InterRent Real Estate Investment Trust

Good morning, ladies and gentlemen, and welcome to the Interrent Q1 2023 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star for the operator. This call is being recorded on Tuesday, May 9, 2023. I would now like to turn the conference over to Renee Way. Please go ahead.

Welcome, everyone. Thank you for joining InterRent REIT's Q1 2023 earnings call. My name is Renee Wei, and I've recently joined InterRent as Director of Investor Relations and Sustainability. It's a pleasure being here with you today. You can find a presentation to accompany today's call on the Investor Relations section of our website under Events and Presentations. We're pleased to have Brad Cutsey, President and CEO, Kurt Miller, CFO, and Dave Nevins, COO on the line today. As usual, the team will present some prepared remarks, and then we'll open it up to questions. Before we begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. For more information, please refer to the cautionary statements on forward-looking information in the REIT's news release and MD&A, dated May 9, 2023. During the call, management will also refer to certain non-IFRS measures, Although the REIT believes these measures provide useful supplemental information about its financial performance, they are not recognized measures and do not have standardized meanings under IFRS. Please see the REIT's MD&A for additional information regarding the non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Brad, you're up.

Thanks, Renee. Let's start by reviewing our Q1 highlights. As you can see on the left-hand side of the slide, we've been able to maintain our strong occupancy levels compared to the prior quarter. And when compared to Q1 2022, we've been able to improve our overall occupancy by 130 basis points and 140 basis points for our total and same property portfolios, respectively. Turning to the right-hand side of the slide, these strong occupancy numbers and the burn-off in promotions combined with robust rent growth have resulted in strong overall operating revenue growth of 11.3%. In turn, this has driven NY growth of 12.9% on a year-over-year basis, This theme continues when we look at our same property portfolio, where our operating revenue growth was 9.8% and NOI growth was 11.4%. This was the third consecutive quarter with double-digit NOI growth within this part of our portfolio. Not only have we been able to grow our NOI, but we've also seen NOI margin expansion of 90 basis points for both total and same property portfolios on a year-over-year basis. These growth numbers are a testament to our team on the ground and our commitment to delivering unparalleled value to our residents and stakeholders. We continue to see higher financing costs this quarter, similar to the tail end of 2022, that offset our strong revenue and NOI prints. Our FFO coming in at $18.9 million, or $0.13 per unit, and the AFFO coming in at $16.4 million, or $0.113 per unit. Both decreased marginally in total and on a per unit basis when compared to Q1 of last year. As a result of seasonality, we typically see these two performance measures decrease from Q4 to Q1 and are pleased to see both metrics improve marginally compared to Q4 of 2022 as a result of the continued strong operating performance. Q1 has continued with significant volatility in the debt market as the historical rate increases seen in 2022 and early 2023 work their way through the economy. Throughout this volatility, we remain steadfast in our efforts to maintain a strong balance sheet while managing our interest rate risk. Kurt will provide further insights into our balance sheet later in this call, but I'd like to take a moment to underscore our continued commitment to this objective. Our solid financial position, where debt-to-growth portfolio has remained flat compared to the prior quarter, and our healthy liquidity levels position us well to continue executing on our business model with confidence. It gives us great pleasure to announce the successful acquisition of a 605-suite community in the city of Brampton. I will provide more details about this later in the presentation, but suffice to say that we're very happy to be starting the new year with such a substantial acquisition, which is partially funded by very attractive debt at 2.17%, and we're doing it with such great joint venture partners such as Crestpoint and Vetscore. Turning attention to average rents, the fundamentals of our portfolio and sector continues to strengthen. as demonstrated by 7.1% growth in average monthly rent in March compared to the prior year. It is essential to take note that this metric is affected by both same-store rent growth as well as changes in the portfolio's composition as we continue to build our portfolio in urban core markets with higher rents such as Toronto and Vancouver. Looking ahead, we anticipate a tight rental market through 2023 due to various factors. Notably, Canada is experiencing an imbalance in the rental market where limited rental supply is paired with continued strong immigration and housing demand. In 2022, Canada welcomed over 437,000 new permanent residents and over 550,000 international students, both being all-time records for administration in a single year. The federal government continues to set ambitious immigration targets in 2023, with a range between 400,000 to 500,000. Strong immigration has continued through Q1, will welcome over 145,000 new permanent residents, up 33% compared to last year. Now let's consider a more detailed breakout of this growth. These charts showcase the noteworthy year-over-year growth in average monthly rent was observed through all regions, indicating that the fundamentals are not restricted to specific locales. This displays the resiliency of our portfolio and validates our commitment to fostering growth and stability in all regions. With our ongoing capital program and a strong team, we are confident that we can continue to meet the opportunity of this rising demand across all regions. Turning our attention towards organic growth prospects within our current portfolio, as demonstrated on the preceding slides, we are continuously fostering growth through traditional means such as annual regulated increases, capturing mark-to-market on turnover, and driving auxiliary revenues. I'd however like to point out there are other areas that will drive revenue growth in the coming year. Firstly, our intensification efforts, most notably through the conversion of unutilized space in our existing buildings to new residential suites. One such example is currently taking place in Montreal about the transformation of C-class office space into 36 residential suites. The project is nearing completion with leasing activity already underway, and preparation for Quebec's traditional moving day on July 1st. Other such initiatives, albeit to a lesser extent, are underway in various stages throughout our entire portfolio. Secondly, I'd like to highlight the growth opportunity within our commercial portfolio. We've strategically taken a hit on occupancy during the repositioning process to transition from historically low rents per square foot on gross leases to higher rents per square foot on a triple net basis. At the end of March, our occupancy was 75% based on our total commercial square footage. We have some positive momentum post-quarter on this front, loosening up two key locations to strong QSR tenants. Lastly, developments have grown and will remain a key part of the REIT's future. We'll get into that in more detail later in the presentation. This quarter, we moved the slate in Ottawa from development into income-producing properties for Q1, and I wanted to highlight how pleased we are with the lease momentum through the hard-to-lease winter months, with the property quickly approaching 50% occupancy as we enter the strong summer rental season. The completion of this project and lease-up will help drive revenue and NY growth throughout the remainder of 2023. We are confident that our capabilities to find and drive supplementary revenues will help sustain the momentum of NOI growth throughout 2023. Dave, over to you to take us through some of the operating highlights.