Watch the Industrial REIT – Fund President Q3 2023 Update
Transcript
Ray Punn: [00:00:25]
I’m pleased to provide you with Skyline Industrial REIT‘s update for Q3 2023. Joining me here today is Mike Bonneveld. He is the President of Skyline Industrial REIT. Mike, thanks for joining me today.
Mike Bonneveld: [00:00:35]
Yeah, no worries, Ray.
Ray Punn: [00:00:37]
So, let’s get right into our first question. Mike, as always, give us an update on Q3 and the financials for the fund.
Mike Bonneveld: [00:00:43]
Yeah, Ray, no problem. It’s been a really good quarter for the REIT. NOI is 3.4% above budget. Occupancy is held at 98.9%, same as the last quarter. Rent collections again remain very strong through the quarter and through 2023.
The leasing team’s already dealt with a significant portion of the tenant maturities/expiries in 2024, which is great to see, and we’ve completed the sale of our Cervus portfolio, which has been under contract previously this year, as well as the sale of Henri-Bourassa in Montreal.
Post-Q3, the Asset Management team has also completed the acquisition of two other assets using a portion of the net proceeds from the previous sales: Mascouche, which is an asset that we were developing for our largest tenant, Congebec. That’s now 100% owned inside the REIT. So, that’s a 322,000 square foot facility, 222,000 of which is leased to Congebec; and then also 353 Griffin Way, which is a 148,050 square foot, brand new warehouse/logistics building in Woodstock, Ontario, that we acquired post-Q3 as well.
In addition to that, we’ve been working with one of our tenants, TRW, in Windsor. We’re almost complete with their expansion of about 50,000 square feet. So, the capital team has been working on that, and that’s gone very, very well. As well, our development partnerships in Montreal, Ottawa, and Halifax are all proceeding generally ahead of schedule for the most part, with pre-leasing going very well.
And a bit macro, as we look at interest rates being achieved on acquisitions and on refinancings, it’s obviously materially higher than what we were doing in 2022. But the good news out of what’s going on right now is our access to capital through our core lending group, which is the Schedule 1 Banks and Life Insurance Companies is very, very good. And so that availability of debt capital for the REIT continues to be quite strong.
Ray Punn: [00:03:14]
Thanks, Mike, for that. You touched on acquisitions, you touched on dispositions. You touched a little bit on interest rates. What do investors have to look forward to with Skyline Industrial REIT going forward?
Mike Bonneveld: [00:03:27]
Yeah. Great question. Right. So, as we sit here nearing the end of 2023, and I have the asset management team together, we’re looking at next year really in a bunch of different components in terms of material things.
So, we anticipate out of our Rosefellow development partnership in Montreal, the REIT acquiring the balance of the interest on three assets, as two of those assets are already fully leased and stabilized, and just the structuring of the closing to get rolled up. So, that will happen at the beginning of next year.
We also continue to see some other really good acquisition opportunities, some very accretive opportunities, just given the capital displacement that’s happening right now, both in the private market and in the public markets. So, we’re being very selective and looking at those.
We’re also, and I’ll say, hopeful that based on what a lot of the economists are saying right now, and some of what’s happening in the US debt markets over the last week or so, is that we hope to see by mid-end of 2024 a little bit of positive movement on interest rates. Again, it’s a hope at this point. And based on the research we’re reading and guys we’re speaking to, but I think that will also provide a little more stability from a market standpoint. But again, kind of from a leverage return standpoint, it will really help provide opportunities.
So, I think just on an industry-wide standpoint for industrial, while rental rates [somewhat] continue to increase, we’re starting to see that flatten out – a little bit because of economically what’s happening, a little bit because there is starting to be supply happening. We’re still seeing those rates hold in most markets. There is some growth. We’re not seeing the 50% growth that we’ve seen year over year in places like Montreal, but we’re still seeing good positive movement in a lot of those markets for brand new, good-quality industrial space, which the REIT is building and owns.
And then, as a final wrap up, one of the things that the Property Management team and the Asset Management team put into place during 2023 is the installation of a partial rollout of an EV program at some of our sites. We’ve been working with our tenants and utilizing grants where available. So, really supplying and installing those where needed and wanted by tenants. We’ve got that, I would say, half-done right now. The balance will finish out by Q2 or Q3 of 2024.
And then the Management team is also finalizing our signage upgrade rollout for both our single-tenant assets as well as our multi-tenant assets. So, really from a branding and a marketing standpoint, really trying to create a cohesive and similar format across the country, especially now that we’re, as I mentioned before, through the lion’s share of all the disposition stuff, right? So, now it’s spending money in terms of that branding and tenant awareness for the portfolio.
Ray Punn: [00:07:26]
That’s a great update, Mike. Thanks for sharing that. And thanks for joining me today.
Mike Bonneveld: [00:07:29]
Yeah. No worries. Anytime, Ray.
Ray Punn: [00:07:29]
Now with that, Skyline Industrial REIT is currently open for new investment. If you have any questions, please connect with your Skyline Wealth Management representative or simply email us at Invest@SkylineWealth.ca. Thanks for watching.