TSX:WRK.DB.K - Post by User
Post by
Robinbrookon Mar 30, 2010 11:28am
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Post# 16939426
Canaccord on wrk
Canaccord on wrk(with thanks to beararn for posting on Trusts bb at IV)
Cannacord on whiterock...verypositive...look to Q2
Whiterock REIT(WRK.UN : TSX : $15.05) - Buy - Target: C$16.50
Shant Poladian
Comment: Q4 a bit light, but no major surprises; maintaining BUY ratingand C$16.50 target price
Whiterock REIT reported Q4/09 diluted FFO/unit of
.37 vs.
.50 inQ4/08, and
.02 below our
.39 estimate (consensus was
.41). Thenegative variance to our estimate was due to slightlylater-than-expected lease-up of some vacant space (until H2/10).
Importantly, we note that the significant investment activity undertakenwill begin to meaningfully contribute to FFO and AFFO in Q2/10 andtherefore look towards mid- year 2010 financial performance on aper-unit basis as more meaningful than Q4/09 and Q
1/10. Same-store cash NOI held flat (+0.1%) in Q4/09 over Q4/08 anddeclined 1.8% on a full-year basis in 2009. The decline for full-year2009 was attributable to previously disclosed vacancies at 655 BayStreet and 193 Malpeque Road and other properties. The vacancies at 655Bay St and 193 Malpeque Road have been leased subsequent to Q4/09 andshould fully contribute to NOI by H2/10. Q4/09 occupancy came in at96.2%, sequentially up 20 bps from Q3/09, but down 190 bps from Q4/08.
Whiterock completed its 2009 leasing with a 21% rent uplift overexpiring rents. 50% of the 2010 maturities have already beenrenewed/re-leased at 25% rental uplift. Pro-forma the above acquisitionsand recent equity financing activity, we estimate Whiterock's debt togross book value is now only 52% excluding convertible debentures, and66% including convertible debt. From a liquidity perspective, Whiterockcurrently has $42 million of undrawn lines of credit and ~$7 million ofcash. As noted in our March
19 upgrade to BUY from Hold, our comfort level with the story has taken aquantum leap forward, due to the following factors:
(i) deleveraging;
(ii) high- quality acquisitions;
(iii) a near sustainable AFFO payoutratio; and
(iv) a management team that has persevered through a verychallenging downturn.
We believe management will be successful ingrowing the company into a high-quality mid cap REIT in the foreseeablefuture. Our C$16.50 target price is based on a modest premium to our $15.25 pre-tax NAV estimate using a 7.50% portfolio cap rate.