Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Q3 2019 Earnings Presentation
34 slides from Killam Apartment Reit's earnings presentation, Nov 6, 2019
Slide 1: Q3-2019 Results Conference Call
Q3-2019 Results Conference Call Nov 6, 2019 |12PM 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: Q3-2019 Highlights
Q3-2019 | Highlights SP Apartment 4.2% Increase Occupancy 4.5% Same in Average Rental Property (SP) Rate 97.3% NOI Growth 3.8% FFO per Unit 60 bps Growth Improvement in Debt to Total Assets of SP NOI Margin $36M in 47.2% Investment 2.91% Property Fair Value Weighted Average Mortgage Interest Rate Ga
Slide 4: Strategic Achievements
Q3-2019 | Strategic Achievements 2019 Target Year to-date 2019 Performance Same Property NOI Growth of 3% 4.1% Same property NOI growth. to 5%. Grow the portfolio to over $3.0 billion by the end of 2019, with a ~ $3.1 billion in assets as at Q3-2019. Completed $145.2 million of minimum acquisition t
Slide 5: Financial Highlights
Q3-2019 | Financial Highlights Q3 FFO & AFFO Per YTD FFO & AFFO Per Unit Unit YTD-2019 YTD-2018 Q3-2019 Q3-2018 $0.27 $0.26 $0.23 $0.22 $0.73 $0.71 $0.59 $0.58 FFO AFFO FFO AFFO Same Property Portfolio Performance For the three & nine months ended September 30, 2019 3 months 9 months 3.7% 3.5% 4.5%
Slide 6: Financial Highlights: Revenue Growth
Q3-2019 | Financial Highlights Strong revenue growth. • Increasing rental rates: Rate increases on renewals of 2.1%, on turns of 5.7% and repositionings of 28.9%, averaged 3.4% in Q3-2019. • Strong occupancy and minimal incentives required with strong market fundamentals. Apt Same Property Apt Same
Slide 7: Financial Highlights: Managing Expenses
Q3-2019 | Financial Highlights Managing expenses to increase same property earnings. • Investing in energy and water conservation initiatives. • Maximizing economies of scale. • Successfully appealing property tax assessments. Same Property Expense Same Property Expense Change by Category ($M) Growt
Slide 8: Financial Highlights: Conservative Leverage
Q3-2019 | 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% 49.8% 47.2% 10.63 10.51 10.50 10.62 10.47 3.13 2.34 3.22 3.19 2.7 8
Slide 9: Apartment Mortgage Maturities by Year
Q3-2019 | Financial Highlights Apartment Mortgage Maturities by Year As at September 30, 2019 Mortgage Maturities Weighted Average Interest Rate (Apartments) Current $400 Weighted Five-year CMHC rate Ten-year CMHC rate 4% $350 Average 3.27% 3.10% 3.08% Interest Rate Mortgage Maturities ($M) $300 2.6
Slide 10: Financial Highlights: Investment Properties Value
Q3-2019 | Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction Investment Properties $1.7 $1.8 $1.9 $2.3 $2.8 $3.1 Weighted Average Apartment Cap-Rates 5.52% 5.49% 5.37% 5.15% 4.99% 10
Slide 11: Growing FFO & NAV
Q3-2019 | 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: Increasing Revenues to Grow NOI
Q3-2019 | Increasing Revenues to Grow NOI With continued high occupancy levels, rental rate growth is a key focus for revenue optimization. Same Property Rental Increases (%) 6.0% 5.6% 5.7% 5.3% 5.0% 5.1% 4.9% 5.0% 4.6% 4.0% 3.3% 3.4% 3.4% 3.4% 3.2% 2.9% 3.0% 2.7% 2.4% 2.5% 2.2% 2.0% 2.1% 1.9% 2.0%
Slide 13: Increasing Revenues: Unit Repositionings
Q3-2019 |Increasing Revenues Driving revenues through unit repositionings to meet market demand, maximize NOI growth and investment returns. • ~251 units upgraded, 13% ROI, YTD-2019 $26K avg investment, $280 avg monthly lift 2019 Target • 300 units~$7-8M Investment • ~$1.0M Annualized Revenue • 400-
Slide 14: Fort Howe, Saint John Suite Repositionings
Q3-2019 | Increasing Revenues to Grow NOI Fort Howe, Saint John (153 units) | Growing revenues through repositioning units AFTER Suite Repositionings • $36k - Average investment per unit • 41% - Average rent lift • 13% - Average ROI • $390 Avg monthly increase BEFORE 14
Slide 15: Killam's ESG Progress
Killam’s ESG Progress Killam continues to build on our current successes to make buildings more sustainable and resilient to the impacts of climate change. Electric Water Vehicle Geothermal Conservation Chargers Efficient Solar Heating LED Lighting Heating • Investing $5 million annually in energy-e
Slide 16: NOI by Region
Q3-2019 | NOI by Region Apartment NOI increased 4.4% during Q3 with Ontario and Halifax leading NOI growth of 7.8% and 5.5%. Q3-2019 Same Property Growth by Region Revenue Growth NOI Growth (0.6)% (1.4)% (2.6)% (5.0)% 5.1% 5.5% 5.1% 7.8% 2.5% 4.3% 2.6% 2.2% 2.8% 3.5% Halifax Ontario New Brunswick St
Slide 17: YTD-2019 Acquisitions
YTD-2019 | Acquisitions Annual Acquisitions ($ millions) Average $115M $145 $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 2019 NOI Generated Outside Atlantic Canada *Based on its curre
Slide 18: Acquisitions | Fredericton, NB Lian Street
Q3-2019 Acquisitions | Fredericton, NB 150 Lian Street Description: Acquisition Details: 48 units; 48 underground parking spots $9.25 million Four-storey apartment complex with large 5.60% capitalization rate 2 & 3 bedroom units 100% occupied Average rent – $1,367/month ($1.00/sf) Closed: Aug 20, 20
Slide 19: Development Success
Q3-2019 | Development Success Approximately $300 million of developments completed. 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS 49 units - Charlottetown, PEI 47 units - Charlottetown 63 units - Halifax, NS 102 units - St. John’s, NL 228 units
Slide 20: Development Activity, Ottawa
Q3-2019 | Development Activity, Ottawa Phase I (Frontier) of Gloucester City Centre, was substantially complete in June 2019. Key Statistics Number of units 228 Start date Q2-2017 Completion date Q2-2019 Project Budget ($M)* $37.5 Green Features: Sub-metered water, Cost per unit $329,000 geothermal
Slide 21: Development Activity | Ottawa: Frontier Leasing
Q3-2019 | Development Activity | Ottawa Ottawa, ON – Phase I (Frontier) of Gloucester City Centre Frontier Leasing Activity 15% 26% 36% 44% 55% 62% 72% 78% 83% 89% 92% 95% Dec-19* Feb-19 Mar-19 Apr-19 Jan-19 Jul-19 Aug-19 May-19 Sept-19 Oct-19 Jun-19 Nov-19* *forecast 21
Slide 22: Development Activity | Ottawa: Latitude Phase II
Q3-2019 | Development Activity | Ottawa Ottawa, ON - Phase II (Latitude) of Gloucester City Centre Frontier (Phase I) Latitude (Phase II) Key Statistics Number of units 209 Start date Q2-2019 Est. Completion date Q4-2021 Project Budget ($M)* $43.5 Cost per unit $416,000 Expected Yield 5.2% Expected
Slide 23: Phase II (Latitude) Underway
Q3-2019 | Development Activity | Ottawa Phase II (Latitude) is actively underway with $9.1 million invested to-date. Frontier (Phase I) * Killam’s 50% interest. 23
Slide 24: Development Activity | PEI
Q3-2019 | Development Activity | PEI Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4-2018 Estimated Completion date Q2-2020 Project Budget ($M) $22.0 Cost per unit $282,000 Expected Yield 5.6% Expected Value 4.75-5.0% *Killam’s 50% interest. Green
Slide 25: Shorefront Development On Schedule
Q3-2019 | Development Activity | PEI Shorefront development is on schedule with $10.5 million invested to-date. *Killam’s 50% interest. Shorefront, Charlottetown Shorefront Development 25
Slide 26: Development Activity | Mississauga
Q3-2019 | Development Activity | Mississauga The Kay development broke ground in Q3-2019. Key Statistics Green Features: Sub-metered water, Number of units 128 geothermal heating and cooling Start date Q3-2019 Estimated Completion date Q2-2021 Project Budget ($M) $56.0 Cost per unit $437,500 Expecte
Slide 27: The Kay Development Broke Ground
Q3-2019 | Development Activity | Mississauga The Kay development broke ground in Q3-2019. The Kay, Mississauga 27
Slide 28: Development Pipeline - ~$700 million
Q3-2019 | 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 29: Appendices
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Slide 30: Performance | Halifax
Q3-2019 | Performance | Halifax The Halifax rental market is strong with overall occupancy of 98.3%. 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 31: Performance | New Brunswick
Q3-2019 | Performance | New Brunswick Population growth coupled with limited construction has resulted in high occupancy of 97.5%. Current Market Conditions Killam’s Same Property Performance • Population growth from increased interprovincial and international migration boosts rental demand in New B
Slide 32: Performance | Ontario
Q3-2019 | 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. Ontario • • Rising population due to immigration and intra-provincial • migration.
Slide 33: 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 34: Q3-2019 Results Conference Call
Q3-2019 Results Conference Call November 6, 2019 |12PM Eastern
Killam Apartment REIT — Q3 2019 Earnings Presentation on 6ix