Q3 2019 Earnings Call
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Now I'd like to have the conference to your Speaker today talk Cook Chief Executive Officer. Please go ahead Sir.
Thank you good afternoon, ladies and gentlemen, and thank you best for joining us for the third quarter Conference call.
Joining me today, especially the inner Chief operating Officer, Travis meeting, our Chief Financial Officer.
Andrew parts of that or finance director of corporate planning and Investor Relations.
The webcast of today's conference call, including the presentation slides can be accessed by visiting the Investor Relations section of our website under events and presentations.
Well through the Weblinc located in a recent financials results immediate release.
We will begin the conference call after Andrew reads, a brief summary ever cautionary statement as outlined on slide two Andrew.
Thanks Todd.
Today's conference call and presentation may contain forward looking information with respect to North Sea apartment read among other things <unk> current expectations I future results performance.
Excellent opportunities operation strategy and condition. The actual results performance more fitness ISCA hearing could differ materially from those expressed or implied by such statements.
Important factors that could cause actual results could differ materially from expectations include among other things.
General economic and market factors competition changes in government regulation and other risk factors described in security filings.
All forward looking.
David boutique speak only as of today November eight 2019, and the parties have no obligation to lucky such statements.
Thank you Andrew.
Yesterday, we released our financial results for the third quarter.
Before we get into the detailed commentary I'll take you through the highlights diluted EPS per unit was 57 cents for third quarter down slightly from 58 cents in 2018.
We continue to deliver strong same store NOI growth led by Ontario.
Accompanying accompanying this was anyway contributions from exact acquisitions and newly developed properties.
These increases were slightly offset by the dilutive impact of the equity issued over the past 12 months.
And the disposition of noncore assets.
Staying with revenue growth, we saw an increase in total revenue by 6.3% has resolved the portfolio growth in same store revenue growth of 2.2%.
We are on track with the execution of our growth strategy through both acquisitions and development.
We completed a strategic acquisition of a concrete building and Halifax from Scotia for 12.5 million.
Comes with opportunities for high end renovations.
This is on the continuation of the playing the proceeds from June .
19 equity offering of just over 91 million.
And the noncore asset sales completed this year.
On the development front, we commenced a new projects into calories.
And our other two development projects are progressing as planned more on that call later.
Finally, we continue to deliver on are high and renovation program completing just over 500 units as of Q3 year to date with returns just over 26% and 5700 units remaining in the program.
I'll turn the call over to last add some color on the operations for the quarter less.
Thanks Todd.
I'll provide an update on how we performed on multifamily commercial and executive suites portfolios and Saudi with multi family. We achieved positive same store NOI growth of 4.4%, which is now the 11th consecutive quarter of positive growth without regions reported growth with Ontario, which accounts for approximately 40% of the rights multifamily and Hawaii.
Once again recording the strongest same DAU growth at 8.3%.
Up to two quarters of negative same store growth, mainly due to the effects of the prolonged colder weather Northern Canada reported positive same store NOI growth of 4.6%.
We continue to focus on our sustainability initiatives and have allocated capital, which we expect to the play over the next four to five years on projects, including energy water waste and systems upgrades. So I'd expect it to result in a reduction in operating costs once completed.
We have committed approximately $3 million on these projects in 2019 with an expected payback of approximately two and a half years anticipate spending similar amounts of the next three to five years on sustainability initiatives targeted paybacks of under three years.
Moving to all regions in Ontario on slide five average market rates have increased 5.3% since the third quarter of 2018.
Rents on turnover increased 16.4% in a quota and year to date, we have seen rents on turnover increased 15.7%.
Ontario rate increases onto another continue to outperform the portfolio average, which was 7.1 for sitting in the quota and 6.7% year to date.
We estimate the in place rents in Ontario, currently between 15, and 20% below current market range.
Operating margins and Altera increased 130 basis points as we benefited from the acquisitions of newer properties with higher every trends and also lower operating costs, we completed 213 high and renovations in Ontario, and the third quarter, bringing the year to date you. That's completed to 514, which puts us on track to complete assumed the number of hydro.
Innovations that we did in 2018 more details are available light on slide 10.
Moving onto Western Canada on slide six the region again had slightly positive same store NOI of just under 1%.
The resource dependent markets in northern Alberta, and ruled and northern BC, which accounts for approximately half of the NOI in the region at 2.3% negative same store NOI growth and continues to see challenges well over a longer occupancy in these markets is flat year over year at 80% fundamentals remain weak and we're not anticipating any material.
The improvement looking ahead to two entry into 2020.
Fort Mcmurray continues to be a challenging market the town recently announced any 47% of the rebuilds on the fire have occurred and business licenses are down 20% since 2015.
We continually monitor the markets and that being aggressive with incentives and market rate reductions to maintain our current occupancy levels.
The southern markets in BC, and Alberta had same store NOI growth of 4.6% and the occupancy of 95% was largely in line year over year.
The second phase of our Calgary Vista project, which was completed in April is currently 70% leased and we'd be pleased with the progress to date, we expect the property to stabilize in early 2020.
Moving to Atlantic, Canada on Slide seven the region reported same store NOI growth of 2.9%.
Hey, Mark grew 2.9% compared to the third quarter of last year and occupancy was higher in all major Atlantic Canada markets compared to the same quarter last year.
One unit property document that suffered extensive damage in a fire in the second quarter of 2018 reopened in August and we have leased all but three units with rents, 15% to 20% higher than those in place prior to the fire.
Leverageable City has been a pleasant surprise for us this year with occupancy at 84.6% for the quarter compared to 70.8% in the same quarter last year and has continued to prove subsequent to quarter. It. The improvement is as a result of the reopening of the on all plant, which has brought more jobs into the area.
Moving onto slide eight our northern Canada region was back on track in the quarter with 4.6% sandal growth and improved operating margins of 71% compared to 64% in the second quarter and 270 basis points higher than the same quarter last year.
And yet enough I expense management plan implemented at the end of the first quarter starting to just starting to show with controllable expenses not more inline with expectations. We also currently repositioning one of our properties and Yellowknife with returns expected to be in the 20% to 25% range once completed.
Keller with remains an extremely strong market for the read with no vacancy in the current waitlist of over 200 people, but currently redeveloping aside any keller with that we previously operated as a hotel and the 30 rental units and 5900 square feet of commercial space is expected to be ready for occupancy in the first quarter of next year with high them on the radio.
Thanks, Sean for these rental units.
Finally, Quebec, we reported a second consecutive quarter of positive same store NOI growth and a 0.8% increase for the quarter. Following two consecutive quarters of negative growth. This was as a result of higher rates and lower expenses.
Year over year, we have seen a small decline in occupancy Montreal as we are undergoing a large suite renovation program, which has resulted in suites being applied for longer periods and we also had higher turnover in the current period.
As shown on slide 10, we completed a high renovation on 514 units.
In the three quarters of 2019, achieving a rate of return of 26.5%, which will result in an annualized NOI increase of $1.9 million. We have expanded the program by a thousand units since the first quarter of 2019 following the decision to reposition two properties in London and another Incent Kathryn.
With approximately 5700 units remain remaining suitable for the program, we expect to be able to maintain our current pace of renovations through 2020.
We expect to spend approximately $13 million and on track to complete 700 units this year.
Now turning to our commercial and executive suites operations on Slide 11, Seo and why declined 3.6% largely due to the performance of properties executive suite properties and yellen off Incent John's, which have both been impacted by new supply, which has resulted in lower occupancy at the properties.
Got to mine commercial markets, yet an office in John's market conditions remain challenging.
Notwithstanding same store NOI in our commercial portfolio is flat in 2019, we have successfully at least 80% of about 2019 renewals and we expect three new approximately 95% of renewals by year end.
Ill now turn the call to Travis to discuss the financial results.
Thanks, Leslie as shown on slide 12, we have several improvements and financial metrics. Since last year. This includes total revenue and I know why are up by 6.3, and 7.6%, respectively and Hawaiian margin is up by 70 basis points diluted FFO on a total dollar basis is up 6.6%. These improvements are the result of seem to.
Rental why growth and and away from acquisitions, and our recently completed developments in Calgary and Kenmore.
Four per unit increased by one cent or 1.7%. This was mostly driven by 7.2% increase in units outstanding from the June equity offering and the disposition of non core assets. During the quarter trusted men was 4.6 of total revenue consistent with the same period of 2018 at 4.5%.
Cash flow from operating activities increased by $4.3 million to $45 million during the third quarter of 2019.
This is mainly from changes to war noncash working capital of $5 million, our distribution remains at $1.63 per unit on an annualized basis, which is sustainable long term.
Moving on to slide 13 at September Thirtyth, our debt to gross book value was 51.9% a decrease of 270 basis points from the same period last year and an improvement of 120 basis points.
From the second quarter of 2019. This is a result to fair value increases on investment properties on the third quarter of 2019.
We had a fair value increase of 122 million on investment properties in the quarter translating into $1.75 of any fee per unit.
The majority was from ongoing strong performance of 88 million and 33 million from cap rate compression, primarily driven by Ontario.
Since 2017, we've achieved cumulative fair value increases of 462 million.
These increases demonstrate that organic growth along with cap rate reductions is contributing to our and Avi growth.
We have made significant progress over the last two years or as a result of organic growth equity offerings fair value increases on investment property, partially offset by internally funded development growth our leverage as at the lowest since 2015, and we remain committed to leverage target of 50% to 55% interest and debt service coverage ratios continue.
Due to remain strong.
Now on slide 14 at September Thirtyth 2019, our weighted average interest rate was 3.02% slightly lower than previous year. During the quarter. We completed 223 million of mortgage refinancing excluding short term financing for multifamily properties with a weighted average interest rate of 2.41% and an average term.
And the maturity of eight years.
All in CMHC rates were relatively flat quarter over quarter. However, spreads have continue to widen on tenure money up about 10 basis points since the second quarter. Despite the recent upward trend in spreads are all in rates remain attractive and should provide interest saving opportunities for the remainder of 2019 as we.
We refinance maturing debt at 3.393% to the current CMHC rates of around 2.4 to 2.6.
Currently approximately 85% of north views multifamily debt as CMHC insured and we look to steadily increase this as we retire conventional blanket mortgage debt and convert maturing conventional mortgages to CMHC insured.
At September Thirtyth 2019, we have to operating facilities with total credit limit of $230 million and a maximum borrowing capacity.
199 million.
At September Thirtyth, we had 73 million and availability our current developments have longer lead time on larger overall cost, which puts more pressure on our balance sheet with the recent equity offering and available liquidity North sea is well positioned to support its strategic growth and we look forward to further progress.
Ill now turn the call back to Todd.
Thank you Travis moving on to slide 15, our external growth activity for the quarter.
In a little more depth, we continue to execute our growth strategy with focus on strengthening our portfolio and strong and growing markets.
This summer, we started a new development and Callaway.
So redevelopment on the side of the former navigator in.
Consist of 30 units with 5900 square feet of commercial space.
Cost us approximately 10 million and has an expected yield of 9% to 9.5%.
This development is identical to the Super duty building complete in 2018, which is 100% occupied today.
We've now finished the framing and electrical and maintenance is 50% complete initial occupancy expected to be in the first quarter of 2020.
The first phase and Kitchener, Ontario is well underway with the required excavation completed to date. The foundations has been built for the building.
The precast concrete installation is scheduled to start late in the fourth quarter.
Phase one we'll have 233 units for the cost of 73 million and is planned to be completed in early 2021 of the stabilized cap rate around 5.5%.
The first phase and then IMO is progressing.
The retaining wall and exhibition is close to excavation is close to 70% complete.
We are nearly complete in receiving permitting the only permit outstanding is the building permit and that's expected to be completed by the end of this month.
This development will also be completed in two phases. The first phase consisting of 140 units.
$35 million and cost as planned we completed in mid 2021.
On the acquisition front, we closed on the 12 and a half million.
Each acquisition of a mixed use property in Halifax. This building as well located in the south into downtown near the waterfront with numerous universities with opportunities to complete high end renovations.
In early October we also closed on a brand new 60 unit buildings.
Built in 2018 for 17 and half million in Lankford BC.
This brings our cumulative acquisitions completed year to date to 94 million.
Consistent with our strategic plan, we continue to identify noncore assets per capital recycling.
During the quarter, we completed noncore disposition of a small piece of our portfolio of Monkton New Brunswick.
Consisting of 112 units for just over 5 billion.
And over the last week, we also dispose of our portfolio in medicine hat.
Which is one building with 92 units for just over $10 million year to date, we've disposed of 36 million of noncore assets.
In conclusion the results are in line with our expectations Brexit cheating on both our organic growth strategy and external growth through both developments and acquisitions.
We continue to review our growth opportunities as they arise, but expect to keep the modest pace of acquisitions for remainder of the year as previously advertise.
Thank you for your time I'll now turn the call back to the operator for question and answer session.
Thank you as a reminder to ask the question do we need to press star one on your telephone.
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And by only composite Kenny roster.
My first question will come from the line.
Bumbalough from a calum.
Alon partners you may begin.
Thanks, and good afternoon.
So in terms of the apartment portfolio occupancy now at 92.5, what should we expect towards the end of 2019 and next year I guess, what I'm trying to see here is.
In your opinion, what we'd be optimal occupancy for that portfolio today.
On.
It's it obviously difficult.
Across our markets.
Good luck.
We hope to see.
So the markets in in Quebec, we'd like to see that.
Tick up a few points and stabilize close to 94, 95%.
Northern Northern Canada, as being pretty stable going back over the last five six quarters and 90 97 97, an office in 9600, 7% nothing Thats a.
You're not you're not going to see any any sort of material movement either way there.
Atlantic Canada.
We run on average we've been running at full 5% vacancy for the loss for the last five quarters.
Again, you might see small improvement there, but I think just given the markets we in.
And Atlantic Canada that's.
You will see occupancy economy in that.
In that region.
Western Canada sort of the we talk about the north in the South we held our occupancy at around 80% in.
In the middle in those NBC and all in all better over the last 12 months and I think just given the market conditions in in a lot of as a lot of those communities.
We if we can hold on our occupancy at that level, we doing well.
With that tenant occupancy maybe this is a little bit of upside stone, but that will come from that will come from southern all that are in southern be steel that we.
We're running.
Any much higher in that region, and then Ontario, we've been we've been around 96, 90 to 96 and off 97% over the last.
As far quotas.
Again.
In Ontario.
Part of it is that we we try and now one of the challenges we're facing is declining to another.
And we obviously look to turn over to help keep up the sort of the momentum with the on renovation program. So we don't line a little bit of.
And and vacancy there so that we can we can continue to affect that program.
Again, I wouldn't expect to see any any material movement in the in the occupancy they are up or down in Ontario and cuts.
Comments, the 97, nice 96, and off 97 and off would be Larry.
We recall that maintain.
Okay, Thats, great color and just wanted to get back portfolio would so could you remind us what's going on there what's the dynamic at this stage.
After big portfolio. So we have one.
Very large complex in the in the market.
We have.
We're in the prices so of renovating.
I think at 60 or 70 units.
Which is obviously taking time, we've had some challenges.
With contractors and just trying to trying to get that that was done.
But we we we are ones that once we've completed that.
We feel that you'll start to see the occupancy.
Improve.
We pretty much in the in the latter in both the.
Of the marketing.
In Quebec with average rates around $800 I think.
No nothing.
So you'd probably start to see improvement moving into the second quarter of 2020.
Okay. Okay.
And last me in terms of your expected development yields I'll see if his be 5% to 5.5% range for your kitchen or project.
No.
It's Todd trend that I think.
It depends on rent I mean, we're talking.
We are talking leasing up starting 15, 15 18 months from now so thats.
It's a fair bit out, but if I look at our cost side, we've got that 90 disciplined 90% of the contracts.
Fixed so I think we're I think we're in good shape, where the cost side. So.
I think I think the good result is five and a half and I think in the downside. It's in the five range I think.
We're pretty comfortable with that with those with that range.
That's great. Thanks, Thats it from me.
That's right.
Thank you.
And our next question will be from the line of Dean Wilkinson from sea I'd be fee.
Maybe again.
Thanks, Hi, guys Hey, Dave.
Just looking at the balance sheet.
Hey, guys have done a lot of would shopping to get it down into this low 50% range, but now you've got call. It close to 100 million of either development Capex and let's assume that the high end renovation program sort of runs.
Similar to 2020 as it did in 2019 should we expect to leverage to perhaps take up a little in the next couple of quarters is that capital goes out and then there would be maybe a valuation catch up down the road or how you're thinking about leverage through the next G. Four to six quarters.
Thank you, Sir you sort of now that.
Dean they were.
We're sort of looking looking forward to say like we're probably going to have 100 800 million or 100 and change.
A steady ongoing PC or kind of have going to have almost say call. It a permanent uptick in the leverage and 100 basis points maybe okay.
Just there because were internally funding and then you'll see some lumpy when we when we when we do the takeout, we raise equity in future equity offerings to take that out and you'll see that the bump that up and down so I wouldn't expect any any significant movement. So I don't work around 52, So you might.
Flop between the 50 due to 53, that's kind of where it's a comfortable place for us.
Right now so I think Thats, thats, where we see it going over the next.
The next couple of years.
Right and as you as you put the money into the development. It just it stays at a cost basis rightly you don't hit a milestone and market up like you'll do that on stabilization of fee income generating yes.
Yes Dana.
It's Travis you on the new developments, we are we wouldn't take the fair value again until lets turn it over to to occupancy and why not it might be before stabilized.
If we have a financing appraisal or.
Something like that but during the construction phase we won't take any gains on those okay fair enough. So we not to look where there that does actually lead into the second second part of that question. So.
Looking at the cap rates and the compression you've had there it looks like the range has sort of its wide three in a quarter on the low end 13 on the high end has stayed the same the past couple of quarters. So I guess mathematically it's fair to assume that the skew of the portfolio has shifted more towards the low end of that capitalization range. So.
Your Nab adjustment has become a little more sensitive to those I know I changes then than it has historically been.
Yes, all of that all of that it's true the.
The three and a quarters, we see a is in the GCA.
But we had a few properties at that three in a quarter in previous quarters. So we didnt reduce any of those good properties below the three in a quarter, but we did find evidence of.
Cap rate compression.
In the Toronto markets some of the other stuff yet properties, we had at.
Mid to high threes, Yep, Yep, well that makes sense.
And last one for me just on the same property NOI growth in Toronto, Ontario.
They are the same thing or is that.
[laughter] Center the universe.
The 300000, the property tax is that a prior period adjustment or is that for in the year like what I'm trying to get out is is that 8.3 reflective of a bit of a catch up and as the actual number closer to six four or is that an adjustment for 2019 taxes specifically.
It's.
That that number includes property taxes, not just from 2019 the.
Appeal that we had portions of it went back to 2016. So it is a catch up so we had.
Little over 300000, I think in the rebate that we earned in 2019, which was from prior periods as well.
But we will see some savings going forward not 300000, our quarter by right. Some of the results of the Appeals mean, the property tax expense will be lower on a run rate based on a run rate basis. Okay. Perfect. That's it I will hand it back thanks guys.
Thank you.
Our next question will come from line.
Hello, Thank culture from TD Securities you may begin.
Thanks, Good afternoon.
First first on the new oncology development can you maybe remind us about the didnt navigator.
Always that was that generating income.
I'm.
Offered on it was we took it off line I'm from generating income I thinking about 2015, we had.
Maybe 16, we at least it to the we'd stop running it as the hotel and we had a three year lease with the.
The folks that were doing the airport development.
And that ended in 17, I think last and then last at the end of 12 months ago. We took it down so it was it was sitting empty and it just it wasnt.
I mean fire hazard so.
It hasn't shown any any income for.
Last 12 18 months.
Okay.
That's good and then just.
On the the sustainability project that you highlighted.
In your prepared remarks like.
Is there is there like a three year payback to be sounds like pretty good investment is already.
Accelerating putting more than 3 million bucks or your to that.
We are in the we started this program at the Oh, we started scoping at at the beginning of at the beginning of this year.
And we were in the prices of identifying and have identified the projects that will.
That will will take on in 2020.
It does take time to too it's not likely sitting there now with 20 million to spend and then Scott Roeder that quick I. If I mean, if we if we can accelerate it we will because obviously the returns a very attractive and in that in the face of rising energy costs.
A quick we can we can do some of these initiatives the better but thats just sort of outpaced estimate in terms of the run rate as in terms of.
Keeping track with.
Ripping up at that pace at which we identified and putting the capital to work.
To.
Mike about a point if it if we can accelerate if we will kind of the base case as to how we'll be spending at over the next couple of years.
John I'd look at it this way, it's sort of like the high end rental program.
If we can get the suites and if we get the the projects and we can scope them and get them get MPS demo books or accelerate when we again.
So a lot of this is in suite stuff.
No it's not.
It's everything I mean, we just we just completed a major.
Oil.
Renewal program in Montreal, we put in I think we just spend a million dollars on new players at the complex Cisco completed.
We've done we're looking at we've done a lot of.
Lighting retrofits, it's it's it's a mixture of.
Projects in fact is probably more outside the suites and than industries.
Okay, and then just on.
On the high end rental program in the vacancy or the occupancy in Ontario, generally speaking like how how many units like you're the 96.6 includes whatever units you have out for your high end rental program right you don't exclude them or anything that's correct.
Okay, and what would that would that be roughly 100 basis points of that the vacancy each quarter.
Im not chipset matched its probably maybe 25 to 15, because we we and we try to keep the.
We try to keep the downtime to 30 days.
So it's it doesn't have as bigger impact on your annual vacancy as you think it's it's about it's 20 550 basis points.
Okay and the rest would just be you tried to push rents as much as you can in the face of.
Thats correct Thats remember, we don't have I mean, we pretty darn obviously.
Spread across Ontario's on auto home.
Not all markets are as strong as others. So so that's that weighs into.
On slide.
Looking at out at all they can see in Ontario, and say, maybe is looking a little bit a little bit higher than enough you agree, but then we are.
We kind of a lot to sort of fourg.
Product, we sort of from saw light will relate to two auto and we had some smaller markets as well, which tend to run with a little bit higher vacancy in tops.
Okay, and then and just lastly, there's.
There's three or four larger portfolios on the market or are you guys.
Looking at those Susan how do you feel a buildup.
We've we've looked at them.
Yes.
At all I can say, we don't know them.
As as to everyone every multifamily peer you're going to talk to the next week or two.
Whether we bid or a successful I I don't know I mean, what what we're seeing as a whole lot of.
Non read vendors coming in unconditional on these things.
And that's that that is something we don't do and the cap rates are being being driven lower so we're looking at them, but I'm not.
And I'm uncomfortable as to whether a you'll see a.
Successful announcements.
But.
As always you got to look at.
Look at most things that come across your desk.
Okay, so either way, it's going to be good for your eye for us value.
It likely won't be bad [laughter], okay. Thanks, So I'll leave it there.
Thanks Chuck.
Thank you and our next question will come from I know Mario Saric from Scotiabank you may begin.
Hi, good afternoon.
And just maybe following up on the on the previous question in terms, the arthroscopy coming down.
Fair to say that activity in the market today that hasnt closed.
Was not a driver of the Ontario coverage during Q3.
Thats correct.
Got it.
Okay, and then on the high and rental program.
The small point, but it looks like and went up 3 million target expand clean drinking to 13 million.
How do you reconcile that with some of the notion that turnovers coming down.
Ontario, So im just wondering what is good rooms, changing yeah, because we when we bought three fairly large properties that we bought into the program in.
Early 2019, Lightings and Catherines had had high vacancy and we were we went.
But keeping that they can see because we want to do you know we wanted to reposition the building.
We have another.
Property in London, which is 666 units, which again.
We had more units day that that'd be good.
We're bringing into the program so.
The to the turnover is it's more of a challenge to us. So you get to the GTS out 10 of is sort of mall is higher.
In London in Us and catherines, so because of the diversity of the portfolio within Ontario to date. That's that's that's what's enabled us to.
To keep up the to keep up the pace of the other innovations and Thats why you've seen the spend spike.
Okay. Thanks, and then.
Oh, let's group.
On the on utility side.
I guess was partially addressed sort of the colds from some initiatives.
To the cost were pulled in a percent year over year.
Impart because of higher electricity costs really touched on some metering program in a while but it is or anything.
What's changed there.
May increase the velocity of.
So I mean diminished going forward relative to the past couple of years.
We obviously continue with the program.
The challenge is that.
Again when units turn.
A lot of the times, it's it's units that have already been that already Beanstock media, you really need to get.
To the units that.
Now that Havent been submitted and we Havent taken the physician way, we've gone in and post submetering on on sitting tenants. We've we've tended to wait until until that until the units have turned.
So now obviously continue to focus on ER on increasing the penetration, but a lot of it depends on that.
Up until now that you're getting.
Okay, and then maybe shifting gears to.
To your reform turnover, which seems to be getting stronger from already pretty good numbers.
How do you or how do you see that evolving over.
Over the next year you track.
On a run through a whole disposable income I understand whether affordability.
Is that all becoming an issue.
Bruce reduced tool steel autos.
To push rent.
Underlying growth.
Two to three vessels.
I mean, most of the rent lift on turnover is coming in Ontario.
The other markets. The rental alternative is a lot more modest and reflective of sort of conditions in those in those markets.
To date, we've you know.
We obviously pushing rates as a as aggressively as we can.
And it hasn't been that we haven't seen seen a lot of resistance in fact, our rate lifting turnover in Ontario has crept up the last five quarters, we were at 12%, 12.6% back in Q3 of 2018, and that's it sequentially increased a little bit each quarters at the moment, we're not seeing.
You know much resistance, but to a point I mean, there is going to come a time win win win affordability a win win affordability as thoughts to plan effective but.
And obviously a lot of this high rate growth is being is being driven by the hi renovation program starts getting it because you putting a it's a different product offering once you once you've completed their innovation sites.
There's that driving it as well.
I think at a plenty of time when you start to get further into the high renovation program and you and you're going to be.
Doing doing less units on a on a on an annual basis, we'll start to see the the rate lift on turnover will will start we'll start to decline.
Are there any market.
In Ontario viewers, where you're seeing particular accelerating strong underlying.
Rent growth for demand growth.
It's.
Obviously in the in the DTA and that's where we've got to allow us to another and Thats and that's where we've got the biggest gain to market. If we can if we can get that.
Okay.
Correct.
And in the other markets, it's just been thats being consistent we've been surprised actually with.
We didnt think some of these markets we've been getting that.
The rates increases that we are through through the program.
And it's it's pretty consistent the returns averaging 25% retail cost and you're seeing that sort of across the board is not that some markets are hired some level on that on average we.
We are getting.
Similar results in our markets across a across Ontario.
Okay and then.
When we when we put a pool it altogether and this quarter seems turnaround rules for Fourq arms for personal loan.
For the year, it's kind of 3% or interest so.
Given the strong rent growth.
From initiatives on the call I'm, sorry, what would you consider to be.
A reasonable.
All right growth target for next year, or perhaps even a stretch target if things were really loan.
Uh huh.
First have to say you know, we don't give guidance. So I can't tell you that.
And then then I make my lawyer screens and give the guidance Justin.
Yes, there is there anything is there anything changing macro wise when you look at.
Other portfolios performed this year and expenses do move around.
Fourth quarter, and what not put drilling from a revenue per spar group, mark rewards or anything that you're seeing.
That is.
Could potentially dissipate.
Becker group some of your.
Yet I don't I don't see anything macro wise that that's going to change the.
On the revenue side.
As as less said in his his remarks.
The northern part of Western Canada's.
Yeah.
Flat. So good result, but outside of that I think that's fine.
On the expense side I think we're going to see the we're going to see pressures, but I think the rent the rents increase will offset that and as just remember the first couple of quarters. We had a we had a higher expense brand with the colder weather in the north so.
That's sort of the the high level thoughts on those.
Pieces.
Okay. Okay.
Okay. Thank you.
Thank you and our next question will come from the line, Oh, Gosh, saying Oh from Laurentian Bank you may begin.
Good afternoon.
The ash.
One of your peers mentioned earlier this week last week a that.
Then sweetener Weitian program is they're able to do that across the entire portfolio.
That is eastern Canada, Ontario.
And they actually that any building that is 10 unit then use on older that able to apply that program there.
Are you guys seeing something like that and as you.
Thinking of expanding your program across your portfolio, especially in eastern Canada.
We always.
We always looking outside.
At opportunities outside of Ontario.
Yes.
Obviously, the focus is being Ontario today as an example, we've just done to when the prices of doing a repositioning in the other enough.
Where we where we had a housing authority was in a long term lease with it hadn't been rent increases since 2002.
And I think that was steady units, which we which we've now relocated into other properties and we in the prices of of doing hind renovation in that.
That market and I think we going to see like potentially 40, 50% increases in the rents. So so we do look at you know we all looking outside.
No I think when we win.
You made reference to somebody two to one about peers.
This is having success with around I think need to see what markets what type of what what.
Sort of a top of buildings you you you have.
But we do look at it all the time and use and you will see some you know you will see a other hi renovations happening in other markets. We also you know we have a program underway in the nine month.
Yes, obviously not to the same to the same expenses.
As in Ontario, but.
Tom It's definitely is a focus on valves and something that we do look at a regulated.
All right that's it for me thank you.
Thanks Ash.
Thank you.
And as a reminder, that star one for questions. Our next question will come from the line Brendan Abrams from Canaccord Genuity may begin.
Good afternoon.
Around it.
Maybe just thinking with the I have for valleys in Ontario.
Travis can you maybe just to remind us.
How projected stabilized NOI is calculated and I guess.
And the basis of my question is in place rents in Ontario.
Our where you estimate to be 15% to 20% Bull market.
Do you closer the projected NOI closer to the in place.
Today or would it be closer to.
Yes.
Mark the portfolio to market, obviously that would imply if not that would imply maybe some upside from these levels, even yeah, the baseline and NOI that we use for us as a like a one year.
Rolling in Hawaii forecasts, so we would not be marking that two markets. We would only assume the one year and why would capture a very small portion of the loss to lease because we know turnover is declining and we know even of the units that do turn some of those are in fact.
More likely to be the units that are.
Close to Mark so the projected NOI does not really capture much of the loss to lease.
Right. Okay. That's helpful and maybe just in terms of.
The disposition front.
Todd just given I know you guys had been disposing of assets opportunistically, but given the.
Evaluations and extreme appetite for apartments right now.
In Canada is there a temptation I don't know if that's very word but to accelerate that program a little bit.
To recycle capital.
And where the market is right now.
I'm that's an ongoing question, we we talk what as a group.
You know the.
The answer is we talk about it today, we've taken the point, though saying we're going to do very pointed.
Pointed dispositions and its theres, a number of factors that fit in and its.
Future Capex it's.
The value of and maximize is there.
A location that sort of fee. So there's there's a number of factors them today, we haven't looked at a large portfolio thing doesn't mean, we won't but.
The 2019 program.
Doesn't doesn't reflect that than that.
Plan.
Okay. That's helpful I'll turn it over thank you.
Thank you.
And I'm not showing any further questions at this time I will now like to turn the call back over Thomas Cook for any closing remarks.
I'd like thank everybody for your time in interest was appreciate a engaging so.
Look forward to talking to you asked sometime in February drove the rest of your.
Today chairs.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.