Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net operating income for the quarter increased by almost 5% to $31.8 million compared to the previous year.
- Same asset net operating income for the six-month period rose by 4.6%, indicating strong performance across all asset classes.
- Retail results showed growth with increased traffic and sales in enclosed malls, reflecting a recovery post-pandemic.
- Overall occupancy levels improved to 90.8%, with retail occupancy up by 60 basis points and office occupancy up by over 100 basis points.
- The Trust successfully executed the sale of Heritage Towne Centre, generating $20 million in net proceeds to pay down debt.
Negative Points
- Interest expenses increased by 15% for the quarter, primarily due to higher interest costs on mortgage rollovers.
- Funds from operations (FFO) decreased by 6% to $14.1 million, impacted by the higher interest expenses.
- A $16 million fair value loss was recorded on real estate properties, mainly due to expanded cap rates in Toronto and Vancouver office assets.
- Elevated capital needs are expected to exceed reserve amounts due to increased leasing capital requirements and higher costs for capital projects.
- A decrease in net operating income of approximately $14 million to $15 million is anticipated in 2025 due to lease-up and vacancy costs at Penn West Plaza.
Q & A Highlights
Q: Can you elaborate on the elevated capital spend related to leasing for office deals, particularly regarding Penn West?
A: Some of the elevated capital spend is indeed related to Penn West. We are working through new deals, and leasing capital for office deals is generally higher these days. Additionally, the cost of capital has increased across the board. - Andrew Tamlin, CFO
Q: Regarding Penn West, you mentioned 70% renewal. Is there any space being sublet, or are you dealing with sublet tenants?
A: We are working with current subtenants to establish new deals extending beyond 2025 and 2026, which includes any sublet arrangements. - Andrew Tamlin, CFO
Q: After selling Heritage Towne Centre to recycle capital, are there plans for additional property sales this year?
A: Currently, there are no immediate plans for additional property sales. We are always open to opportunities, whether buying or selling, but nothing is on the front burner right now. - Andrew Tamlin, CFO
Q: Can you discuss the refinancing opportunities and the rates you are seeing? Will there be a reduction in renewal rates compared to expiring ones?
A: We do not anticipate a reduction in renewal rates compared to expiring ones, despite a recent decrease in bond yields. Historically, our average cost of debt is higher, so I expect renewal rates to be higher as well. - Andrew Tamlin, CFO
Q: Are there any further questions or comments?
A: There are no further questions at this time. Thank you for attending our call, and we look forward to speaking with you next time. - Andrew Tamlin, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
