Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Primaris REIT (PMREF, Financial) reported a strong quarter with a beat and raise headline, indicating continued growth across most metrics.
- Year-to-date FFO per unit increased by 5.6%, excluding adjustments related to the unsecured bond issuance.
- Committed occupancy is approaching 95%, with significant improvement in recovery ratios.
- The acquisition of Les Galeries de la Capitale enhances the REIT's value proposition and offers significant income growth opportunities.
- The company has a strong pipeline of leasing activity, with 96 leases renewed at positive spreads and 36 new deals completed in the quarter.
Negative Points
- The company had to halt its stock buyback program due to a treasury offering, ending a long streak of repurchases.
- Tenant sales have started to flatten, which could impact future growth if the trend continues.
- There is uncertainty regarding the impact of recent immigration policy changes on future growth targets.
- General and administrative expenses are expected to increase slightly due to bonus accruals.
- The company faces challenges in precisely forecasting the timing and magnitude of recovery ratio improvements due to lag effects.
Q & A Highlights
Q: What are your views on the recent immigration policy changes, and do you think these changes could impact your three-year SPNOI growth target?
A: Our internal growth trajectory isn't significantly influenced by immigration. The growth is more driven by occupancy improvements and rising recovery ratios. While immigration was beneficial, our business impact is more lagged, and we don't anticipate a significant effect on NOI from these changes. Sales have been flattening out, but this is not directly linked to immigration policy changes. - Alex Avery, CEO
Q: What is driving the increase in G&A expenses, and what should we expect for the next 6 to 12 months?
A: The increase is primarily due to bonus accruals, as we are performing strongly. We typically make these accruals at year-end, and they are expected to be slightly higher. For next year, while the budget is still being finalized, we anticipate only a slight increase in G&A expenses. - Rags Davloor, CFO
Q: Can you update us on the acquisition front, particularly after the Les Galeries de la Capitale acquisition?
A: Since September, the opportunity set has actually expanded. While Les Galeries de la Capitale has been acquired, we are now looking at five to six, maybe even seven, potential acquisitions. - Alex Avery, CEO
Q: Regarding the recovery ratios, you mentioned they could continue to improve for several quarters. Can you elaborate on the runway for these improvements?
A: There is significant runway for recovery ratio improvements, linked to rising occupancy and lease conversions. As occupancy rises, recovery ratios will improve, but there is a lag. We expect growth from these ratios over the next couple of years. - Patrick Sullivan, President & COO
Q: On the assets held for sale, what are you seeing in terms of buyer interest and market liquidity?
A: We've seen increased liquidity in the private market for assets up to $150 million since August. This is partly due to the Bank of Canada's rate cuts. There's been a lot of interest, and we expect more activity on the disposition side, with some upside risk to our targets over the next three years. - Alex Avery, CEO and Rags Davloor, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
