Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total NOI increased by 4% over the previous year, driven by recently completed developments and strong same-asset NOI growth.
- AFFO for the quarter rose by 14% due to lower leasing and maintenance capital expenditures.
- Committed occupancy rate improved by 50 basis points from the previous quarter, reaching 97.6%, aligning with the best performance in recent history.
- Lease renewal spreads remained robust at 7.9% for the first year of the renewal term and 9.7% using the average rent over the renewal term.
- Capital recycling program saw non-core asset sales exceed IFRS values by 11%, with a weighted average cap rate of 5.9%.
Negative Points
- Debt to assets ratio remained high at 51%, excluding land leases.
- A $7.3 million write-down was taken on investment properties due to revised stabilized NOI at an enclosed mall and cost overruns on a development property.
- Higher interest rate environment posed challenges, although FFO remained consistent with the previous year.
- Leasing costs year-to-date totaled approximately $2.9 million, impacting overall financials.
- Despite strong performance metrics, the company faces ongoing risks and uncertainties that could affect future results.
Q & A Highlights
Q: Can you provide an overview of Plaza Retail REIT's financial performance for Q2 2024?
A: Michael Zakuta, President and CEO, highlighted that the first half of 2024 showcased strong financial performance through new retail developments, redevelopments, and effective management. The portfolio remains resilient with high-quality essential needs retailers, benefiting from a drop in bond yields and two prime interest rate cuts.
Q: How is the occupancy rate and tenant demand for Plaza Retail REIT?
A: Jason Parravano, Chief Operating Officer, mentioned that the occupancy rate remains stable, and tenant demand is robust. The geographic positioning of their asset mix is advantageous, with significant population growth in their markets leading to better performance for tenants and higher rental rates.
Q: What are the key leasing metrics for the year so far?
A: Jason Parravano noted that Plaza Retail REIT renewed 575,000 square feet at record-high leasing spreads. Leasing costs year-to-date totaled approximately $2.9 million, positioning assets for long-term value. Same-asset NOI was 2.7% for the quarter and 3.8% year-to-date.
Q: Can you elaborate on the capital recycling program for 2024?
A: Jason Parravano explained that the capital recycling program is well underway, with the disposal of various non-core properties. The goal is to increase the average size of properties, reduce the average age of assets, and improve the overall portfolio quality. Interest and bids for asset sales have been compelling and exceeded IFRS values.
Q: What are the future development plans for Plaza Retail REIT?
A: Jason Parravano announced a new development project in Welland, Ontario, set to launch in the fall. The project will feature a 37,000 square foot grocery tenant and approximately 100,000 square feet of retail space. Plaza will retain a 50% interest in the project.
Q: How did Plaza Retail REIT's financial metrics perform in Q2 2024?
A: Jim Drake, Chief Financial Officer, reported that total NOI was up 4% year-over-year, with FFO consistent with last year despite higher interest rates. AFFO increased by 14% due to lower leasing and maintenance capital expenditures. Committed occupancy rose to 97.6%, with strong lease renewal spreads.
Q: What is the status of Plaza Retail REIT's balance sheet and liquidity?
A: Jim Drake stated that the debt-to-assets ratio is consistent at 51%, excluding land leases. Plaza has $50 million in liquidity from various sources, including cash and operating lines. The fair value of investment properties saw a $7.3 million write-down due to revised stabilized NOI and cost overruns on a development property.
Q: What are the current trends in the retail market according to Plaza Retail REIT?
A: Jason Parravano highlighted a strong demand from non-discretionary retailers and a contrast between discount/value retailers and those with traditional pricing models. There is significant demand from QSRs offering good value propositions compared to mid-priced sit-down restaurants.
Q: How does Plaza Retail REIT view its portfolio valuation?
A: Jim Drake mentioned that the weighted average cap rate is consistent at 6.84%, which they believe is a conservative valuation given the portfolio's quality.
Q: Are there any questions from the participants?
A: There were no questions from the participants during the call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
