Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Investor Presentation (January 2020)
72 slides from Killam Apartment Reit's investor presentation, January 2020
Slide 1: Investor Presentation | January 2020
Investor Presentation | January 2020
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: Best-in-class multi-family residential owner, operator and developer
Best-in-class multi-family residential owner, operator and developer Killam's portfolio includes ~$3.2 billion in real estate assets, comprised of 16,486 apartment units, 5,786 manufactured home community (MHC) sites and 0.8 million square feet of commercial space. NOI by Sector 6% 5% Apartments MHC
Slide 4: Portfolio Details
Portfolio Details Apartment Portfolio% Manufactured Home Community Portfolio Number of % of Total Number of % of Total Units Properties NOI(1) Sites Communities NOI(1) Nova Scotia Nova Scotia 2,749 17 3.1% Halifax 5,753 63 35.3% Ontario 2,284 17 4.0% Sydney 139 2 0.9% New Brunswick(2) 583 2 0.2% 5,8
Slide 5: Proven Record of Strong Growth
Proven Record of Strong Growth Net Operating Income FFO & Distribution Per Unit AFFO Payout Ratio1 $140 FFO Per Unit Distribution 140% $130 $120 120% $0.90 $110 100% Millions $100 $0.80 80% $90 $0.70 60% $80 $0.60 40% $70 $0.72 $0.79 $0.86 $0.90 $0.94 124% 106% $105 $115 $136 0.60 0.60 0.60 0.62 0.6
Slide 6: Why Invest in Killam
Why Invest in Killam Solid Operating Performance Growing the portfolio and expanding geographically with accretive acquisitions, growing FFO, AFFO and NAV per unit. High Quality Portfolio One of Canada’s highest-quality and youngest apartment portfolios with 33% of NOI generated from apartments buil
Slide 7: 2019 Year-to-date Achievements
2019 | Year-to-date Achievements 2019 Target Q1 - Q3 2019 Performance Same Property NOI Growth of 3% to 4.1% Same Property NOI growth. 5%. Grow the portfolio to over $3.0 billion $190 million of assets purchased in 2019 and recorded $134 by the end of 2019, with a minimum million Q3 YTD-2019 in
Slide 8: Accretive Capital Allocation
Accretive Capital Allocation Development JV Investment Acquisitions Invest in developing high-quality energy Invest in joint development opportunities Acquire high-quality multi-residential efficient assets. to maximize growth potential. assets. Intensification NOI Enhancing Cap Ex Dispositions Inte
Slide 9: Clearly Defined Strategy to Grow FFO & NAV
Clearly Defined Strategy to Grow FFO & NAV Killam’s strategy to increase FFO, NAV and maximize value is focused on three priorities: 1. Increase earnings from existing portfolio. 2. Expand the portfolio and diversify geographically through accretive acquisitions, targeting newer properties. 3. Devel
Slide 10: Roadmap to Same Property NOI Growth
1. Increasing earnings from existing portfolio. Roadmap to Same Property NOI Growth Revenue Optimization Expense Management Energy Efficiencies Leading in Technology • Focused economics of • Energy and water • Data driven decisions • Data driven decisions scale strategies projects ↓ CO2 on revenue o
Slide 11: Increasing earnings from existing portfolio: occupancy and rents
1. Increasing earnings from existing portfolio. • Strong occupancy • 2018 occupancy was Killam’s highest, • YTD 2019 occupancy is 50 bps higher than YTD-2018. • Rising rental rates • Rate increases on renewals (2.1%), regular turns (5.7%) and repositioned turns (28.9%) averaged 3.4% in Q3-2019, up f
Slide 12: Same Property Rental Increases
1. Increasing earnings from existing portfolio. With continued high occupancy levels, increasing rental rates is a key focus for revenue optimization. Same Property Rental Increases (%) 5.6% 5.7% 5.3% 5.0% 5.1% 4.9% 4.6% 3.4% 3.2% 2.9% 3.3% 3.4% 3.4% 2.7% 2.5% 2.4% 2.2% 2.0% 2.0% 2.1% 1.9% 1.6% 1.7%
Slide 13: Unit repositioning program
1. Increasing earnings from existing portfolio. 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 Annual
Slide 14: Expense management
14 1. Increasing earnings from existing portfolio. Increasing earnings from existing operations through expense management. • Energy conservation initiatives • Economies of scale – Negotiating lower pricing for goods and services. • Employee training – Focusing on front-line repairs and maintenance
Slide 15: Energy Project Budget
1. Increasing earnings from existing portfolio. Increasing earnings from operations through energy efficiency. Five year plan | $25 Million of investments | $11 Million invested to date | 5 Year average payback | $5 Million potential savings for a $100 Million increase in NAV at 5.0% cap rate. Five
Slide 16: Technology platform
1. Increasing earnings from existing portfolio. Mobile Inspections Online Tenant Mobile Work Portal Orders Online Property Management Integrated Credit Platform Online Leasing Screening Customer Marketing Relationship Management Analytics Next Priorities: • Implementing rent optimization software •
Slide 17: Expand Portfolio Through Accretive Acquisitions
2. Expand Portfolio Through Accretive Acquisitions Expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties. Annual Acquisitions ($ millions) Average $117M $190 $115 $106 $121 $160 $200 $315 $167 $200 $103 $125 $85 $54 $72 $16 $45 $
Slide 18: 2020 Acquisitions | Christie Point
2020 Acquisitions | Christie Point Description: Acquisition Details: Location: 161 units $54 million Victoria, BC 5 two-storey apartment buildings and 4 two-storey 4.1% capitalization rate townhouses with 2 and 3 bedroom units 99% occupied Average rent – $1,555/month ($1.67/sf) Closed: January 15, 2
Slide 19: 2019 Acquisitions
2019 Acquisitions Purchase Price(1) ($M) Property Location Acquisition Ownership Property Type Income- Land for Date Interest (%) Producing Development Properties ($M) ($M) 1 9 Dietz Waterloo, ON Jan 15, 2019 100% Dev Land $- $1,500 2 11 Harold Doherty Fredericton, NB Apr 18, 2019 100% Apartment 8,1
Slide 20: Develop High Quality Properties
3. Develop High Quality Properties Developing high-quality properties in core markets. • Over $400 million (1,500 units) of developments completed or underway. • Experienced in-house architect and engineers. • Development pipeline of approximately 2,200 units. Developments Completed and Underway $mi
Slide 21: Develop High-Quality Properties
3. Develop High-Quality Properties Approximately $300 million of developments completed. 101 units - Fredericton, NB 122 units - Cambridge, ON 94 units - Cambridge, ON 70 units - Halifax, NS Projects Completed 2013 – 2019 Value today - $348M Cost to build - 278M Gain - $70M (25%) 47 units - Charlott
Slide 22: Development Activity | PEI
Development Activity | PEI Shorefront development broke ground in October 2018. Key Statistics Number of units 78 Start date Q4-2018 Estimated Completion date Q2-2020 Project Budget ($M) $22.0 Cost per unit $282,000 Expected Yield 5.6% Expected Value 4.75-5.0% *Killam’s 50% interest. Green Features:
Slide 23: Development Activity | Mississauga
Development Activity | Mississauga The Kay development broke ground in Q3-2019. Key Statistics Green Features: Sub-metered water, Number of units 128 geothermal heating and cooling Start date Q3-2019 Estimated Completion date Q2-2021 Project Budget ($M) $56.0 Cost per unit $437,500 Expected Yield 5.
Slide 24: Development Activity | Ottawa
Development Activity | Ottawa Latitude (Phase II of Gloucester City Centre) Frontier (Phase I) Latitude (Phase II) Key Statistics Number of units 209 Start date Q2-2019 Est. Completion date Q4-2021 Project Budget ($M)* $43.5 Cost per unit $416,000 Expected Yield 5.2% Expected Value Cap-rate 4.0% Ave
Slide 25: Development Activity | Charlottetown
Development Activity | Charlottetown 10 Harley Street – 38-unit redevelopment in Charlottetown. Key Statistics Number of units 38 Latitude (Phase II) Start date Q3-2019 Estimated Completion date Q4-2020 Project Budget ($M) $10.0 Cost per unit $263,000 Expected Yield 5.4% Expected Value 4.75-5.0% 5 H
Slide 26: Future Development | Kitchener
Future Development | Kitchener Weber Scott Pearl Description: 1.8 acre development site including a small commercial building and a heritage residence Opportunity to develop a 163-unit apartment building Commercial Location: Downtown Kitchener Building Future development Acquisition Details: $6.0 mi
Slide 27: Future Development | Waterloo
27 2018 Acquisitions/ Future Development Future Development Westmount Place, Waterloo | Waterloo Westmount Place Development Opportunity: • ~1000 units • 3-phase development • Construction expected to begin in early 2020 • Opportunity to create over $70 million of unitholder value through the develo
Slide 28: Development Pipeline - ~$700 million
Development Pipeline - ~$700 million Future Development Opportunities Killam Potential # Est Year of Property Location Interest of Units Status Completion Developments expected to start in the next 24 months The Governor Halifax, NS 100% 12 In design and approval process 2021 Nolan Hill Calgary, AB
Slide 29: High-Quality Portfolio
High-Quality Portfolio Killam operates one of Canada’s newest apartment portfolios. • 33% of apartment NOI is earned from properties built in the last 10 years. • Modern, high‐quality buildings are in greater demand and require less maintenance capital to operate. Apartment NOI by Year of Average Ca
Slide 30: Strong Balance Sheet, Increased Flexibility
Strong Balance Sheet, Increased Flexibility Killam is managing its balance sheet with conservative leverage. Debt as a % of Total Assets Interest Coverage Debt to Normalized Ratio EBITDA 55.8% 56.4% 53.5% 48.7% 49.8% 47.2% 10.37 10.63 10.51 10.50 10.62 10.47 2.21 2.34 2.70 3.13 3.22 3.19 • Killam ha
Slide 31: Mortgage Maturities ($M)
Interest Expense Savings Current Weighted Currently expect to refinance mortgage maturities at similar Average Interest Rate interest rates in 2019 & 2020. of 2.91% Apartment Mortgage Maturities by Year 84% of Apartment As at September 30, 2019 Mortgages CMHC Insured Mortgage Maturities Weighted Ave
Slide 32: Appendices
| Killam APARTMENT REIT Appendices 32
Slide 33: 2018 & YTD-2019 Performance
2018 & YTD-2019 Performance 33
Slide 34: Strong YTD-2019 Results
Strong YTD-2019 Results FFO and AFFO per unit growth from same property NOI growth, interest savings, accretive acquisitions and developments. Same Property YTD FFO & AFFO YTD Operating Margin Consolidated NOI Per Unit Expansion Growth For the nine months Operating Margin For the nine months ended S
Slide 35: 2018 & YTD-2019 Performance
2018 & YTD-2019 Performance 2018 Same Property 2018 Results by Market Performance Revenue Growth NOI Growth 5.1% 3.6% 4.8% 0.9% 10.2% 0.7% (0.3%) 1.6% 3.7% 4.1% 3.8% 5.4% 5.1% 4.7% 5.7% 5.7% 8.6% 2.7% 4.7% 4.0% 2.4% Revenue Expense NOI 15% YTD 2019 Results by Market YTD 2019 Same Property Revenue Gr
Slide 36: Core Market Update
| Killam APARTMENT REIT Core Market Update 36
Slide 37: Halifax – 40% of NOI
Halifax – 40% of NOI The Halifax rental market is strong with occupancy at a historic high level of ~99% for 2019. Current Market Conditions CMHC Market Stats1 • Strong demand as population growth from immigration, Halifax Vacancy intraprovincial migration and demographics continues to per CMHC 50,7
Slide 38: Halifax – 40% of NOI
Halifax – 40% of NOI New supply has been absorbed by population growth from immigration, migration and demographics. Halifax Housing Starts - Apt & Single Halifax Housing Starts & Vacancy Trend Total Singles/Semi-Detached/Row Total Apartments/Condos Total Starts Vacancy Average Total Starts 4,000 4,
Slide 39: Halifax – 40% of NOI
Halifax – 40% of NOI From January 2016 – June 2019, more than 18,000 new permanent residents have settled in Halifax. Halifax Population Growth Halifax Total Population Annually from July 1 – June 30 10,000 480,000 9,000 460,000 8,000 7,000 440,000 6,000 420,000 5,000 4,000 400,000 3,000 380,000 2,0
Slide 40: New Brunswick – 19% of NOI
New Brunswick – 19% of NOI Population growth coupled with limited construction has resulted in 18-year high occupancy of ~98% for 2018 & YTD-2019. Current Market Conditions CMHC Rental Stats1 NB Vacancy 35,888 Rental Units • Population growth from increased interprovincial per CMHC 2.6% Vacancy and
Slide 41: Ontario – 24% of NOI
Ontario – 24% of NOI Strong rental market driven by robust job market, international immigration and high housing prices. CMHC Rental Stats1 Current Market Conditions Ottawa (6.2% of NOI) 1.8% vacancy in 2019 Ontario Vacancy 1.6% vacancy in 2018 • Strong economic growth. per CMHC London (3.6% of NOI
Slide 42: St. John’s & Charlottetown, 5% & 6% of NOI
St. John’s & Charlottetown, 5% & 6% of NOI St. John’s – Slow recovery of economic conditions as highly dependant on major oil investments. Market Fundamentals St. John’s Same St. John’s Vacancy per CMHC1 Property Revenue • Uptick in vacancy in 2019 after a couple years of Growth decreasing vacancy r
Slide 43: ESG Initiatives
| Killam APARTMENT REIT ESG Initiatives 43
Slide 44: Our Commitment to Sustainability
Our Commitment to Sustainability As one of Canada’s largest residential landlords, we take the responsibilities of corporate citizenship seriously. Our core values of Build Community and Do the Right Thing guide our commitment to Environmental, Social and Governance (ESG) programs and initiatives. N
Slide 45: Killam’s Green Future
Killam’s Green Future As Killam continues to grow, we challenge ourselves to ensure our impact on the environment is minimized and our buildings are more sustainable and resilient to climate change. • Since 2015, installed • Seven properties (and all • Committed to geothermal 9,100 low-flow toilet d
Slide 46: Contributing to Our Community
Contributing to Our Community Community Involvement Committee monitors all Killam’s community involvement and charitable efforts on an ongoing basis. Below are Killam’s key ongoing community initiatives: Donate nine fully furnished Partner with non-profit units to hospitals across our housing agenci
Slide 47: Our Customer Service
Our Customer Service Killam provides outstanding customer service and fosters community at its properties. Satisfaction with Killam as a Landlord Killam surveys residents to measure its 89% 90% 90% 90% 88% 88% success in meeting expectations and to National Average identify areas for improvement. 75
Slide 48: The Right People
The Right People Killam’s success is due to the hard work and dedication of our people. Killam is an equal opportunity employer. Killam is committed to providing a supportive and inclusive workplace for all employees. Killam recognizes the benefits which arise from employee diversity, including
Slide 49: Leading with Strong Governance
Leading with Strong Governance The commitment to sound governance practices is in the best interest of the Trust and its unitholders and contributes to effective and efficient decision making. The Board carries out its responsibilities with the support of several Board committees. Independence C
Slide 50: 2019 Completed Developments
2019 Completed Developments 50
Slide 51: Development Activity | Ottawa
Development Activity | Ottawa Ottawa, ON - Frontier, Phase I 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 geotherm
Slide 52: Development Activity | Ottawa
Development Activity | Ottawa Ottawa, ON - Frontier, Phase I of Gloucester City Centre Frontier Leasing Activity 15% 26% 36% 44% 55% 62% 72% 78% 83% 89% 92% 95% Feb-19 Mar-19 Apr-19 Jan-19 Jul-19 Nov-19 Aug-19 Dec-19 May-19 Sept-19 Oct-19 Jun-19 52
Slide 53: Development Activity | Ottawa
Development Activity | Ottawa Phase II (Latitude) is actively underway with $9.1 million invested to-date. Frontier (Phase I) * Killam’s 50% interest. 53
Slide 54: Repositioning Program
| Killam APARTMENT REIT Repositioning Program 54
Slide 55: Spruce Grove, Calgary repositioning
1. Increasing earnings from existing portfolio. Spruce Grove, Calgary (66 units) | Driving revenues through repositioning units Suite Repositionings • $27k - Average investment per unit • 22% - Average rent lift • 14.1% - Average ROI • $390 Avg monthly increase AFTER BEFORE 55
Slide 56: Westminster, London repositioning
1. Increasing earnings from existing portfolio. Westminster, London (106 units) | Growing revenues through repositioning units Suite Repositionings • $32k - Average investment per unit • 44% - Average rent lift AFTER • 13% - Average ROI • $350 Avg monthly increase BEFORE 56
Slide 57: Spring Garden Terrace, Halifax repositioning
1. Increasing earnings from existing portfolio. Spring Garden Terrace, Halifax (201 units)|Driving revenues through repositionings Suite Repositionings • $110K invested in 6 units in 2018 • 20% Avg ROI • 18% Avg rent lift AFTER BEFORE • $230 Avg monthly increase Common area upgrades 57
Slide 58: Quinpool Tower, Halifax common area upgrades
58 1. Increasing earnings from existing portfolio. Quinpool Tower, Halifax (233 units) | Investing in common area upgrades AFTER Common area upgrades BEFORE 58
Slide 59: Brewery Market Redevelopment
Brewery Market Redevelopment 59
Slide 60: Redevelopment to maximize potential
Redevelopment to maximize potential Repositioning the 158,000 SF Brewery Market, located adjacent to The Alexander (240 units). 60
Slide 61: Redevelopment to maximize potential
Redevelopment to maximize potential Key Statistics Total Property GLA (SF) 158,000 Current redevelopment (SF) 54,000 Released to-date (SF) 29,000 Current Occupancy (%) 66% Committed Occupancy (%) 84% Est. Stabilized NOI Increase $230k Est. NOI Increase 2019 vs. 2020 $750k 61
Slide 62: Brewery Market NOI
Redevelopment to maximize potential Brewery Market NOI ($M) $1.84 We expect to see $750k NOI $1.64 increase in 2020 vs 2019. $1.42 $1.42 $1.35 $0.87 2016 2017 2018 2019 2020 Stabilized Actual Actual Actual Forecast Forecast Complex (1) (1) Includes all commercial space in the Brewery Market/Alexande
Slide 63: 2019 Acquisitions
| Killam APARTMENT REIT 2019 Acquisitions 63
Slide 64: 2019 Acquisitions | Harold Doherty
2019 Acquisitions | 11 Harold Doherty 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 Closed: April 18, 2019 Vibe Lofts, Edmonton
Slide 65: 2019 Acquisitions | Charlottetown Mall
2019 Acquisitions | Charlottetown Mall Description: Commercial/Retail Details: Acquisition Details: • 32 acre commercial site with • 5.42 year average lease term • $23.75 million (50% interest) apartment development opportunity • 89.2% occupied • 6.7% yield for ~300 units • 80% national tenants • Cl
Slide 66: Charlottetown Mall | Future Development
2019 Acquisitions Charlottetown Mall | Future Development Development Potential • Zoned for multi-residential • ~100 unit buildings, 4-5 storeys each • Prime location to transit, trails, the universities and downtown business district University of PEI ↓ 66
Slide 67: 2019 Acquisitions | Grid 5 & Silver Spear
2019 Acquisitions | Grid 5 & Silver Spear Description: Acquisition Details: Location: Grid 5 – 50% of 307 units $69.9(1) million Calgary, AB Silver Spear – 50% of 199 units 4.2% capitalization rate Mississauga, ON Closed: June 14, 2019 Killam acquired its initial ownership interest in Silver Spear i
Slide 68: 2019 Acquisitions | Dieppe Village
2019 Acquisitions | Dieppe Village Description: Acquisition Details: Location: 3 residential apartment buildings Blended all cash yield of 5.7% Moncton, NB 1 mixed-use commercial & residential building 5.0% residential capitalization rate 127 units total 7.9% commercial capitalization rate 1 Co-op g
Slide 69: 2019 Acquisitions | Lian Street
2019 Acquisitions | Lian Street Description: Acquisition Details: Location: 48 units; 48 underground parking spots $9.25 million Fredericton, NB Four-storey apartment complex with large 2 & 3 5.40% capitalization rate bedroom units 100% occupied Average rent – $1,367/month ($1.00/sf) Closed: August
Slide 70: 2019 Acquisitions | 145 Canaan
2019 Acquisitions | 145 Canaan Description: Acquisition Details: Location: 48 units $9.5 million Moncton, NB Underground parking 5.0% capitalization rate Four-storey apartment with large 1 & 2 bdrm units 100% occupied Average rent – $1,229/month ($1.06/sf) Closed: Nov 22, 2019 Vibe Lofts, Edmonton 7
Slide 71: 2019 Acquisitions | The Link
2019 Acquisitions | The Link Description: 105 units Underground parking Eight-storey apartment complex with 1 & 2 bdrm units Average rent – $1,627/month ($1.97/sf) Acquisition Details: Location: $31.5 million ($305,000/unit) Edmonton, AB 4.5% capitalization rate 88% leased Closed: November 25, 2019
Slide 72: Contact Information
Philip Fraser President & Chief Executive Officer 902-453-4536 pfraser@killamreit.com Robert Richardson, FCPA, FCA Executive Vice President 902-442-9001 rrichardson@killamreit.com Dale Noseworthy, CPA, CA, CFA Chief Financial Officer 902-442-0388 dnoseworthy@killamreit.com Nancy Alexander, CPA, CA V
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