Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — FY2019 Earnings Presentation
40 slides from Killam Apartment Reit's earnings presentation, Feb 13, 2020
Slide 1: 2019 Results Conference Call
2019 RESULTS CONFERENCE CALL FEB 13, 2020 | 10AM EASTERN KILLAM APARTMENT REIT
Slide 2: Cautionary Statement
Cautionary Statement This presentation may contain forward-looking statements with respect to Killam Apartment REIT and its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as “may”, ”will”, “expect”, “estima
Slide 3: 2019 Highlights
2019 | Highlights 4.3% $244M 43.4% 4.1% $191M FFO per Unit Fair Value Gains Debt to Total Same property NOI Accretive Growth $244 million in fair Assets growth Acquisitions $0.98 per unit, a 4.3% value gains on IP from Debt metrics 4.1% growth and 40 Added 640 apartment increase from $0.94 NOI growt
Slide 4: Strategic Achievements
2019 | Strategic Achievements 2019 Target 2019 Performance Same Property NOI Growth of 3% Target achieved - 4.1% same property NOI growth. to 5%. Grow the portfolio to over $3.0 Targets exceeded - with $191 million in acquisitions, billion by the end of 2019, with a investment in development project
Slide 5: Proven Record of Strong Growth
Proven Record of Strong Growth Net Operating Income FFO & Distribution Per Unit Total Assets FFO Per Unit Distribution $3,500 $170 $150 $1.00 $3,000 Millions $0.90 $2,500 Millions $130 $0.80 $110 $2,000 $0.70 $1,877 $1,988 $2,311 $2,824 $3,380 $90 $1,500 $0.60 $0.79 $0.86 $0.90 $0.94 $0.98 $105 $115
Slide 6: Q4-2019 Financial Highlights
Q4-2019 | Financial Highlights Completed the year with strong Q4 FFO and same property NOI growth • Generated FFO per unit of $0.25, 8.7% increase from Q4-2018. • Produced AFFO per unit of $0.21, 16.7% increase from Q4-2018. • Strong rental rate growth, 10 bps increase in occupancy and managed expen
Slide 7: Financial Highlights: Revenue Growth
2019 | Financial Highlights Strong revenue growth for same property for 2019 • Increasing rental rates: Rate increases on renewals of 2.1%, on turns of 5.8% and repositionings of 28.5%, averaged 3.6% in December 2019. • Strong occupancy and minimal incentives required with strong market fundamentals
Slide 8: Financial Highlights: Managing Expenses
2019 | Financial Highlights Managing expenses to increase same property earnings • Investing in energy and water conservation initiatives. • Maximizing economies of scale. • Successfully appealing property tax assessments. Same Property Expense Growth Same Property Expense Change by Category ($M) 20
Slide 9: Financial Highlights: Conservative Leverage
2019 | Financial Highlights Managing balance sheet with conservative leverage. Debt as a Percentage of Interest Coverage Ratio Debt to Normalized Assets EBITDA 56.4% 53.5% 48.7% 43.4% 49.8% 10.63 10.51 10.50 10.62 10.15 2.34 2.70 3.13 3.22 3.20 9
Slide 10: Apartment Mortgage Maturities by Year
2019 | Financial Highlights Apartment Mortgage Maturities by Year As at December 31, 2019 Current $400 Weighted $350 4% Average 3.27% Interest Rate of Mortgage Maturities ($M) $300 3.06% 2.72% 2.90% 2.63% 2.52% 3% Interest Rate $250 3.08% 85% of $200 2.64% 2.50% 2% Apartment $150 Mortgages $100 CMHC
Slide 11: Increasing Value of Investment Properties
2019 | Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction Investment Properties $1.8 $2.0 $2.3 $2.8 $3.3 Weighted Average Apartment Cap-Rates 5.52% 5.49% 5.37% 5.15% 4.76% 11
Slide 12: Growing FFO & NAV
2019 | Growing FFO & NAV Killam’s strategy to increase FFO, NAV and maximize value is focused on three priorities: Increase earnings from existing portfolio. Expand the portfolio and diversify geographically through accretive acquisitions, targeting newer properties. Develop high-quality properties
Slide 13: Increasing Revenues to Grow NOI
2019 | Increasing Revenues to Grow NOI With continued high occupancy levels, rental rate growth is a key focus for revenue optimization. Same Property Rental Increases (%) 7.0% 5.7% 5.8% 6.0% 5.6% 5.3% 5.0% 5.1% 4.9% 5.0% 4.6% 4.0% 3.4% 3.4% 3.6% 3.3% 3.4% 3.2% 2.9% 3.0% 2.7% 2.4% 2.5% 2.2% 2.0% 2.1
Slide 14: Increasing Revenues: Unit Repositions
2019 | Increasing Revenues Driving revenues through unit repositions to meet market demand, maximize NOI growth and investment returns. 2019 Actuals 2020 Target Total Opportunity • 304 unit repositions • 13% ROI • $25K avg investment • 400-500 unit repositions • ~$10-12M investment • ~$1.3-1.7M annu
Slide 15: Leading with Technology
2019 | Leading with Technology Killam invests in technology and automation to deliver high-quality service to tenants and prospective tenants, optimize rental opportunities and further reduce vacancy. Mobile Mobile Work Inspections Orders Online Tenant Online Portal Applications Integrated Enhanced
Slide 16: Killam's ESG Progress
2019 | Killam’s ESG Progress Killam continues to build on its current successes to make its buildings more ESG Oversight Committee – sustainable and resilient to the impacts of bi-monthly meetings to drive climate change. progress against ESG targets and reports to the Board’s Governance & ESG Commi
Slide 17: NOI by Region
2019 | NOI by Region Apartment NOI increased 4.2% during 2019 with Ontario and New Brunswick leading NOI growth of 5.6% and 5.4%. 2019 Same Property Growth by Region 4.7% 5.2% 4.1% 5.6% 3.4% 5.4% 2.2% 2.9% 3.6% 3.7% 1.1% (1.4)% (1.5)% (4.1)% Halifax Ontario New Brunswick St. John's Charlottetown Alb
Slide 18: Acquisitions
2019 | Acquisitions Purchase Price(1) ($M) Property Location Acquisition Ownership Property Type Income- Land for Date Interest (%) Producing Development Properties ($M) ($M) 1 9 Dietz Waterloo, ON Jan 15, 2019 100% Dev Land $- $1,500 2 11 Harold Doherty Fredericton, NB Apr 18, 2019 100% Apartment 8
Slide 19: Annual Acquisitions
2019 | Acquisitions Annual Acquisitions ($ millions) Average $117M $115 $167 $200 $103 $125 $106 $121 $160 $200 $315 $191 $16 $45 $36 $85 $54 $72 $63 $3 NOI Generated Outside Atlantic Canada • 2020 Target of 32% • 2022 Target of 37% 27% 15% 20% 21% 23% 30% 19
Slide 20: Acquisitions: Moncton, NB & Canaan Street
2019 Acquisitions | Moncton, NB 125 & 145 Canaan Street Acquisition Details: $9.52 million 4.99% capitalization rate Closed: November 22, 2019 Description: 48 units; 38 underground parking spots Four-storey apartment complex with large 1 & 2 bedroom units Average rent – $1,229/month ($1.06/sf) Vibe
Slide 21: Acquisitions: Edmonton, AB
2019 Acquisitions | Edmonton, AB The Link Acquisition Details: Description: Location: $31.5 million ($305,000/unit) 105 units Edmonton, AB 4.5% capitalization rate Underground parking 86% leased Eight-storey apartment complex with 1 & 2 bdrm units Closed: November 25, 2019 Average rent – $1,627/mont
Slide 22: 2020 Acquisitions: Victoria, BC
2020 Acquisitions | Victoria, BC Description: Acquisition Details: Location: 161 units $54 million Greater Victoria, BC 5 two-storey apartment buildings and 4 two- 4.1% capitalization rate storey townhouses with 2 and 3 bedroom units 99% occupied Average rent – $1,555/month ($1.67/sf) Closed: Januar
Slide 23: 2020 Acquisitions: Victoria, BC
2020 Acquisitions | Victoria, BC Christie Point Development agreement in place for a total of 473 units. 23
Slide 24: 2020 Acquisitions: Halifax, NS
2020 Acquisitions | Halifax, NS Description: Acquisition Details: Location: 54 units $8.8 million ($163,000/unit) Halifax, NS 42 underground parking; 36 surface parking 5.3% capitalization rate Average rent – $1,176/month Closed: January 31, 2020 Occupancy – 100% 9 Carrington Vibe Lofts, Edmonton 24
Slide 25: Development Success
2019 | Development Success 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS Projects Completed 2013 – 2019 Value today - $348M Cost to build - $278M Gain - $70M (25%) 47 units - Charlottetown 63 units - Halifax, NS 102 units - St. John’s, NL 228 u
Slide 26: Development Activity, Ottawa
2019 | Development Activity, Ottawa Phase I (Frontier) of Gloucester City Centre, was substantially complete in June 2019. Key Statistics Green Features: Sub-metered water, geothermal heating and cooling Number of units 228 Start date Q2-2017 Completion date Q2-2019 Project actual ($M)* $37.5 Cost p
Slide 27: Development Activity, Ottawa
2019 | Development Activity, Ottawa Ottawa, ON - Phase II (Latitude) of Gloucester City Centre Frontier (Phase I) Latitude (Phase II) Key Statistics Number of units 209 Start date Q2-2019 Estimated completion date Q4-2021 Project budget ($M)* $43.5 Cost per unit $416,000 Expected yield 5.2% Expected
Slide 28: Development Activity, Ottawa
2019 | Development Activity, Ottawa Latitude (Phase II) Frontier (Phase I) Phase II (Latitude) is actively underway and expected to be completed in late 2021. 28
Slide 29: Development Activity, Charlottetown
2019 | Development Activity, Charlottetown Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4-2018 Estimated completion date Q2-2020 Project budget ($M) $22.0 Cost per unit $282,000 Expected yield 5.5% Expected value 4.75-5.0% *Killam’s 50% interest.
Slide 30: Development Activity, Charlottetown
2019 | Development Activity, Charlottetown Shorefront development is on schedule and expected to be completed in mid-2020. Shorefront *Killam’s 50% interest. Shorefront Development 30
Slide 31: Development Activity, Mississauga
2019 | Development Activity, Mississauga The Kay development broke ground in Q3-2019. Key Statistics Number of units 128 The Kay Start date Q3-2019 Estimated completion date Q2-2021 Project budget ($M) $56.0 Cost per unit $437,500 Expected yield 5.0% Expected value cap-rate 3.5% Green Features: Sub-
Slide 32: Development Activity, Mississauga
2019 | Development Activity, Mississauga The Kay 32 32
Slide 33: Development Activity, Charlottetown
2019 | Development Activity, Charlottetown 10 Harley Street – 38-unit redevelopment in Charlottetown. Key Statistics Number of units 38 Latitude (Phase II) Start date Q3-2019 Estimated completion date Q4-2020 Project budget ($M) $10.4 Cost per unit $274,000 Expected yield 5.25% Expected value 4.75-5
Slide 34: Development Pipeline - ~$850 million
2019 | Development Pipeline - ~$850 million Future Development Opportunities Killam’s Potential # Est Year of Property Location Interest of Units(1) Status Completion Developments expected to start in the next 24 months The Governor Halifax, NS 100% 12 In design and approval process 2021 Weber Scott
Slide 35: Appendices
Appendices 35
Slide 36: Q4-2019 Performance | Halifax
Q4-2019 Performance | Halifax The Halifax rental market is strong with overall occupancy of 98.3%. Current Market Conditions (per CMHC) Killam’s Same Property Performance • Strong demand as population growth from immigration, intraprovincial migration and demographics continues to outpace new supply
Slide 37: Q4-2019 Performance | New Brunswick
Q4-2019 Performance | New Brunswick Population growth coupled with limited construction has resulted in record high occupancy of 98.1%. Current Market Conditions per CMHC Killam’s Same Property Performance • Population growth from increased interprovincial and international migration boosts rental d
Slide 38: Q4-2019 Performance | Ontario
Q4-2019 Performance | Ontario Strong rental market driven by robust job market, international immigration and high housing prices. Current Market Conditions per CMHC Killam’s Same Property Performance • Strong economic growth. • Rising population due to immigration and intra-provincial migration. On
Slide 39: Non-IFRS Measures
Non-IFRS Measures Non-IFRS Measures Management believes these non-IFRS financial measures are relevant measures of the ability of the REIT to earn revenue and to evaluate Killam's financial performance. The non-IFRS measures should not be construed as alternatives to net income or cash flow from ope
Slide 40: 2019 Results Conference Call
2019 RESULTS CONFERENCE CALL FEB 13, 2020 | 10AM EASTERN KILLAM APARTMENT REIT