Mr. Brad Cutsey reports

INTERRENT REIT CONTINUES DOUBLE-DIGIT NOI EXPANSION AND STRENGTHENING FFO/UNIT GROWTH IN Q3 2023

InterRent Real Estate Investment Trust has released its financial results for the third quarter ended Sept. 30, 2023.

Operational and financial highlights:

• Average monthly rent (AMR) of $1,576 for the total portfolio and $1,566 for the same-property portfolio, an increase of 7.8 per cent and 7.3 per cent year-over-year (YoY), respectively.
• Same-property and total portfolio occupancy for September, 2023, was 95.2 per cent, a decrease of 40 basis points (bps) compared with the same period last year.
• Same-property net operating income (NOI) for Q3 was $39.5-million, an increase of $3.8-million, or 10.5 per cent, YoY.
• Total portfolio NOI was $40.3-million, an increase of $4-million, or 11 per cent, YoY.
• NOI margin for the same-property portfolio and total portfolio was 67.6 per cent, reflecting increases of 140 bps YoY.
• Funds from operations (FFO) of $21.3-million, a 4.9-per-cent increase from Q3 2022. FFO per unit (diluted) of 14.6 cents, an increase of 4.3 per cent YoY.
• Adjusted funds from operations (AFFO) of $18.9-million, an increase of 6.3 per cent YoY, and AFFO per unit (diluted) of 12.9 cents, an increase of 4.9 per cent YoY.
• Strong financial position with $268-million of available liquidity, with debt to gross book value (GBV) of 38.6 per cent.
• Board of trustees has approved a 5-per-cent increase to the distribution, from 36 cents per unit to 37.8 cents per unit, marking the 12th consecutive year that the REIT has grown its distribution by 5 per cent or more.

Brad Cutsey, president and chief executive officer of InterRent REIT, commented on the results:

"We're thrilled to announce our third consecutive quarter of double-digit NOI growth and rising FFO/unit growth, accompanied by strengthening NOI margin, reaching its highest level since Q3 2019, all achieved amid the backdrop of rising interest rates and evolving economic conditions. I want to extend my appreciation to our team for their dedicated efforts in delivering these results. We maintain our strong focus on building resilience, optimizing controllable costs, pro-actively managing our debt and, lastly, exercising discipline in our capital allocation strategy, which is of the utmost importance."

Sustained double-digit NOI expansion, with NOI margin returning to prepandemic levels

As of Sept. 30, 2023, InterRent had proportionate ownership in 12,728 suites, up 1.2 per cent from 12,573 as of Sept. 30, 2022. Including properties that the REIT owns in its joint ventures, InterRent owned or managed 13,879 suites at Sept. 30, 2023.

AMR growth across the total portfolio gained further momentum to reach 7.8 per cent as compared with September, 2022, while same property AMR increased by an impressive 7.3 per cent for the same period. September, 2023, occupancy rate in the REIT's same-property and total portfolios decreased 40 bps over September, 2022, and decreased 20 bps over June, 2023, to 95.2 per cent, in line with its historical performance and strategic approach. The increase in vacancy for September in some major markets was driven by pricing discovery. Fall leasing activity has been robust, with vacancy returning to normal seasonal levels after quarter-end.

The strong AMR growth and leasing demand have resulted in total portfolio revenue to increase 8.6 per cent year-over-year. Within the same-property portfolio, these same factors have grown operating revenues by 8.2 per cent compared with Q3 2022. NOI margin for the overall portfolio and same-property portfolio both accelerated by 140 basis points, reaching 67.6 per cent during the quarter, the highest since Q3 2019.

Operating results translate into FFO/unit growth

Net loss for the quarter was $54.6-million, compared with $32.7-million of net income in Q3 2022. This $87.2-million decrease was almost entirely driven by an $82.9-million difference in fair-value adjustments of investment properties compared with Q3 2022. These fair-value adjustments reflect continued expansion of capitalization rates during the quarter. The REIT's weighted average capitalization rate used across the portfolio at the end of Q3 2023 was 4.22 per cent, an increase of 15 basis points from Q2 2023, driven by moderate cap rate expansion across all regions.

FFO increased 4.9 per cent from last year to $21.3-million and, on a per-unit basis, increased 4.3 per cent to 14.6 cents. AFFO during the quarter increased 6.3 per cent to $18.9-million and, on a per-unit basis, increased 4.9 per cent to 12.9 cents.

Solid financial position with focus on optimizing debt profile

Proportionate financing costs in Q3 2023 amounted to $14.8-million, or 24.8 per cent of operating revenue, compared with $12.5-million, or 22.7 per cent of operating revenue, for the quarter in Q3 2022. This increase was driven by rising interest rates, as well as higher amount of outstanding mortgage debt. Quarter-over-quarter, financing costs are down $200,000 from $15-million in Q2 2023.

Weighted average cost of mortgage debt increased marginally from June, 2023, to 3.48 per cent, and variable rate exposure ended the quarter at 5 per cent, in line with the prior quarter and decreased from the same period last year at 6 per cent. Including the line of credit, the REIT's variable rate exposure as of Q3 was 5.7 per cent, compared with 7.9 per cent at Q3 2022.

Debt-to-GBV ratio increased 120 basis points year-over-year and 90 basis points quarter-over-quarter, and ended the quarter at 38.6 per cent. With debt-to-GBV remaining at a healthy level and $268-million of available liquidity, the REIT remains in a solid financial position to execute on its growth strategies.

Strong momentum continues at the Slayte -- onward with second office conversion project

The Slayte development in Ottawa, the REIT's first office conversion project, has completed its interior construction, with all amenities on the rooftop, including the lounge area, now accessible to residents. Leasing activities have been robust despite continuing construction in the vicinity of the building, exceeding 84 per cent by the end of October.

The REIT is advancing its second office conversion project, 360 Laurier, situated in downtown Ottawa. The adaptive reuse initiative is presently undergoing site plan control. Upon completion, the project will deliver 139 residential units and 1,736 square feet of retail space. Drawing on valuable experience from the Slayte, the REIT, along with its trusted partners, are well positioned to drive significant progress with this new development project.

Twelve consecutive years of distribution increases of 5 per cent or more

With the consistent strength in industry fundamentals and the sustained strong performance of the REIT's portfolio, the board of trustees has approved a 5-per-cent increase in the monthly distribution. This is the 12th consecutive year that the REIT has grown its distribution by 5 per cent or more. The increase is effective for the November, 2023, distribution to be paid in December, 2023, and increases the annualized distribution to 37.80 cents per unit from 36 cents per unit.

Announced the filing of base shelf prospectus

The REIT has filed a base shelf prospectus dated Oct. 31, 2023, with the Ontario Securities Commission, relying on the well-known seasoned issuer exemption. This filing will allow the REIT, if it chooses, to make offerings of units or subscription receipts (collectively, the securities) of the REIT, or any combination thereof, in all of the provinces and territories of Canada for a period of 25 months. The REIT may also use the base shelf prospectus in connection with an at-the-market distribution, in accordance with applicable securities laws, which would permit the securities to be sold on behalf of the REIT through the Toronto Stock Exchange, as further described in the applicable prospectus supplement. To date, no agreement has been entered into with respect to such a distribution.

The REIT has filed the base shelf prospectus to maintain financial flexibility, but has no present intention to pursue a capital raise in the near future. There is no certainty any securities will be sold under the base shelf prospectus within the 25-month effective period.

A copy of the base shelf prospectus can be found under the REIT's profile on SEDAR+ or may be obtained from the REIT at investorinfo@interrentreit.com.

Sustainability update: Record-breaking golf tournament; Building certification

In September, the annual Mike McCann Charity Golf Tournament raised a record-breaking $1.67-million, increasing its cumulative contributions to $8.2-million. All proceeds directly support various charities within the REIT's communities.

In addition, the REIT successfully certified six communities under the Canadian Rental Building Program in October. The REIT is committed to expanding its building certification program and anticipate further certifications in the months ahead.

Conference call

Management will host a webcast and conference call to discuss these results and current business initiatives on Wednesday, Nov. 1, 2023, at 1 p.m. ET. The webcast will be accessible at the company's website. A replay will be available for seven days after the webcast. The telephone numbers for the conference call are 1-888-886-7786 (toll-free) and 416-764-8658 (international). No access code is required.

About InterRent Real Estate Investment Trust

InterRent is a growth-oriented real estate investment trust engaged in increasing unitholder value and creating a growing and sustainable distribution through the acquisition and ownership of multiresidential properties.

InterRent's strategy is to expand its portfolio primarily within markets that have exhibited stable market vacancies, sufficient suites available to attain the critical mass necessary to implement an efficient portfolio management structure, and offer opportunities for accretive acquisitions.

InterRent's primary objectives are to use the proven industry experience of the trustees, management and operational team to: (i) grow both funds from operations per unit and net asset value per unit through investments in a diversified portfolio of multiresidential properties; (ii) to provide unitholders with sustainable and growing cash distributions, payable monthly; and (iii) to maintain a conservative payout ratio and balance sheet.

We seek Safe Harbor.