News

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01
Aug

News Release

 

InterRent REIT Results for the Second Quarter of 2016

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

 

Ottawa, Ontario(July 28, 2016) – InterRent Real Estate Investment Trust (TSX-IIP.UN) (InterRent or the “REIT”) today reported financial results for the second quarter ended June 30, 2016.

 

Highlights   

 

  • Gross rental revenue for the quarter increased by $4.5 million, or 21.8%, over Q2 2015.    
  • Gross rental revenue from the stabilized portfolio was $16.2 million for the quarter, an increase of 3.9%, over Q2 2015.
  • Average monthly rent per suite for the entire portfolio increased to $1,020 (June 2016), or 4.3%, from $978 (June 2015).  The stabilized portfolio increased to $1,027 (June 2016) from $989 (June 2015), an increase of 3.8%.  
  • Occupancy for the overall portfolio was 94.0%, down 1.1% (June 2016 compared to June 2015) as a result of an increase in acquisitions and continued repositioning of properties acquired in 2014 and 2015.  Occupancy from stabilized operations was up from 95.5% (June 2015) to 96.4% (June 2016). 
  • Net Operating Income (NOI) for the quarter increased by $2.5 million over Q2 2015, or 20.0%, to $14.7 million.  NOI margin for Q2 2016 was 59.6%, up 30 basis points over Q2 2015.
  • Stabilized NOI for the quarter increased by $0.6 million, or 6.3%, to $10.1 million.  Stabilized NOI margin for Q2 2016 was 61.9%, up 100 basis points over Q2 2015. 
  • Funds from operations (FFO) for the quarter increased by 11.0% on a per unit basis, going from $6.4 million (or $0.091 per unit) for Q2 2015 to $7.2 million (or $0.101 per unit) for Q2 2016.
  • Adjusted funds from operations (AFFO) for the quarter increased by 11.4% on a per unit basis, going from $5.6 million (or $0.079 per unit) for Q2 2015 to $6.3 million (or $0.088 per unit) for Q2 2016.
  • InterRent closed on the acquisition of 418 suites in Ottawa in the quarter and disposed of seven properties (202 suites) in Kingston. 
  • The previously announced disposition of 2 properties (104 suites) in Brantford, 5 properties (346 suites) in Sarnia and 1 property (69 suites) in Niagara Falls all closed in July 2016.

 

Financial Highlights

 

 

Selected Consolidated Information
In $000’s, except per Unit amounts
and other non-financial data

3 Months Ended

June 30, 2016

3 Months Ended

June 30, 2015

Change

Total suites

8,578

 

7,663

 

+11.9%

Average rent per suite (June)

$1,020

$978

+4.3%

Occupancy rate (June)

94.0%

95.1%

-1.2%

Operating revenues

$24,682

$20,648

+19.5%

Net operating income (NOI)

$14,706

$12,254

+20.0%

NOI %

59.6%

59.3%

+5.0%

Stabilized average rent per suite (June)

$1,027

$989

+3.8%

Stabilized occupancy rate (June)

96.4%

95.5%

+0.9%

Stabilized NOI

$10,091

$9,492

+6.3%

Stabilized NOI %

61.9%

60.9%

+1.6%

Funds from Operations (FFO)

$7,226

$6,399

+12.9%

FFO per weighted average unit - basic

$0.101

$0.091

+11.0%

FFO per weighted average unit - diluted

$0.100

$0.090

+11.1%

Adjusted Funds from Operations (AFFO)

$6,288

$5,589

+12.5%

AFFO per weighted average unit - basic

$0.088

$0.079

+11.4%

AFFO per weighted average unit - diluted

$0.087

$0.079

+10.1%

Cash distributions per unit

$0.0578

$0.0549

+5.3%

AFFO payout ratio

66%

69%

-4.3%

Debt to GBV

56.3%

51.5%

+9.3%

Interest coverage (rolling 12 months)

2.57x

2.46x

+4.5%

Debt service coverage (rolling 12 months)

1.53x

1.41x

+8.5%

Gross rental revenue for the quarter was $25.2 million, an increase of $4.5 million, or 21.8%, compared to Q2 2015. Operating revenue for the quarter was up $4.0 million to $24.7 million, or 19.5% compared to Q2 2015.  The average monthly rent across the portfolio for June 2016 increased to $1,020 per suite from $978 (June 2015), an increase of 4.3%.  The June 2016 vacancy rate across the entire portfolio was 6.0%, an increase from 4.9% recorded in June of 2015.  The 6.0% was comprised of 3.4% for stabilized properties and 10.5% for un-stabilized.  “We are continuing to work through the repositioning of the recently acquired properties and continue to believe that the short term vacancy impact is well worth the resulting upside as we prepare the suites to capture full market rents,” said Mike McGahan, CEO.

On a stabilized portfolio basis (stabilized properties are those owned by the REIT continuously for 24 months), the average monthly rent per suite increased from $989 to $1,027 over the same period, an increase of 3.8%. Management expects to continue to grow revenues organically through moving to market rent on suite turnovers, guideline increases, continued roll-out of AGIs, as well as continuing to drive other ancillary revenue streams.

NOI for the quarter was $14.7 million, or 59.6% of operating revenue, compared to $12.3 million, or 59.3% of operating revenue, for the three months ended June 30, 2015.  NOI from the stabilized portfolio increased from $9.5 million for Q2 2015 to $10.1 million for Q2 2016, an increase of $0.6 million, or 6.3%.  Stabilized NOI margin increased by 100 basis points in the quarter-over-quarter comparison going from 60.9% to 61.9% primarily as a result of continued strong revenue growth combined with a reduction in operating costs as a percentage of operating revenue.

InterRent is continuing to execute on its capital recycling program by actively pursuing an asset allocation strategy of monetizing value created by the REIT in smaller non-core markets and recycling capital into core growth markets.  Year to date, InterRent has purchased 2 properties (totaling 545 suites), sold eleven properties (totaling 357 suites) and announced the sale of a further 8 properties (totaling 519 suites).  “We continue to execute on our strategy of recycling capital from our non-core properties into new repositioning opportunities within our core markets,” said Mike McGahan, CEO. 

About InterRent

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 multi-residential 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.

 

InterRent's primary objective is to use the proven industry experience of the Trustees, Management and Operational Team to: (i) provide Unitholders with stable and growing cash distributions from investments in a diversified portfolio of multi-residential properties; (ii) enhance the value of the assets and maximize long-term Unit value through the active management of such assets; and (iii) expand the asset base and increase Distributable Income through accretive acquisitions. 

*Non-GAAP Measures

InterRent prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with IFRS (GAAP). In this and other earnings releases, as a complement to results provided in accordance with GAAP, InterRent also discloses and discusses certain non-GAAP financial measures, including NOI, FFO, AFFO and EBITDA. These non-GAAP measures are further defined and discussed in the MD&A dated July 28, 2016, which should be read in conjunction with this press release. Since NOI, FFO, AFFO and EBITDA are not determined by GAAP, they may not be comparable to similar measures reported by other issuers. InterRent has presented such non-GAAP measures as Management believes these measures are relevant measures of the ability of InterRent to earn and distribute cash returns to Unitholders and to evaluate InterRent's performance.  These non-GAAP measures should not be construed as alternatives to net income (loss) or cash flow from operating activities determined in accordance with GAAP as an indicator of InterRent's performance.

 

Cautionary Statements

 

The comments and highlights herein should be read in conjunction with the most recently filed annual information form as well as our consolidated financial statements and management’s discussion and analysis for the same period.  InterRent’s publicly filed information is located at www.sedar.com

 

This news release contains “forward-looking statements” within the meaning applicable to Canadian securities legislation.  Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “anticipated”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. InterRent is subject to significant risks and uncertainties which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements contained in this release. A full description of these risk factors can be found in InterRent’s most recently publicly filed information located at www.sedar.com.  InterRent cannot assure investors that actual results will be consistent with these forward looking statements and InterRent assumes no obligation to update or revise the forward looking statements contained in this release to reflect actual events or new circumstances.

 

 

 

 

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.  

 

For further information about InterRent please contact:

Mike McGahan

Brad Cutsey

Curt Millar, CPA, CA

Chief Executive Officer

President

Chief Financial Officer

Tel: (613) 569-5699 Ext 244

Tel: (613) 569-5699 Ext 226

Tel: (613) 569-5699 Ext 233

Fax: (613) 569-5698

Fax: (613) 569-5698

Fax:(613) 569-5698

e-mail: mmcgahan@interrentreit.com

e-mail: bcutsey@interrentreit.com

e-mail:cmillar@interrentreit.com

 

web site: www.interrentreit.com