Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — FY2018 Earnings Presentation
40 slides from Killam Apartment Reit's earnings presentation, Feb 13, 2019
Slide 1: 2018 Results Conference Call
2018 Results Conference Call February 13, 2019 |10AM 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: 2018 Highlights
2018 | Highlights Normalized Debt Apartment 4.8% in to EBITDA of Occupancy of Same 97.1% 10.62x Property NOI 4.4% FFO per unit Growth 70 bps Growth improvement in Debt to Total Assets of SP NOI Margin $135M in 49.8% $315M in Fair Value New Gains 5.8% in Acquisitions Apartment 3.22x Interest AFFO Pay
Slide 4: 2018 Strategic Achievements
2018 | Strategic Achievements 2018 Target 2018 Performance Grow Same Property NOI by 1% to 2% 4.8% Same Property NOI growth in 2018. REVISED: 3% to 5% Acquire a minimum of $125M of assets $315 million of assets purchased in 2018. REVISED: Minimum of $225M Focus 75% of acquisitions and ~66% of comp
Slide 5: Highlights: Five Years of Strong Growth
2018 Highlights | Five Years of Strong Growth Net Operating Income FFO & Distribution Per Unit AFFO Payout Ratio1 $140 FFO Per Unit Distribution 140% $130 $120 $0.90 120% $110 100% Millions $0.80 $100 80% $0.70 $90 60% $80 $0.60 40% $70 $0.72 $0.79 $0.86 $0.90 $0.94 124% 106% $105 $115 $136 $0.50 0.
Slide 6: Q4-2018 Financial Highlights
Q4-2018 | Financial Highlights • Generated FFO per unit of $0.23 versus $0.22 in Q4-17. • Produced AFFO per unit of $0.18 consistent with Q4-17. • Increased rental revenue 3.1% for the quarter. • Managed operating expense increases, 0.1% for the quarter. • Achieved same property NOI growth of 5.0% i
Slide 7: 2018 Financial Highlights
2018 | Financial Highlights Strong revenue growth to increase same property earnings. • Increasing rental rates: Rate increases on renewals of 1.7% and turns of 5.3%, averaged 2.7% in 2018. • Strong occupancy: Both 2018 and 2017, amongst Killam’s highest years. • Reduced incentives: 30 bps lower tha
Slide 8: 2018 Financial Highlights: Same Property Expense
2018 | Financial Highlights Managing expenses to increase same property earnings. • Investing in energy and water conservation initiatives. • Maximizing economies of scale. • Appealing rising property tax assessments. Same Property Expense 2018 Same Property Expense Change by Category ($M) Growth $3
Slide 9: 2018 Financial Highlights: Leverage
2018 | Financial Highlights Managing balance sheet with conservative leverage. Interest Coverage Debt to Normalized Debt as a Percentage of Ratio EBITDA Assets 55.8% 56.4% 53.5% 48.7% 49.8% 10.37 10.63 10.51 10.50 10.62 2.70 2.21 2.34 3.13 3.22 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014
Slide 10: Apartment Mortgage Maturities
2018 | Financial Highlights Apartment Mortgage Maturities by Year As at December 31, 2018 Mortgage Maturities Weighted Average Interest Rate (Apartments) Five-year CMHC rate Ten-year CMHC rate $300 5% $250 Current Mortgage Maturities ($M) 3.44% 4% 3.28% 3.17% Weighted 3.11% $200 2.82% 2.54% 2.53% 2.
Slide 11: Increasing Value of Investment Properties
2018 | Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction Investment Properties $1.7 $1.8 $2.0 $2.3 $2.8 2014 2015 2016 2017 2018 Weighted Average Apartment Cap-Rates 5.52% 5.49% 5.37% 5.15% 11 Q4-15 Q4-16 Q4-17
Slide 12: Growing FFO & NAV
2018 | Growing FFO & NAV Killam’s strategy to increase FFO, NAV and maximize value is focused on three priorities: Increase Expand the Develop high- earnings from portfolio and quality existing diversify properties in portfolio. geographically core markets. through accretive 12 acquisitions.
Slide 13: Increase Value in Existing Portfolio
2018 | Increase Value in Existing Portfolio $ Increase NAV $ Increase FFO • Advanced Technology & Analytics • Provide Superior Customer Service • Drive Expense Management Practices • Reposition Units to Optimize Rental Growth • Optimize Rents on Renewal • Enhance Other Revenue Streams • Invest in En
Slide 14: Increasing Revenues to Grow NOI
2018 | Increasing Revenues to Grow NOI Driving revenues through increased occupancy and rental rates, as well as fewer rental incentive offerings. Same Property Rent Region Dec-18 Dec-17 % Change Halifax $1,043 $1,011 3.2% ↑ Ontario $1,382 $1,343 2.9% ↑ Moncton $868 $843 3.0% ↑ Fredericton $960 $937
Slide 15: Increasing Revenues to Grow NOI: Unit Repositioning
2018 | Increasing Revenues to Grow NOI Driving revenues through unit repositionings to meet market demand. • Seeking higher rent lifts and ROI on each unit turn with an increased focus on unit repositioning. Total 2018 2019 Target Opportunity • ~170 Units vs 47 units • 300 Unit Repositions • 3,000 U
Slide 16: Increasing Revenues to Grow NOI
2018 | Increasing Revenues to Grow NOI Accelerating capital investment in suites to maximum NOI growth and investment returns. 2018 ~170 units | ~$3M investment | ↑$0.6M NOI Rivers Edge, Fort Howe, Saint Cambridge Brentwood, Halifax Lorentz, Moncton John Harlington, Silver Spear, Torbay, St. John’s
Slide 17: Garden Park, Halifax Suite Repositionings
2018 | Increasing Revenues to Grow NOI Garden Park, Halifax (246 units) | Driving revenues through repositioning units AFTER Suite Repositionings • $260K invested in 17 units in 2018 • 14% Avg ROI BEFORE • 21% Avg rent lift • $220 Avg monthly increase 17
Slide 18: Garden Park Common Area Upgrades
2018 | Increasing Revenues to Grow NOI Garden Park, Halifax (246 units) | Driving revenues through repositionings AFTER BEFORE Common area upgrades AFTER Common area upgrades • $x invested in 2018 18 BEFORE
Slide 19: Parker Street, Halifax Repositionings
2018 | Increasing Revenues to Grow NOI Parker Street, Halifax (239 units) | Driving revenues through repositioning units AFTER BEFORE Suite Repositionings • $205K invested in 13 units in 2018 • 12% Avg ROI • 25% Avg rent lift • $220 Avg monthly increase 19
Slide 20: Spring Garden Terrace, Halifax Repositionings
2018 | Increasing Revenues to Grow NOI Spring Garden Terrace, Halifax (201 units) | Driving revenues through repositionings AFTER BEFORE Common area upgrades Suite Repositionings • $110K invested in 6 units in 2018 • 20% Avg ROI • 18% Avg rent lift • $230 Avg monthly increase 20
Slide 21: Managing Expenses to Grow NOI
2018 | Managing Expenses to Grow NOI Killam’s $25 million energy efficiency investment in existing properties • Killam has invested $10M to date in efficiency projects, including • 9,100 low-flow toilets installs (annual savings of 600M litres of water) • Lighting retrofits at ~90 properties (annual
Slide 22: Leading with Technology
2018 | Leading with Technology Coming in Mobile late 2019 Inspections Rent Mobile Maximizing Work Software Orders Online Online Property Seamless Tenant Online Portal Management Leasing Platform Currently being rolled out and implemented Integrated Enhanced Credit Marketing Screening Analytics Custo
Slide 23: Leveraging Technology
2018 | Leveraging Technology Investment in CRM (Customer Relationship Management) platform benefits all stakeholders. Prospect Employees Management Tenants Book showings Self Service = less Manage by online data entry exception CRM Implementation currently underway - 47% Complete Focus on the Drive
Slide 24: CRM (Customer Relationship Management)
2018 | CRM (Customer Relationship Management) Analytics that Drive Decisions Conversion Ratios Average Response Time Traffic by Source Traffic By Source Craigslist Leads By Hour Google Daily Traffic Trends Killam Data Entry Email Response Time Website Average Age of Customer Inquiry RentFaster Appli
Slide 25: Largest Acquisition Year in History
2018 | Largest Acquisition Year in History Annual Acquisitions ($ millions) Average $113M $115 $106 $121 $160 $200 $315 $167 $200 $103 $125 $85 $54 $72 $16 $45 $36 $3 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 NOI Generated Outside Atlantic Canada Based on i
Slide 26: Acquisition Activity
2018 | Acquisition Activity 2018 Acquisitions by Segment 2018 Acquisitions by Region ($000’s) ($000’s) $210,200 $235,250 $72,900 $27,650 $4,675 $80,175 Apartments Commercial MHCs Development 2018 Acquisitions Opportunity Atlantic Canada Ontario and Alberta 2018 Acquisitions • 2018 was the largest ye
Slide 27: Acquisitions: Treo, Calgary
2018 Acquisitions | Treo | Calgary Description: Acquisition Details: Location: 158 units $39.0 million ($247,000/unit) Calgary, AB Average rent – $1,339/month ($1.55/sf) 4.9% capitalization rate Current occupancy – 100% 27 Vibe Lofts, Edmonton
Slide 28: New Development Leasing Activity
2018 | New Development Leasing Activity Saginaw Park and The Alexander completed Apr-2018 and Oct-2018, both are 100% leased. Saginaw Park – 2018 Leasing Activity The Alexander – 2018/2019 Saginaw Park – Cambridge Leasing Activity 100% 100% 49% 65% 74% 77% 79% 89% 77% 87% 91% Apr-18 Jul-18 Aug-18 Ma
Slide 29: Development Activity: Halifax
Q4-2018 | Development Activity | Halifax Halifax, NS - The Alexander was substantially complete in October 2018. Key Statistics Number of units/commercial (SF) 240 units/ 6,350 SF Start date 2016 Completion date October-2018 Cost ($M)* $41.6 Expected Yield 4.50-4.75% Market Cap-rate 4.40% Average Un
Slide 30: Development Activity: Ottawa
Q4-2018 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre Key Statistics Number of units 228 Start date Q2-2017 Completion date Q2-2019 Project Budget ($M)* $36.5 Cost per unit $320,000 Expected Yield 5.0% Expected Value Cap-rate 4.0% Average Unit Size 789 SF
Slide 31: Frontier, Ottawa
Q4-2018 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre frontier 31 The Frontier, Ottawa
Slide 32: Development Activity: PEI
Q4-2018 | Development Activity | PEI Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4-2018 Estimated Completion date Q2-2020 Project Budget ($M) $20.8 Cost per unit $267,000 Expected Yield 5.6% Expected Value 4.75-5.0% *Killam’s 50% interest. 32 Sh
Slide 33: Development Activity: Mississauga
Q4-2018 | Development Activity | Mississauga Silver Spear development to break ground in early Q2-2019. Key Statistics Number of units 128 Start date Q2-2019 Estimated Completion date Q1-2021 Project Budget ($M)* $24.5 Cost per unit $383,000 Expected Yield 5.0-5.25% Expected Value Cap-rate 3.5% *Kil
Slide 34: Development Pipeline - ~$850 million
Q4-2018 | Development Pipeline - ~$850 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 Silver Spear II Mississauga, ON 50% 64 Approved; to break ground Jan-19 2020 Weber
Slide 35: Appendices
Appendices 35
Slide 36: Performance: Halifax
2018 | Performance | Halifax The Halifax rental market is strong with overall occupancy at a historic high level of 98.4%. Current Market Conditions Killam’s Same Property Performance • Strong demand as population growth from immigration, intraprovincial migration and demographics continues to Halif
Slide 37: Performance: New Brunswick
2018 | Performance | New Brunswick Population growth coupled with limited construction has resulted in an 18-year high occupancy of 96.8%. Current Market Conditions Killam’s Same Property Performance • Population growth from increased interprovincial and international migration boosts rental demand
Slide 38: Performance: Ontario
2018 | 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. Ontario • • Rising population due to immigration and intra-provincial • migration. Gr
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: 2018 Results Conference Call
2018 Results Conference Call February 13, 2019 |10AM Eastern