Interrent REIT is building a base
Interrent reported it's year-end and quarterly results on March4,2015.It is a junior REIT that buys and develops apartment buildings.It has built a good amount of equity ($393 million) in a couple of years and has assets of almost $1 billion($920 million).It is a growth oriented REIT.
Quarterly results
It's gross rental revenues were up by $.7 million or more than 10% and NOI operating income increased by $1 million or by almost 10% over that of Q4,2013.While funds from operations(FFO) were up by $.7 million or 16%. Results for the year were a little less buoyant.Gross rental revenues were up by only $6 million or 9.5%;while NOI was up by $1.8 million or 5% for the year.Funds from operations decreased by $.2 million or .2%.So the reader can see that results for the year were only average but quarterly results are starting to trend upwards.The most important statistic is adjusted funds from operations(AFFO) and it followed the same trend.It decreased for the year by $.1 million to $16.2 million for a .5% decrease annually while for the quarter it increased by $.7 million or 16%.The statistics all point upwards for the fourth quarter.
Redevelopment
2014 was a year of slow growth for Interent;it increased the number of units by 645 or 11% and added 7 new units to existing properties.At the same time they raised monthly rents from an average of $931 per month to $965 per month.They also acquired two properties that need a considerable amount of redevelopment;one is in Ottawa and one in Hamilton.Money has been spent on these properties but more must be spent to get them up to market standards.It ended the year by acquiring 959 more suites but the deal will only close in early 2015.Both the redevelopment and the newly acquired properties will be a source of future revenues.If we consider only the suites to be redeveloped there is possible additional revenues of almost $5.5 million annually.This figure is derived by adding the redevelopment properties in Ottawa to those in Hamilton (444 plus 17) and multiplying by the average monthly rent of $965 per month.This represents an annual increase of almost 10% that will gradually be added throughout 2015 and 2016.
The Capital Structure
In late 2014 Interrent acquired 959 new suites.This was done by taking on considerable new debt.It's interest coverage ratio is still adequate but it's debt service ratio has become fairly low.Even though the debt to gross book value of assets is still in very safe territory.Interrent managed to lower it's weighted interest rate from 3.31% to 3.13% so this helps to keep it's interest coverage ratio healthy.But Interrent correctly decided that it needed more equity in it's capital structure.So it raised $75 million in a new equity issue at a reasonable price.This will likely be used to pay off this newly acquired debt and add working capital.This will strengthen all it's interest and debt ratios and leave some working capital to update it's redevelopment properties.
2015 Results
Interrent's CEO said in a statement that "over the last two years the REIT has acquired 1986 suites and grown our portfolio by over 42%.We expect repositioning and redevelopment efforts at the properties acquired over the last two years to be strong contributors to our bottom line in the second half of 2015."Mr. McGahan does not give guidance for the next quarter nor for 2015.This blog expects revenue increases of 12 to 15% but net income (NOI) increases of only 7 to 9% as money is still spent on redevelopment.Also funds from operations(FFO)and (AFFO) may only increase from 7 to 9%.but these figures are for the first half of 2015.This blog expects lower revenue growth and bigger increases for FFO and AFFO for the second half as redevelopment tapers off.Readers can expect Interrent to stay in a tight range around it's present price for the first quarter and move upwards in the second quarter to possibly the $7.00 per share area.This blog hopes that the debt service coverage ratio moves closer to 2.00 in the second quarter.This will be a signal for investors to buy in.
Quarterly results
It's gross rental revenues were up by $.7 million or more than 10% and NOI operating income increased by $1 million or by almost 10% over that of Q4,2013.While funds from operations(FFO) were up by $.7 million or 16%. Results for the year were a little less buoyant.Gross rental revenues were up by only $6 million or 9.5%;while NOI was up by $1.8 million or 5% for the year.Funds from operations decreased by $.2 million or .2%.So the reader can see that results for the year were only average but quarterly results are starting to trend upwards.The most important statistic is adjusted funds from operations(AFFO) and it followed the same trend.It decreased for the year by $.1 million to $16.2 million for a .5% decrease annually while for the quarter it increased by $.7 million or 16%.The statistics all point upwards for the fourth quarter.
Redevelopment
2014 was a year of slow growth for Interent;it increased the number of units by 645 or 11% and added 7 new units to existing properties.At the same time they raised monthly rents from an average of $931 per month to $965 per month.They also acquired two properties that need a considerable amount of redevelopment;one is in Ottawa and one in Hamilton.Money has been spent on these properties but more must be spent to get them up to market standards.It ended the year by acquiring 959 more suites but the deal will only close in early 2015.Both the redevelopment and the newly acquired properties will be a source of future revenues.If we consider only the suites to be redeveloped there is possible additional revenues of almost $5.5 million annually.This figure is derived by adding the redevelopment properties in Ottawa to those in Hamilton (444 plus 17) and multiplying by the average monthly rent of $965 per month.This represents an annual increase of almost 10% that will gradually be added throughout 2015 and 2016.
The Capital Structure
In late 2014 Interrent acquired 959 new suites.This was done by taking on considerable new debt.It's interest coverage ratio is still adequate but it's debt service ratio has become fairly low.Even though the debt to gross book value of assets is still in very safe territory.Interrent managed to lower it's weighted interest rate from 3.31% to 3.13% so this helps to keep it's interest coverage ratio healthy.But Interrent correctly decided that it needed more equity in it's capital structure.So it raised $75 million in a new equity issue at a reasonable price.This will likely be used to pay off this newly acquired debt and add working capital.This will strengthen all it's interest and debt ratios and leave some working capital to update it's redevelopment properties.
2015 Results
Interrent's CEO said in a statement that "over the last two years the REIT has acquired 1986 suites and grown our portfolio by over 42%.We expect repositioning and redevelopment efforts at the properties acquired over the last two years to be strong contributors to our bottom line in the second half of 2015."Mr. McGahan does not give guidance for the next quarter nor for 2015.This blog expects revenue increases of 12 to 15% but net income (NOI) increases of only 7 to 9% as money is still spent on redevelopment.Also funds from operations(FFO)and (AFFO) may only increase from 7 to 9%.but these figures are for the first half of 2015.This blog expects lower revenue growth and bigger increases for FFO and AFFO for the second half as redevelopment tapers off.Readers can expect Interrent to stay in a tight range around it's present price for the first quarter and move upwards in the second quarter to possibly the $7.00 per share area.This blog hopes that the debt service coverage ratio moves closer to 2.00 in the second quarter.This will be a signal for investors to buy in.
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