Boardwalk REIT: Expenses Eat Q3 as NOI Slips 1.1 Percent

Boardwalk Real Estate Investment Trust (TSE:BEI.UN) posted a 1.1% year-over-year decline in third-quarter same-property net operating income (NOI), as total rental expenses climbed 5.3% and the operating margin fell 140 basis points to 67%. Same-property rental revenue rose just 0.9%, executives said on the Nov. 4 earnings call.

The chief culprit was Alberta's education property tax, which took effect in July, alongside unplanned repair costs. CFO Gregg Tinling cited mandated inspections in Quebec and record rainfall in Edmonton and Grande Prairie as drivers of third-quarter maintenance spending.

What happened to per-unit results?

CEO Sam Kolias said funds from operations (FFO, a cash-flow measure used for REITs) declined largely because of asset sales, although unit repurchases limited the drop in FFO per unit to 1.6%. The trust held occupancy at 97% during the quarter, crediting resident retention and a focus on affordable housing.

Samantha Kolias-Gunn, senior vice president of corporate development and governance, said the average occupied rent for a two-bedroom apartment was CAD 1,609, against a Canadian average of CAD 2,221 based on Rentals.ca data.

Tinling said blended leasing spreads (the average rent change across new and renewed leases) were slightly negative as the trust adjusted rents to local conditions. Renewal spreads stayed positive and preserved occupancy, while rents were lowered in some communities facing new supply or higher-priced competition. President James Ha told analysts that renewal spreads around 2% were consistent with what the trust expects over the next couple of months.

How tight is the guidance?

Boardwalk narrowed its 2026 forecast to same-property NOI growth of 1% to 2% and FFO per unit of CAD 4.65 to CAD 4.75. Ha said sequential revenue growth in the third quarter was helping offset higher property taxes in the second half. Utilities remain the biggest variable in the range, depending on winter weather.

Tinling said fourth-quarter property taxes should be similar to the third quarter. He added that the trust does not expect a similar education tax increase next year, though it is too early to make a firm forecast. Boardwalk plans to issue 2027 guidance with its fourth-quarter results.

Where is the capital going?

Senior Vice President of Investments Samantha Adams said Boardwalk had completed or announced CAD 629 million in asset sales year to date at an average capitalization rate (a property yield metric) of 5.2%. Once remaining deals close, the sales should generate CAD 342 million in net proceeds and cut near-term capital spending by roughly CAD 33 million. The total includes CAD 177 million of third-quarter sales in London, Grande Prairie and Edmonton, sold for high deferred capital needs, operational challenges or market overexposure.

The trust has repurchased CAD 245 million of units in 2026 at an average price of CAD 65.37. Adams described the normal course issuer bid (a buyback program) as Boardwalk's top capital allocation priority, citing the gap between its unit price and private-market valuations. Eric Bowers, vice president of financial and investor relations, said the current program was completed during the quarter and is eligible for renewal in late November. Adams said acquisitions remain under review but highly selective.

How solid is the balance sheet?

Boardwalk ended the quarter with approximately CAD 403 million in liquidity. Its debt-to-EBITDA ratio improved to 9 times from about 10 times at the end of 2025, with debt just under 43% of total assets, Bowers said.

Of roughly CAD 815 million in mortgages maturing in 2026, Boardwalk had renewed or forward-locked CAD 579 million at an average rate of 3.89% and an average term of about seven years, Tinling said. The fair value of investment properties stood at CAD 8 billion at Sept. 30, down from CAD 8.6 billion at the end of 2025 on asset sales and a fair-value loss adjustment.

The trust confirmed monthly distributions of CAD 0.15 per unit for December 2026 and January and February 2027. Bowers said Boardwalk expects to update investors in December on any special distribution tied to taxable gains from its sales program. Competition, meanwhile, is sharpest at higher price points, including in Calgary, where the trust upgraded its portfolio in recent years. Ha said Boardwalk would like to lift occupancy further heading into 2027.