/NOT FOR DISTRIBUTION TO UNITED
STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES/
OTTAWA,
ON, Nov. 1, 2023 /CNW/ - InterRent Real
Estate Investment Trust (TSX: IIP.UN) ("InterRent" or the
"REIT") today reported financial results for the third
quarter ended September 30, 2023.
Operational and Financial Highlights:
- Average Monthly Rent ("AMR") of $1,576 for the Total Portfolio and $1,566 for the same property portfolio, an
increase of 7.8% and 7.3% year-over-year ("YoY") respectively.
- Same Property and Total Portfolio occupancy for September 2023 were 95.2%, a decrease of 40 basis
points compared to the same period last year.
- Same Property Net Operating Income ("NOI") for Q3 was
$39.5 million, an increase of
$3.8 million or 10.5% YoY.
- Total Portfolio NOI was $40.3
million, an increase of $4.0
million, or 11.0% YoY.
- NOI margin for the Same Property Portfolio and Total Portfolio
were 67.6%, reflecting increases of 140 bps YoY.
- Funds from Operations ("FFO") of $21.3
million, a 4.9% increase from Q3 2022. FFO per unit
(diluted) of $0.146, an increase of
4.3% YoY.
- Adjusted Funds from Operations ("AFFO") of $18.9 million, an increase of 6.3% YoY, and AFFO
per unit (diluted) of $0.129, an
increase of 4.9% YoY.
- Strong financial position with $268
million of available liquidity with Debt-to-Gross Book Value
("GBV") of 38.6%.
- Board of Trustees has approved a 5% increase to the
distribution, from $0.3600 per unit
to $0.3780 per unit, marking the
12th consecutive year that the REIT has grown its
distribution by 5% or more.
Brad Cutsey, President and CEO of
InterRent REIT, commented on the results:
"We're thrilled to announce our third consecutive quarter of
double-digit NOI growth and rising FFO/unit growth, accompanied by
strengthening NOI margin reaching its highest level since Q3 2019,
all achieved amid the backdrop of rising interest rates and
evolving economic conditions. I want to extend my appreciation to
our team for their dedicated efforts in delivering these results.
We maintain our strong focus on building resilience, optimizing
controllable costs, proactively managing our debt and lastly,
exercising discipline in our capital allocation strategy, which is
of the utmost importance.
Selected
Consolidated Information
|
|
3 Months
Ended
|
|
3 Months
Ended
|
Change
|
In $000's, except per
Unit amounts
|
|
September 30,
2023
|
|
September 30,
2022
|
|
and other non-financial
data
|
|
Total
suites
|
|
12,7281
|
|
12,5731
|
+1.2 %
|
Average rent per suite
(September)
|
$
|
1,576
|
$
|
1,462
|
+7.8 %
|
Occupancy rate
(September)
|
|
95.2 %
|
|
95.6 %
|
-40
bps
|
Proportionate
operating revenues
|
$
|
59,596
|
$
|
54,866
|
+8.6 %
|
Proportionate net
operating income (NOI)
|
$
|
40,291
|
$
|
36,309
|
+11.0 %
|
NOI %
|
|
67.6 %
|
|
66.2 %
|
+140
bps
|
Same Property average
rent per suite (September)
|
$
|
1,566
|
$
|
1,460
|
+7.3 %
|
Same Property
occupancy rate (September)
|
|
95.2 %
|
|
95.6 %
|
-40
bps
|
Same Property
proportionate operating revenues
|
$
|
58,493
|
$
|
54,064
|
+8.2 %
|
Same Property
proportionate NOI
|
$
|
39,527
|
$
|
35,769
|
+10.5 %
|
Same Property NOI
%
|
|
67.6 %
|
|
66.2 %
|
+140
bps
|
Net Income
(Loss)
|
$
|
(54,560)
|
$
|
32,670
|
-267.0 %
|
Funds from Operations
(FFO)
|
$
|
21,303
|
$
|
20,309
|
+4.9 %
|
FFO per weighted
average unit - diluted
|
$
|
0.146
|
$
|
0.140
|
+4.3 %
|
Adjusted Funds from
Operations (AFFO)
|
$
|
18,925
|
$
|
17,806
|
+6.3 %
|
AFFO per weighted
average unit - diluted
|
$
|
0.129
|
$
|
0.123
|
+4.9 %
|
Distributions per
unit
|
$
|
0.0900
|
$
|
0.0855
|
+5.3 %
|
Adjusted Cash Flow
from Operations (ACFO)
|
$
|
17,415
|
$
|
23,756
|
-26.7 %
|
Debt-to-GBV
|
|
38.6 %
|
|
37.4 %
|
+120
bps
|
Interest coverage
(rolling 12 months)
|
|
2.30x
|
|
2.96x
|
-0.66x
|
Debt service coverage
(rolling 12 months)
|
|
1.52x
|
|
1.75x
|
-0.23x
|
(1) Represents 12,060
(2022 - 11,965) suites fully owned by the REIT, 1,214 (2022 -
1,214) suites owned 50% by the REIT, and 605 (2022 - nil) suites
owned 10% by the REIT.
|
Sustained double-digit NOI expansion, with NOI margin
returning to pre-pandemic levels
As of September 30, 2023,
InterRent had proportionate ownership in 12,728 suites, up 1.2%
from 12,573 as of September 30, 2022.
Including properties that the REIT owns in its joint ventures,
InterRent owned or managed 13,879 suites at September
30, 2023.
AMR growth across the total portfolio gained further momentum to
reach 7.8% as compared to September
2022, while same property AMR increased by an impressive
7.3% for the same period. September
2023 occupancy rate in the REIT's same property and total
portfolios decreased 40 bps over September
2022, and decreased 20 bps over June
2023 to 95.2%, in line with its historical performance and
strategic approach. The increase in vacancy for September in some
major markets was driven by pricing discovery. Fall leasing
activity has been robust with vacancy returning to normal seasonal
levels post quarter end.
The strong AMR growth and leasing demand have resulted in total
portfolio revenue to increase 8.6% year over year. Within the same
property portfolio, these same factors have grown operating
revenues by 8.2% compared to Q3 2022. NOI margin for the overall
portfolio and same property portfolio both accelerated by 140 basis
points, reaching 67.6% during the quarter, the highest since Q3
2019.
Operating results translate into FFO/Unit growth
Net loss for the quarter was $54.6
million, compared to $32.7
million of Net Income in Q3 2022. This $87.2 million decrease was almost entirely driven
by a $82.9 million difference in fair
value adjustments of investment properties, compared to Q3 2022.
These fair value adjustments reflect continued expansion of
capitalization rates during the quarter. The REIT's weighted
average capitalization rate used across the portfolio at the end of
Q3 2023 was 4.22%, an increase of 15 basis points from Q2 2023,
driven by moderate cap rate expansion across all regions.
FFO increased 4.9% from last year to $21.3 million and on a per unit basis increased
4.3% to $0.146. AFFO during the
quarter increased 6.3% to $18.9
million, and on a per unit basis increased 4.9% on a per
unit basis to $0.129.
Solid financial position with focus on optimizing debt
profile
Proportionate financing costs in Q3 2023 amounted to
$14.8 million, or 24.8% of operating
revenue, compared to $12.5 million,
or 22.7% of operating revenue of the quarter in Q3 2022. This
increase was driven by rising interest rates, as well as higher
amount of outstanding mortgage debt. Quarter-over-quarter,
financing costs are down $0.2 million
from $15.0 million in Q2 2023.
Weighted average cost of mortgage debt increased marginally from
June 2023 to 3.48%, and variable rate
exposure ended the quarter at 5%, in line with the prior quarter
and decreased from the same period last year at 6%. Including the
Line of Credit, the REIT's variable rate exposure as of Q3 was
5.7%, compared to 7.9% at Q3 2022.
Debt-to-GBV ratio increased 120 basis points year over year and
90 basis points quarter over quarter and ended the quarter at
38.6%. With Debt-to-GBV remaining at a healthy level and
$268 million of available liquidity,
the REIT remains in a solid financial position to execute on its
growth strategies.
Strong momentum continues at the Slayte; onward with second
office conversion project
The Slayte development in Ottawa, the REIT's first office conversion
project, has completed its interior construction, with all
amenities on the rooftop, including the lounge area, now accessible
to residents. Leasing activities have been robust despite ongoing
construction in the vicinity of the building, exceeding 84% by the
end of October.
The REIT is advancing its second office conversion project, 360
Laurier, situated in downtown Ottawa. The adaptive reuse initiative is
presently undergoing site plan control. Upon completion, the
project will deliver 139 residential units and 1,736 sq. ft. of
retail space. Drawing on valuable experience from the Slayte, the
REIT, along with its trusted partners, are well-positioned to drive
significant progress with this new development project.
12 consecutive years of distribution increases of 5% or
more
With the consistent strength in industry fundamentals and the
sustained strong performance of the REIT's portfolio, the Board of
Trustees has approved a 5% increase in the monthly distribution.
This is the 12th consecutive year that the REIT has
grown its distribution by 5% or more. The increase is effective for
the November 2023 distribution to be
paid in December 2023, and increases
the annualized distribution to $0.3780 per unit from $0.3600 per unit.
Announced the filing of base shelf prospectus
The REIT has filed a base shelf prospectus dated October 31, 2023 (the "Base Shelf Prospectus")
with the Ontario Securities Commission, relying on the "well-known
seasoned issuer" exemption. This filing will allow the REIT, if it
chooses, to make offerings of units or subscription receipts
(collectively, the "Securities") of the REIT, or any combination
thereof, in all of the provinces and territories of Canada for a period of 25 months. The REIT may
also use the Base Shelf Prospectus in connection with an
"at-the-market distribution" in accordance with applicable
securities laws, which would permit the Securities to be sold on
behalf of the REIT through the Toronto Stock Exchange as further
described in the applicable prospectus supplement. To date, no
agreement has been entered into with respect to such a
distribution.
The REIT has filed the Base Shelf Prospectus to maintain
financial flexibility but has no present intention to pursue a
capital raise in the near future. There is no certainty any
Securities will be sold under the Base Shelf Prospectus within the
25-month effective period.
This news release does not constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction
where the offer, sale or solicitation would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction. If any securities are offered under the Prospectus,
the terms of any such securities and the intended use of any net
proceeds will be established at the time of any such offering and
will be described in a prospectus supplement filed with the
applicable Canadian securities regulatory authorities at the time
of any such an offering. A copy of the Base Shelf Prospectus can be
found under the REIT's profile on SEDAR+ at
www.sedarplus.ca or may be obtained from the REIT at
investorinfo@interrentreit.com.
Sustainability update: Record-breaking Golf Tournament;
Building Certification
In September, the annual Mike McCann Charity Golf Tournament
raised a record-breaking $1.67
million, increasing its cumulative contributions to
$8.2 million. All proceeds directly
support various charities within the REIT's communities.
In addition, the REIT successfully certified six communities
under the Canadian Rental Building Program in October. The REIT is
committed to expanding its building certification program and
anticipate further certifications in the months ahead.
Conference Call
Management will host a webcast and conference call to discuss
these results and current business initiatives on Wednesday November 1, 2023 at 1:00 PM ET. The webcast will be accessible at:
https://www.interrentreit.com/2023-q3-results. A replay will be
available for 7 days after the webcast at the same link. The
telephone numbers for the conference call are 1-888-886-7786 (toll
free) and 416-764-8658 (international). No access code
required.
About InterRent
InterRent REIT is a growth-oriented real estate investment trust
engaged in increasing Unitholder value and creating a growing and
sustainable distribution through the acquisition and ownership of
multi-residential properties.
InterRent's strategy is to expand its portfolio primarily within
markets that have exhibited stable market vacancies, sufficient
suites available to attain the critical mass necessary to implement
an efficient portfolio management structure, and offer
opportunities for accretive acquisitions.
InterRent's primary objectives are to use the proven industry
experience of the Trustees, Management and Operational Team to: (i)
grow both funds from operations per Unit and net asset value per
Unit through investments in a diversified portfolio of
multi-residential properties; (ii) provide Unitholders with
sustainable and growing cash distributions, payable monthly; and
(iii) maintain a conservative payout ratio and balance sheet.
*Non-GAAP Measures
InterRent prepares and releases unaudited quarterly and audited
consolidated annual financial statements prepared in accordance
with IFRS (GAAP). In this and other earnings releases, as a
complement to results provided in accordance with GAAP, InterRent
also discloses and discusses certain non-GAAP financial measures,
including Proportionate Results, Gross Rental Revenue, NOI, Same
Property results, Repositioned Property results, FFO, AFFO, ACFO
and EBITDA. These non-GAAP measures are further defined and
discussed in the MD&A dated November 1,
2023, which should be read in conjunction with this press
release. Since Proportionate Results, Gross Rental Revenue, NOI,
Same Property results, Repositioned Property results, FFO, AFFO,
ACFO and EBITDA are not determined by GAAP, they may not be
comparable to similar measures reported by other issuers. InterRent
has presented such non-GAAP measures as Management believes these
measures are relevant measures of the ability of InterRent to earn
and distribute cash returns to Unitholders and to evaluate
InterRent's performance. These non-GAAP measures should not be
construed as alternatives to net income (loss) or cash flow from
operating activities determined in accordance with GAAP as an
indicator of InterRent's performance.
Cautionary Statements
The comments and highlights herein should be read in conjunction
with the most recently filed annual information form as well as our
consolidated financial statements and management's discussion and
analysis for the same period. InterRent's publicly filed
information is located at www.sedar.com.
This news release contains "forward-looking statements" within
the meaning applicable to Canadian securities legislation.
Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as "plans",
"anticipated", "expects" or "does not expect", "is expected",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or
variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "might" or "will be
taken", "occur" or "be achieved". InterRent is subject to
significant risks and uncertainties which may cause the actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward looking statements contained in this
release. A full description of these risk factors can be found in
InterRent's most recently publicly filed information located at
www.sedar.com. InterRent cannot assure investors that actual
results will be consistent with these forward looking statements
and InterRent assumes no obligation to update or revise the forward
looking statements contained in this release to reflect actual
events or new circumstances.
The Toronto Stock Exchange has not reviewed and does not
accept responsibility for the adequacy or accuracy of this
release.
SOURCE InterRent Real Estate Investment Trust