TORONTO, Nov. 13, 2024 (GLOBE NEWSWIRE) -- SmartCentres Real Estate Investment Trust ("SmartCentres”, the "Trust” or the "REIT”) (TSX: SRU.UN) is pleased to report its financial and operating results for the quarter ended September 30, 2024.
"Building on a successful first half of the year, retail fundamentals are outperforming, driven by strong momentum in leasing demand and executed lease deals for both existing space and for new build space,” said Mitchell Goldhar, CEO of SmartCentres. "We are seeing it in the higher quality of our income, strong same property NOI and higher spreads on lease extensions. We renewed and extended lease maturities in 2024 at strong rental growth rates of 6.1%, or 8.9%, excluding anchors. In-place and committed occupancy has increased again this quarter to an industry leading 98.5%, with approximately 187,000 square feet of vacant space leased during the quarter. We expect to continue delivering solid rental growth and strong occupancy levels for the balance of the year. The Millway, our new purpose-built rental project in the VMC, continues to experience strong leasing momentum with 93% occupancy at the end of the quarter, which is expected to exceed 95% by year-end, at rental rates above budget. Our mixed-use development pipeline continues to add to the bottom-line with the closing of 47 townhomes at our Vaughan NW project. Finally, we secured and closed on a construction facility of $135.0 million to finance our 224,000 square foot Canadian Tire anchored retail project on Laird Drive in Toronto which will provide additional income once completed in approximately 18 months.”
2024 Third Quarter Highlights
Retail Operations
- Same Properties NOI excluding Anchors(1) for the three months ended September 30, 2024 increased by 8.2% (4.9% including anchors) compared to the same period in 2023.
- Leasing momentum has strengthened further, with approximately 187,000 square feet of vacant space leased during the quarter, resulting in an in-place and executed for future occupancy rate of 98.5%, an improvement of 30 basis points compared to the prior quarter.
- New build retail leasing also reflects strong momentum with over 220,000 square feet executed year-to-date.
- Renewed and extended 88.1% of all leases maturing in 2024, with strong rental growth of 8.9% (excluding anchors).
- A significant development pipeline will provide long-term portfolio expansion and profitable growth from the approximately 58 million square feet (at the Trust's share) of zoned mixed-use development permissions, including 0.8 million square feet of sites currently under construction. In addition to growth, this on-site development pipeline enhances our operating shopping centres while fulfilling our vision of creating whole communities.
- The Millway, a 458-unit purpose-built rental apartment building located in VMC, was completed in Q4 2023. Leasing activity is on track with 93% of the units leased and committed by quarter-end, at average rental rates above budget. Leased and reserved units are expected to exceed 95% by year-end from continuing strong leasing momentum.
- Siteworks and excavation are now complete at ArtWalk condo Phase I and construction is advancing, with approximately 93% of the 340 units in Tower A pre-sold.
- Construction of Phase I of the Vaughan NW townhomes is progressing well, with 47 units completed and closed in Q3 2024. As at September 30, 2024, approximately 83% of the 120 units in Phase I have been pre-sold.
- Siteworks for the 224,000 square foot Canadian Tire and ancillary retail units project on Laird Drive in Toronto continues, and possession is expected in approximately 18 months.
- Construction of the self-storage facility in Stoney Creek is nearing completion with opening expected in Q4 2024. Three other self-storage facilities are under construction and on schedule to open in 2025.
- Net rental income and other increased by $11.6 million or 8.9% for the three months ended September 30, 2024 compared to the same period in 2023, primarily due to lease-up activities and increase in residential closing revenue from townhome sales.
- FFO per Unit(1) for the three months ended September 30, 2024, was $0.71 compared to $0.55 for the same period in 2023. This increase was primarily due to an increase in the fair value adjustment on the TRS resulting from fluctuations in the Trust's Unit price. FFO per Unit with adjustments(1) for the three months ended September 30, 2024, was $0.53 compared to $0.54 for the same period in 2023. The decrease was primarily attributed to higher interest rates and lower interest capitalization following the completion of development projects compared to the prior year period, partially offset by increased net rental income driven by lease-up activities for retail properties, self-storage facilities and apartment rentals.
- Net income and comprehensive income per Unit was $0.23 for the three months ended September 30, 2024 (three months ended September 30, 2023 - $1.19). The decrease was mainly driven by a decrease in fair value adjustments on revaluation of properties due to updated valuation parameters and leasing activities in the prior year period, and a decrease in the fair value adjustment on financial instruments due to mark-to-market adjustments for interest rate swap agreements and a fair value change in units classified as liabilities due to fluctuation in the unit price.
- In August 2024, the Trust issued $350.0 million principal amount of Series AA senior unsecured debentures by way of a private placement (the "Series AA Debentures”). The Series AA Debentures bear interest at a rate of 5.162% per annum, with a maturity date of August 1, 2030. The Trust used the proceeds from the Series AA Debentures primarily to repay the $100.0 million aggregate principal of Series O senior unsecured debentures in full upon their maturity, and the outstanding floating rate debt on its operating lines.
- In September 2024, the Trust entered into a construction facility for the project on Laird Drive, Toronto, totaling $135.0 million. The facility bears interest at Adjusted CORRA plus 1.45%, with a maturity date of September 27, 2027. As at September 30, 2024, the facility was undrawn.
| (1) | Represents a non-GAAP measure. The Trust's method of calculating non-GAAP measures may differ from other reporting issuers' methods and, accordingly, may not be comparable. For additional information, please see "Non-GAAP Measures” in this Press Release. |
| (in thousands of dollars, except per Unit and other non-financial data) | |||||||
| As at | September 30, 2024 | December 31, 2023 | September 30, 2023 | ||||
| Portfolio Information (Number of properties) | |||||||
| Retail properties | 155 | 155 | 155 | ||||
| Office properties | 4 | 4 | 4 | ||||
| Self-storage properties | 10 | 8 | 8 | ||||
| Residential properties | 3 | 3 | 2 | ||||
| Industrial properties | 1 | 1 | 1 | ||||
| Properties under development | 22 | 20 | 20 | ||||
| Total number of properties with an ownership interest | 195 | 191 | 190 | ||||
| Leasing and Operational Information(1) | |||||||
| Gross leasable retail, office and industrial area (in thousands of sq. ft.) | 35,282 | 35,045 | 35,033 | ||||
| In-place and committed occupancy rate | 98.5 % | 98.5 % | 98.5 % | ||||
| Average lease term to maturity (in years) | 4.3 | 4.3 | 4.3 | ||||
| In-place net retail rental rate excluding Anchors (per occupied sq. ft.) | $23.13 | $22.59 | $22.43 | ||||
| Financial Information | |||||||
| Investment properties(2) | 10,606,288 | 10,564,269 | 10,518,429 | ||||
| Total unencumbered assets(3) | 9,366,921 | 9,170,121 | 9,067,121 | ||||
| Debt to Aggregate Assets(3)(4)(5) | 43.6 % | 43.1 % | 43.0 % | ||||
| Adjusted Debt to Adjusted EBITDA(3)(4)(5) | 9.8X | 9.6X | 9.7X | ||||
| Weighted average interest rate(3)(4) | 4.09 % | 4.15 % | 4.13 % | ||||
| Weighted average term of debt (in years) | 3.2 | 3.6 | 3.7 | ||||
| Interest coverage ratio(3)(4) | 2.4X | 2.7X | 2.8X | ||||
| Three Months Ended September 30 |
| ||||||
| 2024 | 2023 | 2024 | 2023 | ||||
| Financial Information | |||||||
| Rentals from investment properties and other(2) | 243,326 | 206,016 | 688,616 | 623,560 | |||
| Net income and comprehensive income (2) | 42,479 | 215,175 | 150,220 | 495,938 | |||
| FFO(3)(4)(6) | 128,174 | 98,405 | 305,911 | 294,072 | |||
| AFFO(3)(4)(6) | 109,619 | 85,788 | 274,392 | 262,237 | |||
| Cash flows provided by operating activities(2) | 105,380 | 93,855 | 252,090 | 237,108 | |||
| Net rental income and other(2) | 141,978 | 130,402 | 405,928 | 385,110 | |||
| NOI(3)(4) | 148,785 | 143,834 | 423,922 | 424,407 | |||
| Change in SPNOI(3)(4) | 4.9 % | 1.9 % | 2.4 % | 3.2 % | |||
| Weighted average number of units outstanding - diluted(7) | 180,858,726 | 180,069,508 | 180,602,179 | 180,002,762 | |||
| Net income and comprehensive income per Unit(2) | $0.24/$0.23 | $1.21/$1.19 | $0.84/$0.83 | $2.78/$2.76 | |||
| FFO per Unit(3)(4)(6) | $0.72/$0.71 | $0.55/$0.55 | $1.72/$1.69 | $1.65/$1.64 | |||
| FFO with adjustments per Unit(3)(4) | $0.54/$0.53 | $0.54/$0.54 | $1.58/$1.56 | $1.60/$1.59 | |||
| AFFO per Unit(3)(4)(6) | $0.61/$0.61 | $0.48/$0.48 | $1.54/$1.52 | $1.47/$1.46 | |||
| AFFO with adjustments per Unit(3)(4) | $0.44/$0.43 | $0.47/$0.47 | $1.40/$1.39 | $1.42/$1.41 | |||
| Payout Ratio to AFFO(3)(4)(6) | 75.2 % | 96.1 % | 90.1 % | 94.3 % | |||
| Payout Ratio to AFFO with adjustments(3)(4) | 105.9 % | 97.7 % | 98.8 % | 97.6 % | |||
| Payout Ratio to cash flows provided by operating activities | 78.2 % | 87.8 % | 98.1 % | 104.3 % | |||
| (1) | Excluding residential and self-storage area. |
| (2) | Represents a Generally Accepted Accounting Principles ("GAAP”) measure. |
| (3) | Represents a non-GAAP measure. The Trust's method of calculating non-GAAP measures may differ from other reporting issuers' methods and, accordingly, may not be comparable. For additional information, please see "Non-GAAP Measures” in this Press Release. |
| (4) | Includes the Trust's proportionate share of equity accounted investments. |
| (5) | As at September 30, 2024, cash-on-hand of $31.4 million was excluded for the purposes of calculating the applicable ratios (December 31, 2023 - $31.4 million, September 30, 2023 - $45.3 million). |
| (6) | The calculation of the Trust's FFO and AFFO and related payout ratios, including comparative amounts, are financial metrics that were determined based on the REALpac White Paper on FFO and AFFO issued in January 2022 ("REALpac White Paper”). Comparison with other reporting issuers may not be appropriate. The payout ratio to AFFO is calculated as declared distributions divided by AFFO. |
| (7) | The diluted weighted average includes the vested portion of the deferred issued pursuant to the deferred unit plan and vested EIPs granted pursuant to the equity incentive plan. |
The following table provides additional details on the Trust's 8 development initiatives that are currently under construction or where initial siteworks have begun (in order of estimated initial occupancy/closing date):
| Projects under construction (Location/Project Name) | Type | Trust's share | Actual / estimated initial occupancy / closing date | % of capital spend | GFA(1) (sq. ft.) | No.
of units | ||||||
| Mixed-use Developments | ||||||||||||
| Vaughan NW | Townhomes | 50 % | Q1 2024 | 59 % | 366,000 | 174 | ||||||
| Stoney Creek Self-Storage | Self-Storage | 50 % | Q4 2024 | 83 % | 138,000 | 973 | ||||||
| Toronto (Gilbert Ave.) Self-Storage | Self-Storage | 50 % | Q1 2025 | 70 % | 177,000 | 1,540 | ||||||
| Dorval (St-Regis Blvd.) Self-Storage | Self-Storage | 50 % | Q2 2025 | 56 % | 164,000 | 1,165 | ||||||
| Toronto (Jane St.) Self-Storage | Self-Storage | 50 % | Q3 2025 | 68 % | 143,000 | 1,404 | ||||||
| Ottawa SW | Residential apartments | 50 % | Q4 2026 | 29 % | 376,000 | 402 | ||||||
| Vaughan / ArtWalk | Condo | 50 % | Q2 2027 | 35 % | 295,000 | 340 | ||||||
| Total Mixed-use Developments | 1,659,000 | 5,998 | ||||||||||
| Retail Development | ||||||||||||
| Toronto (Laird) | Retail | 50 % | Q2 2026 | 31 % | 224,000 | - |