Choice Properties Real Estate Investment Trust T.CHP.UN

Alternate Symbol(s): PPRQF

Choice Properties Real Estate Investment Trust is a real estate investment trust that creates value through the ownership, operation, and development of commercial and residential properties. The Company’s portfolio is comprised of retail properties primarily leased to necessity-based tenants. It also owns a portfolio of industrial, mixed-use, and residential assets concentrated in markets across Canada. Its retail portfolio is primarily leased to grocery stores, pharmacies, and other necessity-based tenants. Its industrial portfolio is centered around large, purpose-built distribution facilities for Loblaw and generic industrial assets that accommodate the diverse needs of a range of tenants. Its industrial properties are in target distribution markets across Canada. Its residential properties include both newly developed purpose-built rental buildings and residential-focused mixed-use communities. It is the owner and manager of over 64 million square feet of gross leasable area.

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Choice Properties Real Estate Investment Trust

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Post by retiredcfon Nov 07, 2024 6:57am

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Post# 36300387

RBC

November 6, 2024

Choice Properties REIT
Q3 in line, 2024 guidance sticks; CFO transition announced

TSX: CHP.UN | CAD 13.85 | Sector Perform | Price Target CAD 15.00

Sentiment: Neutral

Our view: CHP reported Q3/24 FFOPU of $0.26, in line with RBC/Street at $0.26E/$0.26E, vs. $0.25 last year (+3% YoY). Overall, an in line quarter, with healthy SP NOI growth, a pick-up in capital recycling, and 2024 FFOPU guidance unchanged (+2-3% YoY). With respect to the announced retirement of CFO, Mario Barrafato, we expect a smooth transition with Senior VP, Finance, Erin Johnston, set to replace Mr. Barrafato next March. Conference call Nov-7 (10 a.m. ET, 1-888-330-2454; ID 4788974).

Highlights:

Variances to our forecast were minor, with NOI slightly ahead (results included ~$0.01/unit of lease termination fees), offset by higher G&A costs (restructuring related).
SPNOI+3%YoY(+3.3%YTD)fromhigherrentsandhigherrecoveriesinindustrialandretail.Industrialledat+11.7%YoY,followed by mixed-use/residential at +2.6%, and retail at +1.2% (partly impacted by timing differences).
Occupancy down a touch to 97.7% (-30 bps QoQ, flat YoY). Retail at 97.6% (-10 bps QoQ), industrial at 98.1% (-70 bps QoQ), and mixed-use/residential at 94.7% (flat QoQ).
2024 FFOPU guidance intact at $1.02-1.03 (in line with RBC/Street at $1.03E/$1.03E). No significant changes to assumptions (+2.5-3% SP NOI, stable occupancy, and debt/EBITDA below 7.5x).
IFRS BVPU (pre-tax) at $14.04 (+2% QoQ, +3% YoY). IFRS cap rate 6.09% (+1 bps QoQ, +10 bps YoY) vs. our 6.35% NAV cap rate and current 6.5% implied. In Q3, CHP recorded an $83MM ($0.11/unit) fair value gain for updated leasing assumptions, rents, and retail portfolio cap rate adjustments.
Capital recycling picks up. In Q3, CHP 1) acquired a 50% interest in three properties (two grocery stores and one industrial) from Loblaw for $129MM, 2) acquired a retail property in Wolfville, NS for $1MM; and 3) sold two retail properties for $42MM. Development completions were $22MM in Q3, raising the 9M/24 total to $104MM (5.7% stabilized yield).
Debt/GBV at 40% (-50 bps QoQ, -60 bps YoY) and debt/EBITDA at 7x (+0.1x QoQ, -0.4x YoY).
CFO transition announced, with Mario Barrafato to retire effective Mar-1/25. Erin Johnston, Senior Vice President, Finance at CHP will succeed Mr. Barrafato. Ms. Johnston has spent over a decade within the George Weston Group of Companies, holding various corporate and operational finance roles at George Weston Limited and Loblaw Companies Limited.