Soaring rents in Alberta and Saskatchewan contributed to a $14-million revenue jump for Boardwalk Real Estate Investment Trust in the second quarter, but the country's biggest landlord still posted a $97.5-million net loss on potential tax losses in 2011.
One-third of Boardwalk's units are in rapidly growing Edmonton, where monthly rents were up $107 over the first quarter of 2007 and vacancy rates are shrinking.
"Vacancy continues to remain very low in all our Albertan markets and rents are increasing for the province as a whole," chief executive officer Sam Kolias told a conference call yesterday.
As home prices continue to rise in the booming cities of Edmonton and Calgary, "the delta between owning a home and renting continues to increase substantially ... driving demand [for] more affordable rental alternatives," Mr. Kolias said.
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An average single family home sold for over $500,000 last month in Calgary and close to $400,000 in Edmonton.
Analyst Gail Mifsud of Blackmont Capital says Boardwalk has outperformed expectations for the past couple years with strong future prospects while maintaining a reputation as good corporate citizens.
"They're not in the Alberta market to make a quick buck today," Ms. Mifsud said from Toronto.
"They've developed rental increase guidelines they believe are fair with the view that if you keep your tenants happy, your turnover will be less and in the long term you'll make more money."
Although Alberta has no rent controls, Boardwalk implemented its own policy limiting monthly hikes to $150 once a year.
The Calgary-based property owner raised its forecast for 2007 funds from operations - a key measure of financial performance. Boardwalk expects to generate between $1.95 to $2.04 a unit, up from an earlier expected range of $1.90 to $2.02.
Some real estate trusts will remain exempt when laws governing trusts come into effect in 2011, but Boardwalk is not sure it if it will qualify. It has booked a $111-million non-cash charge linked to future taxes payable when Ottawa begins taxing trusts as corporations.
Rental revenue was up 18 per cent to $94.2-million from the same period of 2006.
Meanwhile, funds from operations jumped to $29.8-million from $22.2-million and distributable income increased to $30-million from $22.7-million as the fast-growing economies across Western Canada drive demand for rental accommodation.
Boardwalk also said yesterday it intends to buy back up to 4.3 million units, or about 10 per cent of its outstanding capital stock, in a move to boost the property company's value.
Boardwalk REIT owns and operates more than 260 properties with about 35,800 units.Its portfolio is concentrated in Alberta, British Columbia, Saskatchewan, Ontario and Quebec, with 69 per cent in the Western provinces.
BEI.UN (TSX) fell $1 to $45.
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