Watch the Retail REIT – Fund President Q1 2023 Update
Transcript
[00:00:25] Ray Punn:
I’m pleased to provide you with Skyline Retail REIT‘s update for quarter one, 2023. Today, I’m joined by Gord Driedger, President of Skyline Retail REIT. Gord, thanks for joining me.
[00:00:34] Gordon Driedger:
Pleasure.
[00:00:35] Ray Punn:
Gord, let’s get right into it. Can you walk our investors through the Retail REIT’s financial summary and provide any insights for Q1?
[00:00:42] Gordon Driedger:
So, the REIT has just wrapped up another solid quarter. Occupancy was very stable in the quarter with several leases being renewed. Specifically, as many of you know, Bed, Bath and Beyond declared themselves bankrupt in January of this year. Prior to that, we had negotiated a new lease with Mark’s Work Wearhouse for their space, subject to receiving the space back from Bed, Bath and Beyond. So, as of May 1st, Mark’s is in possession of that space with no gap in rent payment. And really, it’s a story. It’s one space, it’s a large space, but it’s a story that really exemplifies the strength of the REIT. The property is strong; it’s grocery-anchored. And it presented an opportunity for Mark’s to be in a market where they had not yet opened a free-standing store. So, it was really a kind of win for us, and a win for Mark’s as well. So, we’re pleased to have put them into the Bed, Bath and Beyond space. So, in the Retail REIT, it’s important to differentiate between kinds of retail. There are fashion-oriented, sometimes enclosed mall formats in the retail space. With only a few exceptions in Canada, they are the assets that are more challenged. They resemble the kind of retail that struggles to replace tenants when they leave, and turnover in the retail space just like in the apartment space and other tenancies is a given. What we try to focus on is retail that is strong in good markets, so should a tenant like Bed, Bath and Beyond struggle to perform, we have the kinds of spaces that can be readily re-leased to a new tenant.
[00:02:38] Gordon Driedger:
Grocery, pharmacy, and everyday essentials, of course, are the most desirable assets – not only for our tenants, who are doing exceptionally well, but also for investors. The appetite for high-quality grocery and pharmacy-oriented centres is very high, which has led to increased values for just the kind of assets that Skyline [Retail REIT] has in its portfolio. In fact, effective May 25th of this year, te Trustees have approved an increase in the Unit Price to $15.50, which represents a $0.25 increase. And this is really a reflection of the quality and desirability of the portfolio of the Skyline [Retail REIT] assets. Otherwise, the leasing activity in the portfolio is very good. We have continued to get good increases on our lease renewals over expiring rents of about 7.5% in the quarter. It’s a very good number and very strong relative to our peers. It’s exceptionally high in historical terms. I’ve been in this business now for a very long time, and these are numbers that I don’t think we’ve experienced for a very long time. So, it allows us to grow our portfolio organically from our existing tenant base at a very low cost and very high incremental value to our portfolio. Our development program continues to be an important part of our business as well. We’ve just started construction of over 20,000 square feet of new retail space, fully leased, including Starbucks and LCBO. And this is within our existing portfolio base. As with all of our developments, we never commit to new construction until we have fully binding leases in place and we have construction contracts in place for the construction.
[00:04:23] Ray Punn:
Gord, what’s the outlook for the Fund for the remainder of the year and going into 2024?
[00:04:29] Gordon Driedger:
Going forward, we continue to manage our business very aggressively. We’re seeking new acquisitions that meet our portfolio acquisition criteria to incrementally improve the overall quality of the portfolio. I’d like to say that every new acquisition is better than the average of our prior acquisitions. It’s a very detail-oriented and incremental approach, which maximizes the value for our portfolio and minimizes our risks. So, there’s a great team behind all of the incremental pieces, but we approach it very incrementally, one step at a time, adding value as we go. And that’ll be for the next number of quarters, and it’s really the way of our business.
[00:05:19] Ray Punn:
Thanks again, Gord, for joining me today and providing the quarter one update.
[00:05:22] Gordon Driedger:
Thanks for having me.
[00:05:23] Ray Punn:
Skyline Retail REIT is currently open for new investment. If you have any questions, connect with your Skyline Wealth Management representative or email us at Invest@SkylineWealth.ca. Thanks for watching.