Boardwalk Real Estate Investment Trust T.BEI.UN

TD Follow Suit

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Boardwalk REIT

(BEI.UN-T) C$61.15

Well-Positioned Heading into the Summer Leasing Months

Event

Forecast update. For our initial thoughts, click here.

Impact: POSITIVE

Boardwalk delivered solid Q1/23 results that featured a slight beat on FFO/unit, a modest guidance raise and their highest SPNOI growth (+13.7%) since 2007. Guidance now anticipates 9.5%-13.0% SPNOIG, up from 8.5%-12.5% and FFO/ unit of $3.30-$3.46, which is +1% at the mid-point from $3.25-$3.45 previously. The increase was due to the Q1 outperformance, along with the expected accretion from the recently completed acquisition of "The Vue" (details on page 2). We are now forecasting SPNOI growth of 11.0% in 2023 (and 7.8% in 2024), while our 2023 FFO/unit estimate is up a penny to $3.43 — remaining near the top end of management's guidance range.

The REIT's largest market, Alberta (~63% of NOI), continues to perform exceptionally well, with management commenting that fundamentals are the strongest they have seen since the late-90s, given the lack of new supply and elevated net new migration coming into the province. New lease growth was +11.6%, while renewals were +8.1%, marking a continuation of the upward trend we have seen since new lease growth returned to positive territory in March 2022. Momentum continued in April with new lease/renewal growth of +14.8%/+8.9%. With occupancy in Alberta at ~98%, we expect growth to be mostly derived from market rent growth, which we expect to continue, and, to a lesser extent, a further reduction of incentives, albeit this should be limited.

Forecasts. Our 2023 AFFO/unit estimates are largely unchanged, while our 2024 AFFO/unit estimates increase by ~1% on slightly higher NOI assumptions, partially offset by higher G&A. Our NAV/unit estimate is +4% on higher NOI (cap rate unchanged at 5%).

TD Investment Conclusion

Looking ahead, we anticipate further improvements in fundamentals over our forecast period. Despite having the best AFFO CAGR among its Canadian-focused apartment peers, Boardwalk continues to trade at a discounted valuation (on 2024 AFFO). We believe Boardwalk's valuation should improve over time, as the REIT continues to execute on its growth potential. We are maintaining our BUY rating and increasing our target price to $74.00.