TSX:PRV.DB - Post by User
Post by
incomedreamer11on Jun 05, 2023 9:06am
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Post# 35480059
TD comments
TD commentsTD still see risk for dividend cut ,AFFO above 100% in 2023 and 2024
Event
We are resuming coverage following PROREIT's issuance of $35mm 8.00% Convertible Unsecured Debentures, maturing June 30, 2028 and at a conversion price of $7.00.
Impact: NEUTRAL
Our take: PROREIT's convertible issuance provides immediate liquidity and financial flexibility as it awaits progress on some planned dispositions that were announced last quarter ($36mm in conditional sales contracts across office and retail properties). While the initial impact on per-unit results is largely unchanged (since the credit facility's variable rate is close to 7% today), our 2024 estimates are impacted because the convert replaces existing lower-cost mortgage debt in our model. Although PROREIT has locked-in this relatively high coupon for five years, we note that this represents only 7% of the REIT's total debt.
Use of proceeds: PROREIT intends to use net proceeds of ~$33.7mm towards paying down its $60mm credit facility, which was ~75% drawn at Q1/23. Pro forma liquidity increases to ~$59mm from ~$25mm at Q1/23.
Details: The debentures come due on June 30, 2028, and will pay an annual rate of 8.00% payable semi-annually, commencing December 31, 2023. The $7.00/unit conversion price is in-line with our NAV/unit estimate but below PROREIT's IFRS NAV/unit of $8.17.
Forecast: Our 2023 FFO/unit and AFFO/unit estimates are largely unchanged while our 2024 estimates declined 4%/3%. Our revised AFFO estimates now include a net $0.03/unit (previously $0.04/unit) non-cash cost for PROREIT's LTIP expense. Backing this out would result in a 2024E AFFO payout ratio of 102% vs. 110% currently.