Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net operating income for the quarter increased by almost 6% to $32.2 million, driven by improved results in enclosed malls.
- Same asset net operating income for the third quarter rose by nearly 8%, with all asset classes showing growth.
- Retail results continue to improve, with increased traffic and sales in enclosed malls post-pandemic.
- The Trust has reduced its debt by $123 million over the past four years, focusing on paying down debt.
- Occupancy levels increased to 90.7%, with a notable 100 basis point rise in office asset occupancy, particularly in Alberta.
Negative Points
- Interest expenses increased by 5% for the quarter, primarily due to higher interest costs on mortgage rollovers.
- The Trust anticipates elevated capital needs above reserve amounts due to increased leasing capital requirements.
- A decrease in net operating income of approximately $13 million to $15 million is expected in 2025 due to lease-up and vacancy costs at Penn West Plaza.
- Liquidity decreased to $92 million at the end of the third quarter, down from $98 million in the second quarter and $101 million at the end of 2023.
- The office market remains challenging, with competitive leasing environments requiring aggressive tenant improvements and allowances.
Q & A Highlights
Q: Are there any expected paydowns on mortgages coming up for renewal in the fourth quarter?
A: Yes, we expect to have a paydown of around $10 million as we move forward into the renewal of those mortgages. The loan-to-value ratio is not great, which necessitates this paydown. - Andrew Tamlin, Chief Financial Officer
Q: What sort of leasing spreads are you seeing in enclosed mall leases or renewals?
A: Leasing spreads in enclosed malls have been strong, primarily due to pent-up demand and the high cost of new construction. This year, leasing spreads are approximately 5% over contracts on renewal. - John Ginis, Director of Asset Management - Retail
Q: What are the expected leasing spreads across the board for both retail and office, excluding Penn West?
A: For retail, leasing spreads are around 5%. The office market is more challenging, with competitive pressures requiring inducements to secure renewals. We strive to maintain value, but it's a tough environment. - Andrew Tamlin, Chief Financial Officer and Todd Febbo, Vice President of Eastern Office Management
Q: How is the office leasing environment currently, and what challenges are you facing?
A: The office market is tough, with aggressive tenant improvement allowances from competitors. We work hard to secure renewals, but it's a competitive environment, and maintaining rates is challenging. - Todd Febbo, Vice President of Eastern Office Management
Q: Are there any concerns about tenant renewals in the portfolio?
A: Outside of Penn West, we are not overly concerned about tenant renewals. We feel positive about the remaining leasing activity necessary for the upcoming period. - Andrew Tamlin, Chief Financial Officer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
