16:28:59 EDT Thu 28 Mar 2024
Enter Symbol
or Name
USA
CA



InterRent Real Estate Investment Trust
Symbol IIP
Shares Issued 140,949,412
Close 2022-08-08 C$ 13.31
Market Cap C$ 1,876,036,674
Recent Sedar Documents

InterRent earnings rise to $77.6-million in Q2 2022

2022-08-09 10:08 ET - News Release

Mr. Brad Cutsey reports

INTERRENT REIT SEES STRONG MOMENTUM BUILDING AT END OF Q2 AND INTO Q3 AS DEMAND RETURNS TO MORE NORMALIZED LEVELS

InterRent Real Estate Investment Trust (REIT) has released its financial results for the second quarter ended June 30, 2022.

InterRent REIT achieves 8.9-per-cent growth in same property NOI (net operating income) in Q2 2022:

  • Same-property occupancy of 95.6 per cent in June, 2022, an increase of 340 basis points (bps) compared with June, 2021;
  • Same-property operating expenses continue to track in line with expectations, resulting in same-property NOI of $29.8-million for the quarter and growth of 8.9 per cent compared with Q2 2021;
  • Administrative costs of $4.3-million in Q2 2022 capture increased bench strength relative to prior year, as well as advances toward sustainability commitments;
  • Refinancing activity in the quarter lengthens average term to maturity to 4.8 years and increases share of CMHC-insured mortgages to 73 per cent;
  • FFO (funds from operations) of $18.9-million (13.1 cents per unit -- diluted) in Q2 2022; growth of 6.3 per cent overall and 5.6 per cent on a per-unit basis, compared with Q2 2021;
  • Enhancing environmental profile with new build acquisition in Brossard in Q2 2022.

Solid net operating income serves to offset higher expense base in the second quarter

As of June 30, 2022, InterRent had 100-per-cent ownership in 12,573 suites, up 6.1 per cent from 11,850 as of Q2 2021. Including properties that the REIT owns in its joint operations, InterRent owned or managed 13,180 suites as of June 30, 2022. At 95.1 per cent, the June, 2022, occupancy rate in InterRent's portfolio improved 360 bps over June, 2021 (91.5 per cent), and is in line with seasonal expectations against March, 2022, backdrop (95.5 per cent). The REIT's same property portfolio likewise saw year-over-year occupancy gains in Q2 2022, posting an improvement of 340 bps over June, 2021, to reach 95.6 per cent.

Within the same property portfolio, June, 2022, occupancy slipped 80 bps relative to March, 2022 (96.4 per cent), largely driven by a dip in the National Capital Region. Encouragingly, this region is seeing strong demand post-quarter, which should support an improved figure in Q3.

Total portfolio operating revenues in Q2 2022 were up over 17.5 per cent over Q2 2021 following a strong year of external growth in 2021. Narrowing to the same property portfolio, operating revenues grew 9.5 per cent in Q2 2022 to $46.7-million, driven by improvements in average rent per suite (over 6.2 per cent). Though the current inflationary environment is impacting operating expenses for the REIT's portfolio, property operating costs and utility consumption for Q2 2022 are tracking in line with internal budget expectations. Total and same property portfolios both saw mild NOI margin contraction of 30 bps relative to Q2 2021, with top-line strength generating year-over-year NOI growth of 16.9 per cent and 8.9 per cent, respectively, in the quarter.

Administrative costs of $4.3-million in Q2 2022 are higher compared with both Q2 2021 ($3.2-million) and Q1 2022 ($3.5-million); they are more representative of the REIT's expected run-rate, following the strategic build out of its team in 2021 and continuing sustainability efforts. Of note, approximately 7 per cent of the Q2 2022 figure relates to ESG (environmental, social and governance) actions, including the impact of InterRent's initiative to support refugees from Ukraine and Afghanistan, foundational work for the REIT's climate commitments, and various biodiversity initiatives across the portfolio.

Financing costs in Q2 2022 came in at $10.4-million, reflecting the higher rate environment relative to Q2 2021 ($7.5-million). During the quarter, the Trust closed on three new mortgages totalling an additional $71-million, renewed three mortgages totalling $54.6-million and closed on six up-financings totalling $161.6-million (maturing loans totalled $50.5-million). As a result, the average term to maturity of the REIT's mortgage debt was approximately 4.8 years at June 30, 2022, compared with 4.5 years at March 31, 2022; the share of mortgage debt backed by CMHC insurance increased from 71 per cent at the end of Q1 2022 to 73 per cent at the end of Q2 2022. Given the higher-rate environment in Q2 2022, this refinancing activity saw the weighted average cost of mortgage debt increase to 2.8 per cent, 29 bps higher relative to March 31, 2022. Subsequent to the quarter, the REIT has continued to work through its remaining 2022 mortgage maturities, with only $92-million of 2022 maturities remaining to be renewed or up-financed as of July 31, 2022. As of July 31, the variable rate debt exposure has been reduced to 7.2 per cent, the weighted average interest rate has increased to 2.99 per cent and the average life to maturity has been extended to over five years.

Net income for Q2 2022 was $77.6-million, an increase of $16.5-million compared with Q2 2021. This difference was due primarily to the fair value gain on financial liabilities, which was $31.2-million in Q2 2022, versus a loss of $16-million in Q2 2021 due to movements in the REIT's unit price. Also contributing was a fair value gain on investment properties of $27.8-million and an increase in net operating income of $4.9-million offset by a $2.9-million increase in financing costs, as well as a $1-million increase in administrative costs.

At $18.9-million (13.1 cents per unit -- diluted), FFO increased by 6.3 per cent compared with Q2 2021 ($17.8-million or 12.4 cents per unit -- diluted), resulting in 5.6-per-cent growth on a per-unit basis. AFFO (adjusted funds from operations) grew from $15.7-million (11 cents per unit -- diluted) in Q2 2021 to $16.3-million (11.3 cents per unit -- diluted) in Q2 2022, representing 3.8-per-cent and 2.7-per-cent growth on an absolute and per-unit basis, respectively.

Enhancing environmental profile with new build acquisition in Q2 2022

On June 30, 2022, InterRent closed on the acquisition of a recently constructed luxury 254-suite apartment community in Brossard on the south shore of Montreal for $109.3-million. With stand-out sustainability features, the community boasts 25-per-cent better GHG (greenhouse gas) emissions and energy performance than building code requirements; it led to CMHC-insured financing that qualified under the MLI Select program using energy efficiency and GHG emission criteria.

Commenting on the results published today, Brad Cutsey, president and chief executive officer of InterRent, said: "Our financial results for the second quarter of 2022 demonstrate the resilience of our business model despite ongoing macro headwinds.

Although we are navigating short-term challenges of inflation and interest rate volatility, one constant remains -- at InterRent, we remain steadfast in our mission to create communities where people are proud to call home.

We see encouraging demand trends going into Q3 and look forward to sharing our progress in the coming months."

Conference call

Management will host a webcast and conference call to discuss these results and current business initiatives on Tuesday, Aug. 9, 2022, at 10 a.m. EST. The webcast will be accessible. A replay will be available for seven days after the webcast. The telephone numbers for the conference call are 888-886-7786 (toll-free) and 416-764-8658 (international). No access code is required.

About InterRent Real Estate Investment Trust

InterRent REIT is a growth-oriented real estate investment trust engaged in increasing unitholder value, and creating a growing and sustainable distribution through the acquisition and ownership of multiresidential properties.

InterRent's strategy is to expand its portfolio primarily within markets that have exhibited stable market vacancies, have sufficient suites available to attain the critical mass necessary to implement an efficient portfolio management structure, and offer opportunities for accretive acquisitions.

InterRent's primary objectives are to use the proven industry experience of the trustees, management and operational team to: (i) grow both funds from operations per unit and net asset value per unit through investments in a diversified portfolio of multiresidential properties; (ii) provide unitholders with sustainable and growing cash distributions, payable monthly; and (iii) maintain a conservative payout ratio and balance sheet.

We seek Safe Harbor.

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