Q1-22 comments after reading MD&A / FSThis is a blowout quarter and many of you have already pointed out the main highlights like NAV / SPNOI numbers. Here's a few more of my observations after going through the reports, some of which are just smaller.
- NAV comments. In his first comments on being the new president, his quote is:
I am committed to this expanded leadership role to advance our strategic repositioning plan, and deliver on our commitment to close the significant discount to NAV at which our Units trade.
Management here is laser focused on bridging the NAV gap and providing value to shareholders. This is not always the case - some REIT's I follow never even put the NAV in their reports and make you calculate it. This indicates to me that share buybacks are happening for a while. It also tells me that management and us are on the same team and our interests are aligned. - Office assets written up by $53 million with cap rate compression.
We were all expecting the write ups on the industrial/residential (although not to that extent - the actual amount is on the higher range from all of us). I did not expect to see the office assets written up in this environment. Good news from a sale perspective if the market is heating up a bit (or might just be that they were too conservative before). - FFO per unit in the Q of $0.28
Multiply this by 4 and even assuming 0% growth, this is trading at a P/FFO of 10.8 right now which is very cheap, even ignoring NAV completely. Keep in mind that we will see the Caledon industrial assets come on line in the rest of 2022 (which are already leased up) and the other residential properties in latter 2022 come online which are in lease up right now which will just add to FFO. With the future growth and SPNOI, this is trading at a very attractive multiple. - Mortgages receivable of $177 million
This is just a quick note to keep in mind that we will see cash coming from the working capital change as H&R collects on their receivable which will be used to help fund the buyback without need to borrow. - Rezoning delay in Toronto
This is the one bit of disappointing news that is not unexpected. The first property at 145 Wellington in Toronto which was expected to be approved in early 2022 is now moved back to Q3. Toronto is awful with zoning, but hopefully all the housing issues going on right now will start to put some pressure on them to approve the rezoning for new units.
I'm expecting about a 6-7% bounce today as there are too many weak hands that will get excited once they see green and sell off. If it doesn't jump too crazy, I might consider leveraging up to add to my position here. H&R is already my largest holding, but in these uncertain times, this is a pretty stable investment as far as it goes.