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Retail REIT – Fund President Q2 2024 Update Transcript

Watch the Retail REIT – Fund President Q2 2024 Update

Transcript

00:19.070 — Ray Punn:

I’m pleased to provide you with Skyline Retail REIT’s update for Q2 2024. Joining me here today is Craig Leslie, the President of the Fund. Craig, welcome.

00:27.380 — Craig Leslie:

Thanks, Ray. Glad to be here.

00:29.210 — Ray Punn:

Let’s get right into it. Craig, can you provide our investors with an update for Q2 and the Fund’s performance from the last quarter?

00:35.840 — Craig Leslie:

Yeah, certainly. Q2 results have continued to demonstrate robust and consistent performance, providing that strong yield and unit value stability our investors have always been able to rely on. Our Unit Prices continue to remain stable, in contrast to what we’ve seen in the public markets recently. We continue to see growth in revenues through higher rents on new and renewed space.

With interest rates now trending downwards and that tailwind on capital values, we’re optimistic about the future in this respect. On the portfolio, our occupancy rate on what now extends to over 5.3 million square feet of essentials-based retail stands at 97%. Including committed occupancy, so retailers who haven’t yet opened but we’ve agreed deals with, our occupancy is now at 99%.

As we hear about in the news, the consumer is continuing to be cautious with their discretionary spending and focusing on the essentials. Our occupancy rate really does reflect this and illustrates the depth and strength of demand for essential retail and local communities across the country.

01:35.750 — Ray Punn:

Thanks, Craig. Well said. Now, on the backs of two rate cuts in 2024 and potentially more coming in 2024 (Q3, Q4), can you provide our investors with some insight on how this is going to impact the Fund?

01:48.350 — Craig Leslie:

With that higher interest rate environment we’ve seen in the last couple of years, transaction volumes have been somewhat reduced. Grocery-anchored retail has remained in high demand, however, and owners of those assets have been reluctant to sell at prices reflective of the higher financing costs, given the expectation of future rate cuts, particularly in view of the rental growth that we’re seeing in the sector, and its positive impact to net income, and ultimately, value.

The recent cuts have marked the beginning of a new cycle, and while the progress of that cycle can never be precisely timed, what we do know is values tend to move in the opposite direction to interest rates. And, with little new development on the horizon and continued tenant demand, the prospects for the portfolio look robust.

02:28.350 — Ray Punn:

Craig. We often see volatility in the public stock market, and recently, we saw the biggest drop in the public trading since 2022 just a few days ago. What’s your take on this?

02:40.110 — Craig Leslie:

Our business is based on essential retail, and those retailers represent some of the most financially secure retailers in the country, whether that’s grocery stores, pharmacies, banks, dollar stores. Our business is not fundamentally any different from our publicly traded peers, and we’re influenced by the same factors: increasing population, lack of development representing a demand-supply imbalance and leading to strong rental growth over a sustained period as existing leases roll over and are renewed at higher rates. Time in the market can be incredibly challenging. Real estate is inherently a long-term investment.

However, if you review your total returns, including both yield and Unit Price, you’ll see that we’ve consistently outperformed our public peers since 2017. This really demonstrates the value of being a private REIT, with our Unit Prices not based on intangible market perceptions but on solid, quantifiable asset values.

03:31.500 — Ray Punn:

Thanks, Craig. So, to wrap things up, can you speak to any upcoming transactions in Skyline Retail REIT?

03:36.940 — Craig Leslie:

Yeah, as I mentioned, transactional opportunities have been limited, given the reluctance of vendors to sell in-demand assets at prices reflective of current financing costs. While that’s been the case, we’ve been focused on diversifying our opportunities, and adding infill development on existing sites and selective new projects. Our most recently completed project is a brand-new development in Huntsville, anchored by a Freshco Sobeys banner, which will be opening its doors in August. So, with interest rates on the decline, we expect to see valuable opportunities in the transaction market.

Skyline is strategically positioned to seize those opportunities as they emerge and is maintaining a sharp focus, in the meantime, on driving revenue growth within our current portfolio.

04:18.760 — Ray Punn:

Craig, thanks for joining me today.

04:20.290 — Craig Leslie:

Thanks, Ray.

04:21.130 — Ray Punn:

Skyline Retail REIT is currently open for new investment. If you have any questions, please reach out to your Relationship Manager with Skyline Wealth Management. Thank you for watching.

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