TSX:SGR.UN - Post by User
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incomedreamer11on Aug 03, 2022 8:49am
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Scotia comments on result
Scotia comments on result
Q2 Glance: Once Again Healthy Leasing Volumes
OUR TAKE: Neutral. Q2/22 FFOPU came in at $0.26 vs. $0.26 last year (flat y/y) and slightly below our estimate of $0.273 (and consensus estimate of $0.27). We note the variance was due to higher G&A expense driven by REIT’s portfolio growth. SP NOI growth was +1.4% in Q2/22 and up +1.3% over 12-month period from leasing activity on new leases and increasing spreads on renewals. Including the impact of the completed redevelopments, SP NOI growth was +1.5% in Q2/22 and +2.6% over a 12-month period.
Reported IFRS NAVPU rose to $14.11 from $13.02 in Q2/22 due to $50M of FV gains recognized this quarter. We note that IFRS NAV is up 12.4% y/y. IFRS cap rates slightly went down this quarter at 6.82% vs. 6.98% in Q1/22; driven primarily by increased buyer demand for grocery-anchored strip centres, value-add asset management activities and capital investments and improvements. Despite spike in corporate and govt. bond yields, IFRS cap rate did not show any expansion (in fact adjusted down). We saw the same thing in Canada as well – strip grocery-anchored cap rates expanded only 8bp q/q in Q2/22 CBRE Cap Rate Survey.
Portfolio occupancy was up slightly to 93.4% (20 bps q/q) and 60 bps higher than pre-pandemic levels. Grocery-anchored occupancy held steady at 100% while small-shop occupancy was slightly up to 87.5% (120 bps below pre-pandemic levels).
$425M portfolio acquisition – previously announced: On June 21st, SGR acquired a large grocery-anchored portfolio of 14 properties comprising 2.5M sf of GLA at a total purchase prices of $425M at going-in cap rate of 6.9% (implying $174 per sf). More details on this transaction can be found in our note that was published earlier in June. In the note, we mentioned that the transaction provides good validation of the SGR portfolio, platform and IFRS valuation.
Healthy leasing spreads continued in Q2/22. SGR capped off the quarter signing 440k sf of leases this quarter, new leases being done at a 27% leasing spread and renewals at 6%. SGR has ~2.6% of leases coming due this year with the majority being non-anchor tenants. Leasing performance continues to be strong.
Leverage slightly lower. Debt/GBV on IFRS came in at 51.3% vs. 52.8% last quarter and 53.0% last year. We expect leverage to stay around low 50s, as $425M portfolio acquisition was leverage-neutral.