Bullboard - Stock Discussion Forum InterRent Real Estate Investment Trust T.IIP.UN

Alternate Symbol(s): IIPZF

InterRent Real Estate Investment Trust is a real estate investment trust. It is engaged in acquisition, ownership, management and repositioning of strategically located, income-producing, multi-residential properties. Its primary objectives are to grow both funds from operations per Unit and net asset value per Unit through investments in a diversified portfolio of multi-residential properties;... see more

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TSX:IIP.UN - Post Discussion

InterRent Real Estate Investment Trust > TD

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Post by retiredcf on Aug 03, 2023 8:47am

TD

InterRent REIT

(IIP.UN-T) C$12.62

Robust Demand Fundamentals to Continue; Expect Further Dispos.

Event

Forecast update. For our initial thoughts on the quarter, click here.

Impact: NEUTRAL

A continuation of exceptionally strong demand fundamentals along with moderating cost pressures/burn off of incentives led to solid Q2/23 results that were largely in line with expectations. Results were highlighted by +15.0% SPNOI growth (+9.7% SP Revenue growth and +0.6% SP expense growth), driven by broad-based AMR growth, and +300bps of margin expansion. Looking forward, we expect rental markets to remain exceptionally tight (especially in the REIT's core markets) on elevated population growth/limited supply. Management expects top-line growth above the high-single digit level along with modest operating expense growth over the near-term.

Management kicked off its capital recycling program with a commitment to sell a 54- suite property in Ottawa for $11.5mm ($213,000/suite) — above IFRS fair value and has further identified $75mm of net disposition opportunities. Given its current cost of capital, we now expect the REIT to be a net seller of non-core assets through 2024. The buyer pool is smaller, private players. Our forecast has $100mm in unannounced sales with proceeds being targeted to fund the REIT's development/capex programs, debt repayment, and at the current stock price, NCIB purchases.

Lease-up of the REIT's 158-suite office to residential conversion in Ottawa (The Slayte) stood at >60% as of Q2/23 (Q1/23: 50%) and management expects to reach stabilization (~90%) by year-end. The REIT has a further three developments (four including the recent purchase of a 25% interest in the residential-to-office conversion in Ottawa) in the planning stages. Management continues to evaluate development start timing as it balances financing program availability (e.g. MLI select), and construction costs.

Forecasts. Our 2023/24 estimates are largely unchanged. Our $16.10 NAV/unit estimate is -1% (cap rate +5bps to 4.0%).

TD Investment Conclusion

We believe InterRent is well-positioned to capture growing demand in its core markets. We also continue to see earnings and NAV upside through the successful execution of its acquisition, repositioning, and development programs. That said, at current levels, we view the units as fairly valued. We are maintaining our HOLD recommendation and $14.50 target price.