InterRent REIT rides wave of acquisitions to solid Q1 performance

LIV apartments
InterRent REIT owns the LIV Apartment complex on Bell Street in Ottawa. (Google Street View image)

Thanks in large part to a spate of acquisitions that have grown its rental inventory, InterRent REIT’s revenues jumped more than 10 per cent in the first three months of 2021 compared with a year earlier.

In its first-quarter financial filings released Tuesday, the Ottawa-based real estate investment trust said its funds from operations – a key cash-flow metric for REITs – rose nearly 12 per cent compared with the first quarter of 2020 to $16.2 million. 

The company has boosted the size of its portfolio substantially over the past 12 months, acquiring more than 1,200 suites as its total inventory surpassed 11,400 units. The additional cash flow from those new properties helped bolster InterRent’s balance sheet as the firm’s average rent per suite rose from $1,270 in March 2020 to $1,325 this year.

The extra units helped offset a growing number of empty suites in InterRent’s buildings over the past year as pandemic-related restrictions dampened demand for rental housing across the country.

The vacancy rate at InterRent properties stood at 8.7 per cent in the first quarter, the same as in the fourth quarter of 2020 but up substantially from the rate of 4.7 per cent a year ago.

In a statement, the REIT said properties traditionally popular with post-secondary students have become harder to fill amid immigration restrictions that have prevented international students from entering the country. In addition, the widespread shift to online learning during the pandemic meant students from other parts of Canada also stayed home.

Still, InterRent management said it sees light at the end of the tunnel as vaccinations ramp up and schools consider a return to in-person classes. In a statement, it said it views the recent spike in vacancies “as temporary in nature and is optimistic for improvements in the back half of 2021.”

CEO Mike McGahan touted the company’s ongoing acquisition drive, noting the REIT has bolstered its holdings in the Greater Toronto Area as well as Hamilton while establishing a foothold in the Vancouver region. Nearly 85 per cent of the firm’s properties are now located in four main geographic areas – southern Ontario, Ottawa, Montreal and Vancouver.

Shopping spree

InterRent has added more than 1,100 new units this year alone to the portfolio of suites it owns or manages, including a 50 per cent stake in nearly 700 apartments on the West Coast. 

The company says it’s agreed to buy two properties with a total of 100 units in the Toronto suburb of Oakville for $46.7 million, a deal that’s expected to close later this week. InterRent says it also expects to finalize its $32.7-million purchase of a 95-suite property in Mississauga later this month.

“We have started off 2021 with occupancy stabilizing, which sets the stage well for the second half of 2021,” McGahan said. “We are particularly pleased that we have been successful on the acquisition side, reinforcing our Greater Toronto and Hamilton core market and entering the Greater Vancouver market at scale, thus securing profitable growth for our unitholders for the future."

InterRent’s local holdings include the LIV Apartment towers on Bell Street in west Centretown. The company also owns a 47.5 per cent interest in Trinity Development Group’s proposed three-tower project at 900 Albert St. near Bayview Station after adding to its one-third stake in the development last year.

The company’s shares ended the day down 20 cents to $15.73 in trading on the Toronto Stock Exchange.