TD commentsImpact: SLIGHTLY NEGATIVE
FFO/unit (f.d.) of $0.184 was -10% versus Q1/20, and below our $0.206 estimate (consensus: $0.20).AFFO/unit (our calculation) of $0.157 was also below our estimate.
The miss versus our forecast was due to lower-than-expected average occupancy. Unfurnished occupancy decreased ~550bps y/y and ~120bps q/q to 91.1%. The decline was driven by higher seasonal turnover of 7.2% (Q1/20: 5.2%), as tenants who deferred move-outs in Q2/20 and Q3/20 (turnovers were ~190bps below comparable 2020 periods) on hopes of a return to normal in Q4/20, elected to find new accommodations as the pandemic dragged on.
On the positive side, the REIT signed 470 new leases in Q1, a record number (Q1/20: 353), at 7.6% uplifts. Management noted that March move-ins were higher than move-outs and April trended the same, suggesting Q1 could be the trough occupancy. Minto will continue to prioritize rents, as it believes it has good visibility to an H2/21 recovery in occupancy.
Operations
Unfurnished Suites SPNOI declined 6.1% (-3.3% revenues combined with a 1.3% increase in costs). Including furnished suites SPNOI declined 8.2%. Furnished suite inventory was lowered to 216 (Q4/20: 232). Achieved +7.6% uplifts on new leases, which compares nicely to the 2.1% increase in Q4/20, with gains in Ottawa (+10.1%), Montreal (+10.1%), Alberta (+3.5%), and Toronto (+2.0%). Management estimates that the mark-to-market on in-place rents is 8.2% (Q4/20: 7.6%).
Portfolio Update
Repositioned 49 suites (Q4/20: 56), achieving an 8.7% unlevered return (2020: 9.4%). Completed feasibility study at Roehampton and will reposition the property. In late-April, announced it will be providing up to $51.4 million of mezzanine financing (6.0% interest rate) to MPI to develop Beechwood, a nine-storey, 229- suite (153,000sf) apartment property located in New Edinburgh (Ottawa). Minto has an option to buy at 95% of FMV upon stabilization. Richgrove (225 suites) and Leslie York Mills (192 suites) developments expected to break ground in Q3/21.
Balance Sheet
Minto had ~$158.9mm of available liquidity (Q4/20: $170.7mm). Q1 leverage (D/ GBV) was +10bps q/q to 38.7%. Book value was +0.5% q/q to $22.36