Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Investor Presentation (September 2023)
46 slides from Killam Apartment Reit's investor presentation, September 2023
Slide 1: Investor Presentation
INVESTOR PRESENTATION September 2023 1
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT This presentation may contain forward-looking statements with respect to Killam Apartment REIT ("Killam") and its operations, strategy, financial performance and condition. These statements generally can be identified by use of forward-looking words such as "may", "will", "expec
Slide 3: Portfolio Statistics
PORTFOLIO STATISTICS Best-in-class multi-family residential owner, operator and developer NOI Contribution by Market NOI by Segment as of June 30, 2023 (%) Apartments 5% 89% MHCs 6% Commercial AB | 8.4% NL | 4.6% Calgary | Edmonton St. John’s ON | 25.0% BC | 3.7% Ottawa | London PEI | 6.1% Victoria
Slide 4: Why Invest in Killam
WHY INVEST IN KILLAM Growing the portfolio and expanding geographically through Solid Operating Performance accretive acquisitions and developments, growing FFO, AFFO and NAV per unit One of Canada’s highest-quality and youngest apartment High Quality Portfolio portfolios with 33% of NOI generated f
Slide 5: Long-Term Growth Strategy
LONG-TERM GROWTH STRATEGY 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 6: 2023 Strategy Targets
2023 STRATEGY TARGETS Target: Average 3.0%-5.0% Same property NOI growth of 7.1% for the six months ended June 30, 2023. Killam expects same property NOI growth in 2023 to exceed the top end of its original target of 3.0% to 5.0% and has increased its target to 6.0%. Target: Sell a minimum of $100 m
Slide 7: Proven Record of Strong Growth
PROVEN RECORD OF STRONG GROWTH Revenues ($M) Net Income ($M) Investment Properties ($B) Investment Properties under Construction Investment Properties $2.8 $3.3 $3.7 $4.5 $4.8 $5.0 $216 $242 $262 $291 $329 $172 $175 $284 $146 $286 $123 $198 2018 2019 2020 2021 2022 YTD 2018 2019 2020 2021 2022 YTD 2
Slide 8: Capital Allocation
CAPITAL ALLOCATION DEVELOPMENT Invest in developing high-quality energy efficient assets. ACQUISITIONS Acquire high-quality multi-residential assets. JV INVESTMENT Invest in joint development opportunities to maximize growth potential. DISPOSITIONS Dispose of select properties to provide capital to
Slide 9: FFO & AFFO Per Unit Growth
FFO & AFFO PER UNIT GROWTH Q2 FFO & AFFO Per Unit Same Property Portfolio For the three months ended June 30, 2023 Q2-2022 Q2-2023 7.9% 5.3% 0.7% $0.28 $0.30 $0.24 $0.26 Revenue Expense NOI FFO AFFO YTD FFO & AFFO Per Unit Same Property Portfolio For the six months ended June 30, 2023 2022 2023 7.1%
Slide 10: Consistent Growth from Existing Portfolio
CONSISTENT GROWTH FROM EXISTING PORTFOLIO Killam achieved total same property NOI growth of 7.9% in Q2-2023, its 37th consecutive quarter of positive NOI growth. YTD-2023 Same Property Apartment Revenue and NOI Growth by Market Revenue NOI 12.9% 11.1% 11.5% 8.8% 7.3% 7.0% 5.5% 5.7% 5.5% 5.2% 4.2% 4.
Slide 11: Revenue Optimization
REVENUE OPTIMIZATION Northfield Gardens - After 2023 Program 450 suite repositions ~$15M investment ~$2.5M annualized revenue growth Total Opportunity 5,500 suite repositions ~$180-190M investment ~$28M annualized revenue 219 suites repositioned YTD Northfield Gardens - Before 11
Slide 12: Strong Occupancy Across Apartment Portfolio
STRONG OCCUPANCY ACROSS APARTMENT PORTFOLIO Apt Same Property Occupancy(1) by Region Q2-2022 Q2-2023 99% 98% 98% 98% 99% 99% 98% 99% 98% 98% 96% 96% Apt Same Property Occupancy(1) Apartment Same Property Occupancy(1) 98.40% 99% 98% 97% 96% 95% 97.1% 97.3% 96.7% 97.0% 98.3% 98.4% 94% Q1/18 Q2/18 Q3/1
Slide 13: Annual Turnover by Region
ANNUAL TURNOVER BY REGION Annual Turnover by Region 2020 2021 2022 Avg 2021 Avg 2022 Killam’s turnover was 50% 22% in 2022. Expect turnover for 2023 to be ~18%. 40% 30% 20% 10% 38% 36% 30% 27% 25% 23% 22% 22% 21% 20% 14% 10% 0% 13
Slide 14: Growing Market Rents
GROWING MARKET RENTS Apartments Same Property Rental Rate Growth by Quarter Upon Lease Renewal For tenants with lease renewals in For new tenants moved in during Upon Unit Turn Q2, rents increased by 2.5%. Q2, rents increased 14.7%. Combined Average Increase % 14% 12% 10% 8% 5.5% 4.3% 4.2% 3.8% 6% 3
Slide 15: 2023 Rent Control by Province
2023 RENT CONTROL BY PROVINCE Province(1) Apartments Apartments MHCs 2023 2024 2023 British Columbia 2.0% TBD 2.0% Ontario(2) 2.5% 2.5% 2.5% Nova Scotia(3) 2.0% 5.0% 2.2% Prince Edward Island 0% TBD 0% New Brunswick None None None Newfoundland None None None Alberta None None None Manitoba 0% 3% Non
Slide 16: Moderating Expense Growth
MODERATING EXPENSE GROWTH Total same property operating expenses were up 0.7% in Q2-2023. The increase was driven a 3.2% increase in general operating expenses, and a 0.5% increase in utility and fuel expenses. These increases were offset by a 2.3% decrease in property taxes. Same Property Expense G
Slide 17: Debt Ladder
DEBT LADDER Apartment Mortgage Maturities by Year As at June 30, 2023 Mortgage Maturities ($) 5 year estimated CMHC-insured rate 10 year estimated CMHC-insured rate Weighted average interest rate (apartments) 6% $350 5% $300 $250 4% $200 3.62% 3.48% 3% 3.25% $150 2.94% 2.86% 2.65% 2.70% 2% $100 2.07
Slide 18: Strong Balance Sheet
STRONG BALANCE SHEET Increasing value of investment properties with conservative debt metrics. Total Debt as a % of Assets(1) Interest Coverage Ratio(2) Debt to Normalized EBITDA(3) 47% 45% 43% 41% 39% 37% 43.4% 44.6% 45.0% 45.3% 43.1% 3.20 3.36 3.53 3.31 3.14 10.15 10.78 11.33 11.21 10.90 35% 2019
Slide 19: Commercial
COMMERCIAL Total commercial occupancy increased to 94.7% in Q2-2023, compared to 93.1% in Q2-2022. Commercial Same Property NOI Growth Revenue NOI 22.8% 15.7% 12.1% 11.6% 9.8% 9.5% 7.6% 4.4% (2.2%) (3.1%) Brewery Market, Halifax Q2-2019 Q2-2020 Q2-2021 Q2-2022 Q2-2023 Commercial Portfolio 949,466 SF
Slide 20: Manufactured Home Communities (MHC)
MANUFACTURED HOME COMMUNITIES (MHC) MHC Same Property NOI Growth Revenue NOI 11.4% 8.5% 7.3% 6.5% 3.8% NL 3.0% 2.0% 1.8% 1.6% ON NB NS Q2-2019 Q2-2020 Q2-2021 Q2-2022 Q2-2023 MHC Site Count 5,975 5,975 5,875 5,875 5,786 5,427 Holiday Harbour, Ontario 5,165 Camper’s City, New Brunswick 20
Slide 21: Strategic Portfolio Growth
STRATEGIC PORTFOLIO GROWTH NOI Generated Outside Atlantic Canada 40% YTD, 37.1% of 36% 37% 32% 33% Killam’s NOI has been 30% 27% generated outside of 21% 23% 20% Atlantic Canada. 12% 15% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD 2025 2023 Target Net Annual Portfolio Growth ($ millions) A
Slide 22: Disposition Activity
DISPOSITION ACTIVITY Killam is focused on identifying dispositions that will maximize value for our Unitholders and strengthen our balance sheet. These strategic dispositions are accretive to both NAV and FFO per unit and enhances capital flexibility. Target Halifax To recycle PEI $100 million Ontar
Slide 23: Capital Investment
CAPITAL INVESTMENT Total Capital Investment ($M) Capital Investment per Apt Unit ($) $6,000 $100 $5,000 $80 $4,000 $60 $3,000 $40 $2,000 $20 $1,000 $0 $0 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 YTD YTD 2022 Capital Investment Commercial 7% Suite Renovations Curb Appeal 31% 6% Ene
Slide 24: Capital Projects: Quinpool Towers, Halifax
CAPITAL PROJECTS Quinpool Towers, Halifax Fitness Center Before 2022 retrofit After 2022 retrofit Social Room 24
Slide 25: Capital Projects: Brentwood and Belvedere
CAPITAL PROJECTS Brentwood, Halifax Belvedere, Charlottetown Before recladding Before recladding Recladding in progress After recladding 25
Slide 26: High Quality Developments Completed
HIGH QUALITY DEVELOPMENTS COMPLETED More than $695 million of developments completed. 102 units - St. John’s, NL 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS 71 units - St. John’s, NL 78 units – Charlottetown, PE 47 units - Charlottetown 240 u
Slide 27: Strong Leasing of New Developments
STRONG LEASING OF NEW DEVELOPMENTS Fully leased Latitude, Ottawa The Kay, Mississauga Luma, Ottawa 33% 47% leased leased Governor, Halifax Civic 66, Kitchener 27 (1) As of August 30, 2023
Slide 28: Strong Development Leasing: The Kay
STRONG DEVELOPMENT LEASING THE KAY – MISSISSAUGA, ON The Kay Leasing Activity Avg Rent: $3.04/ft2 24% 52% 73% 93% 100% 28
Slide 29: Strong Development Leasing: Latitude
STRONG DEVELOPMENT LEASING LATITUDE – OTTAWA, ON Avg Rent: $3.05/ft2 Geothermal 17,500 ft2 heating and of amenity cooling space LATITUDE – 208-unit development in Ottawa adjacent to the Frontier 29
Slide 30: Strong Development Leasing: Luma
STRONG DEVELOPMENT LEASING LUMA – OTTAWA, ON Luma Leasing Activity Avg Rent: $2.82/ft2 96% 100% 84% 67% 50% 42% 26% Aug 22 Sept 22 Oct 22 Dec 22 Mar 23 May 23 July 23 LUMA – 168-unit development in Ottawa 30
Slide 31: Strong Development Leasing: Civic
STRONG DEVELOPMENT LEASING CIVIC 66 – KITCHENER, ON Green features: - Geothermal heating & cooling - Sub-metered water - Low-flow plumbing fixtures - PV solar panels - EV car chargers - Heat pumps for domestic hot water 31
Slide 32: Strong Development Leasing: Governor
STRONG DEVELOPMENT LEASING GOVERNOR – HALIFAX, NS Green features: • Heating & cooling with Variable Refrigerant Flow heat pumps • EV chargers for all parking stalls • Wi-fi Connected Programmable Thermostats 32
Slide 33: Development Progress
DEVELOPMENT PROGRESS Killam currently has two active developments underway, which will add an additional 373 new high-quality suites to Killam’s portfolio in the next two years. Nolan Hill Phase 2 | 234 units The Carrick | 139 units Calgary Waterloo Cost $65M (1) $84M Expected Completion Date Q4-202
Slide 34: Development Activity: Waterloo
DEVELOPMENT ACTIVITY – WATERLOO THE CARRICK– Broke ground on the 139-unit development in Waterloo in Q2-2022. Key Statistics Number of units 139 Start date Q2-2022 Est. completion date Q1-2025 Project budget ($M) $83.5 Cost per unit $601,000 Expected yield 4.00%-4.25% Expected value cap-rate 3.50% A
Slide 35: Development Activity: Nolan Hill, Calgary
DEVELOPMENT ACTIVITY – Nolan Hill, Calgary Killam has a 10% interest* in the 234-unit second phase of the Nolan Hill development Broke ground in Q4-2021 and is expected to be completed in late 2023 Progress shots as of June 2023 35 *Killam has a $65.0 million commitment to purchase the property foll
Slide 36: Affordability and Value Delivery
AFFORDABILITY AND VALUE DELIVERY Killam delivers affordable, safe, clean and high-quality housing to our residents across Canada: 52% of Killam’s portfolio rents for less than $1,200 per month. Average rent is $1.44 per SF across the portfolio. Killam supports affordable housing with more than
Slide 37: Commitment to Green
COMMITMENT TO GREEN 75 Knightsridge, Halifax Civic 66, Waterloo Increasing earnings from operations through energy efficiency. Includes increasing the installations of photovoltaic solar panels, smart metering, decreasing peak electric demand, water conservation projects and heating efficiencies at
Slide 38: Preventative Maintenance
PREVENTATIVE MAINTENANCE Currently 19 properties are connected to our central Building Automation System (BAS) server capable of monitoring and diagnosing the property’s energy system performance remotely. Building Energy Increased Lifecycle Cost Optimization Reduction of Equipment Savings Targeting
Slide 39: Commitment to Green
COMMITMENT TO GREEN Killam earned a green, three-star designation for the 2022 GRESB real estate assessment. Killam achieved a 15% score improvement from its 2021 rating. Killam has also maintained its GRESB Public Disclosure survey rating of "A”. Geothermal Level II PV Solar Committed to Buil
Slide 40: Innovated Developments: Civic 66
INNOVATED DEVELOPMENTS CIVIC 66 Geothermal heating & cooling Heat pumps for domestic hot water PV solar panels 52% less energy 67% fewer emissions 40
Slide 41: Electric Vehicle Charger Program
ELECTRIC VEHICLE CHARGER PROGRAM Targeting an additional ~400 level II electric vehicle (EV) chargers across 50 properties 8-10 hours average time to charge from empty 183 EV chargers installed to date at 39 properties Project budget of $2 million ($5k/charger) with 50% funding from National R
Slide 42: Solar
SOLAR PV solar installed at 18 properties with total potential production of 1,817 MWh/year (equal to 343 apartment units) 2 x Nova Scotia | 158 kW 4 x Ontario | 662 kW 1 x Alberta | 97 kW 11 x Prince Edward Island | 742 kW Producing 4% of operationally controlled electricity (targeting 10%
Slide 43: Sustainable Communities
SUSTAINABLE COMMUNITIES Killam works towards minimizing its impact on the environment by investing in sustainable solutions, renovations, and technologies. 43
Slide 44: Long-Term Targets
LONG-TERM TARGETS Environmental © Long-Term Targets + Reduce GHG emissions 15% by 2030.” + Reduce carbon intensity 15% by 2030.2 + Produce a minimum of 10% of electricity® consumed by its portfolio through renewable energy sources by 2025. + Pursue green building health and operating certifications
Slide 45: Non-IFRS Measures
NON-IFRS MEASURES Management believes the following non-IFRS financial measures, ratios and supplementary information are relevant measures of the ability of Killam to earn revenue and to evaluate Killam's financial performance. Non-IFRS measures should not be construed as alternatives to net income
Slide 46: Investor Presentation
INVESTOR PRESENTATION September 2023 46
Killam Apartment REIT — Investor Presentation (September 2023) on 6ix