Earnings Alert: InterRent REIT Reports Strong Results in Q3 2024 Performance

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Earnings Alert: InterRent REIT Reports Strong Results in Q3 2024 Performance

InterRent REIT (TSX:IIP.UN) reported strong performance for the third quarter of 2024 with significant increases in occupancy rates, average monthly rent, and key financial metrics. The company's disciplined capital allocation strategy led to the acquisition of a new community in Montreal, and its sustainability efforts were recognized with improved GRESB scores and BOMA Best certification for its Montreal portfolio. Despite some market uncertainties, InterRent remains optimistic about long-term revenue growth and operational efficiency.

Key Highlights:

  • Occupancy rates increased by 120 basis points year-over-year to 96.4%.
  • Average monthly rent rose by 7% to $1,687.
  • InterRent signed 1,279 new leases, matching last year's record levels.
  • Same-property revenue grew by 7.9%, resulting in a proportional NOI margin of 68.2%.
  • FFO and AFFO increased by 9.7% and 10.3%, respectively.
  • The debt-to-book value ratio stands at 38.5%, with $295 million in available liquidity.
  • A new property was acquired in Montreal, with return expansion and stabilization expected.
  • The company raised a record $1.8 million at a charity golf tournament.

Company Outlook: Moderate revenue growth is expected due to recent changes in immigration policies affecting population growth in Canada. The acquisition in Montreal is anticipated to stabilize returns within 2.5 to 3 years. The company forecasts revenue growth of 4% to 5% for the current year, 3% to 4% for the next year, and potentially 4% to 5% for 2025.

Negative Highlights: A fair value loss of $93.5 million was reported due to rising average capitalization rates. Management expects operational expenses to grow by 4% to 5% for 2025. Decreased immigration may result in a current supply shortage lasting longer than anticipated.

Positive Highlights: The strategic acquisition in Montreal is close to amenities like UQAM and CHUM Super Hospital, which has the potential to attract tenants. The company has outperformed in rental growth and expects mid-single-digit growth moving forward. Despite market uncertainties, the company sees long-term opportunities in its Richmond and Churchill developments.

Shortcomings: The company reported a fair value impairment of $93 million. There is a trading discount of 30% to 35% based on NAV, with a unit price of $11 and an IFRS NAV of approximately $17.

Q&A Highlights: Management discussed the impact of household formation and immigration on demand. There is an intention to divest an asset valued at approximately $50 million, with potential fund allocation for buybacks or growth initiatives. The company is open to slightly increasing leverage as long as it remains attractive.

InterRent REIT's Q3 2024 earnings call showcased the company's strong financial health and strategic growth initiatives. With a disciplined approach to capital allocation and a focus on long-term returns, InterRent continues to navigate market uncertainties while maintaining a positive outlook for the future.