Killam Apartment REIT · TSX:KMP.UN
Killam Apartment REIT — Investor Presentation (February 2024)
60 slides from Killam Apartment REIT's investor presentation, February 2024
Slide 1: Investor Presentation February 2024
INVESTOR PRESENTATION February 2024 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 NOI Contribution by Market (%) NOI by Segment as of December 31, 2023 KMP Established Regions KMP Expansion Regions 6% Apartments MHCs 6% 88% Commercial AB | 8.5% NL | 4.3% Calgary | Edmonton St. John’s ON | 25.3% Ottawa | London PEI | 5.9% BC | 3.7% Toronto | KWC Charlottetown
Slide 4: Key Investment Highlights
KEY INVESTMENT HIGHLIGHTS Strategy for Earnings High Quality Proven Capital Experienced ESG Growth Portfolio Results Flexibility Developer Leader Disciplined and 35% of NOI Track record of Defensive balance Value creation Purpose driven proven approach earned from solid operating sheet and through i
Slide 5: Long-Term Growth Strategy
LONG-TERM GROWTH STRATEGY Increase earnings from existing Expand the portfolio portfolio and diversify geographically by focusing on increasing Develop high-quality rental revenue and investing through accretive in sustainable energy acquisitions and dispositions, properties efficiency investments t
Slide 6: Capital Allocation
CAPITAL ALLOCATION DEVELOPMENT Invest in developing high-quality energy efficient assets. ACQUISITIONS Acquire high-quality multi-residential assets. INTENSIFICATION Intensify existing assets with multi-residential developments. DISPOSITIONS Dispose of select properties to provide capital to strengt
Slide 7: Continued Geographic Diversification
CONTINUED GEOGRAPHIC DIVERSIFICATION 4% 23% With a focus on developing in primary markets and divesting out of slower 2018 markets, Killam could increase the number of units outside Atlantic Canada to almost 73% 50% of the portfolio in the next 5 years. (1) ATL 10% 3% 3% 5% 66% 55% ON BRITISH COLUMB
Slide 8: Proven Record of Strong Growth
PROVEN RECORD OF STRONG GROWTH Revenues ($M) Net Income ($M) Investment Properties ($B) Investment Properties under Construction Investment Properties $3.3 $3.7 $4.5 $4.8 $5.0 $242 $262 $291 $329 $348 $284 $146 $286 $123 $266 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Slide 9: FFO & AFFO Per Unit Growth
FFO & AFFO PER UNIT GROWTH Q4 FFO & AFFO Per Unit Same Property Portfolio For the three months ended Dec 31, 2023 Q4-2023 Q4-2022 8.8% 5.4% (0.3%) $0.28 $0.27 $0.23 $0.23 Revenue Expense NOI FFO AFFO Annual FFO & AFFO Per Unit Same Property Portfolio For the year ended Dec 31, 2023 2023 2022 7.8% 5.
Slide 10: Performance Against Strategic Targets
PERFORMANCE AGAINST STRATEGIC TARGETS Target: Achieve same property NOI growth averaging 3.0% to 5.0% (increased to over 7.0% in Q3-2023) Performance: Killam achieved same property NOI growth of 7.8%. Target: Sell a minimum of $100 million of non-core assets. Performance: Killam completed 14 disposi
Slide 11: Strategic Portfolio Growth
STRATEGIC PORTFOLIO GROWTH NOI Generated Outside Atlantic Canada 40% 36% 37% Killam ended 2023 with 32% 33% 30% 27% 37.4% of NOI 21% 23% 20% generated outside of 15% 12% Atlantic Canada. 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2025 Target Net Annual Portfolio Growth ($ millions) Acqui
Slide 12: High Quality Portfolio
HIGH QUALITY PORTFOLIO 22% 1-10 33% 33% 11-20 of Killam’s Units by Age 21-30 portfolio has (years) 31-40 17% been built in 41-50 the last 5% 13% 50+ 10 years 9% Weighted Average Age of Portfolio in Years, by Province 15 25 32 42 48 27 21 AB BC NB NL NS ON PEI 12
Slide 13: Low Exposure to Rent Controlled Markets
LOW EXPOSURE TO RENT CONTROLLED MARKETS Apartments MHCs Province Killam’s Exposure (1) 57% 2024 limit 2024 limit Nova Scotia 5.0% 5.8% 30.3% (2) of Killam’s NOI is restricted by Ontario 2.5% 2.5% 19.0% (3) provincial rent control, which Prince Edward Island 3.0% N/A 4.2% includes Nova Scotia (30%) w
Slide 14: Consistent Portfolio Growth
CONSISTENT PORTFOLIO GROWTH Total Apartment Average Monthly Rent by Quarter $1,500 $1,400 $1,300 $1,200 $1,384 $1,355 $1,100 $1,318 $1,304 $1,289 $1,279 $1,260 $1,242 $1,227 $1,212 $1,202 $1,193 $1,184 $1,162 $1,149 $1,138 $1,000 $1,126 $1,114 $1,103 $1,082 $1,076 $1,067 $900 $800 Killam’s Portfolio
Slide 15: Diverse Portfolio Offering
DIVERSE PORTFOLIO OFFERING With average rent across the entire portfolio of approximately $1.52 per square foot, Killam’s relative affordability offering allows for organic growth in each market with minimal concerns of hitting an affordability ceiling. Rent per Square Foot – Regional Ranges Avg Ren
Slide 16: Growing Market Rents
GROWING MARKET RENTS Killam continues to see growing rental rates across the portfolio as units turnover and renew. We expect to see further growth in 2024 as Nova Scotia’s allowable increase for 2024 is a 5.0% increase on renewals. Apartments Same Property Rental Rate Growth by Quarter Upon Lease R
Slide 17: Top Line Growth Opportunities
TOP LINE GROWTH OPPORTUNITIES Mark-to-Market Rent Spread by Region Q1-2023 Q2-2023 Q3-2023 Q4-2023 40% 33% 25% 25% 30% 23% 21% 18% 17% 16% 20% 10% 9% 10% 6% 0% 0% Halifax Moncton Fredericton Saint John Ottawa London KWC/GTA PEI St. John's Calgary Edmonton Victoria Overall Mark-to-Market Opportunity
Slide 18: Trending Turnover
TRENDING TURNOVER Annual Tenant Turnover (%) 32% 31% 29% 26% 22% 19% 2018 2019 2020 2021 2022 2023 Average turnover was Annual Tenant Turnover by Region 50% 19% 2021 2022 2023 in 2023 40% 30% 20% 10% 36% 28% 27% 25% 24% 23% 20% 18% 18% 16% 15% 10% 0% 18 *Markets with rent control restrictions.
Slide 19: Strong Occupancy Across Apartment Portfolio
STRONG OCCUPANCY ACROSS APARTMENT PORTFOLIO Apt Same Property Occupancy(1) by Region 2022 2023 99% 99% 98% 99% 98% 99% 99% 98% 98% 98% 97% 97% Apt Same Property Occupancy(1) Apartment Same Property Occupancy(1) 98.50% 99% 98% 97% 96% 95% 97.1% 97.3% 96.7% 97.0% 98.3% 98.4% 94% Q3/18 Q4/18 Q1/19 Q2/1
Slide 20: Consistent Growth from Existing Portfolio
CONSISTENT GROWTH FROM EXISTING PORTFOLIO Killam achieved total same property NOI growth of 8.8% in Q4-2023, its 39th consecutive quarter of positive NOI growth. 2023 Same Property Apartment Revenue and NOI Growth by Market Revenue NOI 11.5% 11.9% 8.8% 8.0% 8.5% 7.6% 5.5% 6.2% 5.7% 4.5% 4.6% 5.7% 4.
Slide 21: Revenue Optimization from Existing Portfolio
REVENUE OPTIMIZATION FROM EXISTING PORTFOLIO Northfield Gardens - After 2024 Program Our team continue to identify opportunities for repositionings within our portfolio, while considering the incremental margins achievable based on current market rents compared to a standard unit turn with the in-pl
Slide 22: Moderating Expense Growth
MODERATING EXPENSE GROWTH Total same property operating expenses were up 1.6% in 2023. The increase was driven a 3.5% increase in general operating expenses, and a 4.3% increase in utility and fuel expenses. These increases were offset by a 2.1% decrease in property taxes. Same Property Expense Grow
Slide 23: Strong Commercial Segment Results
STRONG COMMERCIAL SEGMENT RESULTS Commercial Portfolio 973,839 SF Commercial Same Property NOI Growth Revenue NOI Other 17.6% 15.8% Brewery Westmount 9.5% 7.9% 7.4% Place, 5.9% Market, (0.8%) (2.7%) Waterloo (5.8%) (1.9%) Halifax Royalty Crossing, Charlottetown 2019 2020 2021 2022 2023 Total Commerc
Slide 24: Manufactured Home Communities (MHC)
MANUFACTURED HOME COMMUNITIES (MHC) MHC Same Property Portfolio For the year ended December 31, 2023 Permanent Seasonal Consolidated 4.9% 4.7% 4.6% 4.5% 4.1% 3.8% 3.5% 3.5% 2.8% NL ON NB NS Revenues Expenses NOI MHC Operating Margins Permanent MHC Seasonal Resorts 66% 64% 62% 60% Holiday Harbour, On
Slide 25: High Quality Developments Completed
HIGH QUALITY DEVELOPMENTS COMPLETED More than $695 million of developments completed. 102 units - St. John’s, NL 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS 71 units - St. John’s, NL 78 units – Charlottetown, PE 47 units - Charlottetown 240 u
Slide 26: Killam's Development History
KILLAM’S DEVELOPMENT HISTORY Killam’s Development History ($ millions) $200 $150 $100 $50 $63 $22 $16 $25 $111 $38 $22 $65 $152 $92 $0 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 (1) (1) Does not include Nolan Hill Phase 2 which Killam had a 10% interest in the Nolan Hill Phase II development
Slide 27: Future Development Pipeline
FUTURE DEVELOPMENT PIPELINE Killam has a development pipeline of over 4,000 units, with almost 70% of future projects located in Ontario and Western Canada. AB | 400 units Calgary NL | 350 units St. John’s BC | 312 units PEI | 495 units Victoria Charlottetown NS | 420 units Halifax ON | 1,750 units
Slide 28: Strong Leasing of New Developments
STRONG LEASING OF NEW DEVELOPMENTS Fully leased Latitude, Ottawa The Kay, Mississauga Luma, Ottawa 50% 73% 24% 57% leased leased leased Building 1 Governor, Halifax Civic 66, Kitchener Nolan Hill Phase 2, Calgary 28 (1) As of February 26, 2024.
Slide 29: New Development Completed – Nolan Hill 2
NEW DEVELOPMENT COMPLETED – NOLAN HILL 2 Nolan Hill 2 Calgary, AB Nolan Hill 2 is the second phase of a six-building 234 units complex, comprising 234 units across Completed three buildings. Q4-2023 $65.0 million Avg $2.59/SF Progress shots as of October 2023 (1) Killam had a 10% interest in the Nol
Slide 30: New Development Completed – Governor
NEW DEVELOPMENT COMPLETED – GOVERNOR The Governor Halifax, NS 12 luxury suites $24.3 million Completed Q3-2023 Avg $3.30/SF 30
Slide 31: New Development Completed – Civic 66
NEW DEVELOPMENT COMPLETED – CIVIC 66 Civic 66 Kitchener, ON 169 units Completed Q2-2023 $69.8 million Avg $2.98/SF Geothermal PV Solar Panels EV Chargers Sub-metered 31
Slide 32: Civic 66: Innovative Developments
CIVIC 66: INNOVATIVE DEVELOPMENTS CIVIC 66 Geothermal heating & cooling Heat pumps for domestic hot water PV solar panels 52% less energy 67% fewer emissions 32
Slide 33: Development Underway – The Carrick
DEVELOPMENT UNDERWAY – THE CARRICK Killam obtained attractive financing terms for The Carrick WESTMOUNT PHASE 1 (The Carrick) through CMHC’s Apartment Construction Loan Program Broke ground on the 139-unit development in Waterloo in Q2-2022. Progress shots as of Jan 2024 Key Statistics Number of uni
Slide 34: Development Underway – Eventide
DEVELOPMENT UNDERWAY – EVENTIDE Key Statistics Number of units 55 Start date Q1-2024 Est. completion date 2026 Project budget ($M) $33.6 Cost per unit $611,000 Expected yield 4.50%-5.00% Avg rent $3.75-$4.00 per SF Avg unit size 765 SF Eventide Development Site – February 2024 Project rendering 34
Slide 35: Geographic Repositioning Through Dispositions
GEOGRAPHIC REPOSITIONING THROUGH DISPOSITIONS Nova Scotia In 2023, Killam completed over 2023 PEI 16% $168.7 million Dispositions Ontario in strategic based on $ value New Brunswick dispositions Total Sales Value and Units Sold by Region ($ 000’s) Market Value Unit Count $80,000 400 $60,000 300 $40,
Slide 36: Successful Disposition Program
SUCCESSFUL DISPOSITION PROGRAM Killam is focused on identifying dispositions that will maximize value for our Unitholders and strengthen our balance sheet. Our strategic target of recycling $100 million of non-core assets in 2023 is accretive to NAV and FFO. Sale Price Property Location Disposition
Slide 37: Defensive Balance Sheet
DEFENSIVE BALANCE SHEET Increasing value of investment properties with conservative debt metrics. Total Debt as a % of Assets(1) Interest Coverage Ratio(2) Debt to Normalized EBITDA(3) % % % % % % 43.4% 44.6% 45.0% 45.3% 42.7% 3.20 3.36 3.53 3.31 3.10 10.15 10.78 11.33 11.21 10.29 % 2019 2020 2021 2
Slide 38: Mitigating Debt Exposure
MITIGATING DEBT EXPOSURE Apartment Mortgage Maturities by Year As at December 31, 2023 Mortgage Maturities ($) 5 year estimated CMHC-insured rate 10 year estimated CMHC-insured rate Weighted average interest rate (apartments) $450 5% $400 4% $350 3.96% $300 3.63% 3.57% 3.26% 3% $250 2.91% 2.94% $200
Slide 39: Commitment to Green
COMMITMENT TO GREEN Geothermal THE KAY Geothermal Level II PV Solar Committed to Building Systems EV Chargers Panels Affordability Certifications 401 chargers across 23 installations to date Over 950 units with a Over 5,300 units certified Installed at 6 properties 57 properties long-term affordabil
Slide 40: Electric Vehicle Charging Program
ELECTRIC VEHICLE CHARGING PROGRAM 401 Electric Vehicle charging stations installed to date across 57 buildings 2021-2023 electric vehicle charger deployment of 372 with a budget of $2 million ($5k/charger) and 50% funding from National Resources Canada Targeting 8-10% ROI In several provinces,
Slide 41: Solar Program
SOLAR PROGRAM PV solar installed at 23 properties with total potential production of ~2,395 MWh/year 3 x Nova Scotia | 342 kW 7 x Ontario | 1,093 kW 1 x Alberta | 106 kW 12 x Prince Edward Island | 854 kW Projecting +5% of operationally controlled electricity for 2024 (target 10% by 2025) In
Slide 42: Sustainable Communities
SUSTAINABLE COMMUNITIES Killam works towards minimizing its impact on the environment by investing in sustainable solutions, renovations, and technologies. 42
Slide 43: Long-Term ESG Targets
LONG-TERM ESG 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 certificati
Slide 44: Affordability and Value Delivery
AFFORDABILITY AND VALUE DELIVERY Killam delivers affordable, safe, clean and high-quality housing to our residents across Canada: 2023 Resident Survey Results(1) 40% of Killam’s portfolio rents for less than $1,200 per month. 82% of residents are pleased with the Average rent is ~$1.65 per SF ac
Slide 45: Opportunity for Organic Growth
OPPORTUNITY FOR ORGANIC GROWTH Killam Portfolio Offering within 30% of Median Income (1) 30% of Median Income Median Monthly Income (2021) Killam Units within 30% Median Income $8,000 100% $6,000 75% $4,000 50% $2,000 25% $- 0% Alberta New Brunswick Newfoundland PEI Nova Scotia British Columbia Onta
Slide 46: 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 47: Appendices
7 . Appendices .
Slide 48: Canadian Landscape
CANADIAN LANDSCAPE Growing International Migration to Canada Net Annual Population Growth Annual Immigration Target Population The Canadian Mortgage Housing 800,000 41,000,000 Corporation(CMHC) projects that Canada 600,000 39,000,000 will need to build an additional 400,000 37,000,000 3.5 million un
Slide 49: Population Growth Across Canada
POPULATION GROWTH ACROSS CANADA Canada’s T H Epopulation S E V E N P increased U B L I C M by U L 430,635 T I - F A M people I L Y R E in S I Q3-2023, D E N T I A Loutpacing R E I T S Mhome starts. AKE U P 6 . 7 % O F T H E T O TA L C A N A D I A N R E N TA L M A R K E T 49
Slide 50: National Housing Completions
NATIONAL HOUSING COMPLETIONS 10-yearT average HE SEV 178,000 ofE N P U B L I C housing M U L T Icompletions - F A M I L Y per R E year S I D is EN not T Ikeeping A L R E pace I T S with MAK the E UP 10-year average population 6 . 7 % O growth F T H EofT420,000 O T A L Cper AN year. A D I A N R E N T
Slide 51: Components of Growth by City
COMPONENTS OF GROWTH BY CITY • International migration was the largest source of population growth for Halifax and all its benchmark cities in 2022. • Interprovincial migration’s contribution to population growth was much stronger in Halifax at 38.8% and Calgary at 21.9%. On the other hand, cities l
Slide 52: Halifax: Second Fastest Growing City in Canada
HALIFAX: SECOND FASTEST GROWING CITY IN CANADA • In 2022, Halifax was the second-fastest growing city in Canada, behind Moncton, with population growing at a rate of 4.4% from July 1, 2021 to July 1, 2022 (+20,713). • Vacancy at historic lows in Halifax as demand for housing outpaces new rental supp
Slide 53: Halifax: Components of Growth
HALIFAX: COMPONENTS OF GROWTH Data shows strong trending of positive population growth from both interprovincial and international origins as Halifax increasingly becomes a destination of choice for young professionals, retirees, and new Canadians. Historical components of population growth – Halifa
Slide 54: Halifax: Employment by Industry
HALIFAX: EMPLYMENT BY INDUSTRY Young professionals are moving to Halifax for employment opportunities and relative affordability. 54
Slide 55: Halifax Supply vs. Population Growth
HALIFAX SUPPLY VS. POPULATION GROWTH Home Starts to Population Growth – Halifax Population growth Home Starts Vacancy Rate (CMHC) 25,000 10% 9% 20,000 8% 7% 15,000 6% 5% 10,000 4% 3% 5,000 2% 1% 0 0% Source: Canadian Mortgage Housing Corporation 55
Slide 56: Halifax Housing Fundamentals
HALIFAX HOUSING FUNDAMENTALS New supply has been absorbed by population growth from immigration, migration, and shift in apartment rental demand. Halifax Halifax Housing Starts - Apt & Single Housing Starts & Vacancy Trend Total Apartments Total Singles Average Total Starts Total Starts Vacancy (CMH
Slide 57: New Brunswick Population Growth
NEW BRUNSWICK POPULATION GROWTH Killam’s core markets in New Brunswick include Moncton, Fredericton and Saint John. All three markets are home to universities with approximately 15,000 student enrolments combined in 2022. New Brunswick is also a major transportation and logistics hub for the movemen
Slide 58: Moncton: Components of Growth
MONCTON: COMPONENTS OF GROWTH Moncton had the highest growth rate among Canadian cities, growing at a rate of 5.3% between July 1, 2021 and July 1, 2022. Historical components of population growth – Moncton Net international mig. Net interprovincial mig. Net intraprovincial mig. Natural increase 10,
Slide 59: New Brunswick Housing Fundamentals
NEW BRUNSWICK HOUSING FUNDAMENTALS New supply has been absorbed by population growth from immigration, migration, and shift in apartment rental demand. Saint John, Moncton, Fredericton Saint John, Moncton, Fredericton Housing Starts - Apt & Single Housing Starts & Vacancy Trend Total Apartments Tota
Slide 60: Investor Presentation
INVESTOR PRESENTATION January 2024 60
Killam Apartment REIT — Investor Presentation (February 2024) on 6ix