Crombie Real Estate Investment Trust is pursuing approximately $350 million in acquisitions involving 28 retail properties across Canada, expanding its holdings of grocery-anchored and necessity-based shopping centres occupied by Sobeys, Safeway, FreshCo, Walmart and Shoppers Drug Mart.
The transactions will add approximately 1.2 million square feet of gross leasable area at Crombie’s ownership share. They include a $134-million acquisition of 13 Ontario properties and a separate $216.2-million agreement to acquire the remaining 89% interest in 15 grocery-anchored properties that Crombie already co-owns.
The expansion follows a third quarter marked by strong retail leasing, higher property income and continued investment in smaller grocery-anchored developments. Crombie is also disposing of shopping centres with persistent vacancies and higher maintenance requirements, redirecting capital toward properties with stronger anticipated returns.
$134 Million Ontario Acquisition Includes Sobeys, Walmart and Shoppers Drug Mart
The Ontario acquisition comprises approximately 588,000 square feet across 13 fully occupied retail properties. Nine are anchored by Sobeys, two by Walmart and two by Shoppers Drug Mart, with additional tenants including Dollarama, LCBO, TD Bank, McDonald’s and Tim Hortons.
The Sobeys-anchored properties are in Beamsville, Pelham, Angus, Paris, Innisfil, Kincardine, Blenheim, Dunnville and Brighton. The Walmart properties are in Hawkesbury and Hanover, while the Shoppers Drug Mart locations are in Rockland and Hamilton.
The portfolio has a weighted average remaining lease term of approximately 4.6 years, with Empire Company Limited accounting for about 60% of annual minimum rent. The properties are spread across smaller Ontario communities and regional markets, giving Crombie additional exposure to established retail locations outside the province’s largest urban centres.
Crombie President and CEO Mark Holly told analysts during the November 5 earnings call that the portfolio was sourced through an off-market transaction with a private vendor. The acquisition was not arranged through Crombie’s longstanding relationship with Empire, the parent company of Sobeys, and the seller’s identity has not been disclosed.
Management expects opportunities to increase rents as leases expire and modernize selected properties. With the portfolio already fully occupied, future income growth will depend principally on rental increases and improvements to the properties.
Holly told analysts that the acquired portfolio was expected to achieve a stronger growth profile than Crombie’s existing business. The company did not provide a numerical forecast for the properties’ net operating income growth.
Arie Bitton, Executive Vice President of Leasing, Operations and Corporate Development, said relatively few leases in the acquired portfolio contain fixed-rate renewal provisions. Crombie had already begun reviewing certain 2027 renewals during due diligence, with management indicating that the results were consistent with leasing activity elsewhere in its portfolio.
The Ontario transaction was agreed through binding agreements dated October 13 and October 22, with closing scheduled for November. Its approximately $134-million purchase price excludes closing and transaction costs, and completion remains subject to the applicable conditions.
Crombie to Reacquire Full Ownership of 15 Grocery-Anchored Properties
A second acquisition will give Crombie full ownership of 15 grocery-anchored properties in which it currently holds an 11% interest. The REIT is exercising its right of first refusal under an existing co-ownership agreement to acquire the remaining 89% for $216.2 million, excluding closing and transaction costs.
Crombie originally acquired the properties between 2008 and 2014 before selling an 89% interest in 2019. It continued to manage and operate the properties after that sale, making the new agreement a return to full ownership of an established portfolio.
The 15 properties contain approximately 721,000 square feet at full ownership, adding roughly 641,000 square feet to Crombie’s ownership share. All are fully occupied, with Empire grocery banners generating approximately 98% of annual minimum rent and a weighted average remaining lease term of 15.9 years.
The portfolio includes Safeway stores in Spruce Grove, Calgary, Stony Plain, Smithers and Selkirk, along with FreshCo locations in Wood Buffalo, Kamloops and Chilliwack and a Chalo! FreshCo in Calgary. Sobeys anchors the properties in St. John’s, Dartmouth, Orangeville and Bradford, while IGA Extra operates at the Sherbrooke and Quebec City locations.
The purchase price includes the assumption of approximately $56 million in existing mortgage debt. Closing is expected late in the fourth quarter of 2026 or early in 2027, subject to customary conditions, including approval under Canada’s Competition Act.
Together, the two acquisitions have an estimated blended initial capitalization rate of approximately 6%. Upon completion, Crombie expects its portfolio to comprise 324 properties and approximately 20.7 million square feet of gross leasable area at its ownership share, including joint ventures.
The acquisitions would also increase committed occupancy to approximately 97.9%. That figure is a company projection based on completion of both transactions, not Crombie’s occupancy at September 30.
Strong Retail Leasing Conditions Support Higher Rents
Crombie renewed approximately 107,000 square feet of retail space during the third quarter, achieving first-year rental increases averaging 13.9% over expiring rates. It was the company’s strongest renewal spread in more than five years and marked its eighth consecutive quarter of double-digit renewal growth.
Measured against the weighted average rental rate over the full renewal term, the increase was 16.7%. Both figures apply to leases renewed during the quarter and do not represent rent growth across the entire portfolio.
Bitton explained during the earnings call that many of the renewed leases had originally been negotiated more than a decade earlier. Those agreements are now reaching subsequent renewal periods, allowing Crombie to negotiate rents reflecting current market conditions.
Management also cited limited availability of desirable retail space, particularly in established necessity-based retail locations. Tenants seeking to maintain stores in productive trade areas may have relatively few comparable alternatives.
Committed occupancy reached 97.7% at September 30, matching Crombie’s previous record, while economic occupancy stood at 96.8%. Approximately 170,000 square feet of committed space was awaiting tenant possession, with tenants expected to take possession during 2026 and 2027.
Commercial same-asset property cash net operating income increased 2.7% during the quarter and 3.2% over the first nine months of 2026. The sale of a lower-occupancy shopping centre also contributed to the improvement in reported occupancy.
Grocery-Anchored Developments Advance Across Canada
Crombie is increasing investment in smaller retail developments as grocery and other necessity-based retailers pursue additional locations. Its active non-major land-use intensification and redevelopment pipeline contained six projects totalling approximately 118,200 square feet at Crombie’s ownership share at the end of September, compared with roughly 30,000 square feet under construction three months earlier.
The company is targeting yields on cost of approximately 6% to 8% for these projects. Management considers smaller developments attractive because they generally require shorter construction timelines than major mixed-use investments.
During the earnings call, Holly said existing retail space cannot fully accommodate the expansion plans of necessity-based retailers. Crombie sees opportunities to support that growth through new construction and additional commercial space at existing properties.
In Windsor, Nova Scotia, Crombie acquired two parcels totalling approximately 10.8 acres for $4.4 million during the third quarter. The land forms part of its pipeline of grocery-anchored greenfield development opportunities.
Construction has also begun in Martensville, Saskatchewan, where the first phase of a grocery-anchored project is expected to contain approximately 48,000 square feet. The development occupies part of an eight-acre site.
Another project reached completion during the quarter at Faubourg Contrecœur in Montréal, adding approximately 27,000 square feet at Crombie’s ownership share. IGA Extra and Dollarama opened during the summer, with a McDonald’s restaurant expected to follow before the end of 2026.
Management is evaluating opportunities to add commercial space at approximately 10 to 20 existing properties. Potential projects include additional retail buildings and smaller freestanding units on sites already generating rental income.
Crombie also invested approximately $23.1 million in property modernizations during the first nine months of 2026, including about $6 million during the third quarter. The work involved 24 projects and forms part of the REIT’s continuing relationship with Empire.
These smaller investments are separate from Crombie’s major mixed-use development pipeline. Management continues to pursue planning approvals and other entitlements for selected larger properties but had not committed those projects to construction as of the November 5 call.
Shopping Centre Sales Reduce Exposure to Weaker Properties
Crombie is selling selected shopping centres with persistent vacancies and higher maintenance capital requirements. The dispositions provide another source of capital as the company pursues acquisitions and development projects.
During the third quarter, the REIT sold Charlotte Mall in St. Stephen, New Brunswick, for approximately $5.5 million. The 116,000-square-foot property had been roughly half occupied, according to management, limiting its appeal for continued ownership.
Another disposition followed on October 29, when Crombie sold County Fair Mall in New Minas, Nova Scotia, for approximately $5.45 million before closing and transaction costs. The property contained approximately 271,000 square feet, and the transaction included $2.7 million in vendor take-back financing over three years.
Crombie retained the Empire grocery component through a long-term lease, preserving the associated rental income while disposing of the broader shopping centre. The arrangement illustrates how the REIT can reduce exposure to a weaker property without giving up its relationship with the grocery anchor.
Management continues to evaluate properties with limited growth prospects, although Holly indicated that relatively few assets with comparable challenges remain in the portfolio. The company is directing investment toward acquisitions, modernizations and developments it expects to deliver stronger long-term income growth.
Third-Quarter Results and Financing Plans
Crombie reported third-quarter property revenue of $127.6 million, up 6.2% from the same period in 2025, according to its financial results. Net property income increased 7.2% to $85.2 million, supported by acquisitions, leasing activity and higher rental income.
Funds from operations reached $63.9 million, or $0.34 per unit, representing a 3% year-over-year increase on a per-unit basis. Adjusted funds from operations totalled $57.1 million, or $0.30 per unit, with the per-unit figure unchanged from the previous year.
Operating income attributable to unitholders declined 8.7% to $28.3 million. Crombie attributed the decrease primarily to investment-property impairment, higher interest expense and lower development-management fees, partly offset by stronger property performance.
At September 30, the REIT had approximately $591.5 million in available liquidity and a debt-to-gross-fair-value ratio of 41.9%. Approximately 94% of its debt, including its share of joint ventures, carried fixed interest rates.
On November 9, Crombie announced a $200-million equity financing, comprising approximately $117 million in trust units to be purchased by underwriters and an $83-million private placement involving an Empire subsidiary. Empire is expected to maintain an approximately 41.5% economic and voting interest following completion.
The following day, Crombie announced an agreement to issue $175 million in Series O senior unsecured notes. The notes will bear interest at daily compounded CORRA plus 0.90% annually and mature on November 18, 2028.
Proceeds from the financing transactions are intended to support the acquisitions, repay debt and provide additional financial flexibility. Both offerings were expected to close around November 18, subject to their respective conditions, and neither financing is conditional on completion of the acquisitions.
Crombie also faces approximately $280 million in mortgage maturities during 2027, with an average existing interest rate of 3.36%. Management has been evaluating refinancing alternatives, including conventional and CMHC-insured financing where appropriate.
Next Steps for Crombie’s Retail Portfolio
The Ontario acquisition is scheduled to close in November, while the purchase of the remaining interests in the 15 co-owned properties is expected late in 2026 or early in 2027. Completion of both transactions would substantially increase Crombie’s ownership of fully occupied grocery-anchored retail properties across Canada.
Construction in Martensville and planning for additional grocery-anchored developments will continue alongside the acquisition program. The company is also evaluating opportunities to add retail space at existing properties, where established grocery operations provide a foundation for further investment.
