TD Q1/24 RESULTS SHOW GROWTH THAT SHOULD BE WELL-PROTECTED FROM MACRO HEADWINDS
THE TD COWEN INSIGHT
CHP's portfolio continued to deliver resilience and growth in Q1/24 — aided by a concentration in high quality grocery-anchored retail and industrial properties, and in- demand locations. As caution increasingly prevails in today's interest rate environment, we see CHP's strong portfolio and balance sheet boding well for continued outperformance. Our 5% forecast AFFO CAGR remains intact.
Impact: NEUTRAL
Initial views: here.
CHP's expanded operating and investment teams continue to execute in today's strong market, as demonstrated by occupancy remaining near post-CREIT highs. Mgmt. shared a clear line of sight to industrial SPNOI growth near-term bouncing back to the upper single- digits, keeping CHP fully on track to meet the prior full-year guidance on both SPNOI and FFO, despite interest rate headwinds.
Q1 capital activity highlights included the acquisition of the St-Clair/Bathurst Loblaw store (Fig. 5), in a type of location that very seldom comes available, and at a near-6% cap rate (and sharing future redevelopment upside with Loblaw). The Uniti/MPV development was completed at an NOI yield +70bps vs target, and is leasing up quickly (already 58%) at higher rents (est. ~$3.30/sf).
Retail: Leasing spreads reverted to a still-strong 10% after spiking up to 14% last-quarter. Not only are new vacancies being leased quickly, but tenants are now committing to
lease spaces coming available longer into the future. Strong demand tenant categories are unchanged, including grocers, pharmacies, fitness, value goods, etc., and the list of "watchlist" tenants remains very small. Retail developments scheduled for completion through late-2025 all remain 100% preleased.
Industrial: Leasing spreads were robust at 67%, and the average in-place rent of $9.16/sf is +8% y/y and remains well below market rents (which continue to grow for smaller-bay properties). Industrial properties now contribute 19% of total NOI (vs 15% y/y) and should exceed 20% this year as rents keep rising and developments reach completion. Industrial developments scheduled for completion through late-2025 remain 100% preleased (including a 300,000sf expansion option expected to be exercised).
Residential: The Q1 completion of Uniti/MPV increased CHP's rental residential portfolio by 20% to 923 suites and 0.7mmsf (at share). While there are now no remaining active residential developments, Golden Mile could commence construction in 2025. Over 4,000 suites of potential development have zoning approved, and zoning applications have been submitted for an additional 8,100 suites.