Crombie lifts rents and plans Ontario portfolio expansion in Q3

Marcus Bennett

CAD 134 million, excluding closing and transaction costs, is the agreed purchase price for 13 fully occupied Ontario retail properties in a deal Crombie expects to close in the fourth quarter. Crombie agreed to the deal after quarter-end.

The trust will initially fund the acquisition through its unsecured revolving credit facility. That places the revolver at the center of near-term funding analysis.

What changed in third-quarter earnings?

Third-quarter property revenue rose 6.2% year over year to CAD 127.6 million, while net property income increased 7.2% to CAD 85.2 million. Rent increases and new leasing across the grocery-anchored portfolio drove those gains, converting stronger rents into higher property income.

Funds from operations (FFO), the trust’s real-estate earnings measure, reached CAD 63.9 million, or CAD 0.34 per unit, up 3% per unit. The increase shows leasing gains carried through to the headline per-unit result.

Adjusted FFO was CAD 57.1 million, or CAD 0.30 per unit, with the per-unit figure unchanged from a year earlier. The divergence between the two measures leaves reported per-unit growth without a matching improvement in management’s adjusted result.

How strong were lease renewals?

Crombie renewed 107,000 square feet during the quarter at a first-year rent increase of 13.9% over expiring rates. President and CEO Mark Holly said the result represented “the trust’s strongest renewal spread in more than five years” and its eighth consecutive quarter of double-digit spreads.

CFO Kara Cameron said retail renewals drove the increase. Comparing expiring rates with weighted average rent over the full renewal term produced a 16.7% increase.

Executive Vice President of Leasing, Operations, and Corporate Development Arie Bitton told analysts that “nothing unusual had inflated the renewal spread.” Many tenants had held leases for more than 10 years, while supply and demand favored Crombie as those rents came up for renewal. Scheduled expiries therefore remain a relevant input for forecasting additional rent gains.

What did occupancy show?

Committed occupancy, representing space under signed leases, matched a record 97.7%, while economic occupancy, representing space paying rent, reached 96.8%. Cameron attributed the sequential improvement to new leasing and the Charlotte Mall sale.

Commercial same-asset property cash net operating income, or NOI cash earnings from comparable properties, rose 2.7% in the quarter and 3.2% year to date, supported by leasing and contractual rent increases. The result links the occupancy and renewal gains to reported cash earnings.

What does the Ontario acquisition add?

The acquisition covers about 588,000 square feet across 13 properties. Nine properties are anchored by Sobeys stores, two by Walmart Supercentres and two by Shoppers Drug Mart locations.

The off-market transaction involved a private seller and was not sourced through Empire, Sobeys’ parent company. The portfolio carries a 4.6-year weighted average lease term and relatively few fixed-rate renewals.

CEO Holly declined to provide an underwritten net operating income growth figure, but said the portfolio’s growth profile was higher than Crombie’s existing business. Potential rent increases, future store modernizations and opportunities to add space support that outlook.

How are asset sales reshaping the portfolio?

Crombie sold Charlotte Mall, a 116,000-square-foot retail property in St. Stephen, New Brunswick, during the quarter. After quarter-end, it sold County Fair Mall in New Minas, Nova Scotia, for CAD 5.5 million before costs.

The County Fair transaction included CAD 2.7 million in vendor take-back financing, or seller financing, over three years. Crombie retained the Empire grocery component through a long-term lease.

Holly said the sales reduce exposure to lower-growth properties with vacancies and maintenance capital needs. He added that not many more comparable assets remain in the portfolio, although Crombie continually reviews properties that do not contribute to its growth profile.

What is under development?

Crombie invested CAD 6 million in its modernization program with Empire during the quarter, taking year-to-date spending to CAD 23.1 million across 24 projects. It also completed a retail project at Faubourg Contrecœur, adding about 27,000 square feet at Crombie’s share.

The non-major development pipeline under construction expanded to approximately 120,000 square feet from about 30,000 square feet at June-end. These shorter-duration, grocery-anchored projects target yields on cost, measured against project cost, of 6% to 8%.

Locations include Windsor, Nova Scotia, and Martensville, Saskatchewan. At The Marlstone in Halifax, 40% of units were committed at September 30, up from 22% at June-end. Commitments subsequently reached roughly 42.5%, while Bitton said the stabilization timeline had not changed.

What is the refinancing position?

Crombie ended the quarter with CAD 591.5 million in available liquidity and debt equal to 41.9% of gross fair value. Cameron said approximately CAD 280 million of mortgages, bearing an average rate of about 3.36%, mature in 2027.

The trust is actively assessing refinancing options. Refinancing those maturities is therefore the next major balance-sheet variable, while the acquisition adds immediate revolver usage.

How large is the portfolio?

As of September 30, 2025, Crombie’s portfolio comprised 306 properties and approximately 18.8 million square feet, inclusive of joint ventures at Crombie’s share. The holdings primarily comprise grocery-anchored retail, retail-related industrial and mixed-use residential properties, alongside a significant pipeline of future development projects.