Interrent Reit makes a bigger Footprint
Interrent started as a small reit with properties in a few markets in Ontario.5 years ago the share price was about $4 a share and it has steadily climbed up to it's present $11 level (see the graph below).However it has always been a well-managed reit.And it has always kept a tight control over expenses.In the past it has bought properties with low cap rates and improved them and sold them at higher cap rates.
5 year price performance
Virtually every single performance indicator improved over the first quarter of 2016.Both total suites and average rent per suite were up 5 to 8%.As well as occupancy rates and operating revenues.While the payout ratio and debt/gross book value were down.As a result adjusted funds from operations(AFFO) and funds from operations were both up about 36 to 39%As has been said above Interent is a well managed company.However net loss for the period was ($12 million) and this was because of a $44 million charge for "management internalization costs".This blog assumes ,although no specific mention was made, that this means that the original shareholders were bought out;these shareholders were likely taking especially large dividend payments.This payment may have ended or almost ended these payments.And the end result is that AFFO per share was $.092 for a 18% increase.
The Likely 2018 Outcome
All of IIP's financial as well as operational indicators have improved in 2018,notably the number of suites increased by 8%and the rent per suite is up almost 6%.In addition, the stock price is up.So it would be natural to expect Interrent to make a small equity issue and buy one or more slightly run-down buildings in their chosen markets.Or they could develop the land and build on the land that they bought (.70 acres).Also it would be natural to see adjusted EBITDA per share and AFFO/share higher than in 2017.But the $44 million payment is a substantial charge.So this blog feels that e.p.s. will fall in a range between $1.75 and $1.90 per share for the year.However this is still a bargain as IIP trades at one of the lowest P/E ratios (5 times) on the TSX.Furthermore this blog expects IIP to make an initial or a second investment in BTB Reit.BTB is a very good fit to the Interrent footprint and another way their footprint will grow.These structural changes will only strengthen Interrent and help to send it towards $15 per share.
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