Q4 2020 Boardwalk Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen, and welcome to the Boardwalk real estate investment trusts for quiet 'twenty 'twenty earnings Conference call.
At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session. If at any time. During this call you acquire immediate assistance. Please press star zero for the operator.
This call is being recorded on February 26, 2020, I would now like to turn the conference over to Mr. James half. Please go ahead.
Thank you Anna and welcome to the Boardwalk reached 2024th quarter results Conference call.
With me here today is Sam Collier, Chief Executive Officer, Mr. Smith, Chief Financial Officer, and Lisa Russell Senior Vice President of corporate development.
This call is being broadly disseminated by way of webcast.
If you've not already done so please visit <unk> dot com slash investors, where you will find a link to today's.
Presentation financial statements MD&A as well as supplemental information package.
Starting on slide two we'd like to remind our listeners that certain statements in this call and presentation may be considered forward looking statements. Although the expectations set forth in such statements are based on reasonable assumptions boardwalk future operations and its actual performance may differ materially from those in any forward looking statements.
[noise] formation that could cause actual results to differ materially from these statements are detailed in boardwalk publicly filed documents.
I would like to now turn the call over to Sam Collier.
Thank you James and thank you everyone for joining us this morning, leading with Karen integrity Boardwalk top priority remains the health and safety of both our resident members and our Boardwalk team up heroes, who continue to adapt evolve and emerge through this pandemic environment, we remain committed to providing our essential service.
Our faith affordable housing in all our markets and are so grateful and proud of our team who have been rewarded with record high resident satisfaction scores, which in turn have delivered resilient and growing at that phone results for our unit holders.
Virtuous circle.
Coming together with all hands on deck with safety always in mind, we are moving the COVID-19 mountain, especially with vaccinations on the weight side.
Slide four demonstrates our most impressive F F O per unit growth of six 6%, including retirement costs nine 3% excluding that.
Our F O per unit remains the highest in the Canadian multifamily REIT sector.
Slide five provides a summary of teammates East recently released occupancy and average rental rate data compared to boardwalk portfolio in our core market.
Boardwalk represented by the Blue bars outperformed in both metrics in our core markets.
Building better communities continues to be at the heart of what we do and Boardwalk remains the choice housing provider in all our markets.
Slide six illustrates some key operational metrics our team continues to optimize our revenues balancing occupancy occupied grant and the use of incentives.
Occupancy has seen a percentage decrease I reflection of seasonality and the second wave of Lockdowns in our core markets.
Our occupied rents have continued to increase.
Our rent rentals this year have outpaced our move outs and our trend for March is for rising occupancy as it has been over the last three years as per slide 40 in our appendix.
Next slide seven highlighted our new and renewal lease spreads the precursor to average occupied rents.
Our revenue optimization strategy through the current environment continues to focus on retention noon.
New leasing spreads have gradually improved from the onset of the pandemic with increased lead generation.
With our current high occupancy and the lifting up rental rate restriction.
Work has reintroduced sustainable discount reductions on our renewals and continued to see success targeting inflationary adjustments with.
With approximately 60% to 70% of Boardwalk fleet activity in the form of renewals. These sustainable discount reductions will provide a resilience and growth and optimizing boardwalks revenue to.
To offset increasing non controllable expenses incentives for new leases are being offset with an increase in occupancy. We are now experiencing in the first quarter.
Slide eight boardwalk portfolio of well located affordable homes provide an exceptional value proposition for current and future residents members.
Boardwalks 33000 apartment units approximately 62% are based in Alberta, 11% in Saskatchewan with each of these provinces, providing exceptional affordability with multi decade low rents as a percentage of incomes, creating an opportunity for incentives to be reduced further to <unk>.
Offset increasing non controllable expenses, Ontario, Quebec represent 27% at boardwalk communities, providing exceptional affordable average rents as well with opportunity for future revenue growth.
Slide nine boardwalk product diversification captures a much wider audience of resident members meet increasing the overall demand for boardwalk communities, we provide three different branded communities boardwalk living affordable value boardwalk communities enhance value.
And boardwalk lifestyle affordable luxury currently we have approximately 6% lifestyle, 44%, EMEA and 50% living suites across our portfolio. Each brand provides exceptional value at each price point grounded on some of the most affordable rents in Canada.
Slide 10 through 13 highlight our most recent rebrand communities completed in 2020 with targeted rental rate adjustments to date, we have completed approximately 34% of our total portfolio common area and amenity improvements as well as 23% of total suite improvement.
Our design team in house renovation team and contractor partners move mountains on renovating twenty-three community common areas last year well done team.
Slide 11 are designed asset management and operations teams work closely to strategically identify each community rebrand or refresh our focus is to continue to deliver the best product optimizing our capital allocation for our value add program to our targeted resin.
Net member demographics. So we can continue to provide the most exceptional elevated experience at an affordable price.
The result is increased market demand exceptional value and appealing returns with sustainable market rental adjustments, we have highlighted Richmond towers in Calgary, and both South Gate towers, and Tower Hill and Edmonton at most recent completions that have continued during the COVID-19 environment.
Slide 12 showcases more of our value add capital program rebrand communities three communities in Edmonton, the Palisades terrorists tower, and Northridge states as well as one community in Calgary Oculus States with modest exterior lobby amenity inexperienced center upgrades unveiling.
The tremendous improvement in both aesthetics and resident member experience.
Slide 13.
Continued on our value add capital program rebrand features in Regina Calgary and Edmonton Slide.
Slide 14, and 15 illustrates actual returns on to renovations, we have completed approximately a year ago, providing actual stabilized average in place rent relative to comparable communities, where renovation dollars, we're not invested our Wimbledon community in Edmonton and our cash.
Our Alton tower community in Saskatoon are delivering a 10.4 and 9% yield on renovation costs, well above our 8% stabilized target.
Our results continue to reflect the success of the reengineering of our service product quality diversity and experience led by our design team and executed by our entire teams all hands on deck approach.
Two our entire boardwalk team we.
We'd like to now pass the call onto leases mandate, who will provide us with an overview of our financial results Lisa.
Thank you Sam on Slide 16, the trust delivered strong SSO and S. S. All growth, but F. F O increasing by six 6% from $32 2 million to $34 3 million for the three months ended December 31 2020.
<unk> increased by 14, 1% from $26 1 million to $29 7 million using an annualized maintenance capex estimate of $596 per apartment unit.
For the year ended December 31, 2020, that's also increased six 7% from 131 million to $139 7 million, while <unk> increased 12, 1% from $106 9 million to $119 9 million included in our year end <unk> and <unk> results.
Approximately 37 million $33 7 million apologies for retirement costs Slide 17 summarizes the trust monthly revenue collections from its resident members for 2020 in January of 2021. Please note collections are reported for the calendar months only and do not include revenue collected in subsequent months.
98, 4% of January revenue was collected in January which is consistent with the trust's historic run rate, though varying by province city insight prior to 2020, the Trust's historic bad debt expenses between 1% and 1.1 percentage of total revenue for the year ended December 31, 2020 that did.
There's 1.3 percentage of total revenue during COVID-19 and up to today Boardwalk is offered as president members that deferral program for those who can demonstrate financial hardships.
As at the end of January there were approximately 30 participants in this program, which is down from 100 participants at the end of July. Additionally, the total deferred balance was approximately 24000 at the end of January also down from the 85000 at the end of July.
Slide 18 provides a summary of boardwalks available liquidity.
Trust is well positioned with approximately $70 million in cash and subsequently funded financings as well as an undrawn $199 million operating line.
Just approximate 269 million in liquidity provides the trust with a flexible financial position in the current environment as well as providing the ability to take advantage of opportunities as they present themselves and as visibility improves.
Slide 19 illustrates boardwalk mortgage maturity schedule, our mortgages are well staggered with approximately 99% of our mortgage balance carrying any change durrance to the Canada mortgage and housing Corporation.
This insurance remains in effect for the full amortization of the mortgage and in addition to carrying the government of Canada's backing provides access to low cost financing with current estimated five and 10 year CMA sea rate of one 3% and two 1% respectively.
The trust debt metrics continue to improve with an interest coverage of $2 79 in the current quarter.
The summary of our 2020 mortgage maturities as presented on Slide 20 Boardwalk took advantage of the current low interest environment to renew for lock as well as secure additional financing from our mortgage portfolio in 2020, we renewed $310 5 million as well as secured $184 9 million in new financing.
I'll, let record low interest rates, taking our maturity our maturing interest rate down by 90 basis points from 2.54% to $1 six 5%.
Slide 21 summarizes our progress on our 2021 mortgage maturities to date, we have renewed our forward locked approximately 21% of our 'twenty and 'twenty, one mortgage maturities as well as secured $16 5 million in new financing at record low interest rates highlighted by some recently completing completed financing.
Net interest rates just over 1% current underwriting criteria in our most recent submissions to see me seek and our lenders has remained in line with our historically conservative estimates I would now like to turn the call. It's Elisa Russell will provide an update on our investment.
Thank you Lisa.
Slide 22 provides a brief update on our current and future development projects, which provides progression toward our long term strategy of geographic diversification and high grading our portfolio.
45, Brett Railroad in Brampton, Ontario is the trust only development projects currently under construction.
Work on the two tower 365 unit project continues to move forward on time and on budget.
We anticipate the first tower to be delivered in late 2022.
Both the underground parkade and podium structures are complete with work now focusing on tower portions. The partnership is nearing its 40% equity requirement and will be moving into the construction financing facility, which will fund the remaining construction costs.
And Mississauga, Ontario development site, which boardwalk holds a 50% interest in <unk> continues through the rezoning process, we estimate resulting to occur in the summer of 2021.
In addition to our eastern development projects.
The trust has two future development sites in Victoria B C rental fundamentals in this market have remained strong throughout 2020 with low vacancy rates and demand outpacing the supply of rental housing.
These two prime development types get boardwalk, a solid foothold in this high growth market.
Victoria site Eagle's nest is located in the growing municipality and derail this.
Land was purchased in Q4 2020 for $14 million and has the owning in place for approximately 250 rentals units yes.
As Prime site is located near Victoria General Hospital, as well as a large retail plaza and provides quick access to both downtown Victoria and Lankford work on permitting is currently underway for a potential 2022 construction start.
The second Victoria site. The card out land is an assembly of 14 residential lots in the Jennifer Gentrifying municipality of Esquimalt, and whether acquired for a total of $14 $8 million low.
Okay got it across from the newly developed it's quite small town square and Recreation Center. This prime development site will provide new rental housing and a growing and under supplied market.
Planning and entitlement work is underway and we anticipate rezoning to be completed in 2021.
These two states provide the opportunity for boardwalk to utilize its past experience and success in building accretive low rise development. The trust is excited to bring boardwalk brand up unique design and affordability to Victoria, while creating value for the trust in our proven low rise development program.
We will continue to progress through rezoning entitlement and the design of all of our new development projects in 2021 for clarity the trust will not begin any new construction in 2021.
Slide 23 shows several transactions that occurred throughout 2020 in our core markets of Edmonton and Calgary.
Though 2020 started decline in transaction volume compared to 2019, the resiliency of the multifamily sector continues to attract investment leading to stable valuations. Despite economic uncertainty caused by COVID-19.
Low interest rates high energy prices higher energy prices rental rate growth potential from a base of strong affordability and exceptional value relative to increasing replacement of construction costs are leading to an increase in investment activity in Edmonton and Calgary.
These most recent low rise suburban transactions have traded at per door valuations well above the implied valuation of boardwalk is high quality well located portfolio I would now like to turn the call over to James.
Thanks, Lisa expanding on Lisa's comments slide 20 for further illustrates the exceptional value boardwalks current trading price represents when extrapolating the implied cap rate based on the trust's current trailing financial results.
Slide utilizes our reported NOI to illustrate implied valuation on a cap rate and per apartment door basis.
Boardwalk on trading price implies an attractive five 6% cap rate on these most recent results.
Trust resilient NOI performance through 2020 as highlighted on slide 25.
Boardwalks resident friendly approach has provided for steady revenue growth through 2020.
Despite increases in non controllable operating expenses Boardwalk is focused on innovating controllable expenses provided a significant offset leading to portfolio operating expense increase of just 50, and 20 basis points for the fourth quarter and full year respectively.
Sequential revenue in the fourth quarter decline in our Alberta market, primarily due to increased vacancy.
Looking at current availability for the month of February you rentals have exceeded turnover and with lower availability are seeing occupancies improving.
As shown on slide 26, each of Boardwalk core markets present unique opportunities to continue on our trend of organic growth.
Our Alberta, and Saskatchewan portfolios provide an opportunity to gain occupancy while targeting sustainable incentive reductions on lease renewals.
Our affordable and high value offering, Ontario, and Quebec markets remain near full occupancy troughs.
Troughs continues to focus on achieving sustainable agi increases for community improvements and optimizing rental rates when units turnover.
Just a 25 dollar adjustment in our monthly average in place rents or a 2% improvement to our occupancy each equate to approximately <unk> 20 in annual F. O per unit and represents a significant growth opportunity over the near and long term as we continue to optimize our revenue and NOI.
Slide 27 reflects on our performance through 2021 of the most uncertain economic periods of our time.
Our competitive advantage and resident friendly approach was rewarded with resilience and growth through optimization of our NOI delivering 3.7% same property growth.
Our commitment to market, leading product quality and service allowed us to continue to invest in both suites and common area renovation projects that are targeting solid stabilized return.
Our strong balance sheet paired with noncore asset sales allowed us to take advantage of our steady geographic growth plans by accretively acquiring assets to expand our Kitchener Waterloo portfolio, while also entering the Victorian market.
Record low interest rates provided for a significant tailwind as we renewed loans near and below 1%, providing a reduction of interest expense going forward.
Overall this resulted in 6.6% growth in one of our key performance metrics of F. F O per unit.
Looking forward some uncertainties related to the pandemic remain and as a result, the trust will continue to provide regular operational updates to our shareholders in lieu of financial guidance to begin the year.
As vaccinations progress and both economic and border restrictions ease. This will provide more detailed needed to guide the extent of our growth rate for the year.
Our outlook for 2021 remains cautiously optimistic with the resilience of our essential service of affordable housing and the persistence of our performance focused team.
We look forward to sharing updates on our progress and our continued performance through this new year and we'd like to open up the phone line for questions.
Thank you.
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 you touched on so you will hear three to broaden the collagen requests questions will be taken in the order received should you wish you withdraw your request. Please press the star followed by the true if you're using a speaker.
Phone please lift the handset before pressing any keys.
One moment please before your first question.
The first question comes from Jonathan Keller with TD, Jonathan Your line is now open.
Thanks, Good morning.
John.
For first question just on the.
Revenue growth for 2021, and I understand that youre, not giving guidance, but if we just look at some of the stuff that that makes it up.
On renewals it looks like you're trending credit towards 2% is that something you think you can move higher back to where you you were at the beginning of the 4% or so you were at the beginning of 2020.
Over the course REIT your house, Yeah, right now we are.
We're seeing exactly what we've seen over the last three years in slide 40, our apologies for sticking that in the appendix.
Yeah. It's slide 40 really describes what's happened over the last three years.
And really important to look at rentals, which are much higher than move outs and so our availability is dropping and as soon as our availability drops in our new residents move in because our residents typically don't move in the same day day, they applied for an apartment and get approved.
So it takes a little bit of time for our residents to move in and as per slide 40 that occupancy increases as our residents move in that we've rented right now Uh huh.
We're below 4% availability.
As of today.
It's closer to three 5% as of today.
The trend.
As our availability drops our incentive for new rental will drop as well and so it's a it's a direct function as to the supply of <unk>.
New rentals that we have so the good news is that the trend that's in place right now will allow us to reduce incentives for new a new rentals, even further the math.
On a new rental is is much more positive to increase occupancy then too.
Worry about and focus on.
Another $50 of incentive or $30 $40 from incentive so the gain we realized on occupancy is much higher than whatever.
Additional incentive adjustment that we have to make and so that that is what we're seeing as we speak just add to Sams comments there Jonathan Yeah. We're seeing we continue to see success with renewals today I mean, we're our team is targeting 2030 40 dollar adjustments on our lease renewals and.
To Sam's point as occupancy continues to improve that's really going to position us coming out of that pandemic to get back to you.
Those incentive reductions that we had targeted prior to the pandemic equating to about half a month or one month reduction or that 4% that you were referring to Jonathan we were on a conference call with the Alberta business Council members off several Ceos in Alberta, and one of the Ceos.
Transalta energy is an economist by training shared with everybody on the phone Alberta in February isn't typically a peak energy demand month and in February we peaked and went over any other energy consumption the provinces ever.
Ever consumed energy is a real leading indicator of economic activity and the CEO of trans out to share that with everybody on the line.
And as has as as there's a lot of negativity out there and the sentiment is still very concerning.
For Alberta, there are facts like a.
Our record energy use that we are using in our province, or a core province that AR has in the past been a leading economic indicator.
Okay.
That is very helpful.
The second question just on your renovation program.
2020, you were you were actually able to do more individual units and you were in 2019, which is which is pretty impressive given COVID-19, where you where you slowed down at all by Covid and 2020 and what do you think you can do in terms of the number of units and in 2021.
Yeah, we really have to give credit to our team of heroes, who whose shoulders we stand.
No we were not slow down.
By Covid and and coming together with her all hands on deck are we moved to another mountain and <unk>.
And really focused on partial renovations as well and that's that's.
A reason.
We are able to renovate more units because we focus more on affordability the demand for affordable units is increasing.
And the demand for affordable housing is increasing and we're seeing that in our numbers.
And so we're focusing in on affordability right now and when the economy comes back and and and the vaccines are rolled out in schools come back in the fall.
Our our demand will increase even more and we will see even better results and get back to.
A new normal.
S S.
As it unfolds.
Okay. So if you did roughly 1600 suites last year is that a number to sort of think about for this year.
It's really hard to say.
We've got the same budget for suite renovation. So it should be very similar so our our budget for this year is very similar to what it was last year and we expect a similar amount of units to.
To turn and to renovate.
Okay.
Right Yep.
Okay. Thanks, I'll turn it back.
Yeah.
Thank you we have a following question from Matt Logan with RBC, Matt. Please go ahead.
Thank you and good morning.
Hello, Matt.
In terms of your outperformance relative to some of the CMA Sea stats for your respective markets. What do you think the key factors are.
Driving that.
The operating results.
Yeah.
A long time ago, we shared in conference calls the key leading indicator for growth in rental revenues is affordability and.
And we saw this.
Many years ago and shared this.
The key driver is affordability, we sat on the affordable housing a panel for the province of Alberta and and the.
The data is very clear there is a growing demand.
For affordability and we're seeing that in our rentals and in our performance. So that's our focus is to continue to deliver affordable.
Amazing homes that folks can can can live in we were in British Columbia, The other day and we have to share a.
Conversation of BCE is doing really really well by the way and it's growing in the population is growing there we're in a restaurant and almost very close to one another shielded.
Shielded by Plexi glass of course, and we couldn't help but hear our conversation next to us as I.
I can't believe the rents are $2000 for a two bedroom and that just caught our ear and I thought Wow, you know of all the things that we would hear somebody talk about pardon we were eavesdropping, but it was so low and it was it was a big Wow, we're shocked that while our rents are under $1200 for.
Typically a two bedroom unit warehouse and Canadians come and move to him. Please if you have any friends that are looking for affordable environment send them to Alberta, that's the solution for affordable housing and Saskatchewan. There is the solution and that's and it's a beautiful place by the way.
Sure.
I appreciate the color.
Maybe changing gears to your same property revenue.
NOI growth in Ontario, and Quebec.
Could you talk about the sustainability of.
What we've seen in Q4 like does that trend continue into 2021.
Yeah, you know, Matt you, you're hitting on some key words affordability and last question sustainability, what a keyword that is and we've taken a similar approach in Ontario, and Quebec as we have in Alberta, and Saskatchewan in the past our average rents in both of those provinces are well below our peers by the way and so we've been take.
In a very sustainable conservative approach and continuing to serve and deliver affordability in both those provinces that are that have been experiencing much higher stress.
In and around markets now on the high end across the country. We've seen the data and that reflects that there is a softening in the higher price rentals, there's clearly enough supply for higher price rentals.
And the data reflects more supply than demand because they can see is increased most in the higher end in Ontario, Quebec like anywhere else in the country affordability is key as well and so we're taking a sustainable approach with a really low average in place rents of Ontario, Quebec. The question of is this sustainable.
Absolutely is the answer absolutely is the answer.
And maybe last one from me.
Do you think about your priorities in growing in eastern Canada.
How should we think about potential capital recycling this year.
So.
On a forward looking basis, and just to give some color to the market since September we've seen a lot of deal flow.
And moving into 2021, and we continue to see the pipeline increase.
Some notable transactions and we are actively underwriting right now specific to markets that we've been active in the past call. It 24 months.
But we are seeing small deals and larger portfolios and we're actually really excited about the remaining part of 2021.
Now would that be mostly just to focus on potential acquisitions or would there be some dispositions as well.
So.
Hi, Mark It is from three Edmonton products, three Edmonton assets, and we have two of them under contract right now be happy to report back next quarter on those two transactions, we're seeing a lot of investment interest in Alberta, and it is picking up in the phones are the phones are ringing and so on.
On the acquisition side, it won't be yeah old eastern it'd be NBC and yeah, we're looking at some some.
Transactions and had mentioned right now buyers.
Our private for the most part very successful private operators.
And counter cyclical.
Operators that are private families and extremely.
Ex successful and have an impeccable track record at picking market bottoms and it was great news to get a call from from one of those families. The other day asking for a large portfolio in Alberta, we were very happy to receive that call, but again, we're we're busier.
Than we've ever been we talked about that last quarter, we continue to be busier than we've ever been seen much more deal flow and it's an exciting exciting time and exciting opportunities that we're seeing both on on the acquisitions and disposition opportunities.
So I appreciate the commentary. Thank you very much I'll turn the call back.
Thank you Matt.
Okay.
Thank you we have a following question from Mike Mercatus with dessert, though Mike. Please go ahead.
Hi, everybody.
Two from me this morning.
First one would just be on the cost side of things for this year has been.
Your ability to really drive a lot of efficiencies.
From your Opex line and through G&A and I'm, just wondering if you could on both of those funds to talk to steel.
The steel a word from Mr. Logan the sustainability of that or were there any sort of anomalous factors that would suppress gross numbers this year.
Hi, it's Lisa mandates so certainly looking at our controllable expenses as you know as you mentioned the focus really has been on our head count and so we're probably at a level, where we're happy with our head count. So right. Now we are still focused on trying to bring those expenses down and working as hard as we can to keep doing that focusing largely on technology initiatives, so things like our youth.
Platform digital leasing virtual showings also focusing on just maintain that head count at an appropriate level.
Obviously will be subject to some inflationary pressure just as we move forward same thing for the other administrative side.
Again, we focus on our head count in 2020 and haven't seen a lot of efficiencies there.
Again looking at technology from an administrative side on what software can we use changes in some of those platforms to see if those can vary first efficiencies, but again, well probably hopefully we can sort of keep that administration costs sort of flat year over year, but again looking for any efficiencies that we can keep bringing.
I think.
You guys Didnt have it.
Sales.
Sure.
That's true.
No I didn't catch the full question wage subsidy is that sorry is that the question because you kind of.
No.
All of us.
Not a partner.
Yeah.
Okay.
Yes.
You're really cutting out on us we can't hear your question.
Okay is that better but yeah okay.
Okay, sorry are closer to my my phone here.
Sorry, some others have noted that they benefited to a small degree from wage subsidy. So just wanted to from that wasn't the case for you guys are true Watson, Okay, and then last one from me Sam in the past you've talked about Grand Prairie, specifically and maybe sometimes growth there is being canaries in the coal mine in terms of leading indicators.
And it just just looking at the last two quarters those markets have been on the revenue side quite weeks I was wondering if you could just talk to the dynamic there and if that.
How are you are you if at all read through that into what could be happening in other markets in Alberta.
Those markets are improving as well and and we are seeing.
The same as we're seeing in our core markets are rentals are higher than move outs in both those markets and so that.
And actually our Fort Mac and they are the Grand a canary in the coal mine is doing really well.
Almost.
98% occupancy.
Our two.
2% availability, 2% to 3% availability towards month and so it is.
Is.
Encouraging rental data that we're seeing in those markets.
Okay. That's it from me congrats on the on such a strong year in a very oh. Thank you.
Thank you Mike.
Thank you. Your next question comes from Mike <unk> with National Bank, Matt. Please go ahead.
Guys just a quick follow up on Mike's line of questioning there and I did notice that Fort Mac was kind of went from 94% occupancy beginning of last year to 97% as at Q1, it sounds like it improved further.
I know historically, you've said you don't house energy workers per se given that they tend to make a lot of money and own homes.
How do you think about the improvement of the energy markets from a W. T I standpoint, with regards to employment to crossover to more generally.
Well, Matt that's a good question in God, We trust and everybody else bring data. So the data is quite a.
Quite strong and reflecting.
Our shortage and supplies.
Being concerning.
Yeah.
The use of energy.
<unk> continues.
<unk> is everything for all of the science fans out there and the big focus in Alberta, and it was great again to share our call with.
So many Ceos on the line with a focus in Alberta is really clean energy that is the key word and we truly are a world leader in clean energy and the more of the world focuses in on clean and environmental sustainability.
<unk>.
The more the more.
Is gonna be invested we had a call from the new CEO of Alberta development.
Oh, he's getting bombarded by sovereign funds by large investment bankers, calling and saying hey.
Alberta is the cleanest, it's where we want to be how do we get there who do we talk with how do we invest back in Alberta that was a great great.
A message that that CEO shared with everybody on the line today and I hope I'm not sharing secrets, but.
But it was it was a great call to be honest you know, it's very very encouraging to see.
Alberta turnaround. We also were on the line with the two Ceos of the unicorns, because everybody believes in flying horses, and unicorns, whether it's multibillion dollars in value and.
<unk> and share works phenomenally profitable.
Amazing companies billion dollar unicorns share in Calgary talked.
<unk> talked about how great.
Calgary is once you get here and how we really have to focus in on Canada.
Marco the C O of of of share at work said, it's about what's great for Canada, because let's face it folks Canada is amazing place to be and when we lift up ourselves as Canadians first and foremost it will get better for Alberta, and for Calgary, and Edmonton and everybody in and what an inspiring CEO.
Marco is to focus in on lifting everybody up and it is no coincidence. His company is a multibillion dollar success.
Okay. It makes sense Oh, one other follow up question I guess, the provincial government put out a budget yesterday.
I don't know I'm sure you guys have looked at it in more detail than I have but if you could provide any commentary as to what you think it does for your business. It sounds like you aren't going to see a tax increase which is nice.
But yeah just in terms of jobs growth I know there was some focus on infrastructure spending but at the same time our.
Government our efficiencies so some thoughts there.
Yeah.
The big headline what's the GAAP to Sip.
And let's let's I guess share some thought with the deficit and that fiscal and monetary policy has changed dramatically with quantitative easing and I'm, sorry, I'm getting into economics here. It's important though because the question is is a conservative fiscal policy of the <unk>.
Past something that is relevant with nations the biggest nations with record deficits and a record a continued growth of <unk>.
Hum.
Our debt capital.
You know.
It is is it a is it.
And inspiration to seek companies spend on innovation spend and invest in technology and our other countries. Great. Examples who are spending records amount of capital on an investment in technology and innovation is that an.
Operations for not just Alberta, but for Canada.
And and how can we look at these other big growth nations and learn from what others are doing and how can we compete if we do not invest in our in our companies and our people and in our in our in our technology innovation and infrastructure. How are we going to compete as a nation, but I'm going to end.
Right, there because I'm way off topic.
No worries.
I appreciate no no fair enough.
It was a bit of a broad question anyways, but it sounds like I mean, it's better to have a deficit and unemployed people and put money into infrastructure from one standpoint.
How can we compete if we don't is the question like like look around its all relative everything is relative.
For all the science fans out there that that's another really important.
Fac to know the law relativity, and we got to keep in mind, what everybody else is doing to keep relevant.
Okay. Thanks, guys appreciate it and you know it looks like Oh.
You have to look into the future in terms of what you've disclosed but it seems like things are forming a base from turning around in Alberta.
Oh God, We trust day, everybody else bring data the data says that.
Thanks, Matt.
Thank you.
We have a following question from Howard Leung with Veritas Howard. Please go ahead.
Hi, Thanks.
Just can you comment a bit on turnover and they can see by brand segment, especially in Calgary or Edmonton.
Given how I think we pointed out earlier that a block spreads are better than the next day I was wondering how is that how you saw the living segment growth.
Segment.
Being affected by the competition.
Oh.
The living by far is the big.
Success story affordability is.
As really key powered and looking at our move outs.
Again, we ask everybody to look at the data.
Slide 40, and and move outs are pretty well in line with what they have been.
In previous years and actually dropping.
Which is a reflection of the success of our team and retention. That's a real key focus we have invested and worked tirelessly on increasing our retention and it's working and in the data reflects our success and we're doing everything we can.
To keep everybody in our communities and especially in these times where being youll.
Yoga flexible straw.
Stretching our legs behind or adds to make a renewal and and it's working it's you know it's it's it's a reflection of the great team.
That we have and we get.
The net promoter scores that we've been keeping track of record net promoter score result, we get so many amazing reviews as I'm here because of James I'm here because of Jeff I'm here because.
And our team is who our residents are here for and that's why we focus in on our employee net promoter score and and I'm the vs.
Hum cover all trainee I'm, a trained here and asking our team what am I missing what are we missing as leaders we work for our site teams and our site teams worked for our residents and our residents' reward us with amazing results, who in turn are shareholders and unit holders.
Benefit so it's a virtuous cycle is what it is and it's working and it's a flywheel, that's gaining momentum and for all those good to great.
Our readers the flywheel is alive, and well and it's gaining momentum and it's tough to move a big heavy flywheel from from the past, where we were three four years ago, it's been tough and we get all our team all the credit because our flywheel.
Wheel spinning faster than it's ever been in net.
And it's not slowing down it's gaining even more momentum.
So I've gone over my time limits sorry.
No no.
It makes a lot of Thanksgiving day.
Our same rental pick up.
On your comment on the team I was wondering you know that.
You referenced that boardwalk had to hire a lot more for us yet.
Too.
Basically we understand the competition that was happening in the space.
Now that we see competition pick up a little bit more do you anticipate having to.
Higher than our more associates.
To help with that competition.
So you know we have to balance our technology and robotics with ethics again.
S G.
Our our in house developed robot who.
Works 24, seven replies to leads automatically quicker than than anybody else and it doesn't get overtime or anything is doing an amazing job are we going to be using more of that of course, we're going to balance and use technology. The question is how do.
We make technology, our slave not the other way around and so technology is great when it's used properly.
And effectively to enhance everybody's performance, it's like the chess players with and without technology that the chess player with technology will always beat.
And has continued to beat the robot.
And that's what we use technology and so are we going to see more now.
Robert Billy last is that the trend and again the data is we're doing a lot more with a lot less because of technology improvements we have to do that because everybody else is doing it as well everything is relative so we explain when we ask our team what do we want to be do we want to be blockbuster.
Didn't change or do we want to be Netflix, that's constantly changing and everybody wants to be Netflix wants to be a company that innovates wants to be a company, that's great and greatness isn't all of us and that's what our purpose is to be just that great.
Okay.
That's helpful.
And then just one last one from me on the on the incentive part.
Thank you disclosed in the Q4 <unk> 77 per door.
With rental kind of exceeding move out you mentioned that they would drop that I got for now they are still around that level.
For the first few months end and are you offering given your comments about by moving but communities are you operating more incentive from the community space.
Yeah.
You have a community space clearly when we invest in common areas.
In place occupied and the incentives are less there. There is data that reflects we are doing extremely well when we do reposition in the REIT location of course, it has to happen in the REIT location that that.
Has that demand for that.
For that enhanced common area improvements slide seven.
Clearly reflects that trend.
Declining incentives for new rentals.
And so the data is clearly there and the occupancy that we're gaining will allow us to continue to reduce incentives for new rentals and incentives overall.
So are the trend is our friend and and the trend is showing in our data showing that we will be able to reduce incentives.
With this trend.
In place just to add to that Howard.
Can't reiterate enough our focus on retention right I mean that that is where represents about 60% to 70% of our deal flow and that's where we're starting to see that steady sustainable incentive to decline in net standpoints out on those leasing spreads on slide seven you can clearly see that we're going to continue to do that targeting 2030 $40.
Our reductions on our lease rentals.
Okay. That's great. Thanks, guys I'll turn it back.
Thanks Howard.
Thank you. Your next question comes from Joie Chen with BMO capital Joanne. Please go ahead.
Hey, guys good morning.
Good morning, Brian.
Just two quick ones from me.
On the Capex side of things, how should we be thinking about the trend for 2021.
Very similar to what we saw in 2020, and we continue to fine.
Savings in materials and parts and supplies at the market continues to be extremely competitive and in technology and innovation continues to.
Flooring prices for example, Joanna.
Keeps on dropping and dropping in.
And we're really open source and inspired by the the Tech community, which is a people focused community in an open source.
Community and were coming.
Coming together as other community providers.
And like a buyer's club.
Union.
Where.
We're coming together.
And putting our buying power together.
Works great for Costco members.
It's great to work with our apartment community member. This concept is something that the U S is way ahead of US there's large multifamily buyer groups in the U S that represent millions of units and so this this club I guess you you might.
<unk> is just starting with some.
Pretty well everybody that we call other other of our.
Public and private are our friends and we're going to get even more savings.
<unk> out or come in with Big Big contract.
And that's good.
Can it be a win win Joanne and it will be a win win well whatever whatever we reduced in price will make up in volume, though so that win win win always.
Okay.
I guess I'm, a little bit further out ahead, but in terms of your Victorian developments.
There are a lot of it Oh I'm, sorry, you went to zoning and whatnot, but what kind of sort of timeline should we be looking at and I guess, maybe it might be a total of course massive but what's sort of your shouldn't would you be targeting for that part of it from kind of move ahead.
Yeah. It is pretty it is pretty early and again, we're working through the rezoning right now in some different entitlements and working with them underwritings have built the consulting team.
For both projects.
It's pretty much and again, it's still based on.
Renton.
Very early days, but probably about four and a half to five.
It's pretty much with it.
Yes.
The build cycle Joanne and everyone around 12 months, that's the beauty with walk up and actually even even quicker than 12 month build cycles.
The permitting.
Soon.
Yeah and again, the one site is known and the other thing that we're taking share rezoning right. Now so there are different stages and staggered development projects.
Yeah.
And then everybody else, yeah, and and the and the equity capital is the value that we create exactly similar.
Similar to the successful walk ups, we built in Regina in Calgary, our equity capital is really the 30, 40% or 30% value that and actually 40, and some because costs have gone up so much.
With time.
Our our value goes up and the value creation goes up as a result, our equity goes up and so that.
That's really the source of our of our equity is is is mostly what we create.
Brampton for example, we're building at around 500, a door average condo prices.
In Brampton or over 700000, a door. So that's 200000 on 700000 and that's that's a big equity that we've created.
In real life.
It's exciting to create and the value.
AD program that we have is in in the most competitive market in the country.
<unk>.
Gaining market share and proving that we have the best value add program.
It's no coincidence there is no such thing we have the best team.
It produces it.
So.
We're super excited with the acquisitions, we made in Cambridge.
And Waterloo Kitchener incredible value creation, well ahead of our performa budgeted NOI is well ahead of it and again a reflection of the value add program, we've really seasoned and curated over the last.
Several years, it's it's a great recipe it just keeps getting better and better and that's what our goal is get better.
Okay.
No that's helpful, but maybe that's the right kind of into my and just a last one from me.
Could you maybe talk to kind of the competitive dynamics that you're seeing now and primarily in Calgary and Edmonton I know you know just like some of the headwinds that so.
What did you say that you know you continue to take share giving be attracting more from the portability of your portfolio right now.
Yeah, It's a tale of two markets Joanne and everyone.
The competitiveness in the new supply is very very.
A very high end and even in a very high competitive new market with our 160 units and JV with REO Count for example, we're doing extremely well we're heading to about.
65%.
Occupancy, where we're very close to that or are there.
I haven't quite looked at brio today.
So so in their affordable living and communities brand demand absolutely is is increasing for us.
Hum.
The market overall continues to add new supply, we continue to see completions in both Calgary and Edmonton in and the good news is there's a lot less investment there is a lot less enthusiasm to build even more supply in Calgary and Edmonton in RF devices don't.
We don't need any more supply in our province.
The they are the focus we have to focus.
<unk> focus is it is helping folks get into affordable housing and continued to focusing on on maintaining that affordable stock.
And serving the increasing demand.
For affordable Affordable housing that's required by residents today across Canada.
And so that's where the demand is that's where we are are in the middle of and it's and it's really a well serviced well maintained well designed and engineered product.
That that is exceptional value for residents and that's always in demand.
Sure.
Okay, No that's super helpful and that's.
That's it from me. Thanks, Thanks, so much guys I'll pass it back.
Thank you so much.
Thank you. Your next question comes from Brendan <unk> with Canaccord Genuity Brandon. Please go ahead.
Hi, good morning, everyone and congrats on a.
And our strong 2020 are in light of Covid and the pandemic and all of those.
Challenges.
Maybe just I'm just trying to get a handle on leasing for next year and I guess, one thing I always struggled with if I look at slide 43, the loss to lease.
I think that there shows the significant I guess mark to market.
The opportunity within the Alberta portfolio, but then.
I'd take a look at slide seven and it shows our spreads on new leases are.
Our negative so I understand 60% to 70% of leases.
Newly signed our renewals, but on the 30% to 40%.
Just wondering for 2021, and obviously no one has a crystal ball, but.
Do you expect there to be upticks in terms of what four slide 43 would suggest or you know maybe slight slightly negative which slide seven months suggests.
Hey, Brendan it's James Yes, as you pointed out on slide 43 of the biggest opportunity in Western Canada is incentives and so as a result of that we post both numbers here, we post the number on the left which includes incentives and the number on the REIT, which excludes incentives.
For what we're seeing right now going forward into 2021 are our plan. Our playbook is the same as we as we had in 2020 through the pandemic. It's all about the sustainable increases focused on retention and so in this environment again targeting those 2030 $40 incentive reductions on renewals.
Where we're seeing success in its appropriate for this current environment on new leasing it is competitive out there you saw it in the same age see data that was recently released there's a cost of acquisition for those new tenants, but as Sam pointed out earlier revenue revenue management or managing that revenue.
Gaining that occupancy is the best way to manage that for the first part of this year and that's where you'll see the focus going forward and so on the incentive front, it's going to be that balanced between what we're able to reduce on the renewals offset by a what we may have to gave on new leases in the interim right and so as we start to see a little more velocity in terms.
A border and economic restrictions, that's what's going to set us up to to get back to those larger incentive reductions going forward.
Right. Okay. That's that's helpful and.
Maybe just a.
On the.
Taking a look at your urban and suburban portfolios I don't know the exact split it might you know that it would be in Calgary and Edmonton, but are you seeing any differences you know have you seen any differences in the last few quarters or even the beginning of 2021 between leasing velocity.
Velocity within your more kind of urban assets versus your suburban assets.
We have focused more on on redevelopment on our common areas and our urban communities.
Communities and as a result, our urban communities are improving.
And we're regaining market share.
Those locations and so we're seeing a improvement overall, both urban and suburban that the result of that.
Okay, So no material differences.
Between the two portfolios.
Sure.
There is a stabilization.
As we speak there you're used to be.
Last year there was.
This year, we're seeing a more.
Stabilization between our urban or suburban because we focused a lot on retention and our common.
Common area improvements and are more urban Edmonton communities.
And made some adjustments as per our higher for us on on market rents and our urban.
Communities to be more competitive.
So those have all helped to state re stabilize.
Occupancy in both the urban versus suburban.
Okay. That's helpful and then.
Maybe just last question from me the most important one Sam do you think there'll be a Calgary Stampede. This summer and will be hosting an investor day for that.
Well our theme.
In 2013 for the Calgary Stampede exhibition in Stampede was hell or high water.
There is gonna be a it's going to be a stampede and so.
Even even scientists believe.
And and and we all.
We all have heard perception is our reality.
And when we believe.
It create a reality so yes.
We'll see at the Stampede.
Yeah.
Alright, well metal, it's not reality everyone.
Thank you.
Thanks.
Sure.
Thank you.
Your next question comes from Mario <unk> with Scotiabank Mario Please go ahead.
Alright, thank you.
And realize were from trigger an hour and you're absorbing Eric just a couple of Rupert simple brand.
For the quarter I noticed that G&A picked up $4 million versus Q3.
Operating car.
Came down a little bit.
Relative to commodity.
Just want to clarify where there's an accounting.
During the quarter that would have gone.
For the balance of commodity figures.
Hi, Mario its lease that no. There is no accounting changes from Q3 to Q4 day increased administration expense largely deals with yearend accruals as we finalized based on bonuses and profit share. So.
Based on improved results for Q4 that was a function of why that accrual was bigger going into Q4 or for administrative expenses.
Okay, and then you.
You noted that you had three assets on the market.
Good day.
But just curious with respect to Calgary. The CBRE survey that just came out last week Moody's reported.
Five basis point decrease.
Calgary multifamily cap rates is that consistent with what youre seeing on the ground in terms of all day.
Demand is actually quite small so I'm just trying to.
Yeah the failure.
Yeah, its consistent and again cap rates.
Our reported from various groups private and public.
Theres different filters that everybody does he two.
To end on their number but that would be a fair comment.
It's a fair comment to say, yes.
Okay.
And then.
Thirdly.
In terms of.
The Alberta outlook.
Hey, Sam you've noted.
Gardening and voted one of the top three or four points from.
And the world economy.
From affordability.
Several times very clearly very affordable.
They're moving more important post COVID-19.
That bodes well for Alberta, so low.
Good thing.
Happening in positive terms.
The federal government seems like there.
To get international immigration kick started again through various initiatives.
That bodes well.
Given the lower supply from capital relative to total.
So the Big question then comes from job growth and you just touched on earlier in the call but.
What can your oil industry and energy midstream EBITDA transmission will be pointed out too.
What kind of water.
No business meetings with other constituents.
Which room from where it might on the ground.
I could point to one industry or two industries, where you think that the market is under appreciating job growth potential within the next 12 months.
What would that one or two industries.
Do you have any data kind of supports the potential.
From a job growth and low to industry.
Health.
Our health.
Industry is massive.
Infrastructure.
That's that's a global.
Growth.
Area for investment as well.
And so those those.
Our.
And really the work from home.
<unk> is a big movement.
Because we heard from the Unicorn Ceos.
The work from home Super Super helpful.
And so it's a it's a real.
Less than.
And especially in the last year, where where we have seen.
As as as a Ah.
Global community how closely we are connected and when somebody sneezes in some place in the planet our whole planet can shut down and so this conversation on how closely we are connected came up with the Unicorn Ceos and how important it is to focus in on on attracting all <unk>.
<unk> of talent not just full stack developers because a full stack developer will need a CFO will need accounting will need cleaning services in the office and the flexibility the work from home ability will need affordable housing and so equal.
Our system is what the tech world talks about ecosystems.
And more and more governments and communities are learning about the importance of this ecosystem and how how every we all have to come together as a country, we really do and and work on real positive reasons and make it super.
Simple that's yeah, that's the big lesson technology Kiss and easy keep it Super simple and easy so if we make it really simple to come to Canada.
And grow in Canada, and innovate and succeed in Canada.
Works out we're already doing that and so.
This this.
A data as far as population works out Alberta doing that because the population data. According to stats can clearly clearly reflects as our Burton word is getting out because alberta as per stats can is growing more than anywhere else in Canada.
So all of those factors, we talked about is absolutely working as reflected by the data.
And so we need to get more of that information out and again as al burdens. We are proud Canadians first and foremost.
And Thats, who who all burdens our it and that's and that's how we all have to be as Canadians and the more we come together as a country.
The vaccine producers and innovators here in Calgary, we have a vaccine company in Calgary that as Canadians, we have to all be really grateful foreign support. So there's all sorts of great things happening here, the diversity and the day that economic data clearly reflects a much.
More diverse economy in Alberta, and every time, we go through an energy cycle, our economy gets much more diverse and more diversed statistically as per the job data than we've ever been and we're going to continue to be because the mother of invention is necessity.
Okay. My last question just from a.
On the garden.
Hum London greater visibility.
In order to provider.
Am I correct from thing that we have greater visibility is more on the top line revenue.
Part of the equation as opposed to expenses or is it both from a top line as well.
Kind of a wildcard in the expense category.
That's not possible.
Hey, Mario it's James.
Look at the end of the day, we are still in a pandemic here.
From from an expense items standpoint.
Good news.
I'd actually argue that we have better visibility than we did.
At this time last year for 2020 and specifically.
0.2 property taxes, right and you remember this time last year, we talked a lot about property taxes and ended up seeing double digit tax increases in some of our municipalities really good news for 'twenty and 'twenty, one we're not anticipating that.
As far as the other expense line items go again, I mean in the context of what we're seeing right now we're seeing more inflationary increases with the exception of maybe insurance as a specific line item, but on the revenue front.
You know our playbook for 2021 like I said earlier is going to be very similar to what were what we did in 2020 and how we ended up with growth through 2020 that focus on retention that focus on gaining occupancy, but let's face. It we are in a pandemic and so in the meantime, and in between time, we will continue with our increased transparency and disclosure with regular.
The updates to our stakeholders and as economic and border restrictions ease that will give us the ability to reintroduce that guidance.
Okay, great good true time, everyone.
Thank you Mario.
Thank you there are no further questions at this time you'd be proceed.
Thank you operator before we end the call our annual an ESG report will be published in March and take a more environmentally friendly interactive digital approach as always if there are any questions or comments. Please do not hesitate to contact us with gratitude, we'd like to thank our amazing team.
Of heroes are great leaders.
Loyal residents CMA sea, our lenders and all of our stakeholders. It really is all about our amazing team of heroes, who is huge shoulders, we stand and as leaders. We continue to do everything we can to support continued growth and excellence.
We really can't thank our amazing team and great leaders enough.
We are pleased with our improving results on a foundation of exceptional value. We continue to provide a resident members our investors and all our stakeholders.
Our home is much more than a place.
The future is family, where love always lifts what more important when.
When choosing where to call home.
Thank you again, everyone for joining us this morning, and May God Bless us all with continued healing health and peace through all times. Thank.
Thank you.
Ladies and gentlemen, this concludes your conference call for today.
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