TSX:MI.UN - Post Discussion
Post by
incomedreamer11 on May 04, 2022 8:46am
Scotia comments on results
Q1 Glance: Below Our Call on Revenue While Cost Pressure Impacts Y/Y Growth
OUR TAKE: Mixed. Reported FFOPU of $0.19 was below our and consensus $0.21 (range = $0.19-$0.22) and = 3.3% y/y growth (Q4/21 = 5.5%; 2021A = -4.0%); Exhibit 2. The shortfall vs. us was on revenue, not expenses (more clarity required); Exhibit 3.
MI IFRS NAVPU was +$0.33 (+1.4%; +5.5% annualized) q/q to $24.33 (Q4 = +$0.01 q/q) on $14M FV gain on higher NOI in Toronto and Ottawa (cap rate intact at 3.60%).
SPNOI growth of 2.6% lagged Q4 (5.2%) on big cost pressure driving SPNOI margin 160bp lower y/y; Exhibit 1. SP REV/EXP was +5.6%/+9.9% (furnished suites no longer separately disclosed).
New lease spread jumped to 10.8% vs. 7.2% q/q (2021A = 5.4%) while est. portfolio MTM of 10.7% was +3% q/q (Q4 = flat q/q) on a 4.5% increase in est. market rent to $1,832 (Q4 = +0.3%). Improvements in lease spreads were highest in Toronto & Montreal.
Bottom-line, the cost pressure isn’t overly surprising while our view coming into the quarter was that SSREV trends mattered more. Full update post tomorrow’s 10:00 a.m. ET c/c (1-416-764-8688). Focus areas = rationale for recent acquisition (at no spread), 2022E SPNOI metrics (i.e., sustainability of cost pressure), large recorded est. market rent growth, any regulatory updates and capital priorities.
We estimate disclosed market rents were +4.5% q/q (Q4 = -0.3% q/q), the largest increase since our initiation in Q3/20, while in-place rent was +0.9% q/q (~3.4% annualized; Q4 = +0.8% q/q/ or ~3% annualized). Based on our analysis, it appears estimated market rent increased 3%+ in all regions except in Alberta (-1% q/q); Toronto was the strongest at +6.2% q/q. These are very strong numbers, in our view, and bode well for solid SSREV trends in 2022 and beyond. MI repositioned 60 suites (vs. 113 q/q) at an avg. 8.4% return (Q4 = 9.4%), leaving 1,570 to go at MI share (25% of portfolio; Q4 =1,614). MI expects to reposition 180-250 suites for the remainder of 2022 (vs. 2021A of 367).
Slightly lower than expected occupancy with in-line rent growth. Unfurnished Occupancy was +314bp y/y (Q4 = +275bp y/y) and down 78bp q/q (Q4 = +217bp q/q) to 94.26% (~50bp below our call) on a 310 leases signed (Q4/21 = 514). In-place rent of $1,655 was +0.9% q/q and +1.5% y/y (Q4 = +0.6% q/q and +1.1% y/y), and matched our $1,656 forecast. On a per/sf basis, rent was +$0.01 q/q to $1.96/sf (Q4 = flat q/q). Underperforming commercial space in Ottawa impacted SPNOI by 80bp in Q1.
Furnished suite revenue was +6.9% y/y, despite # of suites falling 8 q/q to 195 (3% of total suites) vs. 216 suites in Q1/21. Q1/22 avg. occupancy fell 17.7% q/q but was +0.3% y/y to 62.8% post a 5.8% q/q decline in Q4 (+3.2% y/y). MI disclosed Q1/22 avg. rent of $4,219/month was +3.5% q/q and +19.2% y/y (Q4/21 = +2.0% q/q and +14.2% y/y).
MI reported $144M of liquidity fell $7M q/q to $144M (Q4/21 = +$25M). Disclosed debt/GBV was +30bp q/q to 36.8% (Q4/21 = -140bp) and TTM Debt/EBITDA was +0.2x to 12.5x (Q4/21 = -0.3x). That said, post recent acquisition announcement, we estimate disclosed Q1/22 debt/GBV is +120bp to 38.0%, while TTM Debt/EBITDA is +0.15x to 12.6x.
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