BOARDWALK REIT REPORTS STRONG RESULTS FOR Q1 2024
BOARDWALK REIT REPORTS STRONG RESULTS FOR Q1 2024
PR Newswire
CALGARY, AB, May 7, 2024
CALGARY, AB, May 7, 2024 /PRNewswire/ - Boardwalk Real Estate Investment Trust (TSX: BEI.UN)
- STRONG FINANCIAL PERFORMANCE
- Funds From Operations ("FFO") of $0.95 per Unit(1)(2); an increase of 20.3% from Q1 2023
- Profit of $307.7 million
- Net Operating Income ("NOI") of $87.5 million; an increase of 15.5% from Q1 2023
- Same Property(3) Net Operating Income ("Same Property NOI") of $87.2 million; an increase of 13.5% from Q1 2023
- Operating Margin of 60.3%; 240 basis point (bps) improvement from Q1 2023
- SAME PROPERTY RENTAL REVENUE GROWTH IN Q1 2024
- Q1 2024 same property sequential quarterly rental revenue growth of 1.8% from the prior quarter
- Occupied rent of $1,418 in March of 2024, a $30 improvement from December 2023
- Q1 2024 same property rental revenue growth of 9.4% from a year ago
- Occupancy of 98.8% in Q1 2024; an increase of 72 basis points from Q1 2023
- LEASING STRENGTH CONTINUES IN MAY
- May 2024 preliminary occupancy of 98.7%, an increase of 40 bps from May 2023
- New leasing spreads of 14.3% in Alberta in April 2024
- Renewal leasing spreads of 9.1% in Alberta in April 2024
- Rents in Alberta remain some of the most affordable amongst major cities in Canada
- STRONG AND FLEXIBLE FINANCIAL POSITION
- Approximately $378.6 million of total available liquidity at the end of the quarter
- 96% of Boardwalk's mortgages carry CMHC-insurance
- Unitholders' Equity of $4.6 billion
- Fair value capitalization rate of 5.09%, an increase of 4 bps from Q4 2023
- Net Asset Value increase to $90.37 per Unit(1)(2), primarily a result of higher market rental rates in the Trust's non-price controlled markets
- UPDATE TO 2024 FINANCIAL GUIDANCE
- Revised FFO range of $4.00 to $4.20 per Unit(1)(2)
- Revised Same Property NOI growth range of +11.0% to +14.0%
- STRENGTHENING OUR SENIOR LEADERSHIP TEAM
- Appointment of Samantha Adams as Senior Vice President, Investments
- Appointment of Nandini Somayaji as General Counsel and Corporate Secretary
- ADDING IRREPLACEABLE LOCATIONS
- Removed conditions subsequent to quarter end on $12.0 million land acquisition in Marda Loop, Calgary
- Removed conditions subsequent to quarter end on $12.0 million land acquisition in Marda Loop, Calgary
- DISTRIBUTION OF $1.44 PER TRUST UNIT ON AN ANNUALIZED BASIS CONFIRMED FOR THE MONTHS OF JUNE, JULY, AND AUGUST 2024
(1) Please refer to the section titled "Presentation of Non-GAAP Measures" in this news release for more information. |
(2) Boardwalk REIT's units (the "Trust Units") trade on the Toronto Stock Exchange ("TSX") under the trading symbol 'BEI.UN'. Additionally, the Trust has 4,475,000 special voting units issued to holders of "Class B Units" of Boardwalk REIT Limited Partnership ("LP Class B Units" and, together with the Trust Units, the "Units"), each of which also has a special voting unit in the REIT. |
(3) Same property figures exclude un-stabilized properties (properties which have been owned for less than 24 months) and sold assets. |
Boardwalk Real Estate Investment Trust ("Boardwalk", the "REIT" or the "Trust") today announced its financial results for the first quarter of 2024.
Sam Kolias; Chairman and Chief Executive Officer of Boardwalk REIT commented:
"We are pleased to report on another very strong quarter with significant growth in Net Operating Income, Funds from Operations per Unit and Profit. Our FFO per Unit of $0.95 during the first quarter represents an improvement of 20.3% from the prior year, and provides the Trust with growing cash flows that can be redeployed and compounded within our value add capital program and accretive external opportunities, where appropriate. We continue to expand our Operating Margin as our Resident Member focused approach to sustainable rent adjustments and ongoing commitment to cost improvement initiatives has delivered outsized NOI and FFO per Unit growth.
As of the beginning of May, same property portfolio occupancy is at approximately 98.7%. We continue to implement positive market rent adjustments in many of our communities. Rental market fundamentals continue to be strong across all of the Trust's markets, as demand for quality affordable housing remains high. Our largest markets of Edmonton and Calgary continue to see large net inflows from both international and interprovincial migration as new Residents pursue exceptional relative affordability, lifestyle and economic opportunities. Strong population growth continues to outpace new construction starts in Canada, while construction economics and labour shortages have presented challenges for new development.
We continue to work with all levels of government and other stakeholders toward implementing proven public policy to help rebalance demand and supply over the longer term. While we applaud many of the housing-related initiatives announced recently in advance of and in the most recent federal budget, we anticipate many of the measures to take significant time in terms of bringing new supply online and an eventual moderation in demand to more sustainable levels.
We remain focused on delivering a win-win outcome for our Resident Members and our stakeholders through increased retention, reduced turnover and costs, increased Associate efficiency, and increased margins and financial performance. Our ongoing Resident-Member centric, strategic self-moderation of leasing spreads on both new leases and lease renewals continues to be a key differentiator for our Resident Members, preserving essential affordability while providing a gradual, less volatile, long-term revenue growth profile for our Unitholders.
Our outlook for the remainder of the year continues to be positive. We are confident that the strong housing fundamentals that we are seeing, combined with the quality of our communities and Resident-focus will translate to strong ongoing performance in 2024. We remain well-positioned to continue de-leveraging our balance sheet organically, while utilizing our enhanced liquidity to capitalize on additional growth opportunities throughout the remainder of the year."
$ millions, except per Unit amounts | |||
Highlights of the Trust's First Quarter 2024 Financial Results | |||
3 Months | 3 Months | % Change | |
Operational Highlights | |||
Rental Revenue | $145.2 | $130.9 | 10.9 % |
Same Property Rental Revenue | $142.2 | $130.0 | 9.4 % |
Net Operating Income ("NOI") | $87.5 | $75.8 | 15.5 % |
Same Property NOI | $87.2 | $76.8 | 13.5 % |
Operating Margin (1) | 60.3 % | 57.9 % | |
Same Property Operating Margin | 61.3 % | 59.1 % | |
Financial Highlights | |||
Funds From Operations ("FFO") (2)(3) | $51.0 | $39.6 | 28.9 % |
Adjusted Funds From Operations ("AFFO") (2)(3) | $42.4 | $31.7 | 33.6 % |
Profit | $307.7 | $221.4 | 39.0 % |
FFO per Unit (3) | $0.95 | $0.79 | 20.3 % |
AFFO per Unit (3) | $0.79 | $0.63 | 25.4 % |
Regular Distributions Declared (Trust Units & LP Class B Units) | $17.0 | $13.9 | 21.8 % |
Regular Distributions Declared Per Unit (Trust Units & LP Class B Units) | $0.315 | $0.278 | 13.5 % |
FFO Payout Ratio (3) | 33.2 % | 35.2 % | |
Same Property Apartment Suites | 33,564 | 33,069 | |
Non-Same Property Apartment Suites(4) | 760 | 741 | |
Total Apartment Suites | 34,324 | 33,810 | |
(1) Operating margin is calculated by dividing NOI by rental revenue allowing management to assess the percentage of rental revenue which generated profit. |
(2) This is a non-GAAP financial measure. |
(3) Please refer to the section titled "Presentation of Non-GAAP Measures" in this news release for more information. |
(4) Includes 183 suites related to the Trust's joint venture in Brampton, Ontario which is accounted for as an equity accounted investment |
In Q1 2024, same property operating margin increased compared to the same period in the prior year, as the Trust's same property rental revenue growth remained strong. The Trust anticipates further improvement in its operating margin throughout the remainder of 2024 as a result of continued strong revenue growth and execution of various cost containment initiatives.
Continued Highlights of the Trust's First Quarter 2024 Financial Results | ||||||
Mar. 31, 2024 | Dec. 31, 2023 | |||||
Equity | ||||||
Unitholders' Equity | $4,612,385 | $4,320,072 | ||||
Net Asset Value | ||||||
Net asset value (1)(2) | $4,877,588 | $4,553,515 | ||||
Net asset value (NAV) per Unit (2) | $90.37 | $84.41 | ||||
Liquidity, Debt and Distributions | ||||||
Cash and cash equivalents | $182,777 | |||||
Unused committed revolving credit facility | $195,800 | |||||
Total Available Liquidity | $378,577 | |||||
Total mortgage principal outstanding | $3,428,455 | $3,446,801 | ||||
Interest Coverage Ratio (Rolling 4 quarters) | 2.84 | 2.83 | ||||
(1) This is a non-GAAP financial measure. |
(2) Please refer to the section titled "Presentation of Non-GAAP Measures" in this news release for more information. |
The Trust's fair value of its investment properties as at March 31, 2024 increased from year end, primarily attributable to an increase in market rents driven by strong market conditions. The Trust's stabilized capitalization rate ("cap rate") increased to 5.09% for Q1 2024 compared to 5.05% for the prior quarter as a result of an increase in some of the Trust's Ontario markets. The cap rate ranges utilized continue to be in line with recently published third party quarterly cap rate reports.
Portfolio Highlights for the First Quarter of 2024 | ||||||
Mar-24 | Mar-23 | |||||
Average Occupancy (Quarter Average) (1) | 98.83 | % | 98.11 | % | ||
Average Monthly Rent (Period Ended) | $ | 1,401 | $ | 1,267 | ||
Average Market Rent (Period Ended) (2) | $ | 1,620 | $ | 1,444 | ||
Average Occupied Rent (Period Ended) (3) | $ | 1,418 | $ | 1,292 | ||
Mark-to-Market Revenue Gain (Period Ended) ($ millions) | $ | 80.2 | $ | 59.5 | ||
Mark-to-Market Revenue Gain Per Unit (Period Ended) | $ | 1.49 | $ | 1.18 | ||
(1)Average occupancy is adjusted to be on a same property basis. |
(2)Market rent is a component of rental revenue and is calculated as of the first day of each month as the average rental revenue amount a willing landlord might reasonably expect to receive, and a willing tenant might reasonably expect to pay, for a tenancy, before adjustments for other rental revenue items such as incentives, vacancy loss, fees, specific recoveries, and revenue from commercial tenants. |
(3)Occupied rent is a component of rental revenue and is calculated for occupied suites as of the first day of each month as the average rental revenue, adjusted for other rental revenue items such as fees, specific recoveries, and revenue from commercial tenants. |
May-23 | Jun-23 | Jul-23 | Aug-23 | Sep-23 | Oct-23 | Nov-23 | Dec-23 | Jan-24 | Feb-24 | Mar-24 | Apr-24 | May-24 | |
Same Property | 98.3 % | 98.3 % | 98.3 % | 98.5 % | 98.6 % | 98.9 % | 98.9 % | 99.0 % | 99.0 % | 98.8 % | 98.8 % | 98.8 % | 98.7 % |
The Trust improved occupancy compared to the same period a year ago by focusing on retention and by leveraging its vertically-integrated operating platform to limit time to complete unit turnovers. Market rents were adjusted in many communities where rental market fundamentals are strong. Turnover rates continued to decline as compared to the previous year across the Trust's portfolio. Average occupied rent increased sequentially, and when compared to the same period a year ago, as the Trust focuses on reducing or eliminating incentives on lease renewals, leasing at market rents for new leases and adjusting market rents in many of our communities.
For the first quarter of 2024, same property rental revenue increased 9.4% while same property total rental expense increased by 3.5%, resulting in same property NOI growth of 13.5% in comparison to the same quarter prior year. Same property rental expenses increased primarily due to higher wages and salaries from inflation, higher utilities from increased rates, and higher property taxes.
During the first quarter of 2024, lower incentives along with positive market rent adjustments supported Boardwalk's Calgary portfolio increase in same property NOI of 13.7% in comparison to the same quarter prior year. The positive revenue growth was partially offset by an increase in wages and salaries, building maintenance costs, and property taxes.
In Edmonton, NOI growth was 16.5% for the first quarter of 2024 compared to the same period in the prior year. The overall growth was driven by lower vacancy loss and incentives, and higher market rents. The overall positive increase was partially offset by higher wages and salaries, utilities, and property taxes.
Saskatchewan's market continues to be strong with the Trust's portfolio in the region realizing 13.5% same property NOI growth in the first quarter of 2024 versus the same period last year, as a result of strong same property revenue growth due to lower incentives as well as market rent increases, partially offset by higher wages and salaries and utilities.
In Ontario, NOI growth was 4.6% in the first quarter of 2024 compared to the first quarter of 2023. The mark-to-market opportunity on turnover contributed to same property rental revenue growth of 5.1%, which was partially offset by increases in wages and salaries, building repairs and maintenance costs, bad debt, and property taxes.
In Quebec, NOI growth was 9.1% compared to the same quarter in the prior year. The overall growth was driven by increases in occupied rents along with higher occupancy rates, as well as lower utilities, insurance premiums relative to the previous year, and a decrease in wages and salaries.
In British Columbia, a same property rental revenue increase of 5.0% and a decrease in total rental expenses of 13.2%, due largely to lower water and sewer costs, resulted in same property NOI growth of 10.2% in the first quarter of 2024 compared to the first quarter of 2023.
As shown in our updated guidance further in this release, Boardwalk remains well positioned for continued revenue growth and NOI growth in 2024.
Same Property Mar. 31 2024 - 3 M | # of Suites | % Rental | % Total Rental | % Net Operating | % of NOI | ||||||||||
Edmonton | 12,882 | 10.8 | % | 4.0 | % | 16.5 | % | 34.4 | % | ||||||
Calgary | 6,108 | 11.8 | % | 8.1 | % | 13.7 | % | 23.9 | % | ||||||
Other Alberta | 1,936 | 10.7 | % | (4.9) | % | 25.2 | % | 4.9 | % | ||||||
Alberta | 20,926 | 11.1 | % | 4.1 | % | 16.1 | % | 63.2 | % | ||||||
Quebec | 6,000 | 5.5 | % | (0.2) | % | 9.1 | % | 17.0 | % | ||||||
Saskatchewan | 3,505 | 9.0 | % | 2.2 | % | 13.5 | % | 11.0 | % | ||||||
Ontario | 3,019 | 5.1 | % | 6.0 | % | 4.6 | % | 8.1 | % | ||||||
British Columbia | 114 | 5.0 | % | (13.2) | % | 10.2 | % | 0.7 | % | ||||||
33,564 | 9.4 | % | 3.5 | % | 13.5 | % | 100.0 | % | |||||||
In the first quarter of 2024, Boardwalk renewed $35.8 million of its maturing mortgages at a weighted average interest rate of 4.38% while extending the term of these mortgages by an average of 4.8 years.
For the remainder of 2024, the Trust anticipates $400.5 million of mortgages payable maturing with an average in-place interest rate of 2.91% and will continue to renew these mortgages as they mature. Current market 5 and 10-year CMHC financing rates are estimated to be approximately 4.40 and 4.50%, respectively. To date, the Trust has renewed or forward-locked the interest rate on $152.5 million or 34.9% of its maturing mortgages in 2024 at an average interest rate of 4.50% and an average term of 5.3 years. While interest rates have increased significantly since the beginning of March 2022, the Trust remains positioned with a laddered maturity schedule within its mortgage program, a disciplined capital allocation program and continued use of CMHC funding, which decreases the renewal risk on its existing mortgages.
In Q1 2024, the Trust completed the previously announced acquisition of The Circle for $77.6 million purchase price, a 295-suite newly built construction apartment complex in Calgary, Alberta, and repaid its portion of a floating rate construction loan facility on its joint venture in Brampton, Ontario in the amount of $57.4 million. With increased liquidity, the Trust remains well-positioned to fund future acquisition and development opportunities in its existing pipeline.
The Trust's current outlook is for a continued growth trend across its portfolio as multi-family fundamentals remain strong with outsized revenue and NOI growth in its non-price controlled markets. With Q1 finalized, the Trust is updating and tightening its guidance range as follows:
2024 Revised Guidance | 2024 Original Guidance | 2023 Actual | |||
Same Property NOI Growth | 11.0% to 14.0% | 10.0% to 14.0% | 13.7 % | ||
Profit | N/A | N/A | 666,099 | ||
FFO (1)(2) | N/A | N/A | 181,353 | ||
AFFO (1)(2)(3) | N/A | N/A | 149,098 | ||
FFO Per Unit (2) | $4.00 to $4.20 | $3.93 to $4.18 | $3.60 | ||
AFFO Per Unit (2)(3) | $3.37 to $3.57 
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