Crombie Real Estate Investment Trust (TSE:CRR.UN) reported second-quarter results marked by continued leasing growth, near-record occupancy and a strengthened balance sheet, as the grocery-anchored retail landlord continued to pursue acquisitions, property modernizations and selected development entitlements.
President and Chief Executive Officer Mark Holly said the company’s necessity-based retail portfolio continued to provide stable performance in a changing economic environment. Commercial same-asset property cash net operating income increased 3.2% from a year earlier, supported by leasing activity and contractual rent increases.
Leasing Activity Supports NOI Growth
Crombie completed 121,000 square feet of lease renewals during the quarter at a first-year rental-rate increase of 11.3% over expiring rates. The result represented its seventh consecutive quarter of double-digit renewal spreads. When measured against the weighted-average rental rate over the full renewal term, rates increased 12.7%.
The company also signed 33,000 square feet of new commercial leases during the quarter. For the first half of 2026, new commercial leases added 63,000 square feet of occupancy at an average first-year rate of C$26.26 per square foot.
Committed occupancy ended the quarter at 97.5%, while economic occupancy was 96.6%. Chief Financial Officer Kara Cameron said the slight sequential decline in economic occupancy reflected normal lease expirations and early terminations. Crombie had 160,000 square feet of committed space at quarter-end, with tenants expected to take possession through 2026 and 2027.
Executive Vice President of Leasing and Operations Arie Bitton said the company expects occupancy to remain relatively steady during the second half, though it may “ebb and flow a little bit” given the portfolio’s already high occupancy. He cited the departure of a 35,000-square-foot Toys“R”Us tenant and one office departure as contributors to recent changes, while noting that Crombie expects the Toys“R”Us space to enter committed occupancy in the near term.
Financial Results and Capital Position
Property revenue rose 1.9% year over year to C$126.2 million, while net property income increased 0.6% to C$81.8 million. Cameron said acquisitions, renewals and new leasing contributed to the gains, partly offset by lower lease termination income and higher tenant-incentive amortization associated with modernizations.
Funds from operations totaled C$62.4 million, or C$0.33 per unit, while adjusted funds from operations were C$55.4 million, or C$0.30 per unit. On a reported per-unit basis, FFO declined 2.9% and AFFO was essentially unchanged from the prior year, which management attributed primarily to additional units issued under the distribution reinvestment plan, lower termination income and higher interest expense.
Excluding the difference in lease termination income, FFO per unit increased 3.1% and AFFO per unit increased 3.6%, according to the company.
Finance costs increased C$1.1 million year over year to C$25.5 million, mainly due to higher interest on revolving and bilateral credit facilities. Crombie ended the quarter with C$478.7 million in available liquidity and an unencumbered asset pool with a fair value of C$4.2 billion.
- Debt to gross fair value was 42.6%.
- Debt to trailing 12-month adjusted EBITDA was 8.01 times.
- Interest coverage was 3.4 times.
- Approximately 90% of debt, including Crombie’s share of joint ventures, carried fixed rates.
Subsequent to quarter-end, Crombie issued C$300 million of Series N senior unsecured notes due in 2033 at a 4.518% rate. The company used part of the proceeds to redeem C$200 million of Series F notes due in August 2026 and applied the remaining proceeds to reduce borrowings under its revolving credit facility. Cameron said the 124-basis-point spread over the Government of Canada curve was Crombie’s tightest new-issue spread on record.
Acquisitions, Modernizations and Development
During the quarter, Crombie acquired Ocean Park, a 30,000-square-foot freestanding Safeway store in Surrey, British Columbia, for C$12.7 million excluding closing costs. Holly described the property as being located in the community’s primary retail node.
The company invested C$10.6 million in its modernization program with Empire and reported approximately 29,000 square feet of development activity across intensification projects and greenfield builds. Crombie continues to target yields on cost in the 6% to 8% range for these non-major investments, with Cameron saying modernizations are still expected to generate roughly 7% returns.
Holly said Crombie has invested nearly C$150 million in acquisitions year to date and is seeing more potential opportunities than it did six months or a year ago. He emphasized, however, that management will remain selective and will not pursue growth solely for its own sake.
The company does not intend to begin construction on a new major development in the near term. Instead, it is focusing on advancing entitlements and development permits to preserve future optionality while emphasizing quicker-turning, lower-cost modernization and intensification projects, as well as income-producing acquisitions.
The Marlstone Leasing Progress
Construction at The Marlstone residential project in Halifax is substantially complete, and the property celebrated its grand opening on June 22. Crombie had leased nearly one-quarter of the units by the end of June, and Bitton said occupancy exceeded 30% at the end of July after its strongest leasing month to date.
Management maintained its expectation that the project will stabilize in the second half of 2027. Crombie’s estimated total cost at its share rose modestly to C$72 million from C$71 million, while its expected stabilized yield on cost remained 4.5% to 5.5%.
Bitton said the company has used selective incentives, including promotions associated with open houses, generally amounting to about one month of free rent on a 12-month lease where offered. He added that rental rates on a per-square-foot basis are above the company’s initial 2023 underwriting assumptions. Crombie is targeting several prospective tenant groups, including military personnel, first responders and students, but is not planning to use bulk or corporate leasing to support occupancy.
Holly said the company’s capital-allocation framework remains centered on non-major investments, major-development entitlements, acquisitions and distributions. Crombie has raised its distribution twice in 2026, which management said reflects the cash-flow growth generated by its strategy.
About Crombie Real Estate Investment Trust (TSE:CRR.UN)
Crombie invests in real estate with a vision of enriching communities together by building spaces and value today that leave a positive impact on tomorrow. As one of the country’s leading owners, operators, and developers of quality real estate assets, Crombie’s portfolio primarily includes grocery-anchored retail, retail-related industrial, and mixed-use residential properties. As at September 30, 2025, our portfolio contained 306 properties comprising approximately 18.8 million square feet, inclusive of joint ventures at Crombie’s share, and a significant pipeline of future development projects.
