TSX:PRV.DB - Post by User
Post by
incomedreamer11on Nov 16, 2023 9:15am
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Post# 35738786
Scotia comments on results
Scotia comments on results
Distribution Yield Approaching 10%
OUR TAKE: Neutral. Post Q3 results, our estimates are slightly tweaked. Our target is reduced to $6.50 (-$0.50). Our NAVPU is largely unchanged at $6.75 (-$0.05), and our FFO estimates are slightly reduced (4.6% in 2024).
Distribution yield is now approaching 10% (9.8% to be exact), and we think market focus is on AFFO payout ratio and leverage (in that order). Based on our model, 2024E AFFO payout ratio is 94% (Exhibit 1). Given payout ratio <100% and modest debt maturities in 2024, we don’t expect a distribution cut. Our 2024E FFOPU implies 13% y/y growth (but only 4.9% growth once we factor non-recurring G&A expenses in 2023).
PRV is also making good progress on leverage. Reported D/GBV (including Converts) at 49.5% in Q3/23 versus 50.3% last quarter. 8.4% of total debt maturing in 2024 – so very manageable.
Our NAVPU of $6.75 is based on cap rate of 6.5% – Exhibits 2 & 3 for our sum-of-the-parts valuation. Once the credit environment improves, we expect narrowing of the valuation gap.
KEY POINTS
Strong progress on leasing activity: Leasing spreads continue to look good with 89% of leases maturing in 2023 renewed at average renewal spread of 43.9% and 18% of leases maturing in 2024 were renewed at 29.7% spread. PRV has 12.4% of GLA (783k sf) maturing in 2024. Occupancy was down 80bp q/q at 98.2% vs. 99.0% in Q2/23. SP NOI grew +1.7% y/y in Q3/23 excl. temporary vacancy, down from +3.9% last quarter. Industrial SP NOI up +2.1% y/y (excl. vacancy in MTL property), followed by retail at -0.8% and office at +5.7%. 102k sf vacant industrial property in Montreal was re-leased to two tenants with 10-year lease terms with an avg. rental spread of 55% – occupancy is expected to begin in October.
Progress on Balance Sheet – manageable debt maturities (Exhibit 8): There are no near term major debt expiries: $25M mortgage coming due for the remainder of 2023 and $27M in 2024. Liquidity at $57.4M incl. $46M available on credit facility. We note that only 2.7% of total debt is variable.
Active quarter on dispositions: PRV continued to dispose of non-core retail and office assets this quarter. Two non-core office (60k sf) and one retail (3k sf) properties were sold for $11.3M. Proceeds will be used to repay $7.2M related mortgages and balance for general business purposes. In late October, PRV entered into agreements to dispose of two non-core retail assets (approx. 50k sf) for $10.9M. Transactions are expected to close in Q4 2023.