TD commentsMinto Apartment REIT (MI.UN-T) C$19.24
Q1/22 Results Below Expectations; Leasing Momentum Improving
Jonathan Kelcher, CFA Lorne Kalmar, CPA, CA
Event Q1/22 results. Conference call at 10:00 a.m. ET today (1-888-390-0546). Conference call slides.
Impact: SLIGHTLY NEGATIVE
FFO/unit (f.d.) of $0.191 was +3% versus Q1/21, but below our estimate of $0.218 and consensus of $0.21. AFFO/unit (our calculation) of $0.163 was also below our $0.190 estimate. The miss was on lower revenues (~$1mm/3%) and NOI margins (57.8% versus TDS at 61.0%). The furnished suite portfolio drove ~$0.5mm of the revenue miss (Exhibit). Despite the miss, there was clear evidence of some positive momentum, including +2.6% SPNOI growth. The mark-to-market trended higher to 10.7%, nicely ahead of the 6.8% reported in Q4/21. On the leasing front, new leases (401) were completed at 10.8% above expiring, another improvement versus Q4/21 (7.2%). As expected, operating cost pressures impacted the quarter, with sameproperty operating expenses +9.9% (utilities/operating costs), a trend we expect to play out with other Apartment REITs.
Operations SPNOI was +2.6% y/y. Same-property revenue was +5.6%. Occupancy was +320bps y/y to 94.3%, although down slightly from ~95% in Q4/21. AMR was +2.9% y/y to $1,677. Revenue growth was partially offset by a 9.9% increase in costs, including a 23% increase in utilities (colder winter, natural gas prices) and an 8% increase in property operating costs (salaries, insurance and R&M). SPNOI margins were -160bps y/y to 58.0%.
Furnished suite NOI (~5% of Q1/22 NOI) increased 6.9% y/y (occupancy flat; average rents +19% to $4,219).
Portfolio Update Post-Q1 announced the acquisition of two assets for $201mm (link).
Repositioned 60 suites (Q4/21: 113) achieving an 8.4% unlevered return. Targeting 180-250 suite suite repositionings over balance of 2022.
Agreed to provide a $51.7mm development loan to finance 80% of MPI's 45% interest in a JV to redevelop University Heights shopping mall in the Greater Victoria Area into a mixed-use property (option to acquire MPI's interest on stabilization at 95% of FMV; expected 2026). Fifth and Bank is 76% leased, with stabilization expected in mid-2022 (option to acquire at 95% of FMV).
Balance Sheet Liquidity of ~$144.4mm (Q4/21: $150.7mm).
Leverage (D/GBV) was +30bps q/ q to 36.8%. $14.4mm Q1/22 fair-value gain. IFRS book value +1.4% q/q to $24.33/unit.