Boardwalk REIT: Unlocking Value in Canada's Affordable Housing Powerhouses

Boardwalk Real Estate Investment Trust (TSX: BEI.UN) has emerged as a standout performer in Canada's real estate sector, with its Q2 2025 earnings underscoring its dominance in high-growth, affordable housing markets. The Trust's strategic focus on Edmonton, Calgary, and Québec City—regions experiencing robust demographic and economic tailwinds—has driven a 9.8% year-over-year increase in same-property Net Operating Income (NOI), outpacing industry averages. For income-focused and growth-oriented investors, Boardwalk's disciplined capital recycling, strong balance sheet, and undervalued real estate exposure present a compelling case for inclusion in a diversified portfolio.

NOI Growth: A Testament to Operational Excellence

Boardwalk's Q2 2025 results highlight its ability to capitalize on structural demand in affordable housing. Same-property NOI surged 9.8% year-over-year, driven by a 6.2% rise in rental revenue and effective cost management. In Edmonton, its largest market, NOI grew 12.8%, fueled by reduced leasing incentives and higher occupancy (97.8% in Q2 2025). The Trust's vertically integrated operations and retention-focused strategies have minimized turnover costs, a critical differentiator in a sector where operational efficiency often determines margins.

The Trust's value-add initiatives further amplify its growth potential. For instance, the recent acquisition of The Arch in Calgary—a high-rise community with 158 suites—offers a stabilized cap rate of 5.1%, reflecting its alignment with market fundamentals. Calgary's rental market, constrained by limited inventory and rising demand from energy-sector job growth, is projected to see average rents for 2-bedroom apartments climb to $2,100 by year-end. Boardwalk's ability to secure assets at attractive valuations while enhancing unit economics positions it to outperform peers in a tightening housing environment.

Capital Recycling: Strategic Asset Reallocation

Boardwalk's Q2 2025 capital recycling activities exemplify its commitment to optimizing portfolio quality. The Trust sold four communities in Edmonton and Québec City for $117.2 million, achieving a 5.3% cap rate, and reinvested proceeds into higher-quality assets like North Prairie Townhomes in Saskatchewan and The Arch in Calgary. These transactions reflect a balanced approach: dispositions unlock liquidity while acquisitions target markets with strong demographic fundamentals.

The Trust's capital recycling strategy is particularly timely. With 96% of its mortgages CMHC-insured and a debt-to-EBITDA ratio of 9.77x (down from 10.08x in Q4 2024), Boardwalk maintains flexibility to execute accretive deals. For example, the $133.1 million acquisition of North Prairie Townhomes was funded with a mix of debt and equity, preserving liquidity while enhancing portfolio diversification. This disciplined approach ensures that the Trust remains agile in a low-interest-rate environment, where refinancing risk is minimized.

Balance Sheet Strength: A Foundation for Resilience

Boardwalk's financial position is a key catalyst for long-term value creation. As of June 30, 2025, the Trust held $324.6 million in liquidity, including $245.8 million in unused credit facilities. Its interest coverage ratio of 3.05x and a debt-to-total-assets ratio of 39.6% underscore its ability to withstand economic volatility. Notably, the Trust has already renewed 43.6% of its 2025 maturing mortgages at an average rate of 3.85%, locking in favorable terms amid expectations of a gradual rate cut cycle in 2025.

This financial discipline has allowed Boardwalk to maintain a 11.5% year-over-year increase in FFO per unit, outpacing its 2025 guidance of $4.48–$4.63. With a current share price of $71, the Trust trades at a 5.9% cap rate on trailing NOI—a discount to its replacement cost of $192,000 per suite. Analysts suggest this valuation reflects a market underappreciation of Boardwalk's ability to generate consistent cash flow in a sector where cap rates have compressed due to low-interest rates.

Market Fundamentals: Population Growth and Affordability

Boardwalk's strategic positioning in Edmonton, Calgary, and Québec City is underpinned by structural demand. In Edmonton, population growth of 2.1% in 2025—driven by international migration and job creation in construction and professional services—has kept vacancy rates near 1.5%, one of the tightest in Canada. Similarly, Calgary's energy sector recovery has spurred a 1.8% population increase, with rental demand outpacing new supply. Québec City, though less publicized, benefits from its affordability (median home prices 40% below the national average) and a 2.3% population growth rate, making it a magnet for skilled workers.

These trends are not ephemeral. With housing starts in Edmonton projected to rise 12% in 2025 and Calgary's rental market expected to see 3% annual rent growth, Boardwalk's focus on these markets ensures exposure to compounding demand. The Trust's emphasis on affordable, non-price-controlled units further insulates it from regulatory risks, a critical advantage in a sector where rent control policies are expanding in larger Canadian cities.

Investment Thesis: A Dual-Engine Opportunity

For investors, Boardwalk REIT represents a rare confluence of income and growth potential. Its 4.8% dividend yield, supported by a 11.5% FFO growth rate, offers an attractive income stream, while its strategic acquisitions and capital recycling initiatives provide growth catalysts. The Trust's current valuation—trading at a 20% discount to NAV—reflects a market that has yet to fully price in its execution on capital upcycling and portfolio optimization.

Moreover, Boardwalk's ESG initiatives, including energy efficiency upgrades and water conservation programs, align with long-term value creation. These efforts not only reduce operational costs but also enhance tenant retention in an era where sustainability is a key differentiator.

Conclusion: A Compelling Buy for Long-Term Investors

Boardwalk REIT's Q2 2025 outperformance is a testament to its operational rigor, strategic vision, and deep understanding of Canada's affordable housing landscape. With a robust balance sheet, disciplined capital allocation, and exposure to high-growth markets, the Trust is well-positioned to deliver consistent returns in both stable and volatile environments. For investors seeking a high-conviction play on Canada's housing renaissance, Boardwalk offers an undervalued opportunity to participate in a sector poised for sustained growth.