TD commentPROREIT (PRV.UN-T) C$6.57 Q2/22 First Look: Results Largely in Line; Industrial SPNOI +5% Lorne Kalmar, CPA, CA Sam Damiani, CFA
Event Q2/22 results. Conference call today at 12:00 PM (dial in: 1-888-664-6383; passcode: 24018773).
Impact: NEUTRAL
FFO (f.d.) was $0.127, +28% versus Q2/21 and largely in line with our estimate/ consensus of $0.13. AFFO/unit (our calculation) of $0.104 compares to our estimate of $0.109 (Exhibit). Once again results displayed the resiliency of the REIT's industrial and retail assets, while vacancy in its office portfolio partially offset the growth. Q2 SPNOI growth was +0.8%. Same-property occupancy declined 30bps y/y owing largely to the vacancy in its office portfolio. Industrial SPNOI was +5% on higher rental rates and occupancy (+10bps to 99.2%), while the retail portfolio reported 3% SPNOI growth on higher occupancy (+20bps to 97.3%) and rents. This was partially offset by a negative SPNOI print in the office portfolio (-19%), owing to $137k adjustment in Q2/21 and higher vacancy in two properties (occupancy -490bps to 87.6%). We expect Office SPNOI to improve in Q4/22 owing to a new six year lease for 12,218sf, which is expected to contribute $0.1mm/quarter of gross rent (commences November 1, 2022). Leasing momentum continued in Q2/22, with PROREIT having renewed/ replaced 82% of 2022 lease maturities at 12.9% above expiring rents through H1/22.
Acquisitions/Dispositions
On August 4, PROREIT closed on its 50/50 JV with Crestpoint which will own 42 industrial properties aggregating 3.1mmsf of GLA, including 41 in Halifax's Burnside Park. While the transaction was effectively balance sheet neutral, PROREIT will manage the JV, which should result in an incremental $1mm of annual management fee revenue (link).
Post-Q2 agreed to sell a portfolio of nine retail properties aggregating 94,000sf (~9.5% of total retail GLA) in Western Canada for $18.8mm, or ~$200/sf. Closing is expected in September.
Balance Sheet
D/GBV was 51.2%, flat q/q. Proforma the retail disposition, remaining 2022 mortgage maturities total $10.0mm.
Recorded a modest $0.8mm IFRS FV gain (5.7% cap rate unchanged).
PROREIT had liquidity of $31.8mm, including $3.8mm of cash and $28.0mm of capacity on its credit facility (Q1/22: $44.0mm).