Artis Real Estate Investment Trust (ARESF) Q2 2024 Earnings Call

Release Date: August 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Artis Real Estate Investment Trust (ARESF, Financial) successfully sold $651.6 million of real estate in 2024, with additional unconditional sale agreements for approximately $371.2 million.
• The REIT’s debt-to-gross book value decreased to 49.8% at June 30 from 50.9% at December 31, showing progress in reducing leverage.
• Occupancy rates, including commitments, remained over 90% this quarter, indicating stable operational performance.
• Lease renewals in Q2 were negotiated at a weighted average rate increase of 3.1%, continuing a 14-quarter streak of growth in rental rates.
• Artis Real Estate Investment Trust (ARESF) utilized its NCIB to purchase 2,212,000 common units at an average price of $6.43 per unit, enhancing unit holder value.

Negative Points

• The real estate sector continues to face near-term challenges despite the Bank of Canada’s rate cuts.
• Artis Real Estate Investment Trust (ARESF) has $184.8 million of mortgage debt maturing during the remainder of 2024, requiring careful management.
• The strategic review process has incurred significant costs, including another $500,000 this quarter.
• The REIT’s $150 million non-revolving credit facility and the first tranche of its revolving credit facilities mature this year, necessitating active discussions with lenders.
• Despite progress, the REIT’s leverage remains relatively high, with a debt-to-gross book value of 49.8%.

Q & A Highlights

Q: On the strategic or the special committee’s strategic reviews, another $500,000 in costs or so this quarter. How long will that committee remain in place?
A: The Board is continuously evaluating the need for the special committee to remain and the strategic review to remain in place. We anticipate providing a further update within the next one or two quarters. (Samir Manji, President, Chief Executive Officer, Trustee)

Q: It doesn’t seem like your strategy has changed much with the special committee in place. Am I right in reading that?
A: That’s a fair comment. Initially, the exercise had a broad scope to explore all opportunities. Over time, it became clear that the practical path aligned closely with our original strategy. (Samir Manji, President, Chief Executive Officer, Trustee)

Q: On the incentive fee, it looks to be around $6 million. Can you give us some color on what that relates to? Are there more opportunities like that on your balance sheet?
A: This fee relates to a successful development initiative. We recognized a portion of it this quarter and expect the total fee to be greater, which will be fully recognized in the next one or two quarters. (Samir Manji, President, Chief Executive Officer, Trustee)

Q: When the asset closes this quarter or Q4, will we get the full amount then?
A: Correct. The mechanics in place will enable us to fully recognize and receive the total fee payable to Artis in the next one or two quarters. (Samir Manji, President, Chief Executive Officer, Trustee)

Q: Even though that’s in NOI, it doesn’t count as any sort of same property NOI, correct?
A: No, this is separate from property-level NOI. (Samir Manji, President, Chief Executive Officer, Trustee)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.