InterRent REIT 'basically back to pre-pandemic performance,' executive chair says

Westboro InterRent property
West 236, a rental complex at 236 Richmond Rd., is one of InterRent REIT's 21 properties in the National Capital Region. File photo

Buoyed by a string of acquisitions and rising occupancy in its apartments, InterRent REIT said Tuesday it posted significant gains in several key financial indicators in the first quarter of fiscal 2022 compared with a year earlier.

In financial filings for the three-month period ending March 31, the Ottawa-based real estate investment trust said its funds from operations – a key cash-flow metric – rose nearly 18 per cent compared with the first quarter of 2021 to $19.1 million. 

Much of that growth was fuelled by acquisitions. As of the end of March, the firm owned 12,445 suites, up 8.5 per cent from a year earlier. InterRent’s balance sheet was also bolstered by rising rents, which jumped from an average of $1,321 per suite in March 2021 to $1,391 in the same properties this year.

InterRent also saw its same-property occupancy rate – which had been on a steady slide earlier in the pandemic – jump nearly five percentage points year-over-year to 96.4 per cent in March.

Former CEO Mike McGahan, who stepped down on May 1 and now holds the role of executive chair, said in a statement he is “more than pleased” with the firm’s latest financial results.

“We are basically back to pre-pandemic performance,” McGahan said. “We had a strategy at the beginning of COVID and we stuck to it. The results have proven our thesis and we anticipate they will continue to shine as we burn off the incentives that were used to hold rents.”

Still, InterRent acknowledged it’s facing a few headwinds even as its financial picture improves, due mainly to rising inflation that’s driven up the cost of utilities such as natural gas. Utilities accounted for 11.4 per cent of the REIT’s operating revenues in the first quarter, up from 10.5 per cent a year earlier.

But the company said it expects its sustained cost-cutting efforts, combined with rising rents and fuller buildings, will more than offset the increase in expenses.

“Management continues to expect that top line growth should outpace inflationary pressure in operating expenses in 2022 as the elevated level of rebates granted during the pandemic normalizes by the end of the year,” it said in a statement.

InterRent’s latest earnings report comes just a few days after new CEO Brad Cutsey told OBJ the firm is “tracking in the right direction.”

In an update on its activities Tuesday, the company said projects such as its conversion of a former class-C office building at 473 Albert St. into a rental complex will help increase its yields before the year is out. 

The $35-million renovation, which will add 158 new suites to InterRent’s portfolio, is expected to be completed in the next few months, with the first tenants slated to start occupying the property in late summer.

The REIT’s unit price – which has fallen by nearly 30 per cent over the past six months – was up 26 cents to $12.62 in late-afternoon trading on the Toronto Stock Exchange.