After refinancing hundreds of millions of dollars’ worth of mortgages earlier this year, Minto Apartment REIT says it is looking at refinancing other properties in an effort to reduce its debt.
The Ottawa-based real estate investment trust said this week it is “continuing to explore upward refinancing” of three properties whose mortgages mature in early 2024. Minto says the move has the potential to generate between $55 million and $65 million in incremental proceeds.
“Management will carefully evaluate the impact that each potential financing has on (funds from operations) per unit by considering a variety of factors,” the company said in a statement released after markets closed on Tuesday.
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The announcement comes as rising interest rates have jacked up the REIT’s debt-servicing costs.
Minto said last spring it was replacing a variable-rate mortgage on its Niagara West property in downtown Toronto with a fixed-rate mortgage and was in the process of refinancing its variable-rate mortgage at The International, a building in downtown Calgary, with a new fixed-rate mortgage.
Minto also said it has submitted applications to the Canada Mortgage and Housing Corp. to refinance nearly $137 million of maturing variable-rate mortgages at other properties with fixed-rate mortgages. The company said it expected the switch to result in “incremental proceeds” of between $60 million and $70 million, which it plans to use to repay a portion of its revolving credit facility.
In financial filings this week, Minto said it will continue to explore strategies to reduce interest costs and make “prudent capital allocation decisions” as mortgage financing costs rise.
“The REIT will continue to evaluate opportunities to further reduce its variable rate debt, extend its weighted average term to maturity and stagger its debt maturity profile,” the company said.
Meanwhile, Minto said it expects demand for rental units to keep rising as “affordability pressures, demographic forces and behavioural preferences” increase the proportion of Canadians who rent rather than own their homes.
“Given the continued strength anticipated in the rental market, management believes that suite turnover will be slower than seasonal norms in certain markets going forward as existing tenants are more likely to stay in place since affordable housing alternatives are less available,” the firm added.
Minto reported its funds from operations for the third quarter ending Sept. 30 were $15.7 million, virtually unchanged from a year earlier. Overall revenues totalled $39.8 million, up from $37.8 million in the same period last year thanks to higher average rents and lower vacancy rates in the REIT’s buildings.
The occupancy rate in Minto’s suites rose to 96.9 per cent in the third quarter from 96.2 per cent the previous year.
The REIT’s average gain of 17 per cent on new leases was its highest-ever quarterly increase. Average monthly rents rose 7.2 per cent year-over-year to $1,837.
Minto’s net operating income at its same properties was $24 million, a 6.9 per cent increase from a year ago. Overall net operating income was $25.8 million, up 6.6 per cent.
Minto reported net income of $27.8 million, compared with $39.7 million a year ago. The company attributed the drop to a larger non-cash, fair value loss on investment properties and a smaller non-cash fair value gain on Class B limited-partnership units.
Minto REIT’s portfolio currently includes 31 properties with a total of 8,227 suites in Ottawa, Toronto, Montreal, Calgary and Edmonton.
Minto’s unit price was up 78 cents to $14.40 Wednesday afternoon on the Toronto Stock Exchange.
