TSX:HOM.DB.U - Post by User
Post by
retiredcfon Aug 10, 2022 9:17am
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Post# 34884200
RBC
RBC BSR REIT
Solid in-line Q2; The bigger positive – lower debt, no variable rate exposure & FFO guidance intact
TSX: HOM/U | USD 16.63 | Outperform | Price Target USD 21.00
Sentiment: Positive
First Look: BSR REIT (“BSR”) reported a solid in-line quarter with FFO/unit of $0.21, +62% y/y, vs. RBC/consensus of $0.21/$0.21. The big news of the quarter, in our view, is the de-risking of the balance sheet in terms swapping the variable rate exposure for fixed and lowering the debt level through equity raise. Both were achieved with no change to 2022 FFO guidance owing to the improved SP NOI growth outlook of 13% (+100 bps).
Key points:
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SP NOI growth: +17% (SP-Rev +12%; SP-Exp +6%). Given its concentration in the three TX markets, this came in at the high end of its larger, more diversified Sun Belt peers which posted growth in the 14-17% range. SP NOI margin improved 250 bps y/y to 55%. Austin continues to be an outperformer with SP NOI +25%.
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Occupancy: 95%, +50 bps sequentially; Average monthly rent $1,307, +5.5% sequentially
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De-risking the balance sheet: D/GBV of 36% is down materially given the Q2 equity offering. Importantly, post quarter, the REIT
entered into several interest rate swaps such that 100% of BSR’s debt will effectively be fixed at an average rate of 3.4%.
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2022 FFO guidance maintained but SP NOI growth increased: FFO/unit $0.86-$0.90; mid-point of $0.88; SP NOI growth guidance is now 12-14% (vs. 11-13%), based on 10-12% revenue growth and 4.5-6.5% expense growth. We gather that the de-risking of
the balance sheet noted above offset the improved NOI outlook.
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Lease spreads: Blended +12.6%; New lease +16.3%; renewal +8.8%.
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IFRS BV/unit (pre-tax): $22.35, +51% y/y, +1.7% sequentially. Average cap rate utilized was 3.9%.