Scotia commentsOUR TAKE: Slight Negative.
Reported FFOPU of $0.185 was below our $0.21 and $0.20 consensus (range = $0.19-$0.21), reflecting 10% y/y erosion (Q4/20 = +2% y/ y; 2020A = +0.7%). MI did not disclose IFRS NAVPU this quarter (Q4/20A = $22.26; +5.3% q/q) but we note the cap rate was flat and negligible FV gains.
SPNOI erosion accelerates, with less variation between unfurnished and furnished suites.
Note, SP portfolio = total portfolio this quarter. Q1/21 SPNOI (incl. furnished suites) fell 8.2% y/y and was down 6.1% ex. furnished suites on combined lower revenue and higher expenses. SP REV/EXP was -4.8%/+0.7% or -3.3%/+1.3% ex. furnished suites, with SPNOI margin down 180bp ex. furnished suites.
MTM on new (unfurnished) jumped to 7.6% vs. 2.1% q/q, but still below the 13.6% y/y (2020A = 8.1%). MI estimated 8% portfolio MTM is flat q/q. No issues with rent collection or bad debt. Bad debt expense as % of revenue was ~0.5% vs. ~1.0% in Q4/20; MI did not disclose % of residents on deferral plans this Q (Q4/20 = -100bp q/q to 1.4%).
We note MI is +5% post Q4/20 Results vs. +5% for Sector and +4% for Peers. Negative variance mostly on lower revenue. Actual revenue was ~$0.025 below our forecast, including avg. unfurnished occupancy falling 130bp q/q (vs. our -40bp).
We note MI changed its definition of occupancy to quarterly avg. vs. quarter-end before (didn't disclose Q1/21 occupancy under former method). Furnished revenue of $1.5M was $0.5M below our call (~$0.01). Disclosed market rents are holding in. MI-est. market rent of $1,736 was +1.0% q/q (+4.1% annualized), with q/q growth ranging from 0.3% in Toronto to 3.0% in Montreal (surprisingly high in Montreal); we expect more colour as it may be due to methodology change (i.e. est. are on occupied suites vs. total suites before).
MI continues to prioritize rent over occupancy, in anticipation of a market recovery in 2H/21. Furnished suites take a bit of a step back after showing some life in Q4/20. Q1/21 avg. occupancy was 62.5%, down 1,480bp q/q and 170bp y/y following a 210bp q/q increase in Q4.
MI disclosed Q1/21 avg. rent of $3,540/month was down 1% q/q and 19% y/y (Q4/20 was +3.2% q/q and -15% y/y). 3% of total suites (216) are furnished, with MI converting 16 to unfurnished during Q1 (2021 plan is for 50+). Modest SP AMR growth of +0.4% q/q to $1,630/suite (Q4/20 = +0.6% q/q) met our $1,629/suite forecast, but unfurnished occupancy fell 110bp q/q and 460bp y/y to 92.2% (Q4/20 = -140bp q/q and -270bp y/y; under old methodology. On a y/y basis, SP AMR and occupancy were +1.9% (Q4/20 = 2.9%). Disclosed in-place rent was flat at $1.92/sf (Q4/20 = +$0.01).
Tenant turnover of 7.2% was +1.0% q/q and +2.0% y/y, ahead of expectations. MI repositioned 46 suites vs. 56 q/q (2020A = 239) for $2.4M (8.7% return; Q4/20 = 9%; 2020A = 9.4%). 2021 target = 250-300.