A landlord recycling capital

Boardwalk Real Estate Investment Trust (TSX:BEI.UN) is in the headlines because it is selling a large number of apartment suites while repurchasing its own units. The Calgary-based trust says this reflects a gap between private-market apartment prices and what its units imply.

Boardwalk owns and operates multi-family rental communities, mainly in Alberta, Quebec, Saskatchewan and Ontario. At 30 June 2026 its same-property portfolio held 31,534 suites, with a further 1,724 suites outside that group, for 33,258 in total.

What the second quarter showed

For the quarter ended 30 June 2026, Funds From Operations (FFO) were $1.19 per unit, compared with $1.16 a year earlier. Adjusted FFO was $1.02 per unit, against $1.00. Total FFO was $60.9 million, slightly below $61.9 million, as fewer units are in issue and properties have been sold.

Net Operating Income (NOI) rose to $107.2 million from $104.2 million, while same-property NOI grew 1.7 per cent. The trust reported a loss of $13.5 million, versus a profit of $76.3 million a year earlier, a swing that reflects non-cash fair-value movements.

Occupancy and rents

Same-property occupancy was 97.0 per cent in the quarter, though June 2026 stood at 96.9 per cent compared with 97.8 per cent a year before. Average monthly rent reached $1,562 from $1,524, while average market rent was $1,693, leaving room for further increases as leases turn over.

That room is narrowing. The mark-to-market Revenue gain was $32.0 million, down from $45.1 million. Calgary same-property NOI fell 1.2 per cent, while Quebec and Ontario grew by roughly five per cent each.

Selling at private-market prices

In the second quarter Boardwalk closed nine property sales covering 1,096 suites for $222.0 million gross. After quarter-end it agreed to sell two communities in London, Ontario, comprising 201 suites, for $40.0 million. Including a 50 per cent co-ownership sale to DGAM Real Estate Fund, sales for 2026 total $492.0 million gross across 2,081 suites, at an average of about $236,000 per suite and a 5.1 per cent exit Capitalisation rate.

The trust values its portfolio at a 5.25 per cent capitalisation rate, and reports net asset value of $96.37 per unit, versus $96.23 at the end of 2025. Management notes that at $65 per unit, the market implies roughly $194,000 per suite.

Buybacks, Debt and distributions

Under its normal course issuer bid, Boardwalk repurchased 1,669,200 units in the second quarter at a weighted average of $65.25, costing $108.9 million. From January through 24 July 2026 it bought 3,106,600 units for $203.5 million.

Debt to total Assets was 43.0 per cent, up from 42.3 per cent at year-end, though debt to EBITDA improved to 9.34 times from 9.99 times. About 99 per cent of mortgages are insured by Canada Mortgage and Housing Corporation. Liquidity was $374.8 million. The monthly distribution is $0.15 per unit.

Risks and what to watch

Management trimmed its 2026 guidance. Same-property NOI growth is now expected at 1.0 to 3.5 per cent, versus an original range of 1.5 to 4.5 per cent, and FFO per unit at $4.60 to $4.80. The previous year's same-property NOI growth was 9.0 per cent, so the pace is clearly slowing.

Our analysis suggests three pressures. First, shrinking mark-to-market gains limit rent growth. Second, the remaining $343.4 million of 2026 maturities, at an in-place rate of 2.14 per cent, will refinance near current CMHC rates of about 3.80 per cent for five years. Third, a smaller portfolio means less absolute income unless buyback accretion keeps pace.

Investors should watch completion of the pending sales, further buyback activity, the third-quarter results and progress on the remaining 2026 refinancings, since each will show whether Capital recycling is lifting per-unit earnings.