SmartCentres Real Estate Investment Trust Releases First Quarter Results for 2024
TORONTO, May 08, 2024 (GLOBE NEWSWIRE) -- SmartCentres Real Estate Investment Trust ("SmartCentres" or the "Trust") (TSX:SRU) is pleased to report its financial and operating results for the quarter ended March 31, 2024.
"We are pleased to report a strong start to 2024," said Mitchell Goldhar, CEO of SmartCentres. "Our focus on value-oriented retail continues to drive robust customer traffic, resulting in a $5.9 million increase in net rental income(1) compared to the first quarter of last year. Significant demand for additional locations from existing and new retailers will result in the expansion of the portfolio in the coming quarters. In addition, exceptional retention of maturing tenancies has already led to 4.4 million square feet of renewals with a compelling average rent growth of 8.9% (excluding anchors). On the development front, we have lots of activity and some significant projects under construction. In addition, we delivered and closed the first two units in Phase I of our Vaughan NW Townhomes project in March, and closings are expected to accelerate in subsequent quarters, with 95% of the pre-sold units closing this year, providing additional net operating income to our core retail operations."
2024 First Quarter Highlights
Operations
- Same Property NOI(1) for the three months ended March 31, 2024 increased by $4.0 million or 3.0% compared to the same period in 2023. The increase was driven by lease-up activities and lease extensions at improved rental rates.
- Strong leasing momentum continued with 160,860 square feet of vacant space leased in the quarter, and 209,617 square feet leased for new build.
- Our largest tenants are expanding store sizes in major markets, with executed new deals during the quarter from tenants such as Winners, HomeSense, Dollarama, Shoppers Drug Mart, Mark's and Scotiabank.
- Extended or finalized 82% of space maturing in 2024, with strong rent growth of 8.9% (excluding anchors).
Development
- Significant development pipeline will provide constant portfolio expansion and decades of profitable growth from the approximately 56 million square feet (at the Trust's share) of zoned mixed-use development permissions, including 0.9 million square feet of sites currently under construction.
- Millway, a 458-unit purpose-built rental, was completed in Q4 2023. Leasing activity accelerated during the quarter at approximately 1% per week, with 76% of the units leased by quarter-end. We have seen continued leasing progress subsequent to the quarter-end with rental rates ahead of expectations, and we expect to reach close to 90% leased by Q2.
- Sitework at ArtWalk condominium Phase I is well underway, with all released units (approximately 85% of the 373 units) in Tower A pre-sold.
- Construction of Phase I of the Vaughan NW townhomes is underway, with the first two units closed in March 2024. All released units (approximately 83% of the 120 units) have been pre-sold.
- Our self-storage facility in Whitby opened in March 2024. This portfolio continues to expand with the addition of two new locations: one within the Trust's shopping centre at Laval East, Quebec, and a new strategic site that was acquired with SmartStop subsequent to the quarter-end in Victoria, British Columbia. This portfolio has now increased to nine operating facilities with five additional sites under construction.
Financial
- Net rental income and other increased by $5.9 million or 4.7% for the three months ended March 31, 2024 compared to the same period in 2023, mainly attributable to the increase in base rent resulting from lease-up activities and lease extensions at improved rental rates.
- FFO per Unit(1) for the three months ended March 31, 2024 was $0.48 compared to $0.54 for the same period in 2023. This decline is primarily due to a decrease in fair value adjustment on the TRS as a result of fluctuations in the Trust's unit price, and the change in condominium and townhome closings. FFO per Unit with adjustments(1) for the three months ended March 31, 2024 was $0.52 compared to $0.51 for the same period in 2023, an increase of 2.0%. The increase was primarily due to the increase in net rental income.
- Net income (loss) and comprehensive income (loss) per Unit(2) was $(0.12) for the three months ended March 31, 2024 (three months ended March 31, 2023 – $0.63). The decrease was primarily due to a loss in fair value adjustment on investment properties which included a write down of $135 million ($0.75 per Unit) on certain future development properties resulting from changes in market conditions.
(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.
Selected Consolidated Operational and Financial Information
| (in thousands of dollars, except per Unit and other non-financial data) | |||||||
| As at | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||
| Portfolio Information (Number of properties) | |||||||
| Retail properties | 155 | 155 | 155 | ||||
| Office properties | 4 | 4 | 4 | ||||
| Self-storage properties | 9 | 8 | 8 | ||||
| Residential properties | 3 | 3 | 1 | ||||
| Industrial properties | 1 | 1 | — | ||||
| Properties under development | 21 | 20 | 20 | ||||
| Total number of properties with an ownership interest | 193 | 191 | 188 | ||||
| Leasing and Operational Information(1) | |||||||
| Gross leasable retail, office and industrial area (in thousands of sq. ft.) | 35,109 | 35,045 | 34,777 | ||||
| In-place and committed occupancy rate | 97.7% | 98.5% | 98.0% | ||||
| Average lease term to maturity (in years) | 4.3 | 4.3 | 4.2 | ||||
| Net annualized retail rental rate excluding Anchors (per occupied sq. ft.) | $ | 23.07 | $ | 22.59 | $ | 22.47 | |
| Financial Information | |||||||
| Investment properties(2) | 10,491,638 | 10,564,269 | 10,344,596 | ||||
| Total unencumbered assets(3) | 9,176,421 | 9,170,121 | 8,653,321 | ||||
| Debt to Aggregate Assets(3)(4)(5) | 43.8% | 43.1% | 43.2% | ||||
| Adjusted Debt to Adjusted EBITDA(3)(4)(5) | 9.8X | 9.6X | 10.0X | ||||
| Weighted average interest rate(3)(4) | 4.17% | 4.15% | 3.89% | ||||
| Weighted average term of debt (in years) | 3.4 | 3.6 | 3.9 | ||||
| Interest coverage ratio(3)(4) | 2.6X | 2.7X | 2.9X | ||||
| Weighted average number of units outstanding – diluted(7) | 180,265,745 | 180,023,932 | 179,891,028 | ||||
| Three Months Ended March 31 | |||||||
| 2024 | 2023 | ||||||
| Financial Information | |||||||
| Rentals from investment properties and other(2) | 217,239 | 210,594 | |||||
| Net income (loss) and comprehensive income (loss)(2) | (21,175) | 112,861 | |||||
| FFO(3)(4)(6) | 86,812 | 97,133 | |||||
| AFFO(3)(4)(6) | 81,242 | 88,601 | |||||
| Cash flows provided by operating activities(2) | 69,719 | 81,931 | |||||
| Net rental income and other(2) | 130,728 | 124,821 | |||||
| NOI(3)(4) | 136,075 | 133,468 | |||||
| Change in net rental income and other(3) | 4.7% | 3.4% | |||||
| Change in SPNOI(3)(4) | 3.0% | 4.3% | |||||
| Net income (loss) and comprehensive income (loss) per Unit(2) | $(0.12)/$(0.12) | $0.63/$0.63 | |||||
| FFO per Unit(3)(4)(6) | $0.49/$0.48 | $0.55/$0.54 | |||||
| FFO with adjustments per Unit(3)(4) | $0.52/$0.52 | $0.51/$0.51 | |||||
| AFFO per Unit(3)(4)(6) | $0.46/$0.45 | $0.50/$0.49 | |||||
| AFFO with adjustments per Unit(3)(4) | $0.49/$0.48 | $0.46/$0.46 | |||||
(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 March 31, 2024, cash-on-hand of $33.3 million was excluded for the purposes of calculating the applicable ratios (December 31, 2023 – $31.4 million, March 31, 2023 – $29.7 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 units issued pursuant to the deferred unit plan.
Development Initiatives Summary
The following table provides additional details on the Trust's 10 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 |