|
|
REITS(canadian)
|
|
||
Re: Ruf.un expands again- some comments and comparisons More Texas. Seems pretty popular in the Canadian REIT universe
right now: Morguard, Milestone, Pure Multi, Drimmer/Starlight US
Opportunity, and even HR REIT has picked up a few apts there. (It's also interesting to compare Pure's Dallas acquisition at 5.35% to Boardwalk's Windsor sale at 5.43%. Twelve year financing for Pure at 3.83% and Boardwalk purchaser likely having CMHC ten year rate of 2.5% available, i.e. about 150bps spread versus 300bps spread. How much is cheap debt financing affecting property values and REIT cost of equity and capital...and why are there all these new Canadian REITs buying US apartments when the spread is higher up here? Rent control and availability of product probably explains a chunk of it....? All three new US apt focused REITs have external mgmt contracts (Pure - likely less than five years, MST - likely ten years, MRG - likely perpetual - these contracts are a gold mine - internalized or not ), maybe another factor?) It's
been a fair bet for Pure so far. SPNOI growth for Q1
(vs Q1 2014) is 6.7%. Sequential SPNOI,
i.e. Q1 2015 vs Q4 2014, is -4.8%. For 2014 over
2013, SPNOI was 8.5%.
(certainly helps out the narrow "going in" accretion over time if it
holds up) SPNOI margin for 2014 is 55.3%. Overall same property picture looks good, better than Milestone on all except sequential. The four US apartment REIT comparables in common to both RUF and MST presentations also generally have slightly declining sequential SPNOI in their TX mkts but not across the board. One quarter hardly makes a trend. Skimming through recent cc's for all four, general explanation is: Houston is weakening -energy, and Austin is weakening -new supply; Houston and San Antonio not as robust as DFW and Austin; new supply in all four TX mkts but mostly in CBDs and class A. (Neither RUF or MST has CBD "Urban Core" type assets.) As far as the comparables' acquisitions and dispositions, they're selling older secondary mkt properties to capture gains and upgrade AFFO growth as older properties had higher capex, and developing or partnering w/ developers to capture 100-150bps of upside vs buying at mkt cap rates. RUF and MST acquisitions and dispositions are different stories. RUF is staying concentrated in TX so far, MST is diversifying. RUF's last five acq'n/dsp'n are one sale of a 1983 vintage, purchase of two late 90's built (IIRC, Phoenix and DFW, and both from a Sunstone/Pure fund) and two built last year (San Antonio and Dallas). MST is probably best looked at from this table: Majority of the MST portfolio is eighties vintage TX, so bulk of it will soon be winding through its fourth decade. Can't really say if $400/suite covers that versus the $300/suite reserving at Pure - Pure's wtd avg age of construction is 1998. (CAP - $450/suite; BEI - $500/suite currently, $450/suite in 2013, $400/suite in 2005; actual cash drain of capex is almost always much higher than reserving and reserving is subjective - a change to free cashflow to equity instead of FFO/AFFO approaches might be more conservative especially for older portfolios, IMO) In terms of the future cost of external mgmt contracts, IMO Pure is going to be "cheaper." Three parts to Pure mgmt contract: 1) 5% of the then $300 million mkt cap, or $15 million in units; 2) 5% of all distributions until the $300 million mkt cap trigger; and 3) property mgmt contract internalization which will be either acquisition at fair mkt value of the prop mgmt company or acquisition of the then existing prop mgmt Agreement (guessimate for the latter of $7-10 million, former would likely be more expensive). Milestone mgmt contract is two parts: 1) base fee of 40 bps of assets, and 2) incentive fee on AFFO; if mgmt earns the extension it'll run for ten years then end with no termination fee. Milestone's current quarter had ~$2 million in asset mgmt fees so it'll likely end up paying out multiples of what Pure will get - w/ extension there's >30 quarters left. (extension review timeline is 2017 and mgmt already has the 15% above 2013 pro forma AFFO estimate, so it's almost a given) (*Same property stats over a short time period, portfolio age, reserving, cost of external mgmt, etc - this is a superficial comparison between Pure and Milestone - it's just the stuff that came to mind at the moment.) FWIW, a few snapshots of the Texas apt mkt: And just for quick comparison, Canada's Texas: (Boardwalk Q1 presentation - it's blurry in the presentation as well) |
return to message board, top of board |
Msg # | Subject | Author | Recs | Date Posted |
4697 | Re: Ruf.un expands again- some comments and comparisons | beararn | 0 | 7/24/2015 10:06:17 AM |