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Boardwalk Real Estate Investment Trust T.BEI.UN

Alternate Symbol(s):  BOWFF

Boardwalk Real Estate Investment Trust (Trust) is a Canada-based open-ended real estate investment trust, which owns/operates multi-family rental communities. The Company provides homes in more than 200 communities, with over 34,000 residential suites totaling over 29 million net rentable square feet. Its brands include Boardwalk Living, Boardwalk Communities, and Boardwalk Lifestyle which, caters to a diverse demographic. Its objectives are to provide Resident Members with quality rental communities and the best tenant/customer service, provide its holders of Trust Units with stable monthly cash distributions, and to increase the value of the Trust Units through the effective management of its residential multi-family revenue producing properties, renovations and upgrades to its current portfolio, and the acquisition and/or development of additional, accretive properties or interests therein.


TSX:BEI.UN - Post by User

Post by retiredcfon Aug 12, 2023 10:18am
103 Views
Post# 35585202

CIBC Raise Target

CIBC Raise Target
EQUITY RESEARCH
August 11, 2023 Earnings Update
BOARDWALK REIT
 
Responsible Growth Is A Good Thing

Our Conclusion
As we have come to expect, BEI reported another strong quarter, driven by
heightened rental demand in all of its markets coupled with prudent cost-
management initiatives (read: margin expansion). Alberta continued to lead
the pack, with Edmonton taking the title of “Belle of the Ball”, and we expect
the absence of rent controls (other than those self-imposed by the REIT)
should result in that dance card remaining full for some time to come. With
the REIT’s focus on its cost-optimization plan, expenses continue to be
controlled well below inflationary pressures, resulting in another quarter of
SP-NOI margin expansion (+230 bps). Indeed, sustained operating
fundamentals resulted in further upward revisions to guidance, and as
Alberta continues to be one of the most affordable rental markets within the
country with an estimated mark-to-market opportunity without incentives of
~9.8% (12.8% on a portfolio level), we view the REIT as having sufficient
runway to sustain (or perhaps exceed) its near-term growth trajectory (which
appears to show no signs of slowing, as July printed new leasing and
renewal spreads of +12.8% and +8.4%, respectively).
 
While we recognize the many positive tailwinds afforded to the REIT, a good
deal of the valuation upside may have already been captured in current unit
prices, which have significantly outperformed year to date (up 34% vs. the
XRE, which is down ~1%). As such, we maintain our Neutral rating, but
increase both our NAV estimate and price target to $70.00 (from $68.00), off
an unchanged 5% utilized cap rate.
 
Key Points
Earning Results: BEI reported diluted FFO per unit of $0.89, ahead of our
estimate of $0.87 as lower vacancy loss and incentives supported positive
NOI growth. We note that the REIT reported a ~$222.9MM fair value gain on
investment properties off a 2 bps decrease in its utilized cap rate.
 
Debt And Balance Sheet: At quarter-end, D/GBV was 44.3%, a 170 bps
decrease over Q2/22 and a 90 bps decrease Q/Q. IFRS NAV per unit was
$80.98 (vs. $70.03 in Q2/22) as increased market rents continued to drive
NOI. With a DSCR of 1.57x, both the REIT’s DSCR and D/GBV ratio remain
well within the requirements prescribed in its credit facility agreement, which
are <75% and above 1.20x, respectively. The REIT also maintains a prudent
debt maturity ladder, with ~$210.9MM in mortgages maturing in 2023
(~6.2%) and sufficient liquidity of ~$238.7MM to cover any immediate debt or
capex obligations.
 
Another Bump To Guidance: Given the increased visibility on non-
controllable expenses, continued cost optimization, and revenue trending
towards the upper end of its original forecast, management further provided
upward revisions to its 2023 guidance. SP-NOI is now expected to grow
between 11.5% and 14% (previously 9.5%-13%) while FFO per unit was
increased to $3.42-$3.54 (previously $3.30-$3.46); as such, our estimates
increase to the mid-point of the range.

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