.0%
1.0%
0.9%
0.7%
0.6%
0.6%
0.5%
0.5%
0.5%
0.5%
0.5%
0.4%
0.4%
228,000
366,000
355,000
173,000
207,000
190,000
158,000
132,000
130,000
68,000
49,000
65,000
127,000
88,000
120,000
65,000
45,000
188,000
86,000
5.7 years
5.2 years
6.4 years
3.2 years
8.2 years
5.7 years
4.1 years
14.1 years
3.1 years
5.3 years
4.3 years
6.7 years
7.3 years
6.4 years
5.6 years
4.8 years
2.5 years
3.9 years
4.7 years
75.1%
13,624,000
10.4 years
DBRS Credit Rating
BBB
BBB (high)
BBB
A (high)
AA
—
—
BBB
AA
AAA
—
AA (high)
AA (low)
—
BBB
—
—
AA (high)
—
—
(1) Includes Sobeys and all other subsidiaries of Empire Company Limited.
Other than Empire, which accounts for 58.0% of AMR and Shoppers
Drug Mart, which accounts for 2.5% of AMR, no other tenant accounts for
more than 1.8% of Crombie’s AMR. Empire’s percent of AMR increased
by 130 basis points compared to December 31, 2021 as a result of the
acquisition of Empire properties over the last twelve months, two new
Voilà spoke locations taking occupancy, modernizations, and contractual
rent step-ups.
For the year ended December 31, 2022, Empire also represents 53.0%
of total property revenue. Total property revenue includes 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 9.0 years, which decreased 0.3 years as compared
to December 31, 2021. This remaining lease term is influenced by the
weighted average Empire remaining lease term of 11.6 years, which
decreased 0.6 years from December 31, 2021.
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 intensification, and the unlocking of major developments.
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 and those for
which planning activities are underway are also in this category until
such development activities commence and/or tenant leasing/renewal
activity is suspended. Same-asset property cash NOI* reflects Crombie’s
proportionate ownership of jointly operated properties (and excludes
any properties held in joint ventures).
36
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Crombie-owned Properties
Investment
Properties (“IP”)
Properties Under
Development (“PUD”)
Sub-total
Additional Properties
in Joint Ventures (“JV”)
Same-asset properties
Non same-asset properties:
Acquisitions – 2022
Other2
Active and completed major developments3
Total Properties
274
11
2
2
15
289
—
1
6
—
7
7
274
12
8
2
22
296
1
—
2
2
4
5
(1) Same-asset metrics throughout the MD&A do not include properties held in joint ventures.
(2) Other includes investment properties that have been designated for repositioning, land parcels included in PUD, or non-active major developments within a JV.
(3) Active and completed major development includes:
Avalon Mall retail (IP)
Total1
275
12
10
4
26
301
Voilà CFC 3 (IP)
Le Duke (JV)
Bronte Village (JV)
Davie Street was developed as both a retail (Crombie-owned) and
residential (joint venture-owned) development. Davie Street is treated as
two properties, one being Crombie-owned investment property (retail),
and the other a separate completed major development (residential
rental property) within the 1600 Davie Limited Partnership Joint Venture
(additional properties in joint ventures – same-asset properties).
The following table illustrates the movement in Crombie’s same-asset
properties as at December 31, 2022.
Same-asset properties December 31, 2021
Transfers from acquisitions2
Transfers to dispositions
Transfers to/from other non same-asset properties
Transfers to/from active and completed major developments
Total same-asset properties December 31, 2022
(1) Same-asset metrics throughout the MD&A do not include properties held in joint ventures.
(2) Acquisitions transferred to same-asset were acquired in 2020 and 2021, and have a full 12 months of comparative results.
Investment
Properties (“IP”)
Additional Properties
in Joint Ventures (“JV”)
267
10
(8)
2
3
274
—
—
—
—
1
1
Total1
267
10
(8)
2
4
275
STRATEGIC ACQUISITIONS AND DISPOSITIONS
As at December 31, 2022, GLA at Crombie’s interest in its investment properties was 18.4 million square feet compared to 17.9 million square feet as at
December 31, 2021. The net increase in GLA was driven by 589,000 square feet of acquisitions and the addition of 406,000 square feet of development
square footage entering GLA, partially offset by 339,000 square feet of dispositions and 74,000 square feet of reduction adjustments to GLA related to
property repositioning.
ACQUIRED GLA BY MARKET CLASS (SQ. FT.)
DISPOSED GLA BY MARKET CLASS (SQ. FT.)
as at December 31, 2022
as at December 31, 2022
39.6%
46.3%
70.8%
27.4%
1.8%
14.1%
VECTOM
Major Markets
Rest of Canada
VECTOM
Major Markets
Rest of Canada
37
MANAGEMENT’S DISCUSSION AND ANALYSIS
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 other 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, 2022, Crombie completed acquisitions
of 10 income-producing properties, the remaining 50% interest of
an existing income-producing retail-related industrial asset, one
land parcel (that has since been redeveloped by Crombie), and
one development property, for a total aggregate purchase price
of $107,761 excluding transaction and closing costs. Of the 13 acquisitions,
10 were acquired from Empire, our strategic partner. The remaining
three acquisitions are or will be anchored by Empire. These acquisitions
added 589,000 square feet and potential for future density to be added
to Crombie’s GLA.
Of the 13 acquisitions, eight are located in Rest of Canada markets,
of which the majority are grocery-anchored assets. The remaining
acquisitions, located in VECTOM and Major Markets, are also grocery-
anchored assets, inclusive of retail-related industrial, and a parcel of
development land.
Date
Property
Location
Vendor
Strategy
2022 First Quarter
January 6, 2022
January 7, 2022
Division Street
Cobourg, ON
Related Party
Income-producing
Cobblestone2
Grande Prairie, AB
Related Party
Income-producing
January 25, 2022
Terrebonne DC3
Terrebonne, QC
Related Party
Income-producing
January 27, 2022
Princess Street
Kingston, ON
Related Party
Income-producing
January 27, 2022
Court Street
Thunder Bay, ON
Related Party
Income-producing
January 27, 2022
33rd Street West
Saskatoon, SK
Related Party
Income-producing
January 27, 2022
Anderson Street
Nelson, BC
Related Party
Income-producing
January 27, 2022
Dawson Road
Thunder Bay, ON
Related Party
Income-producing
January 28, 2022
Rue Principale
Tracadie-Sheila, NB Third Party
Income-producing
March 24, 2022
Lewis Estates
Edmonton, AB
Related Party
Income-producing
2022 Second Quarter
May 3, 2022
May 30, 2022
2022 Third Quarter
Highland Road
Kitchener, ON
Related Party
Income-producing
Centennial Drive Martensville, SK
Third Party
Development
July 7, 2022
Plummer Avenue
New Waterford, NS Third Party
Income-producing
Total acquisitions for the year ended December 31, 2022
Total acquisitions for the year ended December 31, 2021
(1) Prices are stated before transaction and closing costs.
(2) Acquisition of a parcel of retail land developed by Crombie.
(3) Relates to an acquisition of the remaining 50% interest in a pre-existing retail-related industrial property.
Ownership
Number of
Investment
Properties
Interest
Sq. ft.
Price1
1
1
—
1
1
1
1
1
1
1
9
1
—
1
1
11
7
100%
100%
31,000
$
—
50%
235,000
100%
100%
100%
100%
100%
100%
100%
100%
100%
35,000
39,000
16,000
39,000
54,000
31,000
38,000
518,000
67,000
—
67,000
3,300
2,567
38,050
8,035
5,900
3,800
8,100
8,200
2,000
10,520
90,472
11,000
4,939
15,939
100%
4,000
1,350
589,000
$ 107,761
228,000
$
62,887
Strategic Dispositions
Over the years, Crombie has worked to optimize its portfolio through
traditional dispositions and innovative partnerships. In line with our
strategy of recycling capital through dispositions at or above IFRS
fair values, Crombie uses the proceeds for debt reduction, to fund
development projects, to increase Crombie’s concentration in VECTOM
and Major Markets, and to seize other higher-value opportunities.
Some of these opportunities include supporting Empire’s growth into
urban markets and 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 throughout 2022. Four Major
Markets investment properties were disposed of and one property
under development was disposed to a joint venture. Additionally, two
investment properties was disposed of in VECTOM and two investment
properties were disposed of in Rest of Canada markets.
38
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Date
Property
Location
2022 Second Quarter
June 14, 2022
2022 Third Quarter
August 8, 2022
August 10, 2022
August 22, 2022
August 26, 2022
September 8, 2022
September 15, 2022
2022 Fourth Quarter
November 1, 2022
November 16, 2022
Bernard Avenue
Kelowna, BC
Gaetz Plaza
Rue de Verdun
King Street
Red Deer, AB
Montreal, QC
Cambridge, ON
Opal Ridge (Penhorn)1
Halifax, NS
Milltowne Plaza
Grimbsy Centre
Burlington, ON
Grimsby, ON
King George Boulevard Surrey, BC
Barrington Place
Halifax, NS
Total dispositions for the year ended December 31, 2022
Total dispositions for the year ended December 31, 2021
Ownership
Number of
Investment
Properties
Interest
Sq. ft.
Net
Property
Income
Price
1
1
1
1
—
1
1
5
1
1
2
8
7
100%
19,000
$
394
$
10,250
100%
100%
100%
100%
100%
100%
100%
100%
74,000
6,000
9,000
—
11,000
29,000
1,593
26,500
52
102
—
326
458
1,125
1,900
7,701
7,600
7,300
129,000
2,531
52,126
—2
191,000
191,000
1,519
1,732
3,251
87,087
26,331
113,418
339,000 $
6,1763 $
175,794
430,0004 $
4,5245 $
209,188
(1) A parcel of land adjacent to existing retail properties was disposed to a joint venture.
(2) Square footage totalling 62,000 for this property was removed from GLA in the second quarter of 2022 as the lease was terminated at that time in anticipation of its disposition.
(3) Reflects actual net property income earned on 2022 dispositions for the full year ended December 31, 2021. Total actual net property income for the year ended December 31, 2022 for the disposed
properties prior to disposition was $4,470, as reflected in our consolidated results.
(4) Square footage totalling 33,000 for one of the 2021 disposition properties was removed from GLA in the second quarter of 2020 as the property was slated for redevelopment.
(5) Reflects actual net property income earned on 2021 dispositions for the full year ended December 31, 2020. Total actual net property income for the year ended December 31, 2021 for all disposed
properties prior to disposition was $7,268, as reflected in our consolidated results.
NON-MAJOR DEVELOPMENT
Property development is a strategic priority for Crombie, and included in that is non-major development. Non-major developments are accretive
with shorter project durations and less overall risk than our major development projects. For the year ended December 31, 2022, Crombie added
102,000 square feet of GLA, at Empire-anchored sites, enhancing overall portfolio quality.
Property Name
Market Class
March 31,
2022
June 30,
2022
September 30,
2022
December 31,
2022
Total GLA
Tenants
Three months ended
Cobblestone
Rest of Canada
44,000
Bird’s Hill Road Major Markets
Don Reid Drive
VECTOM
Marketway Lane Major Markets
Kinlock Plaza
Rest of Canada
Leduc Centre
VECTOM
Total
3,000
19,000
16,000
17,000
—
99,000
—
—
—
—
—
3,000
3,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
44,000
FreshCo, Buster’s Pizza & Donair,
Mucho Burrito, Plant Life, Edo Japan,
and Pet Valu
3,000
Dairy Queen
19,000
Voilà Spoke
16,000
Dollarama, Sobeys Fast Fuel, and NSLC
17,000 Mezza Lebanese Kitchen, Pizza Hut
Express, Starbucks, and SPIN/CO
3,000
Church’s Texas Chicken
102,000
39
MANAGEMENT’S DISCUSSION AND ANALYSIS OPERATIONAL PERFORMANCE REVIEW
OCCUPANCY AND LEASING ACTIVITY
The portfolio occupancy and committed space activity by market class and asset type for the year ended December 31, 2022 was as follows:
Occupied Space (sq. ft.)
January 1,
2022
Net
Acquisitions
(Dispositions)
VECTOM
5,402,000
267,000
Major Markets
4,451,000
(149,000)
Rest of Canada
7,219,000
142,000
New
Leases1
60,000
178,000
111,000
Lease
Expiries
(37,000)
(47,000)
Other
Changes2
December 31,
2022
Economic
Occupancy
Committed
Space
(sq. ft.)3
Total
Committed
Space
(sq. ft.)
Committed
Occupancy
(81,000)
5,611,000
173,000
4,606,000
(30,000)
(175,000)
7,267,000
94.2%
96.1%
94.4%
305,000
5,916,000
68,000
21,000
4,674,000
7,288,000
99.3%
97.5%
94.7%
96.9%
Total
17,072,000
260,000
349,000
(114,000)
(83,000)
17,484,000
94.8%
394,000
17,878,000
Occupied Space (sq. ft.)
January 1,
2022
Net
Acquisitions
(Dispositions)
New
Leases1
Lease
Expiries
Other
Changes2
December 31,
2022
Economic
Occupancy
Committed
Space
(sq. ft.)3
Total
Committed
Space
(sq. ft.)
Committed
Occupancy
Retail
Office
Retail-related
industrial
14,383,000
25,000
279,000
(113,000)
(79,000)
14,495,000
834,000
—
50,000
(1,000)
(4,000)
879,000
96.1%
92.1%
86,000
14,581,000
4,000
883,000
1,855,000
235,000
20,000
—
—
2,110,000
87.4%
304,000
2,414,000
Total
17,072,000
260,000
349,000
(114,000)
(83,000)
17,484,000
94.8%
394,000
17,878,000
96.7%
92.5%
100.0%
96.9%
(1) New leases include new lease and expansions to existing properties.
(2) Other changes include amendments to existing leases; lease terminations and surrenders; bankruptcies; space certifications; and reclassifications within market classes or asset types.
(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.
Committed occupancy has increased from 96.2% at December 31, 2021
to 96.9% at December 31, 2022. During 2022, Crombie had an increase
from net acquisition activity of 260,000 square feet and had new leases
outpace lease expiries by 235,000 square feet.
In the first quarter of 2022, three investment properties had a change in
market class as a result of changes to census metropolitan area/census
agglomeration boundaries defined by Statistics Canada. Approximately
209,000 square feet of occupied GLA was reclassified as Major Markets
from Rest of Canada, and is captured under “Other Changes”.
Committed space in our retail properties portfolio was 96.7% at
December 31, 2022, an increase from 96.0% at December 31, 2021,
primarily due to strong new leasing activity across the portfolio.
Committed space in office properties was 92.5% at December 31, 2022,
which increased from 91.8% at December 31, 2021. This was primarily
due to new tenants at certain office properties. Committed space in
retail-related industrial properties of 100.0 % at December 31, 2022
remained constant from 100.0 % at December 31, 2021. Economic
occupancy was negatively impacted by the addition of approximately
304,000 square feet of development GLA at the Voilà CFC 3 in Calgary,
Alberta, with economic occupancy expected in mid 2023. Excluding
the impact of Voilà CFC 3, economic occupancy would be 96.4%.
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 2022, Crombie acquired the
remaining 50% interest in a distribution centre, in Terrebonne, Quebec,
from Empire. Additionally, two Voilà spoke facilities developed by
Crombie, located in Ottawa, Ontario, and Quebec City, Quebec moved
into economic occupancy.
The portfolio average AMR per occupied square foot for our income-
producing properties was $17.07 as at December 31, 2022, an increase
of 0.8%, compared to $16.94 as at December 31, 2021.
40
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 NEW LEASING ACTIVITY
NEW LEASING BY MARKET CLASS (SQ. FT.)
NEW LEASING BY ASSET TYPE (SQ. FT.)
as at December 31, 2022
as at December 31, 2022
31.8%
17.2%
51.0%
5.7%
14.3%
80.0%
VECTOM
Major Markets
Rest of Canada
Retail
Office
Retail-related industrial
New leases increased occupancy by 349,000 square feet at
December 31, 2022, at an average first year rate of $21.59 per
square foot.
Crombie is focused on increasing its presence in VECTOM and Major
Markets. For the year ended December 31, 2022, 68.2% of new leases,
equivalent to 238,000 square feet, were completed in these markets.
New leases of 111,000 square feet occurred in Rest of Canada markets
during the year ended December 31, 2022. The vast majority of
the portfolio’s vacancy is within this market, as few Rest of Canada
properties have material vacancy.
RENEWAL ACTIVITY
At December 31, 2022, 394,000 square feet of GLA at an average
first year rate of $20.50 per square foot was committed, with tenants
expected to take possession throughout 2023. VECTOM and Major
Markets represent 373,000 square feet of committed space, including
304,000 square feet in Calgary, Alberta, and 31,000 square feet in
Burlington, Ontario.
RENEWAL BY MARKET CLASS (SQ. FT.)
as at December 31, 2022
RENEWAL BY ASSET TYPE (SQ. FT.)
as at December 31, 2022
)
s
0
0
0
’
(
.
t
f
.
q
S
500
400
300
200
100
0
)
s
0
0
0
’
(
.
t
f
.
q
S
900
600
300
0
VECTOM
Major
Markets
Rest of
Canada
Retail
Office
2022 renewals
Early renewals completed
2022 renewals
Early renewals completed
For the three months and year ended December 31, 2022, renewal activity for our portfolio was as follows:
Three months ended December 31, 2022
Year ended December 31, 2022
Square Feet
Rate PSF
Growth %
Square Feet
Rate PSF
Growth %
2022 Renewals
Future Year Renewals
Total
197,000
177,000
374,000
$14.71
$18.87
$16.68
1.6%
24.9%
12.9%
648,000
408,000
1,056,000
$18.04
$20.63
$19.04
3.4%
12.4%
7.0%
41
MANAGEMENT’S DISCUSSION AND ANALYSIS
Crombie’s renewal activity for the three months ended December 31,
2022 included retail renewals of 268,000 square feet with an
increase of 4.4% over expiring rental rates. Driving this growth was
188,000 square feet of renewals at retail plazas, with an increase of
5.6% over expiring rental rates. Renewal spreads are based on the first
year rate and do not factor in any additional rent step-ups that may
take place throughout the lease term. When comparing the expiring
rental rates to the weighted average rental rate for the renewal term,
Crombie achieved an increase of 15.0% for the three months ended
December 31, 2022.
For the year ended December 31, 2022, Crombie renewed
897,000 square feet of retail renewals with an increase of 4.6% over
expiring rental rates. Driving this growth was 531,000 square feet of
renewals at retail plazas, with an increase of 5.8% over expiring rental
rates. When comparing the expiring rental rates to the weighted
average rental rate for the renewal term, Crombie achieved an increase
of 8.5% for the year ended December 31, 2022.
Crombie continues to demonstrate portfolio stability with approximately
57.2% of total renewals occurring in VECTOM and Major Markets. Total
renewal growth was positively impacted by the 155,000 square feet of
renewals in VECTOM at an average first year rate of $26.24 per square
foot, an increase of 5.4% over expiring rental rates. Major Markets saw
renewals of 449,000 square feet, with an increase of 12.6% over expiring
rental rates or an average first year rate of $17.12 per square foot. The
remaining 452,000 square feet of renewals was in Rest of Canada at an
average first year rate of $18.47, with an increase of 3.0% over expiring
rental rates.
Crombie proactively manages its lease maturities, taking advantage
of opportunities to renew tenants prior to expiration. During the year
ended December 31, 2022, approximately 408,000 square feet of
renewals related to future year expiries were completed.
LEASE MATURITIES
The following table sets out, as at December 31, 2022, 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 AMR per square foot
at the time of expiry.
Year
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Thereafter
Total
Number of Leases1
Renewal Area (sq. ft.)
% of Total GLA
283
186
156
163
162
85
91
46
88
81
262
1,603
1,155,000
841,000
1,001,000
985,000
1,163,000
778,000
1,061,000
614,000
1,090,000
549,000
8,641,000
17,878,000
6.3%
4.6%
5.4%
5.3%
6.3%
4.2%
5.8%
3.3%
5.9%
3.0%
46.8%
96.9%
Average AMR
per sq. ft. at Expiry
$
16.03
18.38
16.92
17.93
17.82
18.00
19.00
16.59
19.75
21.29
20.39
$
19.19
(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, 2022, 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 AMR per square foot at the time of expiry.
Year
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Thereafter
Total2
Number of Leases1
Renewal Area (sq. ft.)
% of Total GLA
17
2
7
15
14
9
16
8
14
4
208
314
172,000
68,000
255,000
305,000
416,000
307,000
543,000
294,000
513,000
145,000
8,101,000
11,119,000
0.9%
0.3%
1.4%
1.7%
2.3%
1.7%
2.9%
1.6%
2.8%
0.8%
43.9%
60.3%
Average AMR
per sq. ft. at Expiry
$
10.21
13.60
13.34
14.00
12.13
15.68
16.02
13.62
16.80
18.91
20.37
$
18.80
(1) Assuming tenants do not holdover on a month-to-month basis or exercise renewal options or termination rights.
(2) Two Empire leases, totalling approximately 335,000 square feet, included in committed occupancy.
42
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 FINANCIAL PERFORMANCE REVIEW
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
2022
2021
Variance
2020
Property revenue
Property operating expenses
Net property income
$ 107,939
$ 103,832
$
4,107
$ 419,591
$ 408,892
$
10,699
$ 388,733
37,123
70,816
32,430
71,402
(4,693)
137,773
(586)
281,818
125,861
283,031
(11,912)
129,872
(1,213)
258,861
Net property income margin percentage
65.6%
68.8%
(3.2)%
67.2%
69.2%
(2.0)%
66.6%
Other items:
Gain on disposal of investment properties
Impairment of investment properties
Depreciation and amortization
General and administrative expenses
Finance costs – operations
Gain on distribution from equity-accounted
investments
Loss from equity-accounted investments
Operating income before taxes
Taxes – current
Operating income attributable to Unitholders
Distributions to Unitholders
Change in fair value of financial instruments
Increase (decrease) in net assets
attributable to Unitholders
Operating income attributable to
Unitholders per Unit, basic
Basic weighted average Units outstanding
(in 000’s)
Distributions per Unit to Unitholders
Other Non-GAAP Performance Metrics
Same-asset property cash NOI*
FFO*
FFO* per Unit – basic
FFO* payout ratio (%)
AFFO*
AFFO* per Unit – basic
AFFO payout ratio (%)
62,584
—
(18,991)
(6,063)
(20,623)
—
(1)
87,722
(4)
87,718
(39,697)
(1,704)
46,317
0.49
178,095
0.22
67,704
52,104
0.29
76.2%
45,061
0.25
88.1%
$
$
$
$
$
$
$
$
42,762
(1,300)
(18,805)
(7,367)
(22,639)
15,525
(685)
78,893
(163)
78,730
(36,637)
(1,018)
41,075
0.48
164,592
0.22
67,103
46,948
0.29
78.0%
40,468
0.25
90.5%
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
19,822
1,300
(186)
1,304
2,016
(15,525)
684
8,829
159
8,988
(3,060)
(686)
80,804
(10,400)
(79,836)
(19,547)
(83,014)
2,933
(4,954)
56,525
(2,539)
(75,763)
(25,484)
(92,788)
15,525
(2,941)
167,804
155,566
(4)
(165)
167,800
155,401
(157,840)
(144,559)
2,323
(2,972)
5,242
$
12,283
0.01
$
0.95
13,503
176,325
—
$
0.89
$
$
$
7,870
0.96
162,130
0.89
601
$ 270,045
$ 265,900
5,156
$ 203,737
$ 185,032
—
$
1.16
$
(1.8)%
77.5%
1.14
78.1%
4,593
$ 177,297
$ 157,532
—
$
(2.4)%
$
1.01
89.0%
0.97
91.8%
24,279
(7,861)
(4,073)
5,937
9,774
(12,592)
(2,013)
12,238
161
12,399
(13,281)
5,295
3,335
(6,600)
(75,567)
(20,534)
(91,808)
—
(72)
67,615
(7)
67,608
(140,302)
805
$
$
$
$
$
$
$
$
4,413
$ (71,889)
(0.01)
$
0.43
14,195
157,448
—
$
0.89
4,145
$ 244,853
18,705
$ 165,850
0.02
$
(0.6)%
1.05
84.6%
19,765
$ 138,963
0.04
$
0.88
(2.8)%
101.0%
43
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 $8,988, or
11.4%, compared to the fourth quarter of 2021 primarily due to higher
gain on disposal of investment properties of $19,822 in the fourth quarter
of 2022 and lower finance costs from operations of $2,016 resulting
primarily from reduced mortgage interest expense due to mortgage
repayments and dispositions, and the redemption of Series D senior
unsecured notes in the fourth quarter of 2022. The growth in operating
income was partially offset by a lower gain on distribution from equity-
accounted investments of $15,525 compared to the fourth quarter of
2021 resulting from cash distributions received from 1600 Davie Limited
Partnership in excess of our investment in the joint venture.
A decrease in net property income of $586 was primarily due to an
increase of $3,423 in recoverable property tax expense resulting
primarily from development, lease conversions, acquisitions, and higher
assessments. Rental revenue decreased by $2,616 due to properties that
were disposed, recoverable operating expenses increased $965 as a
result of higher repair costs, lease termination income was reduced by
$926, and tenant incentive amortization increased $691 primarily from
new leasing. The reduction in net property income is partially offset
by increased property tax recoveries of $3,155, income of $2,013 from
acquisitions, increased operating cost recoveries of $1,588, and $885 in
supplemental rent from modernization investments compared to the
fourth quarter of 2021.
Operating income attributable to Unitholders increased by $12,399, or
8.0%, on an annual basis primarily driven by higher gain on disposal
of investment properties of $24,279 compared to 2021. Finance costs
from operations decreased $9,774 due primarily to lower mortgage
interest expense resulting from mortgage repayments and dispositions.
The growth in operating income was offset in part by reduced gain
on distribution from equity-accounted investments of $12,592 resulting
from cash distributions received from 1600 Davie Limited Partnership in
excess of our investment in the joint venture in the fourth quarter of 2021.
An additional $7,861 in impairments was recognized in 2022 compared
to 2021. The impairments on three properties in the third quarter of
2022 were the result of continuing high vacancy at one property, the
demolition of a vacant building, and a recent redevelopment that
included a partial demolition.
A decrease in net property income of $1,213 compared to 2021 is
primarily due to a decrease of $10,900 in rental revenue from properties
that were disposed, and increased recoverable property tax expense
of $6,263 resulting primarily from development, lease conversions,
acquisitions, and higher assessments. Recoverable operating expenses
increased $5,285 due to higher repair costs, lease termination income
decreased by $3,473, and tenant incentive amortization increased by
$3,178 as a result of new leasing. This is partially offset by income of
$7,831 from acquisitions, increased property tax recoveries of $6,281,
increased operating cost recoveries of $5,836, $2,273 in supplemental
rent from modernization investments, increased parking revenue of
$1,634, and $1,500 from renewals and new leasing.
SAME-ASSET PROPERTY CASH NOI*
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 82, 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,
2022
2021
Variance
2022
2021
Variance
$
70,816
$
71,402
$
(586)
$ 281,818
$ 283,031
$
(1,213)
(1,648)
5,940
75,108
2,116
5,288
(1,998)
5,249
74,653
2,649
4,901
350
691
455
(533)
387
(5,432)
22,989
(9,486)
19,811
299,375
293,356
7,640
21,690
9,206
18,250
4,054
3,178
6,019
(1,566)
3,440
7,404
7,550
(146)
29,330
27,456
1,874
Same-asset property cash NOI*
$
67,704
$
67,103
$
601
$ 270,045
$ 265,900
$
4,145
(1) Refer to “Amortization of Tenant Incentives” on page 48 for a breakdown of tenant incentive amortization.
44
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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.
Same-asset property cash NOI* by asset type and market class is as follows:
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
%
2022
2021
Variance
%
VECTOM
Major Markets
Rest of Canada
$
24,125
$
24,560
20,650
22,929
19,234
23,309
Same-asset property cash NOI*
$
67,704
$
67,103
$
$
(435)
1,416
(380)
601
(1.8)% $
95,950
$
94,209
$
7.4%
(1.6)%
82,236
91,859
79,082
92,609
1,741
3,154
(750)
0.9%
$ 270,045
$ 265,900
$
4,145
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
Retail1
Office
Retail-related industrial2
$
60,528
$
60,140
2,968
4,208
2,815
4,148
Same-asset property cash NOI*
$
67,704
$
67,103
$
$
388
153
60
601
%
0.6%
5.4%
1.4%
2022
2021
Variance
$ 242,053
$ 238,700
$
3,353
11,890
16,102
11,583
15,617
307
485
0.9%
$ 270,045
$ 265,900
$
4,145
1.8%
4.0%
(0.8)%
1.6%
%
1.4%
2.7%
3.1%
1.6%
(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 same-asset properties include retail distribution centres owned in Toronto (100%), Calgary (50%), Montreal (50%), and Montreal (100% owned with 50% in same-asset and the
remaining 50% having been acquired in the first quarter of 2022).
For the three months ended:
For the year ended:
Same-asset property cash NOI increased by $601, or 0.9%, compared
to the fourth quarter of 2021 primarily due to strong occupancy,
higher supplemental rent of $813 from modernizations and capital
improvements, as well as increased parking revenue of $429. This
is offset in part by a decrease in lease termination income of $1,006
resulting from tenant surrenders in 2021. Same-asset property cash
NOI adjusted for the removal of lease termination income increased
by 2.4% compared to the same period in 2021.
On an annual basis, same-asset property cash NOI increased by
$4,145, or 1.6%, compared to 2021 primarily due to strong occupancy,
an increase in supplemental rent of $1,859 from modernizations and
capital improvements, and increased parking revenue of $1,634. This
is offset in part by a decrease in lease termination income of $2,765
resulting from tenant surrenders in 2021. Same-asset property cash
NOI adjusted for the removal of lease termination income increased
by 2.6% compared to 2021.
45
MANAGEMENT’S DISCUSSION AND ANALYSIS FUNDS FROM OPERATIONS (FFO)*
Crombie follows the recommendations of the January 2022 guidance of the Real Property Association of Canada (“REALPAC”) in calculating FFO*.
Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 82, for a more detailed discussion on FFO*.
The reconciliation of FFO* for the three months and year ended December 31, 2022 and 2021 is as follows:
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
2022
2021
Variance
Increase in net assets attributable to Unitholders
$
46,317
$
41,075
$
5,242
$
12,283
$
7,870
$
4,413
Add (deduct):
Amortization of tenant incentives
Gain on disposal of investment properties
Gain on distribution 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
5,940
(62,584)
—
—
18,630
1,426
59
915
5,249
(42,762)
(15,525)
1,300
18,437
841
58
620
691
(19,822)
15,525
(1,300)
193
585
1
295
22,989
(80,804)
(2,933)
10,400
78,383
4,697
230
2,975
19,811
(56,525)
(15,525)
2,539
74,359
2,267
225
2,480
3,178
(24,279)
12,592
7,861
4,024
2,430
5
495
Finance costs – distributions to Unitholders
39,697
36,637
3,060
157,840
144,559
13,281
Finance costs (income) – change in fair value of financial
instruments
1,704
1,018
686
(2,323)
2,972
(5,295)
FFO* as calculated based on REALPAC recommendations
$
52,104
$
46,948
Basic weighted average Units (in 000’s)
FFO* per Unit – basic
FFO* payout ratio (%)
178,095
164,592
$
$
0.29
76.2%
0.29
78.0%
$
$
5,156
$ 203,737
$ 185,032
13,503
176,325
162,130
—
$
1.16
$
(1.8)%
77.5%
1.14
78.1%
$
$
18,705
14,195
0.02
(0.6)%
For the three months ended:
For the year ended:
The increase in FFO of $5,156 is primarily due to lower finance costs from
operations driven by reduced mortgage interest expense of $2,436 as a
result of mortgage repayments and dispositions since the fourth quarter
of 2021. Additional increases in income are due to increased property
tax recoveries of $3,155, $2,013 from acquisitions since January 1, 2022,
increased operating cost recoveries of $1,588, and $885 in supplemental
rent from modernization investments compared to the same quarter
in 2021. A decrease in general and administrative expenses of $1,304 is
due primarily to a $1,129 reduction in Unit-based compensation costs
resulting from a decrease in Crombie’s Unit price from the same period
in 2021. A reduction in loss from equity-accounted investments of $684,
with increased FFO adjustments for equity-accounted investments
of $585, also contributed to the increase in FFO in the quarter. FFO
growth is offset in part by an increase of $3,423 in recoverable property
tax expense resulting primarily from development, lease conversions,
acquisitions, and higher assessments. Rental revenue decreased by
$2,616 due to dispositions and interest on floating rate debt increased
by $1,521 due to higher interest rates and higher average loan balances
compared to the same period in 2021. Additionally, recoverable
operating expenses increased $965 as a result of higher repair costs
and lease termination income decreased by $926.
On an annual basis, FFO increased $18,705 primarily driven by lower
finance costs from operations due to reduced mortgage interest
expense of $9,986 resulting from mortgage repayments and dispositions
since January 1, 2021 and higher capitalized interest of $1,671 as a result
of development activity in the current year. Income increased $7,831
from acquisitions, $6,281 from increased property tax recoveries, $5,836
from increased operating cost recoveries, $2,273 from supplemental
rent from modernization investments, $1,634 in parking revenue, and
$1,500 from renewals and new leasing. A reduction in general and
administrative expenses of $5,937 resulted primarily from a decrease
in Unit price and its impact on Unit-based compensation plans of
$5,649. The improvement in FFO is offset in part by a decrease of
$10,900 in rental revenue from dispositions, an increase of $6,263 in
recoverable property tax expense resulting primarily from development,
lease conversions, acquisitions, and higher assessments. Recoverable
operating expenses increased $5,285 due to higher repair costs, lease
termination income decreased by $3,473, and interest expense on
floating rate debt increased by $2,379 as a result of higher interest rates
and higher average loan balances during the year.
46
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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. Refer to the “Non-GAAP Financial Measures” section of this MD&A, starting on page 82, for a more detailed discussion.
The reconciliation of AFFO* for the three months and year ended December 31, 2022 and 2021 is as follows:
FFO* as calculated based on REALPAC recommendations
$
52,104
$
46,948
$
5,156
$ 203,737
$ 185,032
$
18,705
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
2022
2021
Variance
Add (deduct):
Straight-line rent adjustment
Straight-line rent adjustment included in loss
from equity-accounted investments
Internal leasing costs
(1,648)
(1,998)
350
(5,432)
(9,486)
4,054
Maintenance expenditures on a square footage basis
(4,620)
(4,006)
AFFO* as calculated based on REALPAC recommendations
$
45,061
$
40,468
Basic weighted average Units (in 000’s)
AFFO* per Unit – basic
AFFO* payout ratio (%)
178,095
164,592
$
0.25
$
88.1%
0.25
90.5%
140
(915)
144
(620)
(4)
(295)
(614)
493
(2,975)
(18,526)
509
(2,480)
(16,043)
4,593
$ 177,297
$ 157,532
13,503
176,325
162,130
—
$
(2.4)%
$
1.01
89.0%
0.97
91.8%
(16)
(495)
(2,483)
19,765
14,195
0.04
(2.8)%
$
$
$
$
For further details on Crombie’s maintenance expenditures, refer to the “Non-GAAP Financial Measures” section of this MD&A.
For the three months and year ended:
The improvement in AFFO is primarily due to the same factors
impacting FFO as described above. This is offset in part by the impact
of the increase in the maintenance capital expenditure charge in the
first quarter of 2022 from $0.90 to $1.00 per square foot of weighted
average GLA.
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 2022
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. Subject to approval of the
Board of Trustees, Crombie intends 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 we 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,
2022
2021
Variance
2022
2021
Variance
$
23,459
16,238
$
39,697
$
$
21,645
14,992
36,637
$
$
1,814
1,246
$
93,190
$
85,416
64,650
59,143
3,060
$ 157,840
$ 144,559
$
$
7,774
5,507
13,281
76.2%
88.1%
78.0%
90.5%
(1.8)%
(2.4)%
77.5%
89.0%
78.1%
91.8%
(0.6)%
(2.8)%
(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.
47
MANAGEMENT’S DISCUSSION AND ANALYSIS Pursuant to the requirement of National Policy 41-201, Income Trusts and Other Indirect Offerings, the tables below outline the differences between
cash provided by operating activities and cash distributions, and operating income attributable to Unitholders and cash distributions, respectively,
in accordance with the policy guidelines.
Cash provided by operating activities
Monthly distributions paid and payable
$
67,606
$
85,189
$
(17,583)
$ 233,545
$ 226,365
$
7,180
(39,697)
(36,637)
(3,060)
(157,840)
(144,559)
(13,281)
Cash provided by operating activities in excess
of distributions paid and payable
$
27,909
$
48,552
$ (20,643)
$
75,705
$
81,806
$
(6,101)
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
2022
2021
Variance
Operating income attributable to Unitholders
$
87,718
$
78,730
$
8,988
$ 167,800
$ 155,401
$
12,399
Monthly distributions paid and payable
(39,697)
(36,637)
(3,060)
(157,840)
(144,559)
(13,281)
Operating income attributable to Unitholders in excess
of distributions paid and payable
$
48,021
$
42,093
$
5,928
$
9,960
$
10,842
$
(882)
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
2022
2021
Variance
Monthly distributions paid for three months and year ended
December 31, 2022 and 2021 were funded with cash flows from
operating activities and borrowing on the bank credit facilities.
In the first quarter of 2022, Crombie issued 11,461,446 additional Units
which resulted in increased distributions for the remainder of the year.
On January 13, 2023, Crombie declared distributions of 7.417 cents per
Unit for the period from January 1, 2023 up to and including January 31,
2023. The distributions will be paid on February 15, 2023, to Unitholders
of record as at January 31, 2023.
On February 15, 2023, Crombie declared distributions of 7.417 cents
per Unit for the period from February 1, 2023 up to and including
February 28, 2023. The distributions will be paid on March 15, 2023,
to Unitholders of record as at February 28, 2023.
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,
2022
3,196
2,744
5,940
$
$
2021
Variance
2022
2021
Variance
$
$
2,890
2,359
5,249
$
$
306
385
691
$
12,524
10,465
$
22,989
$
$
11,021
8,790
19,811
$
$
1,503
1,675
3,178
48
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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,
$
2022
2,656
1,447
365
303
173
1,119
$
2021
3,555
2,576
323
198
146
569
Variance
2022
2021
Variance
$
899
1,129
(42)
(105)
(27)
(550)
$
10,387
$
11,287
$
2,888
1,494
1,461
619
2,698
8,537
1,782
1,154
565
2,159
900
5,649
288
(307)
(54)
(539)
General and administrative expenses
$
6,063
$
7,367
$
1,304
$
19,547
$
25,484
$
5,937
As a percentage of property revenue
5.6%
7.1%
1.5%
4.7%
6.2%
1.5%
(1) Unit-based compensation includes both employees and trustees.
For the three months ended:
For the year ended:
The lower general and administrative expenses in the quarter are
primarily due to a decrease in Crombie’s Unit price, resulting in
decreased Unit-based compensation costs of $1,129 compared to
the same period in 2021. A decrease of $899 in salaries and benefits
resulted from lower annual incentive plan amounts. General and
administrative expenses excluding Unit-based compensation of $1,447
is 4.3% of property revenue (December 31, 2021 – 4.6%).
On an annual basis, the reduction in general and administrative
expenses is driven primarily by a decrease in Unit-based compensation
costs of $5,649 resulting from a decrease in the Unit price compared to
the same period in 2021. General and administrative expenses excluding
Unit-based compensation of $2,888 and payment in respect of an
executive retirement arrangement of $1,211 is 3.7% of property revenue
(December 31, 2021 – 4.1%).
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
Amortization of deferred financing charges
Three months ended December 31,
Year ended December 31,
2022
9,397
1,879
(1,389)
9,695
(139)
526
19,969
654
2021
Variance
2022
2021
Variance
$
11,833
$
2,436
$
39,183
$
49,169
$
9,986
358
(1,037)
10,364
(144)
523
21,897
742
(1,521)
352
669
(5)
(3)
1,928
88
4,275
(5,264)
40,605
(562)
2,092
80,329
2,685
1,896
(3,593)
40,741
(548)
2,056
89,721
3,067
(2,379)
1,671
136
14
(36)
9,392
382
Finance costs – operations
$
20,623
$
22,639
$
2,016
$
83,014
$
92,788
$
9,774
For the three months ended:
For the year ended:
Finance costs decreased by $1,928 primarily due to reduced mortgage
interest expense of $2,436 resulting from the deleveraging impact of
mortgage repayments and dispositions, and from decreased interest
on senior unsecured notes of $669 due to the redemption of Series D
notes in the fourth quarter of 2022. This is partially offset by an increase
of $1,521 on floating rate debt resulting from higher interest rates and
higher average loan balances compared to the same period in 2021.
On an annual basis, finance costs decreased by $9,392 primarily due
to reduced mortgage interest expense of $9,986 from the deleveraging
impact of dispositions and mortgage repayments realized in part from
proceeds from the Unit issuance in the first quarter of 2022. Capitalized
interest increased $1,671 as a result of development activity in the
current year. The reduction in operating costs was offset in part by
higher interest rates and higher average loan balances during the year,
increasing interest on floating rate debt by $2,379.
49
MANAGEMENT’S DISCUSSION AND ANALYSIS DEPRECIATION, AMORTIZATION, AND IMPAIRMENT
Crombie’s total fair value of investment properties exceeds carrying value by $1,113,573 at December 31, 2022 (December 31, 2021 – $1,150,558).
Crombie uses the cost method of 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,
2022
2021
Variance
2022
2021
Variance
Same-asset* depreciation and amortization
$
16,780
$
16,936
Acquisitions, dispositions and development
depreciation/amortization
Depreciation and amortization
Impairment
2,211
18,991
—
$
$
1,869
18,805
1,300
$
$
$
$
$
156
$
67,550
$
68,251
(342)
(186)
1,300
12,286
79,836
10,400
$
$
7,512
75,763
2,539
$
$
$
$
$
701
(4,774)
(4,073)
(7,861)
For the three months ended:
For the year ended:
The increase in depreciation and amortization of $186 is due to
acquisitions and completed developments, offset in part by dispositions.
The $4,073 increase in depreciation and amortization on an annual
basis is primarily due to accelerated depreciation recorded on a
property that was demolished and acquisitions during the year. This is
partially offset by dispositions.
During the year ended December 31, 2022, Crombie recorded
impairments totalling $10,400 on three properties in the third quarter.
These impairments were the result of continuing high vacancy at
one property, the demolition of a vacant building, and a recent
redevelopment that included a partial demolition. All three properties
are in secondary markets. 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 each
property. The recoverable amount is the higher of the economic benefit
of the continued use of the asset and the selling price less costs to sell.
In all three cases, the recoverable amount was determined to be the
economic benefit of the continued use of the asset. To calculate the
benefit of the continued use of the asset, Crombie utilizes 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 Debt2
Total non-current financial liabilities
Number of Units outstanding (in 000’s)
As at December 31,
2022
2021
Variance
2020
$
$
$
$
$
$
$
4,078,398
3,936,427
5,050,000
286,077
454,000
2,227,858
1,861,702
178,377
$
$
$
$
$
$
$
4,023,041
3,875,442
5,026,000
288,1531
387,000
2,425,549
1,960,143
164,803
$
$
$
$
$
$
$
55,357
60,985
24,000
(2,076)
67,000
(197,691)
(98,441)
13,574
$
$
$
$
$
$
$
4,105,438
3,893,026
4,815,000
225,127
225,6281
2,627,132
2,192,047
158,258
(1) Updated from the previously reported figures.
(2) 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 higher total assets balance (a difference of $55,357 compared to the
prior year) is driven primarily by acquisitions of investment properties of
$112,730 and additions to tenant incentives of $38,183, offset in part by
dispositions of investment properties of $92,969. The increase of $24,000
in fair value of investment properties resulted from acquisitions and
completed developments. Investment properties held in joint ventures
increased in fair value ($67,000 compared to the prior year) due to
the substantial completion of development at Bronte Village in the first
quarter of 2022. The decrease in total debt of $197,691 is driven by the
repayment of mortgages during the year of $162,232 and the $150,000
redemption of Series D senior unsecured notes in the fourth quarter of
2022, offset in part by net amounts drawn on credit facilities during the
year of $130,780.
50
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 DEVELOPMENT
Property development is a strategic priority for Crombie to improve
NAV*, cash flow growth and Unitholder value. With urban intensification
an important reality across the country, Crombie is focused on
evaluating and undertaking major developments at certain properties,
where incremental costs to develop are greater than $50,000 and
where development may include 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 85 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 27 major development properties over the next 15 years or
longer. Crombie benefits from having solid income (NOI, 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 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 development plans include the 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.
SUBSTANTIALLY COMPLETED
DEVELOPMENTS
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, 2022, Crombie reached
substantial completion on two of its major development projects. Bronte
Village, Crombie’s mixed-use development in partnership with Prince
Developments, reached substantial completion in the first quarter
ended March 31, 2022. Commercial GLA of 54,000 is 83.5% leased as
at December 31, 2022 and lease up continues for the 466,000 square
feet of residential area with 50.5% of all units available being leased
as at year end. Project costs at Bronte totalled $278,000, $139,000 at
Crombie’s share, with yields still expected to be in the 5.4%–6.0% range.
During the quarter ended December 31, 2022, Crombie achieved
substantial completion at its retail-related industrial development,
Voilà CFC 3, in Calgary, Alberta. Voilà CFC 3 is Crombie’s wholly owned
state-of-the-art Empire grocery fulfillment hub powered by Ocado’s
industry leading technology. The 304,000 square foot industrial building
is fully leased as at December 31, 2022, with rent expected to commence
in mid 2023.
These projects have reached substantial completion, thereby reducing
the construction risk remaining in the developments. The remaining risk
at Bronte Village 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 this development.
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 paragraphs is
discussed at full project density.
Total estimated costs include the current carrying costs of development
lands, where applicable, net of any reductions from 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.
The expected yield for each project is then derived by dividing the
estimated annual NOI by the total estimated cost for the project.
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 externally generated market studies.
DEVELOPMENT PIPELINE
Crombie has identified 27 major development projects as at
December 31, 2022 (December 31, 2021 – 31). 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
15 years or longer. 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 venture partners,
dispositions of pipeline properties, and a variety of external factors that
may affect project costing. Costs presented in Crombie’s pipeline are
reflective of current construction cost estimates on a market-by-market
basis. Crombie monitors inflationary pressures impacting construction
costs and adjusts pipeline assumptions when necessary. 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 at December 31, 2022, total project
costs to develop the pipeline range from $5,000,000 to $6,800,000
(December 31, 2021 – $5,300,000 to $7,500,000). Year over year changes
in the pipeline can be attributed to changing project scopes, changing
project costs, the ongoing refinement of development assumptions,
completions and removals of properties from the pipeline, and evolving
opportunities in our pipeline. Crombie may enter joint ventures or other
partnership arrangements for these properties to share cost, revenue,
risk, and development expertise, depending upon the nature of each
51
MANAGEMENT’S DISCUSSION AND ANALYSIS 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 redevelopment, new grocery-anchored retail, retail-related
industrial e-commerce facilities, and land-use intensification.
Near-term Projects
Crombie divides its development pipeline into three timing based
segments. 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 three projects in the near-term category.
NEAR-TERM GLA BY CITY
as at December 31, 2022
NEAR-TERM GLA BY ASSET TYPE (SQ. FT.)
as at December 31, 2022
)
s
0
0
0
’
(
.
t
f
.
q
S
750
500
250
0
112,000
905,000
Victoria
Vancouver
Halifax
Commercial
Residential
Commercial
Residential
The table below provides additional detail into Crombie’s near-term developments.
Property
Westhill on Duke
City
Halifax
1780 East Broadway (Broadway and Commercial)
Vancouver
Belmont Market – Phase II
Victoria
Total Near-term Developments
(1) Crombie will own 100% of the commercial portion of this development.
Full project density reflects estimated GLA upon completion. 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.
Crombie actively seeks ways to optimize the value of its development
pipeline while balancing its capital allocation priorities and portfolio
balance. In consideration of current opportunities and trends, Crombie
has elected to monetize the remaining residential development parcels
at Opal Ridge – Penhorn rather than proceed with the residential
development option. Given this direction, Opal Ridge – Penhorn has
been removed from the development pipeline.
Near-term Project Update
WESTHILL ON DUKE, HALIFAX, NOVA SCOTIA
Type: Residential
Ownership: 100%
Project status: Westhill on Duke is a planned 290-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 early to mid 2023.
Full Project Density
% Ownership
Commercial GLA
Residential GLA
Residential Units
100%
50%1
100%
—
112,000
—
112,000
188,000
572,000
145,000
905,000
290
890
200
1,380
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
redevelopment on 2.43 acres of land located at the busiest transit node
in Western Canada. A rezoning application is in process with the City
of Vancouver that comprises a mix of grocery-anchored retail, rental
residential, and office. Crombie anticipates completion of rezoning in
2024 and construction commencement in late 2024 or early 2025.
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 1.70 acres of
land within the Belmont Market development area. The lands are fully
entitled and could be ready for construction commencement in 2024.
52
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022
Total Development Pipeline
In addition to near-term projects, Crombie is actively working on its pipeline to ensure a consistent inventory of projects. A number of potential major
developments in Crombie’s pipeline are large, multi-phased projects spanning over a decade in total duration. For the charts and tables outlined
throughout this section, Crombie has summarized total project costs and GLA data at the date of its financial commitment to Phase 1. The following
chart and table details total project cost estimates by category at December 31, 2022:
CROMBIE DEVELOPMENT SPENDING BY PROJECT TIMELINE
as at December 31, 2022
8.8%
47.1%
44.1%
Project Timeline
Near-term
Medium-term
Long-term
Total Pipeline
Near-term
Medium-term
Long-term
At Crombie’s Share ($ in millions)
Number of Projects
Total Estimated Costs1
Total Spend to Date2
3
8
16
27
$
500-600
2,300-3,000
2,200-3,200
$
5,000-6,800
$
$
40
70
160
270
Estimated Cost
to Complete
$
460-560
2,230-2,930
2,040-3,040
$
4,730-6,530
(1) Many projects in the pipeline are multi-phased. Project costs are shown to align with the first phase of project commencement. Project timelines are subject to change.
(2) Total spend to date include Crombie’s total investment in land at these properties.
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 within the
potential pipeline in order to maximize NOI and NAV* creation.
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 a 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 that 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,
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
1,171,000 square feet of commercial GLA, and up to 9,775,000 square feet
(up to 11,450 units) of residential GLA (which may include a combination
of rental or condominium units).
53
MANAGEMENT’S DISCUSSION AND ANALYSIS TOTAL PIPELINE GLA BY CITY
as at December 31, 2022
)
s
0
0
0
’
(
.
t
f
.
q
S
5,000
4,000
3,000
2,000
1,000
0
Victoria
Vancouver
Kelowna
Calgary
Edmonton
Hamilton
Toronto
Halifax
Project Timeline1
Near-term
Medium-term
Long-term
Total Pipeline
Total Pipeline Density by Project Timeline
Commercial GLA
Residential GLA
Residential Units
112,000
277,000
782,000
1,171,000
905,000
4,692,000
4,178,000
9,775,000
1,380
5,300
4,770
11,450
(1) Many projects in the pipeline are multi-phased. GLA is shown to align with the first phase. Project timelines are subject to change.
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 six of these 27 potential major projects either already zoned
or identified for rezoning and is currently in various stages of entitlement pursuit as noted in the following chart:
Zoned
Application Submitted
Future
Total
Crombie’s Entitled Projects
Number of
Projects
4
2
21
27
Estimated
Commercial
Sq. ft.1
55,000
153,000
963,000
1,171,000
Estimated Residential
Sq. ft.1
Estimated Total
Sq. ft.1
Residential
Units1
1,466,000
1,591,000
6,718,000
9,775,000
1,521,000
1,744,000
7,681,000
10,946,000
1,820
1,880
7,750
11,450
(1) Square footage and unit information presented in the table are estimates only and are subject to change. Design, municipal approvals and market conditions may influence estimates provided.
Zoning is in place for the following development sites: Westhill on Duke
(Halifax), Belmont Market – Phase II (Victoria), Barrington Residential,
formerly Triangle Lands, (Halifax), and Brunswick Place (Halifax).
Rezoning applications have been submitted and are in process
for Broadway and Commercial (Vancouver), and McCowan and
Ellesmere (Toronto).
During the quarter, two projects were removed from the Zoned
status in the above table, dropping the count from six projects to four
projects. Calgary Voilà CFC 3 was removed as substantial completion
was reached while Opal Ridge – Penhorn was removed from the
development pipeline in the fourth quarter.
During the fiscal year 2022, Crombie’s application submission efforts
have added 1,191,000 square feet of GLA to advance its development
pipeline. Year over year changes to Zoned projects resulted in a
decrease of 870,000 square feet of GLA, which can be attributed directly
to substantial completions at Bronte Village and Calgary Voilà CFC 3.
54
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022
The following table lists the 27 identified Potential Major Development locations and certain key features of each property. Potential developments in
the following table are organized in order of potential construction commencement:
Major Development Pipeline
Existing Property1
1 Westhill on Duke2
2 Belmont Market – Phase II
3 1780 East Broadway
(Broadway and Commercial)
4 Brunswick Place
5 McCowan & Ellesmere
CMA
Halifax
Victoria
Vancouver
Halifax
Toronto
6 1170 East 27 Street (Lynn Valley)
Vancouver
7 Park West
8 Toronto East
9 Broadview
10 Barrington Residential5
11 Fleetwood
12 1818 Centre Street
13 Port Coquitlam
14 3130 Danforth
15 2733 West Broadway
16 Centennial Parkway
17 990 West 25 Avenue (King Edward)
18 524 Elbow Drive SW (Mission)
19 Robson Street
20 410 10 Street NW (Kensington)
21 813 11 Avenue SW (Beltline)
22 3410 Kingsway (Kingsway and Tyne)
23 East Hastings
24 Bernard Ave
25 10930 82 Avenue (Whyte Ave)
26 New Westminster
27 Brampton Mall
Halifax
Toronto
Toronto
Halifax
Vancouver
Calgary
Vancouver
Toronto
Vancouver
Hamilton
Vancouver
Calgary
Vancouver
Calgary
Calgary
Vancouver
Vancouver
Kelowna
Edmonton
Vancouver
Toronto
Site Size
(acres)
Existing Tenants
Potential
Commercial
Expansion
0.463
1.70
2.43
0.754
4.48
2.82
19.66
0.14
1.43
0.68
4.45
2.18
5.31
0.79
1.95
2.75
1.80
1.60
1.15
1.73
2.59
3.74
3.30
1.83
2.44
2.82
8.74
N/A
Land
Safeway
Office/Parkade
FreshCo/Other
Safeway
Sobeys
Land
Dollarama
Land
Safeway
Safeway
Safeway
The Beer Store
Safeway
Retail
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway/Other
Safeway/Other
Safeway
Safeway/Other
Safeway
Office/Retail
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
Entitlement
Status
Zoned
Zoned
Application
Submitted
Project Timing
Near-term
Near-term
Near-term
Zoned Medium-term
Application
Submitted
Medium-term
Future Medium-term
Future Medium-term
Future Medium-term
Future Medium-term
Zoned Medium-term
Future Medium-term
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
Future
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
Long-term
Long-term
(1) All projects in the pipeline are transit-oriented and have the potential for residential expansion.
(2) Westhill on Duke was formerly referred to as Westhill and Scotia Square residential.
(3) Westhill on Duke can be developed through densification on 0.46 acres of the existing 9.05-acre Scotia Square site.
(4) Brunswick Place can be developed through densification on the existing 0.75-acre Brunswick Place Parkade.
(5) Barrington Residential was formerly referred to as Triangle Lands.
55
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 rating 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 objectives consist of
four main priorities:
1. to maintain multiple sources of both debt and equity financing;
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 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:
2. to reduce risk by prefunding capital commitments;
• cash on hand;
3. to source capital with the lowest cost on a long-term basis and to
• cash flow generated from operating the property portfolio;
maintain overall indebtedness at reasonable levels, utilize staggered
debt maturities, minimize long-term exposure to excessive levels of
floating rate debt; and
• cash distributions from our joint ventures;
• bank credit facilities;
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 being
approved by the Investment Committee and/or Board. Crombie’s Board
Our guiding principles for managing capital are as follows:
• 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 41.8% at December 31, 2022 compared to 45.3% at December 31, 2021.
Maintain minimum of $250 million liquidity
Increased liquidity to $583.0M, up $75.2M from 2021.
Improve weighted average term to maturity
Decrease to 4.7 years at December 31, 2022 versus 5.1 years at December 31, 2021.
Lower cost of capital through equity raises and/or innovative
funding solutions, such as capital recycling
During 2022, Crombie raised $200M of equity at a record price of $17.45 per Unit,
and completed dispositions for cash proceeds of $173.8M.
Maintain balance sheet strength during current period of rising
interest rates
Increase unencumbered asset pool
Reduce mortgage debt outstanding by $154M from December 31, 2021.
Expanded unencumbered asset pool by approximately 23% to $2.2B since
December 31, 2021.
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 2022, Crombie received notice of an upgrade in its credit rating from “BBB (low)” with a “Negative” trend to “BBB (low)” with a “Stable” trend.1
(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.
56
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 STRONG CAPITAL STRUCTURE
CAPITAL STRUCTURE
as at December 31, 2022
Net Assets Attributable
to Unitholders
47.1%
Mortgages
23.2%
Bank Credit Facilities
and Lease Liabilities
5.0%
Unsecured Notes
24.7%
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 mortgages1
Drawn credit facilities
Senior unsecured notes1
Lease liabilities
Net assets attributable to Crombie REIT Unitholders
Net assets attributable to Special Voting Units and Class B Limited Partnership Unitholders
Total capital structure
(1) Net of deferred financing charges.
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*2
Weighted average interest rate3
Debt to trailing 12 months adjusted EBITDA*2,4
Interest coverage ratio*4
(1) Represents fair value of unencumbered properties.
(2) The prior year calculations have been restated to include Crombie’s share of debt and assets held in joint ventures.
(3) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.
(4) The prior year calculations have been restated to include Crombie’s share of revenue and expenses in joint ventures.
December 31, 2022
December 31, 2021
$
913,706
160,264
972,003
35,000
1,097,070
753,470
23.2%
4.1%
24.7%
0.9%
27.9%
19.2%
$
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%
$
3,931,513
100.0%
$
3,851,094
100.0%
December 31, 2022
December 31, 2021
$
2,154,468
$
1,752,927
191.5%
41.8%
3.8%
8.02x
3.26x
128.8%
45.3%
3.8%
8.99x
3.06x
Crombie has continued to grow its unencumbered asset pool, increasing its fair value from $1,752,927 as at December 31, 2021 to $2,154,468 as at
December 31, 2022. This increase is primarily due to acquisitions, mortgage maturities, and development completions, partially offset by dispositions.
57
MANAGEMENT’S DISCUSSION AND ANALYSIS Debt to Gross Fair Value*
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
trade payables and accruals in the ordinary course of business, and
distributions payable. Debt includes Crombie’s share of debt held in
equity-accounted joint ventures.
Gross fair value includes investment properties measured at fair value,
including Crombie’s share of those held within joint ventures. All other
components of gross fair value are measured at the carrying value
included in Crombie’s financial statements. Crombie’s methodology
for determining the fair value of investment properties includes
capitalization of trailing 12 months net property income using biannual
capitalization rates from external property valuators. The majority
of investment properties are also subject to external, independent
appraisals on a rotational basis over a period of not more than four
years. Valuation techniques are more fully described in Crombie’s year-
end audited financial statements.
The fair value included in this calculation reflects the fair value of the
properties as at December 31, 2022 and December 31, 2021 respectively,
based on each property’s current use as a revenue-generating
investment property. As at December 31, 2022, Crombie’s weighted
average capitalization rate used in the determination of the fair value
Fixed rate mortgages
Senior unsecured notes
Non-revolving credit facility
Revolving credit facility
Joint operation credit facility
Bilateral credit facility
Debt held in joint ventures, at Crombie’s share2,3
Lease liabilities
Total debt outstanding
Less: Applicable fair value debt adjustment
Adjusted debt*
Investment properties, fair value
Investment properties held in joint ventures, fair value, at Crombie’s share3
Other assets, cost4
Other assets, cost, held in joint ventures, at Crombie’s share3,4,5
Cash and cash equivalents
Cash and cash equivalents held in joint ventures, at Crombie’s share3
Deferred financing charges
Interest rate subsidy
Gross fair value
Debt to gross fair value*
of its investment properties was 5.94%, an increase of 29 basis points
from December 31, 2021. Crombie’s weighted average capitalization
rate used in the determination of the fair value of its share of investment
properties held in equity-accounted joint ventures was 3.47% as at
December 31, 2022, an increase of 17 basis points from December 31,
2021. 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, and the “Risk Management” section of this MD&A, under
“Capitalization Rate Risk” in the “Risk Factors Related to the Business
of Crombie” section.
Debt to gross fair value* was 41.8% at December 31, 2022 compared
to 45.3% at December 31, 2021.
The improvement in this leverage ratio during the year ended
December 31, 2022 was reduction of outstanding debt of $157,934 from
December 31, 2021, resulting primarily from mortgage repayments. Also
contributing to the improvement in the ratio was an increase of $67,000
in total gross fair value of investment properties held in joint ventures,
primarily due to the substantial completion of Bronte Village in the first
quarter of 2022. In addition, the fair value of investment properties
increased by $24,000 primarily as a result of acquisitions and completed
developments, partially offset by dispositions.
December 31, 2022
December 31, 20211
$
$
$
$
$
$
918,552
975,000
150,000
—
10,264
—
270,642
35,000
2,359,458
—
2,359,458
5,050,000
454,000
99,728
26,974
6,117
2,487
7,843
—
1,073,895
1,125,000
—
9,220
9,904
10,000
254,074
35,352
2,517,445
(53)
2,517,392
5,026,000
387,000
102,683
18,370
3,915
4,453
9,769
(53)
$
5,647,149
$
5,552,137
41.8%
45.3%
(1) The prior year calculation has been restated to include Crombie’s share of debt and assets held in joint ventures.
(2) Includes Crombie’s share of fixed and floating rate mortgages, construction loans, revolving credit facility, and lease liabilities held in joint ventures.
(3) See the “Joint Ventures” section of this MD&A.
(4) Other assets exclude tenant incentives and related accumulated amortization, and accrued straight-line rent receivable.
(5) Other assets held in joint ventures include deferred financing charges.
Debt to Adjusted EBITDA* and Interest Coverage* Ratios
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 82, for more information.
As at December 31, 2022, Crombie has completed a number of
developments in joint ventures and, as a result, in 2022, Crombie
changed its methodology in calculating adjusted EBITDA* to include
Crombie’s share of revenue, operating expenses, and general and
administrative expenses in joint ventures. Interest service coverage*
and debt service coverage* calculations now include Crombie’s
share of finance costs – operations and debt repayments in joint
58
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 ventures. This is consistent with the treatment under the unsecured
notes bond indenture. Prior quarters have been restated to reflect this
new methodology.
Crombie’s debt to adjusted EBITDA* improved to 8.02x for the trailing
12 months ended December 31, 2022 from 8.99x for the trailing 12 months
ended December 31, 2021. The improvement was to decreased
outstanding debt of $157,934 resulting primarily from mortgage
repayments and higher adjusted EBITDA. The $14,202 increase in
adjusted EBITDA over the trailing 12 months ended December 31, 2022
when compared to the trailing 12 months ended December 31, 2021
resulted from increased operating income and higher net property
income from joint ventures resulting from completed developments.
The interest coverage* ratio for the quarter ended December 31, 2022
improved to 3.26x compared to 3.06x for the quarter ended December 31,
2021 due to reduced finance costs from operations and increased
adjusted EBITDA as described above. Finance costs decreased by
$1,928 compared to the fourth quarter of 2021 primarily due to reduced
mortgage interest from repayments and dispositions, and decreased
interest on unsecured notes resulting from the redemption of Series D
senior unsecured notes in the fourth quarter of 2022.
Crombie’s debt service coverage* increased to 2.31x for the
quarter ended December 31, 2022 from 2.05x for the quarter
ended December 31, 2021 due primarily to reduced debt principal
repayments and improved adjusted EBITDA as described above.
Operating income attributable
to Unitholders
Amortization of
tenant incentives
Gain on disposal of
Dec. 31, 2022
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Dec. 31, 2021
Sep. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Three months ended
$
87,718
$
26,410
$
28,424
$
25,248
$
78,730
$
23,851
$
19,605
$
33,215
5,940
5,795
5,690
5,564
5,249
5,187
4,840
4,535
investment properties
(62,584)
(13,357)
(4,863)
—
(42,762)
(2,619)
Gain on distribution from
equity-accounted
investments
Impairment of investment
properties
Depreciation and amortization
Finance costs – operations
Loss from equity-accounted
investments
Property revenue in joint
—
—
18,991
20,623
(1,000)
10,400
22,744
20,884
—
—
19,222
20,762
(1,933)
(15,525)
—
—
18,879
20,745
1,300
18,805
22,639
1,239
19,109
23,070
1
1,787
1,627
1,539
685
923
ventures, at Crombie’s share
7,271
3,258
2,616
2,356
2,100
1,578
—
—
—
(11,144)
—
—
19,054
23,618
18,795
23,461
562
968
771
442
Property operating expenses
in joint ventures, at
Crombie’s share
General and administrative
expenses in joint ventures,
at Crombie’s share
Taxes – current
(3,022)
(1,296)
(1,002)
(903)
(724)
(695)
(483)
(203)
(77)
4
(31)
—
(21)
—
(150)
—
(32)
163
(47)
—
(110)
2
(96)
—
Adjusted EBITDA* (1)
$
74,865
$
75,594
$
72,455
$
71,345
Trailing 12 months adjusted
EBITDA* (4)
$ 294,259
$ 290,022
$ 286,024
$ 281,626
Finance costs – operations
$
20,623
$
20,884
$
20,762
$
20,745
Finance costs – operations
in joint ventures, at
Crombie’s share
Amortization of deferred
financing charges
Adjusted interest expense* (2)
Debt principal repayments
Debt principal repayments
in joint ventures,
at Crombie’s share
2,961
2,564
2,157
1,776
(654)
(675)
(668)
(688)
$
$
22,930
9,172
$
$
22,773
9,349
$
$
22,251
9,599
$
$
21,833
9,979
$
$
$
$
$
70,628
$
71,596
280,057
$ 276,643
22,639
$
23,070
1,157
1,031
(742)
(759)
23,054
11,304
$
$
23,342
11,343
$
$
$
$
$
68,056
$
69,776
270,324
$ 258,498
23,618
$
23,461
568
546
(764)
(802)
23,422
11,229
$
$
23,205
10,548
307
305
306
2,864
12
15
15
15
Debt principal repayments (3)
$
9,479
$
9,654
$
9,905
$
12,843
$
11,316
$
11,358
$
11,244
$
10,563
Debt outstanding (see Debt
to Gross Fair Value*) (5)1
Interest service coverage*
ratio {(1)/(2)}
Debt service coverage* ratio
$ 2,359,458
$ 2,463,882
$ 2,502,845
$ 2,456,686
$ 2,517,392
$ 2,659,702
$ 2,629,569
$ 2,693,601
3.26x
3.32x
3.26x
3.27x
3.06x
3.07x
2.91x
3.01x
{(1)/((2)+(3))}
2.31x
2.33x
2.25x
2.06x
2.05x
2.06x
1.96x
2.07x
Debt to trailing 12 months
adjusted EBITDA* {(5)/(4)}
8.02x
8.50x
8.75x
8.72x
8.99x
9.61x
9.73x
10.42x
(1) Includes debt held in joint ventures, at Crombie’s share.
59
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, 2022 is as follows:
Year ended December 31, 2022
Year ended December 31, 2021
Mortgages
Senior
Unsecured
Notes
Credit
Facilities
Mortgages
Senior
Unsecured
Notes
Credit Facilities
Opening balance, beginning of year
$
1,073,553
$
1,125,000
$
29,124
$
1,273,674
$
1,125,000
$
62,256
Additions to existing mortgages
New borrowings or issuances
Principal repayments
Repayments on maturity
Vendor assumptions on disposition
Redemption
Net (repayments) advances
—
7,000
(38,099)
(124,133)
—
—
—
—
—
—
—
—
(150,000)
—
150,000
—
—
—
—
—
(18,860)
25,000
550
(44,424)
(119,755)
(61,492)
—
—
—
150,000
—
—
—
(150,000)
—
—
—
—
—
—
—
(33,132)
Closing balance, end of year
$
918,3211
$
975,000
$
160,264
$
1,073,553
$
1,125,000
$
29,124
(1) Excludes unamortized fair value debt adjustment of $231 (December 31, 2021 – $342).
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, 2022
December 31, 2021
918,321
$
1,073,553
231
918,552
(4,846)
913,706
666,748
246,958
4.07%
4.6 years
$
$
$
342
1,073,895
(6,036)
1,067,859
893,364
174,495
4.00%
4.9 years
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 $106,435 of
floating rate debt.
Senior Unsecured Notes (“Notes”)
The following series of senior unsecured notes were outstanding as at December 31, 2022 and December 31, 2021:
Series D
Series E
Series F
Series G
Series H
Series I
Series J
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, 2022
December 31, 2021
November 21, 2022
4.066%
$
— $
January 31, 2025
August 26, 2026
June 21, 2027
March 31, 2028
October 9, 2030
August 12, 2031
4.802%
3.677%
3.917%
2.686%
3.211%
3.133%
$
$
$
175,000
200,000
150,000
150,000
150,000
150,000
(2,997)
972,003
972,003
$
$
— $
3.61%
5.1 years
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
There are no required periodic principal payments, with the full face value of the notes due on their respective maturity dates.
60
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Credit Facilities
The following floating rate credit facilities had balances drawn as at December 31, 2022 and December 31, 2021:
Revolving credit facility
Non-revolving credit facility
Unsecured bilateral credit facility
Joint operation credit facility I1
Joint operation credit facility II1
Total credit facilities
Weighted average interest rate
(1) Availability is limited by mortgages held in the joint operations.
Total Available Facility
Weighted Average
Term to Maturity
December 31, 2022
December 31, 2021
$
$
400,000
200,000
130,000
7,167
3,520
740,687
3.5 years
$
—
$
2.9 years
1.5 years
1.3 years
1.8 years
150,000
—
7,167
3,097
2.8 years
$
160,264
$
9,220
—
10,000
7,167
2,737
29,124
6.06%
2.53%
REVOLVING CREDIT FACILITY
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, 2022, 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 the interest rate on both
facilities at 3.27%. At December 31, 2022, Crombie’s portion of the term
and revolving credit facilities was $1,815 and $1,282, respectively.
Crombie has in place an authorized floating rate revolving credit facility
of up to $400,000 (the “revolving credit facility”). It has been amended
to extend the maturity date to June 30, 2026. No balance was drawn at
December 31, 2022 ($2,883 including outstanding letters of credit). 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.
NON-REVOLVING CREDIT FACILITY
In the fourth quarter of 2022, Crombie entered into a credit agreement
with a Canadian chartered bank for an unsecured non-revolving
credit facility. The credit facility has a maximum principal amount of
up to $200,000 with a maturity date of November 18, 2025, of which
$150,000 was drawn at December 31, 2022. The facility was used to
fund the redemption of Series D senior unsecured notes and may be
used for working capital purposes. Borrowings under the unsecured
non-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.
UNSECURED BILATERAL CREDIT FACILITY
The unsecured bilateral credit facility has a maximum principal
amount of $130,000 and has been amended to extend the maturity
date to June 28, 2024. No balance was drawn as at December 31, 2022.
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.
61
MANAGEMENT’S DISCUSSION AND ANALYSIS DEBT MATURITIES
Principal repayments of the fixed rate mortgages, unsecured notes, and credit facilities are scheduled as follows:
12 Months Ending
December 31, 2023
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027
Thereafter
Total1
Maturing Debt Balances
Mortgages
$ 214,315
$
251,209
30,596
12,401
111,854
139,973
Senior
Unsecured
Notes
—
—
175,000
200,000
150,000
450,000
Credit
Facilities
Total
% of Total
Payments of
Principal
Total Required
Payments
% of Total
$
—
$ 214,315
11.3%
$
32,643
$ 246,958
10,264
150,000
—
—
—
261,473
355,596
212,401
261,854
589,973
13.8%
18.8%
11.2%
13.8%
31.1%
21,309
16,146
14,126
10,420
63,329
282,782
371,742
226,527
272,274
653,302
12.0%
13.8%
18.1%
11.0%
13.3%
31.8%
$ 760,348
$ 975,000
$ 160,264
$1,895,612
100.0% $ 157,973
$2,053,585
100.0%
(1) Excludes fair value debt adjustment of $231 and deferred financing charges of $(4,846) (December 31, 2021 – $342 and $(6,036), respectively).
OUTSTANDING UNIT DATA
REIT Units and Class B LP Units and the Attached
Special Voting Units
On January 31, 2022, Crombie closed a public offering, on a bought
deal basis, of 6,705,000 Units, at a price of $17.45 per Unit for proceeds
of $111,872 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 4,756,446 Class B LP Units and the attached Special Voting
Units at a price of $17.45 per Class B LP Unit, for proceeds of $82,869
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, 2022, Crombie issued 1,215,032 REIT
Units and 860,958 Class B LP Units under its DRIP. Units issued under
the DRIP are issued at a price equal to 97% 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.
Throughout the year ended December 31, 2022, Crombie issued
36,487 REIT Units under its Unit-based compensation plans.
Total Units outstanding at January 31, 2023, were as follows:
Units
Special Voting Units1
105,418,576
73,125,018
(1) Crombie Limited Partnership, a subsidiary of Crombie, has issued 73,125,018 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.
CASH FLOWS
The following shows the major sources and uses of cash for the year ended December 31, 2022:
$233,545
MAJOR SOURCES AND USES OF CASH
$3,915
$(123,713)
$7,000
$(83,014)
$131,140
$194,741
$171,702
$5,393
$6,117
$(2,654)
Opening
cash
Operating
cash flow
before
distributions
and finance costs
Cash
distributions
$(162,232)
$(150,000)
$(115,327)
Finance
costs –
operations
Issue of
mortgages
Mortgage
payments
Credit
facility
net
advances
Notes
redemption
Unit
issue
Acquisitions
Source of cash
Use of cash
$(104,379)
Additions
to
investment
properties
Proceeds
on
disposition
Distributions
from joint
ventures
Other,
net
Closing
cash
62
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Cash provided by (used in):
Operating activities
Financing activities
Investing activities
Three months ended December 31,
Year ended December 31,
2022
2021
Variance
2022
2021
Variance
$
67,606
$
85,189
$
(17,583)
$ 233,545
$ 226,365
$
7,180
(153,988)
(169,305)
90,977
79,135
15,317
11,842
(184,059)
(302,712)
(47,284)
16,969
118,653
(64,253)
Net change during the period
$
4,595
$
(4,981)
$
9,576
$
2,202
$
(59,378)
$
61,580
(1) Cash provided by operating and investing activities for the periods ended December 31, 2021 updated from previously reported figures.
Operating Activities
For the three months ended:
The decrease in cash provided by operating activities in the quarter
is primarily due to a decrease in the net change in non-cash working
capital items of $21,833. This is offset in part by lower additions to tenant
incentives ($7,432 compared to $9,833 in the fourth quarter of 2021) and
$5,242 growth in increase in net assets attributable to Unitholders.
Financing Activities
For the three months ended:
The decrease in cash used in financing activities is due primarily
to mortgage repayments of $22,314 in the fourth quarter of 2022
compared to $120,447 for the same period in 2021 and an increase
in the amount drawn on floating rate credit facilities of $69,011
compared to $3,021 in the fourth quarter of 2021. This is offset in
part by the $150,000 redemption of Series D unsecured notes in
the fourth quarter of 2022.
Investing Activities
For the three months ended:
The increase in cash provided by investing activities results from
increased proceeds from disposition of $23,253 compared to the fourth
quarter of 2021 and increase in collection of notes receivable from
related parties of $10,516. This is partially offset by the reduction of
distributions from equity-accounted investments of $25,001 compared
to the fourth quarter of 2021.
For the year ended:
The increase in cash provided by operating activities on an
annual basis is primarily due to lower additions to tenant incentives
($42,135 compared to $72,542 in 2021), growth in increase in net
assets attributable to Unitholders and non-cash items of $4,413 and
$4,674, respectively. This is partially offset by a decrease in the net
change in non-cash working capital items of $35,982.
For the year ended:
The decrease in cash used in financing activities on an annual basis is
primarily driven by the net amount drawn on floating rate credit facilities
of $131,140 compared to net repayments of $33,132 in 2021. Additionally,
the Unit issuance was $194,741 net of costs in 2022 compared to the Unit
issuance of $97,225 in 2021 and finance costs decreased by $9,392 from
the prior year primarily due to reduced mortgage interest expense.
This is offset in part by the $150,000 issue of Series J unsecured notes
in 2021 and the $25,550 issuance of mortgages in 2021 compared to
$7,000 in 2022.
For the year ended:
The annual increase in cash used in investing activities is primarily
due to the increase in acquisitions of investment properties of $51,023
in 2022 compared to 2021, additions to investment properties $27,608
higher than in 2021, and decreased distributions from equity-accounted
investments of $19,677. This is partially offset by increased proceeds from
disposition of $27,688, and higher collection of notes receivable from
related parties of $7,832 compared to 2021.
63
MANAGEMENT’S DISCUSSION AND ANALYSIS 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
Unsecured non-revolving credit facility
Amount drawn
Available liquidity
Unrestricted cash
December 31, 2022
September 30, 2022
June 30, 2022
March 31, 2022
December 31, 2021
$
400,000
$
400,000
$
400,000
$
400,000
$
400,000
—
(2,883)
397,117
130,000
—
130,000
200,000
(150,000)
50,000
5,886
(5,989)
(3,639)
390,372
130,000
(75,000)
55,000
—
—
—
—
(2,525)
(3,213)
394,262
130,000
(80,000)
50,000
—
—
—
—
(3,783)
(3,058)
393,159
130,000
—
130,000
—
—
—
—
(9,220)
(3,003)
387,777
130,000
(10,000)
120,000
—
—
—
—
Total available liquidity1
$
583,003
$
445,372
$
444,262
$
523,159
$
507,777
(1) Joint facilities with joint operation partners are excluded from the calculation of available liquidity since they can only be drawn upon as payments are made on the mortgages pertaining
to the related properties.
Cash and cash equivalents on the balance sheet of $6,117 includes $231
of restricted cash related to a mortgage on a retail-related industrial
property which is therefore not included in available liquidity.
Under the amended terms governing the revolving credit facility,
Crombie is entitled to borrow a maximum of 70% of the fair market value
of assets, subject to a first security position, and 60% of the excess of
fair market value over first mortgage financing of assets, subject to a
second security position or a negative pledge (the “borrowing base”).
The revolving credit facility provides Crombie with flexibility to add or
remove properties from the borrowing base, subject to compliance with
certain conditions. The terms of the revolving credit facility also require
that Crombie must maintain certain covenants:
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.
As at December 31, 2022, the remaining amount available under the
revolving credit facility was approximately $400,000 (prior to reduction
for standby letters of credit outstanding of $2,883) and was not
limited by the aggregate borrowing base. Crombie has remained
in compliance with all debt covenants.
• annualized NOI for the prescribed properties must be a minimum
of 1.3 times the coverage of the related annualized debt service
requirements;
• annualized NOI on all properties must be a minimum of 1.4 times
the coverage of all annualized debt service requirements; and
• cash distributions to Unitholders are limited to 100% of funds
from operations.
The terms of the unsecured bilateral revolving credit facility and
the unsecured non-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
2023
2024
2025
2026
2027
Thereafter
Twelve months ending December 31,
Fixed rate mortgages – principal and interest
$ 295,140
$
65,764
$
42,125
$
30,659
$
Fixed rate mortgages – maturities
Senior unsecured notes
Trade and other payables
Lease liabilities
Credit facilities
Other
760,348
1,144,759
119,194
151,921
214,315
35,176
97,383
3,028
2,471,362
415,666
187,681
1,143
9,715
1,143
251,209
35,176
4,425
2,948
335,883
19,779
—
30,596
202,476
3,351
2,907
269,989
158,187
—
26,847
12,401
224,220
2,469
2,792
111,854
166,322
2,469
2,526
268,729
303,001
—
—
—
—
139,973
481,389
9,097
137,720
878,094
—
—
$
19,830
$ 109,915
Total estimated payments
$2,660,186
$ 426,524
$ 355,662
$ 428,176
$ 268,729
$ 303,001
$ 878,094
(1) Contractual cash flows include principal and interest and exclude extension options.
64
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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 has agreed to indemnify its trustees and officers, and particular
employees, in accordance with Crombie’s policies. Crombie maintains
insurance policies that may provide coverage against certain claims.
Crombie obtains standby letters of credit to support its obligations with
respect to construction work on its investment properties and satisfying
mortgage financing requirements. As at December 31, 2022, Crombie
has a total of $2,883 (December 31, 2021 – $3,003) in outstanding
letters of credit related to construction work being performed on
investment properties.
Crombie does not believe that any of these standby letters of credit are
likely to be drawn upon.
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.
Financial assets
Accounts receivable1
Financial liabilities
Investment property debt
Senior unsecured notes
Total financial liabilities
As at December 31, 2022, Crombie had signed construction contracts
totalling $187,111, of which $159,830 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, 2022, Crombie has provided
guarantees of approximately $111,022 (December 31, 2021 – $128,973)
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 2.3 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, 2022, Crombie has committed to contributing $1,143
to 1700 East Broadway Limited Partnership as part of the ongoing
predevelopment work in the joint venture.
There were no transfers between levels of the fair value during the year
ended December 31, 2022.
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 that have a fair
value different from their carrying value:
December 31, 2022
December 31, 2021
Fair Value
Carrying Value
Fair Value
Carrying Value
$
$
$
22,619
1,035,216
877,058
1,912,274
$
$
$
22,619
1,078,816
975,000
2,053,816
$
$
$
27,737
1,177,814
1,157,820
2,335,634
$
$
$
27,751
1,103,019
1,125,000
2,228,019
(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 fair values of long-term receivables, investment property debt, and senior unsecured notes are Level 2 measurements.
65
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
The impact on markets of the global pandemic, recent inflation,
and rising interest rates, and the resulting effect 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, and extending the time to
completion and occupancy of our major developments. There is also
increased risk as to the extent of the impact of a possible economic
recession on leasing, occupancy, tenant inducements, land use
intensification, market rents, and capital expenditures. The potential
impact of this moderate economic uncertainty on Crombie’s future
financial results and valuation of assets is difficult to reliably measure.
Real Property Ownership and Tenant Risks
All real property investments are subject to elements of risk. The value
of real property and any improvements thereto depend on the credit
and financial stability of tenants and upon the vacancy rates of the
properties. In addition, certain significant expenditures, including
property taxes, ground rent, mortgage payments, insurance costs, and
related charges must be made throughout the period of ownership of
real property regardless of whether a property is producing any income.
Cash available for distribution will be adversely affected if a significant
number of tenants are unable to meet their obligations under their 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 helps to mitigate this risk.
As technology and e-commerce continue to evolve and proliferate the
daily business activities of certain of our tenants and resulting shopping
options for their customers, tenants may need to alter the way they
do business to remain relevant and successful. This could include
reducing store footprints, rationalizing the number of properties they
operate from and/or investing in a larger e-commerce presence to
remain competitive in light of continued technology and e-commerce
innovation. Any such changes could adversely affect tenant demand
for our properties.
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, which could have an adverse effect on Crombie’s
financial condition and results of operation and decrease the amount
of cash available for distribution. Competition for acquisitions of real
properties can be intense and some competitors may have the ability
or inclination to acquire properties at a higher price or on terms less
favourable than those that Crombie may be prepared to accept. An
increase in the availability of investment funds, an increase in interest
in real property investments or a decrease in interest rates may tend to
increase competition for real property investments thereby increasing
purchase prices and reducing the yield on them.
66
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 There has been upward pressure on capitalization rates since the
beginning of the year, largely in response to the dramatic increase in
interest rates and bond yields, and the weakening Canadian economy.
This, along with the lower level of comparable transactions in the
market, has resulted in less reliable data for valuators, which may result
in increased subjectivity in their capitalization rates provided to Crombie.
Significant Relationship
As at December 31, 2022, 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, for the year ended December 31, 2022, 58.0% of the
AMR and 53.0% of total property revenue generated from Crombie’s
properties is derived from anchor tenants that are owned and/or
operated by Empire (including Sobeys and all other subsidiaries
of Empire). Therefore, Crombie is reliant on the sustainable operation
by Empire in these locations.
Potential Conflicts of Interest
The trustees will, from time to time, in their individual capacities, deal
with parties with whom Crombie may be dealing, or may be seeking
investments similar to those desired by Crombie. The interests of these
persons could conflict with those of Crombie. The Declaration of Trust
and Code of Conduct contain conflict of interest provisions requiring the
trustees to disclose their interests in certain contracts and transactions
and to refrain from voting on those matters. In addition, certain
decisions regarding matters that may give rise to a conflict of interest
must be made by a majority of independent elected trustees only.
Conflicts may exist due to the fact that certain trustees, senior officers,
and employees of Crombie are directors and/or senior officers of
Empire and/or its affiliates or will provide management or other services
to Empire and its affiliates. Empire and its affiliates are engaged in a
wide variety of real estate and other business activities. Crombie may
become involved in transactions that conflict with the interests of the
foregoing. The interests of these persons could conflict with those of
Crombie. To mitigate these potential conflicts, Crombie and Empire have
entered into a number of agreements to outline how potential conflicts
of interest will be dealt with, including a Non-Competition Agreement,
Management Agreement, and Development Agreement. As well,
the Declaration of Trust contains a number of provisions to manage
potential conflicts of interest including setting limits to the number of
Empire appointees to the Board, “conflict of interest” guidelines, as
well as outlining which matters require the approval of a majority of
the independent elected trustees, such as any property acquisitions or
dispositions between Crombie and Empire or another related party.
Reliance on Key Personnel
The management of Crombie depends on the services of certain key
personnel. The loss of the services of any key personnel could have an
adverse effect on Crombie and adversely impact Crombie’s financial
condition. Crombie does not have key person insurance on any of its
key employees.
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
that 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, including our mixed-use developments at
Davie Street, Le Duke, Bronte Village, Opal Ridge, and Broadway
and Commercial, where Crombie holds a 50% ownership. For more
information on these developments, please see the “Development”
section of this MD&A. As a result of these joint arrangements,
Crombie may not have the same level of control over the operation
or development of such properties that it ordinarily has, which may
impact its ability to respond to conditions affecting such properties.
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.
Capitalization Rate Risk
Crombie values its investment properties using 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 assumptions are the
capitalization rates for each specific property and stabilized net income.
Crombie is responsible for the reasonableness of the assumptions and
for the accuracy of inputs that are used to determine our valuation
disclosures. Crombie receives biannual capitalization rate reports
(June and December) 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 rate for each property from
the range provided that management believes is most appropriate in
its judgment. In addition to this, Crombie uses the market information
obtained in external appraisals each quarter and makes relevant
adjustments to our input assumptions. If these input assumptions are not
correct, our valuation disclosures may not accurately describe the fair
value of our properties.
67
MANAGEMENT’S DISCUSSION AND ANALYSIS 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, earthquakes, 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,
impact the tenant demand for 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 and opportunities in
alignment with industry best practices.
Reliance on Empire, Sobeys, and Other
Empire Affiliates
Crombie’s ability to acquire new properties is dependent in part upon
Empire and Sobeys Developments Limited Partnership (“SDLP”) and the
successful operation of the right of first offer agreement as described in
the “Material Contracts” section of Crombie’s 2021 Annual Information
Form. Also, a significant portion of Crombie’s rental income is 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 in relation to some properties and
unlimited in relation to other properties. There is no certainty that
Empire and SDLP 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.
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 10 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 organizational impact 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, technologies, procedures, and controls to help mitigate
these risks, and has made it a priority to better educate and train all
Crombie team members on cyber security awareness. These measures,
however, as well as Crombie’s enhanced awareness of risk of a cyber
incident, do not guarantee that its financial results will not be negatively
impacted by the occurrence of any such event.
Environmental Matters
Environmental issues can cover a broad range of topics, including
energy usage, water conservation, pollution, waste management, 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. This
includes measuring, managing, and reporting on our sustainability
performance through the lens of ESG deliverables. In 2022, Crombie
completed updates to its Sustainable Development Policy, including
a community engagement program that includes ESG specific issues,
introduced portfolio-wide ESG risk assessments, and finalized ESG
specific language in standard lease contracts. Crombie continues to
improve its energy, water, and waste data coverage, having set internal
targets in 2022, and is in the process of finalizing an inventory of its GHG
emissions. In the second quarter of 2022, Crombie published its second
annual Sustainability Report.
Crombie is not aware of any material non-compliance with
environmental laws at any of its properties and is not aware of
any material 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 and developments to manage exposure to liability.
68
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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. The residential component of Crombie’s investment in joint ventures further
diversifies our portfolio.
In measuring tenant concentration, Crombie considers both the AMR and total property revenue of major tenants.
• Crombie’s largest tenant, Empire (including Sobeys and all other subsidiaries of Empire), represents 58.0% of AMR. No other
tenant accounts for more than 2.5% of Crombie’s AMR;
• total property revenue includes base rent as well as 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 $222,264 for the year ended December 31, 2022
(December 31, 2021 – $209,684) from Sobeys and other subsidiaries of Empire; and
• over the next five years, leases on no more than 6.3% of the gross leasable area of Crombie will expire in any one year.
Receivables are substantially comprised of current balances due from tenants and past due receivables. The balance of
accounts receivable past due is usually not significant. Historically low receivable balances increased significantly over the past
few years as a result of the impacts of the COVID-19 pandemic, but have since returned to their pre-pandemic collection rates.
Generally, rents are due the first of each month and other tenant billings are due 30 days after invoicing, and 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
and ongoing discussions with tenants.
During the year ended December 31, 2022, Crombie recorded bad debt recovery of $(136) (December 31, 2021 – expense of $811).
Our trade receivables and allowance for doubtful accounts balances at December 31, 2022 were $21,645 and $(2,328),
respectively (December 31, 2021 – $27,472 and $(3,031), 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.
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. At December 31, 2022, Crombie has improved its credit rating
on outstanding senior unsecured notes to “BBB (low)” with a “Stable” trend from DBRS.
Liquidity Risk
Risk Description
Risk Management
69
MANAGEMENT’S DISCUSSION AND ANALYSIS Liquidity Risk
Risk Management
(continued)
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
2021 Annual Information Form dated March 29, 2022. 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 is likely to 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 it 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
Canadian prime interest rates have increased significantly from 2.45% at December 31, 2021 to 6.70% effective January 25, 2023.
Crombie mitigates this risk of rising interest rates by utilizing staggered debt maturities and limiting the use of permanent
floating rate debt and, on occasion, utilizing interest rate swap agreements. The interest swap rates would be based on
Canadian bond yields, plus a premium, called the swap spread, which reflects the risk of trading with a private counterparty
as opposed to the Canadian government. Under interest rate swap arrangements, Crombie would agree to pay the
counterparty an amount if market interest rates decline, in return for the counterparty’s agreement to pay Crombie an amount
if market interest rates increase. As a result, the combined effect of variable interest rates on certain debt arrangements
coupled with the payment obligations under interest rate swap agreements is to stabilize Crombie’s net interest expense, as
increased interest payments are partially offset by the right to receive payments under the interest rate swap agreements,
while decreased interest payments are partially offset by the obligation to make payments under the interest rate swap
agreements. In the event that interest rates change by more than was anticipated in the interest rate swap agreements,
payment obligations under interest rate swap agreements could adversely impact Crombie’s financial condition and results
of operations and decrease the amount of cash available for distribution. Crombie does not enter into these interest rate
swaps on a speculative basis. Crombie is prohibited by its Declaration of Trust in purchasing, selling, or trading in interest rate
future contracts other than for hedging purposes.
As at December 31, 2022:
• Crombie’s weighted average term to maturity of its fixed rate mortgages is 4.6 years;
• Crombie’s weighted average term to maturity of its unsecured notes is 5.1 years;
• Crombie has a floating rate revolving credit facility available to a maximum of $400,000, subject to available borrowing
base, with no balance outstanding/drawn;
• Crombie has an unsecured non-revolving credit facility available to a maximum of $200,000 with a balance of
$150,000 outstanding;
• Crombie has a floating rate bilateral credit facility available to a maximum of $130,000 with no balance outstanding;
• Crombie has joint operation credit facilities available to a maximum of $10,687 at Crombie’s share with a balance of
$10,264 outstanding;
• Crombie has interest rate swap agreements in place on $106,435 of floating rate debt and an interest rate swap agreement
in place held in equity-accounted investments on $52,000 of floating rate debt, at Crombie’s share; and
• Crombie has floating rate credit facilities, included in debt held in equity-accounted investments, available to a maximum
of $130,250 with a balance of $116,820 outstanding, at Crombie’s share.
70
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Interest Rate Risk
Risk Management
(continued)
A fluctuation in interest rates would have an impact on Crombie’s operating and other comprehensive income related
to the use of floating rate debt. The following tables look at the impacts of selected interest rate moves on operating and
other comprehensive income:
Impact on operating income attributable to Unitholders
of interest rate changes on the revolving credit facility
Increase
in Rate
Decrease
in Rate
Increase
in Rate
Decrease
in Rate
Three months ended
December 31, 2022
Year ended
December 31, 2022
Impact of a 0.5% interest rate change
Impact of a 1.0% interest rate change
Impact of a 1.5% interest rate change
$
$
$
(113)
(227)
(340)
$
$
$
113
227
340
Impact on other comprehensive income of interest rate changes
on interest rate swap agreements at Crombie’s share
Impact of a 0.5% interest rate change
Impact of a 1.0% interest rate change
Impact of a 1.5% interest rate change
$
$
$
$
$
$
(315)
(631)
(946)
$
$
$
315
631
946
As at December 31, 2022
Increase
in Rate
Decrease
in Rate
2,200
4,800
7,000
$
$
$
(2,200)
(4,800)
(7,000)
RISK FACTORS RELATED TO THE UNITS
CASH DISTRIBUTIONS ARE NOT GUARANTEED
POTENTIAL VOLATILITY OF UNIT PRICES
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.
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.
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 is 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.
71
MANAGEMENT’S DISCUSSION AND ANALYSIS 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.
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.
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
2022 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.
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
INDIRECT OWNERSHIP OF UNITS BY EMPIRE
• the market for similar securities.
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.
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.
72
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 JOINT VENTURES
As at December 31, 2022, Crombie holds partial ownership interests
in six joint ventures, five 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 operational metrics such as occupancy
and GLA, unless specifically indicated that such metrics are presented
on a proportionate consolidation basis. The figures presented below
represent only the results of these joint ventures, at 100%, with the
exception of FFO*.
JOINT VENTURE SUMMARY
The following represents Crombie’s interest in joint venture 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, 2022
December 31, 2021
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
—%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
1600 Davie Limited Partnership
Davie Street is a retail/residential mixed-used property consisting of
330 residential units and 54,000 square feet of retail GLA in Vancouver,
British Columbia. Crombie retains 100% ownership of the retail GLA,
which is anchored by a 44,500 square foot Safeway. Stabilization of NOI
was reached in September 2021 and the residential property is 96.4%
leased at December 31, 2022. The joint venture retains ownership of the
330 residential units.
Bronte Village Limited Partnership
Bronte Village is a retail/residential mixed-used property located in
Oakville, Ontario. It is comprised of two residential towers incorporating
481 residential rental units and 54,000 square feet of grocery-anchored
retail GLA that is owned by the joint venture. Substantial completion
was reached on tower one in the third quarter of 2021, with the
remaining residential tower completed during the first quarter of 2022.
The residential portion of the property is 50.5% leased at December 31,
2022. Tower one is expected to be fully leased by December 2023, with
full occupancy of tower two, and stabilization of NOI for the property,
expected in May 2024.
The Duke Limited Partnership
Le Duke is a retail/residential mixed-use property with an existing
heritage building integrated into the ground floor of the property.
The property incorporates 387 residential units, a 25,000 square foot
IGA on the ground floor, and an additional 1,000 square feet of retail
space that is all owned by the joint venture. Stabilization of NOI was
reached in December 2022 and the residential tower is 92.2% leased
at December 31, 2022.
Penhorn Residential Holdings Limited Partnership
Opal Ridge (Penhorn), formerly referred to as Penhorn Lands, is a
26-acre parcel in Halifax, Nova Scotia with zoning proposed for the
development of multi-family parceled building lots. Entitlement and
development agreements were approved in June 2022 and marketing
of select land parcels has commenced, with the sale of a 3 acre parcel
occurring in the fourth quarter of 2022. Certain development will be
completed by third parties and the Penhorn joint venture may develop
select land parcels.
140 CPN Limited
Centennial Parkway is a retail plaza consisting of 33,000 square feet
of retail GLA, which is fully leased and owned by the joint venture.
1700 East Broadway Limited Partnership
1700 East Broadway (Broadway and Commercial) is a proposed
major mixed-use redevelopment located at the busiest transit node
in Western Canada. It will include grocery-anchored retail, office,
residential rental, and condominiums. The project is currently being
rezoned with construction expected to commence in 2024. The joint
venture will own the residential and office components, with Crombie
retaining 100% ownership of the retail.
King George Development (I) Limited Partnership
10355 King George Boulevard was a multi-phased mixed-use
redevelopment in Vancouver, British Columbia. In 2022, Crombie
determined that it did not intend to pursue the development of this
property, either by itself or through a joint venture. The property was
sold in the fourth quarter of 2022 and the joint venture was dissolved
and wound up.
73
MANAGEMENT’S DISCUSSION AND ANALYSIS OCCUPANCY METRICS
Stabilized properties1
Lease-up in progress:
Bronte Village
Total
Retail
Occupancy % as at
December 31,
2022
Residential
Occupancy % as at
December 31,
2022
Residential GLA
100.0%
481,000
83.5%
92.4%
466,000
947,000
94.1%
50.5%
76.6%
Retail GLA
59,000
54,000
113,000
Total GLA
540,000
520,000
1,060,000
Number of
Residential Units
Number of
Committed Units
717
481
1,198
675
243
918
(1) Comprised of Davie Street Residential, Le Duke, and Centennial Parkway.
Total average residential rent is $3.81 per square foot.
FINANCIAL PERFORMANCE
December 31, 2022
December 31, 2021
Three months ended
Davie LP
Bronte LP
Duke LP
Other
Total
Davie LP
Bronte LP
Duke LP
Other
Total
Property revenue
$ 2,774
$ 2,321
$ 1,739
$
7,708
$ 14,542
$
2,578
$
873
$
597
$
151
$
4,199
Property operating
expenses
(685)
(814)
(495)
(4,051)
(6,045)
(595)
Net property income
2,089
1,507
1,244
3,657
8,497
1,983
(481)
392
(328)
269
(44)
107
(1,448)
2,751
General and
administrative
expenses
Depreciation and
amortization
Finance costs –
operations
Net income (loss)
Contribution to
Crombie’s FFO*1
(83)
(1)
(34)
(35)
(153)
(58)
(1)
(3)
(1)
(63)
(874)
(1,342)
(490)
(18)
(2,724)
(705)
(542)
(477)
(21)
(1,745)
(1,430)
(3,572)
(816)
(105)
(5,923)
(1,086)
$
$
(298)
$ (3,408)
356
$
(899)
$
$
(96)
$ 3,499
$
(303)
210
$ 1,758
$ 1,425
$
$
134
120
$
$
(618)
(769)
(32)
$
$
(586)
(797)
(75)
$
$
(24)
(2,314)
61
$ (1,371)
21
$
34
(1) FFO line above is included in Crombie’s total FFO numbers.
December 31, 2022
December 31, 2021
Year ended
Davie LP
Bronte
LP
Duke LP
Other
Total
Davie LP
Bronte
LP
Duke LP
Other
Total
Property revenue
$ 10,826
$ 6,514
$ 5,466
$ 8,196
$ 31,002
$
6,624
$
1,781
$
1,100
$
668
$ 10,173
Property operating
expenses
(2,705)
(3,699)
(1,822)
(4,219)
(12,445)
(1,939)
(1,312)
Net property income
8,121
2,815
3,644
3,977
18,557
4,685
469
(746)
354
(210)
458
(4,207)
5,966
General and
administrative
expenses
Depreciation and
amortization
Finance costs –
operations
(115)
(54)
(69)
(319)
(557)
(511)
(29)
(27)
(1)
(568)
(3,493)
(4,720)
(1,957)
(60)
(10,230)
(2,801)
(1,078)
(737)
(62)
(4,678)
(5,750)
(9,812)
(3,137)
(218)
(18,917)
(4,275)
(1,242)
(986)
(99)
(6,602)
Net income (loss)
$ (1,237)
$ (11,771)
$ (1,519)
$ 3,380
$ (11,147)
$ (2,902)
$ (1,880)
$ (1,396)
Contribution to
Crombie’s FFO*1
$
997
$ (3,243)
$
268
$ 1,721
$
(257)
$
(208)
$
(70)
$
(149)
$
$
296
$ (5,882)
90
$
(337)
(1) FFO line above is included in Crombie’s total FFO numbers.
74
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Net property income
Non-cash straight-line rent
Non-cash tenant incentive amortization
Property cash NOI*
Net property income
Non-cash straight-line rent
Non-cash tenant incentive amortization
Three months ended
December 31, 2022
December 31, 2021
Retail
Residential
Total
Retail
Residential
Total
$
3,826
$
4,671
$
8,497
(18)
290
297
—
279
290
$
4,098
$
4,968
$
9,066
$
$
449
(27)
124
546
$
2,302
$
2,751
317
—
290
124
$
2,619
$
3,165
Year ended
December 31, 2022
December 31, 2021
Retail
Residential
Total
Retail
Residential
$
5,358
$
13,199
$
18,557
$
1,608
$
(116)
662
1,102
—
986
662
(93)
585
$
4,358
1,112
—
Total
5,966
1,019
585
Property cash NOI*
$
5,904
$
14,301
$
20,205
$
2,100
$
5,470
$
7,570
FAIR VALUE
The estimated fair value of the investment properties in Crombie’s equity-accounted joint ventures at 100% is as follows:
December 31, 2022
December 31, 2021
(1) Carrying value as at December 31, 2021 was updated from the previously reported figure.
Fair Value Carrying Value
$ 908,000
$ 572,153
$ 774,000
$ 576,3061
The fair value included in this summary reflects the fair value of the
properties as at December 31, 2022 and December 31, 2021, 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, 2022, properties held within 1600 Davie
Limited Partnership, Bronte Village Limited Partnership, The Duke Limited
Partnership, and 140 CPN Limited are revenue-generating properties.
Crombie has utilized the following weighted average capitalization rates
for its joint venture properties:
Weighted average capitalization rate
Capitalization rate sensitivity
December 31, 2022
December 31, 2021
3.47%
3.30%
Crombie has determined that a change in this applied capitalization rate at December 31, 2022 would result in an (increase) decrease in the fair value
of the properties as follows:
Capitalization rate change
0.25%
0.50%
0.75%
Increase
in Rate
Decrease
in Rate
$ (63,000)
$
65,000
$ (115,000)
$ 146,000
$ (160,000)
$ 243,000
75
MANAGEMENT’S DISCUSSION AND ANALYSIS DEBT TO GROSS FAIR VALUE*
Fixed and floating rate mortgages and construction loans
Revolving credit facilities
Partnership loans
Lease liabilities
Total debt outstanding1
Investment properties, fair value
Other assets, cost2
Cash and cash equivalents
Gross fair value
Debt to gross fair value*
December 31, 2022
December 31, 2021
$
$
$
$
506,143
$
17,256
10,364
7,521
541,284
908,000
53,948
4,974
966,922
$
$
$
465,027
1,200
15,533
26,388
508,148
774,000
36,740
8,906
819,646
56.0%
62.0%
(1) December 31, 2021 total debt has been updated from the previously reported figure to include partnership loans.
(2) Other assets include deferred financing costs, and exclude tenant incentives and related accumulated amortization, and accrued straight-line rent receivable.
DEBT PROFILE
December 31, 2022
December 31, 2021
Mortgages1
Revolving
Credit
Facilities2
Partnership
Loans
Total
Borrowings
Mortgages1
Opening balance, beginning
of period3
$ 465,027
$
1,200
$
15,533
$ 481,760
$ 299,431
$
Additions to existing mortgages
43,511
—
Net (repayments) advances
—
16,056
—
—
Principal repayments
(2,395)
—
(5,169)
43,511
16,056
(7,564)
115,710
50,000
(114)
Revolving
Credit
Facilities2
—
—
1,200
—
Partnership
Loans
Total
Borrowings
$
15,533
$ 314,964
—
—
—
115,710
51,200
(114)
Closing balance, end of period
$ 506,143
$
17,256
$
10,364
$ 533,763
$ 465,027
$
1,200
$
15,533
$ 481,760
(1) Includes construction financing.
(2) The unsecured revolving term credit facility is used by the joint venture to finance development activity of the partnership during rezoning.
(3) Opening balances were updated from the previously reported figures to include partnership loans.
Total borrowings1
Long-term portion1
Current portion
Weighted average fixed interest rate1
Weighted average floating interest rate2
Weighted average term to maturity of fixed rate debt
Weighted average term to maturity of floating rate debt2
December 31, 2022
December 31, 2021
$
$
$
533,763
314,875
218,888
$
$
$
3.17%
7.00%
5.4 years
0.3 years
481,760
194,803
286,957
3.15%
2.66%
5.8 years
0.2 years
(1) Previously reported figures for December 31, 2021 have been restated to include partnership loans.
(2) Includes construction financing and credit facilities of $233,640 at December 31, 2022 (December 31, 2021- $282,492).
From time to time, our joint ventures have entered into interest rate swap agreements to manage the interest rate profile of their current or future debts
without an exchange of the underlying principal amount. Our joint ventures currently have an interest rate swap agreement in place on $104,000 of
floating rate debt.
76
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 OTHER DISCLOSURES
RELATED PARTY TRANSACTIONS
As at December 31, 2022, 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
Crombie’s transactions with related parties are as follows:
a 50% interest, as well as transactions with key management personnel
and trustees, and post-employment benefit plans.
Related party transactions are measured at the amount of consideration
established and agreed to 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,
2022
2021
2022
2021
(a)
(b)
(c)
$
$
$
$
$
$
$
$
56,114
246
23
(34)
152
(155)
—
(16,440)
$
$
$
$
$
$
$
$
53,759
206
34
(34)
193
(65)
55
(15,194)
$
$
$
$
$
$
$
$
222,264
956
125
(135)
398
(331)
53
(65,459)
$
$
$
$
$
$
$
$
209,684
1,001
136
(96)
483
(265)
230
(59,952)
(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, project 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, 2022,
Crombie issued 860,958 (December 31, 2021 – 213,577) Class B LP Units
to ECLD under the DRIP.
On January 31, 2022, ECLD purchased 4,756,446 Class B LP Units and the
attached Special Voting Units at a price of $17.45 per Class B LP Unit for
proceeds of $82,869 net of issue costs, on a private placement basis.
During the year ended December 31, 2022, Crombie purchased nine
retail properties and the remaining 50% interest in one retail-related
industrial property from a subsidiary of Empire for a total purchase price
of $99,472 before transaction costs.
During the year ended December 31, 2022, Crombie invested $14,932
(December 31, 2021 – $34,119) 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 $25,207 (December 31, 2021 –
$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 $10,364 (December 31, 2021 –
$15,533) in a 6% subordinated note receivable due from Bronte Village
Limited Partnership.
77
MANAGEMENT’S DISCUSSION AND ANALYSIS 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.
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. 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
reflect the specific risks inherent in the net property income, to arrive
at property valuations. (For further explanation of the determination of
capitalization rates, see the “Risk Management” section of this MD&A,
under “Capitalization Rate Risk” in the “Risk Factors Related to the
Business of Crombie” section.) As at December 31, 2022, management’s
determination of fair value was updated for current market assumptions,
including net 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.
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.
Critical Accounting Estimates and Assumptions
FAIR VALUE MEASUREMENT
A number of assets and liabilities included in Crombie’s consolidated
financial statements require measurement at, and/or disclosure of, fair
value. In estimating the fair value of an asset or a liability, Crombie uses
market-observable data to the extent it is available. Where market-
observable data is not available, Crombie estimates the fair value
based on discounted future cash flows using discount rates that reflect
current market conditions for instruments with similar terms and risks.
INVESTMENT PROPERTY ACQUISITIONS
Upon acquisition, Crombie performs an assessment of the investment
properties being acquired to determine whether the acquisition is to
be accounted for as an asset acquisition or a business combination. A
transaction is considered to be a business combination if the acquired
property meets the definition of a business under IFRS 3 – “Business
Combinations”: being an integrated set of activities and assets that
are capable of being managed for the purpose of providing a return
to the Unitholders. Crombie performs an assessment of the fair value
of the properties’ related tangible and intangible assets and liabilities
and allocates the purchase price to the acquired assets and liabilities.
Crombie assesses and considers fair value based on cash flow
projections that take into account relevant discount and capitalization
rates and any other relevant sources of market information available.
Estimates of future cash flow are based on factors that include historical
operating results, if available, and anticipated trends, local markets and
underlying economic conditions.
Crombie allocates the purchase price based on the following:
• Land – The amount allocated to land is based on an appraisal
estimate of its fair value.
• Buildings – Buildings are recorded at the estimated fair value of the
building and its components and significant parts.
• Intangible Assets – Intangible assets are recorded for tenant
relationships, based on estimated costs avoided should the respective
tenants renew their leases at the end of the initial lease term,
adjusted for the estimated probability of renewal.
• Fair value of debt – Values ascribed to fair value of debt are
determined based on the differential between contractual and
market interest rates on long-term liabilities assumed at acquisition.
78
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 REVENUE RECOGNITION
DEFINED BENEFIT LIABILITY
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.
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
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.
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 assumptions. 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 at December 31, 2022. 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, 2022, and have concluded that
our current ICFR are effective based on that evaluation. There have
been no material changes to Crombie’s internal controls during the year.
79
MANAGEMENT’S DISCUSSION AND ANALYSIS QUARTERLY INFORMATION
Property revenue
$
107,939
$
103,642
$
103,064
$
104,946
$
103,832
$
101,517
$
100,006
$
103,537
Dec. 31, 2022
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Dec. 31, 2021
Sep. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Three months ended
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
37,123
70,816
87,718
32,068
71,574
26,410
32,967
70,097
28,424
35,615
69,331
25,248
32,430
71,402
78,730
30,216
71,301
23,851
29,814
70,192
19,605
33,401
70,136
33,215
(39,697)
(39,513)
(39,394)
(39,236)
(36,637)
(36,578)
(36,124)
(35,220)
(1,704)
1,782
2,034
211
(1,018)
291
(1,219)
(1,026)
$
$
$
$
$
$
$
$
46,317
0.49
39,697
0.22
52,104
0.29
76.2%
45,061
0.25
88.1%
$
$
$
$
$
$
$
$
(11,321)
0.15
39,513
0.22
52,665
0.30
75.0%
46,788
0.26
84.5%
$
$
$
$
$
$
$
$
(8,936)
0.16
39,394
0.22
49,877
0.28
79.0%
43,551
0.25
90.5%
$
$
$
$
$
$
$
$
(13,777)
0.15
39,236
0.22
49,091
0.28
79.9%
41,898
0.24
93.6%
$
$
$
$
$
$
$
$
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%
Number of investment properties
289
290
294
294
284
287
287
287
Gross leasable area
Economic occupancy
Committed occupancy
Debt metrics
Unencumbered investment
properties1
Available liquidity
Debt to gross fair value*2
Weighted average interest rate3
Debt to trailing 12 months
adjusted EBITDA*2,4
Interest coverage ratio*4
18,445,000
18,331,000
18,500,000
18,488,000
17,861,000
18,232,000
18,235,000
18,229,000
94.8%
96.9%
96.2%
96.8%
95.9%
96.3%
95.5%
96.4%
95.6%
96.2%
95.8%
96.5%
95.6%
96.2%
95.5%
96.3%
$ 2,154,468
$ 2,200,890
$ 2,155,326
$ 2,009,252
$ 1,752,927
$ 1,461,775
$ 1,445,423
$ 1,388,141
$
583,003
$
445,372
$
444,262
$
523,159
$
507,777
$
512,168
$
368,483
$
469,548
41.8%
3.8%
8.02x
3.26x
42.0%
3.8%
8.50x
3.32x
42.7%
3.8%
8.75x
3.26x
42.5%
3.8%
8.72x
3.27x
45.3%
3.8%
8.99x
3.06x
47.3%
3.8%
9.61x
3.07x
47.5%
3.9%
9.73x
2.91x
50.2%
3.9%
10.42x
3.01x
(1) Represents fair value of unencumbered properties.
(2) Calculations for comparative quarters have been restated to include Crombie’s share of debt and assets held in joint ventures.
(3) Weighted average interest rate is calculated based on interest rates for all outstanding fixed rate debt.
(4) The prior year calculations have been restated to include Crombie’s share of revenue and expenses in joint ventures.
80
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Variations in quarterly results over the past eight quarters have been
influenced by the following specific transactions and ongoing events:
• Property acquisitions and dispositions (gross proceeds excluding
closing and transaction costs) for each of the above three-month
periods were:
- December 31, 2022 – disposition of two retail properties for
proceeds of $113,418;
- September 30, 2022 – acquisition of one retail property for a total
purchase price of $1,350 and disposition of five retail properties
and a parcel of land adjacent to existing retail properties for
proceeds of $52,126;
- June 30, 2022 – acquisition of one retail property and one
development property for a total purchase price of $15,939 and
disposition of one retail property for proceeds of $10,250;
- March 31, 2022 – acquisition of nine retail properties, including a
parcel of land subsequently developed by Crombie in the quarter,
and acquisition of the remaining 50% interest in one retail-related
industrial property for a total purchase price of $90,472;
- 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; and
- 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.
• 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.
81
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. 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.
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, 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 274 as at December 31, 2022.
Reconciliation
“Same-asset Property
Cash NOI” starting on
page 44
“Same-asset Property
Cash NOI” starting on
page 44
Funds from operations
(“FFO”)
• Crombie follows the recommendations of 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 46
- gain or loss on disposal of investment properties and related income tax;
- gain on distribution from equity-accounted investments;
- 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 and 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.
FFO payout ratio
• 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.
“Funds from
Operations (FFO)*”
starting on page 46
82
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 Non-GAAP Measure
Description and Purpose
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.
Reconciliation
“Adjusted Funds from
Operations (AFFO)*”
starting on page 47
• 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
• 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.
Net asset value (“NAV”)
• NAV represents total assets less total liabilities excluding net assets attributable to Unitholders.
Unencumbered
investment properties as
a % of unsecured debt
• Unencumbered investment properties represents the fair value of investment properties that
have not been pledged as security for any debt obligations.
• Unsecured debt currently consists of Crombie’s senior unsecured notes and its bilateral and
non-revolving credit facilities.
• This ratio is used to assess the aggregate unencumbered investment properties currently
available for secured financing to satisfy all outstanding unsecured debt obligations.
Debt to gross fair value
• Used to evaluate Crombie’s flexibility to incur additional financial leverage.
Adjusted debt
• Represents debt excluding transaction costs, which Crombie feels is a more relevant
presentation of indebtedness. It includes Crombie’s share of debt held in equity-accounted
joint ventures.
• Adjusted debt is used in the calculation of our debt to gross fair value and debt to trailing
12 months adjusted EBITDA.
“Adjusted Funds from
Operations (AFFO)*”
starting on page 47
“Development” starting
on page 51
“Debt Metrics” starting
on page 57
“Debt Metrics” starting
on page 57
“Debt Metrics” starting
on page 57
Earnings before interest,
taxes, depreciation
and amortization
(“adjusted EBITDA”)
• Represents earnings before interest, taxes, depreciation, and amortization adjusted for certain
items such as amortization of tenant incentives, impairment of investment properties, gain
(loss) on disposal of investment properties, and gain on distribution from equity-accounted
investments. It includes Crombie’s share of revenue, operating expenses, and general and
administrative expenses from equity-accounted joint ventures.
“Debt Metrics” starting
on page 57
• 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.
Adjusted interest
expense
• Represents finance costs from operations, excluding amortization of deferred financing costs.
It includes Crombie’s share of interest from equity-accounted joint ventures.
• Adjusted interest expense is used in the calculation of our interest service coverage and debt
service coverage ratios.
Interest service coverage
Debt service coverage
• These ratios are useful in determining Crombie’s ability to service the interest requirements
of its outstanding debt.
“Debt Metrics” starting
on page 57
“Debt Metrics” starting
on page 57
“Debt Metrics” starting
on page 57
83
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.
is incurred in the first year of operation. Crombie also discloses actual
maintenance expenditures for comparative purposes. The rate per
square foot is a proxy for actual historical 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 2022, Crombie
has increased the normalized rate from $0.90 to $1.00 per square
foot of weighted average GLA, based on the actual spend for the
previous three years and for 2022. 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 a reserve amount for
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 obtained as little to no maintenance expense
Maintenance Expenditures – Actual
Year ended
Three months ended
Year ended
Three months ended
Dec. 31,
2022
Dec. 31,
2022
Sep. 30,
2022
Jun. 30,
2022
Mar. 31,
2022
Dec. 31,
2021
Dec. 31,
2021
Sep. 30,
2021
Jun. 30,
2021
Mar. 31,
2021
Total additions to investment
properties
$ 104,379
$
29,182
$
21,129
$
18,435
$
35,633
$
76,771
$
31,735
$
29,919
$
6,736
$
8,381
Less: revenue-enhancing
expenditures
(95,032)
(25,543)
(19,726)
(17,086)
(32,677)
(69,051)
(29,005)
(26,173)
(6,641)
(7,232)
Maintenance capital
expenditures
Total additions to TI and
deferred leasing costs
Less: revenue-enhancing
9,347
3,639
1,403
1,349
2,956
7,720
2,730
3,746
95
1,149
43,408
7,561
6,521
11,064
18,262
73,514
10,058
7,283
26,122
30,051
expenditures
(32,721)
(6,738)
(3,634)
(8,018)
(14,331)
(65,086)
(6,778)
(7,168)
(23,875)
(27,265)
Maintenance TI and
deferred leasing costs
10,687
823
2,887
3,046
3,931
8,428
3,280
115
2,247
2,786
Total maintenance
expenditures – actual
$
20,034
Reserve amount charged
against AFFO*
$
18,526
$
$
4,462
$
4,290
$
4,395
$
6,887
$
16,148
4,620
$
4,662
$
4,659
$
4,585
$
16,043
$
$
6,010
4,006
$
$
3,861
4,023
$
$
2,342
4,024
$
$
3,935
3,990
Obligations for expenditures for TIs 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
2022 and 2021.
Revenue-enhancing expenditures are capitalized and depreciated
or charged against revenue over their useful lives. Revenue-enhancing
expenditures during the year ended December 31, 2022 consisted
primarily of development work and modernization investments.
84
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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”, 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 the
principal related risks include statements regarding:
(i)
annual expenditures 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) anticipated growth in grocery-anchored retail, residential, and
retail-related industrial asset types as a percentage of our total
portfolio, which depends on successful execution of our current
development strategy, our relationship with Empire, availability of
suitable properties and development opportunities, and general
economic conditions;
(v)
statements under the heading “Development” including the
locations identified, timing, cost, development size and nature,
and anticipated impact on portfolio quality and diversification,
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 assume 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;
(vi)
fair value of investment properties, which is based on assumptions
such as cash flow projections, and estimates of future cash flows
and anticipated trends and economic conditions;
(vii) 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;
(viii) estimated GLA, estimated completion dates, and estimated total
costs, 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;
(ix) 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;
(x)
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;
(xi) estimated payments on derivative and non-derivative financial
liabilities, which could be impacted by interest rates on floating
rate debt and fluctuations in the settlement value and settlement
timing of any derivative financial liabilities;
(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)
the effect that any contingencies or guarantees would have on
Crombie’s financial statements, which could be impacted by their
eventual outcome.
85
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.
86
MANAGEMENT’S DISCUSSION AND ANALYSISCROMBIE REIT Annual Report 2022 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 Accounting Standards as issued by the International Accounting Standards Board (“IFRS”). 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, 2022, 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 22, 2023
CLINTON D. KEAY, CPA, CA
Chief Financial Officer and Secretary
February 22, 2023
87
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, 2022 and 2021, 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, 2022 and 2021;
• the consolidated statements of comprehensive income 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.
88
CROMBIE REIT Annual Report 2022 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, 2022. 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; and (iii) 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 REIT’s total investment properties as at December 31, 2022 were
$3.936 billion. The investment properties are carried at cost less
accumulated depreciation, with their fair value disclosed at each
reporting period. The REIT disclosed a total fair value of $5.050 billion
on December 31, 2022.
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.
89
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.
90
CROMBIE REIT Annual Report 2022 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 22, 2023
91
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED
BALANCE SHEETS
(in thousands of Canadian dollars)
Assets
Non-current assets
Investment properties
Investment in joint ventures
Other assets
Current assets
Cash and cash equivalents
Other assets
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
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
92
Note
December 31, 2022
December 31, 2021
$
3,590,211
$
3,546,752
40,397
394,148
4,024,756
6,117
47,525
53,642
44,210
362,801
3,953,763
3,915
65,363
69,278
4,078,398
4,023,041
666,748
160,264
972,003
6,819
21,811
34,057
893,364
29,124
971,267
8,130
23,838
34,420
1,861,702
1,960,143
246,958
—
271
117,984
943
366,156
174,495
150,000
284
139,695
932
465,406
2,227,858
2,425,549
1,850,540
$
1,597,492
1,097,070
753,470
1,850,540
$
$
950,271
647,221
1,597,492
$
$
$
3
4
5
17
5
7
7
8
9
10
21
7
8
9
10
21
22
23
signed (Paul Beesley)
Paul Beesley
Audit Committee Chair
CROMBIE REIT Annual Report 2022 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
(in thousands of Canadian dollars)
Property revenue
Property operating expenses
Net property income
Gain on disposal of investment properties
Impairment of investment properties
Depreciation and amortization
General and administrative expenses
Finance costs – operations
Gain on distribution from equity-accounted investments
Loss from equity-accounted investments
Operating income before taxes
Taxes – current
Operating income attributable to Unitholders
Distributions to Unitholders
Change in fair value of financial instruments
Increase in net assets attributable to Unitholders
Other comprehensive income
Items that will be subsequently reclassified to increase net assets attributable to Unitholders:
Share of net change in derivatives designated as cash flow hedges of
equity-accounted investments
Net change in derivatives designated as cash flow hedges
Unamortized actuarial gains in employee future benefits obligation
Other comprehensive income
Comprehensive income
See accompanying notes to the consolidated financial statements.
Note
11
12
3
3
3,5
14
15
4
4
14
4
Year ended December 31,
2022
$
419,591
$
137,773
281,818
80,804
(10,400)
(79,836)
(19,547)
(83,014)
2,933
(4,954)
167,804
(4)
167,800
(157,840)
2,323
(155,517)
12,283
3,992
5,571
1,643
11,206
2021
408,892
125,861
283,031
56,525
(2,539)
(75,763)
(25,484)
(92,788)
15,525
(2,941)
155,566
(165)
155,401
(144,559)
(2,972)
(147,531)
7,870
—
4,628
444
5,072
$
23,489
$
12,942
93
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO UNITHOLDERS
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
ATTRIBUTABLE TO UNITHOLDERS
(in thousands of Canadian dollars)
REIT Units, Special
Voting Units and
Class B LP Units
(Note 16)
Net Assets
Attributable to
Unitholders
Accumulated
Other
Comprehensive
Income (Loss)
Attributable to
Total
REIT Units
Class B
LP Units
Balance, January 1, 2022
$
1,966,481
$
(368,431)
$
(558)
$
1,597,492
$
950,271
$
647,221
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
1,172
—
33,120
526
194,741
—
12,283
—
11,206
1,172
23,489
1,172
13,844
—
9,645
—
—
—
—
—
—
33,120
19,385
13,735
526
194,741
526
111,872
—
82,869
Balance, December 31, 2022
$
2,196,040
$
(356,148)
$
10,648
$
1,850,540
$
1,097,070
$
753,470
(in thousands of Canadian dollars)
REIT Units, Special
Voting Units and
Class B LP Units
(Note 16)
Net Assets
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
Adjustments related to EUPP
Comprehensive income
Units issued under 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
See accompanying notes to the consolidated financial statements.
94
CROMBIE REIT Annual Report 2022 CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands of Canadian dollars)
Cash flows provided by (used in)
Operating Activities
Increase 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
Cash distributions to Unitholders
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 financing activities
Investing Activities
Acquisition of investment properties and intangible assets
Additions to investment properties
Additions of predevelopment costs
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
Collections (advances) on long-term receivables
Cash (used in) provided by investing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Year ended December 31,
Note
2022
20211
17
17
15
7
7
15
7
8
8
16
16
17
3
3
3
4
4
5
$
12,283
$
(42,135)
26,566
(4,019)
(4)
83,014
157,840
233,545
7,000
270
(38,099)
(124,133)
(83,014)
130,780
360
—
(150,000)
(123,713)
200,002
(5,261)
(936)
2,685
7,870
(72,542)
21,892
31,963
(165)
92,788
144,559
226,365
25,550
(2,731)
(44,424)
(118,990)
(92,788)
(33,493)
361
150,000
(150,000)
(135,645)
100,015
(2,790)
(844)
3,067
(184,059)
(302,712)
(115,327)
(104,379)
(6,199)
171,702
(2,077)
5,393
(256)
(1,273)
5,132
(47,284)
2,202
3,915
6,117
$
$
(64,304)
(76,771)
(1,521)
144,014
(5,653)
25,070
(194)
(972)
(2,700)
16,969
(59,378)
63,293
3,915
(1) Cash provided by operating and investing activities for the year ended December 31, 2021 was updated from the previously reported figure.
See accompanying notes to the consolidated financial statements.
95
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(In thousands of Canadian 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, 2022 and December 31, 2021
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 22, 2023.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Accounting Standards as issued by the International
Accounting Standards Board (“IFRS”).
(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 consolidated balance sheets, it will present additional consolidated balance sheets 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, 2022. Subsidiaries are all entities over
which Crombie has control. All subsidiaries have a reporting date of December 31, 2022.
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.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 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, and cash in bank.
(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.
97
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 redemption will 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 with changes in fair value reflected as a decrease (increase) in fair value
of financial instruments.
(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.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 (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 most of its leases with its tenants are operating leases of which revenue is recorded in accordance with Crombie’s
revenue recognition policy. In some instances Crombie may classify a lease as a finance lease if it transfers substantially all of the risks and rewards
of the underlying asset. For these leases a finance lease receivable is established and interest income is recognized over the term of the lease.
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 statements of comprehensive income
(loss) 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 liabilities 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.
99
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 consolidated
balance sheets 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 consolidated balance sheets 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, both joint credit facilities, and a variable mortgage in a joint venture.
(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, 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.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 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
Derivatives designated in a hedging relationship
Category
Assets at amortized cost
Assets at amortized cost
Assets at amortized cost
Assets at amortized cost
FVTPL
FVTPL
FVTOCI
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
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. On a continual basis,
Crombie assesses whether any of its financial assets that are measured at amortized costs are impaired under an expected credit loss model. For
trade and long-term receivables, Crombie utilizes a provision matrix that uses aging categories as well as tenant specific history, and the current
economic environment to determine expected credit losses. Crombie’s financial assets are reported net of any expected credit loss on the consolidated
balance sheets.
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 and lease 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.
101
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 the consolidated balance
sheets 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 consolidated balance sheets 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 presentation
As a result of the classification of all units as financial liabilities, the statement of comprehensive income 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 consolidated balance sheets.
(iv) Presentation of per unit measures
As a result of the classification of all units as financial liabilities, Crombie has no equity instrument; therefore, in accordance with IAS 33 “Earnings per
Share”, there is no denominator for purposes of calculation of per unit measures.
(v) Allocation of comprehensive income (loss)
The components of comprehensive income (loss) are allocated between REIT Units and Class B LP Units as follows:
• Operating income – based on the weighted average number of units outstanding during the reporting period.
• Distributions to Unitholders – based on the actual distributions paid to each separate unit class.
• Accumulated other comprehensive income (loss) – increases are allocated based on the weighted average number of units outstanding during the
reporting period, decreases in previously accumulated amounts are drawn down based on the average accumulation allocation rate.
(w) Critical judgments in applying accounting policies
The following are the critical judgments that have been made in applying Crombie’s accounting policies and that have the most significant effect
on the consolidated financial statements:
(i) Investment properties
Crombie’s accounting policies relating to investment properties are described in Note 2(e). In applying these policies, judgment is applied in
determining whether certain costs are additions to the carrying amount of an investment property and whether properties acquired are considered
to be asset acquisitions or business combinations. Crombie has determined that all properties acquired to date are asset acquisitions.
(ii) Investment in joint ventures
Crombie makes judgments in determining the appropriate accounting for investments in other entities. Such judgments include: determining the
significant relevant activities and assessing the level of influence Crombie has over such activities through agreements and contractual arrangements.
(iii) Classifications of Units as liabilities
Crombie’s accounting policies relating to the classification of Units as liabilities are described in Note 2(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.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 (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. 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) 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, 2022, 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.
(iv) 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
assumptions. 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.
(v) 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.
(y) Future changes in accounting standards
The International Accounting Standards Board (“IASB”) has issued a number of standards and interpretations with an effective date after the date
of these consolidated 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 the 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, 2024.
(ii) IFRS 16 – Leases
The IASB has issued amendments to IFRS 16 “Leases” (“IFRS 16”). The amendments clarify how a seller-leasee subsequently measures sale and
lease-back transactions. The amendments to IFRS 16 apply to annual reporting periods beginning on or after January 1, 2024.
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3) INVESTMENT PROPERTIES
Income properties
Properties under development
Total investment properties
Income properties
Cost
December 31, 2022
December 31, 2021
$
$
3,523,067
67,144
3,590,211
$
$
3,436,965
109,787
3,546,752
Land
Buildings
Intangibles
Deferred
Leasing Costs
Total
Opening balance, January 1, 2022
$
1,129,645
$
2,912,068
$
71,758
$
10,329
$
4,123,800
Acquisitions
Additions
Dispositions
Write-off of fully depreciated assets
Transfer to investment properties held for sale (Note 6)
Reclassification from properties under development
30,021
1,902
(9,241)
—
(19,536)
16,038
75,573
33,325
(32,851)
(4,247)
(27,652)
86,880
7,136
—
(821)
(1,322)
(806)
—
—
1,170
—
(736)
(60)
—
112,730
36,397
(42,913)
(6,305)
(48,054)
102,918
Balance, December 31, 2022
1,148,829
3,043,096
75,945
10,703
4,278,573
Accumulated depreciation, amortization,
and impairment
Opening balance, January 1, 2022
Depreciation and amortization
Dispositions
Impairment
Write-off of fully depreciated assets
Transfer to investment properties held for sale (Note 6)
7,906
316
—
2,200
—
—
642,311
72,158
(7,815)
8,200
(4,247)
(5,187)
Balance, December 31, 2022
10,422
705,420
32,307
4,870
(551)
—
(1,322)
(228)
35,076
4,311
1,039
—
—
(736)
(26)
4,588
686,835
78,383
(8,366)
10,400
(6,305)
(5,441)
755,506
Net carrying value, December 31, 2022
$
1,138,407
$
2,337,676
$
40,869
$
6,115
$
3,523,067
Included in land are right-of-use assets of $15,456 net of accumulated depreciation of $1,266 for land held under lease.
During the year ended December 31, 2022, Crombie recorded impairments totalling $10,400 on three properties. These impairments were the result
of continuing high vacancy at one property, the upcoming scheduled demolition of a vacant building, and a recent redevelopment that included a
partial demolition. 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 each property. The recoverable amount is the higher of the economic benefit of the continued use of
the asset and the selling price less costs to sell. In all three cases, the recoverable amount was determined to be the economic benefit of the continued
use of the asset. To calculate the benefit of the continued use of the asset, Crombie utilizes the present value of the estimated future cash flows,
discounted using a discount rate based on the risk associated with the property.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 Cost
Opening balance, January 1, 2021
$
1,147,608
$
2,921,305
$
73,318
$
10,078
$
4,152,309
Land
Buildings
Intangibles
Deferred
Leasing Costs
Total
Acquisitions
Additions
Disposals
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 is the higher of the
economic benefit of the continued use of the asset and the selling price less costs to sell. In all three cases, the recoverable amount was determined to
be the economic benefit of the continued use of the asset. 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, 2022
Acquisitions
Additions
Dispositions
Reclassification to income-producing properties
Balance, December 31, 2022
Opening balance, January 1, 2021
Acquisitions
Additions
Reclassification to income-producing properties
Balance, December 31, 2021
Land
Buildings
Total
$
67,063
$
42,724
$
109,787
5,007
2,889
(6,069)
(16,038)
—
58,448
—
5,007
61,337
(6,069)
(86,880)
(102,918)
52,852
$
14,292
$
67,144
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 consolidated financial statements.
Fair value
Crombie’s total fair value of investment properties exceeds carrying value by $1,113,573 at December 31, 2022 (December 31, 2021 – $1,150,558). Crombie
uses the cost method of 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.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The estimated fair values of Crombie’s investment properties are as follows:
December 31, 2022
December 31, 2021
Carrying value consists of the net carrying value of:
Income properties
Properties under development
Accrued straight-line rent receivable
Tenant incentives
Total carrying value
Fair Value
Carrying Value
$
$
5,050,000
5,026,000
$
$
3,936,427
3,875,442
Note
December 31, 2022
December 31, 2021
3
3
5
5
$
$
3,523,067
$
3,436,965
67,144
98,338
247,878
109,787
94,896
233,794
3,936,427
$
3,875,442
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, 2022 and 2021, 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, 2022
December 31, 2021
5.94%
5.65%
Capitalization rate sensitivity
Crombie has determined that a change in this applied capitalization rate at December 31, 2022 would result in an (increase) decrease in the fair value
of the investment properties as follows:
Capitalization rate change
0.25%
0.50%
0.75%
Increase in Rate
Decrease in Rate
$
$
$
(203,000)
(389,000)
(560,000)
$
$
$
222,000
466,000
735,000
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 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.
2022
Transaction Date
January 6, 2022
January 7, 20222
January 25, 20223
January 27, 2022
January 28, 2022
March 24, 2022
May 3, 2022
May 30, 2022
June 14, 2022
July 7, 2022
August 8, 2022
August 10, 2022
August 22, 2022
August 26, 2022
September 8, 2022
September 15, 2022
November 1, 2022
November 16, 2022
Vendor/Purchaser
Properties Acquired
(Disposed)
Approximate
Square Footage
Initial Acquisition
(Disposition) Price1
Related Party
Related Party
Related Party
Related Party
Third Party
Related Party
Related Party
Third Party
Third Party
Third Party
Third Party
Third Party
Third Party
Joint Venture
Third Party
Third Party
Third Party
Third Party
1
1
—
5
1
1
1
—
(1)
1
(1)
(1)
(1)
—
(1)
(1)
(1)
(1)
31,000
—
235,000
183,000
31,000
38,000
67,000
—
(19,000)
4,000
(74,000)
(6,000)
(9,000)
—
(11,000)
(29,000)
(62,000)
(191,000)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
3,300
2,567
38,050
34,035
2,000
10,520
11,000
4,939
(10,250)
1,350
(26,500)
(1,125)
(1,900)
(7,701)
(7,600)
(7,300)
(87,087)
(26,331)
(1) The initial acquisition (disposition) prices exclude closing and transaction costs.
(2) Acquisition of a parcel of retail land developed by Crombie.
(3) Acquisition of the remaining 50% interest in one retail-related industrial property from a related party.
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, 20212
December 9, 2021
December 9, 20213
December 14, 20212
December 15, 2021
(1) The initial acquisition (disposition) prices exclude closing and transaction costs.
(2) Disposal of a partial interest in one retail property to a third party.
(3) Disposal of a 50% interest in one retail-related industrial property to a third party.
Vendor/Purchaser
Properties Acquired
(Disposed)
Approximate
Square Footage
Initial Acquisition
(Disposition) Price1
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)
(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)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(17,570)
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)
107
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
Development costs
Provisions
Total gain on disposal
Proceeds
Mortgages assumed by buyer
Cash proceeds
Year ended December 31,
2022
$
175,794
$
(2,021)
173,773
(34,846)
(53,265)
(848)
(34)
(1,110)
(1,982)
(284)
(600)
$
$
$
80,804
$
Year ending December 31,
2022
173,773
—
173,773
$
$
2021
209,188
(3,682)
205,506
(46,264)
(79,585)
(716)
(17)
(18,369)
(2,889)
—
(1,141)
56,525
2021
205,506
(61,492)
144,014
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
Retail-related industrial
Total co-owned properties
Year ended
December 31, 2022
December 31, 2021
Number of
co-owned properties
Ownership
co-owned properties
Number of
61
2
63
11%–50%
50%
60
3
63
Ownership
11%–50%
50%
4) INVESTMENT IN JOINT VENTURES
The following represents Crombie’s interest in 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, 2022
December 31, 2021
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
—%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
King George Development (I) Limited Partnership was a multi-phased mixed-use redevelopment in Vancouver, British Columbia. In 2022, Crombie
determined that it did not intend to pursue the development of this property, either by itself or through a joint venture. The property was sold in the
fourth quarter of 2022 and the joint venture was dissolved and wound up.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 The following tables represent 100% of the financial position and financial results of the equity-accounted entities:
December 31, 2022
December 31, 2021
Davie LP
Bronte LP
Duke LP
Other
Total
Davie LP
Bronte LP
Duke LP
Other
Total
Non-current assets
$ 181,820
$ 257,765
$ 114,288
$
35,223
$ 589,096
$ 185,530
$ 257,025
$ 115,000
$
44,519
$ 602,074
Current assets
15,707
2,032
11,369
10,306
39,414
18,720
Non-current liabilities
(204,313)
—
(104,000)
(25,183)
(333,496)
(206,141)
981
—
28
—
1,446
21,175
(30,077)
(236,218)
Current liabilities
(4,484)
(230,157)
(560)
(3,492)
(238,693)
(5,142)
(216,595)
(95,745)
(1,709)
(319,191)
Net assets
(11,270)
29,640
Crombie’s share at 50%
(5,635)
14,820
21,097
10,549
—
2,585
—
—
16,854
8,427
(595)
(571)
—
—
56,321
28,161
(8,036)
1,196
18,458
618
(7,033)
(3,516)
(7,441)
(4,500)
15,525
—
41,411
20,705
—
5,182
—
—
19,283
14,179
9,642
7,089
—
2,585
—
—
—
(1,061)
—
—
67,840
33,920
(7,441)
2,206
15,525
—
(7,441)
(6,000)
18,458
618
—
5,182
—
—
Reconciling items:
Deferred gain
Partnership loans
Gain
Unrecognized losses
Crombie’s investment
in joint ventures
$
—
$
20,002
$
13,134
$
7,261
$
40,397
$
68
$
25,887
$
12,227
$
6,028
$
44,210
December 31, 2022
December 31, 2021
Year ended
Davie LP
Bronte LP
Duke LP
Other
Total
Davie LP
Bronte LP
Duke LP
Other
Total
Revenue
$
10,826
$
6,514
$
5,466
$
8,196
$
31,002
$
6,624
$
1,781
$
1,100
$
668
$
10,173
Property operating expenses
(2,705)
(3,699)
(1,822)
(4,219)
(12,445)
(1,939)
(1,312)
(746)
(210)
(4,207)
General and administrative
expenses
Depreciation and
amortization
Finance costs – operations
(115)
(54)
(69)
(319)
(557)
(511)
(29)
(27)
(3,493)
(5,750)
(4,720)
(9,812)
(1,957)
(3,137)
(60)
(218)
(10,230)
(18,917)
(2,801)
(4,275)
(1,078)
(1,242)
(737)
(986)
(1)
(62)
(99)
(568)
(4,678)
(6,602)
Net income (loss)
$
(1,237)
$
(11,771)
$
(1,519)
$
3,380
$ (11,147)
$
(2,902)
$
(1,880)
$
(1,396)
$
296
$
(5,882)
Crombie’s income (loss)
from equity-accounted
investments
$
—
$
(5,885)
$
(759)
$
1,690
$
(4,954)
$
(1,451)
$
(940)
$
(698)
$
148
$
(2,941)
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
Dispositions
Deferred gain
Gain on distribution from equity-accounted investments
Share of loss
Share of other comprehensive income
Closing balance
December 31, 2022
December 31, 2021
$
44,210
$
2,077
(5,393)
(1,873)
(595)
2,933
(4,954)
3,992
$
40,397
$
51,043
5,653
(25,070)
—
—
15,525
(2,941)
—
44,210
Fair Value
The estimated fair value of the investment properties in Crombie’s equity-accounted joint ventures at 100% is as follows:
December 31, 2022
December 31, 2021
(1) Carrying value as at December 31, 2021 was updated from the previously reported figure.
$
$
Fair Value
908,000
774,000
$
$
Carrying Value1
572,153
576,306
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Carrying value consists of the net carrying value at 100% of:
Income properties
Properties under development
Accrued straight-line rent receivable
Tenant incentives
Total carrying value
December 31, 2022
December 31, 2021
$
$
529,520
$
37,330
690
4,613
572,153
$
532,597
38,535
398
4,776
576,306
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, 2022 and December 31, 2021, 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, 2022, 1600 Davie Limited Partnership,
Bronte Village Limited Partnership, The Duke Limited Partnership, and
140 CPN Limited are revenue-generating properties.
Crombie has utilized the following weighted average capitalization rates
for its joint venture properties.
Weighted average capitalization rate
December 31, 2022
December 31, 2021
3.47%
3.30%
Capitalization rate sensitivity
Crombie has determined that a change in this applied capitalization rate at December 31, 2022 would result in an (increase) decrease in the fair value
of the properties as follows:
Capitalization rate change
0.25%
0.50%
0.75%
5) OTHER ASSETS
Increase in Rate
Decrease in Rate
$
$
$
(63,000)
(115,000)
(160,000)
$
$
$
65,000
146,000
243,000
December 31, 2022
December 31, 2021
Current
Non-current
Total
Current
Non-current
Total
Trade receivables
Provision for doubtful accounts
Net trade receivables
Prepaid expenses and deposits
Fair value of interest rate swap agreements
Other fixed assets1,2
Finance lease receivable
Accrued straight-line rent receivable
Tenant incentives
Other
$
21,645
$
(2,328)
19,317
10,346
4,936
—
605
—
—
—
—
—
—
15,329
—
10,365
11,940
98,338
$
21,645
$
27,472
$
(2,328)
(3,031)
19,317
25,675
4,936
10,365
12,545
98,338
24,441
23,827
(635)
—
571
—
—
21
247,878
247,878
—
—
Amounts receivable from related parties
12,321
10,298
22,619
17,138
—
—
—
—
—
10,974
12,545
94,896
$
27,472
(3,031)
24,441
23,827
(635)
10,974
13,116
94,896
233,794
233,794
105
10,487
126
27,625
Total other assets
$
47,525
$ 394,148
$ 441,673
$
65,363
$ 362,801
$ 428,164
(1) For the year ended December 31, 2022, depreciation of other fixed assets was $1,453 (December 31, 2021 – $1,404).
(2) Other fixed assets include right-of-use assets of $2,306 (December 31, 2021 – $2,334) net of accumulated depreciation of $1,331 (December 31, 2021 – $1,106) relating to office and vehicle leases.
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 Tenant Incentives
Balance, January 1, 2022
Additions
Amortization
Disposition
Write-off of fully depreciated assets
Transfer to investment properties held for sale
Balance, December 31, 2022
Tenant incentives
Balance, January 1, 2021
Additions
Amortization
Disposition
Write-off of fully depreciated assets
Transfer to investment properties held for sale
Transfer from properties under development
Balance, December 31, 2021
Cost
Accumulated
Amortization
Net Carrying
Value
$ 326,056
$
92,262
$ 233,794
38,183
—
(44)
(19,216)
(2,674)
—
22,989
(37)
(19,216)
(1,571)
38,183
(22,989)
(7)
—
(1,103)
$ 342,305
$
94,427
$ 247,878
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
6) INVESTMENT PROPERTIES HELD FOR SALE
Land
Buildings
Intangibles
Deferred
Leasing Costs
Tenant
Incentives
Balance, January 1, 2022
Assets transferred to held for sale
Additions
Derecognition through disposition
Net carrying value, December 31, 2022
$
$
—
$
—
$
19,536
—
22,465
5,764
(19,536)
(28,229)
$
—
578
—
(578)
—
$
—
$
—
$
—
$
—
$
—
—
34
—
$
—
$
1,103
—
Total
—
43,716
5,764
(34)
(1,103)
(49,480)
Balance, January 1, 2021
Assets transferred to held for sale
Derecognition through disposition
Net carrying value, December 31, 2021
Land
Buildings
Intangibles
Deferred
Leasing Costs
Tenant
Incentives
Total
$
15,147
$
14,539
9,990
(25,137)
29,394
(43,933)
$
—
$
—
$
$
213
297
(510)
—
$
$
—
13
(13)
—
$
$
—
$
29,899
1,276
(1,276)
40,970
(70,869)
—
$
—
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7) INVESTMENT PROPERTY DEBT
Fixed rate mortgages
Non-revolving credit facility
Revolving credit facility
Joint operation credit facility I
Joint operation credit facility II
Unsecured bilateral credit facility
Deferred financing charges on fixed rate mortgages
Total investment property debt
Mortgages
Non-current
Current
Credit facilities
Non-current
Weighted average interest rate for credit facilities
Range
2.70–6.44%
Weighted Average
Interest Rate
Weighted Average
Term to Maturity
December 31, 2022
December 31, 2021
4.07%
4.6 years
$
918,552
$
1,073,895
2.9 years
3.5 years
1.3 years
1.8 years
1.5 years
150,000
—
7,167
3,097
—
(4,846)
1,073,970
666,748
246,958
—
9,220
7,167
2,737
10,000
(6,036)
$
$
1,096,983
893,364
174,495
$
$
160,264
29,124
$
1,073,970
$
1,096,983
6.06%
2.53%
Specific investment properties with a carrying value of $2,255,470 as at December 31, 2022 (December 31, 2021 – $2,459,912) 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, 2022
For the year ended:
December 31, 2021
Type
New
Repaid
Number of
Mortgages
1
16
Weighted Average
Rate
Terms in Years
Amortization
Period in Years
Proceeds
(Repayments)
4.79%
3.78%
10.0
30.0
Type
Addition
New
Repaid
Disposition
Number of
Mortgages
Rate
Terms in Years
Amortization
Period in Years
Weighted Average
—
1
14
1
2.87%
2.70%
4.02%
2.87%
5.0
25.0
$
$
$
$
$
$
7,000
(124,133)
Proceeds
(Repayments)
25,000
550
(119,755)
(61,492)
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, 2022, 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 the interest rate on both facilities at 3.27%. At December 31, 2022, Crombie’s portion of the term and revolving credit facilities was $1,815 and
$1,282 respectively.
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 Non-revolving Credit Facility
In the fourth quarter of 2022, Crombie entered into a credit agreement with a Canadian chartered bank for an unsecured non-revolving credit facility. The
credit facility has a maximum principal amount of $200,000 and matures November 18, 2025. The facility was used to fund the redemption of Series D
senior unsecured notes and may be used for working capital purposes. Borrowings under the unsecured non-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.
Revolving Credit Facility
The revolving credit facility was extended in the third quarter of 2022. The revolving credit facility has a maximum principal amount of $400,000
and matures June 30, 2026. 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, 2022 – 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 second quarter of 2022. The unsecured bilateral credit facility has a maximum
principal amount of $130,000 and matures June 28, 2024. The facility is used by Crombie for working capital purposes and to provide temporary
financing for acquisitions and development activity. Borrowings under the unsecured 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.
8) SENIOR UNSECURED NOTES
Series D
Series E
Series F
Series G
Series H
Series I
Series J
Deferred financing charges
Total senior unsecured notes
Non-current
Current
Weighted average interest rate
Maturity Date1
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, 2022
December 31, 2021
4.066%
4.800%
3.677%
3.917%
2.686%
3.211%
3.133%
$
$
$
$
—
$
175,000
200,000
150,000
150,000
150,000
150,000
(2,997)
972,003
972,003
—
972,003
3.61%
$
$
$
150,000
175,000
200,000
150,000
150,000
150,000
150,000
(3,733)
1,121,267
971,267
150,000
1,121,267
3.67%
(1) The weighted average term to maturity as at December 31, 2022 was 5.1 years (December 31, 2021 – 5.4).
A continuity of Crombie’s senior unsecured notes is as follows:
Opening balance, January 1, 2022
Redemption
Balance, December 31, 2022
Opening balance, January 1, 2021
Net borrowing or issuances
Redemption
Balance, December 31, 2021
Senior Unsecured Notes
$
$
1,125,000
(150,000)
975,000
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.
113
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 Senior Management Pension Plan 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 Supplementary Executive Retirement 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, 2022 was $602
(year ended December 31, 2021 – $480).
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, 2022
January 1, 2022
December 31, 2023
January 1, 2025
The significant actuarial assumptions adopted in measuring the Company’s accrued benefit obligations and pension costs are as follows:
Discount rate – accrued benefit obligation
Rate of compensation increase
5.10%
3.00%
5.10%
N/A
2.90%
3.00%
2.90%
N/A
December 31, 2022
December 31, 2021
Senior Management
Pension Plan
Post-Employment
Benefit Plans
Senior Management
Pension Plan
Post-Employment
Benefit Plans
For measurement purposes, a 4.50% (2021 – 4.50%) annual rate increase in the per capita cost of covered health care benefits was assumed.
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.
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 Information about Crombie’s defined benefit plans are as follows:
December 31, 2022
December 31, 2021
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
$
6,021
$
2,393
$
8,414
$
6,097
$
2,560
$
8,657
Current service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Termination benefits
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
Termination benefits
Interest cost
Net expense
$
$
$
193
177
(912)
(200)
149
14
69
(730)
(84)
—
5,428
1,662
—
200
(200)
—
5,428
200
5,228
5,428
193
149
177
519
$
$
$
—
84
(84)
—
1,662
71
1,591
1,662
14
—
69
83
$
$
$
207
246
(1,642)
(284)
149
7,090
—
284
(284)
—
7,090
271
6,819
7,090
207
149
246
602
$
$
$
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
The table below outlines the sensitivity of the fiscal 2022 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
5.10%
(529)
628
5.10%
6
(9)
5.10%
(187)
211
4.50%
67
(61)
5.10%
2
(4)
4.50%
3
(3)
(1) Reflects the impact of the current service costs, the interest cost, and the expected return on assets.
For the year ended December 31, 2022, the net defined contribution pension plans expense was $1,127 (year ended December 31, 2021 – $1,067).
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10) TRADE AND OTHER PAYABLES
December 31, 2022
December 31, 2021
Current
Non-current
Total
Current
Non-current
Total
Tenant incentives and capital expenditures
$
42,723
$
Property operating costs
Prepaid rents
Finance costs on investment property debt and notes
Amounts payable to related party
Distributions payable
Unit-based compensation plans
Deferred revenue
30,031
15,448
13,021
156
13,230
3,257
118
—
—
—
—
—
—
17,672
4,139
$
42,723
$
57,161
$
30,031
15,448
13,021
156
13,230
20,929
4,257
34,160
16,983
14,251
71
12,223
4,588
258
—
—
—
—
—
—
19,631
4,207
$
57,161
34,160
16,983
14,251
71
12,223
24,219
4,465
Total trade and other payables
$ 117,984
$
21,811
$ 139,795
$ 139,695
$
23,838
$ 163,533
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
Total property revenue
(1) Includes reimbursement of Crombie’s property tax expense.
Year ended
December 31, 2022
December 31, 2021
$
371,671
$
3,917
5,432
(22,989)
278
56,778
4,504
$
419,591
$
359,322
2,332
9,486
(19,811)
3,751
50,942
2,870
408,892
The following table sets out tenants that contributed in excess of 10% of total property revenue:
Sobeys Inc. (including all subsidiaries of Empire)
$
222,264
53.0%
$
209,684
51.3%
Year ended
December 31, 2022
December 31, 2021
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 12) PROPERTY OPERATING EXPENSES
Recoverable property taxes
Recoverable operating expenses
Other operating costs
Total property operating expenses
13) OPERATING LEASES
Year ended
December 31, 2022
December 31, 2021
$
$
74,048
58,061
5,664
137,773
$
$
67,785
52,776
5,300
125,861
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, 2022, is as follows:
Future minimum rental income
$ 282,433
$ 271,498
$ 256,279
$ 242,672
$ 226,141
$1,492,678
$2,771,701
Year ending December 31,
2023
2024
2025
2026
2027
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
Total general and administrative expenses
(b) Decrease (increase) in fair value of financial instruments
Deferred Unit (“DU”) Plan
Year ended
December 31, 2022
December 31, 2021
12,590
3,640
3,317
19,547
$
$
19,178
3,582
2,724
25,484
Year ended
December 31, 2022
December 31, 2021
2,323
$
(2,972)
$
$
$
117
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
Capitalized interest1
Amortization of issue premium on senior unsecured notes
Amortization of deferred financing charges
Year ended
December 31, 2022
December 31, 2021
$
40,546
$
4,804
(5,264)
41,398
(562)
2,092
83,014
111
1,230
5,264
—
(2,685)
50,969
2,347
(3,593)
41,557
(548)
2,056
92,788
294
(1,241)
3,593
110
(3,067)
92,477
Finance costs – operations, paid
$
86,934
$
(1) For the year ended December 31, 2022, interest was capitalized for qualifying development projects based on a weighted average interest rate of 3.71% (December 31, 2021 – 3.36%).
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, 2022
97,364,481
$
1,162,122
67,438,492
$
804,359
164,802,973
$
1,966,481
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)
—
1,215,032
36,487
6,705,000
1,172
19,385
526
—
860,958
—
—
—
13,735
2,075,990
—
36,487
111,872
4,756,446
82,869
11,461,446
1,172
33,120
526
194,741
Balance, December 31, 2022
105,321,000
$
1,295,077
73,055,896
$
900,963
178,376,896
$
2,196,040
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
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 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 January 31, 2022, Crombie closed a public offering, on a bought deal basis, of 6,705,000 Units, at a price of $17.45 per Unit for proceeds of $111,872
net of issue costs.
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.
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 January 31, 2022, concurrent with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECLD purchased 4,756,446 Class B LP Units and
the attached SVUs at a price of $17.45 per Unit, for proceeds of $82,869 net of issue costs, on a private placement basis.
On May 19, 2021, concurrent with the issue of the REIT Units, in satisfaction of its pre-emptive right, ECLD purchased 2,500,000 Class B LP Units and
their attached SVUs at a price of $16.60 per Class B LP for proceeds of $41,424 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, 2022, there are no loans receivable (December 31, 2021 – $1,172) from executives under Crombie’s EUPP. All loans were repaid which
resulted in an increase in net assets attributable to Unitholders.
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.
119
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 on distribution 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
Year ended
December 31, 2022
December 31, 2021
$
(5,432)
$
22,989
(80,804)
(2,933)
10,400
79,836
—
4,954
4
(125)
(2,323)
(9,486)
19,811
(56,525)
(15,525)
2,539
75,763
(110)
2,941
165
(653)
2,972
$
26,566
$
21,892
Year ended
December 31, 2022
December 31, 20211
$
$
$
5,124
3,018
(12,161)
(4,019)
$
9,815
(1,542)
23,690
31,963
(1) Prepaid expenses and deposits and other assets for the year ended December 31, 2021 was updated from the previously reported figure.
(c) Items not affecting financing cash
Amortization of deferred financing charges
(d) Cash and cash equivalents
Restricted cash1
Cash
Total cash and cash equivalents
Year ended
December 31, 2022
December 31, 2021
$
2,685
$
3,067
December 31, 2022
December 31, 2021
$
$
231
5,886
6,117
$
$
3,915
—
3,915
(1) In 2020, Crombie closed on a construction mortgage in which the proceeds were placed in escrow and drawn down as conditions are satisfied.
120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 18) RELATED PARTY TRANSACTIONS
As at December 31, 2022, 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, 2022
December 31, 2021
$
$
$
$
$
$
$
$
222,264
956
125
(135)
398
(331)
53
(65,459)
$
$
$
$
$
$
$
$
209,684
1,001
136
(96)
483
(265)
230
(59,952)
Crombie pr1ovides property management, project 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, 2022, Crombie issued 860,958 (December 31, 2021 – 213,577) Class B LP Units to ECLD under the DRIP (Note 16).
During the year ended December 31, 2022, Crombie acquired nine retail properties and the remaining 50% interest in one retail-related industrial
property from a subsidiary of Empire for a total purchase price of $99,472 before transaction costs.
During the year ended December 31, 2022, Crombie invested $14,932 (December 31, 2021 – $34,119) 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 $10,364 (December 31, 2021 – $15,533) in a 6% subordinated note receivable due from Bronte Village
Limited Partnership.
Crombie has a mortgage payable due to 1600 Davie Limited Partnership of $25,207 (December 31, 2021 – $25,526). This mortgage relates to the
commercial component of the Davie Street development, 100% of which is included in Crombie’s consolidated financial statements.
Key management personnel and trustees 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 and trustees 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, 2022
December 31, 2021
$
$
7,284
1,026
136
8,446
$
$
7,494
963
129
8,586
121
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 period ended December 31, 2022.
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 that have a fair value
different from their carrying value:
Financial assets
Accounts receivable1
Financial liabilities
Investment property debt
Senior unsecured notes
Total financial liabilities
December 31, 2022
December 31, 2021
Fair Value
Carrying Value
Fair Value
Carrying Value
$
$
$
22,619
1,035,216
877,058
1,912,274
$
$
$
22,619
1,078,816
975,000
2,053,816
$
$
$
27,737
1,177,814
1,157,820
2,335,634
$
$
$
27,751
1,103,019
1,125,000
2,228,019
(1) Accounts receivable include amounts in other assets for the capital expenditure program, interest rate subsidy, and receivable from related parties.
The fair values of 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.
(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 58.0% of annual minimum rent; no other tenant
accounts for more than 2.5% 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, 2022, Empire
(including Sobeys and all other subsidiaries of Empire) represents 53.0% of total property revenue. Excluding these tenants, no other tenant accounts
for more than 2.4% of Crombie’s total property revenue.
• Over the next five years, leases on no more than 6.3% of the gross leasable area of Crombie will expire in any one year.
Receivables are substantially comprised of current balances due from tenants and past due receivables. The balance of accounts receivable past due
is usually not significant. Historically low receivable balances increased significantly over the past few years as a result of the impacts of the COVID-19
pandemic, but have since returned to their pre-pandemic collection rates. Generally, rents are due the first of each month and other tenant billings are
due 30 days after invoiced, and 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.
122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 Provision for doubtful accounts, beginning of year
Additional provision
Recoveries
Write-offs
Provision for doubtful accounts, end of year
Year ended
December 31, 2022
December 31, 2021
$
$
$
3,031
1,635
(1,382)
(956)
2,328
$
7,955
3,622
(3,498)
(5,048)
3,031
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 and ongoing discussions with tenants.
Crombie has entered into joint arrangements or partnerships with other third party entities. As at December 31, 2022, Crombie has $22,619 due from
related parties (December 31, 2021 – $27,625). Risks associated with these arrangements include risk of default by a partner on financing obligations.
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.
Interest rate risk
Interest rate risk is the potential for financial loss arising from increasing interest rates. Canadian prime interest rates have increased significantly
from 2.45% at December 31, 2021 to 6.45% effective December 8, 2022. 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, 2022
• Crombie’s weighted average term to maturity of its fixed rate mortgages is 4.6 years;
• Crombie’s weighted average term to maturity of its unsecured notes is 5.1 years;
• Crombie has an unsecured non-revolving credit facility available to a maximum of $200,000 with a balance of $150,000 outstanding;
• Crombie has a floating rate revolving credit facility available to a maximum of $400,000 subject to available borrowing base, with no balance
outstanding/drawn;
• Crombie has an unsecured bilateral credit facility available to a maximum of $130,000 with no balance outstanding;
• Crombie has joint operation credit facilities available to a maximum of $10,687 at Crombie’s share with a balance of $10,264 outstanding;
• Crombie has interest rate swap agreements in place on $106,435 of floating rate debt and an interest rate swap agreement in place held
in equity-accounting investments on $52,000 of floating rate debt, at Crombie’s share; and
• Crombie has floating rate credit facilities, included in debt held in equity-accounted investments, available to a maximum of $130,250 with
a balance of $116,820 outstanding, at Crombie’s share.
A fluctuation in interest rates would have an impact on Crombie’s operating and other comprehensive income related to the use of floating rate debt.
The following tables look at the impacts of selected interest rate moves on operating and other comprehensive income:
Impact on operating income attributable to Unitholders
of interest rate changes on the revolving credit facility
Impact of a 0.5% interest rate change
Impact of a 1.0% interest rate change
Impact of a 1.5% interest rate change
Impact on other comprehensive income of interest rate changes
on interest rate swap agreements at Crombie’s share
Impact of a 0.5% interest rate change
Impact of a 1.0% interest rate change
Impact of a 1.5% interest rate change
Year ended December 31, 2022
Increase in Rate
Decrease in Rate
(315)
(631)
(946)
$
$
$
315
631
946
As at December 31, 2022
Increase in Rate
Decrease in Rate
2,200
4,800
7,000
$
$
$
(2,200)
(4,800)
(7,000)
$
$
$
$
$
$
123
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. 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 it cannot exceed
the borrowing base security provided by Crombie. As at December 31, 2022, $397,117 was available on this facility.
The estimated payments, including principal and interest, on financial liabilities to maturity date are as follows:
Contractual
Cash Flows1
2023
2024
2025
2026
2027
Thereafter
Twelve months ending December 31,
Fixed rate mortgages
$ 1,055,488
$
280,079
$
293,334
$
61,255
$
39,248
$
131,684
$
249,888
Senior unsecured notes
Trade and other payables
Lease liabilities
Credit facilities
1,144,759
119,194
151,921
2,471,362
187,681
35,176
97,383
3,028
415,666
9,715
35,176
4,425
2,948
335,883
19,779
202,476
224,220
166,322
3,351
2,907
269,989
158,187
2,469
2,792
2,469
2,526
268,729
303,001
—
—
481,389
9,097
137,720
878,094
—
Total estimated payments
$ 2,659,043
$
425,381
$
355,662
$
428,176
$
268,729
$
303,001
$
878,094
(1) Contractual cash flows include principal and interest and exclude extension options.
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 mortgages1
Credit facilities
Senior unsecured notes1
Crombie REIT Unitholders
SVU and Class B LP Unitholders2
Lease liabilities
(1) Net of deferred financing charges.
(2) Crombie REIT Special Voting Units (“SVU”) and Class B LP Units.
December 31, 2022
December 31, 2021
$
913,706
$
160,264
972,003
1,097,070
753,470
35,000
1,067,859
29,124
1,121,267
950,271
647,221
35,352
$
3,931,513
$
3,851,094
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.
For the 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 consolidated balance sheets as net assets attributable to Unitholders. Crombie’s debt to gross book value is defined
as the total obligation for borrowed funds and lease liabilities, including the proportionate share of any borrowings held within joint ventures, divided
by the gross book value of Crombie’s assets which includes its proportionate share of gross assets held within joint ventures.
124
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 2022 Fixed rate mortgages
Senior unsecured notes
Non-revolving credit facility
Revolving credit facility
Joint operation credit facilities
Bilateral credit facility
Debt held in joint ventures, at Crombie’s share2
Lease liabilities
Total debt outstanding
Less: Applicable fair value debt adjustment
Total debt
Income properties, cost3
Properties under development, cost
Investment properties, held in joint ventures, cost, at Crombie’s share
Below-market lease component, cost4
Other assets, cost5
Other assets, cost, held in joint ventures, at Crombie’s share
Cash and cash equivalents
Cash and cash equivalents held in joint ventures, at Crombie’s share
Deferred financing charges
Interest rate subsidy
Gross book value
Debt to gross book value – cost basis
$
$
$
December 31, 2022
December 31, 20211
$
$
$
918,552
975,000
150,000
—
10,264
—
270,642
35,000
2,359,458
—
2,359,458
4,269,416
67,144
291,915
70,192
540,371
30,714
6,117
2,487
7,843
—
1,073,895
1,125,000
—
9,220
9,904
10,000
254,074
35,352
2,517,445
(53)
2,517,392
4,116,843
109,787
289,010
63,753
523,635
21,907
3,915
4,453
9,769
(53)
$
5,286,199
$
5,143,019
44.6%
48.9%
(1) The prior year calculation has been restated to include Crombie’s share of debt and assets held in joint ventures.
(2) Includes Crombie’s share of fixed and floating rate mortgages, construction loans, revolving credit facility, and lease liabilities held in joint ventures.
(3) Includes cumulative impairments on land of $9,157 (December 31, 2021 – $6,957).
(4) Below-market lease component is included in the carrying value of investment properties.
(5) 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, 2022, Crombie is in compliance with all externally imposed capital requirements and all covenants relating to its debt facilities.
125
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
Twelve months ending December 31,
Total
$ 151,921
(116,921)
$
35,000
2023
3,028
(2,085)
943
$
$
2024
2,948
(2,056)
892
$
$
2025
2,907
(2,028)
879
$
$
2026
2,792
(2,003)
789
$
$
2027
Thereafter
$
$
2,526
$ 137,720
(1,983)
(106,766)
543
$
30,954
Lease liabilities are presented on the consolidated balance sheets as follows:
Non-current
Current
Total lease liabilities
December 31, 2022
December 31, 2021
$
$
34,057
943
35,000
$
$
34,420
932
35,352
Some of Crombie’s lease agreements contain contingent rent clauses. Contingent rental payments are recognized in the consolidated statements
of comprehensive income (loss) as required when contingent criteria are met. The lease agreements contain renewal options and purchase options,
none of which are reflected in the minimum lease payments in the above table. For the year ended December 31, 2022, minimum lease payments
of $3,028 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 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, 2022, Crombie has $2,883 (December 31, 2021 – $3,003) in outstanding letters of credit related
to construction work being performed on investment properties.
As at December 31, 2022, Crombie had signed construction contracts totalling $187,111, of which $159,830 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, 2022, Crombie has provided guarantees of approximately
$111,022 (December 31, 2021 – $128,973) 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 2.3 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, 2022, Crombie has committed to contributing $1,143 to 1700 East Broadway Limited Partnership as part of the ongoing
predevelopment work in the joint venture.
23) SUBSEQUENT EVENTS
(a) On January 13, 2023, Crombie declared distributions of 7.417 cents per Unit for the period from January 1, 2023 up to and including January 31,
2023. The distributions will be paid on February 15, 2023, to Unitholders of record as at January 31, 2023.
(b) On January 19, 2023, Crombie acquired a 100% interest in a retail property from a subsidiary of Empire totalling 21,000 square feet for $2,122,
excluding closing and transaction costs.
(c) On February 15, 2023, Crombie declared distributions of 7.417 cents per Unit for the period from February 1, 2023 up to and including February 28,
2023. The distributions will be paid on March 15, 2023, to Unitholders of record as at February 28, 2023.
126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCROMBIE REIT Annual Report 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.
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
T
I
E
R
E
I
B
M
O
R
C
128
PROPERTY PORTFOLIO
Property Name
Location
Type
NEWFOUNDLAND & LABRADOR
Random Square
Clarenville
Retail – Enclosed
Conception Bay Plaza
Conception Bay
Retail – Plaza
2A Commerce Street
71 Grandview Boulevard
21 Cromer Avenue
69 Blockhouse Road
10 Elizabeth Avenue
45 Ropewalk Lane
Avalon Mall
Hamlyn Road Plaza
Topsail Road Plaza
Torbay Road Plaza
Woodgate Plaza
PRINCE EDWARD ISLAND
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 – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Enclosed
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Plaza
400 University Avenue
Charlottetown
Retail – Freestanding
Kinlock Plaza
Stratford
Retail – Plaza
NOVA SCOTIA
Amherst Centre
Amherst Plaza
151 Church Street
Hemlock Square
Mill Cove Plaza
Amherst
Amherst
Antigonish
Bedford
Bedford
Retail – Enclosed
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
2 Forest Hills Parkway
Cole Harbour
Retail – Freestanding
Dartmouth Crossing Cineplex
Dartmouth
Retail – Freestanding
Panavista Drive
Penhorn Plaza
Russell Lake
Elmsdale Shopping Centre
Fall River Plaza
North & Windsor Street
Park West Centre
Queen Street Plaza
Downsview Mall
Downsview Plaza
Dartmouth
Dartmouth
Dartmouth
Elmsdale
Fall River
Halifax
Halifax
Halifax
Retail – Freestanding
Commercial
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Lower Sackville
Retail – Plaza
Lower Sackville
Retail – Plaza
Aberdeen Business Centre
New Glasgow
Commercial
Highland Square Mall
New Glasgow
Retail – Enclosed
West Side Plaza
County Fair Mall
75 Emerald Street
New Glasgow
Retail – Plaza
New Minas
Retail – Enclosed
New Waterford
Retail – Freestanding
3415 Plummer Avenue
New Waterford
Retail – Freestanding
Blink Bonnie Plaza
622 Reeves Street
22579 Highway 7
279, 289 & 303
Herring 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
Scotia Square Properties
Barrington Tower
Brunswick Place
CIBC Building
Cogswell Tower
Duke Tower
Scotia Square
Scotia Square Parkade
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
Pictou
Retail – Plaza
Port Hawkesbury
Retail – Freestanding
Sheet Harbour
Retail – Freestanding
Spryfield
Retail – Freestanding
Stellarton
Sydney
Sydney
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Sydney Mines
Retail – Freestanding
Tatamagouche
Retail – Plaza
Timberlea
Truro
Retail – Plaza
Retail – Plaza
Upper Tantallon
Retail – Plaza
Halifax
Halifax
Halifax
Halifax
Halifax
Halifax
Halifax
Office
Commercial
Office
Office
Office
Commercial
Commercial
Bathurst
Dieppe
Dieppe
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Edmundston
Retail – Freestanding
Fredericton
Fredericton
Grand Bay
Moncton
Moncton
Moncton
Moncton
Moncton
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Office
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
273 Pleasant Street
Newcastle
Retail – Freestanding
Riverview – Findlay Boulevard
Riverview
Riverview Place
Fairvale Plaza
107 Catherwood Street
Loch Lomond Place
Charlotte Mall
Tracadie
Riverview
Rothesay
Saint John
Saint John
St. Stephen
Tracadie
Retail – Plaza
Commercial
Retail – Freestanding
Retail – Freestanding
Commercial
Retail – Plaza
Retail – Plaza
3430 rue Principale
Tracadie-Sheila
Retail – Freestanding
% of
Ownership
Actual GLA
(rounded)
Occupancy %
Committed
Property Name
QUÉBEC
Location
Type
% of
Ownership
Actual GLA
(rounded)
Occupancy %
Committed
100.0
100.0
100.0
100.0
11.0
11.0
100.0
11.0
100.0
100.0
100.0
100.0
100.0
107,000
65,000
29,000
19,000
3,000
2,000
80,000
6,000
594,000
38,000
158,000
102,000
80,000
1,283,000
11.0
6,000
100.0
102,000
108,000
100.0
100.0
11.0
100.0
100.0
50.0
100.0
11.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
11.0
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
100.0
100.0
100.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
100.0
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
271,000
3,000
4,000
51,000
34,000
1,000
73,000
24,000
71,000
190,000
18,000
17,000
57,000
126,000
157,000
186,000
251,000
207,000
204,000
217,000
196,000
-
4,595,000
18,000
52,000
25,000
42,000
43,000
263,000
26,000
140,000
95,000
17,000
52,000
103,000
20,000
66,000
149,000
52,000
5,000
188,000
116,000
40,000
31,000
1,543,000
95.4
100.0
100.0
100.0
100.0
100.0
100.0
100.0
96.3
89.6
97.5
83.3
100.0
96.0
100.0
91.3
91.7
84.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.6
100.0
100.0
94.7
100.0
98.5
97.5
100.0
100.0
92.6
63.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.7
100.0
100.0
100.0
97.9
98.6
99.7
99.2
88.5
92.4
92.2
88.2
0.0
94.7
100.0
100.0
100.0
100.0
100.0
92.1
100.0
89.7
100.0
100.0
100.0
100.0
100.0
100.0
82.1
100.0
100.0
50.0
97.8
95.7
100.0
89.6
Mercier
Retail – Plaza
100.0
58,000
1500 rue de Bretagne
Baie Comeau
Retail – Freestanding
1020 boulevard
Monseigneur-de-Laval
Beauport Plaza
50 rue Bourgeoys
50 rue Bourgeoys
Baie Saint Paul
Retail – Plaza
Beauport
Retail – Plaza
Bromptonville
Retail – Plaza
Bromptonville
Retail – Plaza
3260 boulevard Lapiniere &
Brossard
Retail – Plaza
100.0
100.0
100.0
11.0
100.0
100.0
50,000
65,000
78,000
3,000
4,000
48,000
3305 Broadway
645 boulevard Thibeau
Cap-de-la-
Madeleine
Retail – Freestanding
100.0
49,000
80-90 boulevard d’Anjou
Chateauguay
Retail – Plaza
Marché St-Charles-de-
Drummondville
Retail – Plaza
5555 boulevard des Grandins
Lebourgneuf
5555 boulevard des Grandins
Lebourgneuf
Retail-Related Industrial
5005 boulevard de l’Ormiere
Les Saules
Retail – Plaza
Gatineau
Gatineau
Retail – Plaza
Retail – Plaza
Havre-Saint-Pierre Retail – Freestanding
Huntingdon
Retail – Freestanding
Lavaltrie
Lavaltrie
Retail – Plaza
Retail – Plaza
Retail – Plaza
Louiseville
Retail – Freestanding
Malartic
Matane
Retail – Plaza
Retail – Freestanding
McMasterville
Retail – Plaza
Drummond
1205 rue de Neuville
1248 boulevard de la
Verendrye Est
1298 rue de la Digue
2195 chemin Ridge
Centre Lavaltrie
Marché Lavaltrie
714 boulevard
Saint-Laurent Ouest
1450 & 1454 rue Royale
551 avenue du Phare Est
20-70 boulevard
Sir Wilfrid Laurier
631-665 boulevard
Saint Jean-Baptiste
Marché St-Augustin
1 avenue Westminster Nord
Mirabel
Montreal
Retail – Plaza
Retail – Freestanding
3964 rue Notre-Dame Ouest
Montreal
Retail – Freestanding
Pointe-Claire
Paspebiac Plaza
395 avenue Sirois
395 avenue Sirois
375 boulevard Jessop
254 boulevard de
l’Hotel de Ville
680 avenue Chausse
Carrefour Bourgeois
Montreal
Paspebiac
Rimouski
Rimouski
Rimouski
Retail-Related Industrial
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Rivière-du-Loup
Retail – Plaza
Rouyn-Noranda
Retail – Freestanding
Saint-Amable
Retail – Plaza
Saint-Apollinaire Plaza
Saint-Apollinaire
Retail – Plaza
867-871 rue Principale
Saint-Donat
Retail – Freestanding
8980 boulevard Lacroix
Saint-Georges-
de-Beauce
Retail – Freestanding
131-A avenue Sainte-Cecile
Saint-Pie
Retail – Freestanding
Saint-Romuald Plaza
Saint-Romuald
Retail – Plaza
10505 boulevard Sainte-Anne
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
Sainte-Anne-
de-Beaupré
Shawinigan
Sherbrooke
Sherbrooke
Sorel-Tracy
Terrebonne
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail-Related Industrial
Ancaster
Barrie
Retail – Freestanding
Retail – Freestanding
680 Longworth Avenue
Bowmanville
Retail – Plaza
20 Melbourne Drive
Brampton Mall
Brampton Plaza
Burlington Plaza
142 Dundas Street
215 Park Avenue West
990 Division Street
77 Coldwater Road
Village Centre
15 Lindsay Street
417 Scott Street
44 Livingston Avenue
188 Highland Street
Havelock Centre
400 First Avenue South
2327 Princess Street
274 Highland Road West
London Pine Valley
5931 Kalar Road
5931 Kalar Road
Niagara Falls Plaza
Village Square Mall
Algonquin Avenue Mall
500 Riddell Road
5150 Innes Road
Taunton and Wilson Plaza
Don Reid Drive
25 Pine Drive
Bradford
Brampton
Brampton
Burlington
Cambridge
Chatham
Cobourg
Coldwater
Dorchester
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Fenelon Falls
Retail – Freestanding
Fort Frances
Retail – Freestanding
Grimbsy
Haliburton
Havelock
Kenora
Kingston
Kitchener
London
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Niagara Falls
Retail – Freestanding
Niagara Falls
Retail – Freestanding
Niagara Falls
Retail – Plaza
Nepean
North Bay
Retail – Plaza
Retail – Plaza
Orangeville
Retail – Freestanding
Orleans
Oshawa
Ottawa
Retail – Plaza
Retail – Plaza
Retail-Related Industrial
Parry Sound
Retail – Plaza
3130 Danforth Avenue
Scarborough
Retail – Freestanding
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11.0
11.0
100.0
11.0
100.0
11.0
100.0
58,000
48,000
31,000
71,000
26,000
19,000
43,000
52,000
5,000
1,000
70,000
3,000
29,000
3,000
55,000
100.0
50.0
100.0
50.0
100.0
11.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
11.0
100.0
100.0
11.0
100.0
100.0
11.0
100.0
100.0
50.0
50.0
100.0
11.0
100.0
50.0
100.0
100.0
11.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
11.0
11.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
100.0
50.0
38,000
10,000
41,000
155,000
73,000
5,000
6,000
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
470,000
2,170,000
32,000
24,000
42,000
4,000
103,000
38,000
70,000
4,000
5,000
31,000
15,000
32,000
4,000
43,000
36,000
24,000
2,000
4,000
35,000
67,000
39,000
4,000
2,000
64,000
92,000
163,000
5,000
65,000
107,000
19,000
46,000
3,000
100.0
96.3
98.4
100.0
0.0
96.2
100.0
100.0
100.0
100.0
96.2
100.0
100.0
77.2
97.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
91.7
100.0
0.0
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
98.6
100.0
100.0
100.0
100.0
86.4
100.0
87.1
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.3
100.0
100.0
100.0
100.0
100.0
97.4
100.0
100.0
100.0
100.0
100.0
100.0
Property Name
McCowan Square
Location
Type
Scarborough
Retail – Plaza
Mountain Locks Plaza
St. Catharines
Retail – Plaza
Stittsville Corner
Stoney Creek Plaza
105 Arthur Street West
70 Court Street North
1015 Dawson Road
1099 Broadview Avenue
3362-3370 Yonge Street
The Queensway Commons
The Queensway Commons
8265 Huntington Road
Stittsville
Retail – Plaza
Stoney Creek
Retail – Plaza
Thornbury
Thunder Bay
Thunder Bay
Toronto
Toronto
Toronto
Toronto
Vaughan
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail-Related Industrial
Retail-Related Industrial
385 Springbank Avenue North Woodstock
Retail – Plaza
MANITOBA
3156 Bird’s Hill Road East
3156 Bird’s Hill Road East
498 Mountain Avenue
318 Manitoba Avenue
2 Alpine Avenue
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
East St. Paul
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 – 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
Retail – Freestanding
9801 Territorial Drive
North Battleford
Retail – Freestanding
2895 2nd Avenue West
Prince Albert
Retail – Freestanding
2231 East Quance Street
2915 13th Avenue
4250 Albert Street
302 33rd Street
1860 McOrmond Drive
River City Centre
ALBERTA
318 Marten Street
5700 50th Street
Regina
Regina
Regina
Saskatoon
Saskatoon
Saskatoon
Banff
Beaumont
Beaumont Shopping Centre
Beaumont
550 Cassils Road &
654 4th Street West
55 Castleridge Boulevard NE
99 Crowfoot Crescent NW
110-620 McKenzie Towne
Gate SE
Brooks
Calgary
Calgary
Calgary
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
260199 High Plains Boulevard
Calgary
Retail-Related Industrial
410 10 Street NW
511 17 Avenue SE
504 & 524 Elbow Drive SW
813 11 Avenue SW
850 Saddletowne Circle NE
1818 Centre Street NE &
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
Voilà CFC 3
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
Calgary
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-Related Industrial
1200 Railway Avenue
Canmore
Retail – Freestanding
135 Chestermere Station Way
Chestermere
Retail – Freestanding
304 5 Avenue West
17th Street & 23rd Avenue
400 & 500 Manning
Crossing North
2304 109 Street NW
2534 Guardian Road NW
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
Lewis Estates
Millwood Commons
Namao Centre
304 54 Street
Cochrane
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edmonton
Edson
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
% of
Ownership
Actual GLA
(rounded)
Occupancy %
Committed
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
11.0
100.0
11.0
11.0
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
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
11.0
100.0
100.0
100.0
50.0
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
50.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
61,000
85,000
111,000
12,000
40,000
40,000
54,000
15,000
29,000
36,000
17,000
793,000
55,000
2,572,000
4,000
3,000
2,000
5,000
57,000
37,000
24,000
59,000
18,000
33,000
43,000
20,000
56,000
38,000
46,000
55,000
74,000
84,000
658,000
39,000
30,000
56,000
19,000
20,000
41,000
16,000
58,000
160,000
439,000
19,000
21,000
58,000
61,000
6,000
75,000
9,000
655,000
38,000
42,000
29,000
40,000
6,000
36,000
48,000
69,000
21,000
50,000
79,000
81,000
304,000
53,000
43,000
53,000
52,000
49,000
48,000
49,000
39,000
50,000
22,000
34,000
37,000
21,000
55,000
37,000
38,000
29,000
34,000
33,000
100.0
97.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
98.8
100.0
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
96.6
99.3
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
100.0
100.0
91.9
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
93.8
100.0
Property Name
9601 Franklin Avenue
Clearwater Landing
8100-8300 100 Street
9844 92 Street
9925 114 Avenue
Leduc Centre
1760 23 Street
Location
Type
Fort McMurray
Retail – Freestanding
Fort McMurray
Retail – Plaza
Grand Prairie
Retail – Plaza
Grand Prairie
Retail – Plaza
Grand Prairie
Retail – Plaza
Leduc
Retail – Plaza
Lethbridge
Retail – Freestanding
2750 Fairway Plaza Road South Lethbridge
West Lethbridge Towne Centre
Lethbridge
Retail – Plaza
Retail – Plaza
615 Division Avenue South
Medicine Hat
Retail – Freestanding
410 & 610 Big Rock Lane
Okotoks
Retail – Freestanding
688 Wye Road
Sherwood Park
Retail – Freestanding
1109 James Mowatt Trail SW
Southbrook
Retail – Freestanding
94 McLeod Avenue
395 St. Albert Trail
4607 50 Street
100 Ranch Market
4202 South Park Drive
BRITISH COLUMBIA
575 Alder Avenue
575 Alder Avenue
4454 East Hastings Street
Burnaby Heights
1721 Columbia Avenue
45850 Yale Road
1551 Cliffe Avenue
Spruce Grove
Retail – Freestanding
St. Albert
Stettler
Strathmore
Stony Plain
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
100 Mile House
Retail – Plaza
100 Mile House
Retail – Plaza
Burnaby
Burnaby
Castlegar
Chilliwack
Courtenay
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
Crown Isle Shopping Centre
Courtenay
934 Baker Street
1200 Baker Street
11200 8 Street
9123 100 Street
750 Fortune Drive
945 Columbia Street West
697 Bernard Avenue
Belmont Market
20871 Fraser Highway
27566 Fraser Highway
32520 Lougheed Highway
211 Anderson Street
Cranbrook
Cranbrook
Retail – Freestanding
Retail – Freestanding
Dawson Creek
Retail – Freestanding
Fort St. John
Retail – Plaza
Kamloops
Kamloops
Kelowna
Langford
Langley
Langley
Mission
Nelson
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Plaza
800 McBride Boulevard
New Westminster Retail – Freestanding
1170 27 Street East
North Vancouver
Retail – Freestanding
1175 Mount Seymour Road
North Vancouver
Retail – Freestanding
801-1301 Main Street
Penticton
Retail – Plaza
2850 Shaughnessy Street
Port Coquitlam
Retail – Freestanding
200 2 Avenue West
445 Reid Street
6140 Blundell Road
Prince Rupert
Retail – Plaza
Quesnel
Richmond
Retail – Freestanding
Retail – Freestanding
3664 Yellowhead Highway
Smithers
Retail – Freestanding
7450 120 Street
8860 152 Street
4655 Lakelse Avenue
1599 2nd Avenue
Surrey
Surrey
Terrace
Trail
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
990 King Edward Avenue West
Vancouver
Retail – Freestanding
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
Vancouver
Vancouver
Vancouver
Vancouver
Vancouver
Vancouver
Vernon
Vernon
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Plaza
Retail – Plaza
Retail – Freestanding
Retail – Freestanding
Retail – Freestanding
Williams Lake
Retail – Freestanding
Total Portfolio - Excluding Joint Ventures
Joint Ventures
140 Centennial Parkway North
Hamilton
Retail – Plaza
Le Duke
Bronte Village
Davie Street Residential
Montreal
Oakville
Vancouver
Mixed-Use Residential
Mixed-Use Residential
Mixed-Use Residential
Total Portfolio - Inclusive of Joint Ventures
% of
Ownership
Actual GLA
(rounded)
Occupancy %
Committed
100.0
91.4
95.1
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
99.3
100.0
0.0
100.0
100.0
100.0
100.0
100.0
99.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
97.3
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
99.3
96.9
11.0
100.0
100.0
100.0
100.0
100.0
100.0
11.0
100.0
100.0
11.0
50.0
50.0
11.0
100.0
100.0
100.0
11.0
11.0
100.0
100.0
100.0
11.0
11.0
100.0
100.0
100.0
100.0
11.0
100.0
100.0
11.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
11.0
100.0
11.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
4,000
143,000
67,000
44,000
69,000
140,000
45,000
7,000
104,000
43,000
5,000
23,000
23,000
6,000
53,000
31,000
35,000
5,000
3,370,000
2,000
7,000
4,000
61,000
3,000
6,000
54,000
109,000
9,000
48,000
5,000
67,000
56,000
5,000
30,000
143,000
48,000
45,000
55,000
39,000
43,000
37,000
36,000
59,000
49,000
50,000
3,000
28,000
5,000
60,000
56,000
43,000
32,000
28,000
54,000
42,000
42,000
55,000
51,000
24,000
29,000
56,000
29,000
1,707,000
18,445,000
50.0%
50.0%
50.0%
50.0%
16,000
133,000
260,000
121,000
530,000
18,975,000
129
UNITHOLDERS’ INFORMATION
BOARD OF TRUSTEES
J. Michael Knowlton
Independent Trustee and Chair
Paul V. Beesley
Independent Trustee
Jane Craighead
Independent Trustee
James M. Dickson
Independent Trustee
Mark Holly
Trustee, President and Chief Executive Officer
Heidi Jamieson-Mills
Trustee
Barbara Palk
Independent Trustee
Jason P. Shannon
Independent Trustee
Paul D. Sobey
Independent Trustee
Michael Vels
Trustee
Michael Waters
Independent Trustee
Karen Weaver
Independent Trustee
OFFICERS
J. Michael Knowlton
Chair
Mark Holly
President and Chief Executive Officer
Clinton D. Keay
Chief Financial Officer and Secretary
Cheryl Fraser
Chief Talent Officer and Vice President Communications
John Barnoski
Executive Vice President Corporate Development
Trevor Lee
Executive Vice President Development and Construction
Arie Bitton
Executive Vice President Leasing and Operations
Fred Santini
General Counsel
CROMBIE REIT
Head Office:
610 East River Road, Suite 200
New Glasgow, Nova Scotia, B2H 3S2
Telephone: (902) 755-8100
Fax: (902) 755-6477
Website: www.crombie.ca
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.
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Tenant Profile
The Village at Bronte Harbour
Oakville (Toronto), 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.
59.4% Necessity-Based Retailers1
3.4% Value-Focused Retailers
6.6% Retail-Related Industrial Tenants
2.8%
5.7% Office & Hotel Tenants
4.5%
Medical, Professional &
Personal Services
Entertainment, Sporting Goods
& Stationery Retailers
1.8%
Restaurants – Full Service
1.5% Fitness Facilities & Supplements
4.4%
Restaurants – Quick Service & Cafe
1.4% Other
3.6% Bank and Financial Services
3.6% Apparel & Accessories
1.3%
Home Improvement, Furniture
& Auto Supplies
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