Minto Apartment REIT
(MI.UN-T) C$13.44
Q3/22 First Look; Results Ahead; SPNOI +13.3%. Dist bumped 3.2%
Event
Q3/22 results. Conference call at 11:00 a.m. ET today (1-888-390-0546). Conference call slides.
Impact: SLIGHTLY POSITIVE
FFO/unit (f.d.) of $0.238 increased 13% versus Q3/21 and above our estimate of $0.210. Excluding $0.6mm ($0.01/unit) of one time insurance proceeds, FFO would have been $0.229 and a penny ahead of consensus. The variance versus our estimate was higher revenue and higher NOI margins.
The REIT also announced a 3.2% distribution increase to $0.49 annually, beginning with the November distribution. This marks the 4th annual increase since going public in 2018.
In our view, Minto's results demonstrate strengthening apartment market fundamentals, evidenced by 13.3% SPNOI growth. The mark-to-market continued to trend higher to 12.1%, up from 10.9% in Q2. On the leasing front, new leases (574) were completed at 14.5% above expiring rents, another improvement versus Q2 (12.1%) and represented the second highest quarterly gain in the REIT's history. The REIT faced some operating cost pressures in the quarter, with same-property expenses +4.4% y/y on higher utility prices and property operating costs.
Operations
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SPNOI was +13.3% y/y. Same-property revenue was +9.8% on the back of 4.2% AMR growth (to $1,720) and a 340bps increase in occupancy to 96.3%. Revenue growth was partially offset by a 4.2% increase in costs, including a 6% increase in utilities (higher natural gas prices) and a 4% increase in property operating costs (salaries, insurance and R&M). SPNOI margins were +210bps y/y to 64.1%.
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Furnished suite NOI increased 19.5% y/y (occupancy flat; average rents +32% to $5,261).
Portfolio Update
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Repositioned 75 suites achieving a 9.4% unlevered return. YTD 218 suites have been repositioned and leased at a 9.0% return.
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No change to anticipated development yields on the REIT's three developments although per suite cost estimates increased 7.5% at Leslie York Mills and 9.2% at High Park Village.
Balance Sheet
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Liquidity of ~$145.2mm (Q4/21: $193.2mm). Leverage (D/GBV) was +40bps q/ q to 39.9%.
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$18.7mm Q3/22 fair-value loss. IFRS book value -0.5% q/q to $24.12/unit.
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NCIB. Repurchased 182,227 units during Q3 at an average price of $15.15/unit.