Boardwalk Real Estate Investment Trust T.BEI.UN

RBC

[retiredcf]

February 22, 2024

Boardwalk REIT
A solid beat, a strong guide and a significant distribution hike

TSX: BEI.UN | CAD 73.94 | Outperform | Price Target CAD 82.00

Sentiment: Positive

First Look: Boardwalk REIT (“BEI”) reported FFO/unit of $0.96, +20% y/y, vs. RBC/consensus of $0.89/$0.90. 2024 FFO guidance was $3.93-$4.18 (midpoint of $4.06, +13% y/y), vs. RBC/consensus of $3.86/$3.95. Distribution was increased by +23% to $1.44 annualized starting March (2024 payout stays at ~42%). The quarter benefited from strong top line growth and lower utility costs from milder weather. Given the significant distribution hike, the +8% Q4 beat to consensus, +3% higher guide than 2024 FFO consensus, all while having de-levered materially in Q4, we expect a reasonably strong positive reaction tomorrow.

Key points:

• 2024 FFO guidance: $3.93 to $4.18 (midpoint implying 13% y/y), based on SP NOI growth of +10% to +14%

• SP NOI growth: +16.8% (SP-Rev +9.2%; SP-Exp -1.6%). Expenses benefited from milder weather and lower insurance. NOI margin: 62%, +410 bps y/y

• Average occupied rent: $1,388, +9.2% y/y, +2.3% q/q

• Occupancy: 98.9% (+92 bps y/y, +40 bps q/q); Occupancy in February at 98.8%.

• Leasing spreads: January AB new lease spreads +12.6%; renewal +9.5%.

• MTM opportunity (market rent vs. occupied rent): +13%

• Capital allocation: Closed on $251M equity deal with proceeds used to pay down $57M construction loan post quarter, to close on $78M The Circle (see our note), with remaining balance earning 5%.

• Debt to total assets: 43.6%, -516 bps y/y.

• Reported NAV/unit: $84.41 (+2.9% q/q), based on 5.05% (+0bps) stabilized cap rate utilized.