Canadian Net Real Estate Investment Trust (NET-UN) Q3 2024 earnings summary

Executive summary

• Maintained 100% occupancy in Q3 2024 and completed the capital recycling program, disposing of four properties for CAD 12.8 million and acquiring a CAD 9 million grocery store at a 7% cap rate, enhancing portfolio quality and FFO per unit accretion.

• Opened a new Benny&Co. location post-quarter, contributing CAD 68,000 in annual NOI; necessity-based retail portfolio continues to perform strongly.

• All 2024 lease renewals completed; 78% of 2025 expiring rents already renewed, with a 5% expected increase in expiring rents.

• Navigated higher interest rates from 2023 mortgage renewals, resulting in a 4% decline in normalized FFO year to date.

• Benefited from lower rates and remains optimistic for a favorable rate environment and industry fundamentals.

Financial highlights

• Normalized FFO per unit for the nine months ended September 30, 2024, was CAD 0.453, down 4% year-over-year; total normalized FFO was CAD 9.3 million, down from CAD 9.7 million.

• NOI for the same period was CAD 14.2 million, a 3% decrease from CAD 14.5 million year-over-year; Q3 2024 NOI was $4.6M, down 5.6% year-over-year.

• Property rental income remained stable at CAD 19.3 million, with increases in recoverable additional rents offsetting declines from dispositions; Q3 2024 rental income was $6.2M, down 3% year-over-year.

• Net income attributable to unitholders rose to $13.0M in Q3 2024 from $3.0M in Q3 2023, mainly due to fair value changes in investment properties.

• AFFO for the nine months was $8.7M, up 1% year-over-year; EBITDA was $10.7M, down 45% year-over-year.

Outlook and guidance

• Positioned for growth in 2025 as interest rates decline and acquisition opportunities become more attractive.

• Q3 2024 is expected to be a good run rate for admin expenses and rental income, after adjusting for one-time items and recent acquisitions.

• Capital recycling for 2024 is complete; future dispositions will be opportunistic and property-specific.

• Announced monthly cash distributions of $0.02875 per unit for January, February, and March 2025, annualized at $0.345 per unit.