Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SmartCentres Real Estate Investment Trust (CWYUF, Financial) achieved a new five-year high occupancy rate of 98.7%, reflecting strong tenant demand.
- Rental growth was robust, with an 8.8% increase on lease extensions excluding anchors and 6.6% overall.
- Cash collections remained strong, exceeding 99%, indicating the quality of income and tenant strength.
- The company executed significant new leases, including a new Walmart lease and a Costco lease, which are expected to drive additional traffic and economic activity.
- SmartCentres Real Estate Investment Trust (CWYUF) continues to expand its mixed-use development portfolio, securing 9.8 million square feet of permissions in 2024.
Negative Points
- FFO per fully diluted unit decreased to $0.53 from $0.59 in the comparable quarter last year, primarily due to a fair value adjustment on the total return swap.
- The debt to aggregate assets ratio increased slightly to 43.7%, indicating a marginal rise in leverage.
- The weighted average term to maturity of debt is relatively short at 3.1 years, which may pose refinancing risks.
- The company remains cautious about market conditions, which could impact the timing and execution of new projects.
- Despite strong performance, the company anticipates being at the lower end of its 3% to 5% same property NOI growth guidance for 2025.
Q & A Highlights
Q: Can you clarify the $4 million variance in CAM recoveries noted in the financials?
A: There was a true-up in the prior year due to the launch of a new accounting package in 2024, allowing us to bill on actual CAM versus budgeted CAM with a year-end true-up. This quarter's numbers are clean and reflect a good run rate. - Peter Slan, CFO
Q: What is the potential impact of Walmart's $6.5 billion expansion plan on SmartCentres?
A: While specifics can't be disclosed, SmartCentres is closely aligned with Walmart as a major landlord and will likely participate in some of the new developments. Announcements will be made in due course, with some ground-up developments expected. - Mitchell Goldhar, CEO
Q: Was the Costco lease at Winston Churchill enabled by the relaxation of grocery lease restrictions?
A: The Costco deal was not directly related to grocery lease restrictions. It was a culmination of long-term negotiations, as Rona had the site under lease for a long time, even when vacant. - Mitchell Goldhar, CEO
Q: Can you provide more details on the 200,000 to 250,000 square feet of new retail leases for new construction?
A: These leases are not part of the current disclosed development pipeline and include a variety of retailers like TJX, Dollarama, and LCBO. Construction will start this year, with openings expected over the next 1 to 2 years. - Rudy Gobin, EVP
Q: How do you view the residential development outlook and potential asset dispositions?
A: Currently, the only residential development is the ArtWalk project. There are no immediate plans to go to market with new projects unless market conditions change. No new asset dispositions are planned at this time. - Mitchell Goldhar, CEO
Q: Are there any additional capital requirements for the new Walmart leases?
A: No additional capital is being put into these spaces beyond standard improvements. The leases include rent escalations, unlike historical leases. - Mitchell Goldhar, CEO
Q: What is the expected impact of potential economic dislocations on SmartCentres?
A: SmartCentres is well-positioned with strong covenants and long-term leases, particularly with major tenants like Walmart. The focus on value retail should provide resilience against economic downturns. - Mitchell Goldhar, CEO
Q: Can you discuss the potential development yields and how you define accretion?
A: Development yields are expected to be accretive to FFO. SmartCentres aims for mid to high single-digit returns, ensuring projects are not dilutive. - Mitchell Goldhar, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
