Canadian Net Real Estate Investment Trust (NET-UN) Q2 2024 earnings summary

Executive summary

• Maintained 100% occupancy and a 66% payout ratio in Q2 2024.

• FFO per unit decreased 4% year-over-year, absorbing higher interest rates, but lower rates are now reducing financing costs.

• Disposed of five non-core/gas station properties in 2024, generating CAD 12.8 million in gross proceeds and CAD 7.6 million in net proceeds, reallocating capital to more profitable opportunities.

• Advanced a joint venture development in Beloeil, Quebec, expected to add CAD 68,000 in annual NOI.

• Portfolio focused on necessity-based retailers, with strong demand and below-market rents.

Financial highlights

• Q2 2024 FFO per unit decreased 4% year-over-year, from CAD 0.161 to CAD 0.154.

• Q2 2024 rental income rose 1.7% to $6.6M; NOI fell 1.4% to $4.8M year-over-year due to property sales.

• For the six months ended June 30, 2024, rental income increased 1.8% to $13.1M; NOI decreased 1.1% to $9.6M.

• Six-month FFO was $6.3M ($0.306/unit), down 4% year-over-year; AFFO rose 2% to $5.9M ($0.289/unit).

• IFRS value of investment properties was CAD 316 million as of June 30, 2024, down from CAD 332 million a year earlier.

Outlook and guidance

• Lower interest rates are already reducing costs on credit facilities and mortgage renewals.

• Scheduled rent increases and resumed acquisitions anticipated to offset any remaining rate impacts.

• Liquidity from property dispositions to be reinvested in accretive opportunities.

• Portfolio optimization and capital from property sales are expected to support future growth.

• Monthly distributions of $0.02875/unit declared for October, November, and December 2024.