Boardwalk Real Estate Investment Trust (BEIUN) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Boardwalk Real Estate Investment Trust Second Quarter 2026 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, July 29, 2026. I would now like to turn the conference over to Eric Bowers, VP Finance and Investor Relations. Please go ahead.

Thank you, Joelle, and welcome to the Boardwalk REIT 2026 second quarter results conference call. With me here today are Sam Kolias, Chief Executive Officer; James Ha, President; Gregg Tinling, Chief Financial Officer; Samantha Kolias-Gunn, Senior VP of Corporate Development and Governance; and Samantha Adams, Senior VP of Investments. We acknowledge the traditional lands on which we live and work and our shared commitment to respect, stewardship and community. Before we get to our results, please note that this call is being broadly distributed by way of webcast. If you have not already done so, please visit us at bwalk.com/investors, where you will find a link to today's presentation as well as PDF files of the Trust's financial statements, MD&A and quarterly report. Starting on Slide 2, we would like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements. Additional information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly filed documents. I would like to now turn the call over to Sam Kolias.

Thank you, Eric. Starting on Slide 4, welcome, everyone, to our Boardwalk Family Forever and to our Q2 2026 results. Redefining BFF, Boardwalk Family Forever is at the top of our organizational chart. Family is everything. Affordable multifamily communities have always been an essential product and service. Together with our residents, our associates, investors, partners, capital, environment, community, we are all essential and interconnected family members with our true north, where love always lives. Together, we go far. Our leaders put our team first and our team puts our resident members first. Guided by the golden rule, we have a peak-performing customer service culture that creates exceptional results as we can see on our next Slide 5. Our continued solid performance with GAAP and non-GAAP measures increasing from the same quarter last year. Same property rental revenue increased 1.7% and same property net operating income increased 1.7%, reflecting resilient operating results and fundamentals. Our operating margin remains strong at 67.6%. As a result of our recent asset sales, our funds from operations are down slightly. Our asset sales provide capital for our Normal Course Issuer Bid program, which has helped to increase our FFO per unit by 2.6%, demonstrating the impact of strategic capital allocation and continued growth in cash flow and value creation for our unitholders. Profit is down as a result of a noncash reduction in our IFRS net asset value. I would like to now pass it over to Samantha Kolias-Gunn.

Thank you so much, Sam. We are extremely grateful for our teams, our Boardwalk families, perseverance, performance and continued commitment to our purpose, bringing our resident family members home to love always. Continuing on to Slide 6, our operational stability and commitment to affordable housing. Rental market fundamentals in our core markets are competitive. Demand continues for more affordable housing despite supply deliveries focused on higher-end luxury product to justify high construction costs. We are grateful for our partnership with CMHC and our federal government that have implemented effective public policy to build more supply that has resulted in a balancing of the rental markets across Canada, providing more affordability to all Canadians. We continue to deliver on our commitment to provide much-needed affordable housing in a more competitive environment with our experienced peak-performing team, exceptional product quality with over $1 billion invested since 2017 in rebrand and repositioning efforts and dedication to our Boardwalk family as responsible community providers. Our self-regulation provides us with continued steady results across various market cycles as we remain flexible with our rental rates, producing greater stability in occupancy, margins, NOI and reputation. Paired with our strong financial foundation, minimum distribution policy resulting in maximum reinvestment and free cash flow growth, strategic repositioning, unparalleled customer service and on our foundation of strong family values, we remain in a position to deliver solid performance. This is what sets us apart, bringing you home to where love always lives. Boardwalk strives to be the first choice in multifamily apartment communities to work, invest and call home with our Boardwalk Family Forever. Moving on to Slide 7. Our strategic rebranding enhances our resident member experience and exceptional quality at an affordable price, keeping our occupancy high at 97%. Per Rentals.ca data, our average occupied rents of $1,612 for a 2-bedroom apartment are attractive, especially relative to the Canadian average of $2,159. Moving on to Slide 8. Alberta continues to see positive population growth with small relative amounts of nonpermanent residents. Affordability continues to drive positive population and leading economic growth in our core markets of Alberta and Saskatchewan, reflected in our appendix. Quebec has delivered exceptional results despite negative population growth, further evidencing the strong demand for affordable housing. Ontario remains stable. We are strategically in all the right places at the right time. Please refer to our appendix for more data on the resilience of the Alberta economy and the renewed Alberta Advantage and Alberta's role within Canada as both an energy leader and a strategic engine for Canada's long-term prosperity. Alberta has had a transformative month with the announcements of 2 major pipeline proposals as well as a $4.6 billion natural gas power plant to energize a $13 billion investment from Meta for Canada's largest data center. The combination of energy, security, economic competitiveness and infrastructure investment provides a foundation for job creation, population inflows and sustained economic activity across our core markets. We would like to now pass the call on to Gregg Tinling, who will provide us with an overview of our quarter results, strong balance sheet, fair value and ESG. Gregg?

Thank you, Samantha. Slide 9 shows our key operational metrics. The Trust retained high occupancy during Q2 2026 by focusing on retention and by leveraging its vertically integrated operating platform to limit the time to complete suite turnovers. Trust's approach to strategically moderate its lease renewal rates over the last number of years, while markets were heavily undersupplied, also contributed to maintaining higher occupancy in a more balanced market. Overall, demand remains strong for affordable housing. Average occupied rent increased sequentially and when compared to the same quarter a year ago. Although vacancy loss increased, the Trust was able to reduce incentives that helped contribute to the higher revenues reported for Q2 2026 compared to the same period a year ago. These results reflect the success of our strategic initiatives aimed at maximizing free cash flow and diversifying our product offering, delivering meaningful financial performance. Slide 10 provides an overview of leasing spreads for new and renewed leases under our self-regulated resident-friendly centric model. This approach continues to drive strong retention and referrals while keeping turnover and operating expenses low. On a year-over-year basis, leasing spreads have moderated, reflecting a more balanced supply-demand environment. Positive market rent adjustments were implemented in some communities where rental fundamentals were strong. In other communities, market rents were adjusted downward in pockets that have experienced higher deliveries of new supply and where rents were on the higher end of the price spectrum. On a blended basis, leasing spreads remained positive, reflecting effective resident engagement and retention strategies in a more competitive market. Our strategic flexibility with new rental rates enabled us to preserve high occupancy while maintaining solid operating margins and net operating income. We will continue to focus on maintaining high occupancy and maximizing resident retention. This strategy reinforces our commitment to providing affordable resident-friendly housing in our core markets while also reducing costs and steadying operational performance, delivering long-term value for all stakeholders. Slide 11 shows sequential quarterly rental revenue growth. Rental revenue growth was flat in Q2 2026 compared to Q1 2026, but has improved slightly compared to Q4 2025. With increased competition, Boardwalk focused on maintaining high occupancy while balancing market rents and rental incentives in order to achieve its NOI optimization strategy. Turning to Slide 12. For Q2 2026, same property net operating income increased by 1.7% compared to the same quarter last year, with revenue growth of 1.7%. Same property NOI for Alberta, the Trust's largest region, increased 1% with revenue growth of 1.1%. Total rental expenses increased by 1.9% year-over-year, mainly due to higher building repairs and maintenance, bad debt expense and property taxes, partially offset by lower insurance premiums and utilities expense. Slide 13 outlines Boardwalk's mortgage maturity schedule. The Trust debt portfolio is well staggered, with approximately 99% of the mortgage balance carrying NHA insurance through CMHC. This insurance remains in place for the full amortization period and backed by the Government of Canada, enables access to financing at rates below conventional mortgage levels with a current estimated 5-year and 10-year CMHC rate of 3.80% and 4.20%, respectively. Although current interest rates are above the Trust's maturing rates over the next couple of years, the Trust maturity curve remains staggered, reducing the renewal amount in any particular year. Lastly, the Trust has an interest coverage of 2.97 in the current quarter. To date, in 2026, of the $815 million of 2026 mortgages maturing, we have renewed or forward-locked $457 million at an average rate of 3.78% and an average term of approximately 6 years. Combined with our cash on hand as well as our unused credit facilities, we are well positioned with strong liquidity available. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates. Please refer to Slide 49, which summarizes our 2026 mortgage program completed. Slide 14 illustrates the Trust's estimated fair value of its investment properties, excluding adjustments for IFRS 16. As of June 30, 2026, the fair value of investment properties totaled $8.4 billion compared to $8.6 billion as at December 31, 2025. Decrease in overall fair value is the result of asset sales completed as well as an overall fair value loss adjustment recognized in the period. Current estimated fair value of approximately $243,000 per apartment door remains below replacement cost. As it does every quarter, the Trust will continue to review completed asset sales transactions and market reports to determine if adjustments to cap rates are necessary as well as consult with our external appraisers. Most recent published cap rate reports suggest that the cap rates being utilized by the Trust for calculating fair value are within their estimated ranges. Slide 15 highlights our ESG initiatives. We'd like to highlight our 2025 GRESB score of 72, which represents a 7.5% increase compared to the prior year. Using a disciplined capital allocation approach, we are focused on reducing emissions through reduced utilities consumption and therefore, reducing utilities costs while always promoting social and governance initiatives. We encourage our stakeholders to view our 2025 ESG Report available on the Trust's website. I would like to now turn the call over to Samantha Adams to highlight our capital allocation initiatives.

Thank you, Gregg. Disciplined patience and tactical equity deployment continue to guide our 2026 capital allocation strategy. Consistent with prior quarters, we remain focused on maximizing free cash flow and directing capital towards the strongest risk-adjusted opportunities. A key capital allocation priority remains our value-add and repositioning program. As highlighted on Slide 16, reinvesting free cash flow into our communities strengthens the value proposition for our resident family members. Of the 16 projects planned for 2026, 6 are completed or nearing completion and all are focused on cost-effective, high-impact common area and amenity upgrades that support long-term asset quality, enhance the resident experience, maintain affordability and improve retention. Driven by market demand, this program delivers strong value across our 3 brands and helps ensure our properties remain competitive in their respective markets. Slide 17 summarizes our transaction activity and capital allocation for the first half of 2026. With $492 million of sales completed or announced and in conjunction with our repositioning program, we continue to advance our strategy, our strategic portfolio renewal. Once all of the transactions are closed, these sales will have generated approximately $272 million in net proceeds and reduced near-term capital spending by approximately $26 million. Slide 18 provides further detail on our year-to-date sales activity, including the recently announced sale of a 2-property portfolio in London and our new co-ownership agreement with Desjardins. Our London portfolio was sold at a slight premium to IFRS value with a $40 million sale price representing a 4.5% exit cap rate based on our trailing 12-month NOI. Overall, our dispositions have been completed at pricing in line with our fair value, providing capital to redeploy towards the strongest risk-adjusted opportunities, the majority of which has been allocated to our unit buybacks. As shown on Slide 19, our capital allocation during the quarter was focused on the NCIB, reflecting the continued disconnect between our unit price and the underlying value of our portfolio. The NCIB remains an important capital allocation tool, and we have remained active year-to-date, investing $204 million at a weighted average price of $65.51. With private market transactions in our core markets occurring in the 4.75% to 5.25% cap rate range, repurchasing our units at implied cap rates above 6% remains the most accretive use of our capital today. On Slide 20, we are very pleased to present the highlights of our strategic co-ownership with Desjardins Global Asset Management and its Canadian private real estate funds. For Boardwalk stakeholders, this co-ownership validates the quality and value of our portfolio and platform through the commitment of a long-term institutional partner. Desjardins is acquiring a 50% interest in the seed portfolio at an implied value of $292 million or approximately $446,000 per suite, which is in line with our IFRS values. Just as importantly, this transaction allows us to recycle capital while continuing to participate in the future upside of these properties as Boardwalk will retain a 50% ownership interest. With no fixed targets or equity commitments going forward, this structure provides both parties greater capital flexibility to pursue future acquisitions together when market conditions are aligned and we find the best opportunity. Boardwalk will continue to oversee day-to-day operations with our proven operating platform, allowing us to maintain our focus on the resident family member experience and overall property performance. We will also earn a 4.25% property management and administrative fee on effective gross revenue, which is expected to provide an approximate 25 basis point yield improvement on our proportionate share. Ultimately, this co-ownership reaffirms the value of our portfolio, the strength of our exceptional operating platform and overall investment strategy. It also supports our long-term objective of combining operating excellence with disciplined capital allocation to grow free cash flow and create lasting value for our stakeholders. I would now like to turn the call over to Eric Bowers to discuss our track record of creating value.

Thank you, Samantha. Slide 21 highlights our track record of compounding FFO per unit and distribution growth over the last several years as a result of the Trust's maximum cash flow retention policy. This approach has enabled the Trust to reinvest its cheapest source of capital, internally generated cash flow into its communities to more than double FFO per unit since 2018 and compound distribution growth at an annual rate of approximately 12% since 2021. We are pleased to confirm our regular monthly distribution equating to $0.15 per Trust unit or $1.80 per Trust unit on an annualized basis for the months of September, October and November 2026. On Slide 22, we highlight the strength of the Trust balance sheet and the continued progress we are making on decreasing our financial leverage over time. In Q2, the Trust's debt-to-EBITDA ratio improved to 9.3x down from approximately 10x in Q4 2025, while debt to assets remains at approximately 43%. The Trust's liquidity is estimated at just under $375 million at the end of Q2. Slides 23 and 24 illustrate the exceptional value that the Trust's units continue to represent relative to private market valuations and the Trust's NAV per unit. At the current unit price of approximately $65, the Trust's implied value of $194,000 per suite and implied cap rate in the mid-6% range provides the Trust with an amazing opportunity to invest on an accretive basis and countercyclically in its own high-quality portfolio at a significant discount as previously highlighted by Samantha Adams. I would like to now turn the call over to James Ha to discuss the Trust's latest financial guidance and provide closing remarks.

Thank you, Eric, and thank you to our entire Boardwalk team for your service and commitment to our resident members. Our focus on delivering the best quality and affordable communities is why our residents make Boardwalk their first choice as a place to call home and reward our team with continued high occupancy and high retention rates. Slide 25 provides a review of our 2026 outlook as we continue to demonstrate the strength of our platform and the resilience of affordable housing. Across the country, we continue to see strong demand for affordably priced homes, while more expensive housing options remain competitive. Our positive blended lease spreads so far this year are a reflection of our high affordability, and we anticipate our leasing trends to remain similar for the remainder of the summer leasing season. Since our last report, we are seeing our overall bottom line results in line with our expectations. Same property revenue is tracking toward the lower end of our original growth estimate. However, our outlook for same property expense growth has improved despite the large property tax increase we will be seeing in the second half of the year. With this, we are pleased to reiterate our outlook for the year with anticipated same property NOI growth of between 1% to 3.5% and FFO per unit of between $4.60 and $4.80 for the year. Please note that this is forward-looking guidance, and we will be regularly updating and refining this outlook as the year goes on. Lastly, Slide 26 highlights a few key metrics that our team has and continues to work toward improving. As shared earlier, Boardwalk offers the best value in housing and some of the most affordable rents in the country at just over $1,600 a month. Our operating margins have improved significantly as we continue to find new ways to optimize our NOI. Our unique business model retains and compounds cash flow, allowing us to organically improve our balance sheet with now one of the lowest debt-to-EBITDA ratios in Canada. Our unique platform, disciplined approach to capital allocation, geographic advantage and experienced team continues to demonstrate our ability to create value for all our stakeholders, and we would like to thank again our resident members, our team, our partners and all our stakeholders for making us your first choice in housing. We would now like to open up the line for questions. Joelle?

[Operator Instructions] And your first question comes from Dean Wilkinson with CIBC.

Maybe a question on the new joint venture probably for Samantha. This looks like an opening gambit in something that could be much larger. I realize you don't have targets around it. But looking at the current portfolio, and it seems like this is geared towards newer build assets, do you have a sense of how much of what you have existing could go into this? And what's your appetite for how large this could be?

Dean, yes, thanks for the question. In terms -- like Desjardin approached us initially with an idea of creating this partnership or co-ownership looking at core, core-plus communities. So when we took that back and sort of went through our portfolio, we were able to sort of match their investment criteria with the seed portfolio that we've just presented. There might be a couple of other properties that we currently own that would fit the criteria. But the intent over time is to grow through third-party acquisitions, so buying from a third party, excuse me, when the markets are aligned and the best, as we like to say, the best opportunity comes our way. So there's no -- to your point, there's no fixed or set capital deployment on an annual basis or a target, but an agreement to work together for the foreseeable future.

And I'm assuming that this is open-ended, it doesn't have sort of a 5-year horizon or something like that on it.

Correct.

Okay. Would this also open the door for completion of developments like The Marin and Marda Loop, Island Highway, would those be kind of assets that would probably be something that could go into the JV?

It's possible, but the development economics today are really hard to make sense of. So it's possible, but today, it's very tricky.

Okay. I'm sure others have a lot of questions on this, so I won't monopolize it. Maybe a question just for Gregg on the debt maturities. It looks like some of the more recent roles you did in June and July, shorter duration, like 2 years. Was there something asset-specific there? Or was it just trying to minimize the rate grind on a renewal?

Dean, it's Eric. Yes, we always take our asset plans into account in terms of structuring that. And on our overall ladder, we did have a little bit of a gap in 2028, so just looking to fill in some of that.

Okay. That makes sense. And then I would assume that you're looking longer term on what's left for the rest of the year.

Yes. I think you'll see us do a combination across the ladder, but you can see within our existing ladder where some of those gaps are. So I think you'll see us generally err towards longer in the balance of the year.

Your next question comes from Jonathan Kelcher with TD Cowen.

Going back to the Desjardins transaction, when they came to you, was it with a size that they wanted to invest?

It's sort of a ballpark size, but not a specific target, no. It was more about coming together and aligning sort of strategically on what our mutual investment criteria could look like. That's really where the conversation started, and then we took it back. And the result is, as you can see, we decided to start our relationship with this amazing seed portfolio. But no, they didn't have a target in mind.

Okay. And if we look at the cash proceeds you're going to get from this and then as well as the sale of the London assets, are you still looking at the NCIB as the best way to spend money? Or with the extra 25 bps you get with Desjardins, are you starting to look harder at acquiring assets from third parties?

Jon, it's James. Certainly, as Samantha said in her prepared remarks, there is just no better place to buy apartments right now than on the stock market with -- under the ticker symbol BEI. I mean we're trading at over 6% cap rate with a mid-7% FFO yield. To us, it is a great accretive place to redeploy those proceeds from dispositions.

Okay. Fair enough. And then just one on the operations. The incentives -- your incentives ticked up quarter-over-quarter in Q2. Was there any market in particular? And how do you expect that to trend going forward here?