TSX:PRV.DB - Post by User
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incomedreamer11on Mar 24, 2022 11:16am
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Post# 34541447
Scotia comments on results
Scotia comments on results
Q4/21 Glance: Sizable FV Gains as IFRS NAV Increased 16% Q/Q Led by Industrial Portfolio
OUR TAKE: Positive. PRV recorded FV gains of $0.97/unit in Q4/21 which equates to 13.7% of its current price. IFRS NAVPU increased to $7.27 or up 16% q/q due to re-valuation of its industrial portfolio. Reported AFFOPU in Q4 was in line with expectations. SP NOI grew 5.5% in Q4/21 and 4.3% in full year. 2022 also looking good as 50% of 2022 lease expiries have been renewed at 10%+ renewal spreads. Full update post conf call today @10:30am EST.
PRV offers distribution yield of 6.3% which is the second highest within our coverage group. We recently launched coverage on PRV – see link to our 129-page report in which we reviewed the industrial REIT sector as well. We mentioned earlier that PRV is best suited to investors who are looking for higher yield but could benefit from higher NAV growth as well if cap rate spread between primary and secondary markets narrows over time.
In-line AFFOPU: Reported AFFOPU of $0.12 in Q4/21 in line with Scotia estimate of $0.117 and consensus estimate of $0.12. FFOPU came in at $0.114, slightly below our estimate of $0.128 and consensus estimate of $0.132. The variance was due to non-cash long-term incentive expenses – this gets added back in AFFO but not in FFO. NOI was in line with our estimate.
IFRS NAVPU grew to $7.27 from $6.26 last quarter (+16% q/q), supported by $58.6M of FV gains ($0.97/unit) in Q4 vs. a $2.6M loss ($0.05/unit) in Q3/21. While FV gains are not broken down by segment, we expect the majority of FV gains came from cap rate compression on the industrial portfolio. We will look for more details on the conference call.
10% rental spreads in 2021 and 2022 so far: Occupancy was down slightly to 98.4% vs. 98.5% in Q3/21. Leasing spreads continue to look good with 97% of leases maturing in 2021 renewed at average renewal spread of 10.2% (previously disclosed) and almost half of 2022 expiries were renewed at a spread of 10.1%.
SP NOI grew +5.5% y/y in Q4/21 (+5.0% excl. bad debt expense), up from 3.5% last quarter. SP NOI growth was led by industrial SP NOI growing 7.3% y/y, followed by retail at 2.9% and office at 2.5%. We think that SP NOI growth acceleration this quarter was partially a function of the larger weighting of industrial in its asset mix (64% of base rent was from industrial this quarter vs. 58% in Q3 and 56% in Q2).
Leverage reduction: Leverage fell to 53.1% down from 58.2% last quarter and 57.8% at Q4/20. PRV looks to have made good progress toward management’s 50% near-term leverage target this quarter. PRV’s quarterly leverage reduction was helped by its $83M bought deal offering (including private placement from Collingwood Investments) in October. Liquidity at year-end was $51M (includes cash on hand and availability on its credit facility).
Acquisition activity (previously announced): PRV acquired $163M of properties in Q4/21 and $297M for full year 2021. This quarter’s acquisitions consisted of the previously announced 16 property industrial portfolio for a total of $163.2M at a 5.9% weighted average cap rate. The majority of PRV’s acquisition activity this year consisted of industrial properties and PRV has successfully grown its industrial exposure (by base rent) from 49% at Q4/20 to 64% at Q4/21.