Crombie Real Estate Investment Trust
TSX : CRR.UN

Crombie Real Estate Investment Trust

March 08, 2012 16:28 ET

Crombie REIT Announces $255 Million Acquisition of Grocery and Drug Anchored Shopping Centers and Equity Offering of $120 Million of Units

STELLARTON, NOVA SCOTIA--(Marketwire - March 8, 2012) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Crombie Real Estate Investment Trust ("Crombie") (TSX:CRR.UN) announced today that it has agreed to purchase a portfolio of twenty two (22) retail properties (the "Properties") (the "Acquisition") for $255 million (the "Purchase Price") from a third party vendor, subject to regulatory approval. With the exception of two assets located in Manitoba and Saskatchewan, all of the Properties are located in Ontario.

"With the completion of this transaction, the REIT will add significantly to its portfolio of high quality assets across Canada and, importantly, increase our geographic diversification, particularly in Ontario." commented Donald Clow FCA, Crombie's President and Chief Executive Officer. "The REIT's acquisition of these high quality assets together with debt financing expected to be assumed and added at closing, is anticipated to be immediately accretive to Crombie's AFFO per unit."

Mr. Clow continued: "National and regional tenants comprise approximately 90% of the total rental base for the Properties. Gap lease and head lease adjustments will result in the equivalent of 100% occupancy at closing. Furthermore, certain of the assets have attractive expansion opportunities, which should provide Crombie with additional upside if the REIT chooses to pursue development initiatives in the future. We have completed extensive due diligence in connection with the acquisition and are confident that this portfolio represents a strong addition to our existing asset base."

Description of Public Offering

Crombie has entered into an agreement with a syndicate of underwriters co-led by CIBC World Markets Inc. and Scotia Capital Inc., with CIBC World Markets Inc. acting as sole bookrunner, to issue to the public in Canada on a bought deal basis, 4,630,000 trust units of Crombie (each, a "Unit") at a price of $14.50 per Unit (the "Offering"), representing approximately $67 million of gross proceeds.

Crombie will, by March 14, 2012, file with the securities regulatory authorities in each of the provinces of Canada a preliminary short form prospectus relating to the issuance of the Units. The closing of the Offering is expected to occur on or about March 29, 2012 (the "Offering Closing").

Concurrent with the Offering, ECL Developments Limited (a wholly owned subsidiary of Empire Company Limited) will subscribe for Exchangeable LP Units at a price of $14.50 per unit for additional gross proceeds of approximately $53 million, and has agreed to waive its pre-emptive right with respect to the Offering. The total $120 million Offering is subject to regulatory approval.

Crombie intends to use the proceeds of the Offering and the concurrent private placement, net of the underwriters' fee and expenses attributable thereto, to finance a portion of the Purchase Price. The remainder of the Purchase Price will be satisfied through the assumption by Crombie of approximately $95.1 million of existing property mortgage debt (the "Assumed Mortgages"), as well as borrowings under Crombie's existing line of credit. (See "Acquisition Financing", below). If the Acquisition does not close for any reason, Crombie intends to use the proceeds of the Offering to reduce outstanding borrowings under Crombie's revolving line of credit, for working capital and to fund future acquisitions that are not yet identified.

Summary of the Properties

The Properties primarily consist of drug and food-anchored retail centres, with a primary concentration in Ontario. The following table provides a summary description of the Properties.

Property City Prov Major
tenants
Total GLA
(sq. ft.)
3156 Birds Hill Rd. Birds Hill MB Sobeys 39,193
160 Main St. S Brampton ON Shoppers/Metro 101,325
4021 Upper Middle Rd. Burlington ON Mac's 11,066
2095 Dorchester Rd. Dorchester ON Sobeys 31,197
2300 Dorchester Rd. Dorchester ON Shoppers 18,467
703 Notre Dame St. Embrun ON Shoppers 16,910
15 Lindsay St. Fenelon Falls ON Sobeys 25,010
263 Guelph St. Georgetown ON Shoppers 28,492
150 Main St. E Grimsby ON Shoppers 37,256
321 Main St. E Grimsby ON TCS Stores 24,065
32-38 Ottawa St. Havelock ON Sobeys 14,866
10 Alkenbrack St. Napanee ON Shoppers Realty 24,735
5125 Montrose Rd. Niagara Falls ON Shoppers 17,043
9801 Territorial Dr. North Battleford SK Sobeys/Tim Hortons 29,752
1899 Algonquin Ave. North Bay ON Sobeys/Target 191,123
400 Landsdowne St. E Peterborough ON Loblaws/McDonalds 67,523
1875 & 1913 Landsdowne St. W Peterborough ON Shoppers 18,675
511 Huron St. Stratford ON Shoppers 27,375
521 Hwy. 8 Stoney Creek ON Mac's 9,084
2751-2753 Eglinton Ave. E Toronto ON Shoppers 16,995
1780 Markham Rd. Toronto ON Shoppers 38,715
1555-1563 The Queensway Toronto ON Future Shop 67,004
Total 855,871

Based on the portion of the purchase price that is expected to be allocated to the income-producing assets, Crombie estimates that it will earn a going-in capitalization rate of 6.11% on the Properties.

Acquisition Financing

The Purchase Price, prior to closing costs, is expected to be funded as follows (in $ millions):

Assumed mortgages $95.1
Proceeds of Offering, net 116.9
Draw on line of credit 43.0
Total $255.0

On the closing of the Acquisition, which is expected to occur on or about April 10,2012, subject to receipt of required consents from the applicable lenders, Crombie expects to assume $95.1 million in mortgages with a weighted average term to maturity of 3.8 years and a weighted average interest rate of 4.86%. Crombie may arrange additional mortgage financing for certain of the properties, which would reduce the required borrowings under its existing line of credit.

Non-IFRS Measures

Certain terms used in this press release, such as AFFO, are not measures defined under International Financial Reporting Standards ("IFRS") and do not have standardized meanings prescribed by IFRS. AFFO should not be construed as an alternative to net earnings or cash flow from operating activities as determined by IFRS. AFFO, as presented, may not be comparable to similar measures presented by other issuers. Crombie believes that AFFO is useful in the assessment of its operating performance and that this measure is also useful for valuation purposes and is a relevant and meaningful measure of its ability to earn and distribute cash to unitholders. Examples of reconciliations of AFFO to the most directly comparable measure calculated in accordance with IFRS are provided in the MD&A of Crombie for the year ended December 31, 2011.

This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities in any jurisdiction. The Units will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

About Crombie

Crombie is an open-ended real estate investment trust established under, and governed by, the laws of the Province of Ontario. The trust invests in income-producing retail, office and mixed-use properties in Canada, with a future growth strategy focused primarily on the acquisition of retail properties. Crombie currently owns a portfolio of 138 investment properties in eight provinces, comprising approximately 12.6 million square feet of rentable space. More information about Crombie can be found at www.crombiereit.com.

This news release may contain forward looking statements that reflect the current expectations of management of Crombie about Crombie's future results, performance, achievements, prospects and opportunities. Wherever possible, words such as "continue", "may", "will", "estimate", "anticipate", "believe", "expect", "intend" and similar expressions have been used to identify these forward looking statements. These statements reflect current beliefs and are based on information currently available to management of Crombie, and include, without limitation, statements regarding (a) the expected use of proceeds of the Offering, (b) the anticipated closing date of the Acquisition; (c) the anticipated date of the Offering Closing; (d) the going-in capitalization rate of the Properties implied by the Purchase Price; (e) the effect of the Acquisition on the financial performance of Crombie including the degree to which the Acquisition will be accretive; and (f) the ability to assume existing mortgages or arrange additional mortgage financing. Forward looking statements necessarily involve known and unknown risks and uncertainties.

A number of factors, including those discussed in the 2011 annual Management Discussion and Analysis 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. There can be no assurance that the expectations of management of Crombie will prove to be correct.

Readers are cautioned that such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements. Crombie can give no assurance that actual results will be consistent with these forward-looking statements.

Additional information relating to Crombie can be found on Crombie's web site at www.crombiereit.com or on the SEDAR web site for Canadian regulatory filings at www.sedar.com.

Contact Information

  • Crombie REIT
    Mr. Glenn Hynes, FCA
    Chief Financial Officer and Secretary
    (902) 755-8100
    www.crombiereit.com