Red Friday

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Last Friday August 11th is a day that Boardwalk Real Estate Investment Trust shareholders would sure like to forget. Second Quarter earnings were released and it was not pretty to put it mildly.

Who Is Boardwalk REIT?

Boardwalk REIT currently owns and operates more than 200 communities with over 33,000 residential units totaling approximately 28 million net rent-able square feet. Boardwalk is Canada’s leading owner/operator of multi-family communities with properties in Alberta, Saskatchewan, Ontario, and Quebec.

Boardwalk’s second quarter results came in lower than internal expectations as a result of unanticipated delays relating to the Trust’s suite renovation and re-branding program. They also announced that they did not anticipate meeting their original forecast revenue growth in the last half of the year. Investors responded to this news by selling their shares and the stock tumbled 11.3%. For the last year and a half Boardwalk as struggled with higher vacancy levels, they have had to be aggressive in offering incentives to get tenants to renew their leases. Boardwalk has claimed that some of their problems are due to the challenging economy in Alberta and also new purpose built rental supply has caused a competitive environment in 2016.

Unit Location

As you can see Boardwalk is highly concentrated in Alberta where they have 60% of their residential units. It is no real surprise to see Boardwalk struggle as Alberta has had an economic downturn due to the low oil prices. As an investor I would like to see Boardwalk become more diversified instead of relying mostly on one province.

Second Quarter Financial Numbers

Funds From Operations ($ millions)
Three Months Jun 30, 2017 Three Months Jun 30, 2016 % Change Six Months Jun 30, 2017 Six Months Jun 30, 2016 % Change
$27.5 $38.5 -28.5% $53.2 $77.7 -31.5%
Cash Flow From Operations ($millions)
Three Months Jun 30, 2017 Three Months Jun 30, 2016 % Change Six Months Jun 30, 2017 Six Months Jun 30, 2016 % Change
$25.2 $36.7 -31.40% $50.6 $65.1 -22%
Revenue ($ millions)
Three Months Jun 30, 2017 Three Months Jun 30, 2016 % Change Six Months Jun 30, 2017 Six Months Jun 30, 2016 % Change
$105.6 $110.4 -4.4% $211 $223.8 -5.7%
Net Operating Income ($ millions)
Three Months Jun 30, 2017 Three Months Jun 30, 2016 % Change Six Months Jun 30, 2017 Six Months Jun 30, 2016 % Change
$54.4 $66.5 -18.2% $107 $133.5 -19.8%

As you can see these numbers are decreasing not what you want to see as an investor.


% Occupancy
2017 2016 2015 2014 2013
January 93.8% 97.5% 97.6% 98.2% 98.3%
February 94.3% 97.4% 97.9% 98.6% 98.5%
March 94.7% 97% 97.8% 98.6% 98.5%
April 95.1% 96.8% 97.7% 98.7% 98.7%
May 95.4% 96.3% 97.3% 98.5% 98.5%
June 95.6% 96.8% 97.2% 98.4% 98.6%
July 94.7% 96.5% 98% 98.2%
August 94.2% 96.6% 98.1% 98.4%
September 94.9% 96.8% 97.8% 98.5%
October 94.6% 97.2% 98.2% 98.4%
November 94.3% 97.4% 98% 98.4%
December 93.8% 97.5% 97.7% 98.4%
Total 94.8% 95.7% 97.3% 98.2% 98.5%

Last year Boardwalk reached a high vacancy rate of 93.8% in December the highest in years. For the first six months of 2017 the vacancy rate has been improving every month and reached 95.6% in June. As you see this year’s numbers are worse than 2016 so the financial numbers don’t really surprise me.


Boardwalk pays a monthly dividend of $0.1875 to its unitholders. The dividend maybe in trouble if the downturn persists. The Trust is currently paying out an estimated 103.6% of reported Funds From Operations (FFO) and 133.7% of Adjusted Cash Flow From Operations (ACFO) compared to 74% and 83.4%, respectively for the same period last year.

According to the Trust distributions as a percentage of FFO on a rolling four quarter basis were 95.1%

Reasons To Be Optimistic?

Investing In The Business

I always like to hear when a company invests into their business, I believe it will help their business down the road. At the beginning of 2017 Boardwalk started a renovation and re-branding program. Boardwalk believes this will have long-term value moving forward and that they can charge significantly more for the suites once the renovation is completed.

Some of the work that is being done includes new flooring, baseboards, kitchen cabinets, countertops, appliances, tiling, lighting and fixtures. Through the first six months of 2017, the Trust has placed 2,300 suites under the renovation program. To date, 1,100 suites have been completed. So far the Trust has seen the new suites achieve a return on cost of approximately 8%, while also increasing Net Asset Value 12%.

Through the first six months of this year $92.3 million has been spent on capital improvements ($85.1 million on its investment properties, and $7.2 million on property, plant and equipment). Last year at this time Boardwalk only spent $38.4 million ($35.6 million on investment properties and $2.8 million on property, plant and equipment).

Financial Position

As of June 30, 2017 Boardwalk had $224 million in cash and another $200 Line of Credit available.

Even though they are struggling Boardwalk still has a large amount of cash available to whether this rough patch.

How Was I Affected

I currently own 94 shares of Boardwalk REIT. At the start of last Friday my shares had a $ value of $4,550.54 at the end of Friday this dropped to $4,036.36. It was definitely a tough day as I lost $514.18.

The stock started the day trading at $48.41 and ended the day at $42.94.


While I am concerned with the financial performance of Boardwalk this year, I am going to take a wait and see approach I am not going to rush to the exit and sell my shares. I believe Boardwalk is still in a healthy position financially with what they have in reserve. It seems that they have been able to lease the renovated suites at a higher lease price, hopefully they can figure out the delays and get the renovations done quicker.

So do you own Boardwalk REIT? What would you do if you were me? Please feel free to leave a comment below they are always appreciated.

Thanks for reading



10 thoughts on “Red Friday

  1. Dear Matthew,

    I have positions in HR Reit and Rio can (doubled my position this month). I’m a bit worried about HR Reit as it’s heavy in Alberta and I will be selling my position as I hold it in a non-registered account. Not sure if I’ll buy it back in another account. I really like Riocan and shop at most of the stores they rent to (except Walmart). Hoping the residential project goes well.

    Is your strategy to buy and hold or get in and out? If you like Boardwalk then buy more while it’s “on sale”. If you don’t, sell and buy something you would want to own if the stock market closed down for 10 years (Warren Buffett”s advice, not mine. I wish I was as sure of myself as he is).

    Besos Sarah.

    Liked by 1 person

  2. Some of the REITs have been in trouble for the last couple of years. I am not a holder of units for Boardwalk.

    I own units of DREAM REIT and Cominar REIT. DREAM Reit has cut their distribution twice in the past 2 years while Cominar REIT cut there distribution recently. I own a lot of shares so over a $400 per year in distributions less for me.

    Liked by 1 person

  3. Great write up Matt. I just noticed the drop in boardwalk today to be honest. I was thinking of adding more. Now that i read your article the payout ratio seems high. But you can clearly see the upward trend in rented units. Got to think about this… thanks again

    Liked by 1 person

  4. It’s always hard seeing $500 vanish before your eyes. As others have stated, you need to either stick it out of you feel the company will be able to turn it around or sell and move on. I’m sure the dividend is sweet but their are so many more awesome companies you could move that capital into.

    Liked by 1 person

    1. Hi thanks for stopping by and for the comment. It is definitely hard to see that money disappear I am going to stick it out for the long run. I feel this is just a bump in the road.


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