SmartCentres Real Estate Investment Trust (SRU.UN) Q4 2023 earnings summary

Executive summary

• 2023 delivered higher same-property NOI and FFO per unit, supported by lease-up, rental renewals and condominium closings; occupancy remained 98.5%.

• Major milestones included closing all remaining Transit City 4 & 5 units, opening The Millway, and advancing ArtWalk and Laird Drive development work.

Financial highlights

• Same Property NOI rose $2.3 million, or 1.7%, in Q4 and $11.6 million, or 2.2%, for FY 2023 YoY, primarily from lease-up and higher renewal rates.

• FFO per unit was $0.59 in Q4 and $2.23 for FY 2023, versus $0.57 and $2.07 in 2022; higher condo-closing profits and rental income partly offset higher interest expense.

• Net income and comprehensive income per unit was $0.08 in Q4 and $2.83 for FY 2023, versus $0.56 and $3.54; declines reflected smaller fair-value adjustments on properties and financial instruments.

• Payout ratio to AFFO improved to 89.4% in Q4 and 93.0% for FY 2023, from 95.7% and 98.6%, respectively.

Outlook and guidance

• Canadian Tire is expected to take possession of its 200,000-sq.-ft. Laird Drive flagship store in early 2026; siteworks continue on the 224,000-sq.-ft. retail project.

• ArtWalk Phase 1’s remaining units are expected to be released for sale in 2024; Vaughan NW townhome closings are expected to begin in H1 2024.

• Management’s forward-looking assumptions include a stable retail environment, continued land-use intensification, access to debt and equity capital at acceptable costs, and development consents obtained in the ordinary course.