Minto Apartment REIT's earnings up in 2020 despite rising vacancies

Minto apartment
The Frontenac at 1192 Meadowlands Dr. E. is one of the Ottawa properties in Minto REIT's portfolio. (Google Street View image)

Ottawa’s Minto Apartment Real Estate Investment Trust turned in solid growth in fiscal 2020 despite “challenging” conditions during the pandemic and a higher percentage of empty suites than the previous year, the company said Friday.

The REIT said it generated funds from operations of $50 million for the year ending Dec. 31, up from $39.6 million in 2019. Funds from operations in the fourth quarter rose to $12 million from $11.7 million a year earlier.

The average monthly rent across the REIT’s portfolio was $1,623 at the end of 2020, up 2.8 per cent from $1,579 at the end of the previous year.

“Despite a challenging and uncertain environment, we are very pleased that our team was able to achieve stable operating and financial results in 2020,” CEO Michael Waters said in a statement.

While Minto said rent collections “have largely been consistent with pre-pandemic cycles,” a growing share of its suites are vacant. The occupancy rate of unfurnished apartments fell to 95.6 per cent at the end of the year from 98 per cent in 2019, the company said, as the number of tenants who moved out rose amid “challenging leasing conditions.”

No heavy discounts

“The onset of the pandemic has altered the typical annual turnover pattern for the REIT's suites,” Minto said in its financial filings, noting the fourth-quarter turnover rate of 6.2 per cent was “significantly higher” than usual for that period.

“In order to preserve long-term value, the REIT has elected to let vacancy increase somewhat rather than discounting rents heavily to fill suites,” it said, adding it expects occupancy rates to bounce back in the second half of 2021 as vaccines are rolled out, the economy picks up, immigration increases and students return to in-person classes.

Minto said it signed 406 new tenants in the fourth quarter, up from 300 in the same period the year before. Rents on those new leases rose 2.1 per cent, lower than the REIT’s overall year-over-year increase as gains of more than eight per cent in Toronto were offset by a soft Alberta market.

“Completing this volume of leasing was a significant accomplishment, as leasing demand is typically lower during the winter months and holidays,” the company said.

Acquisitions in T.O., Montreal

The REIT also said it’s stepping up efforts to renovate vacant suites in anticipation of having them ready for “what is expected to be a more robust leasing season in the second half of 2021.” Minto said it refurbished 56 suites in the last three months of 2020 and has a total of more than 2,300 apartments remaining to be renovated.

Much of the REIT’s recent growth has come through acquisitions of properties in Toronto, Montreal and Alberta. About half of Minto’s apartment stock is now located in Ottawa, compared with nearly three-quarters in mid-2018. 

Minto said revenues from the 24 properties common to the company in 2019 and 2020 fell 4.1 per cent year-over-year due to decreased revenues from furnished suites as well as lower overall occupancy rates and a drop in income from amenities such as fitness facilities and party room rentals.

The company is looking at further expanding its portfolio in the Greater Toronto Area, with plans to construct more than 1,000 new units at three separate properties.

Minto REIT owns 29 multi-residential properties in Ottawa, Toronto, Montreal, Calgary and Edmonton with more than 7,200 apartment units.

The company’s shares were up 76 cents to $20.80 in late-afternoon trading on the Toronto Stock Exchange.