Artis Real Estate Investment Trust Unit (TSE:AX.UN), following its February merger with RFA Financial, is pursuing property sales and lending growth as it works toward a three-to-five-year plan, executives said on the company’s third-quarter earnings call.
RFA Financial President and CEO Ben Rodney said the company is targeting cumulative asset sales of approximately CAD 1.3 billion to CAD 1.5 billion and CAD 8 billion to CAD 12 billion in lending assets. Management also aims for a payout ratio below 65% over the same period.
For RFA Bank, the objectives include a low-to-mid-teen return on equity and compound annual net income growth of 40% to 50%, Rodney said. He added that the company remains in the early stages of its plan.
Property Sales Advance
RFA Financial closed the sale of 11 properties for CAD 110.5 million during the third quarter, CFO Jaclyn Koenig said. The company had approximately CAD 334 million of investment properties held for sale as of September 30.
Chief Operating Officer Melody Lo said the quarter’s sales included a 10-property industrial portfolio in Winnipeg for CAD 76.5 million and an Alberta retail property for CAD 34 million. The company had closed CAD 60 million of dispositions in the first quarter and CAD 94 million in the second quarter.
After quarter end, RFA closed the sale of another industrial property for CAD 39 million. That brought closed dispositions to CAD 304 million across 27 properties and a parcel of development land, Lo said.
Including closed, unconditional and conditional transactions, year-to-date disposition activity reached CAD 530 million, or approximately 40% of the company’s three-to-five-year target, according to Lo.
Lo said closed sales and unconditional contracts achieved an average price 5.4% above IFRS values. Closed sales were 4.3% above those values, while unconditional contracts were 8% above them.
Leasing and Portfolio Update
Following recent dispositions, the portfolio consisted of 65 commercial properties in Canada and the United States totaling approximately 7.9 million square feet, along with 395 multi-residential suites, as of September 30, Lo said.
Occupancy, including committed leases, stood at 84% at quarter end, according to Koenig. The company also reported an 11.2% weighted average increase in renewal rates during the quarter.
Lo said the increase covered nearly 117,000 square feet of lease renewals that commenced in the quarter. RFA also signed a tenant to a 20-year lease for more than 120,000 square feet, scheduled to begin in 2028.
Mortgage Originations Rise
Year-to-date mortgage originations across on- and off-balance-sheet operations increased 31% from the prior year, Lo said. She added that the company was close to surpassing its full-year origination volume from the previous year and expected to exceed that level by year-end.
RFA Mortgage Corporation’s arrears rate was 0.063% in the third quarter, compared with a national average of 0.30%, Lo said. The company cautioned that some information cited on the call, including mortgage arrears rates, came from third-party sources and had not been independently verified by RFA.
At RFA Bank, actual credit losses represented 0.23% of average mortgage and loan assets on an annualized basis, Koenig said. The bank’s common equity Tier 1 capital ratio was 16.09%.
Koenig also reported a net interest margin of 2.4%, excluding the impact of non-cash purchase price adjustments. The company noted that measures including net interest margin and average mortgage and loan assets are non-GAAP measures and may differ from those used by other issuers.
No analysts asked questions during the call’s question-and-answer session.
About Artis Real Estate Investment Trust Unit (TSE:AX.UN)
Artis is a diversified Canadian real estate investment trust with a portfolio of industrial, office and retail properties in Canada and the United States.
