Q4 2019 Earnings Call

February 13, 2020

Good morning, My name is showing up and I will be a conference operator today.

Operator: Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Killam Apartment REIT's Q4 2019 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. Thank you. Mr. Philip Fraser, President and CEO, you may begin your conference.

At this time I would like to welcome everyone to the calendar apartment weight fourth quarter 2019 financial results Conference call.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session. It seems like that's the question during this time.

Sorry, and the number one on your telephone keypad.

If you like to withdraw your question. Please press star followed by too.

Thank you Mr. filtration, President and CEO you may begin your conference.

Thank you Hello, and thank you for joining compartment rigs Q4 and year end 2019 conference call.

Philip Fraser: Thank you. Hello, and thank you for joining Killam Apartment REIT's Q4 and Year-End 2019 Conference Call. I am here today with Robert Richardson, Executive Vice President, Dale Noseworthy, Chief Financial Officer, Erin Cleveland, Senior Vice President of Finance, and Nancy Alexander, Vice President of Investor Relations and Sustainability. Slides to accompany today's call are available on the investor relations section of our website under events and presentations. I will now ask Nancy to read our cautionary statement.

I'm here today with Robert Richardson Executive Vice President they'll Noseworthy, Chief Financial Officer, Aaron Cleveland, Senior Vice President Finance and Nancy Alexander.

Vice President Investor Relations and sustainability.

Slides to accompany today's call.

Are available on the Investor Relations section of our website under events and presentations I will now ask Nancy to read our cautionary statement.

Dale Noseworthy: Thanks, Phil. This presentation contains forward-looking statements with respect to Killam Apartment REIT's operations, strategy, financial performance and conditions. The actual results and performance of Killam Apartment REIT could differ materially from those expressed or implied in such statements. These statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from those expressed include, among other things, general economic and market factors, competitions, changes in government regulations, and factors described in the Risk Factors section of Killam's Annual Information Form and other securities and regulatory filings. This cautionary statement qualifies all forward-looking statements attributable to Killam and the persons acting on its behalf. Unless otherwise stated, all forward-looking statements are as at the date of this presentation, and the parties have no obligation to update such statements.

[Company Representative]: Thanks, Phil. This presentation contains forward-looking statements with respect to Killam Apartment REIT's operations, strategy, financial performance and conditions. The actual results and performance of Killam Apartment REIT could differ materially from those expressed or implied in such statements. These statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from those expressed include, among other things, general economic and market factors, competitions, changes in government regulations, and factors described in the Risk Factors section of Killam's Annual Information Form and other securities and regulatory filings. This cautionary statement qualifies all forward-looking statements attributable to Killam and the persons acting on its behalf. Unless otherwise stated, all forward-looking statements are as at the date of this presentation, and the parties have no obligation to update such statements.

Thanks, Phil. This presentation contains forward looking statements with respect to kill apartment, great operation strategy financial performance and conditions. The actual results and performance of killing the probably agree could differ materially from those expressed or implied in such statements.

Our qualified in entirety, but inherent risks and uncertainties surrounding future expectations important factors that could cause actual results could differ materially from those expressed include among other things you're not economic and market factors competition.

Ladies and government regulations and factors described in the risk factor section of killed annual information form and other securities regulatory filings. This cautionary statement qualified all forward looking statements attributable to kill them and the persons acting on it yeah.

Otherwise stated all forward looking statements or has that the day. This presentation and the parties have no obligation to update such statements.

Thank you Nancy I am pleased to report another very strong year for kill them, we achieved net income of $284 million compared to 875 million in 2018.

Philip Fraser: Thank you, Nancy. I am pleased to report another very strong year for Killam. We achieved net income of CAD 284 million compared to CAD 175 million in 2018, and earned funds from operations of CAD 0.98 per unit, a 4.3% increase from 2018. We were successful in meeting our strategic targets in 2019 and summarized on slide four. Performance from our same property assets has been strong and met our same property NOI growth target with a 4.1% growth overall. We completed CAD 191 million in acquisitions consisting of 640 apartment units, 359 manufactured home community sites, an additional 200,000 sq ft of retail space in four provinces.

And they're in funds from operations of 98 cents per unit, 4.3% increase from 2018.

We were successful in meeting or strategic targets in 2019 in summarized on slide before.

Formats from our same property assets has been strong and met our same property NOI growth target with a 4.1% growth overall.

We completed 191 million in acquisitions, consisting of 640 apartment units 359 manufactured home communities sites, an additional 200000 square feet or retail space and for provinces as well, we recorded $244 million in fair value gains.

Philip Fraser: As well, we recorded CAD 244 million in fair value gains, growing the portfolio to CAD 3.3 billion at year-end. We met our target to earn 30% of our 2019 NOI from outside Atlantic Canada. Our development plans are on track with the Frontier completed in June 2019 and 4 developments currently underway, including The Kay in Mississauga, Latitude in Ottawa, Shorefront in Harley in Charlottetown. We are maintaining a strong balance sheet with conservative debt levels, ending the year at 43.4% debt to total asset ratio. I will now ask Dale to recap our financial results.

Growing the portfolio to 3.3 billion at year end.

We met our target to earn at 30% over 2019 into why from outside Atlantic Canada.

Our development plans are on track.

With a frontier completed in June 2019 for developments currently underway, including the K and Mississauga.

Latitude and all the shorefront in Hurley can Charlottetown.

We are maintaining a strong balance sheet with conservative debt levels, ending the year at 43.4% debt to total asset ratio.

I will now ask still to recap our financial results [noise].

Dale Noseworthy: Thanks, Bill. Our strong financial results in 2019 continues a trend of healthy earnings growth. Slide 5 recaps Killam's growth over the past five years. We've achieved positive improvements in all key financial metrics over this period. NOI has increased steadily, and FFO per unit has grown by a compound annual growth rate of 5.5%. Over this same period, Killam has reduced the AFFO payout ratio to 82% and increased its distribution three times. I'm pleased to report that yesterday, the board approved an additional 3% increase, making it four years in a row of distribution growth. 2019 results are highlighted on Slide 5. Killam generated FFO per unit of CAD 0.98, up 4.3% from 2018.

Thanks, Phil our strong financial results in 2019 continues to trend that trend healthy earnings growth slide five recaps kilns growth over the past five years, we've achieved positive improvements in all key financial metrics over this period.

No I has increased steadily and that's all for unit has grown by a compound annual growth rate of 5.5%.

Over the same period, killing has reduced the F O pay AFFO payout ratio to 82% and increased its distribution three times.

I'm pleased to report that yesterday, the board approved an additional 3% increase making it for years in a row at distribution growth.

2019 resolved are highlighted on slide five.

Killing generated FFO per unit of 98 cents up 4.3% from 2018.

Dale Noseworthy: This growth was driven by increased earnings from strong same property performance and incremental contributions from acquisitions and developments, partially offset by higher financing costs and a 10% increase in the weighted average number of units outstanding. Q4 results were also strong, as highlighted on slide six. Killam achieved 8.7% growth in FFO per unit and 16.7% growth in AFFO per unit. Similar to the year-end results, strong same property performance was the main contributor to this growth. Also contributing to the quarterly results was a decrease in deferred financing costs versus Q4 2018. Overall occupancy and rental rate growth continues to trend higher. Slide seven highlights key revenue metrics for the year. Occupancy was very strong at 97.3%, rents were up 3.6%, and incentives were down.

This growth was driven by increased earnings from strong same property performance and incremental contribution from acquisitions and development, partially offset by higher financing cost and a 10% increase in the weighted average number of units outstanding.

Q4 results were also strong as highlighted on slide 16.

Film achieved 8.7% growth in AFFO per unit and 16.7% growth in an AFFO per unit.

Similar to the year unresolved strong same property performance was the main contributors to this growth.

Also contributing to the quarterly results with a decrease in deferred financing costs versus Q4 2018.

Overall occupancy and rental rate growth continues to trend higher.

Seven highlights key revenue metrics for the year occupancy was very strong at 97.3% rents were up 3.6% and incentives were down.

Strong fundamental paired with our revenue enhancing programs are driving topline growth.

Dale Noseworthy: Strong fundamentals paired with our revenue-enhancing programs are driving top-line growth. We also remain focused on expense management. Total same property expenses were up 2.4% for the year, as shown on slide 8. We experienced a 3.5% increase in general operating expenses, which included additional costs associated with rolling out our expanded CRM and leasing platforms. We continue to benefit from energy efficiency investments, realizing less than 1% growth in utility and fuel expenses in the year. Property taxes were up 2.4%. We were successful in numerous tax appeals to help mitigate increasing tax rates and assessment values. We continue to manage our balance sheet conservatively, as highlighted on slide 9. Debt as a percentage of total assets improved to 43.4%, and we realized improvements in debt to normalized EBITDA.

We also remain focused on expense management total same property expenses were up 2.4% for the year as shown on slide eight.

We experienced a 3.5% increase in general operating expenses, which included additional costs associated with rolling out our expanded CRM and leasing platform.

We continue to benefit from energy efficiency investments, realizing less than 1% growth in utility in fuel expenses in the year.

Property taxes were up 2.4% we were successful in numerous tax appeal to help mitigate increasing tax rates and assessment values.

We continue to manage our balance sheet conservatively as highlighted on slide now nine.

<unk> as a percentage of total assets improved to 43.4% and we realized improvements in debt to normalized EBITDA.

Capital flexibility as a priority and we were successful at increasing our pool of unencumbered assets last year and repaying our highest rate stat.

Dale Noseworthy: Capital flexibility is a priority, and we're successful at increasing our pool of unencumbered assets last year and repaying our highest rate debt. Slide 10 highlights our debt maturity profile. Based on current market conditions, we expect to refinance at lower interest rates this year on mortgage renewals. As shown on Slide 11, Killam's real estate portfolio grew to CAD 3.3 billion. In addition to acquisitions and developments, we recorded CAD 244 million in fair value gains in 2019, including CAD 110 million in Q4. These gains were attributable to strong NOI growth and cap rate compression, primarily in Halifax, Ontario, and on the MHC portfolio. Halifax was the focus of cap rate compression in Q4.

Slide 10 highlights our debt maturity profile based on per at current market conditions, we expect to refinance lower interest rates this year on mortgage renewal.

As shown on slide 11 kilns real estate portfolio grew to 3.3 billion. In addition to acquisitions and development. We recorded 244 million in fair value gains in 2019, including 110 million in Q4.

These gains were attributable to strong and why growth and cap rate compression, primarily in Halifax, Ontario, and on the MHC portfolio.

Halifax was the focus of cap rate compression in Q4, an increase in demand for apartment product in Halifax from both local and institutional investors was highlighted with strong interest for the 1500 unit quadrille portfolio marketed in Q4.

Dale Noseworthy: An increase in demand for apartment product in Halifax from both local and institutional investors was highlighted with strong interest for the 1,500-unit QuadReal portfolio marketed in Q4. Investors are attracted to the city's solid apartment fundamentals, including strong population growth and record low vacancy rates. I'll now turn the call over to Robert, who will provide details on our operating performance this year.

Investors are attracted to the city's solid apartment fundamentals, including strong population growth and record low vacancy rate.

I'll turn the call over to Robert Who'll provide details on our operating performance. This year. Thank you Bill good morning, everyone.

Robert Richardson: Thank you, Dale. Good morning, everyone. As shown on slide 12, Killam's long-term strategy continues to focus on increasing both funds from operations and net asset value by executing on its three core strategies, namely increasing earnings from the existing portfolio, expanding the portfolio, and diversifying geographically through accretive acquisitions with an emphasis on newer properties, and thirdly, developing high-quality properties in Killam's core markets. Today, I will speak to Killam's 2019 operating performance, concentrating on key revenue and operating initiatives before turning the call back to Philip to discuss our development pipeline and recent acquisitions. Killam's existing CAD 3.3 billion portfolio includes 16,325 apartment units, 5,800 MHC sites, and 800,000 square feet of commercial space. We are committed to maximizing unitholder value.

As shown on Slide 12 comes long term strategy continues to focus on increasing both funds from operation.

The net asset value by executing on it three core strategies, namely increasing earnings from the existing portfolio expanded the portfolio and diversifying geographically through accretive acquisitions with an emphasis on newer properties and thirdly, developing high quality properties and killing core markets.

Today, I will speak to kill him 2019 operating performance concentrating on key revenue and operating initiatives before turning the call back to fill up to discuss our development pipeline and recent acquisitions.

Count existing 3.3 billion dollar portfolio includes 16325 apartment units.

The 800, and they see site and 800000 square feet of commercial space, we're committed to maximizing unitholder value. Our strong same property NOI performance in 2018 or 29 team are largely attributable to our ability to grow revenues.

Robert Richardson: Our strong same property NOI performance in 2018 and 2019 are largely attributable to our ability to grow revenues. Slide 13 charts Killam's rental rate trends over the past three years. We have generated consistent revenue growth each quarter for the past eight quarters as we implement Killam's revenue-enhancing programs. In Q4 2019, we delivered overall same property rental rate growth of 3.6%, a 90 basis point increase versus Q4 2018, and double the 1.8% increase reported in Q4 2017. Approximately 70% of our tenants renew their leases each year. These 11,000 tenants delivered an average gain of 2.1%, up 40 basis points over Q4 2018. However, Killam's best rental return is with units rented to new tenants on turnover.

Slide 13 church kilns rental rate trends over the past three years, we generate consistent revenue growth each quarter for the past eight quarters as we implement killings revenue enhancing programs.

The last quarter 29 team, we delivered overall same property rental rate growth of 3.6% in 90 basis point increase versus Q4, 2018 and double the 1.8% increase reported in Q4 2017.

Approximately 70% of our tenants renewed their leases each year. He's 11000 tenants delivered an average gain of 2.1% up 40 basis points over Q4 2018. However.

That's rental return is with units rented to new tenants on turnover this quarter come delivered 5.8% rental rate growth on new leasing ensuring rents are brought to market.

Robert Richardson: This quarter, Killam delivered 5.8% rental rate growth on new leasing, ensuring rents are brought to market, which is a 50 basis point improvement versus the same period in 2018. Killam's value proposition and market conditions have never been stronger as we experience record occupancy levels in many of Killam's core markets. Market demand for Killam's new and newly renovated rental units is healthy across the portfolio. In response, Killam has accelerated its suite repositioning program, as highlighted on slide 14. In 2019, we upgraded and repositioned 304 units that are expected to generate an aggregate CAD 1 million in additional net operating income. The average cost to upgrade these units is CAD 25,000 per unit, and we typically earn a 13% unlevered return.

Which is a 50 basis point improvement versus the same period in 2018.

Your value proposition and market conditions have never been stronger as we experienced record occupancy levels than many of kilns core markets.

Market demand for kilns, new and newly renovated rental unit is healthy across the portfolio and their response.

Accelerate its suite repositioning program as highlighted on slide 14.

29 team, we upgraded and reposition 304 units that are expected to generate an aggregate $1 million in additional net operating income.

Average cost upgrade these units is $25000 per unit and we typically earn a 13% unlevered return.

It was interesting to note that earning higher returns on upgrading U.S. is not restricted to specific geography or properties as we have this opportunity throughout kilns portfolio.

Robert Richardson: It is interesting to note that earning higher returns on upgraded units is not restricted to specific geographies or properties, as we have this opportunity throughout Killam's portfolio. Given these superior returns, Killam will increase its unit repositioning program in 2020 to upgrade and reposition upwards of 500 units. This should improve Killam's annualized top-line revenue by approximately CAD 1.5 million. As well, Killam has identified approximately 3,000 additional units for repositioning. Once these are completed, we expect to earn an estimated CAD 10 million in additional annualized rental revenue, representing an approximate CAD 210 million increase in net asset value. We expect the upgrade and repositioning opportunity to cycle with time, providing additional units to renovate every year.

Given these superior returns John will increase its unit repositioning program in 2022 upgrade and reposition upwards of 500 units. This should improve killed annualized topline revenue by approximately $1.5 million.

As well count has identified approximately 300000, sorry 3000 additional units were repositioning.

Since these are completed we expect earn an estimated $10 million in additional annualized rental revenue representing an approximate 210 million dollar increase in net asset value.

We expect upgrade and repositioning opportunity to cycle with time, providing additional units to renovate every year.

The topline growth combined with expense management remains a key priority.

Robert Richardson: The top-line growth combined with expense management remains a key priority, but additional metrics that are more subjective, but just as critically important, are superior customer service, technology gains, and enhanced analytics. Killam seeks continuous improvement and provides the tools to enable its staff to perform efficiently. Please refer to slide 15. We invest in progressive and innovative processes as we leverage and develop our operating and financial platforms to help maximize growth and earnings. We pursue excellence in service to and engagement with our residents, prospective tenants, employees, and suppliers. All Killam employees have smartphones and/or tablets that help deliver faster response times to our tenants' inquiries, enhance staff efficiencies, and reduce paperwork, all saving time and money. For example, we have implemented mobile maintenance work orders and property inspection apps that improve response times, decrease paperwork, and save finite resources by replacing the need for multiple paper copies.

For additional metrics that are more subjective, but just as critically important our superior customer service technology gains and enhanced analytics jumped six continuous improvement and provides the tools to enable itself to perform efficiently. Please refer to slide 15.

We invest in progressive and innovative process as we leverage and develop our operating and financial platforms to help maximize growth and earnings.

We pursue excellence in service to engagement with our resident prospective tenants employee and suppliers.

Oh come fully thats smartphone and our tablets that helped deliver faster response time to our tenants inquiries enhance staff efficiency and reduce paperwork, all saving time and money.

For example, we have implemented mobile maintenance work orders and property inspection App that improved response time decreased paperwork and safe finite resources by replacing the need for multiple paper coffee.

Robert Richardson: In early 2019, we successfully implemented our customer relationship management software that enables Killam to make the best of rental opportunities and minimizes vacancy. Our prospective tenants have the ability to book appointments and complete applications online, and with more of the data entry being driven by our tenant prospects, our leasing teams have additional time to focus on excellent customer service. In the early months of 2020, we are improving our business intelligence platform to make data analytics even more timely and accessible across the company. User-friendly dashboards of real-time data are being rolled out to property management teams to drive leasing decisions, improve rental decisions, and focus on expense management. Other key operating initiatives at Killam include active management of expenses to optimize net operating income in conjunction with sustainability. Please see slide 16.

In early 2019, we successfully implemented our customer relationship management software that enables killing to me to make the best of rental opportunities and minimize vacancy.

Our perspective tenants have the ability to book appointment and complete applications online and with more of the data entry being driven by our tenant prospects. Our leasing teams have additional time to focus on excellent customer service.

In the early months of 2020, we're improving our business intelligence platform to make the data analytics, even more timely accessible across the company across the company.

User friendly dashboards, a real time data are being rolled out to property management team to dry leasing decisions improve rental decisions and focus on expense management.

The key operating initiatives that kellum include active management of expenses to optimize net operating income in conjunction with with sustainability. Please see slide 16.

Robert Richardson: Killam just completed the third year of its 5-year, CAD 25 million energy efficiency plan focused on energy savings. These projects help to lessen Killam's carbon footprint while mitigating the impact of expense increases from rising energy rates and other inflationary pressures. For the past four years, Killam has internally tracked its portfolio's energy intensity on an expense per square foot basis, along with its carbon dioxide emissions. In 2019, we commissioned a third-party baseline greenhouse gas audit, ensuring our metrics are consistent with benchmarks, and benchmarked against the leading green multi-residential companies in North America. We are fully committed to being among the leaders in ESG for multi-residential REITs and completed our initial GRESB submission in 2019.

Im just completed third year of its five year 25 million dollar energy efficiency plan focused on energy savings. These projects help to lessen kilns carbon footprint, while mitigating the impact of expense increases from rising energy rates and other inflationary pressures.

The past four years.

Has internally attractive portfolios energy intensity on an expense per square foot basis, along with its carbon dioxide dioxide emissions in 29 team, we commissioned a third party.

Baseline Green house gas audit, ensuring our metrics are consistent with benchmark and benchmark against a leading green mostly residential companies in North America.

We are fully committed to being amongst the leaders in the S.G. for multi residential retail.

And completed our initial Graz submission in 2019.

We worked diligently on our operating platform as well as our new developments to reduce kilns environmental footprint and sure effective an ethical governance and are investing to maintain sustainable economic growth and enhance our public disclosure.

Robert Richardson: We worked diligently on our operating platform as well as our new developments to reduce Killam's environmental footprint, ensure effective and ethical governance, and are investing to maintain sustainable economic growth and enhance our public disclosure. Slide 17 profiles Killam's strong same-property rental rate growth and NOI growth by region for 2019. The importance of geographic diversification is evident in this slide, as it highlights the strength of the NOI growth in Ontario, Halifax, New Brunswick's 3 principal cities, as well as Charlottetown. The Newfoundland economy has been challenging for the past 3 years, given its focus on offshore oil. For 2019, Killam St. John's vacancy increased by 150 basis points year over year. However, on a positive note, average rents improved by 120 basis points. There are more signs of encouragement in the market.

Slide 17 profile.

Strong the same property rental rate growth and I know why growth by region for 2019, the importance of geographic diversification is evident in this slide as it highlights the strength of the NOI growth in Ontario, Halifax, New Brunswick, three principal cities as well as Charlottetown.

New flattish economy has been challenging for the past three years given its focus on offshore oil for 2019 killed same John vacancy increased by 150 basis points year over year. However on a positive note average rents improved by 120 basis points.

There are more signs of encouragement in the market.

Robert Richardson: Unemployment declined 130 basis points in 2019, helping the unemployment rate reach its lowest level in five years at 11%. Further, RBC's December 2019 Provincial Outlook Report that Newfoundland's economy is expected to report growth of 2% in 2019 and 1.1% for 2020. In Alberta, Edmonton same-property results consist of two properties acquired in 2017, Waybury Park and Tisbury Crossing. These properties are taking longer to stabilize than expected, but if Q4 2019 is a reliable indicator, we may be turning the corner. Same-property occupancy improved 210 basis points, and NOI grew 15% versus Q4 2018. We also own The Vibe and The Link in the Edmonton market. The Vibe is a newly constructed 178-unit property purchased in mid-2018 that is currently 94% leased.

Employment declined 130 basis points in 2019, helping the unemployment rate reached its lowest level in five years at 11%.

Further RBC is December 2019 provincial outlook report.

No that looks Atlanta economies expect it to report growth of 2% in 2019 and 1.1% for 2020.

Alberta Edmonton same property results consists of two properties acquired in 2017 wafer to wafer integrate these properties are taking longer to stabilize that expected but of Q4 2019 is a reliable indicator, we maybe turning the corner same property occupancy improved 210 basis points and Allied grew 15.

Percent versus Q4 2018.

We also own divide and the link in the Edmonton market divide this newly constructed 170 unit property purchased in mid 2018 that is currently 94% leased the link is no. We're still I was purchased in Q4 29 team has 105 units and its 86% leased.

Robert Richardson: The Link is newer still and was purchased in Q4 2019, has 105 units, and is 86% leased. We are confident Killam's modern Edmonton portfolio will perform well in 2020. We're also pleased with our 531-unit Calgary portfolio. Its performance in Q4 2019 was impressive. Same-property occupancy improved 60 basis points to 97.4% occupancy, and average rental rates showed a healthy 3.9% increase. CMHC's October 2019 Housing Market Report forecasts further declines in vacancy for 2020 and 2021 based on improving fundamentals and stronger population growth expected in Calgary. I will now hand you back to Philip to provide details on our acquisitions and new developments this quarter. Thank you.

We are confident kilns modern evanson portfolio will perform well in 2020.

We're also pleased with our 531 unit Calgary portfolio its performance in Q 14, Q4 2019.

What's impressive same property occupancy improved 60 basis points to 97.4% occupancy and average rental rate sort of healthy 3.9% increase.

CMHC is October 2019 housing market report forecast further declines in vacancy for 2020, and 2021 based on improving fundamentals and stronger population growth expected in Calgary.

Ill now hand, you back to fill up to provide details on our acquisitions new developments. This quarter. Thank you. Thank you Robert Slide 18 details or acquisition.

Philip Fraser: Thank you, Robert. Slide 18 details our acquisition activity for the year. 56% of the capital deployed in 2019 was in Alberta and Ontario, as Killam continues to execute on its strategy of increasing the percentage of our NOI that is generated outside Atlantic Canada. Slide 19 details our annual acquisition history with CAD 191 million of assets acquired in 2019. We exceeded our minimal acquisition target for the year. During Q4, Killam purchased a 48-unit property in Moncton, New Brunswick, as shown on slide 20. The property consists of a new 4-story wood frame apartment building costing CAD 9.5 million and shares a parking lot with an existing Killam apartment building. The property is currently 100% occupied.

Tivity for the year, 56% of the capital deployed in 2019.

Wasn't Alberta in Ontario, as Kilton continues to execute on this strategy of increasing the percentage of or in a why that is generated outside Atlantic Canada.

Slide 19 details are annual acquisition history with $191 million.

Assets acquired in 2019.

We exceeded our minimal acquisition target for the year.

During Q4, killing purchase a 48 unit property amongst new Brunswick as shown on slide 20.

The properties consist of a new four story would frame apartment building costing $9.5 million and shares a parking lot was an existing kill him apartment building. The properties currently 100% occupied this acquisition increased kellams portfolio in mountain to over 1800 units.

Philip Fraser: This acquisition increased Killam's portfolio in Moncton to over 1,800 units. Slide 21 shows The Link, an 8-story concrete apartment building located in the growing southwest portion of Edmonton that we purchased in late November. This newly constructed building contained 105 units, with 163 underground parking stalls and a large rooftop patio. The average unit size is 830 sq ft and has condo-quality finishes. Slide 22 and 23 show our first acquisition in 2020, with Killam continuing to geographically diversify its portfolio by acquiring its first apartment building in BC. The purchase of this 161-unit property for CAD 54 million was funded with cash on hand. Christie Point Apartments features five 2-story buildings and four 2-story townhouse buildings on a waterfront peninsula with over 6,000 feet of direct waterfront.

Slide 21 shows the link on eight story concrete apartment building located in the growing so fast portion of images that we purchased in late November.

This newly constructed building containing 105 units with 163 underground Perkins goals and alerts route to rooftop patio. The average unit sizes 830 square feet and his condo called the finishes.

Slide 22, and 23 show our first acquisition in 2020 was killed and continuing to geographically diversify its portfolio.

By acquiring its first apartment building NBC.

The purchase of is 106 to one unit property for $54 million was funded with cash on hand.

Christy point apartments features five two storey buildings for two story townhouse building on a waterfront peninsula with over 6000 feet.

Direct water frontage.

Philip Fraser: Located in the sought-after View Royal neighborhood, the property is close to transit, highways, shopping, hospitals, and schools. This property is currently 99% occupied and contains ample office space that Killam will use in establishing its Victoria operating platform. Longer term, there is potential to redevelop the property in phases, totaling 780,000 sq ft of buildable area for an additional 312 units or a total of 473 units. On 31 January, we acquired a 54-unit building in Halifax, Nova Scotia, adjacent to our existing Killam apartment building in the Clayton Park neighborhood. The purchase price was CAD 8.8 million, and the property is currently 100% occupied and is easily absorbed in our Halifax platform.

Located in the sought after view Royal neighborhood the properties close the transit highways shopping hospitals and schools. This property is currently 99% occupies and contains ample office space the kill new use in establishing.

It's the Toria operating platform.

Longer term, there's potential to redevelop the property.

In phases totaling 780000 square feet of billable area for an additional 312 units or a total of 473 units.

On January 31st we acquired a 54 unit building in Halifax, Nova Scotia adjacent to our existing kilowatt apartment building in the clean power neighborhood.

The purchase price of $8.8 million purchase price was $8.8 million and the properties currently 100% occupied and is easily absorb and in our Halifax platform.

Since our development program started eight years ago, we have completed over 10 projects tend development projects in five provinces, consisting of 1100 units at a cost of approximately $280 million.

Philip Fraser: Since our development program started eight years ago, we have completed over 10 development projects in five provinces consisting of 1,100 units at a cost of approximately CAD 280 million. Slide 26 shows the 228-unit development Frontier, which is co-developed with RioCan and opened in June 2019. Frontier was completed on budget and is currently 97.4% leased. Slides 27 and 28 show renderings of The Latitude, the second phase of the Ottawa project with RioCan. We broke ground in Q2 2019 on The Latitude, and the expected completion date is in late 2021. Details and progress photos of our Shorefront development located in Charlottetown are shown on slides 29 and 30.

Slide 26 shows the 228 unit development Frontier, which is co developed with Riocan and opened in June 2019.

Frontier Frontier was completed on budget and is currently 97.4% leased.

Slide 27, and 28 show renderings of the latitude the second phase.

The auto a project with real Ken.

We broke ground in Q2 2019 on the latitude in the expected completion.

Dave.

Is in late 2021.

Details and progress photos of or Shorefront development located in Charles town are shown on slide 20 930.

Philip Fraser: The demand for new product in Charlottetown is substantial, and we expect to start the pre-leasing in the next couple of months for a mid-2020 opening. The Quay Mississauga broke ground in Q3 2019, with renderings showing on slides 30, 31, and 32. This 128-unit development has a CAD 56 million budget with anticipated 5% all-cash yield. Construction will take 24 months, and the expected completion date is in mid-2021. Finally, we continue to refine and advance our development pipeline. Killam has 2 additional developments slated to break ground in 2020. The Governor, a unique 12-unit luxury building adjacent to our Alexander apartment building in Halifax, and a 170-unit building in Kitchener. A full list of our development pipeline is included on slide 34.

The demand for new product.

Charles Town is substantial and we expect to start the pre leasing in the next couple of months for a mid 2020 opening.

The K Mississauga broke ground in two three to nine 2019 with rendering showing on slides 30, and 30 31 and 32.

This 120 unit development has a 56 million the million dollar budget with anticipated, 5% all cash yield.

Construction will take 24 months and the expected completion date is in mid 2021.

Finally, we continue to refine and advance our development pipeline.

Killen has two additional development slated to break ground in 2020, the governor a unique 12 units flux rebuilding adjacent to our Alexander apartment building in Halifax.

And 870 unit building in kitchen or.

A full list of our development pipeline is included on slide 34.

It's worth noting that over 70% of combs future development pipeline.

Philip Fraser: It is worth noting that over 70% of Killam's future development pipeline that is scheduled to be completed in the next five years is located in Ontario and Alberta. To conclude, 2019 was a very good year for Killam on many fronts, with strong operating and financial performance. We also were successful in enhancing our enterprise risk management program and our new ESG initiatives. With regards to senior management succession planning, we promoted three individuals to the vice president level and three individuals from the vice president to the senior vice president level. For 2020, we will continue to accelerate our suite renovation program, utilize data analytics across our organization, invest in technology for our operating platform, as well as our buildings and new developments.

That is scheduled to be completed in the next five years is located in Ontario in Alberta.

To conclude 2019 was a very good year for killed on many fronts.

With strong operating and financial performance.

We also were successful in enhancing our enterprise risk management program.

Our new Iot and our new SG initiatives.

With regards to senior management succession planning, we promoted three individuals to the vice president level.

Three individuals.

From the Vice President to the senior Vice President level.

For 2020, we will continue to accelerate or suite renovation program utilizing data analytics across our organization.

The best in technology for operating platform as well of our buildings in new developments.

Kill them has always taken responsibility of corporate citizenship seriously and our core values over the last 20 years of helped drive our commitment to the environmental social and government governance issues that impact us today.

Philip Fraser: Killam has always taken responsibility for corporate citizenship seriously, and our core values over the last 20 years have helped drive our commitment to the environmental, social, and governance issues that impact us today. We are aware of the increasing importance ESG is to all our stakeholders, and we want to continue to position ourselves as leaders in sustainability among our real estate peers. This concludes the formal part of the presentation, and we will now open it up to the call for questions.

We are aware of the increasing importance TSG is.

To all our stakeholders and we want to continue to position ourselves as leaders in sustainability amongst our real estate peers.

This concludes the formal part for the presentation, we will now open enough.

Up to call.

For questions.

Thank you.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. The first question is from Mark Rothschild from Canaccord. Please go ahead.

Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear us Tom prompted melching request.

Yeah, you see speakerphone, please let the handset before pressing any Keith.

And the first question is from Mark Rothschild from Canaccord. Please go ahead.

Mark Rothschild: Thanks, Joanne. Good morning, everyone.

Thanks, and good morning, everyone Uh huh.

Philip Fraser: Hi, Mark. In the guidance for same-property NOI of 3% to 5% for the year, can you talk a little bit more about the components of that? In particular, to what extent is turnover slowing in some of your markets, and would that just be offset by stronger rent growth? On turnover, is there a difference in what you're seeing now in Ontario versus let's say Halifax? Mark, I mean, I'll answer one part of that question. I think the answer is when you get markets that are 1% in vacancy, the turnover is less, it is decreasing. Obviously, the turnover is a lot lower in the sort of the GTA Toronto and even most of Ontario for us. It is lower now in PEI. That's one part of what you're asking, I think.

Dale Noseworthy: Hi, Mark.

And the guidance for same property in Hawaii.

Mark Rothschild: In the guidance for same-property NOI of 3% to 5% for the year, can you talk a little bit more about the components of that? In particular, to what extent is turnover slowing in some of your markets, and would that just be offset by stronger rent growth? On turnover, is there a difference in what you're seeing now in Ontario versus let's say Halifax? Mark, I mean, I'll answer one part of that question. I think the answer is when you get markets that are 1% in vacancy, the turnover is less, it is decreasing. Obviously, the turnover is a lot lower in the sort of the GTA Toronto and even most of Ontario for us. It is lower now in PEI. That's one part of what you're asking, I think.

To 5% for the year can we talk a little more about the components of that and in particular as to what extent is turned over slowing in some of your markets and would that just be offset by stronger rank growth. Then on turnover is there is different than what you're seeing now in Ontario versus let's say Halifax.

Mark I mean, I'll answer one part of that question I think the answer is when you get markets that are 1% vacancy. The turnover is less is decreasing so obviously the turnover is a lot lower in the sort of the GTH Toronto in either most of Ontario for us.

And it is lower now in PE.

That's one part of the what you're asking I think a deal what about what the other components of where the the three to five is going to be made up yeah, so and just expanding a bit on turnover. So you know even talking about that decrease we still even in Halifax, we're still fairly healthy compared to some other areas in Canada. So in Halifax overall, we've seen our turnover decreased probably 500.

Philip Fraser: Dale, what about what the other components of where the 3 to 5 is gonna be made up in?

Mark Rothschild: Dale, what about what the other components of where the 3 to 5 is gonna be made up in?

Dale Noseworthy: Yeah. And just expanding a bit on turnover. You know, even talking about that decrease, we still even in Halifax, we're still fairly healthy compared to some other areas in Canada. In Halifax, overall, we've seen our turnover decrease probably by 150 basis points per year over the last few years. Halifax, we're still at about 30% churn. As it's tighter, as Phil mentioned, we might see that come down further. We still right now have a fairly healthy churn in most of our markets. We are definitely seeing very low numbers in our assets, in especially around the GTA area. I mean, I think some are sub 10% is what we're seeing. Definitely some decreases there.

In 50 basis points per year over the last few years health that we're still at about 30% turns though as it tighter as Phil mentioned, we might see that come down further, but we still right now that's a fairly healthy turn.

In most of our market, but in we're definitely seeing very low numbers in our assets in especially around the GT area. I think some are a sub sub 10% as well so I definitely some decreases there, but when we look at that topline growth I think that it is primarily about rental rate.

Dale Noseworthy: When we look at that top line growth, I think that it is primarily about rental rate growth. When we look, there are some markets that we will see some occupancy gains we expect this year. Some of the ones that Rob talked about in terms of Alberta, I think we have some upside on occupancy year over year and Newfoundland and some others. When we're at some pretty high levels at some other markets. It's gonna be rental rate growth is definitely a big part of the top line growth for the year ahead.

When we look theres some markets that we will see some occupancy gains we expect this year some of the ones that Rob talked about in terms of Albert I think we have some upside on occupancy year over year end to end if Atlanta, some others thought when we're right some pretty high levels.

Other markets, so it's going to be rental rate growth as the is definitely a big part of the topline growth for the year ahead.

Thank you. The next question is from Jonathan Culture from TD Securities. Please go ahead.

Operator: Thank you. The next question is from Jonathan Kelcher from TD Securities. Please go ahead.

Jonathan Kelcher: Thanks. I guess just sticking with the guidance. Where do you see cost pressures coming for 2020? Are you mostly done with the CRM costs?

I guess, just sticking with the guidance, where where do you see cost pressures coming for for 2020.

And our you are you mostly done with the CRM costs.

We are yes, so I think year over year, we would have when we looked at expanding our leasing teams and absorbing that incremental costs associated with CRM.

Dale Noseworthy: We are, yes. I think year over year, we would have when we looked at expanding our leasing teams and absorbing the incremental cost associated with CRM, those would have been pretty fairly shown throughout the year in 2019. I think maybe, you know. By March, I'd say we had our full leasing component, so we might have a couple of months there, but really the majority of it was absorbed in 2019.

Those would have been pretty fairly shown throughout the year in 2019, I think maybe you know.

Hi, Mark I'd say, we had our full leasing component that we made up a couple of months there, but really the majority of that was absorbed in 2019.

We think there maybe some pressure on taxes.

Philip Fraser: We think there may be some pressure on taxes.

Robert Richardson: We think there may be some pressure on taxes.

Dale Noseworthy: Mm-hmm.

Philip Fraser: Municipalities look to be a little aggressive in places, so we'll see that. Perhaps insurance.

Robert Richardson: Municipalities look to be a little aggressive in places, so we'll see that. Perhaps insurance.

Municipalities looks to be a little aggressive in places, so we'll see that and perhaps insurance.

I'd also be that hey, the biggest once when we look insurance is a big big unknown, but where are doing all we can to manage that.

Dale Noseworthy: Those would be the, I'd say, the biggest ones when we look. Insurance is a big unknown, but we're doing all we can to manage that.

Thank you. The next question is from Johan Rodrigues from Raymond James. Please go ahead.

Operator: Thank you. The next question is from Johann Rodriguez from Raymond James. Please go ahead.

Hi.

Johann Rodriguez: Hi. I was just wondering, you know, given your entry into BC post 2019, what does that 30% bucket kinda look like in a few years? You know, are you looking to grow mostly in Ontario and Alberta, or do you expect to kinda grow more into BC or even into any other new markets?

I was just wondering given.

Given your entry into <unk>.

See this.

Right.

Post 2019.

What is that 30% pocket kind of look like.

A few years.

Looking to grow.

No.

Yeah.

<unk>.

The answer is we want to grow.

Philip Fraser: The answer is we wanna grow in Ontario for sure. We also wanna grow in Alberta. If we can expand and grow a presence in BC, we'll do that as well. It is about diversification. If we, you know, our objective is to increase that 30 up to 35 to go into 37 over the next few years, and that's, it's only gonna get done if we continue to grow in Ontario plus Alberta and an additional growth in BC. A lot of our growth in Ontario can come from our development program. We do have a relationship where we own a 10% part of a development in Calgary that is starting underway now, which will give us new product in the next couple of years.

In Ontario for short, we also want to grow in Alberta, and its we can expand and grow presence in DC will do that as well. It is about diversification. So if we were objective is to increase that 30 up to 35 to go into 37 over the next few years and that's it's only going to get done if we continue to grow in Ontario.

Plus Alberta in additional.

Growth in DC, a lot of our growth in Ontario can come from or development program.

But we do have.

Oh relationship, where we own a 10%.

Part of a development in Calgary that is starting underway now, which will give us new product in the next couple of years.

Okay and <unk>.

Johann Rodriguez: Okay, what is the savings or ROI that you guys expect on the CAD 5 million of energy efficiency investments?

What is the savings are ROI that you guys expect.

5 million if energy efficiency investments.

You don't want around 15% of sometimes as much as 20, it's about a on the good ones. It's a five year payback and sometimes it goes high seven.

Philip Fraser: You know what? Around 15% and sometimes as much as 20%. It's about, you know, on the good ones, it's a 5-year payback, and sometimes it goes high as 7. At 10-year payback, you slow down a bit, but that's kind of the range we operate in.

Tempered a 10 year payback, you slow down a bit but that's kind of the range we operated.

Okay, and then last question.

Johann Rodriguez: Okay. Last question. Can you quantify the NOI that's being generated by those developments on page 25?

Finally, I know why that's it.

By those developments on page 25.

[noise] [noise] [noise] [noise] Oh, that's all of our in a lot of Oliver developments in the past.

Dale Noseworthy: Of all of our developments in the past?

Johann Rodriguez: Yeah, yeah, the ones that have been completed.

Yeah, the ones that have been completed.

Dale Noseworthy: I'd say, you know what? If you wanna ballpark it, I think you could take the cost to build and assume a yield of 5.5% and a margin of 72.

I'd say you know why did you want to make a to ballpark. It I think you can tell it take that cost to build and assume a yield of 5.5% and a margin of 72.

Dale Noseworthy: I'd say, you know what? If you wanna ballpark it, I think you could take the cost to build and assume a yield of 5.5% and a margin of 72.

Okay.

I don't have the numbers right you ramp I think that that's probably when we talk of averages that's probably a reasonable estimate.

Johann Rodriguez: Okay.

Dale Noseworthy: I don't have the numbers right in front, but I think that that's probably when we talk of averages, that's probably a reasonable estimate.

Johann Rodriguez: Okay, thanks. I'll turn it back.

Okay. Thanks, I'll turn it back.

Thank you. The next question is from Matt Karnak, Some National Bank financial Please go ahead.

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

Matt Kornack: Good morning, guys.

Good morning, guys.

Dale Noseworthy: Good morning.

Matt Kornack: With regards to the mortgage financing, I mean, interest rates have obviously plunged a bit here early in the year. Have you done any early rate locks to lock in this year? Because I think sort of late last year, you probably would have been maybe a little bit higher on where interest costs were. I'm wondering if you're taking advantage of this now or you'll just renew them as they come due.

With regards to the mortgage financing or I mean interest rates of obviously punched a bit here early in the or have you done any early rate locks to lock in this year because I think.

Sort of late last year, you probably would have been maybe a little bit higher on on where interest costs worse. So I'm wondering if you're taking advantage of this now or are you will just renew them as they come due.

No there, we're renewing them as they come due for sure but I think.

Philip Fraser: No, we're renewing them as they come due for sure. But I think, you know, we got some pretty good rates on the manufactured home communities for the first part of the year that we did just sort of normal, sort of renewals, rates that we've never seen, which is very exciting.

Yeah, we got some pretty good rates on the manufactured home communities for the first part of the year that we did just sort of normal sort of for renewals rates that we've never see.

Which is very exciting.

And we kind of pretty big one in Q1, so okay from a timing perspective.

Dale Noseworthy: We do have some pretty big ones in Q1.

Matt Kornack: Okay.

Dale Noseworthy: From a timing perspective,

Well log into low rate.

Philip Fraser: We'll lock in some low rates.

Dale Noseworthy: Yeah. Yeah.

Okay fair enough.

Matt Kornack: Fair enough.

And then discussions what those options are but we'll see.

Dale Noseworthy: We're having discussions about what those options are, but we'll see.

Matt Kornack: Sure. With regards to Kanata, I think there was some commentary that, due to supply, there was a brief increase in vacancy in that market. Is that just an anomaly or is it something you're seeing more broadly as guys start to build more product?

Sure.

Regards to cannot I think there was some commentary that due to supply there was some brief or increase in vacancy in that market is that just an anomaly or is that something you're seeing a more broadly is that's guys don't know tomorrow product that that's unique it's the the developer that we bought the buildings.

Philip Fraser: No. That's unique. It's the developer that we bought the buildings from in phases actually just opened up a building across the street, and it was like 250 units. So there is still a relationship with probably some of the original tenants that he knew.

In phases actually just open up the building across the street. It was like 250 units. So.

There is still a relationship probably with some of the original tenants that he knew and so that's what we're talking about there what sort of got building absorb we're very comfortable that our buildings will be back up to 100%.

Matt Kornack: Okay.

Philip Fraser: That's what we're talking about there. As soon as that building gets absorbed, we're very comfortable that our buildings will be back up to 100%.

Fair enough and then on leverage front with regards to your guidance sounds like you expected to tick up a bit but longer term you want to bring it down to below 45% is that a function of acquisitions and development that it would pick up or.

Matt Kornack: Fair enough. On the leverage front with regard to your guidance, sounds like you expect it to tick up a bit, but longer term, you wanna bring it down to below 45%. Is that a function of acquisitions and development that it would tick up, or I'm just wondering how you see the arc of deploying capital?

I'm just wondering how you see the are.

Deploying capital.

Dale Noseworthy: If you think of the timing of when we did our big equity raise the end of last year, our debt at the end of the year would reflect the timing of that without full deployment of acquisitions on a leverage basis. When we look at our expectation for the year, we're gonna expect to bump around between current levels and kind of 45% depending on what happens. Yeah, so.

And if you think of the timing of when we did our big equity raise the end of last year. So the our debt at the end of the year would reflect the timing of that without full deployment of acquisitions on a leverage basis. So when we look at our expectation for the year, we're kind of expect to bump around between current levels and.

Kind of 45%, depending on what happens and.

Oh, okay.

Matt Kornack: Okay. Not a huge amount.

Okay. So not a huge amount of acquisition activity would be expected with the current a capital structure. Obviously, you can issue equity to purchase more but we.

Dale Noseworthy: We wanna stay-

Matt Kornack: Of acquisition activity would be expected with the current capital structure. Obviously, you can issue equity to purchase more, but we shouldn't be modeling a ton of incremental acquisition activity without equity.

We shouldn't be modeling a ton of incremental acquisition activity.

Without equity.

I think we've got flexibility for capital for it for some of that but I think that in order to a look at big acquisition I think that that's there.

Dale Noseworthy: I think we've got flexibility for capital for some of that, but I think that in order to look at big acquisition, I think that that's fair.

Matt Kornack: Okay. Perfect. Thanks, guys.

Okay perfect. Thanks, guys.

Thank you. The next question is from Alex Leon Femto Chardan capital markets. Please go ahead.

Operator: Thank you. The next question is from Alex Leon from Desjardins Capital Markets. Please go ahead.

Good morning. My first question here is relating to the fair value gains in a investment properties I was wondering.

Alex Leon: Good morning. My first question here is relating to the fair value gain in investment properties. I was wondering what was the fair value gain attributable to the Halifax portfolio, and maybe whether or not you can comment on the methodology used there, and sort of how influential the QuadReal transaction was on that, and whether there was any sort of conservatism built in to leave room on the table for further cap rate compression.

What was the fair value gains attributable to the Halifax portfolio, and maybe whether or not you can comment on the methodology used there and sort of how influential yeah quadruple transaction was on that and whether there was any sort of conservatism built in to leave room on the table for further cap rate.

Compression.

Well I'm sure they'll Halifax, so overall for the year.

Dale Noseworthy: Well, sure. Halifax. Overall for the year, Halifax is about 120-ish fair value gains. In the quarter was about 100, and cap rate compression was a fairly big part of that. Looking at the QuadReal transaction, it did, you know, even in advance of that, we had seen evidence of the cap rate compression, actually a couple of other quarters prior to that. But hearing about a 4% cap rate, or so on that QuadReal really did force us to relook at what these values are worth. When you talk about conservatism, I think it's important to remember that when we do IFRS fair values, it's on an asset-by-asset basis. We can't look at portfolio premium. There was discussion around that.

It's about 120 ish.

Fair value gains in the quarter was about 100 and a cap rate compression was.

Fairly big part of that and looking at the Quadrille transaction. It did you know even in advance of that we had seen evidence of the cap rate compression I actually a couple of other quarters prior to that so I bet hearing about a 4% cap rate or so.

Not quadrille really did.

Forced us to re look at what these values are with.

Think about conservativism I think it's important to remember that when we do IRS fair values. It's on an asset by asset basis, we can't look at portfolio premium. So there was discussion around that the 4% on quite real is their portfolio premium or not lots of debate, whether there is and how much that is that we would've taken that into.

Dale Noseworthy: The 4% on QuadReal, is there a portfolio premium or not? Lots of debate whether there is, and how much that is, but we would have taken that into consideration. You know, in addition to that, the NOI growth was also a big contributor to our growth in total fair value, not only for Halifax, but across the portfolio for the year. You know, as we continue to grow top line and NOI, we've seen that be part of our fair value gains. Every year, we're refining this process a little more. Q4 is a year-end, a time that we really step back and look at some of our stabilized NOI adjustments, which was part of all the numbers that came into play in Q4.

Consideration and in addition to that the NOI growth was also a big contributor to our growth in total fair value not only for how socs that across the portfolio for the year. So you know as we continue to grow topline and and I know why we see not be.

Part of our fair value gains and and every year. We're finding this pro thats little more but so Q4 is at year end time that we really step back and look at some of our stabilized NOI adjustments, which.

Was part of side all the numbers that came into play.

In Q4 about how Thats definitely a was a big part of this story and and we'll see.

Dale Noseworthy: Halifax definitely was a big part of the story, and we'll see what happens in the future.

What happens in the future.

Okay. Thank you. My next question is related to the frontier development, just wondering what the NOI contribution to whats during the quarter.

Alex Leon: Okay. Thank you. My next question is relating to the Frontier development. Just wondering what the NOI contribution was during the quarter.

We don't have agreed on hand, but again, we're talking about leasing in terms, which is a little bit slightly different and move ins.

Philip Fraser: We don't have that right out of hand, but again, we're talking about leasing terms, which is a little bit slightly different than move-ins, but it was positive for the quarter. Do you have-

But it was positive for the quarter.

So you haven't one thing and actually yeah.

Dale Noseworthy: You want than actual?

Philip Fraser: Yeah.

Dale Noseworthy: I can get it. Yeah.

Yeah, I get it for you and I do and in Q4 would have in the first time, you would've seen that positive there at least from an AFFO perspective too when you look at the data associated with that so that's a big contributor AFFO per unit growth as we look for 2020 should be a a big year of growth from the frontier from a and Hawaiian and earnings perspective ethanol perspective.

Philip Fraser: We'll get it for you.

Dale Noseworthy: Q4 would have been the first time we would have seen the positive there, at least from an FFO perspective too, when you look at the debt associated with that. That's a big contributor of FFO per unit growth as we look for 2020. It should be a big year of growth from the Frontier from a NOI and an earnings perspective, FFO perspective.

Okay, and then last one for me.

Alex Leon: Okay. Last one for me. I think in Q2, you guys had mentioned that there was some change in accrual accounting for the utility bills. I was just wondering if there was any positive variance within NOI during the quarter relating to that change in accounting policy.

I think in the second quarter you guys had mentioned that there was some change in a accrual accounting for that utility bills. So.

So just wondering if there was any a positive variance within an a wide during the quarter relating to that a change in accounting policy.

Oh.

So I think your second quarter, you guys I mentioned.

Alex Leon: I think in the Q2, you guys had mentioned there was CAD half a million-

Dale Noseworthy: Tony, I'd say that we did our best this quarter to do an apples to apples comparison. When we show the NOI growth in Q4, it is looking at similar periods year over year from an expense perspective from utility. When you look at utility expenses for the full year, 2019 to 2018, both are based on 12 months of expenses rather. I would say that the change in the way we accrued for it is not. We adjusted for that in Q4 essentially to make sure that it's apples to apples. FFO always has flowed through as we've spent.

That we did a arabesque this quarter to do an apples to apples comparison, so when we show that I know why growth in Q4 is.

Looking at similar period year over year from an earnings perspective from an an expense perspective from utility when you look at utility expenses for the full year 2019 to 2018, both are based on 12 months.

Earning though.

<unk> expenses rather.

So I would say that the change in the other way we accrued for it it's not.

We adjusted for that in a in Q4 essentially to make sure that it's apples to apples.

FFO always is flowing through as fast.

As we expand.

Sure Okay. Thanks.

Alex Leon: Sure. Okay, thanks.

Dale Noseworthy: Oh, Erin has a comment here. Yeah. Just your question on back on Frontier for the NOI contribution. For our 50%, it was CAD 350,000 in the quarter.

Yeah. Just your question on back on frontier for the N.Y. contribution so far 50%. It was 350 grand in the quarter.

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

Alex Leon: Okay. Perfect. Thanks. I'll turn it back.

Thank you. The next question is from Mario Saric from Scotia Bank. Please go ahead.

Operator: Thank you. The next question is from Mario Saric from Scotiabank. Please go ahead.

Hi, good morning.

Mario Saric: Hi. Good morning.

Good morning.

Dale Noseworthy: Good morning.

No just coming back two or 3% to 5% guidance can you talk about how much and why margin expansion is expected at the midpoint.

Mario Saric: Just coming back to the 3% to 5% guidance. Can you talk about how much NOI margin expansion is expected at the midpoint?

I'd say, we we expect some annualized margin expansion, but.

Dale Noseworthy: I'd say we expect some NOI margin expansion, but it might not be as big as this past year.

You might not be as big as this past year.

Okay.

Mario Saric: Got it. Okay. On the top line revenue with turnover coming down and the ability to push rent on renewal becomes increasingly important, how do you see that 2.1% growth on renewal changing over time, and how much, let's say, self-regulation is built into that 2.1%, today?

And then on the on the topline revenue with turnover coming down or the ability to push rental renewal becomes increasingly important.

Do you see that 2.1% growth changing over time, and then how much or.

Let's see self regulation is built into that 2.1% today.

Dale Noseworthy: Sure. You know, I mean, I think that we do have a fair bit of self-regulation in there, and what we do is we look and we're increasingly using data analytics to make sure we understand the market conditions. We also are looking building by building, and property managers and leasing staff look tenant by tenant to consider different circumstances. Trying to understand which units are far below market, but those tenants that have been here a very long time, that's taken into consideration as well. We will be measured in moving those rents to market in a responsible way.

Sure.

I mean, I think that we do have a fair bit as self regulation in there and what we do as we look and we're increasingly using data analytics to make sure we understand the market conditions, but we also are looking building by building and property managers and leasing that affleck tenant by tenant to consider different circumstances, and I'm trying to understand which units are fire.

Far below market, yeah, but those tenants that have been here, a very long time not taken into consideration as well. So we will be measured in moving those rents to market and they're responsible way well certainly 2.1% is responsible number I mean barely inflation. So we've been consistently doing that.

Robert Richardson: Well, certainly 2.1% is a responsible number, I mean.

Dale Noseworthy: Yeah.

Robert Richardson: Barely inflation. We've been consistently doing that.

No no no absolutely.

Mario Saric: Yeah. No, no, absolutely. Regarding the data analytics, you know, has enough time passed now that it's had any kind of impact to your rent setting policies at this stage? If not, how should we think about the contribution of data analytics to kind of revenue maximization going forward?

Regarding the data analytics has enough time pass now about a todd any kind of impact to your regarding policies.

At this stage and if not how should we think about.

Contribution of data analytics to kind of revenue maximization.

Forward.

Robert Richardson: It does assist us, I think, on the renewals in particular. We're able to look at those with more scrutiny, so we're using it to assist us there. Overall, what we're taking the opportunity is with vacant units in particular. We'll move the rents more. Also, when we're redeveloping or renovating units, we're seeing decent increases there. It's a mix of all three as we go forward. We're sensitive to the market, and where we are with moving rents upwards.

It does it does assist us I think on the renewals in particular, we're able to look at those with more scrutiny. So we're using it to assist us there but overall.

What we're taking opportunities with Bacon units in particular will move the rents more.

But with and also one were re developing or renovating units we're seeing.

Decent increases there so it's a mix of all three.

As we go forward, but we're sensitive to the market and a and where we are we moving rents upward.

Dale Noseworthy: I do think that, you know, we've started to see the increase, but we do have more potential in next year. Part of it is using data analytics to look not just at a property level but the unit type in each property. Being able to easily look at that to say, you know, if there's no vacancy at all in a two-bedroom unit, even though the building might carry a little bit, those assets, you know, kind of looking unit by unit and just to understand some of those drivers and different, you know, what time of year and and how much have we seen demand increase or decrease compared to the last couple of years. With more history, it's just gonna provide that much more. I do think that we've started to see it.

I do think that you know we've started to see the increase but we do have more potential in next year in part of it is using data analytics to look not just at a property level, but the unit type in each property and being able to easily look at that to say you know if there is.

If there is no vacancy at all and a two bedroom units even on the building might carry a little bit those assets you know kind of looking unit by unit and just to understand some of those driver then different.

You know what time of year and how much have we seen demand increase or decrease compared to the last couple of years. So with more history. It's just going to provide that much more so I do think that we started to see it just going to be a.

Dale Noseworthy: It's just gonna be help us further.

Help us further and adding to that location in the building whether it's on the first part of the top floor. Other considerations, we would have and then in terms of the unit.

Robert Richardson: Adding to that location in the building.

Dale Noseworthy: Yes.

Robert Richardson: whether it's on the first floor or the top floor, or other considerations we would have. In terms of the unit, whether it's the flooring type, and if it's been upgraded, we would alter the rents appropriately.

What Eric the flooring tight and it's been upgraded.

We would also the rents appropriately.

Oh, that's sounds really interesting so on the whole when you look good.

Mario Saric: All of that sounds really interesting. So on the whole, when you look at the portfolio rent today versus market, what would you estimate the kind of the mark to market within the portfolio is today, assuming kind of a regular CapEx spend on turn as opposed to a renovation, like a full-scale renovation?

The portfolio rent today versus market, but would you estimate the oh, the mark to market within the portfolio is today, assuming kind of a regular capex spend.

On turn as opposed to a renovation fullscale recreation.

So we think theres, probably aftermarket throughout the entire portfolio, 10% to 15% increase across the board would probably do that.

Robert Richardson: We think there's probably to get to market, throughout the entire portfolio, a 10% to 15% increase across the board would probably do that.

Okay, great. Thank you.

Mario Saric: Okay, great. Thank you.

Robert Richardson: Thank you.

Thank you.

Thank you for next question is from didn't Wilkinson from CBC. Please go ahead.

Operator: Thank you. The next question is from Dean Wilkinson from CIBC. Please go ahead.

Dean Wilkinson: Thanks. Morning, everyone.

Thanks, Good morning, everyone.

Dale Noseworthy: Hi, Dean.

Okay.

I guess, Phil when you look at that longer term target Oh sort of getting.

Dean Wilkinson: I guess for Philip, when you look at that longer term target of sort of getting, you know, high 30s% outside of Eastern Ontario or Eastern Canada. There seems to be a lot of money sort of going across the country buying up apartment assets that started on the West Coast, and it's now clearly landed in the East Coast. You're seeing the cap rate compression, and perhaps over time, we may even get conversion just because, you know, that's the cost of debt no matter where you are in Canada.

Hi, Thirtys a percent outside of of Eastern Ontario.

There's a lot or eastern Canada, there seems to be a lot of money sort of going across the country buying up apartment assets that started on the west coast and it's now clearly landed in the east coast.

And you're seeing a cap rate compression and and perhaps over time, we may even get conversion just because.

That's the cost of debt no matter where yard in Canada.

Dean Wilkinson: Could you envision a situation where you could be selling some of those, you know, Halifax-based assets at, you know, a cap rate that people perhaps two years ago wouldn't have even contemplated and moving it back towards, you know, maybe the more central or western part of the country and sort of accelerating that through? How much would the tax hit on any sale like that be an impediment to doing something like that?

Do you envision.

A situation, where you could be selling some of those.

Halifax based assets at cap rate that people, perhaps two years ago wouldn't even contemplated and moving it back towards maybe the more central or or western part part of the country and sort of accelerating that true and how much would the tax hit on any sale like that be an impediment to doing something like that.

Well I mean.

Philip Fraser: Well, I mean, to try to answer that question. I mean, it's about when you look at it today, and if you truly believe that the assets are scarce and they're not that hard, there, you can trade, but what are you really trading for?

To try to answer that question I mean, it's a boat when you look at it today and if you truly believe that those assets are scarce and they're not that her to sort of theres you can trade, but what are you really trading for the fact that we've owned a lot of these assets Atlantic Canada for a long time.

Dean Wilkinson: Mm-hmm.

Philip Fraser: The fact that we've owned a lot of these assets in Atlantic Canada for a long time, they produce, relatively speaking, the returns are very good. As long as there's job creation and population increase, then there is the expectation that the assets will be able to, at whatever level, generate more income over time. To try to answer back to the question you're saying is if you're trying to get to a more balanced, geographically speaking, of where our NOI is coming from, the way that we tend to look at it is if we can't buy because conditions are so competitive in Ontario

There is they produce relatively speaking the returns are very good and as long as there is job creation and population increase then there is the expectation that.

The assets will be able to at whatever level.

Generate more income over time.

And when you so.

To try to answer back into the question, you're seeing is you're trying to get to a more balanced.

Balanced geographically speaking aware in Hawaii is coming from the way that we tend to look at it is we can buy because conditions or so.

Competitive in Ontario, and I wouldn't say they are as competitive west there's lots of product in the right now in Alberta and surprisingly NBC.

Dean Wilkinson: Mm-hmm.

Philip Fraser: I wouldn't say they are as competitive out west. There's lots of product in right now in Alberta and surprisingly in BC. We can build. In fact, part of what we're trying to do in Ontario, and again, I mean, it's an interesting position we're in, where we're not 100% reliant on acquisition, especially older stock that is really, really sought after in Ontario. Because in our mind, just like when we said, well, we really like those assets that we passed on in Halifax, we still see opportunity in this market because we have land ready to develop. So our development side of our company provides us with the growth in a way to actually get out and balance geographically where we're gonna make the NOI from.

We can build that part of what we're trying to do in Ontario, and again I.

I mean, it's a it's an interesting position, we're in where we're not 100% reliant on acquisitions, especially older stock that is really really sought after in Ontario, because our in our mind just like when we said well, we really like those assets that we passed on in Halifax.

We still see opportunity in this market because we have land ready to develop so our development side of our company provides us with the growth in a way to actually get out and balance.

Graphically.

Where we're going to make the.

Yeah.

I guess I'm going ask this question knowing that you can't answer it.

Dean Wilkinson: Right. I guess I'm gonna ask this question knowing that you can't answer it.

Uh huh.

Philip Fraser: No.

Dean Wilkinson: Have private equity or other players knocked on the door, looking around at some of your assets?

Hi, good equity or other players knocked on the door looking around at some of your assets.

I would say no.

Philip Fraser: I would say no.

We have two right [laughter] well I guess Toronto is not the center of the universe, how long it actually got something going for it to that's it for me Thanks, guys I'll hand it back.

Dean Wilkinson: Well, you have to, right? Well, I guess Toronto's not the center of the universe. Halifax has got something going for it, too. That's it for me. Thanks, guys. I'll hand it back.

Thank you and your next question is a follow up from Alex <unk> from Deutsche Bank Capital markets go ahead. Please.

Operator: Thank you. Your next question is a follow-up from Alex Leon from Desjardins Capital Markets. Go ahead, please.

Well.

Philip Fraser: Hi, Alex.

Alex Your line is open you May proceed with your question.

Operator: Alex, your line is open. You may proceed with your question.

Hi, this mistake should be on there [laughter] Grace.

Alex Leon: Oh, yeah, that's a mistake. I shouldn't be on air.

Philip Fraser: Great.

Operator: Okay. Thank you. There are no further questions at this time. You may proceed.

Yes.

Thank you know no further questions at this time you May proceed.

Again, we'd like to thank everybody for listening and participating today and we look forward to being back here for first quarter in me. Thank you.

Philip Fraser: Again, we'd like to thank everybody for listening and participating today, and we look forward to being back here for Q1 in May. Thank you.

Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

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