Minto Apartment REIT rides rental resurgence to strong Q3 growth

The Carlisle luxury suites
Minto Apartment REIT's portfolio includes the Carlisle luxury suites at 221 Lyon St. N. File photo

Minto Apartment REIT continued to benefit from a resurgent rental market in the third quarter as the Ottawa-based organization posted big gains on new leases and saw its average occupancy rate jump more than three percentage points from the same period a year ago.

Minto reported significant year-over-year increases across virtually all key financial indicators in the three-month period ending Sept. 30.

The firm generated funds from operations of $15.7 million, up more than 25 per cent from $12.5 million a year earlier as rental gains on new leases at its properties soared to near-record highs.

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“Our business continued to demonstrate very strong momentum in the third quarter supported by the attractiveness of renting compared to home ownership, a return to downtown living and immigration,” chief executive officer Michael Waters said in a statement.

“Going forward, we believe our high-quality, urban portfolio is well-positioned to capitalize on current market dynamics and our talented operations team will continue to drive (net operating income) and occupancy.”

With the Canadian rental market’s bounceback from COVID-fuelled doldrums now in full swing, Minto is reaping the rewards on the balance sheet.

Occupancy rates rising

The average occupancy rate of the REIT’s unfurnished suites rose to 96.2 per cent, compared with 92.9 per cent in the same period in 2021.

Minto signed 574 new leases between July and September at average rates that were 14.5 per cent higher than expiring rents – the second-highest quarterly gain in the company’s history. That helped push the REIT’s average monthly rents up nearly four per cent year-over-year to $1,714, the first time they’ve surpassed $1,700.

“This strong performance reflected the continued improvement in urban rental market conditions, which is supported by increased immigration and the growing affordability gap between rentals and home ownership,” the company said in a statement.

“As a result of increased demand for rentals, the REIT has increased rental rates and reduced the use of promotions to drive occupancy.”

Revenues up 21%

Minto’s overall revenue rose 21.1 per cent year-over-year to $37.8 million. Its net operating income was $24.2 million, up 24.8 per cent.

But rising inflation and costs related to a series of acquisitions over the past year also drove up the REIT’s operating expenses by 15 per cent and ate into its bottom line.

Minto reported net income of $39.7 million, down from $80.9 million a year earlier. The REIT said the drop was primarily due to a fair value loss on investment properties of $18.7 million, compared to a gain of $34.7 million in the third quarter of 2021.

While Minto has expanded its portfolio with acquisitions in key markets such as Toronto and the Greater Vancouver Area over the past year, it also stepped up its campaign to upgrade its existing properties as tenancies turn over.

Minto said it renovated 75 units in the third quarter, generating average annualized returns of 9.4 per cent. The REIT said it has a total of 2,024 suites remaining to be remodelled under its current program and expects to renovate an additional 40 to 50 suites in the fourth quarter, subject to turnover.

Minto REIT owns 32 multi-residential properties in Ottawa, Toronto, Montreal, Calgary and Edmonton that contain a total of nearly 8,300 apartment units. The firm has more than 2,300 additional suites in its construction pipeline at eight projects in Ottawa, Toronto, Vancouver and Victoria.

Minto REIT’s shares were down six cents to $13.38 in mid-afternoon trading on the Toronto Stock Exchange.

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