Crombie REIT - Q3-2020, Earnings , Price Target Update

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Crombie REIT(CRR.UN) strategy is to own and develop a portfolio of high-quality grocery and pharmacy-anchored shopping centres, freestanding stores and mixed-use developments, primarily in Canada's top urban and suburban markets. At Sept-30-2020, Crombie owned full and partial interests in a portfolio of 286 investment properties in 10 provinces, comprising approximately 17.6M sq. ft. Empire Company Limited (EMP.A,B) owns 41.5%. Assets totaled $3.9B as of Dec-31-2019($4.1B, Dec-31-2018) compared to $4B at Sept-30-2020 including $122M of properties under development. The development pipeline is comprised of 34 properties, 20 of which are in Vancouver, Toronto and Montreal. The total projected cost of the pipeline is $4-$5.8B, with options to enter into joint ventures or other partnership arrangements to reduce risk and financing demands. Annual minimum rent by location consists of: Atlantic Canada 43%; Alberta – 21%, Ontario-15%, BC-11%, and Quebec at 10%. The two primary sources of acquisitions are with the Empire Group (EMP.A) and from third parties. The average remaining lease term is 10.4 years including leases with Empire Group (Sobey's) of 12.7 years. Sobey's contributes 54% of annual rent, Shoppers Drugs – 5%.

Empire Company Ltd (EMP.A) formed Crombie REIT to hold their retail shopping centre properties in an IPO in Mar-2006, comprised of 44 properties. They have since grown to 285 properties, almost all purchased from Empire Company Ltd. Sobeys headquarters in Stellarton, Nova Scotia is a wholly-owned subsidiary of Empire Company Limited (TSX: EMP.A), Sobeys owns or franchises more than 1,500 stores in all 10 provinces under retail banners that include Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, and Lawton's Drug Stores as well as 350 retail fuel locations. Empire Company Limited (EMP.A) holds a 41.5% interest as of Dec-31-2019 unchanged from 41.5% at Dec-31-2016.

Empire Company Ltd. is required according to a loan covenant to maintain at least a 40% interest and to provide loan guarantees. Crombie provides administration services to certain real estate subsidiaries of Empire Company Ltd. on a cost sharing basis.

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