CIBC commentsPRIMARIS REAL ESTATE INVESTMENT TRUST
Q1/22 Results: Guidance Raised As Q1 Comes In Strong
Primaris reported a strong inaugural quarter with encouraging signs of recovery.
Leasing spreads and SPNOI growth were particularly strong, with minor impact from temporary lease agreements reached with certain tenants during the pandemic.
While the NOI forecast for 2022 was increased by ~3%, the portfolio has significantly higher embedded organic growth potential from occupancy gains. Conference call is on Wednesday, May 4 at 10:00 a.m. (ET): 1-833-950-0062; passcode: 439910.
Highlights:
Q1 Results: FFO/unit was $0.38, well above consensus of $0.33/unit. NOI came in ~$0.03/unit ahead of our estimate as margins were stronger than expected. Interest expense also came in lower than modeled. AFFO was $0.30/unit vs. our $0.27/unit. Cash SPNOI (ex HOOPP properties) was up 8.2%, reflecting the post-pandemic recovery, higher precent rent and specialty leasing revenue, and improving tenant sales. Part of the revenue growth is also attributed to the completion of certain lease abatement arrangements.
Occupancy: The Primaris assets had in-place occupancy of 87.2% (committed 89.4%), mostly unchanged from 87.5% (89.4% committed) last quarter, while the HOOPP assets were 83.5% occupied for total in-place occupancy of 85.9%. Excluding Northland Village centre, which is slated for redevelopment, committed portfolio occupancy was 89.2%.
Forecast Raised: 2022 NOI guidance was raised by 2.7%, reflecting a strong Q1 and improving prospects for the balance of the year. In particular, leases committed and completed to date drove the guidance increase.
Leasing Update: Primaris leased 444,000 sq. ft., achieving 2.5% renewal rent lifts. CRU (<15,000 sq. ft. tenants) renewals were at 3.7% lower rents reflecting certain leases with lower rents, in part due to lower tenant sales vs. pre-pandemic levels. Anchor spreads grew by 15.4%. NCIB Activity: Primaris repurchased 0.6MM units YTD, for a total of $9.4MM.
Other Metrics At Q1/22: - IFRS NAV: $22.05/unit and a 6.53% cap rate. - Debt/Total Assets: 28.4%. - Pro forma D/EBITDA: 5.3x.
Price Target Calculation Our price target of $18.50 reflects a ~12% discount to our NAV estimate, to account for some of the uncertainty associated with the higher-discretionary retail footprint, smaller scale and yet-to-be-establis