Post by
incomedreamer11 on Aug 13, 2021 7:20pm
Scotia comments
Q2 Glance: In Line; IFRS NAVPU +4% on Positive Momentum
OUR TAKE: Neutral.
Reported FFOPU of $0.20 was a bit below our $0.210 but hit $0.20 consensus (range = $0.18-$0.22), reflecting 6% y/y erosion (Q1/21 = -10% y/y; 2020A = +0.7%);. The variance to our call was on lower revenue .
MI IFRS NAVPU was +$0.93 q/q (+4.2%) to $23.29. Pace of SPNOI erosion improves. See Exhibit 1 for a comparison of Q2/21 vs. prior quarters on a y/y basis. Q2/21 SPNOI (incl. furnished suites) fell 5.0% y/y and was down 3.1% ex. furnished suites (Q1/21 = -8.2%/-6.1%). SP REV/EXP was -4.6%/-3.8% or -4.6%/-7.3% ex. furnished suites (Q1/21 = -4.8/+0.7%; -3.3%/+1.3%), with SPNOI margin down only 30bp ex. furnished suites (Q1/21 = -180bp). New lease spread fell to 5.9% vs. 7.6% q/q (2020A = 8.1%) primarily due to Ottawa. MI estimated portfolio MTM of 6% fell 200bp q/q on a 1.6% reduction in est. market rent.
Lower-than-expected revenue drove modest variance to our call. Occupancy was 150bp lower than our 93%, while in-place rent of $1,640 matched our forecast. That said, we are encouraged to see the 40bp q/q improvement in occupancy to 91.5% on a record 534 signed leases and expect continued occupancy gains in 2H/21. Disclosed market rents see some pressure. MI-est. market rent of $1,735 fell 1.6% q/q (Q1/21 = +1.0% q/q) while in-place rent was +0.6% q/q (2.4% annualized).
Interestingly, with the exception of Calgary (+2.2% q/q), all market saw a decline (ranging from 0.6% in Montreal to 3.4% in Toronto).
We're pleased to see positive furnished suite occupancy gains. Q2/21 avg. occupancy was +1,200bp q/q to 74.4% (+990bp y/y) following a 1,480bp q/q decrease in Q1. MI disclosed Q2/21 avg. rent of $3,572/month was +0.9% q/q and down 9.7% y/ y (Q1/21 was -1.0% q/q and -19% y/y). 3% of total suites (215) are furnished, with MI converting 1 to unfurnished during Q2. SP AMR was +1.9% y/y (Q1/21 = +1.9%), while SP Occupancy fell 470bp. Disclosed in-place rent was +$0.01 to $1.93/sf (Q1/21 = flat).
Tenant turnover of 8.1% was +90bp q/q and +310bp y/y (Q1 = +1.0% q/q and +2.0% y/y). MI repositioned 88 suites vs. 46 q/ q (2020A = 239) for $4.5M (8.4% return; Q1/21 = 8.7%; 2020A = 9.4%). MI expects to reposition ~125 – 175 suites in 2H/21.
Leverage ticks up on lower EBITDA; debt/FV stable on FV gain. MI reported $128M of liquidity fell $31M q/q (Q1/21 = -$21M). MI recorded a ~$50M ($0.85/un) vs. $1M q/q on a 9bp lower cap rate to 3.72% (vs. our 3.92%). Disclosed debt/GBV fell 10bp q/q to 38.6% (Q1/21 = +16bp), but TTM Debt/EBITDA was +0.6x to 12.5x (Q1/21 = +0.4x).