Killam Apartment Reit · TSX:KMP.UN
Killam Apartment Reit — Investor Presentation (April 2019)
72 slides from Killam Apartment Reit's investor presentation, April 2019
Slide 1: Investor Presentation | April 2019
Investor Presentation |April 2019
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: Killam Apartment REIT
Killam Apartment REIT Killam Apartment REIT owns, manages and develops multi-family residential properties in Atlantic Canada, Ontario and Alberta. Killam's portfolio includes $2.8 billion in real estate assets, comprised of 15,883 apartment units, 5,427 manufactured home community (MHC) sites and 0
Slide 4: Killam Apartment REIT
Killam Apartment REIT 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 3.3% Halifax 5,753 64 35.6% Ontario 2,284 17 3.6% Sydney 139 2 1.0% New Brunswick(2) 224 1 0.1%
Slide 5: Why Invest in Killam
Why Invest in Killam • Clearly defined strategy to grow earnings and net asset value (NAV) per unit. • One of Canada’s highest-quality and youngest apartment portfolios with 33% of NOI generated from apartments built in the last 10 years. • Experienced developer with a $850 million development pipel
Slide 6: 2018 Highlights | Five Years of Strong Growth
2018 Highlights | Five Years of Strong Growth Net Operating Income FFO & Distribution Per Unit AFFO Payout Ratio1 $140 FFO Per Unit Distribution 140% $130 $120 $0.90 120% $110 100% Millions $0.80 $100 80% $0.70 $90 60% $80 $0.60 40% $70 $0.72 $0.79 $0.86 $0.90 $0.94 124% 106% $105 $115 $136 $0.50 0.
Slide 7: 2018 | Strategic Achievements
2018 | Strategic Achievements 2018 Target 2018 Performance 2019 Target Longer-term Target Grow Same Same Property NOI 4.8% Same Property NOI Same Property NOI Property NOI by growth in 2018. Growth averaging over Growth of 3% to 5% 3% to 5%. 3%. Acquire a Grow the portfolio to over $3.0 billion by
Slide 8: 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: Increase earnings Expand the Develop high- from existing portfolio and quality properties portfolio. diversify in core markets. geographically through accretive acquis
Slide 9: Clearly Defined Strategy | Existing Portfolio
Clearly Defined Strategy | 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 9
Slide 10: Clearly Defined Strategy | Existing Portfolio
Clearly Defined Strategy | Existing Portfolio Increasing earnings from existing operations through revenue growth. • Strong occupancy – 2018 occupancy was Killam’s highest. • Rising rental rates – Rate increases on renewals (1.7%) and turns (5.3%) averaged 2.7% 2018, up from 1.8% in 2017. • Reduced
Slide 11: Clearly Defined Strategy | Existing Portfolio
Clearly Defined Strategy | Existing Portfolio Increasing earnings from existing operations through expense management. • Energy conservation initiatives – $4.4 million in 2018, 184 projects, $0.9 million annual savings, 5.0 year payback! • Economies of scale – Negotiating lower pricing for goods and
Slide 12: Clearly Defined Strategy | Existing Portfolio
Clearly Defined Strategy | Existing Portfolio Increasing earnings from operations through energy efficiency. Carbon Intensity • Five year plan developed in 2016 to reduce resource intensity. • $25 Million of investments identified. (kgCO2e/SF) • $10 Million invested to date. 2018 28.6 • 5 Year avera
Slide 13: Managing Expenses to Grow NOI
Managing Expenses to Grow NOI Killam’s $25 million energy efficiency investment in existing properties • Killam has invested $10M to date in efficiency projects, including • 9,100 low-flow toilets installs (annual savings of 600M litres of water) • Lighting retrofits at ~90 properties (annual saving
Slide 14: Developing & Renovating Energy-Efficient Apartments
Developing & Renovating Energy-Efficient Apartments We use technology and renewable resources whenever feasible with the intent to create green and sustainable homes for our residents. From LED lighting and motion sensing technology to geothermal heating and in-suite green switches, energy conservat
Slide 15: Clearly Defined Strategy | Existing Portfolio
Clearly Defined Strategy | Existing Portfolio 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 2018 Actual 2019 Target Opportunity • ~170 Units vs 47 units • 300 Unit Reposit
Slide 16: Increasing Revenues to Grow NOI
Increasing Revenues to Grow NOI Parker Street, Halifax (239 units) | Driving revenues through repositioning units AFTER BEFORE Suite Repositionings • $205K invested in 13 units in 2018 • 12% Avg ROI • 25% Avg rent lift • $220 Avg monthly increase 16
Slide 17: Increasing Revenues to Grow NOI
Increasing Revenues to Grow NOI Spring Garden Terrace, Halifax (201 units) | Driving revenues through repositionings AFTER BEFORE Common area upgrades Suite Repositionings • $110K invested in 6 units in 2018 • 20% Avg ROI • 18% Avg rent lift • $230 Avg monthly increase 17
Slide 18: Increasing Revenues to Grow NOI
Increasing Revenues to Grow NOI Garden Park, Halifax (246 units) | Driving revenues through repositionings AFTER BEFORE Common area upgrades AFTER Common area upgrades • $x invested in 2018 18 BEFORE
Slide 19: Leading with Technology
Leading with Technology Coming in Mobile late 2019 Inspections Rent Mobile Maximizing Work Software Orders Online Online Property Seamless Tenant Online Portal Management Leasing Platform Integrated Enhanced Credit Marketing Screening Analytics Customer Relationship Management 19
Slide 20: Leveraging Technology
Leveraging Technology Investment in CRM (Customer Relationship Management) platform benefits all stakeholders. Prospect Employees Management Tenants Book showings Self Service = less Manage by online data entry exception CRM Implementation was 100% complete in Complete Focus on the Drive leasing & a
Slide 21: CRM (Customer Relationship Management)
CRM (Customer Relationship Management) Analytics that Drive Decisions Conversion Ratios Average Response Time Traffic by Source Traffic By Source Craigslist Leads By Hour Google Daily Traffic Trends Killam Data Entry Email Response Time Website Average Age of Customer Inquiry RentFaster Application
Slide 22: Clearly Defined Strategy | Acquisitions
Clearly Defined Strategy | Acquisitions Expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties. Annual Acquisitions ($ millions) Average $113M $115 $106 $121 $160 $200 $315 $167 $200 $103 $125 $85 $54 $72 $16 $45 $36 $3 2002 2003
Slide 23: Clearly Defined Strategy | Developments
Clearly Defined Strategy | Developments Developing high-quality properties in core markets. • Over $240 million (1,180 units) of developments completed or underway. • Experienced in-house architect and engineers. • Development pipeline of approximately 3,000 units. Developments Completed $millions D
Slide 24: Approximately $250 million of developments completed
Clearly Defined Strategy | Developments Approximately $250 million of developments completed. 49 units - Charlottetown, PEI 63 units - Halifax, NS 101 units - Fredericton, NB 47 units – Charlottetown, PEI 71 units – St. John’s, NL 102 units – St. John’s, NL 122 units - Cambridge, ON 70 units – Halif
Slide 25: Gloucester City Centre (Phase I) – The Frontier, Ottawa
Developments Gloucester City Centre (Phase I) – The Frontier, Ottawa Rental Units: 228 units Ownership: Killam 50%, RioCan 50% Start Date: Q2-2017 Projected Completion: Q2-2019 Location: Ottawa’s East End, adjacent Ottawa’s Light Rail Transit (LRT) Blair Station. Cost: $36.5 million (Killam’s cost)
Slide 26: The Frontier, Ottawa
Developments Gloucester City Centre (Phase I) – The Frontier, Ottawa Ottawa, ON - Frontier, Phase One of Gloucester City Centre frontier The Frontier, Ottawa 26
Slide 27: Gloucester City Centre (Phase II) – Ottawa
Developments Gloucester City Centre (Phase II) – Ottawa Ottawa, ON - Phase Two of Gloucester City Centre Rental Units: 208 units Ownership: Killam 50%, RioCan 50% Start Date: Q2-2019 Projected Completion: Q2-2021 Location: Ottawa’s East End, adjacent Ottawa’s Light Rail Transit (LRT) Blair Station.
Slide 28: Shorefront, Charlottetown
Developments Shorefront, Charlottetown Rental Units: 78 units Start Date: Q4-2018 Projected Completion: Q2-2020 Location: Charlottetown, PEI Cost: $20.8 million ($267,000/unit) Expected Yield: 5.6% Expected Cap-rate: 5.0% 28
Slide 29: Silver Spear II, Mississauga
Future Developments Silver Spear II, Mississauga Rental Units: 128 units Ownership: Killam 50%, Partners 50% Expected Start Date: Q2-2019 Projected Completion: Q2-2021 Location: Dixie Road, Mississauga Cost: $24.5* million ($383,000/unit) Expected Yield: 5.25% Expected Cap-rate: 3.50% Average Unit S
Slide 30: Weber Scott Pearl, Kitchener
2018 Acquisitions/ Future Developments Weber Scott Pearl, Kitchener Description: Commercial Building 1.8 acre development site including a small commercial Future development building and a heritage residence Opportunity to develop a 163-unit apartment building Location: Downtown Kitchener Acquisiti
Slide 31: Westmount Place, Waterloo
31 2018 Acquisitions/ Future Development Westmount Place, Waterloo Development Opportunity: • 560 - 800 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 560-800 units Future de
Slide 32: Westmount Place, Waterloo
32 2018 Acquisitions/ Future Development Westmount Place, Waterloo Development Opportunity – Building A: • 116 units; 98 parking spaces underground and a new parking garage for Sunlife Employees (175 spaces) Future development – Tower One, Westmount Place, Waterloo.
Slide 33: Future Developments
Future Developments Kanata Lakes - New 80-unit building beside existing 5- building property in Ottawa. The Governor - 48 units beside Carlton Terrace - 104 units beside The Alexander in Halifax. Spring Garden Terrace in Halifax. 33
Slide 34: Killam has a $850 million development pipeline
Clearly Defined Strategy | Developments Killam has a $850 million development pipeline. 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 Mississauga, ON 50% 64 Ap
Slide 35: 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 36: Growing Earnings & Improved Payout Ratio
Growing Earnings & Improved Payout Ratio FFO and AFFO per unit growth from same property NOI growth, interest savings, accretive acquisitions and developments. FFO & AFFO Distribution & Payout Per Unit Ratio For the years ended Dec 31 Distribution AFFO Payout Ratio** FFO AFFO* 100% $0.65 95% 91% 90%
Slide 37: Strong Balance Sheet, Increased Flexibility
Strong Balance Sheet, Increased Flexibility Killam is managing its balance sheet with conservative leverage. Debt as a % of Total Interest Coverage Debt to Normalized Assets Ratio EBITDA 55.8% 56.4% 53.5% 48.7% 49.8% 10.37 10.63 10.51 10.50 10.62 2.21 2.34 2.70 3.13 3.22 2014 2015 2016 2017 2018 201
Slide 38: Mortgage Maturities
Interest Expense Savings Current Weighted • ~$158 million of apartment refinancings in 2019. Average Interest Rate • Currently expect to refinance mortgage maturities at similar of 2.95% interest rates in 2019 & 2020. 85% of Apartment Mortgages CMHC Apartment Mortgage Maturities by Year Insured As a
Slide 39: Positioned for Growth
Positioned for Growth Killam is positioned for long-term success with a focus on the following initiatives: • Growing the portfolio and expanding geographically with accretive acquisitions. • Expanding the portfolio through developments in core markets. • Cost management through ongoing process impr
Slide 40: Appendices
KE ae Killam 3 APARTMENT REIT Appendices 40
Slide 41: Q4 & 2018 Performance
y NX He APARTMENT REIT Q4 & 2018 Performance
Slide 42: 2018 & Q4-2018 Performance
2018 & Q4-2018 Performance 2018 Same Property 2018 Results by Market Performance Revenue Growth NOI Growth 5.1% 3.6% 4.8% 0.9% 1.6% 0.7% 10.2% (0.3%) 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 Q4 2018 Same Property Performance Q4 2018 Results by Market 15% R
Slide 43: Core Market Update
KE ae Killam 3 APARTMENT REIT Core Market Update 43
Slide 44: Halifax Rental Market
Halifax – 42% of NOI The Halifax rental market is strong with overall occupancy at a historic high level of 98.4%. Current Market Conditions Halifax Vacancy CMHC Market Stats1 per CMHC 49,025 Rental Units • Strong demand as population growth from immigration, intraprovincial migration and 4.0% 1.6%
Slide 45: Halifax – 42% of NOI
Halifax – 42% 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 Starts Vacancy Total Apartments/Condos 4,000 Average Total Starts 4,
Slide 46: Halifax – 42% of NOI
Halifax – 42% of NOI From January 2016 – August 2018, almost 12,000 new permanent residents have landed in Halifax. Halifax Population Growth and Source Halifax Total Population Annually from July 1 – June 30 9,000 460,000 8,000 440,000 7,000 6,000 420,000 5,000 400,000 4,000 3,000 380,000 2,000 360
Slide 47: New Brunswick – 20% of NOI
New Brunswick – 20% of NOI Population growth coupled with limited construction has resulted in an 18-year high occupancy of 96.8%. CMHC Rental Stats1 Current Market Conditions NB Vacancy 35,066 Rental Units per CMHC • Population growth from increased interprovincial and 3.2% Vacancy international mi
Slide 48: Ontario – 22% of NOI
Ontario – 22% of NOI Strong rental market driven by robust job market, international immigration and high housing prices. CMHC Rental Stats1 Current Market Conditions Ottawa (6.4% of NOI) 1.6% vacancy in 2018 Ontario Vacancy 1.7% vacancy in 2017 • Strong economic growth. per CMHC • Rising population
Slide 49: St. John's & Charlottetown, 6% & 5% of NOI
St. John’s & Charlottetown, 6% & 5% of NOI St. John’s – Occupancy trending higher with more robust and improving economic conditions. St. John’s Same Market Fundamentals St. John’s Vacancy Property Revenue per CMHC1 • Rental market has stabilized with a second year in a Growth 8.0% 3.0% row (2017 &
Slide 50: ESG Initiatives
KE ae Killam 3 APARTMENT REIT ESG Initiatives 50
Slide 51: 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 52: Killam's Green Future
Killam’s Green Future Killam will continue to build on our current successes to make buildings more sustainable and resilient to the impacts of climate change. • Since 2015, installed 9,100 low- • Seven properties have on-site electric vehicle • Committed to increasing its geothermal flow toilet, sa
Slide 53: Contributing to Our Community
Contributing to Our Community Killam has a Community Involvement Committee that extensively monitors all aspects of the Trust’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
Slide 54: Our Customer Service
Our Customer Service Killam provides outstanding customer service and fosters community at its properties. Killam surveys residents to measure its success in meeting expectations and to identify areas for improvement. Creating a sense of community is a priority at Killam. Examples of programs, event
Slide 55: 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 56: 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 Independence responsibilities with the support Code of Business Conduct & Et
Slide 57: 2018 Completed Developments
2018 Completed Developments 57
Slide 58: Saginaw Park, Cambridge
Developments Saginaw Park, Cambridge Rental Units: 94 units Start Date: Q3-2016 Completion Date: April-2018 Location: Adjacent Saginaw Gardens, Saginaw Parkway, Cambridge Cost: $25.5 million ($274,000/unit) Expected Yield: 5.4% Expected Value: 4.0% Average Unit Size: 1,025 sf Average Rent: $1,670 ($
Slide 59: The Alexander, Halifax
Developments The Alexander, Halifax Rental Units: 240 units & 6,350 sf of retail space Ownership during development: Killam 50%, Partners 50%* Completion: Q4-2018 Location: Downtown Halifax across from the waterfront Cost: $41.6 million (Killam’s 50% cost) Expected Yield: 4.70% Market Cap-rate: 4.40
Slide 60: The Alexander, Halifax
Developments The Alexander, Halifax
Slide 61: 2018 Acquisitions
2018 Acquisitions Property Location Acquisition Ownership Property Type Income- Land for Date Interest (%) Producing Development Properties The Killick Halifax, NS Feb 28, 2018 100% Apartment $33,000 $- 4th Avenue Land Calgary, AB Feb 28, 2018 40% Dev Land - 7,200 Weber Scott Pearl Kitchener, ON Mar
Slide 62: The Killick, Halifax
Q1-2018 Acquisitions The Killick, Halifax Description: 110 units & 4,500 sf of commercial space Average rent – $1,810/month ($2.00/sf) Fully leased Location: 49 King’s Wharf, Dartmouth Acquisition Details: $33.0 million ($290,000/unit) 5.0% capitalization rate 62
Slide 63: 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 21,000
Slide 64: Westmount Place, Waterloo
Q1-2018 Acquisitions Westmount Place, Waterloo 64
Slide 65: Central Calgary Development | Plaza 54
Q1-2018 Acquisitions/ Future Developments Central Calgary Development | Plaza 54 Description: 32,548 sf development site located adjacent Grid 5 and another site purchased in 2015 Combined expected to support three towers Grid 5 totalling 970 units Location: 5th Street Southwest and 4th Avenue South
Slide 66: Vibe Lofts, Edmonton
Q3-2018 Acquisitions Vibe Lofts, Edmonton Description: Acquisition Details: 178 units $47.0 million ($267,000/unit) Average rent of $1,444/month ($2.35 per square foot); Location: Construction completed in September 2017 10620-116th Street NW Edmonton, Alberta Occupancy at 85% 66 Vibe Lofts, Edmonto
Slide 67: Vibe Lofts, Edmonton
Q3-2018 Acquisitions Vibe Lofts, Edmonton 67
Slide 68: Nolan Hill, Calgary
Q3-2018 Acquisitions Nolan Hill, Calgary Description: Acquisition Details: 10% interest in a 13.58-acre development site $2.0 million for 10% interest Located in Northwest Calgary Agreed to purchase first phase of 233 units at a Zoned for 829 units purchase price of $55 million ($236,000 per unit) F
Slide 69: Harley Street, Charlottetown
Q3-2018 Acquisitions Harley Street, Charlottetown Location: Description: Charlottetown, PEI 107 units Acquisition Details: Average rent – $1,505/month ($1.40/sf) $22.4 million ($209,000/unit) Current occupancy – 100% 5.6% capitalization rate Westmount Place, Waterloo 69
Slide 70: 151 Greenbank, Ottawa
Q3-2018 Acquisitions 151 Greenbank, Ottawa Description: Location: 60 units Ottawa, ON Average rent – $1,729/month ($2.24/sf) Acquisition Details: Current occupancy – 93% (initial lease-up) $20.7 million ($345,000/unit) 4.6% capitalization rate Westmount Place, Waterloo 70
Slide 71: Treo, Calgary
Q4-2018 Acquisitions Treo, Calgary Location: Description: Sherwood neighbourhood, Calgary 158 units Average rent – $1,339/month ($1.55/sf) Acquisition Details: Current occupancy – 100% $39.0 million ($247,000/unit) 4.9% capitalization rate Westmount Place, Waterloo 71
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 S
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