Event
Minto held a virtual investor day earlier today.
Impact: NEUTRAL
The event was largely focused on the REIT's development pipeline, which
aggregates 1,572 suites (at 100% interest), or ~22% of existing suite count.
Management also spent time on its repositioning program, its sustainability
initiatives, and provided a market overview. While the investor day did not contain
any material new information, it reaffirmed the thesis for our BUY rating on the
stock. With its large urban market focus, we believe Minto continues to possess the
highest quality apartment portfolio in the Canadian REIT space and we see visible
avenues for portfolio growth and quality accretion through both its development and
repositioning programs. Management noted it is seeing good leasing momentum
in May and June, with traffic picking up, move-ins and move-outs rebalancing,
and a reduction in incentives. Management is also encouraged by trends observed
in countries ahead of Canada, noting a repopulation of urban centers. With the
vaccine program accelerating and visibility towards a recovery improving, we
have greater conviction for an H2/21 rebound in fundamentals.
Development. Management highlighted the Minto Group's extensive development
experience (65 years) and the benefits the platform offers to the REIT through
the strategic alliance agreement. The presentation also outlined the REIT's three
development strategies (intensification, convertible development loans, and stand
alone developments), as well as provided a deeper look at several current projects.
We think the REIT's diversified approach to development provides an avenue for
portfolio growth, quality accretion, and NAV growth.
Repositioning (Exhibit 6 & 7). The REIT has nine assets with over 2,400 suites
to reposition. Repositionings can include suites, lobbies, corridors, amenities, and
building exteriors. Management targets 8%-15% ROI on the renovations, which
should also add nicely to NAV over time.
TD Investment Conclusion
We believe that its high quality, urban portfolio, solid liquidity position, and strong
operating platform and management team position Minto well to benefit from a
recovery in market fundamentals. We are maintaining our BUY rating and our
$26.00 target price.