Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — FY2017 Earnings Presentation
32 slides from Killam Apartment Reit's earnings presentation, Feb 14, 2018
Slide 1: 2017 Results Investor Presentation
Investor 2017 Presentation Results January 2018 Conference Call February 14, 2018 11am Eastern
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”, “estim
Slide 3: 2017 Highlights – Achieved Strategic Targets
2017 Highlights – Achieved Strategic Targets Grow Same Property NOI by 1% to 3% 3.6% Same Property NOI growth. Acquire a minimum of $75 million of $200 million of acquisitions. assets Focus 75% of acquisitions and 23% of 75% of acquisitions completed and 23% 2017 NOI outside Atlantic Canada of NOI o
Slide 4: 2017 Financial Highlights – Five Years of Growth
2017 Financial Highlights – Five Years of Growth Net Operating Income FFO & Distribution Per Unit AFFO Payout Ratio1 $120 FFO Per Unit Distribution 140% $110 $0.90 120% $100 Millions $0.80 100% $90 80% $0.70 $80 60% $70 $0.60 40% $0.71 $0.72 $0.79 $0.86 $0.90 123% 124% 106% $105 $115 0.58 0.60 0.60
Slide 5: Q4-2017 Financial Highlights
Q4‐2017 Financial Highlights • Generated FFO per unit of $0.22 versus $0.21 in Q4‐16. • Produced AFFO per unit of $0.18 compared to $0.16 in Q4‐16. • Increased rental revenue 3.9% for the quarter. • Managed operating expense increases to 2.5% for the quarter. • Achieved same property NOI growth of 4
Slide 6: 2017 Financial Highlights
2017 Financial Highlights Increasing earnings from existing operations through revenue growth. • Strong occupancy – 2017 economic occupancy was amongst Killam’s highest. • Rising rental rates – Rate increases on renewals and turns averaged 1.8% in 2017. • Reduced incentives – Managing inducements in
Slide 7: 2017 Financial Highlights
2017 Financial Highlights Increasing earnings from existing operations through expense management. • Energy and water conservation initiatives – $3.5 million of investment in 2017. • Inflationary R&M cost pressures. • Rising property taxes. Same Property Expense Growth Same Property NOI Growth 6.0%
Slide 8: 2017 Financial Highlights
2017 Financial Highlights Managing operations to reduce leverage. • Redeemed convertible debentures. • Increasing unencumbered assets. Debt as a Percentage Interest Coverage Debt to EBITDA of Assets Ratio 12.47 11.87 55.8% 56.4% 3.13 10.42 11.00 10.70 53.9% 53.5% 2.70 47.8% 2.34 2.18 2.21 8
Slide 9: Apartment Mortgage Maturities by Year
2017 Financial Highlights Apartment Mortgage Maturities by Year As at December 31, 2017 Mortgage Maturities Weighted Average Interest Rate (Apartments) Five‐year CMHC rate Ten‐year CMHC rate 6% $200 Mortgage Maturities ($M) 5% Current Weighted $150 3.54% 4% Interest Rate 3.28% 2.98% Average Interest
Slide 10: Clearly Defined Strategy to Grow FFO & NAV
Clearly Defined Strategy to Grow FFO & NAV Killam’s strategy to maximize value and profitability is focused on three priorities. Increase earnings from Expand the portfolio and Develop high‐quality existing portfolio. diversify geographically through properties in core markets. accretive acquisition
Slide 11: Increasing Revenues to Grow NOI
Increasing Revenues to Grow NOI Same Property NOI grew by 3.6% during 2017 • 2.6% increase in revenues due to strong performance in New Brunswick, Nova Scotia and PEI. • Modest increase in expenses as utility savings from efficiency initiatives and lower rates were offset by property tax increases a
Slide 12: Increasing Revenues to Grow NOI
Increasing Revenues to Grow NOI Driving revenues through tenant satisfaction. • Killam surveys tenants each year to gauge their satisfaction. • ~3,000 residents responded to questions on unit quality and customer service. • Surveys administered by Corporate Research Associates. • Overall satisfactio
Slide 13: Managing Expenses to Grow NOI
Managing Expenses to Grow NOI Killam has invested $5 million to date in efficiency projects, including 8,300 low‐ flow toilets installs, boiler upgrades and lighting retrofits. • Average energy intensity for 2017 was $1.25/sf as Killam benefitted from reduced consumption and price reductions. Five Y
Slide 14: Managing Expenses to Grow NOI
Managing Expenses to Grow NOI Heating costs account for approximately 30% of Killam’s total operating expenses. • Natural gas is the heating fuel for 57% of Killam’s units. • Focus on efficiency initiatives to reduce consumption. • Recent projects include boiler upgrades and envelope repairs. • Hedg
Slide 15: Recap of 2017 Acquisitions
Recap of 2017 Acquisitions Killam invested $200 million to grow its portfolio in 2017 • Purchased ~850 units in Alberta, Ontario and Nova Scotia for $184 million. • Average stabilized cap‐rate on acquisitions of 5.4%. • Acquired development sites for 600 units for $12 million. Acquisition Cost Prope
Slide 16: Q4-2017 Acquisitions: Stoney Brook & Fairview Terrace
Q4‐2017 Acquisitions Stoney Brook, Halifax & Fairview Terrace, London Stoney Brook Description: 106 units Average rent – $971/month ($0.91/sf) Current occupancy – 94% leased Location: 155 Stoney Brook Court Acquisition Details: $13.0 million ($122,000/unit) 5.6% capitalization rate Fairview Terrace
Slide 17: Q1-2018 Acquisitions: Killick, Halifax
Q1‐2018 Acquisitions Killick, Halifax Description: 110 units & 4,500 sf of commercial space Average rent – $1,810/month ($2.00/sf) Current occupancy – 97% leased Location: 49 King’s Wharf, Dartmouth Acquisition Details: $33.0 million ($290,000/unit) 5.0% capitalization rate 17
Slide 18: Developments: The Alexander, Halifax
Developments The Alexander, Halifax Rental Units: 240 units & 6,500 sf of retail space Ownership: Killam 50%, Partners 50% Start Date: Q3‐2015 Projected Completion: Podium level completed October 1, 2017 (55 of 240 units occupied) Tower completion mid‐2018 Location: Downtown Halifax across from the
Slide 19: Leasing
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Slide 20: Developments: Saginaw Park, Cambridge
Developments Saginaw Park, Cambridge Rental Units: 93 units Start Date: Q3‐2016 Projected Completion: Q2‐2018 Location: Adjacent Saginaw Gardens, Saginaw Parkway, Cambridge Cost: $25.5 million ($274,000/unit) Expected Yield: 5.4% Expected Value: 4.0% cap rate Average Unit Size: 1,025 sf Average Rent
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Slide 22: Developments: Saginaw Park, Cambridge
Developments Saginaw Park, Cambridge Condo‐quality kitchen fixtures Design Features to Improve the Tenant Experience and Maximize Returns • Condo quality fixtures including quartz counter tops, stainless appliances and LED lighting. • Door enclosures that are controlled by smartphones. • Separately
Slide 23: Gloucester City Centre (Phase I) – The Frontier, Ottawa
Developments Gloucester City Centre (Phase I) – The Frontier, Ottawa Rental Units: 227 units Ownership: Killam 50%, RioCan 50% Start Date: Q2‐2017 Projected Completion: mid‐2019 Location: Ottawa’s East End, adjacent Ottawa’s Light Rail Transit (LRT) Blair Station. Cost: $36 million (Killam’s cost) (
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Slide 25: Development Pipeline
Development Pipeline Killam has a $500 million development pipeline. Property City Units Future Development Opportunities Silver Spear* Mississauga, ON 64 Carlton Terrace Halifax, NS 104 The Governor Halifax, NS 48 Gloucester City Centre (Phase 2‐4)* Ottawa, ON 309 Grid 5 Land* Calgary, AB 199 Camer
Slide 26: 2018 Strategic Targets
2018 Strategic Targets Grow Same Property NOI Same Property NOI growth of 1 – 2%. A minimum of $125 million of Expand the Portfolio acquisitions. Increase presence outside Atlantic 75% of acquisitions and 26% of NOI Canada outside Atlantic Canada in 2018. – Complete Saginaw Park and The Progress dev
Slide 27: Appendices
Investor 2017 Presentation Results January 2018 Conference Call Appendices
Slide 28: Halifax – 43% of NOI
Halifax – 43% of NOI The Halifax rental market has been very strong with overall CMHC Market Stats2 vacancy at its lowest level since 2003. 47,303 Rental Units 2.3% Vacancy Current Market Conditions Halifax Vacancy 2.3% ↑ in Average Rent per CMHC • Strong demand due to population growth from 1,826 S
Slide 29: Halifax – 43% of NOI
Halifax – 43% of NOI New supply has been absorbed by population growth from immigration, migration and demographics. Halifax Housing Starts Halifax Population Growth and Source Total Apartments/Condos Total Singles/Semi‐Detached/Row Net Natural International Interprovincial Intraprovincial Total Ave
Slide 30: New Brunswick – 21% of NOI
New Brunswick – 21% of NOI Population growth coupled with limited construction has CMHC Rental Stats1 resulted in the lowest vacancy level since 2009. 34,766 Rental Units Current Market Conditions NB Vacancy 4.1% Vacancy per CMHC 1.1% ↑ in Average Rent • Emigration has slowed with an improving econo
Slide 31: Ontario – 21% of NOI
Ontario – 21% of NOI Strong rental market driven by robust job market, international CMHC Rental Stats1 immigration and high housing prices. Ottawa (6.0% of NOI) 1.7% vacancy in 2017 3.0% vacancy in 2016 Current Market Conditions Ontario Vacancy London (4.0% of NOI) • Strong economic growth. per CMH
Slide 32: St. John's & Charlottetown, 7% & 6% of NOI
St. John’s & Charlottetown, 7% & 6% of NOI St. John’s – Stabilized occupancy following eight years of rising vacancy. Market Fundamentals St. John’s Vacancy St. John’s Same per CMHC1 Property Revenue • Subdued economic outlook due to reduced activity in 6.0% Growth 8.0% 5.0% the offshore oil sector.