Q3/24: RESULTS IN-LINE; ANNOUNCES CFO TRANSITION
THE TD COWEN INSIGHT
CHP delivered another strong quarter that matched our estimate/cons. Operating metrics were solid although moderated slightly from Q2. The quarter saw transaction activity pick up with three new acq'n's from Loblaw (50% interest) for $128.7mm, as well as two smaller retail dispos. We continue to view Choice as well positioned to delivered on recurring above-average returns with low volatility.
Impact: NEUTRAL
Q3/24 Results. FFO/unit of $0.258 was +3.2% y/y and in-line with our estimate/consensus. Higher NOI was partially offset by higher G&A and interest expense, and lower lease surrender revenue.
2024 Outlook Maintained: Choice continues to target stable occupancy resulting in 2.5%-3.0% SPNOI growth, FFO/unit increasing by 2.0%-3.0% to a range of $1.02 to $1.03, and Adjusted Debt to EBITDAFV below 7.5x.
CFO transition. Choice announced the retirement of CFO Mario Barrafato, effective March 1, 2025. Mr. Barrafato joined Choice with its 2018 acquisition of CREIT, and will be succeeded by Erin Johnston, current Senior Vice President, Finance. We see a smooth transition since Ms. Johnston has become well-known to many investors in recent years.
Operations. SPNOI growth (ex-BDE) moderated to 3.0% from Q2's +3.7% pace, mainly due to timing differences in Retail. The +3.3% YTD growth remains above the top-end of 2024 guidance (2.5%-3.0%). Occupancy was flat y/y and -30bps q/q at 97.7% (Retail steady at 97.7%; Industrial -70bps q/q at 98.1% due to the tenant departure discussed in Q2).
Capital Recycling: Completed the acquisition in two retail properties and one industrial asset from Loblaw for $128.7mm (50/50 JV with Crestpoint). Completed the disposition of two separate retail properties in Quebec City ($33.9mm) and Mississauga ($8.2mm).
Balance Sheet: Debt/EBITDA net of cash was largely unchanged q/q at 7.0x as was total liquidity at $1.5bln. IFRS fair values and cap rates were largely stable q/q (portfolio cap rate +1bps q/q to 6.09%). Repaid the $550mm Series K debentures in September, with proceeds from its $500mm Series U debenture issuance in Q2.
Completed $125.7mm in mortgage refinancings including $82.2mm (64% LTV) relating to the three acquisitions from Loblaw (4.80%; 10.1 years) mentioned above, and $43.5mm relating to Choice's 'Element' purpose-built rental in Ottawa (73% loan-to-cost; 4.02%; 10.2 years).
Conference call Nov 7at 10:00 AM ET (240-789-2714, passcode: 4788974