Boardwalk Real Estate Investment Trust T.BEI.UN

RBC

[retiredcf]

Potential here for them to raise their current target. GLTA

May 9, 2023

Boardwalk REIT
Q1 ahead; Guidance tightened and raised moderately

TSX: BEI.UN | CAD 59.19 | Outperform | Price Target CAD 69.00

Sentiment: Positive

First Look: Boardwalk REIT (“BEI”) reported FFO/unit of $0.79, +16% y/y, vs. RBC/consensus of $0.74/$0.76. Positive variance was due to higher NOI (lower opex). 2023 guidance was tightened and raised moderately. We think BEI’s headline appropriately summarizes the current state of the nation – “highest SP NOI growth since 2007.”

Key points:

• SP NOI growth: +13.7% (SP-Rev +8.5%; SP-Exp +1.8%). AB +16.8% (driven fairly consistently across all of its AB markets, including Edmonton).

• Average occupied rent: $1,292, +6.2% y/y, +1.7% q/q

• Occupancy: 98.1% (+10 bps q/q, 257 bps y/y). Occupancy improved further to 98.3% in May.

• Leasing spreads: April new lease spreads +13.8%, renewal +7.7%. AB new lease spreads +14.8%; renewal +8.9%.

• Loss-to-lease: sitting at $59.5M (vs. $54m in Q4/22). Incentives -33% y/y.

• 2023 FFO guidance tightened and raised (mid point of $3.38 vs. $3.35): 2023 FFO of $3.30 to $3.46 (vs. $3.25 to $3.45), based on SP NOI growth of +9.5% to +13% (vs. +8.5% to +12.5%).

• Capital allocation: BEI acquired 124-unit newly build property in Langford BC for $60M ($484K/suite) at 5.1% cap rate (funded by $46.5M 3.9% 7-year mortgage). Property is close to University of Victoria’s West Shore campus.

• Leverage: Debt to assets of 47.2% (-160 bps q/q)

• Reported NAV/unit: $75.85 (+6% q/q), based on 4.9% stabilized cap rate utilized, unchanged.