Q3 2019 Earnings Call

November 14, 2019

Operator 2: Good morning, ladies and gentlemen. Welcome to the CAPREIT Q3 2019 Results Conference Call. I would now like to turn the meeting over to Mr. David Mills. Please go ahead, Mr. Mills.

All participants please standby youre, calling for somebody to begin good morning, ladies and gentlemen, what comes when you get tweet third quarter 2019 results conference call I wouldn't like to turn the meeting over to Mr. David Miller. Please go ahead mr. males.

Operator: Good morning, ladies and gentlemen. Welcome to the CAPREIT Q3 2019 Results Conference Call. I would now like to turn the meeting over to Mr. David Mills. Please go ahead, Mr. Mills.

David Mills: Thank you very much, and good morning, everyone. Before we begin, let me remind everyone that the following discussion may include comments that constitute forward-looking statements about expected future events and the financial and operating results of CAPREIT. Our actual results may differ materially from these forward-looking statements, and such statements are subject to certain risks and uncertainties. Discussions concerning these risk factors, the forward-looking statements, and the factors and assumptions on which they are based can be found in our regulatory filings, including our annual information form and MD&A, which can be found on our website or at SEDAR+. I'll now turn things over to Mark Kenney, President and Chief Executive Officer.

Thank you very much and good morning, everyone. Before we begin let me remind everyone that the following discussion may include comments constitute forward looking statements about expected future events in the financial and operating results cap rate. Our actual results may differ materially from these forward looking statements such statements are subject to certain risks and uncertainties.

Discussions concerning these sectors. The forward looking statements in the factors and assumptions on which they are based and be found in our regulatory filings, including our annual in for more information form an m. DNA, which found on our website <unk>.

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I'll turn things over to Mark any president and Chief Executive Officer.

Mark Kenney: Thanks, David. Good morning, everyone, and thank you for joining us today. Scott Cryer, our Chief Financial Officer, is also on the call today. Turning to slide 4, we continue to increase the size, scale, and diversification of our portfolio through accretive acquisitions. So far this year, we have purchased 8,413 residential suites and MHC sites in Canada and the Netherlands for just over CAD 1 billion. These acquisitions have strengthened our market presence and are driving further economies of scale and operating synergies through our experienced and proven property management teams. Looking ahead, we continue to evaluate further accretive growth opportunities in both Canada and in Europe. With this portfolio growth and our continuing strong operating performance, we generated another strong period in Q3, as shown on slide 5.

Thanks, David Good morning, everyone and thank you for joining us today.

Crier, our Chief Financial Officer is also on the call today.

Turning to slide four we continue to increase the size scale and diversification of our portfolio through accretive acquisitions.

So far this year, we have purchased 8413 residential suites and MHC sites in Canada, and the Netherlands for just over $1 billion. These acquisitions. It strengthened our market presence and are driving further economies of scale and operating synergies through our experience improving property manager.

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Looking ahead, we continue to evaluate further accretive growth opportunities in both Canada and in Europe .

With this portfolio growth and are continuing strong operating performance we generated another strong period in Q3 as shown on slide five.

Mark Kenney: Revenues were up over 15%, driven by the positive contribution from our acquisitions, increased monthly rents, and continuing high occupancies. NOI rose more than 16%, with NFFO up 15%. We also generated another strong quarter of strong organic growth, with same property NOI up 3.7%. In addition, our growth continued to be accretive as NFFO per unit was up 3.3% despite the 11% increase in the weighted average number of units outstanding. Slide 6 outlines our results through the first 9 months of 2019, with revenues up almost 12%, NOI rising 13.5%, driving a 14.1% increase in MNFFO. Again, our growth was accretive as NFFO per unit rose 3.4% despite the 10.4% increase in the weighted number of units outstanding.

Revenues were up over 15% driven by the positive contribution from our acquisitions increased monthly rents and continuing high occupancy.

And why rose more than 16% and AFFO up 15%.

We also generated another strong quarter of strong organic growth was same property NOI up 3.7%.

In addition, our growth continued to be accretive that's in AFFO per unit was up 3.3%. Despite you 11% increase in the weighted average number of units outstanding.

Slide six eight lines our results through the first nine months of 2019.

With revenues up almost 12% and why rising 13.5% driving a 14.1% increase in eminent CFO .

Again, our growth was accretive that's an AFFO per unit rose, 3.4%. Despite the 10.4% increase in the weighted number of units its standing.

Mark Kenney: Our strong performance this year continues to be driven by our portfolio growth, solid increases in monthly rents, and continuing high occupancies. We look for this growth to continue. Our growth and success for more than 21 years is also the result of strong fundamentals in the residential sector, as detailed on slide 7. Our focus remains on large urban centers that are experiencing strong population growth and rising demand for quality rental properties. A number of factors are driving this strong demand. Natural population growth around the world, immigration trends that largely favor moving to cities, the global trend to urbanization with families and young people gravitating to these urban centers for jobs and a quality lifestyle.

Our strong performance. This year continues to be driven by our portfolio growth solid increases in monthly rent and continuing high occupancy.

We look for this growth to continue.

Our growth and success for more than 21 years. It's also the result of strong fundamentals in the residential sector as detailed on slide seven.

Our focus remains on large urban centers that are experiencing strong population growth and rising demand for quality rental properties.

A number of factors are driving this strong demand.

Natural population growth around the world.

Immigration trends that largely fever, moving to cities the global trend to urbanization with families and young people gravitating to these urban centers for jobs and the quality lifestyle.

Mark Kenney: Younger people are delaying having families and remaining in apartments and townhouses longer before they purchase a house or condo. The growing seniors population that is downsizing and finding rental properties more affordable and desirable. They also look to live on one floor and avoid stairs as they age, a perfect market for an apartment. Finally, the lack of new rental property development in most urban markets. We believe these market fundamentals will continue to drive demand in all of our target markets. In addition, demand continues to grow as people recognize how affordable renting can be. As you can see on slide 8, our average monthly rents in our largest Canadian markets, while they continue to rise, still remain very affordable compared to average family incomes in those neighborhoods. An affordable cost for a CAPREIT rental home ranges between only 18% and 25% of family income.

No there people are delaying having families and remaining in apartments and townhouses longer before they purchase a host where condo.

The growing seniors population that is downsizing and finding rental properties more affordable in desirable.

Also look to live on one floor and avoid steers as the age a perfect market for an apartment.

And finally, the lack of new rental property development in most urban markets.

We believe these market fundamentals will continue to drive demand in all of our target markets.

In addition demand continues to grow as people recognize how affordable renting can be.

As you can see on slide eight our average monthly rents get our largest Canadian markets well. They continue to rise still remain very affordable compared to average family incomes in those neighborhoods.

And affordable cost for a cap rate rental home ranges between only 18% and 25% family income.

Mark Kenney: Much more affordable than the estimated 56% of income being experienced for home ownership in Canada. As a percentage of median family income, the cost of home ownership in 2019 in the key cities of Toronto and Vancouver is even higher at 79% and 88% respectively, with Montreal home ownership sitting at 46%. Looking ahead, as the cost of owning a home continues to become more expensive, we believe that the demand for quality rental accommodation will continue to increase. These strong market fundamentals continue to drive our growth and our performance, as shown on slide 9. Occupancies remain very strong, while average monthly rents continue to increase, driven by solid rent increases on turnovers and renewals.

Much more affordable then you have to me to 56% of income being experienced for hone owners, who ownership in Canada.

That's a percentage of medium family income the cost of home ownership in 2019 in the key cities of Toronto, and Vancouver is even higher at 79% and 88%, respectively with Montreal homeownership sitting at 46%.

Looking ahead at the cost of owning a home continues to become more expensive. We believed that the demand for quality rental accommodation well continue to increase.

These strong market fundamentals continue to drive our growth and our performance is shown on slide nine.

Occupancy was remain very strong well average monthly rents continue to increase driven by solid rent increases on turnovers in renewals.

Mark Kenney: Our track record of organic growth also continues, with same property NOI up 4.7% for the 9 months ended 30 September 2019. In summary, we are confident our strong growth and operating performance will continue going forward. I'll now turn things over to Scott for his financial review.

Our track record of organic growth also continues with same property NOI up 4.7% for the nine month ended September Thirtyth 2019.

In summary, we are confident our strong growth in operating performance will continue going forward.

I'll now turn things over to Scott for his financial review.

Scott Cryer: Thanks, Mark. Turning to our balance sheet on slide 11, we continue to maintain a strong and flexible financial position with conservative leverage, strong coverage ratios, and historically low interest costs on our mortgage portfolio. Debt to GBV strengthened to just under 37% at 30 September, putting us in a great position for future acquisitions and development. You'll also note that our historical cost debt to GBV went from 53% to 50%, showing our prudence managing our equity. As you can see on slide 12, our foreign exchange exposure in Europe, including our investment in IRES, is at only 6% of our portfolio, while we maintain about 15% of our total asset value in Europe.

Thanks Mark.

Turning to our balance sheet on slide 11, we continued to maintain a strong and flexible financial position.

With conservative leverage strong coverage ratios and historically low interest costs on our March portfolio.

That to GE v. strengthened to just under 37% at September Thirtyth.

Putting us in a great position for future acquisitions and development.

You'll also note that our historical cost that did GBB went from 53% to 50% showing our prudence managing our equity.

I think in C on slide 12.

Our foreign exchange exposure in Europe , including our investment in Iraq and Iran.

Is that only 6% of our portfolio, while we maintain about 15% of our total asset value in Europe .

Scott Cryer: We are managing our European exposure by utilizing a number of different tactics with favorable impacts, including obtaining third-party mortgages at very favorable interest rates, utilizing our Euro acquisition and operating facility, and entering into close to CAD 100 million Euro swap to further hedge our Euro exposures. Currently, we have over EUR 1.4 billion of euro-denominated debt after factoring in these swaps. Our mortgage portfolio remains well-balanced, as shown on slide 13. Looking ahead, our ability to top up renewing mortgages through 2034 will provide significant liquidity to fund our acquisitions and development pipeline. Through the balance of 2019, we have CAD 85 million in mortgage maturing with an average interest rate of 2.8%.

We are managing our European exposure by utilizing a number of different tactics with favorable impacts, including obtaining third party mortgages at very favorable interest rates.

Realizing our euro acquisition in operation operating facility and entering into close to 100 million CAD Euro swap to further hedge our your exposures.

Currently we have over 1.4 billion of euro denominated debt after factoring in these swaps.

Our mortgage portfolio means well balanced as shown on slide 13, looking ahead, our ability to talk about renewing mortgages through 2034 will provide significant liquidity to fund our acquisitions and development pipeline.

Through the balance of 2019, we have 85 million in mortgages maturing maturing with an average interest rate of 2.8%.

Scott Cryer: Expected mortgage renewal and refinancings for 2019 are between CAD 365 and 415 million, excluding financings on acquisitions. With the recent drops in the BoC rates, we have seen ten-year financing costs drop back below the 2.5% range, creating, once again, a tailwind for continuing lower interest costs. On the liquidity front, slide 14 demonstrates that we remain well-positioned to continue our growth programs. In January 2019, we completed a successful bought deal offering, raising a total of CAD 288 million in funds, including the over-allotment option. To fund further growth, on 23 April, we completed another successful bought deal offering, raising a total of CAD 345 million in funds, including the over-allotment option.

Expected mortgage renewal and refinancings for 2019 are between 365 million to 415 million excluding financings on acquisitions.

And with the recent drops in the Geo see rates, we've seen 10 year financing cost dropped back below the 2.5% range, creating once again, a tailwind for some tenure and lower interest cost.

On the liquidity front slide 14 demonstrates that we remain well positioned to continue our growth programs.

In January 2019, we completed a successful bought deal offering raising a total 288 million in funds, including the over allotment option.

The fun further growth on April 23rd we completed another successful bought deal offering raising a total of 345 million in funds, including the over allotment option.

Scott Cryer: This results in a total equity raised to date in 2019 of CAD 633 million. With the acquisitions completed so far this year, we have approximately CAD 50 million available in borrowing capacity on our credit facilities at quarter end. In addition, there is available borrowing capacity under an existing bridge facility, as well as that's available under ERES unsecured credit facility. I'll now turn things back to Mark to wrap up.

The result, this results in a total equity raise a date in 2019 of 633 million.

With the acquisitions completed so far this year, we have approximately $50 million available borrowing capacity on our credit facilities at quarter end.

In addition, there isn't available board borrowing capacity.

Under an existing bridge facility as well as that that's available under either as unsecured credit facility.

I'll now turn things back to Mark to wrap up.

Mark Kenney: Thanks, Scott. Before we take your questions today, I wanted to walk you through why we believe our diversification strategies are so key to our ability to drive value for our unitholders. Our geographic diversification across Canada and internationally ensures that our unitholders are not overly exposed to any one market or demographic segment of the population, as detailed on slide 17. Additionally, our increased presence in the manufactured housing community business this year has added to our strength. We really like the MHC space for a number of reasons. Revenues are highly stable, and with residents owning their own homes, capital requirements and maintenance needs are significantly reduced. From a geographic standpoint, they enable us to have a presence in smaller markets, which we wouldn't normally enter. They allow for great operational efficiency as we leverage the same platforms and people used across all of our other properties.

Thanks Scott.

Before we take your questions today I wanted to walk you through why we believe our <unk> our diversification strategies are so key to our ability to drive value for our unit holders.

Our geographic diversification across Canada, and internationally ensures that our unit holders are not overly exposed to any one market or demographic segment of the population as detailed on slide 17.

Additionally, our increased presence in the manufactured housing community business. This year has added to our strength.

We really like the m. each see space for a number of reasons revenues are highly stable and with residents owning their own homes capital requirements and maintenance needs are significantly reduced from a geographic standpoint being able to have a presence in smaller markets, which we wouldn't normally enter the allow for great.

Operational efficiency as we leverage the seemed platforms and people used across all of her other properties.

Mark Kenney: Finally, we have the opportunity to boost revenues in the future by selling homes to residents. Importantly, CAPREIT is now the second-largest owner of manufactured home communities in Canada. Internationally, we continue to be pleased with our performance in Ireland, as you can see on slide 18. Through the first 9 months of 2019, asset and property management fees have increased 9%, driven by acquisitions and NAV appreciation, and we expect this revenue will increase as IRES continues to grow its portfolio. IRES has also completed a successful equity raise earlier this year, which we increased our ownership position to 18.3%. This retained interest continues to generate a solid stream of dividend income amounting to CAD 7.2 million for the 9 months ended 30 September 2019.

And finally, we have the opportunity to boost revenues in the future by selling homes to residents.

Importantly cap rate is now the second largest owner of manufactured home communities in Canada.

Internationally, we continue to be pleased with our performance in Ireland as you can see on slide 18.

To the first nine months of 2019 asset property management fees have increased 9%.

Driven by acquisitions and NAV appreciation and we expect this revenue will increase as Iris continues to grow its portfolio.

This is also completed a successful equity raise earlier this year, which we increased our ownership position to 18.3%.

This retained interest continues to generate a solid stream that dividend income amounted to 7.2 million for the nine months ended September Thirtyth 2019.

Mark Kenney: Our presence in the Netherlands also continues to drive value for unitholders, as shown on slide 19. By the end of September, we had sold a total of 2,710 residential suites to ERES through our pipeline agreement for over CAD 740 million. We now have sold all of our Netherlands properties to ERES, generating a growing base of fee revenues for our asset and property management services. CAPREIT now owns just under 74% of ERES, fully aligning our interest with all ERES unitholders. You can see through the first 9 months of 2019, we earned CAD 29.2 million of NOI from ERES properties in Europe, and another CAD 9.7 million from CAPREIT-owned properties in the Netherlands, which have now been sold to ERES.

Our presence in the Netherlands also continues to drive value for unit holders as shown on slide 19.

By the end of September we had sold a total of 2710 residential suites de rose through our pipeline agreement Rovers $740 million.

We now have sold all of our Netherland properties, two euros generating a growing base of fee revenues for our asset and property management services.

Cap rate now owns just under 74% to be rose Fulani fully aligning or interest with all you raise unit holders you can see through the first nine months of 2019, we earned 29.2 million to then away from eras properties in Europe , and another 9.7 billion from cap rate owned properties in the Netherlands.

Which have now been sold to eat rose.

Mark Kenney: ERES' strong presence in the vibrant Netherlands market further diversifies our business and provides opportunity for additional growth going forward. Driving this growth is our continuing ability to increase our average monthly rents in all of our markets. As you can see on slide 21, we are seeing solid increases in monthly rent on both turnover and renewals in Canada, the Netherlands, and our investment in IRES REIT in Dublin. Overall, the strong fundamentals and demand in all of our markets resulted in an overall 4.8% in our total stabilized net AMRs as of 30 September 2019. Our diversification also allows us to capitalize on the attractive spreads between cap rates and interest rates in our markets, as you can see on slide 22.

He read strong presence in the vibrant Netherlands market further diversifies, our business and provides the opportunity for additional growth going forward.

Driving this growth is our continuing ability to increase our average monthly rents in all of our markets.

As you can see on slide 21, we're seeing solid increases in monthly rent on both turnover and renewals in Canada, the Netherlands, and our investment in I Reds read in Dublin.

Overall, the strong fundamentals and demand in all of our markets resulted in an overall, 4.8% in our total stabilize net m. ours as at September Thirtyth 2019.

Our diversification also allows us to capitalize on the attractive spreads between cap rates in interest rates in our markets as you can see on slide 22.

Mark Kenney: The spreads in the Netherlands and at IRES are particularly attractive at roughly 2.4% and 3% respectively, and we don't believe we will see any major negative change in these spreads for the foreseeable future. In summary, we continue to focus on our long-term goal of making CAPREIT the best place to live, to work, and invest. To become the best place to live, we strive to enhance the lives of our residents by building strong relationships through our hands-on approach to management, a relentless focus on attracting and retaining the best residents, and the use of new and innovative technologies. To ensure that we attract and retain the best people, we have introduced new tools to help everyone stay connected and up-to-date on CAPREIT and industry information.

Spreads in the Netherlands, and I raised our particularly attractive at roughly 2.4, and 3% respectively and we don't believe we will see any major negative change in these spreads for the foreseeable future.

In summary, we continue to focus on our long term goal of making cap rate the best place to live to work and invest to become the best place to live we strive to enhance the lives of our residents by building strong relationships through our hands on approach to management, a relentless focus on a try.

Acting in retaining the best residents and the use of new and innovative technologies.

To ensure that we attract and retain the best people. We have introduced new tools to help everyone stay connected in up to date on cap rate and industry information. We've developed innovative leadership training programs to engage and help advance their careers well implementing state of the art tools and technologies to become more efficient.

Mark Kenney: We have developed innovative leadership training programs to engage and help advance their careers while implementing state-of-the-art tools and technologies to become more efficient. Most importantly, our ultimate goal is to enhance unitholder value, and CAPREIT has been one of the best places to invest for more than 21 years. Thank you for your time this morning, and we would now be pleased to take any of the questions you may have.

Most importantly, our ultimate goal is to enhance unit holder value and cap rate has been one of the best places to invest for more than 21 years.

Thank you for your time. This morning, we would now be pleased to take any of the questions you may have.

Thank you.

Operator 2: Thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your telephone keypad. If at any time you wish to cancel your question, please press the pound sign. Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Jonathan Kelcher from TD Securities. Please go ahead.

Operator: Thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your telephone keypad. If at any time you wish to cancel your question, please press the pound sign. Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Jonathan Kelcher from TD Securities. Please go ahead.

We'll now take questions from the telephone lines.

Having question then you are using a speaker phone people ask yellen said before making a selection if you'll have the question. Please press star one on your telephone keypad. If at any time you wish to catch on your question. Please press the pound sign. Please press star one at this time, if you have any question.

Well there will be false all participants, but just a couple questions. We thank you for your patience.

I'll first question, Jonathan Coucher from TD Securities. Please go ahead. Thanks good morning.

Jonathan Kelcher: Thanks. Good morning.

Mark Kenney: Good morning.

Scott Cryer: Good morning.

Mark Kenney: First question is just on the same property operations, in particular, the expense growth. That's been trending higher than your revenue growth for at least a couple of quarters now. What are your expectations on that going forward?

First the first questions just on.

Jonathan Kelcher: First question is just on the same property operations, in particular, the expense growth. That's been trending higher than your revenue growth for at least a couple of quarters now. What are your expectations on that going forward?

The same property operations and in particular the expense growth that's been trending higher than your revenue growth for for at least a couple of quarters now what what are your expectations on a.

Going forward.

So I think [noise] you know, we've we've talked about this before definitely arent EM is something that's a little lumpy. So we definitely saw higher run rate there.

Mark Kenney: I think, you know, we've talked about this before. Definitely R&M is something that's a little lumpy, so we definitely saw a higher run rate there. That we would see as more of a temporary. There are a couple items that have been more permanent. First of all, we have four ground leases that all kind of came to a renewal period in the current year. That's impacted kind of Q2 and Q3 pretty hard, to the tune of over half a million dollars each quarter in incremental land payments. That's something that's, you know, it's kind of an increase that will hit, you know, the next quarter as well, and then kind of flatten out there.

Scott Cryer: I think, you know, we've talked about this before. Definitely R&M is something that's a little lumpy, so we definitely saw a higher run rate there. That we would see as more of a temporary. There are a couple items that have been more permanent. First of all, we have four ground leases that all kind of came to a renewal period in the current year. That's impacted kind of Q2 and Q3 pretty hard, to the tune of over half a million dollars each quarter in incremental land payments. That's something that's, you know, it's kind of an increase that will hit, you know, the next quarter as well, and then kind of flatten out there. That's definitely a permanent increase that we've had to incur.

So that we would see as more as more of a temporary.

There are a couple items that have been more permanent.

Ah first of all we have for ground leases that all kind of came to a renewal period.

The current year I'm. So that's that's impacted kind of Q2 in Q3 pretty hard to the tune of.

Over half a million dollars each quarter and incremental land payments. So that's something that's.

Now, it's kind of and increase that will hit you know the next quarter as well and then in kind of flattened out there. So that that's definitely a permanent increase.

Mark Kenney: That's definitely a permanent increase.

Scott Cryer: that we've had to incur.

That weve that we've that we've had to incur.

Mark Kenney: Yeah, we don't see R&M, at the end of the day, being a rising trend increase. You know, the Q3, we've got a lot of moves that happened in our student portfolio, a lot of activity just in general, people moving in the month of September. I would see a return to more stabilized numbers going forward.

Yeah, we did we don't see our them at the end of the being a rising trend increase.

Third quarter got a lot of moves that happened in or student portfolio a lot of activity just in general people moving in the month of September I I would see a return to more stabilized numbers going forward yeah. Okay. So for for 2020 <unk>.

Scott Cryer: Yeah.

Jonathan Kelcher: Okay. For 2020, assuming you continue to get the revenue growth that it appears you should, you'd expect that to outpace cost growth?

Continues to get the revenue growth.

It appears you should you'd expect that Oh piece cost growth.

Mark Kenney: Yes.

Yes.

Jonathan Kelcher: Okay. Sorry, Scott, those four ground leases, I guess, that'd be Toronto, Vancouver, and Calgary?

Okay, and then just sorry, it's got those for ground leases I guess I'd be.

Try <unk>.

In Calgary.

Scott Cryer: No, it's actually.

No, it's actually Calgary been drink.

Mark Kenney: Calgary, Vancouver

Scott Cryer: ... three in C-, one in Vancouver and three in Calgary. Some of them are still being negotiated, but we've been prudent in making sure we're appropriately accruing for the potential step up.

One in Vancouver, and three in Calgary and some of them are still being negotiated what we've been we've been prudent in making sure were appropriately accruing for potential step up.

Jonathan Kelcher: Okay. Just turning to slide eight. I guess that's 2016, family income and versus the current AMR. Your stats would actually look a little bit better assuming that family incomes went up the last 2 or 3 years.

Okay, and then just turning to slide eight.

I guess that's 2016.

The income and versus the current atmar.

So your size is actually look a little bit better assuming that a family and comes went up the last two or three years.

Scott Cryer: That's right. Yep.

That's right Yep Yep.

Mark Kenney: That's correct. Yep.

Jonathan Kelcher: Okay. Just flipping that to the other side, how under market do you think your average monthly rents are in those three markets?

Okay, but and just flipping to the other side how under market do you think you're.

Bridge monthly rents are in those three markets.

Well I can give some general of use would be producing more information on this but in the G. T. A we see our mark to market being close to 30%.

Mark Kenney: Well, I can give some general views. We'll be producing more information on this. In the GTA, we see our mark-to-market being close to 30%. I would say the rest of Ontario, 21%. Quebec, we think we've mark-to-market 12%, and BC 18%. With both Alberta, you know, we're seeing positive mark-to-market in Alberta, about 4% in our estimation, with Nova Scotia sitting at around 6%. What's notable here is that for one of the first times in our history, we've got very positive mark-to-market across the portfolio.

I would see the rest of Ontario 21.

Quebec, we think weve mark to market 12.

And B C 18.

Both Alberta.

We're seeing positive mark to Mark in Alberta that 4% interest Imations.

Nova Scotia, I'm sitting at around 6%. So what's notable here is that for one of the first times in our history, we've got very positive mark to market across the portfolio.

Good and it as that like the GTH. If you were thinking about that six months ago, how much would have changed.

Jonathan Kelcher: Good. Has that, like the GTA, if you were thinking about that six months ago, how much would that have changed?

Mark Kenney: I think the number has been pretty stable over at least the last 18 months because the spread continues to hold, if not grow, due to the low churn. Just by virtue of rents gradually rising in the marketplace, our churn has been equally shrinking, which has been raising that mark-to-market overall.

It's I think the number has been pretty stable over at least the last 18 months because the spread continues to hold if not grow due to the low churn so.

So just by virtue of rents gradually rising in the marketplace. Our churn has been equally shrinking which has been raising that mark to market overall.

Okay. Thanks, I'll I'll turn it back.

Jonathan Kelcher: Okay. Thanks. I'll turn it back.

Operator 2: Thank you. Once again, please press star one at this time for any questions or comments. Our following question is from Mario Saric from Scotiabank. Please go ahead.

Operator: Thank you. Once again, please press star one at this time for any questions or comments. Our following question is from Mario Saric from Scotiabank. Please go ahead.

Thank you.

Once again, please press star one at this time for any questions well Commons.

Well following question is from Mario Saric from Scotia Bank. Please go ahead.

Mario Saric: Hi, good morning.

Hi, good morning.

Good morning, I'm going to stick as far as well.

Mark Kenney: Morning

Mario Saric: I'm gonna stick to slide 8, as well. The percentage of household income that you're reporting there, I think in the past, within the CAP portfolio, we've talked about kind of rent to household income in the 30% to 35% range. So these numbers are meaningfully below that. Is that a calculation difference or is there something else that-

The percentage of household income that you're reporting.

Uh huh.

Portfolios talked about.

Household income in the.

35% range.

Are meaningfully below.

Calculation difference.

It is or something else.

Mark Kenney: No, what we wanted to do there is to show just average family household incomes to compare the rental proposition and homeownership. If we took average family income for our portfolio and then took a different family income for number for homeownership, you wouldn't have a true representation. You can see that by taking just average family incomes, the huge disconnect between affordability in homeownership versus the very attractive, even today, rental proposition in the CAPREIT portfolio. That's taking our actual rents, comparing it to average family income, and comparing it to homeownership rates in the markets that we've described. It's quite compelling. Quite often, we're getting these affordability questions, and we just thought it was better or best to give some representation of how truly affordable the CAPREIT portfolio is.

No what what we wanted to do there is to show just average a family household incomes to compared the rental proposition and home ownership. If we took a average family income for our portfolio and they took a different family income number for homeownership, you wouldn't have a true representation.

But you can see that by taking just average family incomes. The huge disconnect between affordability in home ownership versus the very attractive even today homeownership rental proposition in the cap rate portfolio.

That's taking our actual rents comparing it to average family income and comparing it to homeownership rates in the markets that Weve described.

It's it's gets quite compelling quite often we're getting these affordability questions and we just thought it was better our best to give some representation of how truly affordable to coppery portfolio is.

Mario Saric: If we just look at your AMR divided by like the household income estimate in your portfolio.

So if we just if we look out.

Mario Saric: If we just look at your AMR divided by like the household income estimate in your portfolio.

Sure.

Your portfolio.

Mark Kenney: Yes

Mario Saric: What would those percentages look like today?

Yes.

Today.

They would be slightly higher but still well within our traditional 35% guidance.

Mark Kenney: They would be slightly higher, but still well within our traditional 35% guidance.

Got it okay.

Mario Saric: Got it. Okay. The second question is just on the fair value gain during the quarter, pretty substantial at CAD 264 million, 80% of it was due to higher expected NOI. Can you walk us through how that is calculated on the NOI side and specifically kind of how you capture the very attractive mark-to-market in the portfolio that Mark alluded to earlier on the call in that IFRS valuation?

In.

The second question just on the.

During the quarter.

Substantially huh.

4 million, 80% of it was.

Can you give anymore.

Oh that is correct.

And then specifically kind of how you capture.

Dr. Mark to markets and the portfolio Mark alluded to.

On the call.

All right for us.

Yeah, I mean, we <unk>, it's we'd do a stabilized one year forward a roll up our rent rolls based on kind of turnover and renewal rates that we're seeing so we do that quarterly just to kind of keep up.

Scott Cryer: Yeah, I mean, we do a stabilized one-year forward roll of our rent rolls based on kind of turnover and renewal rates that we're seeing. We do that quarterly just to kind of keep up. We obviously have our third-party evaluator help us with cap rates. You know, the reality is that the year-end process is obviously more robust in that you kind of need to take those growth rates into consideration on the cap rates. We generally just roll our rent rolls and take the impacts of those of a one-year roll forward.

And then we obviously have by third party valuate or help us with cap rates.

The reality is that the year end process is obviously more robust than that you kind of need to take those growth rates into consideration on the cap rates, but so we we generally just roll our rent rolls and and and take the impacts of those of a one year roll forward and we don't fully that mark to market that we talked about earlier.

Mark Kenney: The mark-to-market that we talked about earlier would be somewhat reflected in the cap rate when the appraiser takes a look. We've had a very conservative practice at CAPREIT over the years of being careful with those cap rates, because there can be market distortions that happen. Just because one transaction happens doesn't mean it's truly reflective of the whole market.

Is a would be somewhat reflected in the cap rate when the appraiser. It takes a look but we've had a very conservative practice, a cap rate over the years of being careful with those cap rates.

Because there can be market distortions that happen.

It's because one transaction happens doesn't mean, it's truly reflective of the whole market.

Mario Saric: Right. I guess to summarize, it's partially reflected in the cap rate, i.e., the IFRS-

So I.

Understood.

It's partially reflected in the car.

Mark Kenney: Partially reflected in the cap rate.

Partially reflecting the cap rate.

Mario Saric: So-

Mark Kenney: Yep.

Mario Saric: Not nearly to the extent of the full mark-to-market upside over time.

Yep.

Yes.

Before mark to market.

I'm sorry overtime.

Mark Kenney: No.

Scott Cryer: Correct.

Mark Kenney: That's true. The CAPREIT upside mark-to-market is in excess of 20% portfolio-wide.

No correct, that's true cap rate upside mark to market is in excess of 20, 20% portfolio wide.

Okay, and then just there's been a lot of transaction activity or.

Mario Saric: Okay. Just there's been a lot of transaction activity or the expectation for transaction activity in the market in Q4 with larger portfolios, including the Continuum deal announced last week. Is any of that reflected in your cap rates that you highlighted in Q3? Secondly-

Expectation for transaction activity in the market.

Q4, with larger portfolios, including the continuum deal announced last week.

Yes.

Uh huh.

<unk> routes.

<unk>.

Sorry.

Mark Kenney: Yes

Mario Saric: ...would the Kings Club fair value bump be reflected in the 264 at all?

Mark Kenney: Yes

Mario Saric: ...would the Kings Club fair value bump be reflected in the 264 at all?

Kings club.

On a reported in the 264 of them.

Scott Cryer: Yeah. Definitely the transactions as of recently are not included in any of these. You know, obviously, we've been paying attention to that transaction, and it would only allude to a further compression, definitely at least in the GTHA, of course. Yeah, those are not incorporated at all.

Yeah. So definitely the transactions that have recently are not included in any of the so you know obviously, we've been paying attention to that transaction and.

It would only alluded to a further compression definitely at least in the GTH <unk> of course.

So yeah those are not incorporated a at all when we look at a the mark to market rents are we feel that our properties are oh roll a superior locations.

Mark Kenney: When we look at the mark-to-market rents, we feel that our properties are overall superior locations, and condition-wise are exceptional given our long record of investing in the properties. Given similar mark-to-markets and given the quality of the CAPREIT portfolio, I would suggest that our unit holders are sitting on tremendous value.

And condition wise or exceptional given our a long record of investing in the properties.

And given similar mark to markets and given the quality of the cap REIT portfolio.

I would I would suggest that a or unit holders are sitting on tremendous value.

Scott Cryer: Yeah. In regards to your second half of the question, we did take a fair value bump on that asset in this quarter that was fairly significant. That definitely had a strong contribution to the overall gain.

Yeah, Andrew regarding the two years second half of question, we did take a fair value bump.

On that asset.

In this and that in this quarter that was fairly significant.

So that that out that definitely had a strong contribution to the overall gain.

Mark Kenney: It's interesting, Mario, on that, on Kings Club, because only because we're on the topic of mark-to-market. I think, well, I know that you know and others know that we've been progressing with purchasing of brand new properties in the portfolio quite robustly. Even with those big transactions, clearly the mark-to-market on those rents is zero if we're doing our job properly. Even with those fully mark-to-market properties, we're still seeing very significant overall spread.

It's interesting Mary on that Oh kicks up because only because one of the topic of mark to market.

I think well I know that you know and others know that we've been progressing with purchasing a brand new properties in the portfolio quite robustly and so even with those big transactions clearly the mark to market and those rents is zero, if we're doing our job properly, but even with those fully a mark to market properties were still seeing very sick.

Terrific and overall spread.

Okay.

Mario Saric: Interesting. Okay. Just on the liquidity position on slide 14 that you noted, the existing liquidity is kind of back to where it was in early 2016 in terms of size. Given the strength in the market on the valuation side that you're seeing and the acquisition opportunities going forward, how do you think about selling assets into the strength in terms of enhancing that liquidity or essentially recycling capital from one asset to another?

Just on.

Position.

14.

Existing liquidity is.

It was and.

In early 2016 in terms of size.

Given.

The strength in the market.

I'm, sorry that you're seeing.

Opportunities going forward.

So so.

Into the strength in terms of enhanced liquidity essentially recycling capital from one off to another.

Mark Kenney: Yeah. We, I think you may have seen some of the assets that we recycled in 2018, and we really have taken the non-strategic approach. Sorry, if the asset is non-strategic, we'll consider disposition. Given these mark-to-market spreads in the CAPREIT portfolio, I would say overall, we would like to continue to deliver value to the unit holders. With these kind of mark-to-market spreads, we can't find assets of the quality of the CAPREIT portfolio. You know, we talked a little bit earlier about repairs and maintenance spend. This is a seasonal change for us. However, our commitment to investing in the buildings is completely unwavering. The quality of the portfolio, I think, just really stands out relative to other transactions that have happened in the market.

Yeah. We I think you may have seen some of the assets that we recycled in 2018, and we really have taken the non strategic approach it sorry.

Yes. It is non strategic we'll consider disposition, but given these mark to market spreads in the coppery portfolio I'd say overall, we would like to enjoy to deliver value to the unit holders with these kind of mark to markets.

We can't find assets of the quality of the cap rate portfolio, we talked a little bit earlier that repairs and maintenance spend and I do this is a seasonal change for us however, our commitment to investing in the buildings is completely on waiver and the quality of the portfolio I think just a really stands out relative to others.

Transactions that have happened in the market.

Mario Saric: Got it. Okay. My last question, and I may be reading too much into this, but on the development side, I noted that you removed the word well in front of the excess of 10,000 suites in some of your disclosure when describing your pipeline. Is that an indication that you're perhaps becoming a little less optimistic on the development potential within the portfolio going forward? If so, what is driving it?

Right. Okay. My last question.

Too much into this but on the developments.

The word well in front of New York, So sometimes those reasons.

<unk>.

Describe your pipeline.

As an indication that you're becoming a little less optimistic on.

The development potential.

Before we were going forward and if so what is driving.

Mark Kenney: Well, that's an incredibly astute observation.

That's that's an incredibly institute up [laughter] every node is the change it was certainly I'm not intentional you know we remain extremely I'm optimistic about our development opportunities in the cap rate portfolio, especially given or locations. They transactions that are happy leant condo.

Mario Saric: Thank you.

Mark Kenney: I'm not sure we noticed the change. It was certainly not intentional. You know, we remain extremely optimistic about our development opportunities in the CAPREIT portfolio, especially given our locations. The transactions that are happening, look at condo prices hitting brand new records. We know our land is not replaceable. That being said, we continue to be mildly frustrated with the length of time it's taking to get entitlement done. You know, very encouraged at the value creation that lays ahead. We've got no real change of heart in terms of our ambitions to move forward. We're really going as fast as we can, and it's a slow process. However, it continues to, unfortunately, just express that supply problem that the market has in general.

Races, hitting brand New records, we know our land is a is not replaceable that being said where can we continued to be mildly frustrated with the length of time, it's taking to get entitlement done.

But you know very encouraged to the value creation that leaves ahead.

We've got no real change of heart in terms of her ambitions to move forward.

Really going as fast as we can it it's a slow process.

However, it continues to.

Unfortunately, just a expressed that supply problem that the market has in general if it were unable to do this with free Lad. We're it's it's really not the good news for the market in general terms of delivering affordable supply.

Mark Kenney: If we're unable to do this with free land, it's really not good news for the market in general in terms of delivering affordable supply.

Understood Okay.

Mario Saric: Understood. Okay. Thanks for the color.

<unk>.

Operator 2: Thank you. Our following question is from Mike Markidis from Desjardins. Please go ahead.

Operator: Thank you. Our following question is from Mike Markidis from Desjardins. Please go ahead.

Thank you I'm. Following question is from Mike My cadence.

<unk>. Please go ahead.

Michael Markidis: Hi, everyone. Mark, thanks very much for all those spreads that you gave by region. I think that's very helpful. I think you managed, or you mentioned that you've been doing some work on that. Is that something that is gonna be rolling itself into CAPREIT's quarterly disclosure in the near future?

Mike Markidis: Hi, everyone. Mark, thanks very much for all those spreads that you gave by region. I think that's very helpful. I think you managed, or you mentioned that you've been doing some work on that. Is that something that is gonna be rolling itself into CAPREIT's quarterly disclosure in the near future?

Hi, everyone Mark Thanks, very much for all those spreads you give by region. I think that's very helpful. I think you manage and where you mentioned that you've been doing some work on that is that something that is gonna be rolling itself into cap rates quarterly disclosure in near future.

Mark Kenney: Yes, it is. Yeah, it's something that we feel that the market's been asking for. I know you've been asking for it, Mike. It's such a great story. You know, we temper everybody. Market rents can change. We don't see that in Ontario anytime soon, even BC. Some of the other markets, as we all learned, especially out West, can be quite punitive fast. We're really encouraged that all of our markets are firing well. I would continue to deliver caution around those numbers being permanent in all markets.

Yes. It is yeah. It's a it's something that we we feel that the market's been asking for I know you've been asking for life and it's such a great story, you know tempur everybody market rents can change.

We don't see that in a in Ontario, anytime soon even even B.C., but some of the other markets I'm as we all learned especially at west can can be quite a punitive fast. So we're really encouraged that all of our markets are firing well, but I would to get continue to deliver caution.

Around those numbers being permanent.

In all markets.

Michael Markidis: Of course.

Mike Markidis: Of course.

Mark Kenney: They're indicative moment in time.

Of course, they are indicative threedic their indicative moment in time, okay small change, but I guess sequentially in the Canadian portfolio your rent spread on turnover did come down a little bit.

Mark Kenney: They're indicative moment in time.

Michael Markidis: Okay. Small change, but I guess sequentially in the Canadian portfolio, your rent spread on turnover did come down a little bit. Is that impacted at all by your Quebec portfolio and the fact that there's still a high proportion of leases that turn on July 1, or is that not a factor?

Mike Markidis: Okay. Small change, but I guess sequentially in the Canadian portfolio, your rent spread on turnover did come down a little bit. Is that impacted at all by your Quebec portfolio and the fact that there's still a high proportion of leases that turn on July 1, or is that not a factor?

That impacted at all by.

Your product portfolio and the fact that there's still a high proportion of leases that turn on July one or is that not a factor.

No I mean actually.

Scott Cryer: No. I mean, actually, we've seen Quebec probably accelerate generally over the definitely over the last year. We've seen Quebec performing quite well. You know, I don't think it's driven out of the Quebec market at all.

We've seen come back probably accelerate a generally over the over the definitely over the last year, we've seen tobacco performing quite well quite well.

So you know I I don't think it's it's driven out of that market at all there is a little bit of like I said to repeat.

Mark Kenney: There is a little bit of, like I said, to repeat, obviously, and a bit of an effect of new construction assets as they come into the marketplaces. That'll lower the mark-to-market, again, because we're at market. We continue to strongly believe that if we're able to acquire assets at favorable cap rates, with the quality of the assets and the CapEx profile, that the market likes to understand, there's a major benefit to that. You know, we're mindful of the fact that mark-to-market is important, but we're also mindful of the fact that buying good accretive acquisitions that don't have CapEx exposure in the future can also be meaningful.

A there is a little obviously in a bit of in effect of new new construction assets as they come into the market places.

That will lower the mark to market again, because were not market and we continue to strongly believed that if we're able to acquire assets at favorable cap rates with the quality of the assets in the Capex profile, a that the market likes to understand.

The there was a major benefit to that so you know we're we're mindful of the fact that mark to market. It is important but we're also mindful of the fact that buying good accretive acquisitions that don't have capex exposure in the future can also be meaningful.

Michael Markidis: Yeah, that's a good point. I didn't actually think about that. You guys have bought some new assets, and obviously the turnover on that would be different. Okay.

Mike Markidis: Yeah, that's a good point. I didn't actually think about that. You guys have bought some new assets, and obviously the turnover on that would be different. Okay.

Yeah. It's a good point I didn't hear I actually think about that you guys have bought some some new assets and obviously the turnover on that would would be different okay. It'd be paid differently kicked kings club will be a great example of that.

Mark Kenney: It pays differently. Kings Club will be a great example of that.

Michael Markidis: Right. Right. No, that's fair. Okay. Just in terms of your fee revenue, just given all the known activity that's been completed or announced in ERES, are you able to give us a sense of what the run rate for your fee revenue would be now?

Mike Markidis: Right. Right. No, that's fair. Okay. Just in terms of your fee revenue, just given all the known activity that's been completed or announced in ERES, are you able to give us a sense of what the run rate for your fee revenue would be now?

Right now that's fair Okay. Just in terms of your fee revenue just given all the no one activity that's a been completed or announced in <unk>. As are you able to give us a sense of what the run rate for for your fee revenue would be now.

Yeah, I think we've actually got some hopefully what you'll find is a decent disclosure.

Scott Cryer: Yeah. I think we've actually got some. Hopefully, what you'll find is a decent disclosure in our other income section on the MD&A.

And our other income section on the Mdna, Okay, I'm, sorry, pointing towards that I think what's excluded unfortunately, but we've we've added and notes kinda give a run rate we had the I read the income coming through the E. Raz income because we consolidate it's considered a related party to.

Michael Markidis: Okay.

Mike Markidis: Okay.

Scott Cryer: I point you towards that. I think what's excluded, unfortunately, but we've added a note to kind of give a run rate. We have the IRES income coming through. The ERES income, because we consolidate, it's considered a related party transaction, so it's completely eliminated from our income statement, but we provided disclosure. As our percentage ownership drops down, we'll see a bigger percentage of that hit the FFO line item. Yeah, there's some disclosure on there that'll get you numbers. I think it was about CAD 4.4 million for ERES as of Q3.

Transaction. So it's completely eliminated from our income statement, but we provided disclosure so as our percentage ownership drops down will well well see a bigger percentage of that had the NFL a line item, but yeah. There's some disclosure on that'll get you numbers.

I think there's about 4.4 million for you right.

Q3 got itself. So all of that is iras and the rest portion of clearly luminaire, but you actually get a bump in Europe if on the on the bottom.

Michael Markidis: Got it. All of that is IRES, and the ERES portion is completely eliminated, but you actually get a bump in your FFO on the bottom below the line.

Mike Markidis: Got it. All of that is IRES, and the ERES portion is completely eliminated, but you actually get a bump in your FFO on the bottom below the line.

Scott Cryer: Sorry. The CAD 4.4 million was just ERES. IRES is closer to CAD 6 million-

For the 4.4 was just easier as I read the closer to 6 million you'll tend to fluctuate.

Michael Markidis: It's in the five slide.

Mike Markidis: It's in the five slide.

Scott Cryer: you know, for the nine months. You'll see it there, and you can kinda translate what that looks like forward. Yeah, from an FFO point of view or from an income statement point of view, not to get too technical

<unk> for that for the nine month, so you'll see it there and you can kind of translate what that looks like Ford, but yeah. The from an AFFO point of view.

From an income statement point of view not to get to technical we eliminate the asset property management fee, but from an F.L. point of view, we actually do include.

Michael Markidis: Okay

Mike Markidis: Okay

Scott Cryer: ... we eliminate the asset and property management fee. From an FFO point of view, we actually do include the non-controlling interest percentage of that fee in our FFO.

The the non controlling interest percentage of that he and I got it also you know that's trending around 20, 530% right now okay Awesome and last one from me another type of question apologies, but your liquidity position being what it was I guess the problem no being repaid from your as you read subsequent to quarter.

Michael Markidis: Got it.

Mike Markidis: Got it.

Scott Cryer: You know, that's trending around 25 to 30% right now.

Michael Markidis: Okay. Awesome. Last one for me and another technical question. Apologies. Your liquidity position being what it was, I guess the promissory note being repaid from ERES subsequent to quarter, the way you're disclosing and thinking about liquidity, that would be incremental to your liquidity at quarter end, would it not, fully?

Mike Markidis: Okay. Awesome. Last one for me and another technical question. Apologies. Your liquidity position being what it was, I guess the promissory note being repaid from ERES subsequent to quarter, the way you're disclosing and thinking about liquidity, that would be incremental to your liquidity at quarter end, would it not, fully?

The way you're disclosing in thinking about liquidity that that would be.

Incremental to your liquidity at quarter and whatnot.

Scott Cryer: Yes.

Michael Markidis: It would.

Yes or no.

Mike Markidis: It would.

Scott Cryer: Yeah.

Michael Markidis: Okay.

Mike Markidis: Okay.

Scott Cryer: Fully.

Michael Markidis: All right.

Mike Markidis: All right.

All right, Yeah, and then obviously normal course mortgage financing et cetera.

Scott Cryer: Yeah. Then, obviously, normal course mortgage financings, et cetera. Obviously, our leverage continues to drop significantly, so we continue to look for other debt financing opportunities.

And we are obviously, our leverage continues to drop significantly. So we continue to look for other debt financing opportunities.

Michael Markidis: Very, very helpful. Thanks, guys.

Mike Markidis: Very, very helpful. Thanks, guys.

Very helpful. Thanks, guys.

Mark Kenney: Thanks, Mike.

Thanks, Mike.

Operator 2: Thank you. Our following question is from Matt Kornack from National Bank Financial. Please go ahead.

Operator: Thank you. Our following question is from Matt Kornack from National Bank Financial. Please go ahead.

Keith I'm following question, if I'm not going away from National Bank Financial. Please go ahead.

Matt Kornack: Hi, guys. Just a quick

Matt Kornack: Hi, guys. Just a quick question on the mark-to-market. I assume that doesn't include potential suite renovations in terms of improvements. Can you comment? I mean, you've done a lot of heavy lifting, obviously, on building improvements, but presumably you've also renovated a lot of your suites. Is there still an opportunity along those lines to generate higher mark-to-markets?

That's just a quick question on the Mark to market I assume that that doesn't include potential suite renovations in terms of improvement and then can you comment I mean, you've done a lot of heavy lifting obviously on building improvements, but presumably you've also renovated a lot of your suites. So is there.

Mark Kenney: Hi, Matt.

Matt Kornack: ...question on the mark-to-market. I assume that doesn't include potential suite renovations in terms of improvements. Can you comment? I mean, you've done a lot of heavy lifting, obviously, on building improvements, but presumably you've also renovated a lot of your suites. Is there still an opportunity along those lines to generate higher mark-to-markets?

We're still an opportunity along those lines or to generate higher mark to markets.

Mark Kenney: Hi, Matt.

Mark Kenney: The mark-to-markets have been done on established rents. When we're running a reno program, it would take that into account. Like, when we're mark-to-marketing, we're not guessing what the market can deliver. We're basing it on what we've achieved. There are opportunities perhaps where we decide a reno program in a particular building can have a dramatic impact, and that would change the mark-to-market. I would say to be clear, the current mark-to-market that we've been quoting here takes into account the reno program we've been running.

The Mark to markets have been done on established rents. So when we're running a rental program. It would take that into account like over mark to marketing, we're not a guessing what the mark can deliver we're basing it on what we've achieved so there are opportunities, perhaps where we decide that rental program at a particular building can have a.

Dramatic impact and that would change the mark to market.

So I would say to be clear weve. The current mark to market. We've been quoting here takes into account the rental program we've been running.

Matt Kornack: Okay. No, that makes sense. I don't know where it stands, but a rough percentage in terms of the opportunity you see at this point in terms of higher-end suite renovations?

No that makes sense and.

I I don't know where it stands but what would a rough percentage in terms of of the opportunity you see at this point in terms of higher and suite renovations.

Well I you know I think the path. We're currently on like the higher and is really showing up in the suburbs. As you may have her to see that the format like the the move from the core in into the suburbs has really been where we've seen the most success.

Mark Kenney: Well, you know, I think the path that we're currently on, like the higher end is really showing up in the suburbs, as you may have heard us say that before, Matt. Like the-

Matt Kornack: Yeah.

Mark Kenney: The move from the core and into the suburbs has really been where we've seen the most success. Affordability in general in the core has been pushed for so many years now that the renos in the core don't seem to take hold as well as they are in the suburbs.

And affordability in general in the core has been pushed for so many years now that the rentals in the core don't seem to take hold as well as they are in the suburbs.

Matt Kornack: Some of your peers are pushing rents pretty aggressively in Montreal. I know it's an interesting rent control regime there, but are you seeing improved dynamics in that market in your portfolio as well?

Some of your peers are pushing rents pretty aggressively in Montreal.

So interesting rent control regime, there, but are you seeing improved dynamics in that market in your portfolio as well.

Mark Kenney: Yeah. I think we said almost 6%, mark-to-market. You know, we also believe in that. The only caution here is that, you know, when you get into that fully maximized highest level rent, you are now in a far bigger churn environment.

Yeah, I think we said almost 6% a mark to market.

And we also believing that it would only the cone caution here is that you know when you get into that fully maximize highest level read.

You are now in a from a bigger churn environment.

Matt Kornack: Right.

Mark Kenney: Your cost can also be affected by that churn. Sometimes the math doesn't ultimately play out. It will in a year, but as you see over time, if you've got high increased churn at absolute high-end rents, then, A, your vacancy will be impacted, your churn costs will be impacted, and you just end up with a little more volatility. You know, we explore that stuff. We explore it cautiously.

Your cost can also be affected by that churn. So sometimes the boss doesn't ultimately play out you're willing to year, but as you see over time, if you've got high increased churn <unk> absolute tie in rents that eight your vacancy you'll be impacted the churn cost would be impacted and you just end up a little more volatility.

So you know we explore that stuff, we explore it cautiously yard our actual like turn over last year year to date for the versus this year year to date, you know last year were closer to five and come back over all in this year. We're closer to 11. So we are definitely seeing a significant.

Scott Cryer: Yeah. Our actual, like, turnover last year to date versus this year to date. You know, last year we were closer to 5 in Quebec overall, and this year we're closer to 11. We are definitely seeing a significant increase in the Quebec market there. Yeah.

Increase so in in the come back market area.

Mark Kenney: Getting greater churn to the higher rents.

Great greater churn due to higher rents.

Matt Kornack: Interesting. I think the answer to this is gonna be no, but would you ever consider selling the air rights in your properties or developing condos for profit as opposed to rental?

Sure thing and I think the answer to this is gonna be no, but would you consider selling the air rights on your properties are developing condos for profit as opposed to rental.

We're rental company that being said as we get entitlements done we will be looking for the highest and best use of that land and if it's incredibly compelling to sell landed condo premiums than we would consider doing that and recycling the money into value add or or new.

Mark Kenney: We are a rental company. That being said, as we get entitlements done, we will be looking for the highest and best use of that land. If it's incredibly compelling to sell land at condo premiums, then we would consider doing that and recycling the money into value add or new income producing properties.

Income producing properties, Okay would have to be very very a compelling for us to do that and I would assume that would be urban terrano or.

Matt Kornack: Okay.

Mark Kenney: It would have to be very compelling for us to do that.

Matt Kornack: I would assume that would be urban Toronto or maybe Vancouver, but.

Maybe then Cooper.

Mark Kenney: Oddly enough, it's like suburban again, Toronto, where you're seeing like real density allocations being given. Yeah, we've got a number of properties that as we get close to entitlements, we'll give much better guidance in terms of what our intentions are.

Uh Huh oddly enough. It is like suburban again, Toronto, where you're seeing with real density allocations being given.

But yeah, we've got a number of of properties that as we get close to entitlements will give we'll get much better.

In terms of water intentions are okay. That's perfect. Thanks, yes.

Matt Kornack: Okay. That's perfect. Thanks, guys.

Mark Kenney: Thank you, Matt.

Thank you. Thank you. Thank you.

Operator 2: Thank you. Our following question is from Mario Saric from Scotiabank. Please go ahead.

Operator: Thank you. Our following question is from Mario Saric from Scotiabank. Please go ahead.

My question is from Mario Saric from Scotia Bank. Please go ahead.

Mario Saric: Hi. Sorry, just one more for me. Just a clarification on the 20%+ mark-to-market on the total portfolio. What would the implied CapEx spend per door be to generate that 20%+? Would it be-

Hi, sorry, just one more for me just a clarification on the 20% plus mark to market.

What would the employed.

Capex spend per door.

20%.

I don't have the number handy, but it would follow the the trend of what's happened to date on there would be no. There's no I'm not sure who asked the question, we're not planning giant rentals to achieve those numbers, we would be continuing with the program that we have.

Mark Kenney: I don't have the number handy, but it would follow the trend of what's happened to date. I'm not sure who asked the question. We're not planning giant renos to achieve those numbers. We would be continuing with the program that we have because what we're doing is we're looking at actual rents that we've achieved, and those actual rents that we've achieved have been a result of the CapEx program we currently have in place. There wouldn't be a trend from the current CapEx spend. That's a big number, Mario. If you look at our in-suite trend and you look at the mark-to-market rents that we're achieving, that would give you the answer. I just don't have the per unit down.

Because what we're doing as we're looking at actual rates that we've achieved and those actual rents that we've achieved had been a result of the Capex program. We currently have in place.

So there wouldn't be a a trend from the current topics then that's a big numbers myrio to.

If you look at her in Sweet trend and you look at the.

Look at the a mark to market rents that were achieving that would give you. The answer I just don't have the person per unit, though.

Mario Saric: Got it. Okay. Thank you.

Okay.

Thank you. This concludes todays <unk> session I would now like to China meeting over to Mr. Kenny.

Mark Kenney: Thanks.

Operator 2: Thank you. This concludes today's Q&A session. I would now like to turn the meeting over to Mr. Kenny.

Operator: Thank you. This concludes today's Q&A session. I would now like to turn the meeting over to Mr. Kenny.

Well. Thank you very much as we appreciate everybodys ongoing interest in ER and Capri and Ah. Thank you so much for your time today.

Mark Kenney: Well, thank you very much, as we appreciate everybody's ongoing interest in CAPREIT, and thank you so much for your time today.

Thank you.

Operator 2: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. This conference is no longer being recorded.

Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. This conference is no longer being recorded.

Thanks, That's now and then.

Please disconnect your lines at this time and we thank you for your participation.

This conference is no longer being recorded.

No. This is paramount to sit coffeehouse it doesnt Pete.

David Brown: Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you. S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you. S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you. S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you.

Office people.

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Okay, and you're not because it had been coffeehouse autonomy.

She was feeling you see.

Since FIFA. Please note that this conference call has ended please disconnect. Your line at this time. Thank you.

Okay opinion, that's because it took us something else autonomy.

And our Cushing with funding.

I don't process before.

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Pending not because.

I don't see Tammy.

Okay, because she was funding.

So to speak for them.

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David Brown: S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you. S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you. S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra. Please note that this conference call has ended. Please disconnect your line at this time. Thank you. S'il vous plaît, prenez note que cet appel conférence est terminé. S'il vous plaît raccrochez votre ligne. Merci. Un message en français suivra.

Turning up because it had been coffeehouse autonomy.

She was funding.

Process FIFA. Please note that this conference call has ended please disconnect. Your line at this time. Thank you.

Okay opinion, that's because it took us something else autonomy.

Okay, and I could see what funding.

Since before.

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Okay opinion, not because that's going to host autonomy.

Yeah, She was funding.

Oh says people.

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You can pick from the University Medical center for Tommy.

Consumer spending.

Since we've.

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