Watch the Industrial REIT – Fund President Q4 2023 Update

Transcript

Ray Punn: [00:00:55]

I’m pleased to provide you with Skyline Industrial REIT’s (Real Estate Investment Trust) update for Q4 2023. Mike, thanks for joining me today.

Mike Bonneveld: [00:01:02]

Thanks, Ray. Happy to be here.

Ray Punn: [00:01:03]

Let’s just get right into it. Can you walk our investors through the Industrial REIT summary for Q4?

Mike Bonneveld: [00:01:08]

Yes. No problem. Unit Value is still consistent at $22.50. Our distribution is at $1.00, which results in a running yield of 4.44%.

Mike Bonneveld: [00:01:19]

From an operational standpoint, the portfolio continues to perform very strongly. We’re running occupancy at 98.6% as of the end of December, and a total square footage of 9,611,000 square feet. And that incorporates our acquisition of HP10 (1 High Plains Trail, Rocky View County, Alberta) in December.

Mike Bonneveld: [00:01:41]

It’s been, I would say, a somewhat quiet quarter, which was always contemplated. We had a lot of activity in terms of dispositions – and a couple of acquisitions [back] in Q3 [2023]. And as I mentioned to a lot of investors that that I’ve spoken to, we’re really done the vast bulk of any dispositions. So, a lot of that finished out in Q3.

Mike Bonneveld: [00:02:12]

The only acquisition we had scheduled for Q4 was that 414,000 square foot facility, which I toured a week and a half ago. One of the tenants is putting in a new robotic pick-and-pack facility into this building and spending tens of millions of dollars on it. It’s going to be quite impressive. They are six months into a 14-month build-out.

Mike Bonneveld: [00:02:38]

So, while it has not been an overly active quarter in terms of announcement, financial performance is on budget and on track. The leasing team continues to get ahead of all of the lease renewals or expiries that are coming up in 2024; I think [as of] my last chat, we were at about 75% of all 24 expiries dealt with, which means that the leases have either been renewed or the tenants will be vacating, and we’ve already found replacement tenants. So [we are] really, really happy about that.

Mike Bonneveld: [00:03:18]

Also, in December, we finished out our expansion at Hawthorne Drive in Windsor for one of our larger tenants, TRW. As part of that 50,000 square foot expansion at the back of the building, we extended their lease out as well, which has been great for both the tenant and for us.

Ray Punn: [00:03:40]

Thanks for sharing that, Mike. What does 2024 look like for the Industrial REIT? And maybe you can also comment a little bit on the development pipeline coming online.

Mike Bonneveld: [00:03:48]

Yes, 2024 will be a year where we see further completion of a number of assets in our development pipeline. As we sit here today in February, we’ve already acquired another one of those assets – being the asset at Victor Davis in Montreal. That was acquired mid-January from our partners, Rosefellow and F.I.T. Ventures.

Mike Bonneveld: [00:04:17]

We have another asset from that development pipeline scheduled for closing in mid-February over the next couple of weeks. And then I anticipate – even though we’re not at the point yet in terms of substantial completion for the asset – another closing for sure, probably by the end of Q2 of this year. So, between those three projects, it’s about 500,000 square feet of space, which would be, you know, roughly a 5% increase on the overall portfolio size of where we sit right now, just generally.

Mike Bonneveld: [00:04:55]

And as we look into the latter part of 2024, on the development side, there may be one other asset that – just depending on leasing and completion of construction – we may look to acquire, but it will be dependent really on when we get to that stabilization point, and some of the structure of the leases in there.

Mike Bonneveld: [00:05:17]

In terms of new acquisitions outside of our development platform, we don’t have anything really in the pipeline, because we have a lot coming through with those developments. We’re looking at lots of stuff, but nothing committed at this point.

Mike Bonneveld: [00:05:32]

As we edge into February, a lot of our early refinancings for the year are completed and they’ve gone quite well – I would say ahead of budget in terms of rate, given we have seen a little reprieve from, call it, end of Q3 of 2023 to where we are today in terms of the overall interest rate we got. And again, we’re hoping by Q3-Q4 that we get some rate softening from the Bank of Canada as well. And that’s when our next chunk of refinancings will occur: in the back end of 2024.

Mike Bonneveld: [00:06:15]

Some of the other things that we’re looking to really finish out will be on the ESG (Environmental, Social, Governance) side. We rolled out a number of assets based on tenant demand. [In terms of] EV chargers, we’ve got four more sites that we’re looking to do once those are done, and that should be by mid-year, that will be that program rolled out. We continue to look at the viability of solar roof projects in conjunction with the tenants – still going through proforma work on that.

Mike Bonneveld: [00:06:52]

Operationally, I think we have one site left where we’re rebranding in terms of signage on all our assets. Now that virtually all the assets that we wanted to dispose of have been sold, [we’re] really re-signing, branding [our properties] so that when you drive up to a Skyline building, be it as a tenant, or as a leasing broker, or someone coming into that business, that branding is there, that name awareness, and I’m quite proud of the imaging and what it looks like. And we’ve had some really good feedback from tenants as well.

Ray Punn: [00:07:28]

Thanks, Mike, for joining me today. Skyline Industrial REIT is currently open for new investment. If you have any questions, please contact Skyline Wealth Management. Thank you for watching.

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