Minto Apartment Real Estate Investment Trust T.MI.UN

RBC

[retiredcf]

August 9, 2022

Minto Apartment REIT
Overall a neutral quarter with a positive outlook

TSX: MI.UN | CAD 15.24 | Outperform | Price Target CAD 23.50

Sentiment: Neutral

First Look: Minto Apartment REIT (“MI”) reported FFO/unit of $0.21, +4% y/y, vs. RBC/consensus of $0.22/$0.22. NOI came in line; G&A and interest expense were modestly higher. Overall, we view this as a neutral quarter with a positive outlook. Key leading indicators of growth (i.e., new lease spreads and gain to lease) continue to accelerate. MI’s stock performance has lagged its peers recently – we don’t think the results explain the underperformance and its intention to sell assets to fund growth should alleviate equity raise concern if there was any.

Key points:

• SP NOI growth: +6.4% (Rev +10%; Exp +17%); A sizeable one-time property tax refund last year made for a tougher comp, otherwise expense would have grown more or less in line with revenue, leading to SP NOI closer to the 10% range. Regardless, we are seeing continued cost pressures across the board.

• SP-AMR: $1,695, +3.4% y/y; SP occupancy: 94.8%, +330 bps y/y, +50 bps sequentially.

• Leasing spread realized: +12% on turnover vs. +10.8% in Q1/22, +7.2% in Q4/21 and +4.4% in Q3/21. Positive leasing spread

  was across all markets with MTL +15%, TO 13%, Ottawa 13%, AB +8%.

• Gain-to-lease on portfolio: +10.9% vs. +10.7% in Q1/22, implying $14M of NOI upside.

• Capital allocation: New this quarter is MI’s intention to sell some assets to fund future growth (in our view, likely to fund the new

  assets under construction). As previously announced, MI closed on the acquisition of two downtown apartment properties in Toronto and Calgary for an aggregate $201m at an estimated going in cap rate in the low 3% combined. MI is reporting continued high occupancy of 96% and 98% respectively.

• Leverage: D/GBV 39.5%; IFRS reported NAV/unit: $24.24, -0.4% sequentially.