Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Q1 2018 Earnings Presentation
32 slides from Killam Apartment Reit's earnings presentation, May 10, 2018
Slide 1: Q1-2018 Results Conference Call
Q1-2018 Results Conference Call May 10, 2018 1pm Eastern Home. F or all.
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”, “estim
Slide 3: Q1-2018 Highlights – Strategic Achievements
Q1-2018 Highlights – Strategic Achievements 2018 Target Q1- 2018 Performance Grow Same Property NOI by 1% to 2% 4.8% Same Property NOI growth. Q1 Update: Target increased to 2%-4% Acquire a minimum of $125 million of assets $124 million of acquisitions in Q1. Q1 Update: Target increased to $150-
Slide 4: Q1-2018 Financial Highlights
Q1-2018 Financial Highlights • Generated FFO per unit of $0.20, up 5.3% from $0.19 in Q1-17. • Produced AFFO per unit of $0.16, up 14.3% from $0.14 in Q1-17. • Increased property revenue 4.0% for the quarter. • Managed operating expense increases to 3.0% for the quarter. • Achieved same property NOI
Slide 5: Q1-2018 Financial Highlights
Q1-2018 Financial Highlights Strong revenue growth to increase same property earnings. • Rising rental rates: Rate increases on renewals (1.5%) and turns (5.0%), averaging 2.2% in Q1-2018. • Strong occupancy: Q1-2018 economic occupancy was amongst Killam’s highest. • Reduced incentives: 30 bps lower
Slide 6: Q1-2018 Financial Highlights
Q1-2018 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 Growth Same Property Expense Change $8 by Category 12.0% 8.
Slide 7: Q1-2018 Financial Highlights
Q1-2018 Financial Highlights Managing balance sheet with conservative leverage. Debt as a Percentage of Assets Interest Coverage Debt to EBITDA Ratio 12.47 55.8% 56.4% 3.13 3.21 11.87 11.66 11.00 10.70 53.5% 50.2% 2.7 48.7% 2.34 2.21 Leverage increased in Q1 due to mortgages Debt to EBITDA increased
Slide 8: Mortgage Maturities ($M)
Q1-2018 Financial Highlights Apartment Mortgage Maturities by Year As at March 31, 2018 Mortgage Maturities Weighted Average Interest Rate (Apartments) Five-year CMHC rate Ten-year CMHC rate $250 6% Current Weighted 5% Average Interest Mortgage Maturities ($M) $200 Rate of 2.91% 3.56% 4% 2.87% 2.53%
Slide 9: Q1-2018 Financial Highlights
Q1-2018 Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction $2.3 $2.5 $1.9 $1.7 $1.8 2014 2015 2016 2017 Q1-2018 Weighted Average Apartment Cap-Rates 5.52% 5.49% 5.37% 5.25% Q4-2015 Q4-2016 Q4-2017 Q1-2018 9
Slide 10: Growing FFO & NAV
Q1-2018 - Growing FFO & NAV Killam’s strategy to maximize value and profitability is focused on three priorities. Increase earnings from Expand the portfolio and Develop high-quality existing portfolio. diversify geographically through properties in core markets. accretive acquisitions, with an emph
Slide 11: Increasing Revenues to Grow NOI
Q1-2018 - Increasing Revenues to Grow NOI Driving revenues through increased occupancy and less rental incentive offerings. Apartment Same Property Occupancy Q1-2018 Q1-2017 % Q1-2018 Q1-2017 Region SP Rent SP Rent Change 97.5% Halifax $1,015 $993 2.2% ↑ Halifax 96.0% Moncton $846 $824 2.7% ↑ 96.6%
Slide 12: Increasing Revenues to Grow NOI
Q1-2018 - Increasing Revenues to Grow NOI Driving revenues through rental increases. For the three months ended March 31, 2018 2017 Change (bps) Upon unit turn 5.0% 2.0% 300 bps • 27 repositioned units in Q1-2018 vs. 9 repositioned units in Q1-2017. • Stronger market fundamentals enables Killam to r
Slide 13: Increasing Revenues to Grow NOI
Q1-2018 - Increasing Revenues to Grow NOI Accelerating capital investment in suites to maximum NOI growth and investment returns. • Investing an additional $2 million in suite repositioning program in 2018. • Capitalizing on high rental demand in many core market. • Targeting rental lifts of 15% to
Slide 14: Repositioning Units – Spruce Grove, Calgary
Q1-2018 - Increasing Revenues to Grow NOI Driving revenues through repositioning units – Spruce Grove, Calgary • Purchased in January 2017; 66 units • 9 repositioned units • $27k - Average investment per unit • 22% - Average rent lift • 14.1% - Average ROI • $750k - Increased asset value Spruce Grov
Slide 15: Repositioning Units – Garden Park, Halifax
Q1-2018 - Increasing Revenues to Grow NOI Driving revenues through repositioning units – Garden Park, Halifax • 75 repositioned units • $23k - Average investment per unit • 21% - Average rent lift • 12% - Average ROI • $3.6 million - Increased asset value Garden Park, Halifax BEF ORE AF TER 15
Slide 16: Managing Expenses to Grow NOI
Q1-2018 - Managing Expenses to Grow NOI Accelerating Killam’s 5-year, $25 million energy efficiency plan • Killam has invested $6 million to date in efficiency projects, including 8,300 low- flow toilets installs, boiler upgrades and lighting retrofits. • Original 2018 plan of $3.5 million – increas
Slide 17: Performance - Halifax
Q1-2018 Performance - Halifax The Halifax rental market is strong with overall vacancy at its lowest level since 2003. Current Market Conditions Strong demand due to population growth from Q1-2018 • immigration, intraprovincial migration and demographics. Increasing supply with higher than average s
Slide 18: Performance – New Brunswick
Q1-2018 Performance – New Brunswick Population growth coupled with limited construction has resulted in the lowest vacancy since 2009. Current Market Conditions Emigration has slowed with an improving economy, • increasing population growth and rental demand. Q1-2018 • Fewer apartment starts in rece
Slide 19: Performance – Ontario
Q1-2018 Performance – Ontario Strong rental market driven by robust job market, international immigration and high housing prices. Current Market Conditions Strong economic growth. Q1-2018 • • Rising population due to immigration and intra-provincial migration. Affordability of homeownership is driv
Slide 20: Q1-2018 Acquisition & Development Activity
Q1-2018 Acquisition & Development Activity Purchase Price ($ millions) Income Properties Ownership Producing Under Property City Units Interest Properties Construction The Killick Halifax, NS 110 100% $33.0 4th Avenue Lands Calgary, AB 40% $7.2 Weber Scott Pearl Kitchener, ON 100% 1.2 $4.8 Westmount
Slide 21: Acquisitions – Killick, Halifax
Q1-2018 Acquisitions – Killick, Halifax Description: 110 units & 4,500 sf of commercial space Avg rent of $1,810/month; Occupancy 97% Location: 49 King’s Wharf, Dartmouth Acquisition Details: $33.0 million ($290,000/unit) 5.0% capitalization rate Killick, Halifax 21
Slide 22: Acquisitions – Westmount Place, Waterloo
Q1-2018 Acquisitions – Westmount Place, Waterloo Description: Commercial/Office Details: Acquisition Details: 14.7 acre existing commercial site 8 year average lease term $77.8 million 189,000 sf office tower 96% occupancy 5.7% yield 87,000 sf grocery anchored retail plaza 84% national tenants 21,00
Slide 23: Acquisitions – Westmount Place, Waterloo
Q1-2018 Acquisitions – Westmount Place, Waterloo 23
Slide 24: Acquisitions – Westmount Place, Waterloo: Future Development
Q1-2018 Acquisitions – Westmount Place, Waterloo Future Development Development Opportunity: • 560 units • 3-phase development • Construction expected to begin in late 2019/early 2020 • Opportunity to create over $70 million of unitholder value through the development of 560 units Future Development
Slide 25: Acquisitions – Central Calgary
Q1-2018 Acquisitions – Central Calgary Future Development Description: 32,548 sf development site located adjacent Grid 5 and another site purchased in 2015 Grid 5 Combined expected to support three towers totalling 970 units Location: 5th Street Southwest and 4th Avenue Southwest Adjacent Grid 5 Pr
Slide 26: Acquisitions – Weber Scott Pearl, Kitchener
Q1-2018 Acquisitions – Weber Scott Pearl, Kitchener Future Development Description: Location: 1.8 acre development site including a small Downtown Kitchener commercial building and a heritage residence Acquisition Details: Opportunity to develop a 163-unit apartment $6.0 million building Commercial
Slide 27: Development Activity – Saginaw Park
Q1-2018 – Development Activity Cambridge, ON - Saginaw Park is complete. Key Statistics Number of units 93 Start date Q3-2016 Completion date April-2018 Project Budget ($ millions) $25.5 Cost per unit ($ thousands) $274,000 Market Cap Rate 4.0% F air Value on Completion $34 Value Creation ($ million
Slide 28: Development Activity – The Alexander
Q1-2018 – Development Activity Halifax, NS - The Alexander to be completed in Sept 2018. Key Statistics Number of units/ 240 units/ Commercial square feet (SF ) 6,350 SF Start date 2016 Completion date Q3-2018 Project Budget ($ millions)* $39.75 Cost per unit ($ thousands) $320,000 Market Cap Rate 4
Slide 29: Development Activity – Frontier, Ottawa
Q1-2018 – Development Activity Ottawa, ON - Frontier, Phase One. Key Statistics Number of units 227 Start date 2017 Completion date Q2-2019 Project Budget ($ millions)* $36.5 Cost per unit ($ thousands) $320,000 Market Cap Rate 4.0% F air Value on Completion* $43.2 Value Creation ($ millions)* $6.7
Slide 30: Development Activity – Silver Spear
Q1-2018 – Development Activity Silver Spear development to break ground in Q4-2018. Key Statistics Number of units 128 Start date Q4-2018 Estimated Completion date Q4-2020 Project Budget ($ millions)* $22.75 Cost per unit ($ thousands) $356,000 Expected yield 5.4% F air Value on Completion $28.5 ($m
Slide 31: Development Pipeline
Q1-2018 – Development Pipeline Killam has a $760 million development pipeline. Future Development Opportunities Property City Units Weber Scott Pearl Kitchener, ON 163 Gloucester City Centre (Phase 2-4)* Ottawa, ON 283 Grid 5 Land* Calgary, AB 388 Westmount Place Waterloo, ON 560 The Governor Halifa
Slide 32: Investor Q1-2018 Presentation
Investor Q1-2018 Presentation Results January 2018Call Conference
Killam Apartment REIT — Q1 2018 Earnings Presentation on 6ix