SmartCentres Real Estate Investment Trust (SRU.UN) Q4 2024 earnings summary

Executive summary

• Achieved a five-year high occupancy rate of 98.7% with strong tenant demand, high retention, and robust leasing momentum, reflecting resilient fundamentals in the Canadian retail sector.

• Rental growth on lease extensions (excluding anchors) was 8.8%, and 6.6% overall; same-property NOI grew 3.8% year-over-year.

• Major new leases signed with Walmart (South Oakville), Costco (Winston Churchill), and Canadian Tire (Leaside), plus 253,000 sq ft of new retail construction deals in 2024.

• Mixed-use and residential development pipeline expanded, with 9.8M sq ft of new permissions in 2024, 59M sq ft zoned for future projects, and 85M sq ft in the long-term pipeline.

• Self-storage portfolio reached 1.4M sq ft operating, with multiple projects under construction and expansion in Ontario, Quebec, and British Columbia.

Financial highlights

• Q4 net operating income increased by $12.3M (9%) year-over-year, with net rental income for Q4 at $141.6M (+10.2% YoY) and $547.5M for the year (+6.6% YoY), driven by lease-up activity and higher CAM recoveries.

• AFFO per unit was $0.53 (down from $0.59 last year) due to a fair value adjustment; adjusted AFFO (excluding one-time items) was $0.56, up 9.8% year-over-year.

• FFO per unit (diluted) at $0.53, down from $0.59 in Q4 2023; net income per unit was $0.78 for Q4 and $1.62 for the year.

• Annualized distribution rate maintained at $1.85 per unit; full-year payout ratio to AFFO was 91.7%.

• Liquidity at year-end was $833M (excluding accordion features), with $1.1B available including credit lines.

Outlook and guidance

• Expectation of continued momentum in occupancy, rental growth, and cash collections into 2025 and 2026, with strong demand from large format retailers.

• Same-property NOI growth guidance for 2025 remains at 3%-5%, likely at the lower end due to timing of new developments and market volatility.

• Significant stock of municipal approvals supports long-term portfolio expansion, with 59.1M sq ft zoned and 1M sq ft under construction.

• Multiple self-storage and residential projects are on track for completion in 2025–2027, with strong pre-sales and leasing activity.

• Anticipate further leasing of large anchor vacancies (Kitchener, Cambridge, Aurora) in 2025, with significant NOI and AFFO impact when online.