Mr. Brad Cutsey reports

INTERRENT REIT DELIVERS DOUBLE-DIGIT NOI AND FFO GROWTH IN Q1 2024

InterRent Real Estate Investment Trust has released financial results for the first quarter ended March 31, 2024.

Q1 2024 highlights:

• Total portfolio occupancy rate of 96.8 per cent, consistent with March, 2023, and a normal seasonal decrease of 20 basis points from December, 2023.
• Same-property portfolio occupancy rate of 96.8 per cent in March, an increase of 10 basis points from March, 2023, and a decrease of 20 basis points when compared with December, 2023.
• Average monthly rent (AMR) growth of 7.8 per cent for the total portfolio and 7.1 per cent for the same property portfolio for March, 2024, as compared with March, 2023.
• Executed 461 new leases, achieving an average gain-on-lease of 20.3 per cent compared with expiring rents.
• For the three months ended March 31, 2024, same property proportionate net operating income (NOI) of $38.7-million, an increase of $4-million, or 11.7 per cent year-over-year (YoY).
• Total portfolio proportionate NOI of $40.4-million, an increase of $4.1-million for the three months ended March 31, 2023, or 11.2 per cent YoY.
• Same-property NOI margin increased by 230 bps from March, 2023, to reach 65.2 per cent for the three months ended March 31, 2024. Total portfolio NOI margin of 65 per cent, an increase of 210 bps YoY.
• Funds from operations (FFO) of $21.1-million for the three months ended March 31, 2024, an increase of 11.7 per cent compared with the same period last year. FFO per unit (diluted) of 14.4 cents, an increase of 10.8 per cent YoY.
• Adjusted funds from operations (AFFO) of $18.5-million, reflecting an improvement of 12.8 per cent. AFFO per unit (diluted) of 12.6 cents, up 10.8 per cent YoY.
• Committed to sell non-core properties totalling 497 suites in the national capital region for $92-million, or approximately $185,000 per suite, above their international financial reporting standards values. Proceeds, net of the mortgages associated with the properties and disposition costs, of approximately $66.5-million will be used to finance operating and investment priorities, consistent with the REIT's capital allocation strategy. The transaction is anticipated to close in Q2 2024.

Brad Cutsey, president and chief executive officer of InterRent, commented on the results:

"We delivered another quarter of significant growth in revenue, net operating income and funds from operations per unit. We anticipate that sustained strength in rental market fundamentals across all our markets will continue to underpin organic growth and performance in the years to come. We are also pleased to have further advanced our strategic disposition program and achieved premium pricing above IFRS fair values. So far in 2024, net proceeds from our two strategic dispositions have provided us with sufficient capital to fund our capital allocation priorities. With variable debt exposure already reduced to below 1 per cent, we are now well positioned to pursue internal and external growth opportunities as well as NCIB. We will prudently execute our capital allocation strategy to drive long-term value for stakeholders."

Fundamentals underpin sustained top-line growth

Including properties that the REIT owns in its joint ventures, InterRent owned or managed 13,695 suites at March 31, 2024. On a proportionate basis, InterRent had ownership in 12,544 suites, a decrease of 1.1 per cent from 12,689 as of March, 2023.

Momentum in AMR growth continued during the quarter, reaching 7.8 per cent in March, 2024, when compared with the same period last year. Same-property AMR year-over-year growth reached 7.1 per cent. AMR growth is made up of rent growth on lease renewals and on suite turns from new residents moving in during the quarter. The REIT realized significant gain-on-lease of 20.3 per cent in Q1, supported by strong rental market conditions. Turnover rates remained consistent with last year, with TTM turnover remains at 24.8 per cent. The REIT estimates the average market rental gap on the total portfolio continues to be approximately 30 per cent.

Rent growth is robust across all regional markets, with the most significant increases in Greater Vancouver Area and other Ontario, each exceeding 8 per cent in total and same property AMR growth.

Occupancy rates in March, 2024, remained steady at 96.8 per cent, in line with the REIT's strategic target for optimal occupancy levels. compared with March last year, occupancy was unchanged in the total portfolio and showed a 10 bps increase in the same-property portfolio. Occupancy rates remained stable in regional markets, with improvements in the Greater Montreal Area and Greater Toronto and Hamilton Area, and decreases in the national capital region, Greater Vancouver Area and other Ontario. These fluctuations are within expected variations, as the REIT continues to balance short-term occupancy with long-term rental revenue growth.

Driven by AMR growth and leasing demand, the REIT achieved strong gross rental revenue of $61.3-million, an increase of 7.9 per cent compared with the same period last year. NOI margin for the same property and total portfolio improved by 210 bps and 230 bps, respectively, to reach 65 per cent and 65.2 per cent. Proportionate net operating income for the total portfolio was $40.4-million, an 11.2-per-cent increase and same-property NOI increased 11.7 per cent to reach $38.7-million.

Delivered double-digit FFO and AFFO growth

InterRent achieved an 11.7-per-cent increase in funds from operations and a 10.8-per-cent increase in FFO per unit. AFFO growth was 12.8 per cent and 11.5 per cent on a per-unit basis. This growth in FFO and AFFO was attributable to increased NOI and was partially offset by higher interest expenses. Financing costs in Q1 amounted to $15.1-million on a proportionate basis, or 24.5 per cent of operating revenue, compared with $13.9-million, or 24 per cent of operating revenue for the same period last year. This increase was driven by the impact of rising interest rates on the 2023 mortgage refinancings as well as variable rate debt exposure. The refinancings in Q1 as well as the reduction in variable rate exposure resulted in Q1 financing costs being lower that Q4 of 2023.

Net income for the quarter was $26.7-million, a decrease of $56.1-million compared with Q1 2023, primarily driven by unrealized gains on the fair value adjustments of investment properties and is partially offset by the increase in NOI and a lower unrealized loss on the revaluation of unit-based liabilities.

Disciplined capital allocation strengthens balance sheet

During the quarter, InterRent successfully executed refinancing activities that reduced the weighted average cost of mortgage debt to 3.37 per cent from 3.50 per cent and increased overall term to maturity to 5.1 years from 4.7 years at the end of 2023. As of March 31, 90 per cent of the REIT's mortgage debt is backed by Canada Mortgage & Housing Corp., up from 83 per cent as of Dec. 31, 2023. The mortgage refinancing and dispositions allowed the REIT to further reduce its variable-rate debt from approximately 5 per cent of its mortgage debt (7 per cent when including line of credit) at the beginning of the quarter to less than 1 per cent at quarter-end. InterRent decreased its debt as a percentage of total assets by 60 basis points to 37.5 per cent from 38.1 per cent at Dec. 31, 2023. With debt-to-GBV (gross book value) remaining at a healthy level, the REIT remains in a solid financial position to execute on its growth strategies.

Strategic dispositions of non-core assets in NCR

During Q1 2024, InterRent committed to the sale of non-core properties, totalling 497 suites in the national capital region for $92-million, or approximately $185,000 per suite, above their IFRS values. Proceeds net of the mortgages associated with the properties and disposition costs amount to approximately $66.5-million. This transaction is expected to close in Q2 2024. Net proceeds of the sale will be used to finance operating priorities and accretive growth opportunities, consistent with the REIT's capital allocation strategy.

The combined net proceeds from this disposition, along with the one in the Greater Montreal Area, which closed in February, amount to approximately $88.5-million. This exceeds the REIT's anticipated near-term proceeds from dispositions, originally projected at $75-million and mentioned in August, 2023.

Sustainability progress

InterRent remains committed to advancing sustainability initiatives to enhance efficiency, reduce carbon footprints and build resilience against climate change impacts. During the quarter, the REIT invested approximately $460,000 in energy projects such as high-efficiency boilers, LED (light-emitting diode) lights, lighting controls, variable frequency drivers and building automation systems, paving the way for continued improvements in natural gas and electricity usage.

InterRent provided energy training sessions to operations, construction and asset management teams across three regional markets to enhance awareness and empower its team members to actively contribute to energy conservation efforts.

The REIT is set to release its sustainability report in the coming weeks to provide stakeholders with updates on the REIT's sustainability initiatives, progress made and future sustainability goals.

Conference call and webcast

Management will host a webcast and conference call to discuss these results and current business initiatives on Thursday, May 9, 2024, at 10 a.m. EST. The webcast will be accessible on InterRent's website. A replay will be available for seven days after the webcast. The telephone numbers for the conference call are 1-800-717-1738 (toll-free) and 1-289-514-5100 (international). No access code required.

About InterRent Real Estate Investment Trust

InterRent 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, sufficient suites available to attain the critical mass necessary to implement an efficient portfolio management structure and offer opportunities for accretive acquisitions.

We seek Safe Harbor.