Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Choice Properties Real Estate Investment Trust (PPRQF, Financial) reported a high occupancy rate of 97.7% for the third quarter.
- The company achieved strong leasing spreads of 15.3% and delivered same asset cash NOI growth of 3%.
- The acquisition of a 3-building portfolio from Loblaw, valued at approximately $129 million, adds high-quality assets to the portfolio.
- Choice Properties Real Estate Investment Trust (PPRQF) completed $172 million in total real estate transactions, including acquisitions and dispositions.
- The company maintains a strong balance sheet with a fully undrawn $1.5 billion corporate facility and approximately $12.9 billion of unencumbered properties.
Negative Points
- FFO growth of 3.2% was impacted by the timing of lease termination income and certain onetime costs related to operational efficiency.
- The industrial portfolio experienced a slight decline in occupancy, down 70 basis points to 98.1%.
- The company anticipates a marginal decline in industrial occupancy in Q4 due to expected vacancies.
- Higher interest costs partially offset the increase in FFO from higher same-asset NOI and net FFO contributions from completed developments.
- The company faces ongoing market volatility, highlighted by the recent rise in long-term rates.
Q & A Highlights
Q: What is your view on the impact of population growth curtailments on Choice's residential development pipeline in Toronto?
A: Rael Diamond, CEO, stated that despite the curtailments, Canada still faces a significant housing shortage. Choice Properties plans to continue building residential properties when returns are favorable, anticipating significant long-term demand.
Q: Are you seeing any impact on rents for the types of residential products Choice is involved in building?
A: Rael Diamond noted a slight softening in rents in the GTA due to new condo supply. However, Choice remains conservative in its rent increase projections, aligning them with inflation, and remains optimistic about future prospects.
Q: Is there an opportunity to build new retail space on spec given current market fundamentals?
A: Rael Diamond mentioned that Choice has been adding retail space, particularly in collaboration with Loblaw, working on 26 potential locations. This includes new developments and adding retail to existing centers.
Q: Can you comment on the guidance for same asset NOI growth, given the performance year-to-date?
A: Mario Barrafato, CFO, indicated that the company expects to be at the higher end of the 2.5% to 3% range for same asset NOI growth, acknowledging a conservative outlook.
Q: How does the removal of restrictive covenants by Loblaw affect Choice's operations?
A: Rael Diamond stated that removing property controls increases flexibility for landlords and is seen as a positive move, though it is not a material issue for Choice.
Q: Have you seen any retailers curbing growth plans due to changes in population growth assumptions?
A: Niall Collins, COO, confirmed that there has been no pullback from retailers, including Loblaw, in their growth plans.
Q: Why did Choice decide on a 50-50 joint venture for recent acquisitions, and what are the expectations for management fees?
A: Rael Diamond explained that the joint venture was a prudent decision due to elevated interest rates and a commitment to maintaining a strong balance sheet. Management fees are market-standard and not significant.
Q: What is the outlook for industrial occupancy and same asset NOI growth in 2025?
A: Niall Collins expects industrial occupancy to remain stable, with continued strong performance relative to the broader market. More detailed guidance for 2025 will be provided in the next quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
