June 20, 2019

Crombie Real Estate Investment Trust (CRR)

The Crombie Real Estate Investment Trust (CRR) is the largest land owner in Atlantic Canada.  Their headquarters is located in Stellarton, Nova Scotia.  While their strong presence in Atlantic Canada is what defines the REIT, it also has holdings in Quebec, Ontario, Saskatchewan and Alberta.  Crombie specializes in managing shopping centres that vary in size and location, and the REIT also has some office building properties as well.  As of June, 2011 the breakdown of the properties owned by Crombie REIT (CRR) was 76.9% retail, 14.3% mixed-use, and 8.8% Office.  One unique aspect of Crombie is that they have several strong partnerships with grocery stores and drug stores.  This enables their retail venues to piggyback off of the stable consumer base these stores bring to the table.  This strategy has proved to be especially effective given the tough years most retail-based companies have had due to the global economic downturn.  The dependence of Canadians on drugstores is an interesting cultural trait.  Crombie reports that Canadian consumers spend about 22% of their income on staple goods and services compared to an average of 14% for their American counterparts.  This translates into valuable retail properties available for Crombie REIT (CRR) to market.  The crown jewel in the Crombie portfolio is the Avalon Mall in St. John’s, Newfoundland.  It is continuously ranked as one of Canada’s 15 best-performing shopping centres.

 

Most recently, Crombie REIT (CRR) was pleased to announce that they had reached a tentative agreement in regards to the seven Zellers locations it currently owns.  The retail giant Target has announced that they will select four of these locations to be converted into Target outlets.  “We are very pleased to be working with Target Corporation to open two Target stores in our portfolio and adding an additional Walmart store,” stated Donald Chow, the Crombie REIT CEO.  Obviously these international conglomerates will bring a steady flow of new consumers to the already successful locations owned by Crombie (CRR).  Chow went on to say, “We are pleased to add these properties to our portfolio as they support our strategy of pursuing high quality growth at a reasonable price.  These properties also support our objective of realizing greater growth in Quebec, Ontario, and Western Canada.”

 

While Crombie REIT (CRR) may initially look as if it is situated advantageously in regards to a suddenly booming maritime economy (thanks in large part to offshore oil drilling) , as well as with its connection to the new “hot” retail player on the Canadian scene (Target).  I personally blanche at the 6.8% dividend that is currently being offered.  While a 6.8% dividend is not to be immediately dismissed in this economy, it does not stack up well with several of Crombie’s competitors.  It is currently rated a “hold” amongst most major analysts.  Crombie (CRR) is currently trading at about $13.12 per unit, and this is near its 52-week high.  The REIT has a mid-sized market capitalization of $473 million.