Plaza Retail REIT Earnings Call Highlights Strategic Growth and Strong Performance

Plaza Retail REIT (($TSE:PLZ.UN)) has held its Q1 earnings call. Read on for the main highlights of the call.

Plaza Retail REIT’s recent earnings call conveyed a predominantly positive sentiment, highlighting strong operational performance and strategic growth initiatives. Despite facing some seasonal cost challenges and temporary impacts on Adjusted Funds From Operations (AFFO), the company demonstrated solid liquidity and improved financial metrics, underpinning a positive outlook.

Increased Ownership in Key Assets

Plaza Retail REIT has successfully increased its ownership interest in Tacoma Plaza from 50% to 100%. Additionally, the company plans to increase its ownership in three Shoppers Drug Mart locations in Ontario from 25% to 100%, with an IFRS property value of approximately $23 million at full ownership. These strategic moves are expected to enhance the company’s asset portfolio and revenue streams.

Strong Same Property Performance

The company reported a 1.5% year-over-year increase in same property Net Operating Income (NOI), driven by robust leasing activity and disciplined expense management. Leasing spreads were notably strong at 15.4% over the renewal term, reflecting Plaza’s effective leasing strategy and market positioning.

Development and Conversion Initiatives

Plaza has initiated the conversion of 40,000 square feet of space into grocery use, which is expected to generate $1 million of incremental NOI. Furthermore, a new grocery store project is underway, anticipated to contribute $700,000 of NOI upon completion. These initiatives underscore Plaza’s focus on intensification and optimization to drive future growth.

Improvement in AFFO and Debt Metrics

The company reported a 12% increase in AFFO per unit compared to the previous year. Additionally, the debt-to-assets ratio improved by 30 basis points to 50.5%, and the net debt-to-EBITDA ratio decreased to 8x, down 60 basis points from last year. These improvements reflect Plaza’s commitment to strengthening its financial position.

Healthy Liquidity Position

Plaza maintains a robust liquidity position with $64 million available, including cash, operating line, and debt facilities. This financial flexibility enables the company to pursue upcoming opportunities and navigate market challenges effectively.

Higher Winter Costs

A tougher winter resulted in increased snow removal costs, impacting same-asset NOI despite the overall increase. This seasonal challenge highlights the importance of effective expense management in maintaining profitability.

Short-term Impact on AFFO

Capital-intensive space conversions are currently impacting AFFO in the short term. However, these investments are anticipated to yield positive returns on costs in the long run, aligning with Plaza’s strategic growth objectives.

Forward-Looking Guidance

During the Q1 2025 earnings call, Plaza Retail REIT provided key metrics and updates, including a 1.5% year-over-year increase in same property NOI and a 12% rise in AFFO per unit. The company emphasized its focus on intensification and optimization initiatives, with projects expected to generate substantial incremental NOI. Occupancy rates remained at all-time high levels, and the REIT’s debt metrics showed improvement, supporting a positive outlook for future performance.

In summary, Plaza Retail REIT’s earnings call highlighted a positive sentiment driven by strategic acquisitions, strong operational performance, and development initiatives. Despite facing seasonal cost challenges, the company’s improved financial metrics and healthy liquidity position underscore its potential for continued growth and success.