SmartCentres Real Estate Investment Trust (SRU.UN) Q3 2024 earnings summary

Executive summary

• Achieved 98.5% in-place and committed occupancy, with strong leasing momentum and 88% of 2024 lease maturities renewed at rental growth of 8.9% for non-anchor tenants.

• Portfolio includes 195 properties with 35.3M sq. ft. of income-producing assets, reaching over 90% of the Canadian population.

• Mixed-use and residential development advanced, with significant progress on projects like ArtWalk and The Millway, and new zoning achieved in BC.

• Self-storage portfolio expanded to over 1.3M sq. ft. operating, with multiple projects under construction.

• Major tenants are stable, with Walmart accounting for 23.4% of revenue and over 45% of rental income from the top 10 tenants.

Financial highlights

• FFO per unit was CAD 0.71, up from CAD 0.55, mainly due to fair value adjustments and higher rental revenue.

• Adjusted FFO per unit was CAD 0.53, down CAD 0.01 year-over-year due to higher net interest expense.

• Net operating income rose by CAD 5 million (3.4%) year-over-year, and net rental income increased by $11.6M or 8.9% year-over-year in Q3 2024.

• Distributions maintained at an annualized rate of CAD 1.85 per unit, with a payout ratio to AFFO of 75.2% for Q3.

• Dividend yield stands at 7.4%, with a unit price of $24.96 and NAV per unit of $34.64.

Outlook and guidance

• Momentum in rental growth, occupancy, and NOI is expected to continue into Q4 and 2025.

• Same property NOI run rate projected in the 3%-5% range for 2025, supported by strong tenant demand and lease extensions.

• The Millway rental project is projected to exceed 95% occupancy by year-end, with rental rates above budget.

• Development pipeline includes 85.7M sq. ft., with 67% zoning approved and 0.8M sq. ft. under construction.

• Disposition target of CAD 250–350 million, mainly residential land, likely in 2025 or 2026, with potential for higher sales if market conditions improve.