Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Q2 2019 Earnings Presentation
44 slides from Killam Apartment Reit's earnings presentation, Aug 14, 2019
Slide 1: Q2-2019 Results Conference Call
Q2-2019 Results Conference Call August 14, 2019 |9AM 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”, “estima
Slide 3: Q2-2019 Highlights
Q2-2019 | Highlights SP Apartment 5.7% increase Occupancy 3.7% Same in Average Rental Property (SP) Rate 97.1% NOI Growth 12.9% FFO 20 bps Growth improvement in Debt to Total Assets of SP NOI Margin $70M in Fair 47.7% Value Gains 2.95% weighted average mortgage interest rate Normalized Debt to EBITD
Slide 4: Strategic Achievements
Q2-2019 | Strategic Achievements 2019 Target Q2-2019 Performance Same Property NOI Growth of 3% to 3.7% Same Property NOI growth. 5%. Grow the portfolio to over $3.0 billion ~ $3.1 billion in assets as at Q2-2019. Completed $135.9 million of by the end of 2019, with a minimum acquisitions year-to-da
Slide 5: Financial Highlights
Q2-2019 | Financial Highlights Q2 FFO & AFFO Per YTD FFO & AFFO Per Unit Unit YTD-2019 YTD-2018 Q2-2019 Q2-2018 $0.25 $0.25 $0.20 $0.20 $0.45 $0.45 $0.36 $0.36 FFO AFFO FFO AFFO • FFO growth attributable to increased NOI Same Property Portfolio Performance from strong same property performance and F
Slide 6: Financial Highlights
Q2-2019 | Financial Highlights Strong revenue growth. • Increasing rental rates: Rate increases on renewals of 2.0%, on turns of 5.6% and repositionings of 30.0%, averaged 3.2% in Q2-2019. • Strong occupancy: Highest Q2 occupancy in Killam’s history. • Reduced incentives: Minimal incentives currentl
Slide 7: Financial Highlights
Q2-2019 | Financial Highlights Managing expenses to increase same property earnings. • Investing in energy and water conservation initiatives. • Maximizing economies of scale. • Successfully appealing property tax assessments. Same Property Expense Same Property Expense Change by Category ($M) Growt
Slide 8: Financial Highlights
Q2-2019 | 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% 47.7% 49.8% 10.63 10.51 10.50 10.62 10.35 3.13 2.34 3.22 3.21 2.7 8
Slide 9: Apartment Mortgage Maturities by Year
Q2-2019 | Financial Highlights Apartment Mortgage Maturities by Year As at June 30, 2019 Mortgage Maturities Weighted Average Interest Rate (Apartments) Current $400 Weighted Five-year CMHC rate Ten-year CMHC rate 4% $350 Average 3.27% Interest Rate Mortgage Maturities ($M) 3.00% 3.11% 3.11% $300 2.
Slide 10: Financial Highlights
Q2-2019 | Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction Investment Properties $1.7 $1.8 $2.0 $2.3 $2.8 $3.1 Weighted Average Apartment Cap-Rates 5.52% 5.49% 5.37% 5.15% 5.05% 10
Slide 11: Growing FFO & NAV
Q2-2019 | 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 properti
Slide 12: Accretive Capital Allocation
Q2-2019 | Accretive Capital Allocation Development JV Investment Acquisitions Invest in developing high-quality energy Invest in joint development opportunities Acquire high-quality multi-residential efficient assets. to maximize growth potential. assets. Intensification NOI Enhancing Cap Ex Disposi
Slide 13: Increasing Revenues to Grow NOI
Q2-2019 | Increasing Revenues to Grow NOI Same Property Occupancy Driving revenues through increased occupancy Halifax 97.9% and rental rates, as well as fewer rental 97.4% incentive offerings. 97.5% Ottawa 97.8% 96.2% London Same Property Average Rent 94.0% Region Jun 2019 Jun 2018 % Change 98.5% G
Slide 14: Increasing Revenues to Grow NOI
Q2-2019 | Increasing Revenues to Grow NOI With continued high occupancy levels, increasing rental rates is a key focus for revenue optimization. Same Property Rental Increases (%) 6.0% 5.6% 3.5% 5.3% 5.0% 5.1% 4.9% 3.0% 5.0% 4.6% 2.5% 4.0% 3.4% 3.4% 3.3% 2.0% 3.0% 2.0% 2.0% 1.5% 1.9% 2.0% 1.6% 1.7%
Slide 15: Increasing Revenues to Grow NOI
Q2-2019 | Increasing Revenues to Grow NOI Driving revenues through unit repositionings to meet market demand, maximize NOI growth and investment returns. • ~186 Units started in 2019 • 13% ROI YTD-2019 • $26k Avg Investment • $280 Avg Mthly Rental Rate Lift • 300+ Unit Repositions 2019 Target • ~$7-
Slide 16: Westminster, London suite repositionings
Q2-2019 | Increasing Revenues to Grow NOI Westminster, London (106 units) | Growing revenues through repositioning units Suite Repositionings • $32k - Average investment per unit • 44% - Average rent lift • 13% - Average ROI • $350 Avg monthly increase AFTER BEFORE 16
Slide 17: Quinpool Tower common area upgrades
Q2-2019 | Increasing Revenues to Grow NOI Quinpool Tower, Halifax (233 units) | Investing in common area upgrades AFTER Common area upgrades BEFORE 17
Slide 18: Unit and common area upgrades
Q2-2019 | Increasing Revenues to Grow NOI Investing in both unit and common area upgrades to increase curb appeal and revenues AFTER Quinpool Court, Halifax (198 units) Torbay, St. John’s (84 units) AFTER BEFORE BEFORE 18
Slide 19: Advancing with Technology
Q2-2019 | Advancing with Technology Mobile Inspections Online Tenant Mobile Work Portal Orders Online Property Management Integrated Platform Online Credit Leasing Screening Customer Marketing Relationship Management Analytics Next Priorities: • Implementing rent optimization software • Maximizing f
Slide 20: Leveraging Technology
Q2-2019 | Leveraging Technology Data Analytics Drive Decisions Traffic by Source Applications Completed Craigslist ▪ Showing and Lease Conversion Ratios Google ▪ Average Response Time ▪ Traffic By Source Paper Killam ▪ Leads By Hour RentFaster Website ▪ Daily Traffic Trends Online ▪ Email Response T
Slide 21: Redevelopment to maximize potential
Q2-2019 |Redevelopment to maximize potential Repositioning the 158,000 SF Brewery Market, located adjacent to The Alexander (240 units). 21
Slide 22: Redevelopment to maximize potential
Q2-2019 |Redevelopment to maximize potential Key Statistics Total Property GLA (SF) 158,000 Current redevelopment (SF) 54,000 Released to-date (SF) 29,000 Current Occupancy (%) 66% Committed Occupancy (%) 84% Est. Stabilized NOI Increase $230k Est. NOI Increase 2019 vs. 2020 $750k
Slide 23: Brewery Market NOI
Q2-2019 |Redevelopment to maximize potential Brewery Market NOI ($M) $1.84 We expect to see $750k NOI $1.64 increase in 2020 vs 2019. $1.42 $1.42 $1.35 $0.87 2016 2017 2018 2019 2020 Stabilized Actual Actual Actual Forecast Forecast Complex (1) (1) Includes all commercial space in the Brewery Market
Slide 24: YTD-2019 Acquisitions
YTD-2019 | Acquisitions Annual Acquisitions ($ millions) Average $115M $145* $125 $106 $167 $200 $103 $115 $121 $160 $200 $315 $16 $45 $36 $85 $54 $72 $3 2002 2004 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 * Killam closed $135.9 million in acquisitions as at Aug
Slide 25: YTD-2019 Acquisitions | Charlottetown Mall
YTD-2019 Acquisitions | Charlottetown Mall Description: Commercial/Retail Details: Acquisition Details: • 32 acre commercial site • 5.42 year average lease term • $23.75 million (50% interest) • 352,450 SF grocery anchored enclosed • 89.2% occupied • 6.7% yield retail complex • 80% national tenants
Slide 26: Charlottetown Mall Development Potential
YTD-2019 Acquisitions | Charlottetown Mall Development Potential • Zoned for multi-residential • ~100 unit buildings, 4-5 storeys each • Prime location to transit, trails, the universities and downtown business district University of PEI ↓ 26
Slide 27: YTD-2019 Acquisitions | Fredericton Apt
YTD-2019 Acquisitions | Fredericton Apt Description: Acquisition Details: Location: 59 units; 48 underground parking stalls $8.1 million ($137,000/unit) Fredericton, NB Average rent – $1,175/month ($1.40/sf) 5.8% capitalization rate 100% leased Built in 2017 Closed: April 18, 2019 Vibe Lofts, Edmont
Slide 28: YTD-2019 Acquisitions | Grid & Silver Spear
YTD-2019 Acquisitions | Grid 5 & Silver Spear Description: Acquisition Details: Location: Grid 5 – 50% of 307 units $69.9(1) million Calgary, AB Silver Spear – 50% of 199 units 4.2% capitalization rate Mississauga, ON Closed: June 14, 2019 Silver Spear - Annual NOI ($M) $2 $1.2 $1.7 $1.9 $2.0 $2.1 $
Slide 29: YTD-2019 Acquisitions | Dieppe Village
YTD-2019 Acquisitions | Dieppe Village Description: Acquisition Details: Location: 3 residential apartment buildings Blended all cash yield of 5.7% Moncton, NB 1 mixed-use commercial & residential building 5.0% residential capitalization rate 127 units total 7.9% commercial capitalization rate 1 Co-
Slide 30: YTD-2019 Acquisitions | Lian Street
YTD-2019 Acquisitions | Lian Street Description: Acquisition Details: Location: 48 units; 48 underground parking spots $9.25 million Fredericton, NB Four-storey apartment complex with large 2 & 3 5.40% capitalization rate bedroom units 100% occupied Average rent – $1,367/month ($1.00/sf) Expected cl
Slide 31: Development Success
Q2-2019 | Development Success Approximately $300 million of developments completed. 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS 49 units - Charlottetown, PEI 47 units - Charlottetown 63 units - Halifax, NS 102 units - St. John’s, NL 228 units
Slide 32: Development Activity | Ottawa
Q2-2019 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase I of Gloucester City Centre, was substantially complete in June 2019. Key Statistics Number of units 228 Start date Q2-2017 Completion date Q2-2019 Project Budget ($M)* $37.5 Green Features: Sub-metered water, Cost per unit $329,00
Slide 33: Development Activity | Ottawa
Q2-2019 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase I of Gloucester City Centre Frontier Leasing Activity 86% 92% 15% 26% 36% 44% 55% 62% 72% 80% Mar-19 Jan-19 Apr-19 Feb-19 Jul-19 Sept-19* May-19 Jun-19 Aug-19* Oct-19* *forecast 33
Slide 34: Development Activity | Ottawa
Q2-2019 | Development Activity | Ottawa Ottawa, ON - Phase II (Latitude) of Gloucester City Centre Frontier (Phase I) Latitude (Phase II) Key Statistics Number of units 209 Start date Q2-2019 Est. Completion date Q4-2021 Project Budget ($M)* $43.6 Cost per unit $417,000 Expected Yield 5.2% Expected
Slide 35: Development Activity | PEI
Q2-2019 | Development Activity | PEI Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4-2018 Estimated Completion date Q2-2020 Project Budget ($M) $20.8 Cost per unit $267,000 Expected Yield 5.6% Expected Value 4.75-5.0% *Killam’s 50% interest. Green
Slide 36: Development Activity | PEI
Q2-2019 | Development Activity | PEI Shorefront development is on schedule and budget with $4.6 million invested to-date. *Killam’s 50% interest. Shorefront Development 36
Slide 37: Development Activity | Mississauga
Q2-2019 | Development Activity | Mississauga Silver Spear II development (The Kay) to break ground in Q3-2019. Key Statistics Green Features: Sub-metered water, Number of units 128 geothermal heating and cooling Start date Q3-2019 Estimated Completion date Q2-2021 Project Budget ($M) $49.0 Cost per
Slide 38: Development Pipeline - ~$700 million
Q2-2019 | Development Pipeline - ~$700 million Future Development Opportunities Killam Potential # Est Year of Property Location Interest of Units Status Completion Developments expected to start in the next 24 months The Governor Halifax, NS 100% 12 In design and approval process 2021 Nolan Hill Ca
Slide 39: Appendices
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Slide 40: Performance | Halifax
Q2-2019 | Performance | Halifax The Halifax rental market is strong with overall occupancy at 97.9%. Current Market Conditions Killam’s Same Property Performance • Strong demand as population growth from immigration, intraprovincial migration and demographics continues to Halifax outpace new supply.
Slide 41: Performance | New Brunswick
Q2-2019 | Performance | New Brunswick Population growth coupled with limited construction has resulted in high occupancy - 97.8%. Current Market Conditions Killam’s Same Property Performance • Population growth from increased interprovincial and international migration boosts rental demand in New Br
Slide 42: Performance | Ontario
Q2-2019 | Performance | Ontario Strong rental market driven by robust job market, international immigration and high housing prices. Current Market Conditions Killam’s Same Property Performance • Strong economic growth. • Rising population due to immigration and intra-provincial Ontario migration. •
Slide 43: 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 44: Results Conference Call
Q2-2019 Results Conference Call August 14, 2019 |9AM Eastern
Killam Apartment REIT — Q2 2019 Earnings Presentation on 6ix