Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Q1 2019 Earnings Presentation
44 slides from Killam Apartment Reit's earnings presentation, May 2, 2019
Slide 1: Q1-2019 Results Conference Call
Q1-2019 Results Conference Call May 2, 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: Q1-2019 Highlights
Q1-2019 | Highlights Normalized Debt Apartment Occupancy of 4.3% Same to EBITDA of 97.2% Property (SP) 10.04x NOI Growth 5.0% FFO per unit 60 bps Growth improvement in Debt to Total Assets of SP NOI Margin $27M in Fair 46.4% Value Gains 2.97% 5.5% increase weighted average mortgage interest rate in
Slide 4: Strategic Achievements
Q1-2019 | Strategic Achievements 2019 Target Q1-2019 Performance Same Property NOI Growth of 3% to 4.3% Same Property NOI growth. 5%. Grow the portfolio to over $3.0 billion ~ $1.5 million of assets purchased in Q1-2019. $105.1 million by the end of 2019, with a minimum closed/announced year-to-da
Slide 5: Financial Highlights
Q1-2019 | Financial Highlights • Generated FFO per unit of $0.21 versus $0.20 in Q1-18. • Produced AFFO per unit of $0.16 consistent with Q1-18. • Increased same property rental revenue 3.3% for the quarter. • Managed same property expenses with 1.9% increase for the quarter. • Achieved same propert
Slide 6: Financial Highlights: Strong revenue growth
Q1-2019 | Financial Highlights Strong revenue growth. • Increasing rental rates: Rate increases on renewals of 1.9%, turns of 5.1% and repositionings of 27.8%, averaged 2.9% in Q1-2019. • Strong occupancy: Q1-2019 economic occupancy amongst Killam’s highest. • Reduced incentives: Minimal incentives
Slide 7: Financial Highlights: Managing expenses
Q1-2019 | Financial Highlights Managing expenses to increase same property earnings. • Investing in energy and water conservation initiatives. • Maximizing economies of scale. • Appealing rising property tax assessments. Same Property Expense Same Property Expense Growth Change by Category ($M) $9 1
Slide 8: Financial Highlights: Conservative leverage
Q1-2019 | 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% 46.4% 10.63 10.51 10.50 10.62 10.04 3.13 2.34 3.22 3.17 2.7 Q1-2019 2015 2016 2017 2018 Q1-2019 Q1-2019 2015 2016
Slide 9: Apartment Mortgage Maturities by Year
Q1-2019 | Financial Highlights Apartment Mortgage Maturities by Year As at March 31, 2019 Mortgage Maturities Weighted Average Interest Rate (Apartments) Five-year CMHC rate Ten-year CMHC rate $350 5% Current Weighted $300 Average 4% Interest Rate 3.27% 3.33% Mortgage Maturities ($M) $250 3.11% 3.17
Slide 10: Increasing value of investment properties
Q1-2019 | Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction Investment Properties $1.7 $1.8 $2.0 $2.3 $2.8 $2.8 2014 2015 2016 2017 2018 Q1-2019 Weighted Average Apartment Cap-Rates 5.52% 5.49% 5.37% 5.15% 5.11
Slide 11: Growing FFO & NAV
Q1-2019 | 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 acquisitions. 11
Slide 12: Increase Value in Existing Portfolio
Q1-2019 | Increase Value in Existing Portfolio Advancing Technology & Analytics Providing Maximizing Superior rents on Customer renewals Service $ Increase FFO & NAV Enhancing Driving Other Expense Revenue Mgmt Streams Practices Repositioning Units 12
Slide 13: Increasing Revenues to Grow NOI
Q1-2019 | Increasing Revenues to Grow NOI Same Property Occupancy Driving revenues through increased occupancy Total MHCs 97.8% and rental rates, as well as fewer rental 97.8% incentive offerings. Total Apt 96.5% 97.2% 85.2% Edmonton Q1-2018 Same Property Average Rent 90.7% Region Mar 2019 Mar 2018
Slide 14: Increasing Revenues to Grow NOI: Repositioning
Q1-2019 | Increasing Revenues to Grow NOI Driving revenues through unit repositionings to meet market demand, maximize NOI growth and investment returns. • Seeking higher rent lifts and ROI on each unit turn with an increased focus on unit repositioning. • ~170 Units vs 47 units in 2017 • 14% ROI 20
Slide 15: Spruce Grove, Calgary Suite Repositionings
Q1-2019 | Increasing Revenues to Grow NOI Spruce Grove, Calgary (66 units) | Driving revenues through repositioning units AFTER BEFORE Suite Repositionings • $27k - Average investment per unit • 22% - Average rent lift • 14.1% - Average ROI • $390 Avg monthly increase 15
Slide 16: Managing Expenses to Grow NOI: Energy Project
Q1-2019 | Managing Expenses to Grow NOI Increasing earnings from operations through energy efficiency. Carbon Intensity Five year plan | $25 Million of investments | $10 Million invested (kgCO2e/SF) to date | 5 Year average payback | $5 Million potential savings for a $100 Million increase in NAV at
Slide 17: Waterview, Halifax Energy Savings
Q1-2019 | Managing Expenses to Grow NOI Waterview, Halifax (88 units) • 2016 - Low Flow Toilets Retrofit • 2017 – Fuel Conversion Ph 1 • 2018 – Common Area LED Retrofit Decrease Energy Intensity by 12.4% Payback 4.6 years Annual Annual Dollar Energy Intensity Energy/Water 2015 2018 Consumption S
Slide 18: Brentwood, Halifax Energy Savings
Q1-2019 | Managing Expenses to Grow NOI Brentwood, Halifax (240 units) • 2014/15 – Boiler Room Overhauls • 2016 – Low-flow toilets • 2018 – Common Area LED Retrofit • 2018 – Tenant Air Sealing Decrease Energy Intensity by 19.7% Payback 8.1 years Annual Annual Dollar Energy Intensity Energy/Water
Slide 19: 2019 Planned Energy Efficiency Investments
Q1-2019 | Managing Expenses to Grow NOI 2019 Planned Energy Efficiency Investments ($000's) Pumps $190 2019 Investment Insulation • $5.0 Million $735 • 197 projects • $0.8 Million annual savings • 6 year payback HVAC & Lighting Thermostats $1,121 $2,879 Killam’s $25 million energy efficiency investm
Slide 20: Leading with Technology
Q1-2019 | Leading with Technology Coming in Mobile late 2019 Inspections Rent Mobile Maximizing Work Software Orders Online Online Property Seamless Tenant Online Portal Management Leasing Platform Currently being rolled out and implemented Integrated Enhanced Credit Marketing Screening Analytics Cu
Slide 21: Leveraging Technology
Q1-2019 | Leveraging Technology Investment in CRM (Customer Relationship Management) platform benefits all stakeholders. Employees • Self Service = less data entry Prospect • Focus on the customer Tenants experience • Centralized portal • Ability to seamlessly support leasing across all regions Book
Slide 22: Analytics that Drive Decisions
Q1-2019 | CRM (Customer Relationship Management) Analytics that Drive Decisions Conversion Ratios Average Response Time Traffic By Source Leads By Hour Daily Traffic Trends Email Response Time Average Age of Customer Inquiry Application Conversion by Source Data Entry Traffic by Source Craigslist Go
Slide 23: Acquisitions
Q1-2019 | Acquisitions Annual Acquisitions ($ millions) Average $113M $107* $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 * Killam closed $9.6 million in acquisitions as at May 2,
Slide 24: 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) • 352,448 sf grocery anchored enclosed • 91.4% occupancy • 6.7% yield retail complex • 80% national tenants
Slide 25: Charlottetown Mall Key Tenants
YTD-2019 Acquisitions | Charlottetown Mall Key Tenants GLA % Atlantic Superstore 10.1% Sport Chek 7.1% Cineplex 8.1% H&M 5.4% Winners 7.5% Urban Planet 7.1% Ardene 4.3% Bank of Montreal 1.5% Dollarama 2.9% Vibe Lofts, Edmonton 25
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 Vibe Lofts, Edmonton 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 Vibe Lofts, Edmonton 27
Slide 28: YTD-2019 Acquisitions: Grid 5 & Silver Spear
YTD-2019 Acquisitions | Grid 5 & Silver Spear Description: Acquisition Details: Location: Grid 5 – 50% of 307 units; $69.5 million Calgary, AB Silver Spear – 50% of 199 units 4.2% capitalization rate Mississauga, ON Vibe Lofts, Edmonton 28
Slide 29: Development Success
Q1-2019 | Development Success Approximately $250 million of developments completed. 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS 71 units - St. John’s, NL 63 units - Halifax, NS 102 units - St. John’s, NL 49 units - Charlottetown, PEI 240 unit
Slide 30: New Development Leasing Activity
Q1-2019 | New Development Leasing Activity Strong leasing results |Three most recent developments have exceeded expectations. Saginaw Park – 2018 Leasing Activity The Alexander – Frontier – 2019 2018/2019 Leasing Pre-Leasing Activity 100% 49% 65% 74% 77% 79% 89% Saginaw Park – Cambridge Activity Apr
Slide 31: Development Activity | Ottawa: Frontier Phase One
Q1-2019 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre Key Statistics Number of units 228 Start date Q2-2017 Completion date Q2-2019 Project Budget ($M)* $36.5 Cost per unit $320,000 Expected Yield 5.0% - 5.25% Expected Value Cap-rate 4.0% Average Unit Siz
Slide 32: Development Activity | Ottawa: The Frontier
Q1-2019 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre The Frontier, Ottawa 32
Slide 33: Development Activity | Ottawa: The Frontier
Q1-2019 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre The Frontier, Ottawa 33
Slide 34: Development Activity | Ottawa: Frontier
Q1-2019 | Development Activity | Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre The Frontier, Ottawa frontier 34
Slide 35: Development Activity | Ottawa: Phase Two
Q1-2019 | Development Activity | Ottawa Ottawa, ON - Phase Two of Gloucester City Centre Key Statistics Number of units 208 Start date Q2-2019 Completion date Q4-2021 Project Budget ($M)* $42.2 Cost per unit $406,000 Expected Yield 5.2% Expected Value Cap-rate 4.0% Average Unit Size 803 SF Average R
Slide 36: Development Activity | PEI
Q1-2019 | Development Activity | PEI Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4-2018 Estimated Completion date Q2-2020 Project Budget ($M) $20.8 Cost per unit $267,000 Expected Yield 5.6% Expected Value 4.75-5.0% *Killam’s 50% interest. Green
Slide 37: Development Activity | Mississauga
Q1-2019 | Development Activity | Mississauga Silver Spear development to break ground in early Q2-2019. Key Statistics Green Features: Sub-metered water, Number of units 128 geothermal heating and cooling Start date Q2-2019 Estimated Completion date Q1-2021 Project Budget ($M)(1) $24.5 Cost per unit
Slide 38: Development Pipeline - ~$800 million
Q1-2019 | Development Pipeline - ~$800 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 (1) Mississauga, ON 50% 64 Approved; to break ground Q2-19 2021 We
Slide 39: Appendices
Appendices 39
Slide 40: Performance | Halifax
Q1-2019 | Performance | Halifax The Halifax rental market is strong with overall occupancy at a historic high level of 98.0%. Current Market Conditions Killam’s Same Property Performance • Strong demand as population growth from immigration, intraprovincial migration and demographics continues to Ha
Slide 41: Performance | New Brunswick
Q1-2019 | 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 dema
Slide 42: Performance | Ontario
Q1-2019 | 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 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: Q1-2019 Results Conference Call
Q1-2019 Results Conference Call May 2, 2019 |9AM Eastern
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