Boardwalk Real Estate Investment Trust T.BEI.UN

TD

[retiredcf]

Again, potential for them to raise their current target of $67.00. GLTA

Boardwalk REIT

(BEI.UN-T) C$59.19

Strong Fundamentals Drive +13.7% SPNOIG; Modest Guidance Bump

Event

Conference call 1:00 PM ET; dial-in: 1-888-664-6383; passcode: 82822944 (slides).

Impact: SLIGHTLY POSITIVE

Our Take: In our view, Boardwalk delivered strong earnings growth, highlighted by +13.7% SPNOI (highest since 2007) and a slight guidance raise. With occupancy at 98.1%, the REIT is very well positioned heading into the summer leasing months.

FFO/unit (f.d.) of $0.79 was +15% y/y, and ahead of our estimate/consensus at $0.77/$0.76. The beat versus us was on higher NOI and lower interest expense, offset by higher G&A. AFFO/unit (our calculation) of $0.60 was +4% versus our estimate.

2023 Guidance update. Management raised its SPNOI growth guidance to 9.5%-13.0% from 8.5%-12.5%, while also increasing/tightening the FFO/unit guidance range to $3.30-$3.46 from $3.25-$3.45 (+1% at the midpoint to $3.38). Current consensus is $3.41.

Operating Highlights

• New lease spreads averaged +11.3% in Q1 and increased further to 13.8% in April. Renewals averaged +7.2% (+7.7% in April). Alberta continued to exhibit exceptionally strong fundamentals with Q1 new lease growth/renewals of +11.6%/ +8.1% (+14.8%/+8.9% in April).

• Q1 SPNOIG was +13.7% on revenue growth of +8.5% and a modest +1.8% increase in costs (mild weather resulted in only a moderate increase in utilities). By market, Alberta was strong at +16.8% with Edmonton +16.8% and Calgary +16.5%. Saskatchewan was +8.7%, Quebec +11.1%, and Ontario +4.7%.

• Average incentives were -8% q/q to $121/month and are now -23% lower versus Q1/22. Boardwalk's portfolio remained essentially full during Q1, with stabilized occupancy averaging 98.1% in Q1 and 98.4% in April and May.

• Occupied rents were +1.6% q/q to $1,292, while average market rents were +2.5% q/q to $1,444.

  Acquisitions

 Post Q1, Boardwalk acquired a 12-storey newly constructed 94%-leased 124- unit apartment community in Langford, BC ("The Vue") for $60mm ($483,900/ unit) representing a 5.1% forward cap rate. The purchase was financed with a $46.5mm 7-year CMHC mortgage (3.89%) and cash on hand.

Balance Sheet

 Recorded a $211mm FV gain (3% of Q4/22 investment properties) on investment properties (higher market rents; cap rate unchanged at 4.92%). IFRS NAV was +6.3% q/q at $75.85. D/GBV was -200bps q/q to ~45%. Boardwalk has ~$244mm of total liquidity (Q4/22: ~$256mm).