TSX:BEI.UN - Post by User
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retiredcfon Jul 15, 2024 9:22am
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TD
TDHave a $90.00 target. GLTA
BOARDWALK INVESTOR DAY AND PROPERTY TOURS HIGHLIGHT CONTINUED ALBERTA STRENGTH
THE TD COWEN INSIGHT
We attended BEI's investor day/property tour in Calgary, which included presentations and visits to nine properties. While there were no new announcements (update provided July
5 — link), we came away with increased confidence in Boardwalk's outlook, supported by strong supply/demand fundamentals across Alberta (62% of NOI) that should drive above- average earnings growth over our forecast horizon.
Impact: SLIGHTLY POSITIVE
Alberta's fundamentals remain robust. Presentations from Boardwalk's management team and CBRE reaffirmed the favourable supply/demand fundamentals that we are seeing
in Alberta. The province continues to benefit from above-average levels of population growth (including strong inter-provincial migration), which is being supported by robust levels of employment growth in sectors such as healthcare, science/technical services, and education. Most interesting to us was a CBRE slide showing high levels of net inter- provincial migration despite decreasing oil and gas investment as a % of GDP (recreated in Figure 2). We view this favourably and as evidence of the province becoming less reliant on the more cyclical energy industry. Although new starts in Calgary and Edmonton have increased, they have not kept pace with population growth and will likely slow with more difficult development math. CBRE pointed to rents of $3.85/$4.00 to justify the cost of new high-rise construction in Calgary/Edmonton vs. estimated asking rents of between ~$2.25- $3.50/sf (location-dependent). We believe the combination of population growth outpacing supply and decreasing homeownership affordability vs. rental (Figure 4) should continue to allow rents to increase over the next several years. With Calgary and Edmonton rents being the most affordable among larger Canadian cities, we believe BEI has a nice runway on rental rate growth.
June rental data from rentals.ca (link) shows Alberta having the highest y/y growth in asking rents, accelerating to +16% vs. the national average at 9%. We estimate rentals.ca asking rents for BEI's markets at $1,705. BEI's in-place Q1/24 rents were $1,418 and our Q4/26 estimate is only $1,733.
Forecast revisions — Introducing our 2026 estimates. Our 2024 and 2025 estimates are largely unchanged, and our forecast now calls for an ~13% AFFO/unit CAGR from 2023A-2026E. On SPNOI, we are forecasting 13.2%/10.5%/12.5% growth for 2024/2025/2026.
Q2/24 Results. Boardwalk will report results after market close on July 30, with a call at 1:00 p.m. ET July 31 (1-888-664-6383; ID: 12521459). We are forecasting FFO/unit of $1.02 (consensus: $1.04).