SmartCentres REIT
Q1 First Look: NOI & FFO Slight Miss; Developments on Track
Event
Q1/21 results. Conference call is 2:00 pm (1-855-353-9183; code 933973).
Impact: MIXED
Our view: SmartCentres reported a slight miss on FFO, with mixed operating metrics
and NOI below-forecast by a unusually wide margin that we will look to reconcile.
Development projects are progressing nicely, with $20mm of condo profits expected
in the remainder of 2021.
Results:
Q1/21 FFO/unit was $0.486, versus our $0.493 estimate and $0.495 consensus.
Excluding a $0.003 total return swap derivative gain, FFO would have been $0.01
below forecast. We further note that NOI of $119.0mm was $1mm below forecast
despite a $3.7mm favourable variance on bad debt expense ($2.3mm vs. $6.0mm).
In other words, NOI ex-BDE of $121.3mm was $4.7mm or 3.7% below our $126mm
forecast – an unusually high variance.
SPNOI growth was -4.8% (Q4/20: -6.7%), but SPNOI growth ex-BDE worsened
slightly to -3.7% (Q4/20: -2.9%). Q1 rent collections averaged 94.1% (vs. 94.4%
Q4/20 initially-reported, and now at 95.7%) are down marginally, likely reflecting
reinstated lockdowns.
Cash distributions were unchanged at $1.85/unit annualized.
Q1/21 Leasing:
In-place occupancy was flat q/q at 97.0%, but was -15bps before PUD transfers.
Renewal uplift was nominal (+0.2% total, -0.7% excluding anchors) versus the
+3% LTM average. Disclosures suggest that Q1 activity included ~700,000sf of
Walmart lease renewals, which generally come with no rent growth. We note that
Walmart also represents ~40% of 2022-2027 lease maturities.
Balance Sheet:
IFRS fair value changes were minimal (-$19mm or -0.2%). The portfolio cap rate
was not disclosed (Q4/20: 5.69%). The 6.46% discount rate was unchanged.
Debt/Assets was 44.7% (+10bps), while Debt/EBITDA was 8.6x (+0.1x).
Total available liquidity was $1.1bln. Unencumbered assets were $5.9bln.
Development/Intensification Projects Update:
At the VMC, Transit City 3 condos (631 units) closings commenced this week, with
$20mm of FFO contribution targeted for FY2021. The next project sales launch
(620 condo units) is planned for later this year.
The Phase 1 residential rental project in Laval, QC (171 suites) reached 90%-
leased following first occupancies in Q2/20.
SmartCentres acquired a 7.6-acre property at Yonge & Murray Streets in Aurora,
ON for $12.2mm for a planned 425-suite rental residential development.