Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Q3 2018 Earnings Presentation
46 slides from Killam Apartment Reit's earnings presentation, Nov 8, 2018
Slide 1: Q3-2018 Results Conference Call
Q3‐2018 Results Conference Call November 8, 2018 10AM 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”, “estima
Slide 3: Q3-2018 Highlights
Q3‐2018 | Highlights Apartment Debt to Occupancy of 3.9% in Normalized 97.1% Same EBITDA of 10.4x Property Growth 4.0% FFO per unit Growth Debt to Total Assets of 2.5% Average $15M in 49.1% Increase in Fair Value Same Property Gains Rents 50 bps improvement in AFFO Payout Ratio 3.16x Interest SP NOI
Slide 4: Q3-2018 Strategic Achievements
Q3‐2018 | Strategic Achievements 2018 Target YTD 2018 Performance Grow Same Property NOI by 1% to 2% 4.9% Same Property NOI growth in the first nine months of 2018. REVISED: 3% to 5% Acquire a minimum of $125M of assets $226.4 million of assets purchased during the first nine months of 2018. Addi
Slide 5: Financial Highlights
Q3‐2018 | Financial Highlights Q3 FFO & AFFO Per Unit • Q3‐2018 ‐ FFO per YTD FFO & AFFO Per Unit unit up 4.0% & AFFO Q3‐2017 Q3‐2018 YTD‐2017 YTD‐2018 per unit up 4.8% • YTD‐2018 – FFO per unit up 6.0% & AFFO $0.25 $0.26 $0.21 $0.22 $0.67 $0.71 $0.53 $0.58 per unit up 9.4% FFO AFFO FFO AFFO Same Pr
Slide 6: Financial Highlights
Q3‐2018 | Financial Highlights Strong revenue growth to increase same property earnings. • Rising rental rates: Rate increases on renewals of 1.7% and turns of 5.0%, averaged 2.5% in Q3‐2018. • Strong occupancy: Both Q3‐2018 and Q3‐2017 amongst Killam’s highest quarters. • Reduced incentives: 30 bps
Slide 7: Financial Highlights
Q3‐2018 | Financial Highlights Managing expenses to increase same property earnings. • Investing in energy and water conservation initiatives. • Maximizing economies of scale. • Appealing rising property tax assessments. Same Property Expense Q3‐2018 Same Property Change by Category ($M) Expense Gro
Slide 8: Financial Highlights
Q3‐2018 | Financial Highlights Managing balance sheet with conservative leverage. Debt as a Percentage of Interest Coverage Debt to EBITDA Assets Ratio 2014 55.8% 2015 56.4% 2016 53.5% 2017 48.7% Q3‐2018 49.1% 2014 12.47 2015 11.87 2016 11.00 2017 10.70 Q3‐2018 11.39 2.70 2014 2.21 2015 2.34 2017 3.
Slide 9: Apartment Mortgage Maturities by Year
Q3‐2018 | Financial Highlights Apartment Mortgage Maturities by Year As at September 30, 2018 Mortgage Maturities Weighted Average Interest Rate (Apartments) Five‐year CMHC rate Ten‐year CMHC rate $250 6% Current Mortgage Maturities ($M) $200 5% Weighted 4.57% Average 4% Interest Rate $150 Interest
Slide 10: Financial Highlights
Q3‐2018 | Financial Highlights Increasing value of investment properties. Investment Properties ($ billions) Investment Properties under Construction Investment Properties $1.7 $1.8 $1.9 $2.3 $2.7 2014 2015 2016 2017 Q3‐2018 Weighted Average Apartment Cap‐Rates 5.52% 5.49% 5.37% 5.19% Q4‐15 Q4‐16 Q4
Slide 11: Growing FFO & NAV
Q3‐2018 | 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 acquisitions. 11
Slide 12: Increase Value in Existing Portfolio
Q3‐2018 | Increase Value in Existing Portfolio • Advancing Technology & Analytics • Providing Superior Customer Service • Driving Expense Management Practices • Repositioning Units • Enhancing Other Revenue Streams • Maximizing Rents on Renewals • Investing in Energy Efficiencies $ $ Increase FFO In
Slide 13: Increasing Revenues to Grow NOI
Q3‐2018 | Increasing Revenues to Grow NOI Driving revenues through increased occupancy and rental rates, as well as fewer rental incentive offerings. Q3‐2018 Q3‐2017 Region SP Rent SP Rent % Change Halifax $1,035 $1,007 2.8% ↑ Ontario $1,370 $1,334 2.7% ↑ Moncton $862 $839 2.7% ↑ Fredericton $956 $9
Slide 14: Increasing Revenues to Grow NOI
Q3‐2018 | 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 YTD 2018 2018 Target 2019 Target Opportunity • 134 Units vs 24 • 200 Unit • 300 Uni
Slide 15: Increasing Revenues to Grow NOI
Q3‐2018 | Increasing Revenues to Grow NOI Accelerating capital investment in suites to maximum NOI growth and investment returns. YTD 2018 134 units | $2.9M investment | ↑$0.4M NOI Rivers Edge, Fort Howe, Saint Cambridge Brentwood, Halifax Lorentz, Moncton John Harlington, Silver Spear, Torbay, St.
Slide 16: Rivers Edge, Cambridge
Q3‐2018 | Increasing Revenues to Grow NOI Rivers Edge, Cambridge (225 units) | Driving revenues through repositioning units $600k Increased Targeted Asset 14% Avg Value 23 ROI repositioned units AFTER targeted in 2018/19 $13K Avg Investment 9% Avg Rent Lift $150 Avg Monthly Increase BEFORE 16
Slide 17: Brentwood, Halifax
Q3‐2018 | Increasing Revenues to Grow NOI Brentwood, Halifax (240 units)| Driving revenues through repositioning units $1.4M Increased Targeted Asset 15% Avg Value 29 ROI AFTER repositioned units targeted in 2018/19 $18K Avg Investment 26% Avg Rent Lift $220 Avg Monthly Increase 17 BEFORE
Slide 18: Fort Howe, Saint John
Q3‐2018 | Increasing Revenues to Grow NOI Fort Howe, Saint John (153 units) | Driving revenues through repositioning units $1.1M Increased Targeted Asset 10% Avg Value 20 ROI repositioned AFTER units targeted in 2018/19 $32K Avg Investment 32% Avg Rent Lift $275 Avg Monthly Increase 18 BEFORE
Slide 19: Torbay, St. John's, NL
Q3‐2018 | Increasing Revenues to Grow NOI Torbay, St. John’s, NL (84 units) | Driving revenues through repositioning units $520k Increased Targeted Asset 12% Avg Value 20 ROI repositioned AFTER units targeted in 2018/19 $25K Avg Investment 28% Avg Rent Lift $255 Avg Monthly Increase 19 BEFORE
Slide 20: Parker, Halifax
Q3‐2018 | Increasing Revenues to Grow NOI Parker, Halifax (239 units)| Driving revenues through repositioning units $0.4M Increased Targeted Asset 13% Avg Value AFTER 16 ROI repositioned units targeted in 2018/19 BEFORE $21K Avg Investment 24% Avg Rent Lift $220 Avg Monthly Increase 20
Slide 21: Managing Expenses to Grow NOI
Q3‐2018 | Managing Expenses to Grow NOI Accelerating Killam’s 5‐year, $25 million energy efficiency plan • Killam has invested $10 million to date in efficiency projects, including 9,100 low‐ flow toilets installs, boiler upgrades and lighting retrofits. • Original 2018 plan of $3.5 million – increa
Slide 22: Leading with Technology
Q3‐2018 | Leading with Technology Mobile Coming in Inspections 2019 Rent Mobile Work Maximizing Orders Software Online Online Property Seamless Tenant Online Portal Management Leasing Platform Coming in early 2019 Integrated Enhanced Credit Marketing Screening Analytics Coming in Customer Coming in
Slide 23: Performance | Halifax
Q3‐2018 | Performance | Halifax The Halifax rental market is strong with overall YTD vacancy at its lowest level since 2003. Current Market Conditions Killam’s Same Property Performance • Strong demand fueled by population growth ‐ immigration, intraprovincial migration and demographics. Halifax • I
Slide 24: Performance | New Brunswick
Q3‐2018 | Performance | New Brunswick Population growth coupled with limited construction has resulted in the lowest vacancy since 2009. Current Market Conditions Killam’s Same Property Performance • Emigration has slowed with an improving economy, increasing population growth and rental demand. New
Slide 25: Performance | Ontario
Q3‐2018 | Performance | Ontario Strong rental market driven by robust job market, international immigration and high housing prices. Current Market Conditions Killam’s Same Property Performance • Strong economic growth. • Rising population due to immigration and intra‐provincial Ontario migration. •
Slide 26: Largest Acquisition Year in History
Q3‐2018 | Largest Acquisition Year in History Annual Acquisitions ($ millions) Average $111M $167 $200 $103 $125 $115 $106 $121 $160 $200 $271 $16 $45 $36 $85 $54 $72 $3 YTD 2018 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NOI Generated Outside Atlantic Canada 15%
Slide 27: Acquisition Activity
Q3‐2018 | Acquisition Activity Property Region Property Type Month Total Atlantic Ontario & Canada Alberta The Killick Halifax, NS Apartment February $33,000 $33,000 4th Ave Land Calgary, AB Development land February 7,200 $7,200 Weber Scott Pearl Kitchener, ON Development land March 6,000 6,000 Ret
Slide 28: Acquisitions | Vibe Lofts | Edmonton
Q3‐2018 Acquisitions | Vibe Lofts | Edmonton Description: Acquisition Details: • 178 units • $47.0 million ($264,000/unit) • Average rent of $1,444/month ($2.35 per square foot); • 4.65% stabilized yield • Construction completed in September 2017 • Occupancy: On purchase ‐ 78%; Current – 87% Locatio
Slide 29: Acquisitions | Vibe Lofts | Edmonton
Q3‐2018 Acquisitions | Vibe Lofts | Edmonton 29
Slide 30: Acquisitions | Harley Street | PEI
Q3‐2018 Acquisitions | Harley Street | PEI Description: • 107 units with average rent of $1,505/month • 100% occupancy • Built in 2015‐2018 • Charlottetown, PEI Acquisition Details: • Purchase price of $22.4 million ($209,000/Unit) • 5.3% yield 30
Slide 31: Acquisitions | Harley Street | PEI
Q3‐2018 Acquisitions | Harley Street | PEI 31
Slide 32: Acquisitions | Greenbank | Ottawa
Q3‐2018 Acquisitions | 151 Greenbank | Ottawa Description: Acquisition Details: Location: 60 units $20.7 million ($345,000/unit) Ottawa, ON Average rent – $1,729/month ($2.24/sf) 4.6% capitalization rate Current occupancy – 95% Vibe Lofts, Edmonton 32
Slide 33: Acquisitions | Treo | Calgary
Q3‐2018 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% Vibe Lofts, Edmonton 33
Slide 34: Development Activity | Cambridge
Q3‐2018 | Development Activity | Cambridge Cambridge, ON ‐ Saginaw Park completed April 2018 and 100% leased. Key Statistics Number of units 94 units Start date Q3‐2016 Completion date April‐2018 Cost $25.5M Expected Yield 5.4% Expected Value Cap‐rate 4.0% Average Unit Size 1,025 SF Average Rent $1,
Slide 35: Development Activity | Cambridge
Q3‐2018 | Development Activity | Cambridge Cambridge, ON ‐ Saginaw Park completed April 2018 and 100% leased. Unique design features include: • Sub‐metered water Saginaw Park – 2018 Leasing Activity • Smart locks controlled by smartphones October 100% April 49% May 65% June 74% July 77% August 79% S
Slide 36: Development Activity | Halifax
Q3‐2018 | Development Activity | Halifax Halifax, NS ‐ The Alexander was substantially complete October 1, 2018. Key Statistics Number of units/commercial (SF) 240 units/ 6,350 SF Start date 2016 Completion date October‐2018 Project Budget ($M)* $41.6 Expected Yield 4.50% Expected Value Cap‐rate 4.2
Slide 37: Development Activity | Halifax
Q3‐2018 | Development Activity | Halifax Halifax, NS ‐ The Alexander was substantially complete October 1, 2018. View from The Alexander, Halifax 37
Slide 38: Development Activity | Ottawa
Q3‐2018 | Development Activity | Ottawa Ottawa, ON ‐ Frontier, Phase One of Gloucester City Centre Key Statistics Number of units 228 Start date Q2‐2017 Completion date Q2‐2019 Project Budget ($M)* $36.5 Cost per unit $320,000 Expected Yield 5.0% Expected Value Cap‐rate 4.0% Average Unit Size 789 SF
Slide 39: Development Activity | Ottawa
Q3‐2018 | Development Activity | Ottawa Ottawa, ON – Gloucester City Centre, Phase Two Phase Two, ~200 units 39
Slide 40: Development Activity | PEI
Q3‐2018 | Development Activity | PEI Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4‐2018 Estimated Completion date Q2‐2020 Project Budget ($M) $20.8 Cost per unit $267,000 Expected Yield 5.6% Expected Value ~5.0% *Killam’s 50% interest. Shorefron
Slide 41: Development Activity | Mississauga
Q3‐2018 | Development Activity | Mississauga Silver Spear development to break ground in early Q1‐2019. Key Statistics Number of units 128 Start date Q1‐2019 Estimated Completion date Q1‐2021 Project Budget ($M)* $24.5 Cost per unit $383,000 Expected Yield 5.0% Expected Value Cap‐rate 3.5% *Killam’s
Slide 42: Development Activity | Kitchener
Q3‐2018 | Development Activity | Kitchener Weber Scott Pearl development to break ground in 2019. Description: 1.8 acre development site including a small Commercial commercial building and a heritage residence Building Future development Opportunity to develop a 173‐unit apartment building Location
Slide 43: Development Activity | Waterloo
Q3‐2018 | Development Activity | Waterloo Expanding the Westmount development opportunity to 800 units. 192‐196 Erb Street: • 16,500 square foot development site • $2.3 million 192‐196 15 Dietz Erb • Purchased on August 10, 2018 15 Dietz Avenue: • 8‐unit apartment on 0.86 acres • Adjacent to Killam’
Slide 44: Development Activity | Waterloo
Q3‐2018 | Development Activity | Waterloo Expanding the Westmount development opportunity to 800 units. 15 Dietz Building B Shorefront Development 44
Slide 45: Development Pipeline - ~$850 million
Q3‐2018 | Development Pipeline ‐ ~$850 million Future Development Opportunities Killam Potential # Est Year of Property Location Interest of Units Status Completion Carlton Terrace, Halifax Developments expected to start in the next 24 months Shorefront Charlottetown 100% 78 Approved; broke ground O
Slide 46: Investor Q3-2018 Presentation
Investor Q3‐2018 Presentation Results January 2018 Conference Call
Killam Apartment REIT — Q3 2018 Earnings Presentation on 6ix