Boardwalk Real Estate Investment Trust – Third Quarter 2026 Earnings Call - DEFI TECHNOLOGIES INC

Explicit Guidance:

• Full-year 2026 same property Net Operating Income (NOI) growth: 1% to 2%.
• Full-year 2026 Funds From Operations (FFO) per unit: $4.65 to $4.75.
• Regular monthly distribution: $0.15 per unit (equating to $1.80 annualized) confirmed for December 2026, January 2027, and February 2027.
• 2027 guidance (revenue, expenses, FFO, NOI): To be provided during the Q4 2026 earnings release in February 2027.
• 2026 education property tax expense: Approximately $15 million for the second half of the year (Q3 and Q4).

Business-Segment Outlook:

• Occupancy & Leasing: Targeting maintenance of 97% occupancy; expected to remain stable through the winter season with lower turnover; renewals expected to drive most lease activity in Q4 and early 2027; Q4 lease spreads anticipated to remain flat to slightly negative on a blended basis due to competitive renewals.
• Rent Growth: Same property rental revenue growth expected to remain sequential positive; occupancy retention prioritized over aggressive rent increases in higher-priced segments; Quebec rental growth supported by strong summer lease volume offsets regulatory R&M costs.
• Capital Projects: 2026 value-add repositioning program: 7 of 16 projects completed; remaining projects on track for year-end completion.
• Asset Sales: Q3 2026 sales (London, Grand Prairie, Edmonton) closed at 5.4% cap rate; proceeds primarily allocated to the Normal Course Issuer Bid (NCIB); disposition strategy for 2027 currently under review to identify non-core asset opportunities.
• Expense Trends: Anticipated 2027 property tax increases to be more consistent, removing the anomalous 2026 education tax spike; 2027 expense guidance will factor in long-run inflationary factors of 2–4% for portfolio-wide property taxes; Controllable operating expenses (including admin) targeted to remain near $11 million per quarter.

Market and Competitive Outlook:

• Demand Dynamics: Continued strong demand for affordable housing relative to the oversupplied luxury segment; Alberta and Saskatchewan remain the primary growth engines driven by interprovincial migration and non-permanent resident inflows; Quebec market remains competitive but performing well.
• Pricing & Competition: Higher-priced segments facing increased competition and supply delivery, leading to potential rent adjustments (downward) in specific pockets; BoardWalk positioned to win market share in mid-to-high price points within its core markets.
• Supply: Construction starts in Calgary down ~15% year-over-year through September 2026; vacancy loss expected to increase slightly but offset by retention focus; winter season (Q4) typically sees reduced turnover.
• Regional Performance: Ontario remains stable; Alberta and Saskatchewan viewed as strategic engines for long-term prosperity with high migration rates.

Macro / Industry Outlook:

• Immigration: Anticipating new federal immigration levels announcement (expected shortly post-call) to be a critical driver for household formation and rental demand; BoardWalk advocates for economic migration; recent regulatory changes affecting non-permanent residents have led to modest increases in "moving out" churn, though teams are successfully backfilling.
• Interest Rates & Financing: Canadian 10-year benchmark noted at ~3.70%; current refinancing environment (CMHC rates approx. 4.05% for 5-year and 4.45% for 10-year) is above maturing debt rates but manageable due to staggered maturities; no significant impact on private market pricing or M&A activity observed yet regarding recent rate fluctuations.
• Regulatory & Policy: Alberta education property tax increase effective Q3 2026 expected to be removed as a variable driver for 2027; Premier's announcement provides certainty on tax trajectory for next three years; pending federal budget expected to detail timing of major infrastructure projects (e.g., De Havilland financing) impacting job creation.
• Economic Environment: Alberta's economic backdrop described as "constructive" with renewed recognition of energy, agriculture, and technology sectors; Saskatchewan supported by potash, uranium, and energy; overall view suggests resilience in core prairie markets.

Strategic Initiatives:

• Capital Allocation: Primary focus remains on growing Free Cash Flow (FCF) via the NCIB (Normal Course Issuer Bid); $245 million repurchased in 2026 at avg price $65.37; NCIB deemed best use of capital given the gap between public market price (implied cap >6%) and private market valuations (4.75%–5.25%).
• Liquidity & Balance Sheet: Strong liquidity position maintained at ~$403 million; debt-to-EBITDA ratio improved to 9x in Q3 2026; 99% of mortgage balance carries NHA/CMHC insurance with rates below conventional levels.
• Repositioning: Ongoing "BoardWalk Family Forever" strategy focusing on resident experience and affordability; cost-effective common area upgrades to preserve asset quality and retention.
• M&A/Dispositions: Reviewing 2027 disposition strategy for non-core assets; actively seeking acquisition opportunities but remaining highly selective due to valuation gaps; monitoring private market yield movements for potential entry points in 2027.

Risks and Headwinds to Outlook:

• Property Taxes: Anomalous 2026 education property tax increase in Alberta (approx. $15M for H2) caused 140 bps margin compression; future outlook depends on municipal assessment adjustments and the 2–4% inflationary baseline.
• Weather & Utilities: Q4 and full-year FFO guidance ($4.65–$4.75) is heavily sensitive to heating/cooling weather variations (utility costs); a colder winter could widen the FFO range downside.
• Regulatory Compliance: Increased R&M expenses in Quebec due to mandated safety inspections/testing of ~2,500 suites; potential for further regulatory-driven costs.
• Competition: Supply overhang in higher-price segments in Calgary and other urban centers could pressure rental growth and necessitate higher incentives to maintain occupancy.
• Non-Permanent Resident Volatility: Uncertainty regarding immigration status and permit renewals causing churn in specific cohorts; mitigation requires active backfilling.

Management Tone on the Future:

• Confidence: High confidence in the resilience of the affordable housing sector and the company's ability to maintain high occupancy (97%) despite a balanced/competitive market.
• Strategy: Emphasis on "disciplined patience" in capital allocation; belief that current low unit prices present a unique value opportunity for the NCIB and future acquisitions.
• Sentiment: Positive regarding Alberta's economic future post-referendum; proactive in managing operating expenses and adapting to regulatory changes; cautious but ready to pivot on 2027 acquisition/disposition strategy pending 2027 market clarity.

Miscellaneous:

• Fair Value: Investment property fair value estimated at $248,000 per unit as of Sept 30, 2026, remaining below replacement cost; cap rates used for valuation deemed within market ranges.
• Special Distributions: Potential for a special distribution update in December reflecting taxable gains from the 2026 sales program.
• ESG/Community: Continued focus on "BoardWalk Family Forever" culture; partnership with CMHC and federal governments for affordable housing supply.