After reporting stellar earnings this past week, investors who have largely been spooked by the recent interest rate increases from the Bank of Canada and shied away from Real Estate Investment Trusts (REITs) have begun to take another look at Killam Apartment REIT (TSX:KMP.UN).
I’ve covered Killam in the past, and have stood behind my previous recommendations, although the company’s stock price has lagged behind many of its peers over the past six months.
On Wednesday, Killam reported earnings which exceeded expectations for many analysts – in this earnings report, the company announced approximately $100 million in additional investments in two projects in Halifax and Edmonton, acquisitions which are expected to provide additional support to Killam’s underlying Net Operating Income (NOI) which increased by 3% this past quarter, year-over-year.
Rising rental rates combined with decreased vacancy rates among existing properties have allowed Killam to pick up its speed with respect to the frequency and size of the acquisitions the REIT is able to complete.
Additionally, during the most recent quarter, the REIT had more than $100 million worth of its convertible debentures convert to trust units, freeing up the ability of the REIT to lever up and acquire additional assets.
Currently, Killam’s total debt as a percentage of assets is 50.4%, down from 53.5% at the end of last year, corresponding to an interest coverage ratio of 2.97 times vs. 2.74 times over the same period.
Invest wisely, my friends.
