Q1 2020 Earnings Call

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Still receive net income of 38.2 million in q1 and earn funds from operations of twenty two cents per unit a 4.8% increase from q1. 2019. M a f f o Was Eighteen cents per unit up 12.5% in addition to earnings growth. We had a strong start against our strategic priorities in q1 increase the wage earnings from our existing asset based maintaining a strong balance sheet and advancing our acquisition and development pipeline to expand outside Atlantic Canada Slide for highlights our q1 financial performance. F f o n a f f o per unit growth was primarily attributable to strong same property performance accretive Acquisitions and contributions from the recently-completed frontier development in Ottawa.

We're pleased with the performance of our same property portfolio with at 6.1% and 160 basis-point operating margin improvement with strong fundamentals and young and handsome program occupancy remains strong during the quarter at 97.2% and rental rates were up 3.4% across the the apartment portfolio.

As Illustrated on Slide Five overall operating expenses decreased 7% due to reduced utility and heating fuel consumption from both a milder winter and am efficiency projects installed in the past year. We also benefited from lower natural gas and heating oil pricing utility savings were partially offset by General operating cost increases due to inflation. Airy cost pressures increased insurance premiums and the growth in our leasing team in the last 12 months property taxes were up 4.1% off your assessment in addition to strong and a wide growth kill him realize lower interest rates on mortgages mortgage refinance during the first quarter with great 70 basis points lower than on maturing debt and below our budget expectations.

Slide six highlights our debt maturity profile including average apartment mortgage rates by year versus prevailing cmhc insured mortgage rate subsequent to quarter-end and the onset covid-19 mortgage financing and renewals have progressed on schedule. And with for this further interest rate savings the average rate on our cmhc insured mortgage refinance in Q2 to date is 1.7%

We continue to manage our balance sheet conservatively as highlighted on slide seven debt, as a percentage of total assets was 44.4% and parts 31st, and we have long as the improvements in our debt service and interest coverage ratios.

We're pleased to have expanded our credit Capital flexibility over the last few years. This includes reduced that levels across the portfolio a pool of unencumbered assets of approximately 7.5 million and a hundred million of capital available through two lines of credit in addition looking forward. We have approximately forty million in mortgage up financing expected during the summer of 2020. I will now turn the call over to Robert who will give more details on our operations and the impact of covid-19 on our business.

Thank you Dale. Good morning. Everyone the past 8 weeks has certainly been demanding but through it all what stands out the most had been a commitment compassion and co-operation of killing his employees what they've been affected every day and helping each other our residents and our commercial tenants deal with covid-19 has killer maintained safe housing for more than 20,000 families killed 650 employees are doing a relative job managing through covid-19 and the special shout out to our 352 front-line employees specifically our resident managers and their assistants our maintenance team members and our administrative staff that interact daily with our residents suppliers and the public on a daily basis.

We could not ask for a more skilled employee group.

Still maintain its Vigilant cleaning and social distancing programs as we worked in navigate the relaxing of closure mandates by the various provinces him takes the health of its many Steakhouse very seriously and although we are pleased to date with our success in managing the virus. We know Canada and the world have a ways to go yet before anyone can relax as still as mentioned previously. Well prepared to do its part in minimizing and eventually stopping the virus spread looking at slide. Nine comes long-standing strategy remains unchanged. However prior to one at this time, if keeping challenge employees residents and our commercial tenants and their customers healthy and safe as we refine our procedures and prepare our property for the return to the new normal in the second half of 2020.

That said killing will simultaneously pursue opportunities to increase both funds from operations and that asset value where we can by increasing earnings from the existing portfolio about expanding the portfolio to Diversified geographically plus continuing to develop high-quality properties and killed its core markets. I want to touch on a key Revenue drivers and operating initiatives that invite them to deliver consistently strong returns to its investors. For example are strong same property net operating income performance is largely attributable to Killen's ability to grow revenues slide ten charts Kilns rental growth rates for the first quarter of each of the past five years. We have generated consistent Revenue growth for the first quarter of each of the past five years. Most recently killed delivered 3.4% growth in q1 2020. Same property rental rate fifty basis points better than q1 2019.

Killing value proposition and Market fundamentals remain strong as we achieve record-high q1 occupancy levels and many films markets in this quarter will impose a 2.1% off rental rate growth on renewals 6.1% rental rate growth on new Leasing and an impressive 28.4% rental rate growth on leasing renovated units.

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During covid-19 in the case that unit turnover has declined and this is expected to temper Tim's ability to move rent to Market as fewer units will be available for new leasing office units upgrade program. The markets Trend in recent years has been to lower unit turnover. For example twenty nineteen s unit turnover was 30.4% 140 month basis points less than fiscal 2018. So given covid-19 this year. We asked them a unit turnover May decrease by 3.5% to finish the year month plus or minus 27% turnover also Jones decision to assist it's tentative dates by suspending rental rate increases for April May and until covid-19 been curtailed will put pressure on Revenue growth. The exact impact on Revenue due to fewer sweets turning is unknown, but we will know more when we report for Q2 2020.

For now, we have forecasting positive same property Revenue growth for 2020 further. We anticipate businesses business to be relatively normal for 20 21 given the healthy demand and killings Court markets.

The demand for gyms new a newly renovated rental units remain strong across the portfolio after completing 304 renovated units in 2019-2020 repositioning programmed between four hundred and five hundred units has shown on slide eleven, although 2020s number of reposition units remains on track at this point. We've adjusted the annual Target would be between 300 and 500 repositioning units a wider spread given the uncertainty in q1, we upgraded and repositioned 95 units with an average cost to upgrade a $25,000 and during a 13% unlevered return clearly many films residents prefer upgrading units and we'll pay for these upgrades. So til we'll work diligently wage system and

512 highlights Jones investments in its online operating and financial platform and it's preference to embrace technology in a in a traditional brick-and-mortar business. This is paying additional dividend in the age of covid-19. Our customer relationship management software Lots in 2019 enables our leasing team to work remotely and use Virtual showings. Thursdays are available units this CRM technology-enabled killing to deliver high-quality service to our resident and prospective residents uninterrupted during this time.

Operationally online portals and mobile apps have seamlessly facilitated payment processing and enabled our accounting and Property Management teams to work remotely from a phone tablets or their computer.

Maintenance technicians received work orders on their mobile phones and then suggest that their priorities to focus on emergency work orders and other work that respects social distancing despite covid-19. We remain focused on key operating initiative that kill them including active management of expenses to optimize net operating income in conjunction with sustainability referring to slide thirteen. We are a prioritizing our tablets managers will also embracing green projects and remain very focused on Energy savings these projects help minimize children's carbon footprint whilst and mitigating the impact of expense increases from rising energy rates and other inflationary pressures are Mars 3120. We issued our 2019 ESG report which can be found on our website. It was prepared in accordance with global reporting initiative standards further independently measured its greenhouse-gas emissions to provide a benchmark for future assessments dead.

We're fully committed to ESG.

And are working on our second submission to the global real estate sustainability Benchmark organization that are known as grass. I want to hand you back to Phillip to provide an update on our April Recollections Acquisitions and our development pipeline.

Thank you. Robert is shown on slide 14. We have 90% of the total amount of our Revenue coming from apartment tenants 4% from mhcs in 6000 from our commercial tenants. As of yesterday. We received 97% of April's rent rent has been collected from 98.6% of our Apartments 98.5% of mhcs in seventy 2% of our commercial Revenue. We are working on rental deferral arrangements with a number of our commercial tenants in less than fifty residential tenants.

While it is early May rent collection is also looking favorable and in line with our April payment timeline.

Many of our commercial tenants retail in particular have been especially hard-hit with the closures of all non-essential Services across the country slide fifteen shows a breakdown of a 739000 square feet of commercial of our commercial portfolio, which is approximately 6% of our total projected annual revenue over the next few months back intend to work with our tennis on an individual basis to find solutions for the non-payment of rent the commercial space consists, mainly of three large assets westbound choice three hundred thousand square feet 50% interest in Charles Town Mall one hundred seventy-five thousand square feet in the brewery Market a hundred fifty thousand square feet the brewery the unique mixed-use asset connecting.

To r200 and unit 240 unit apartment building the Alexander in downtown Halifax. The other two assets Westmount place in Charles Town Mall were required with a long-term residential development potential.

Today we have collected 98.2% of April Mac rent, which only leaves $17,000 that is still outstanding. We've also lost like seventy 2% of April's commercial rent which leaves approximately $350,000 outstanding with rental deferrals in place in ongoing discussions with our tenants will expect to collect between 60 to 75% of this rent.

Flight 16 summarizes our year-to-date acquisition activity showing seventy point five million dollars in q1 Acquisitions. We detailed Crown Point and nine Carrington Acquisitions during our February conference call.

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March we made two small purchases image see and Shady Shady New Brunswick in a small apartment building in Halifax adjacent to a property. We own in downtown Los both were easily absorbed in our operating platform on April 30th. We purchased the the crossing at Belmont 856 unit property in Langford. BC off. This property is seen on slides eighteen and twenty was purchased for $60. This is Callum second apartment purchased in the Greater Victoria Market off the bottom floor of each building contains retail space, which kill them did not purchase. The all cash yield is 4.4% in the building contains the mixture of one and two bedrooms with an average rent of $1,868 per month.

Lisa