INTERRENT REIT DELIVERS STRONG Q4 AND FULL YEAR RESULTS, ACHIEVING RECORD ANNUAL NOI MARGINS
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
OTTAWA, ON, Feb. 24, 2025 /CNW/ - InterRent Real Estate Investment Trust (TSX: IIP.UN) ("InterRent" or the "REIT") today reported financial results for the fourth quarter and the year ended December 31, 2024.
Fourth Quarter Highlights:
- Same-property portfolio occupancy rate of 97.1% in December, an improvement of 10 bps from December 2023, with total portfolio occupancy rate remaining unchanged Year-over-Year ("YoY") at 97.0%.
- Average Monthly Rent ("AMR") growth of 5.0% for the same-property portfolio and 6.6% for the total portfolio for December 2024, compared to the same period last year.
- For the three months ended December 31, 2024, same-property proportionate Net Operating Income ("NOI") of $41.4 million, an increase of $2.9 million or 7.6% YoY. Total portfolio proportionate NOI of $42.0 million, an increase of $1.4 million or 3.6% YoY.
- Total portfolio proportionate NOI per Suite of $3,462, reflecting an 8.7% increase from Q4 2023.
- Same-property proportionate NOI margin increased by 160 bps from Q4 2023 to reach 67.2% for Q4 2024. Funds from Operations ("FFO) of $23.1 million for the three months ended December 31, 2024, an increase of 11.2% compared to the same period last year. FFO per unit (diluted) of $0.156, an increase of 9.9% YoY.
- Adjusted Funds from Operations ("AFFO") of $20.6 million, reflecting an improvement of 13.9% YoY. AFFO per unit (diluted) of $0.139, up 12.1% YoY.
- During the fourth quarter, repurchased 895,000 units under the Normal Course Issuer Bid ("NCIB") for $9.1 million, at a weighted average price of $10.22 per unit. All units were purchased for cancellation, with some cancellations completed in early January 2025.
- In January 2025, purchased 1,972,084 units under the Automatic Unit Purchase Plan ("AUPP") for an average price of $10.01 per unit. Units repurchased in 2024 and in January 2025 combined represent 2.3% of issued and outstanding trust units as of December 31, 2023.
2024 Fiscal Year Highlights:
- Same-property proportionate NOI reached $162.2 million for the 12 months ended December 31, 2024, an increase of $14.0 million, or 9.4% from 2023.
- Total portfolio proportionate NOI of $165.9 million, an increase of $9.6 million, or 6.2% YoY.
- Same-property portfolio NOI margin of 67.1% and total portfolio NOI margin of 67.0% for the year, an improvement of 140 bps respectively, both reaching the highest levels on record.
- FFO of $90.7 million for the 12 months ended December 31, 2024, or $0.612 per unit (diluted), an improvement of 12.6%, or 11.1% on a per-unit basis.
- AFFO of $80.5 million for the 12 months ended December 31, 2024, or $0.543 per Unit (diluted) reflects a YoY increase of 14.3% or 12.7% per Unit.
- The REIT ended the year in a strong financial position, with $252 million of available liquidity, and Debt-to-Gross Book Value ("GBV") of 40.3%.
- As part of its on-going capital recycling program, the REIT has identified a target portfolio of non-core assets in the range of $200 - $250 million which are anticipated to generate net equity proceeds of $125 - $140 million that may be disposed of over the next 12 months.
Brad Cutsey, President & CEO of InterRent, commented on the results:
"2024 brought both opportunities and challenges for our industry, yet multifamily housing fundamentals remained resilient. Throughout the year, we maintained disciplined management and executed our strategy, delivering strong operational and financial performance, including record annual NOI margins, enabling us to increase our distribution by 5% or more for the 13th consecutive year. Our successful asset dispositions at or above IFRS values strengthened our financial flexibility, allowing us to repurchase trust units at a meaningful discount to their intrinsic value. We entered 2025 from a position of strength, with our well-maintained, high-quality portfolio in prime urban locations supporting continued organic growth. I want to thank our dedicated team and all stakeholders for their support this year and I look forward to the opportunities ahead."
Financial Highlights:
Selected Consolidated Information |
3 Months Ended December 31, 2024 |
3 Months Ended December 31, 2023 |
Change |
12 Months Ended December 31, 2024 |
12 Months Ended December 31, 2023 |
Change |
Total suites |
12,160(1) |
12,756(1) |
-4.7 % |
|||
Average rent per suite (December) |
$ 1,702 |
$ 1,596 |
+6.6 % |
|||
Occupancy rate (December) |
97.0 % |
97.0 % |
no change |
|||
Proportionate operating revenues |
$ 62,614 |
$ 61,881 |
+1.2 % |
$ 247,718 |
$ 238,180 |
+4.0 % |
Proportionate net operating income (NOI) |
$ 42,021 |
$ 40,580 |
+3.6 % |
$ 165,880 |
$ 156,260 |
+6.2 % |
NOI % |
67.1 % |
65.6 % |
+150 bps |
67.0 % |
65.6 % |
+140 bps |
Same Property average rent per suite (December) |
$ 1,697 |
$ 1,616 |
+5.0 % |
|||
Same Property occupancy rate (December) |
97.1 % |
97.0 % |
+10 bps |
|||
Same Property proportionate operating revenues |
$ 61,692 |
$ 58,692 |
+5.1 % |
$ 241,815 |
$ 225,650 |
+7.2 % |
Same Property proportionate NOI |
$ 41,436 |
$ 38,524 |
+7.6 % |
$ 162,184 |
$ 148,196 |
+9.4 % |
Same Property NOI % |
67.2 % |
65.6 % |
+160 bps |
67.1 % |
65.7 % |
+140 bps |
Net Income (Loss) |
$ (107,120) |
$ 27,253 |
-493.1 % |
$ (155,646) |
$ 92,240 |
-268.7 % |
Funds from Operations (FFO) |
$ 23,104 |
$ 20,773 |
+11.2 % |
$ 90,738 |
$ 80,602 |
+12.6 % |
FFO per weighted average unit - diluted |
$ 0.156 |
$ 0.142 |
+9.9 % |
$ 0.612 |
$ 0.551 |
+11.1 % |
Adjusted Funds from Operations (AFFO) |
$ 20,645 |
$ 18,132 |
+13.9 % |
$ 80,494 |
$ 70,396 |
+14.3 % |
AFFO per weighted average unit - diluted |
$ 0.139 |
$ 0.124 |
+12.1 % |
$ 0.543 |
$ 0.482 |
+12.7 % |
Distributions per unit |
$ 0.0977 |
$ 0.0930 |
+5.0 % |
$ 0.3812 |
$ 0.3630 |
+5.0 % |
Adjusted Cash Flow from Operations (ACFO) |
$ 26,441 |
$ 30,617 |
-13.6 % |
$ 81,584 |
$ 76,853 |
+6.5 % |
Debt-to-GBV |
40.3 % |
38.1 % |
+220 bps |
|||
Interest coverage (rolling 12 months) |
2.53x |
2.29x |
+0.24x |
|||
Debt service coverage (rolling 12 months) |
1.66x |
1.54x |
+0.12x |
(1) |
Represents 11,368 (2023 - 12,088) suites fully owned by the REIT, 1,462 (2023 - 1,214) suites owned 50% by the REIT, and 605 (2023 - 605) suites owned 10% by the REIT. |
Robust Operational Results in Q4 and Full Year
During the quarter and the fiscal year, the REIT delivered strong operational results, driven by steady occupancy rates and consistent rent growth. Same property AMR for December reached $1,697, representing a year-over-year increase of 5.0%, while AMR for the total portfolio increased by 6.6% for the same period. Rent growth was healthy across all regional markets, with Ottawa and Montreal leading at above 8% in total portfolio AMR growth.
Same-property occupancy rate in December 2024 reached 97.1%, the highest since 2020 reflecting a YoY increase of 10 bps and a Quarter-over-Quarter ("QoQ") increase of 70 bps. Compared to December 2023, same property occupancy rate in the National Capital Region decreased by 120 bps, remaining tight at 96.6% and within normal range, while all other regions showed occupancy gains, including a 160 bps YoY increase in the Greater Vancouver Area to reach 94.9%.
The REIT executed 635 new leases during Q4 and realized positive gain-on-lease in all its markets. Expiring rents in Q4 2024 were 12.9% higher than expiring rents in Q4 2023. New rents achieved in Q4 2024 were 7.4% higher than the expiring rents for the quarter, resulting in an annualized incremental revenue gain of approximately $2.0 million during the fourth quarter. Canada's revised population growth outlook and macroeconomic uncertainties are expected to lead to a more measured pace of rental growth in certain markets in the near term. Average market rental gap on the total portfolio has decreased slightly to 26% while suite turnover, excluding disposed properties, for the trailing 12 months held steady at 24.0%. InterRent is closely monitoring market conditions in each region and remains flexible in its strategy, including adjusting target occupancy levels as needed to optimize portfolio performance.
Strong top line results with record total portfolio annual NOI margin
As of December 31, 2024, InterRent had proportionate ownership of 12,160, a decrease of 4.7% from December 31, 2023. This change reflects the disposition of 10 properties during the year, which did not contribute to Q4 and had only a partial contribution to the full year 2024 results, and the acquisition of one property during Q4, impacting the total portfolio year-over-year performance comparisons.
InterRent's total portfolio proportionate revenue increased by 1.2% in Q4 and 4.0% for the full year as growth was partially offset by lost revenue from dispositions completed in Q1 and Q2 2024. The REIT achieved a 5.1% increase in same-property proportionate operating revenues during Q4 and 7.2% for full year 2024, outpacing operating expense increases of 0.4% and 2.8% over the same periods, resulting in a year-over-year improvement in same-property NOI margins of 160 bps and 140 bps respectively for the quarter and full year. Annual NOI margins for the same property and total portfolio reached 67.1% and 67.0% respectively, both reaching the highest levels on record.
Proportionate NOI for the same property portfolio increased by 7.6% in Q4 to reach $41.4 million, and for the full year increased 9.4% to reach $162.2 million.
Significant FFO and AFFO performance continued
For the three months ended December 31, 2024, InterRent achieved a 11.2% increase in FFO and a 9.9% increase in FFO per unit compared to the same period last year. FFO for the full year was $90.7 million reflecting a 12.6% year-over-year improvement from 2023.
Full year FFO per unit was $0.612, an increase of $0.061 per unit or 11.1% over the prior year. This was driven by 9.4% same-property NOI growth and a 2.7% decrease in financing costs.
Year-over-year growth in Q4 AFFO was 13.9% and 12.1% on a per unit basis and for the full year, AFFO reached $80.5 million and $0.543 per unit, reflecting an increase of 14.3% and 12.7% on a per unit basis, respectively, from 2023.
During the fourth quarter, financing costs were down 7.2% year-over-year to $14.4 million on a proportionate basis, representing 22.9% of operating revenue, compared to $15.6 million, or 25.1% of operating revenue for the same period last year. For the full year, financing costs were down 2.7% from 2023, representing 23.3% of operating revenue compared to 24.9% in 2023. This improvement was driven by a reduction in the weighted average interest rate to 3.37% as of December 2024, compared to 3.50% at December 31, 2023.
Strategic asset allocation with focus on unit buybacks
Management and the Board have completed a review of the portfolio based on qualitative and quantitative factors to identify several non-core assets for disposition. During 2024, the REIT advanced its capital recycling program, completing the disposition of 10 properties during the year at or above their IFRS values, reinforcing portfolio valuations and generating gross proceeds of $143.5 million (net equity proceeds of $93.3 million).
The next phase of the program will target a portfolio of non-core assets in the range of $200 - $250 million which are anticipated to generate net equity proceeds of $125 - $140 million over the next 12 months. Including the dispositions that have closed or gone firm since year end, approximately $135 million of the next phase of the REIT's program is in negotiation or under contract, this would generate net proceeds of approximately $90 million.
The REIT continued to increase activity under its NCIB program to address the disconnect between the intrinsic value of its Units and their trading price. During Q4, the REIT repurchased and cancelled 0.9 million units, bringing total repurchases for 2024 to 1.3 million units at an average price of $10.88 per unit, compared to an IFRS NAV per unit at year-end of $16.23 per unit. In January 2025, the REIT acquired 2.0 million units under the AUPP at an average price of $10.01 per unit. Units repurchased in 2024 and in January 2025 represent 2.3% of issued and outstanding trust units as of December 31, 2023.
Solid financial position with financial flexibility
Debt-to-GBV ratio increased 180 bps quarter over quarter and 220 bps year over year and ended the year at 40.3%. In Q4 2024, the REIT drew on its credit facilities to fund its Montréal acquisition, with more permanent MLI Select financing currently being processed by the CMHC and anticipated to finalize before the end of Q1 2025.
CMHC-insured mortgages remained at a historically high 91% throughout the year, compared to the five-year average of 79%. Interest coverage and debt service coverage both strengthened consistently throughout the year, reaching 2.53x and 1.66x at year-end, compared to 2.29x and 1.54x at the end of 2023. With Debt-to-GBV remaining at a healthy level and $252 million of available liquidity, the REIT remains in a solid financial position to execute on its value-enhancing initiatives.
Explore InterRent's 2024 interactive Annual Report
InterRent released its interactive 2024 Annual Report and encourages investors to explore it to gain a deeper understanding of the REIT's operations and financial performance, and commitment to sustainable growth. The interactive annual report can be accessed from the REIT's investor relations website.
Conference Call & Webcast
Management will host a webcast and conference call to discuss these results and current business initiatives on Tuesday, February 25, 2025 at 10:00 am EST. The webcast will be accessible at: https://www.irent.com/2024-q4-results. A replay will be available for 7 days after the webcast at the same link. 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
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 objectives are to use the proven industry experience of the Trustees, Management and Operational Team to: (i) to grow both funds from operations per Unit and net asset value per Unit through investments in a diversified portfolio of multi-residential properties; (ii) to provide Unitholders with sustainable and growing cash distributions, payable monthly; and (iii) to maintain a conservative payout ratio and balance sheet.
*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 Gross Rental Revenue, NOI, Same Property results, Repositioned Property results, FFO, AFFO, ACFO and EBITDA. These non-GAAP measures are further defined and discussed in the MD&A dated February 24, 2025, which should be read in conjunction with this press release. Since Gross Rental Revenue, NOI, Same Property results, Repositioned Property results, FFO, AFFO, ACFO 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.sedarplus.ca.
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.sedarplus.ca. 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.
SOURCE InterRent Real Estate Investment Trust
For further information, please contact: Renee Wei, Director of Investor Relations & Sustainability, [email protected], www.irent.com
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