GuruFocus -
- Occupancy Rate: 98.5% occupancy at the end of Q3 2024.
- Same-Property NOI Growth: Up 8.2% excluding anchors, nearly 5% including anchors for the three months ending September.
- Cash Collections: Over 99% cash collections.
- Net Operating Income (NOI): Increased by $5 million or 3.4% from the same quarter last year.
- FFO per Fully Diluted Unit: $0.71 compared to $0.55 in the same quarter a year earlier.
- FFO with Adjustments: $0.53 per unit for Q3 compared to $0.54 a year earlier.
- Distribution Rate: Annualized rate of $1.85 per unit.
- Payout Ratio to AFFO: 75.2% for the three months ended September 30, 2024, or 90% for the trailing 12 months.
- Adjusted Debt to Adjusted EBITDA: 9.8x for the rolling 12-month period ending in Q3.
- Debt to Aggregate Assets Ratio: 43.6% at the end of the quarter.
- Unencumbered Asset Pool: Increased to $9.4 billion in Q3.
- Liquidity: Approximately $863 million of liquidity as of September 30, 2024.
- Weighted Average Interest Rate: 4.09%, a decrease of 16 basis points from the prior quarter.
- Development Projects Under Construction: Eight projects with total share of capital costs at approximately $482 million and estimated cost to complete at $275 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SmartCentres Real Estate Investment Trust (CWYUF) achieved a high occupancy rate of 98.5%, reflecting strong tenant demand and portfolio strength.
- The company executed 187,000 square feet of deals on vacant space and 220,000 square feet of new retail construction deals year-to-date.
- Same-property NOI, excluding anchors, increased by 8.2%, and including anchors, nearly 5%, indicating robust financial performance.
- Cash collections remained strong at over 99%, showcasing the quality of income and tenant strength.
- The company has a significant mixed-use development pipeline with over 59 million square feet already zoned, providing future growth opportunities.
- FFO per fully diluted unit decreased slightly to $0.53 from $0.54 a year earlier, primarily due to increased net interest expense.
- The debt to aggregate assets ratio was 43.6%, indicating a relatively high level of leverage.
- The weighted average term to maturity of debt is 3.2 years, which may pose refinancing risks if interest rates rise.
- The company faces challenges in the current market conditions for selling residential land at desired prices.
- There is uncertainty regarding the timing of when market conditions will align to ramp up development projects.
A: Mitchell Goldhar, CEO: The market is improving, but it's not there yet. We might see some potential sales of density by the second quarter of next year, or if we're lucky, by the middle to end of the first quarter. However, it's hard to predict due to various influencing factors.
Q: Are you able to push for higher increases throughout the duration of non-anchor leases given the strengthening fundamentals?
A: Mitchell Goldhar, CEO: We cannot increase rents on fixed leases, but many leases are coming up for extension, allowing us to reset rents to the new market rates. Historically, we've aimed to be profitable at lower rents, but market conditions are changing.
Q: Could you provide more color on the grocery store program and whether it hinges on the potential removal of exclusivity clauses from tenant leases?
A: Mitchell Goldhar, CEO: We have momentum with food store deals, some of which may require approvals due to restrictions. There is movement on both the food store side and policy side to change food restrictions, which could lead to more competition in food on our sites.
Q: With debt maturities coming due in 2025, could you share insights on where secured versus unsecured financing rates would be?
A: Peter Slan, CFO: We have two unsecured debentures maturing in 2025. Rates have been improving, and we expect further rate cuts. We haven't decided on refinancing terms yet, but there's strong lender appetite for retail products, and we expect attractive rates.
Q: Is the organic growth trajectory for next year expected to be in the 3% range, given your high occupancy and renewal spreads?
A: Rudy Gobin, EVP: We expect a run rate in the 3% to 5% range, driven by tenant demand, rental rate increases, and improved tenant covenant quality. This momentum is expected to continue into 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.