Artis Real Estate Investment Pref Shs Series E T.AX.PR.E

Analysis on Q1 Results

[Frankie10]

I'm prob not going to get through the MD&A tonight - so I shall post this here and finalize later. I think we did good boys *collapses from exhaustion*

ANALYSIS
 
“Our normal course issuer bid remains active and represents the best investment we can make today - something we will continue doing given the significant accretive impact this will have on NAV per unit, FFO per unit and AFFO per unit.”

NAV decrease to $17.09 (decrease of 1.6%) – slightly bad (expected based on unit price decay – consider unit price decrease vs. NAV decrease(~16.7%)*) Price to NAV of 0.4 (based on today’s price) *ASSET VALUATION*

Annual dividend yield of 8.78% with an AFFO payout ratio of 83.3% for Q1 = 9.5% cash flow return (assuming AFFO = cashflow) *CASHFLOW VALUATION*

$118k dispositions not yet closed – gives credibility to assets held for sale # - more money coming for debt repayment and/or buybacks. – great to see more sales!

SPNOI solid growth, occupancy up to 90.5% (q1) from 90.1% (q4), leasing (not sure new lease vs expiring), weighted average rental rate on renewals that commenced during the first quarter of 2023 increased 4.8% – seems like solid fundaments

Three industrial properties come online –  154.1k sq ft. (56.1k + 98k) committed (at Artis ownership) and 100k sq. ft. occupied.  Leasing for half of 300 Main (580k sq. ft.) underway. Increase to FFO and AFFO - great

Proceeds from disposition of equity securities, net of costs $39.2M – selling securities – sold an additional $34.8M in Q1 (at a loss? rationale to fund NCIB?) - great! Manji *finally* acknowledged Artis is the true value per action and quote above! 

Artis’s portfolio has a stable lease expiry profile with 50.6% of gross leasable area expiring in 2027 or later – very good (risk)

Total debt to GBV increased from 49.1% from 48.5%. Total debt slightly down (immaterial) therefore, ratio increased due to asset write-downs (non-cash) – overall immaterial
 
Debt (365+199+721+514+249+204) / Total assets = 50.4% (incl. prefs) –interest rate risk
 
 Adj EBITDA to interest decreased 2.28 from 2.28 (interest expense increasing – debt to ebitda ratio flat - not good)
 
The properties held for sale had an aggregate mortgage payable balance of $107.5M at March 31, 2023. This balance is not accounted for as held for sale but is included in current liabilities as the REIT intends to repay the mortgages upon disposition of the related investment properties.  Current mortgages $514M – of which $107.5 repaid through monetization/sale of properties. – balance sheet continues to improve, however current liabilities ~x2 current assets incl. held for sale – not good
 
Mortgages – 60% fixed or hedged w.a. effective rate 5.24%
 
Senior unsecured debt - $250M @ 3.824 maturing September 18, 2023 – bad – this will negatively affect FFO and AFFO if rolled at higher rate
 
 
 
 
 
Iris –
numbers at artis’ share*
 
decrease in equity to $130M from $146M  – net operating income (11.4k) less other expenses and income (24.4k), add back interest income on pref (~8.4k) = -$4.6M loss – bad – attribute no value to the equity of Iris/Cominar in NBV valuation model
 
Total assets down to $785M from $796M – decrease of $11M vs. FV loss of $2M – sold ~$9M (calculated - unconfirmed)
 
Pref interest still paid in-kind, further highlighting cash deficiency at the Iris entity level – possibly a discount on the pref share valuation