Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Boardwalk Real Estate Investment Trust (BOWFF, Financial) reported a 14.2% increase in same property net operating income for Q2 2024 compared to Q2 2023.
- Funds from operations (FFO) per unit grew by 16.9% year-over-year, reflecting strong financial performance.
- High occupancy rates, lower incentives, and higher occupied rents contributed to increased revenues for Q2 2024.
- The company has a disciplined FFO payout ratio of 34.6%, allowing for reinvestment in organic growth opportunities.
- Boardwalk Real Estate Investment Trust (BOWFF) has a strong balance sheet with a debt-to-total assets ratio of 40.8%, down from 43.2% at the end of 2023.
Negative Points
- Profit decreased due to fair value adjustments, despite strong performance in other financial metrics.
- Operating expenses increased by 1.6% in Q2 2024 and 2.6% for the first half of 2024, primarily due to higher wages and utility costs.
- Administration costs rose by over $1.7 million compared to Q2 2023, driven by inflationary wage adjustments, increased software costs, and higher professional service fees.
- The company incurred additional costs related to the transition to a new customer service platform, including $325,000 for the historic call center.
- Deferred unit-based compensation expenses increased due to a higher number of participants and program costs, with the highest expense historically occurring in the second quarter.
Q & A Highlights
Q: Since launching your strategic moderation on rents, you've hit the 7% to 9% target spread. How long do you think this momentum will sustain, and will you revisit the target if it hits mid-single digits?
A: Sam Kolias, CEO: Our average rents are significantly below the Canadian average, providing exceptional affordability. We see a bright future due to this relative value and will continue to self-regulate, providing the best value and growth for several years.
Q: How are property tax and insurance costs trending for the second half of this year and into 2025?
A: Gregg Tinling, Incoming CFO: Insurance renewal went well, resulting in lower costs than expected. Property taxes are around 3.5% for the year. Overall, total rental expenses are expected to grow by 1% to 3%.
Q: Your maintenance CapEx is tracking closely to your budget. Is this due to lower turnover, and do you expect it to catch up in the second half of the year?
A: Lisa Smandych, CFO: It's driven by seasonality and slightly lower suite turnover. We expect CapEx spend to increase in Q3, especially for exterior projects, and should come close to the capital budget for 2024.
Q: Where are you seeing the most acquisition opportunities right now?
A: Samantha Kolias-Gunn, SVP, Corporate Development and Governance: Calgary offers the best value currently, but we are also looking at recycling out of non-core assets and focusing on the best properties in the best locations.
Q: What is your outlook for third-quarter leasing and the beginning of the school year, considering the foreign student visa cap?
A: James Ha, President: We continue to see strong leasing trends and limited availability in university areas. The foreign student visa cap is not expected to impact us significantly, especially in Alberta, which may benefit from the adjustment.
Q: Do you expect mid- to high-single-digit revenue growth into 2025 given current demand dynamics?
A: James Ha, President: Our strategy aims for consistent and strong results. We are set up well to deliver similar results in 2025, supported by strong demand and supply dynamics.
Q: How do you balance acquisition metrics between newer assets with less CapEx and older assets with more growth potential?
A: Sam Kolias, CEO: We focus on the best acquisition value, whether it's a new development or an older asset with value-add potential. The goal is to maximize total return and free cash flow.
Q: Are there any pockets of weakness in the portfolio that you're keeping an eye on?
A: Sam Kolias, CEO: We are seeing strong fundamentals across the portfolio, especially in affordable housing. Our strategic moderation and focus on affordability continue to drive consistent growth.
Q: Are you considering dispositions in the second half of the year given the strong appetite for multifamily assets?
A: Samantha Kolias-Gunn, SVP, Corporate Development and Governance: Yes, we are contemplating dispositions of non-core assets in Edmonton to redeploy capital into newer assets in core markets.
Q: How do you think about the transaction activity going forward? Are you looking to tie acquisition opportunities with dispositions?
A: Samantha Kolias-Gunn, SVP, Corporate Development and Governance: Ideally, we line up dispositions with strategic acquisitions, but we will take the right opportunity when it comes along.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
