Q1 2021 Boardwalk Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen, and welcome to the Boardwalk Real estate investment Trust first quarter 2021 earnings Conference call. At this time note that all participant lines are in a listen only mode, but following the presentation. We will conduct a question and answer session and if at any time during this call you'll be quiet immediate assistance.
Please press star zero for the operator.
A reminder, that this call is being recorded on May 14th 2021, and I would like to turn the conference over to Mr. James Hart. Please go ahead Sir.
Thank you Sylvia and welcome TV Boardwalk reach 2021 first quarter results conference call with me here today is Sam Coleus, Chief Executive Officer, Lisa manage Chief Financial Officer for me.
So Russell senior Vice President of corporate development.
Note that this call is being broadly disseminated by way of webcast.
If you have not already done so please visit B walk dotcom slash investors, where you will find a link to today's presentation as well as PDF files of the trust 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 boardwalks future operations and its actual performance may differ materially from those in any forward looking statements information that could cause actual results to differ materially from these statements.
Our detailed in boardwalk publicly filed documents.
I'd like to now turn the call over to Sam Coetzer.
Okay.
Pardon me.
Engineered for growth through pandemic conditions. Our results reflect we have adapted we are evolving and our emerging with a focus on our organic growth optimizing our revenues, reducing our controllable cost and siem market gains with our brand renovation.
And repositioned communities.
Strong demand growth as reflected by record population in Alberta in Q1, I return a post secondary students immigration and increasing demand for affordable housing.
Our focus on quality service and experience as reflected by strong resident retention community engagement initiatives.
O clock resident member experience measured by a record high net promoter scores.
Our geographic expansion is providing accretive results from economic and geographically diversified markets are combination of acquisitions and development provides us with exciting opportunities for the post pandemic transition.
Our next slide highlights boardwalk national portfolio and reflects on record affordability levels at current rental rates that provide for a sustainable growth opportunity across all our markets are most affordable markets are our largest edmonton and Calgary market.
<unk> five <unk>.
Straight top boardwalk is capturing market share by outperforming in both occupancy and average rental rates.
Slide six our Q1 'twenty 'twenty operating results reflect positive NOI growth in our core back Saskatchewan and Ontario market.
Drop in NOI for our Edmonton and Calgary market due to the slower winter months last year and further lockdowns with vacancy dropping in the first quarter and occupancy and revenues rising into the second quarter.
Slide seven shows our rent change on new and renewal leases and how they use of incentives for new rental has increase to drive higher occupancy and revenues sustain.
Sustainable rental rate adjustments on renewal are offsetting increases in our non controllable expenses.
Renewals are typically 60% to 70% of our monthly lease activity.
Slide eight shows strong rental for January February March and April as we continued to gain occupancy with more rentals than move outs in each month to date may continues to be very strong with many renters.
From homeownership, new migrants to Alberta, and with new resident members moving out of competitors smaller apartment units into our larger two three and four bedroom units.
Our slide nine provides key operational metrics, which reflect our incentive occupied rents and number of associates essentially flat on Q1 revenue is slightly lower as a result for the lower Q1 occupancy since February our monthly.
Occupancy has increased 100 basis points.
As we head into our strong summer rental season, the occupancy and revenue trend for all our markets is positive.
Slide 10, our boardwalk brand for.
Work product diversification captured a much wider audience of resident members neat increasing the overall demand for boardwalk community.
We provide three different branded communities boardwalk living affordable value boardwalk community enhance value and boardwalk lifestyle affordable luxury.
Currently we have approximately 6% of lifestyle.
44% community 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.
Slides 11 through 17 highlight our rebrand communities and examples of yields on cost for some of our rebrand projects as well as upcoming 2021 exciting community upgrade.
To date, we have completed approximately 34% of total portfolio common area and 47%.
<unk> the completion of 2021 project and amenity improvements as well as 25% of total suite improvements.
Slide 12, our design team in house renovation team and contractor partners continue to move mountains as illustrated by our area exciting community improvements in northern and southern Alberta.
This GAAP Saskatoon, Regina, Kitchener, Montreal, and Quebec City.
<unk> 13 illustrates some beautiful rendering and plan for our large west Edmonton village community.
Slide 14 showcases beautiful rendering and plans for our complex low down conversion from a senior to multifamily community and renamed low.
Slide 15 shows our renderings of a new exterior lobby experience center amenities at hallways for King's tower in Kitchener, just down the street from the Google headquarters Theyre also rendering of Greentree village and West Edmonton.
Slide 16 shares are stabilized renovation return for Wimbledon Edmonton.
10 for 10, 4% and has exceeded our 8% internal hurdle rate our renovations continued to garner positive resident testimonials driving referrals and occupancy higher.
Slide 17 features are efficient renovation at Sanford apartments in London, Ontario, with a strong yield on cost of 18, 2%, we would like to now pass the call on for Lisa <unk>, who will provide us with an overview of our financial results Lisa.
Thank you Sam on Slide 18, the tests delivered strong <unk> and <unk> gross with episode increasing by five 5% from $31 5 million to $33 2 million for the three months ended March 31 2021.
<unk> increased by nine 1% from $22 7 million to $24 8 million using an annualized for maintenance capex estimate of $1012 per apartment unit.
During the recent quarter. The trust completed a thorough review of its capital investment program with a focus on defining its value add and maintenance capex activities. The results from this review is summarized on slide 19, with the trust anticipating total capital investment of $3980 per suite in 2012.
One as compared to 3004 hundred $2 incurred in 2020.
The trust defines value add capital investments and those investments, which focus on increasing the productivity of the property with the goal of increasing net operating income through revenue growth and or decreasing operating expenses.
Value add investments include building improvements and common area renovations as well as suite upgrades and technology initiatives, all with the goal of supporting NOI growth.
For fiscal 2021, the trust anticipates to incur $2968 first sweep on value add investments made.
Maintenance capital expenditures include those expenditures that are incurred to maintain and sustain the existing earning capacity of a property.
Using a three year rolling average as a reserve the trust estimates to spend $1012 per suite on maintenance Capex in 2021.
Please note that the 2020 results presented were calculated using the same methodology as just described as well as noting the significant judgment is required to determine whether on capital expenditure is needed to maintain vs increase the earning capacity of an assets.
Slide 20 summarizes the trusted monthly revenue collections from its resident members for the past year. Please note collections on reported for the calendar months only and do not include revenue collected in subsequent months.
98, 7% of April revenue was collected in April which is consistent with the Trust's historic run rate for the quarter ended March 31, 2021, bad debt expenses totaled $1 2 million or approximately one percentage of rental revenue, which is in line with our pre pandemic bad debt rates.
Slide 21 provides a summary of boardwalks available liquidity.
The trust is well positioned with approximately $94 million in cash and subsequently funded financing as well as an undrawn $199 million operating line.
Just approximate 294 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.
Slide 22 illustrates boardwalk from mortgage maturity schedule, our marriages are well staggered with approximately 99% of our mortgage balance carrying any true insurance through the Canada mortgage and housing Corporation.
Insurance remains in effect for the full amortization of the mortgage and in addition to carrying the government government of Canada backing provides access to low cost financing with current estimated five and 10 years. So you may see rates of one 7% and two 5% respectively with current rates well below the trust maturing rates mortgage financing.
To be one of the lowest cost of capital available to the trust.
The trust debt metrics continued to improve with an interest coverage of 282 in the current quarter.
Slide 23 summarizes on progress on our 2021 mortgage maturities to date, we have renewed our forward locked approximately 35% of our 2021 mortgage maturities as well as secured $42 6 million in new financing at low interest rates. Additionally, we financed a recent acquisition for $32 million and.
On interest rate below 2%.
Current underwriting criteria in our most recent submissions for <unk> and our lenders has remained in line with our historically conservative estimates I would now like to turn the call to Mr. Russell will provide an update on our investments.
Thank you Lisa.
Starting on Slide 24, we were pleased to announce the acquisition of Aurora and newly constructed 114 unit community, which is well located in view Royal and established and growing municipality in Victoria British Columbia.
Sales in 2019. This community was purchased for $48 million at an approximate cap rate at four in a quarter and is currently 100% occupied.
For our offer spacious living with average fleet sizes over 840 square feet there.
This community is surrounded by natural park and walking trails.
Aurora is nestled between one of our future development sites and the Victoria General Hospital, which will provide future operational efficiencies and complements our reentry into the Victorian market.
This acquisition represents the trusts ongoing commitment towards the execution of its long term strategy to geographically diversify and high growth market.
Moving on to Slide 25. The trustee is also excited to announce the acquisition of mountain view on the states are well located 81 unit community in the picture S resort town on South Alberta.
This world right now in tourist destination surrounded by the beautiful Rocky Mountains has historically attracted over 4 million tourists a year and has proven to be remarkably strong despite the impact of COVID-19.
Parks, Canada offers a non participating 42 year land lease, which was recently renewed and expires in 2016.
Mountain view of States consists of three bedroom town homes and two bedroom apartment units offering its residents expansive living space of over 930 square feet on average. This community is surrounded by breathtaking views of the National Park and sits on an underdeveloped eight acre parcel of land.
Mountain view States was purchased for $24 million at an approximate cap three to five per cent.
New acquisition will add operating efficiencies to our existing balance portfolio.
Throughout the pandemic Mountain view States has maintained high occupancy rates showing the resilient nature of this unique tightly held under supplied market.
With a large mark to market over in place rents as well as future development potential value add acquisition presents the trusts are significant value creation opportunity.
Slide 26 provides a brief update on our current and future development projects 45 Railroad in Brampton, Ontario is the trust only development project 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 line.
2022.
The Mississauga, Ontario development site, which boardwalk holds a 50% interest in received rezoning approval in April and is subject to a 20 day appeal period.
The partnership is excited to achieve rezoning and to proceed with maximizing this development opportunity.
In addition to our eastern development projects. The trust has to future development sites in Victoria B C rental fundamentals in this in this market remains strong with low vacancy rates and demand outpacing the supply of rental housing.
Two prime development sites supplemented by our recent acquisition give boardwalk a solid foundation in this high growth market.
The first site Eagle's nest, which is located in view Royal is zoned for approximately 250 rental units, we are working through permitting with a potential construction start in 2022.
The second site. The Marin has received positive feedback from the initial consultation with the community and application for rezoning has been made we anticipate rezoning to be completed in 2021 vs.
These development sites provide the opportunity for boardwalk to utilize its past experience and success in building accretive low rise development the.
The trust is excited to bring boardwalk brand of unique design and affordability to Victoria, while creating value for the trust in our proven low rise development program.
Before I turn the call over to James and wrap up My last conference call at Boardwalk I would like to take a personal moment to thank salmon than.
They are industry leaders and share division over 30 years ago, which has truly transformed the Canadian multifamily real estate sector.
Starting from a 16 unit company in Calgary evolving into a REIT, which today owns and operates over 33000 apartments across Canada.
It has been an honor and my privilege to work with you over the years your brilliant inspirational and have been a mentor a friend to me throughout my career at Boardwalk as.
As well I'd like to send my gratitude to my team as well as our entire Boardwalk family My industry Friends Board members analysts and shareholders I look forward to following the continued success of the company I would now like to turn the call over to James.
Thank you Lisa and thank you for everything.
Slide 27 illustrates the exceptional value boardwalks current trading price represents when comparing to recent transactions on our core markets.
$37 per trust unit equates to approximately 142000 per apartment door.
Boardwalk has high quality well located portfolio has an estimated NAV of approximately 175000 per apartment door and compares in line with recent market transactions and well below the increasing cost of replacement.
Utilizing 12 trailing 12 months property on Hawaii on Slide 28, Boardwalk current trading price equates to an attractive 575% cap rate and is a significant spread to the cost of available mortgage capital as well as recent capitalization rates seen in major markets in Canada.
As shown on slide 29, each of boardwalks core markets present unique opportunities to accelerate on our trend of organic growth as we near the end of the pandemic.
Our Alberta, and Saskatchewan portfolio provides an opportunity to gain on occupancy while targeting sustainable incentive reductions on lease renewals.
Our affordable and high value offering, Ontario, and Quebec markets remained near full occupancy.
The trust continues to focus on achieving sustainable agi increases for community improvements and optimizing rental rates when units turnover.
Just the 25 dollar adjustment in our monthly average in place rents or a 2% improvement to our occupancy each equate to approximately 20 on 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 30 shows a summary of our progress on our objectives through this pandemic our competitive advantage disciplined approach and resident friendly focus has been rewarded with continued growth in <unk> per unit or four eight per cent compared to the first quarter, a year ago, which preceded the pandemic.
Accretive capital allocation combined with our gains in occupancy since February have positioned us to grow revenue sequentially through the year and in advance of the return of postsecondary students immigration and a new post pandemic environment.
Slide 31 provides some highlights from our recent ESG report, while slide 32 provides measurable objectives. The trust is set for the year.
The boardwalk team is proud to highlight our continued focus on ESG by continuing to provide our essential service of affordable housing to Canadians and striving to improve how we can further improve on our environmental and social impact while enhancing our already top rated governance practices.
We look forward to updating our stakeholders on our progress towards our measurable objectives in the coming quarters.
We would now like to open up the phone line for questions Sylvia. Thank.
Thank you Sir.
Ladies and gentlemen, if you do have any questions. At this time. Please slowly press star followed by one on you touched on them from you will then hear a suite on prompt acknowledging your request and if you wish to withdraw your question simply press Star followed by two and if you're using a speaker phone. We do ask you to please lift the handset before pressing.
Any keys.
Please go ahead on press Star one now if you have a question.
And your first question will be from Jonathan culture at TD Securities. Please go ahead.
Thanks, Good morning.
Good morning.
First just Lisa.
It's on.
Your retirement, we will Miss you in the analyst community here.
Thank you very much Jonathan I appreciate it.
First just on the Edmonton market I guess in the report quarterly.
Quarterly report you talked about new supply, making the market a little bit more competitive you did see occupancy tick up in April.
Do you think your.
Through the worst of the new supply the competition from that.
Jonathan Good morning, it's Sam.
Emma let's statistics in Edmonton shows a very very strong absorption of listings and a drop off of inventory our rentals are a very very strong and.
In May <unk>.
During a full lockdown and so the difference between this locked down and the lock locked down is we are experiencing super strong rentals now the good news and our market survey everybody is experiencing strong demand for rentals in.
Minton in Calgary, our rentals in Edmonton today are outpacing rentals in Calgary, we are on track to absorb much more units in Edmonton, because we have more units to absorb in Edmonton and Calgary and so Calgary occupancy has risen.
Very very well Edmonton following through on a on a really strong note and we're seeing population movement into Alberta through other sources like the MLS listings that are on Edmonton Real estate Board line data Calgary Real estate Board raw.
Record high sales in both those markets and when we.
Our contacts.
Homebuilders over 50% are new migrants coming to Canada and fighting Alberta is the most affordable place in Canada to move to and as a result, they're coming bringing their families and buying homes for renting with us and moving to Alberta during a patch.
Dominic.
Okay.
That's good positive good positive color on I guess on your in your opening comments. You said may continues to be very strong I guess that's across the across the board you certainly said that in <unk>. So is it fair to say that new leasing is outpacing move outs again in may.
Significantly significantly and we're on a full shutdown.
So we're extremely pleased with how rental is doing and one word describes our team's extraordinary.
Third there is no other word to describe our team on the efforts, we're all making and really the Alberta market is is absolutely turning around there. There is lots of evidence again for bolt on.
On the Edmonton Real estate board on the Calgary Real estate Board live MLS data there are a lot of people moving back to and to Alberta as we speak.
Okay.
Uh huh.
It's very helpful. That's it for me thanks.
Thank you Jonathan.
Thank you next question will be from Brendon Abrams with Canaccord Genuity. Please go ahead.
Hey, good morning, everyone.
Good morning, Brandon.
Maybe just a follow up on Jonathan's line of questioning.
It seems like Youre seeing a strong demand so far in may on the leasing front.
Occupancy did tick up or increase in March and April, but you know coincide I guess with higher incentive you. So I guess, what's the.
Current incentive use maybe.
Maybe in Edmonton and Calgary.
And what do you expect that to look like over the next few months.
During the high leasing season.
Thank you, Brian and what we're seeing.
And let's go to Saskatoon and Regina for example, when we hit on.
99, 100% occupancy in most of our communities are our belt availability at that 1%. We saw on essential evaporation of incentive for new rental and so in Saskatchewan with our occupancy as high as it is.
We're not seeing incentives like we were and we're gaining on new lease.
Lease rates and renewals of course, and so as we fill up and many communities in Calgary and Edmonton are seen much less incentive because our occupancy is much higher and so several of our communities in Calgary are over 98%.
Occupied and in Edmonton, we're seeing absorption and and rentals that.
Our availability at the end of the month will be much much lower than that than what has been the entire year and certainly at the end of last year. So as our occupancy moved up to over 90, 798% overall, that's when we will be seeing incentive.
Come down on new rentals.
In Alberta, and we believe that is on track for the strong summer and fall months, we're already seeing slight drops.
Overall, an incentive but again, we look at the overall revenue gain the net revenue gain is positive and that.
The reason, we continue to use incentives on new rentals in Edmonton and Calgary to gain on occupancy because it's opportunity lost if we leave out on them.
Apart from empty.
On that revenue is gone for good if we lose that opportunity and that's the reason we use this this methodology and it absolutely drives our NOI higher when a vacant unit.
Is is essentially all paid for because of our expense nature. It's typically all fixed expenses any dollar to the top line goes right to the bottom line because most of our expenses if not all are fixed on that.
That's why we use this occupancy and focusing on occupancy so much.
Right Okay.
That's very helpful.
Just as you were flipping through the sites there in the opening remarks I noticed the west Edmonton village I guess is going through.
Rebranding I think it's out of your largest or second largest asset.
Can you just provide some more color there in terms of.
What you're planning to do is it just the amenities building or is it you know the interior suites as well and the <unk>.
<unk> costs.
Of the overall.
On the project and what you see as the return profile for.
For the property.
So the the renovations have per the.
Pictures that we have provided is including an amazing amenity because of the size of that community approximately 11 173 unit.
It is our largest community in the west non violent as the largest community we have not been non violent.
We're also doing common areas because we find the return on doing common areas is the highest and it's a phenomenal community the scale of the community the diversity of that community relocation of the community we've identified day, but as I said.
Prime candidate to reposition and our targets 8%.
The the.
The budgets.
Again, there are being finalized.
Uh huh.
We're actually doing an amazing job keeping our prices under control and securing materials in this inflationary commodity inflationary environment that we find ourselves in and again, our target is a minimum of 8% we're very.
Confident we're going to get at least that by renovating that phenomenal community and it will really really provide unique value proposition given the scale and the amenities that that we are providing an brushing up.
That will really.
Really stand out from that community and as a result.
Very confident that the returns are.
On that that will realize.
We will be very very.
Significant and then beat our.
8% target.
Hi, Brent Index Jamie.
Sorry, the budget is between two to two $5 million.
And Brendan it's James here, just to add to Sams comments, there obviously with the community that's over 3100 apartment units and very much like other communities that we've renovated in the us.
Notice.
A small rental rate adjustment is all it takes for us to accomplish those returns and so as we target those rental rate adjustments on those common areas. We do anticipate that we're going to be able to obtain a yield on cost well above that 8% per day.
Right. Okay. No that's helpful. Maybe I thought.
You guys are just going to be building, a whole brand new amenities building, but.
Given the given the projected costs. It seems like that's not the case, okay. That's great I'll turn it over thank you.
Thank you Brandon again, what what we have been saying is the use of our eyedropper. When it comes to the use of our capital is very very focused concentrated and it must provide a great value proposition for everybody. Thank you.
Thank you. Our next question will be from Matt Logan at RBC. Please go ahead.
Thank you and good morning.
Good morning, Sam.
It certainly seems like your Eyedropper approach to deploying capital is paying off and the company is doing a good job of controlling the controllable.
Could either you or maybe leaves to talk about where you see the NOI emerging trending this year and give us a few examples of that capital conservation kind of with from the operating side of the business.
Sure Matt It's sorry, it's James here just to get started on the operating margin from.
Our team is doing a fantastic job to your point, Matt on the operating cost control on that.
On specifically on the controllable cost front as everybody remembers on the non controllable side, we faced some significant increase in second half of 2020, specifically in property taxes and insurance.
We haven't yet lapped those expenses are good news is coming and coming forward into the third quarter and the second half of the year and we should get more color on this in the coming weeks on the property tax front theres some potential good news there right relative to last year, especially where we faced 20 per cent tax increases in Calgary and high single digit tax increase.
As in Edmonton those are tax increases that we arent anticipating continuing into this year and so with the revenue build that Sam spoke of that weren't hitting gang are into the spring and into the summer that combined with lapping those expenses should provide some stability on on margins going forward.
Good color.
If we were to build off on Brandon's question with respect to the incentives they were $9 4 million in the quarter.
Based on what you've seen to date.
How should we think about the burn off over the next 12 months is that a two 3% reduction is that a 5% reduction in.
Any sort of general color would be appreciated.
Sure Yeah on the incentives I mean, when we think about the incentives going forward Youll see youll see our pace on lease renewals, that's been where our focus is on on retention. We've seen success in sustainably reducing those those incentives are Tim continues to target through this environment.
<unk> numbers right 2030, 40, 50 dollar adjustments and seeing success with that for Sam's earlier point as occupancy continues to gain that's going to position us to reduce those incentives on new users, we look back to pre pandemic map.
Certainly we believe in our retention and continuing sustainable adjustments going forward. So if I look at pre pandemic, we were investing.
Our incentives on a 4% to eight per cent basis range. So again, continuing to target 40, 50, 60, $70 incentive reductions pre pandemic I think that's fair to say.
On our targets going forward to build that sustainable revenue growth for the coming years.
Great color and maybe if we turn to the transaction market.
Wondering where assets are trading in your core Edmonton and Calgary markets.
Either on a cap rate or price per suite.
And if we think about where your stock is trading where it makes sense to perhaps sell a few assets and buyback units.
So I'll just take the first part of the question and then they probably simple jump in so for transactions on its been relatively quiet in Calgary, there's been a couple of transactions in 2021.
In Edmonton and the cap ranging around for two kind of tough for and a half minutes and.
And probably on a door price.
Like about 170 to 181 on that that kind of a transaction.
James if you want to add some color on.
Yes, Matt I think.
You've seen us being quite active in terms of trading assets right. So paring noncore assets and using that capital and recycling it into geographic expansion opportunities much like we did this quarter with her balance inventory acquisitions, which are very accretive to our bottom line interest will continue to see us do that.
To your point in the past, we have certainly taken that opportunity to pair of non core assets.
And repurchase stock REIT today much of the non core asset sales are being redeployed into geographic expansion opportunities that are providing great accretion to our bottom line.
And just to add to that right. Now we currently have three sales at Edmonton under contract and will be able to give some more color on that in August.
Excellent I appreciate the color and maybe one last one from me before I turn it back I don't know if I missed this but could you tell us where the occupancy stands today in may.
Is that up at all from April at $95 seven.
Yes, we will continue to for we'll provide that update mats in the coming months, specifically with our regular operational updates through this pandemic our availability is lower though as Sam pointed out rentals are continuing on the same pace relative to move out as we've seen in the last few months.
Availability is much lower than that occupancy.
Appreciate it that's all from me I'll turn it back thank you.
Yeah.
Thank you. Our next question will be from Howard Leung tough investment. Please go ahead.
Thanks.
And good morning.
I just want to ask about <unk>.
Wanted to ask about <unk>.
The recent moving on you're seeing.
Are they.
Are they seasonally different from what you've seen on the last year.
In terms of the composition of the tenants, maybe you've talked about the fundamentals.
From outside Alberta can you just give a little more color on that.
Sure. Thank you Howard when we asked our team where folks are coming from.
Some are selling home thing moving back into rentals.
Because of the current economic situation. So we are seeing.
Local demand from home or condominium ownership back into rentals for.
Born and migrants moving to Alberta coming back to school setting up for the fall early on.
Going through the quarantine going through all the rules and regulations that we have that's going to take longer and also preparing for the fall because of the expectation that.
Leaving.
Finding on apartment in the last minute and the summer is going to be.
A very tough situation given that the as we all have discussed the double cohort, having this and last year's classes come back.
And in the summertime, so theres a lot of <unk> are already coming back.
Then we ask our team.
Space.
And size really makes a big difference and so our larger units we hear from our team are very attractive residents moving out a smaller one in studio apartments.
And smaller apartments in the marketplace to our larger 234 bedroom formats that we talked about our average unit size is a two bedroom unit size.
Just under 900 square feet and so the larger spaces is really helping the other.
Phenomenon that we have seen in <unk> and many others have discussed is the suburban locations and when we do our market shops Theres high absorption in the new product very quick.
Filling up of new supply and that continues to drive demand into our low low rise low density suburban locations where.
On new residents are looking for the communities that they can walk to their apartment units not take elevators and so there is.
Difference in the change in preference to lower density communities.
And that's why we're seeing a really high occupancy, especially in our towns town homes and so that's that's the trends.
We're seeing.
Yeah. That's that's helpful and I guess as a follow up to that we have heard that the.
The GAAP between suburban and urban property for for many of them or what.
What would you think for your for your portfolio the Delta in terms of occupancy between your buildings on the core.
Suburban area.
Approximately two or 300 basis points, two or 3% as the delta and we have to give a lot of credit to our teams for repositioning R. R.
Urban and core communities.
And really the improvements that we've made in our.
And our core really has helped us.
Out outpace the competition, especially the brand new high rise when we polled and surveyed in the downtown core it has the highest vacancy because of both price and small size that that is where the.
They can see it and we do not have any any downtown new development high rise concrete.
Communities that we've developed and that.
There'll be find everything is now filling up.
Again.
The demand.
For housing overall is very strong.
Again, our slide eight.
The rental jump out on our slide eight on the right hand side and our rentals are jumping out in May again.
And again, we're in a full lockdown is is what we're in the middle of and we are renting.
Bob.
I would like to use the word like hotcakes.
The strong word, but I don't really know any other word to describe it though as we talk to our competitors all the time Theyre seeing the same thing.
Yeah. It looks like there was a big surge in rental per.
My last one is on it.
Incentives.
Got it.
Looking at your deck it looks like the average incentive on that.
Further with the $175 per unit.
I guess running that number it's implied that the number of three months there is about one two.
How many how many stream on Ah <unk>.
Are you offering lately I guess enjoy incentive then how does it hasnt been declining from let's say the past year.
Hey, Howard it's James here.
Such as really vary from community to community as you know Youre right on average that is approximately where we are at you compare that with our.
Leasing spreads slide to produce really those incentives are ranging anywhere from <unk>.
Zero in Saskatchewan, where we are.
Effectively zero availability.
We are three months and some of our communities that might temporarily have higher availability today, but on average I am not one to one and a half months range Howard would it be fair again on lease renewals is where we're targeting and seeing success in reducing those incentives as well.
Right right that makes sense.
Okay. Thank you guys, taking my questions I'll turn it back.
Thanks, Craig. Thank you next question will be from day, one channel at the BMO. Please go ahead.
Hi, good morning, apologies, if I missed this earlier, but just wanted to check in on in terms of Oh, I see very good control.
On the expense side I, just wondering what the runway is I guess for more opportunities.
On 2021.
I say Joanne on the controllable expense side, our team is doing a fantastic job and continuing to do so.
I'd like to see US continue to maintain that on I think our team can do so.
We may get some reprieve or on some of our non controllable expenses and so keep an eye on for property taxes were watching that very closely I will give more color on that and that's in the coming weeks, maybe at least I can just touch on insurance, that's a place where we might see.
Yes, I would say from an insurance side for a little bit more cautious there I would love to share James optimistic that we might see with property tax, but unfortunately on the insurance side capacity is still an issue in the insurance space, but we're just entering into a renewal period as he can so.
We're probably a little bit cautious I would say on the insurance side, but again insurances roughly three to four percentage of our total operating expenses. So not a big cost. However, I think we sometimes you see some larger increases on that line.
On it.
And I guess, just one last one.
With respect to the occupancy it was great to see it continue to climb.
For the quarter and honestly into April as well.
Kind of the same magnitude of kind of that improvement over the next.
Next few months.
Sam Joanne with vaccination.
With all the <unk>.
Evidence that we're seeing in the United States with the.
The CDC announcement the other day.
Saying that double boxers will not require maps.
Thank God for vaccinations work and and so we're well on our way.
God Bless America for helping Canadians out on vaccination supply.
And it's awesome to see how many are open to getting back the nations and how effective vaccinations really really are they do work and we are well on our way to reopening like great Britain like United States and so that the evidence is overwhelming.
And our Premier our health advisors.
Premier Mall in Saskatchewan put on opening plan together, that's very clear.
Scotch on has the lowest unemployment rate in the country of Canada right now is in a great position. An example of how.
We all can reopen and look to.
A more typical.
Living.
That we used to used to have and.
And share our smiles.
That we're all looking so forward to do and so we're we're very happy with the evidence and the science and how how other other nations are coming through the pandemic and crushed.
Crushing COVID-19.
For sure.
No. That's good to hear Okay. Most of my other questions have been answered so I'll turn it back thank you.
Thank you John.
Thank you next question will be from Mario Sorry at Scotia Bank. Please go ahead.
Hi, good morning.
Good morning Mario.
Maybe it maybe a couple of specific questions with respect to.
For the the rent change on part of release in me I recognize that it's.
Moving to help them on so far but it does seem occupancy is trending in the right direction do you ever since of work for $2 one per cent lease renewal and negative four 7% that was disclosed for April would be amigos from.
Hey, Mario it's James likely fairly.
On the lease renewal side are consistent on the new lease side, it's early here, but to Tom's point earlier.
<unk> ability is quite down and so I would expect that to potentially come in.
You know, we'll keep everybody updated with our release on the coming months.
Okay, and then maybe shifting gears to the property taxes.
Q1 versus Q4, they were down about $1 million.
Order over quarter on.
I think in your disclosure you highlighted some potential savings in Quebec, with some near term COVID-19 related initiatives.
Distribution in Saskatchewan as well got hope.
Can you maybe.
And so we believe declined quarter over quarter on how much about do you think is sustainable versus one time ish in nature.
Hi, Mario its James again, Yeah, I would say most of that was related to a successful tax appeal that we received in the first quarter in Quebec.
Likely for Q2, we're likely to see a property tax number that's somewhere in between where you saw.
First in the fourth quarter.
That said as we mentioned earlier the third quarter is when we would anticipate.
Our new bills come in especially in Western Canada and fingers crossed for we're looking forward to seeing where that comes in and certainly you know anticipating something that is much better than what we saw this time last year.
Hum.
The optimism.
For fog.
So if we look at your Q3 'twenty property tax total of $13 7 million.
I know theres been some portfolio mix changes since then but in terms of the potential changes.
On a simply a deceleration in your expected growth REIT.
Periods like Alberta or.
Could you see actual Florida, lower property taxes year over year.
Now, we're hoping for for the latter there Mario again, we won't know for certain for another few weeks here, but you know keep in mind, we think of Edmonton and Calgary.
Calgary, specifically facing 20 per cent tax increase last year, you know even slot right, 20% over two years with a significant increase so well keep everybody posted again fingers crossed but we would be looking for the latter on that in Western Canada.
Got it Okay and my last question just relates to occur.
Router market supply growth.
Various metrics out there, but do you internally based on the interest would be more jobs in Calgary and Edmonton in particular can you give us a sense of what the expected development rental development completions in 'twenty one.
As far as a percentage of the existing inventory in both Calgary and Edmonton.
Yeah.
Yes, I think from a from a dump development supply standpoint, I mean, the good news in terms of more urban projects in other words not on the outskirts of the city.
You can count on any of those projects on our fingers here through the pandemic.
<unk>, we've seen as our development community slowed down significantly in terms of starting new construction.
That really provides us this opportunity as Sam was mentioning as we see this returns for your students come back and we see immigration come back we really are setting ourselves up for very quick rebalancing of the housing market.
In terms of the actual deliverables, we have that information.
Our investor presentation in the appendix and we can certainly.
For you to reference that but we're fairly comfortable with the supply deliveries that are anticipated over the next 12 to 24 months.
Mario and the other.
Everybody is seeing is the double and triple digit commodity and resorts inflation that we're seeing triple digit with lumber for example in our discussions with again.
A large homebuilder has seen approximately a 35% increase in construction cost and so replacement value. We're seeing our wood replacement cost go up to three to 400000 per unit and then our concrete high rise at about 600000 a unit.
Comparing that to our 140000, a door we are in phenomenal shape theirs.
A huge moat around our products and our cost base is unbeatable right now we are.
We're in a very strong solid position as a result of the huge increases in commodity prices and resource prices that we're seeing right now.
Got it alright.
I don't have the appendix in front of me, but would it be fair to say when we factor in.
As expected condo on completions as well they both Calgary Remington.
Percentage of existing inventory would be fair to say, though you're kind of sub 3% in terms of the pardon.
Yes.
Yes, we do have that in our appendix and.
As James noted when we drive around the new supply in development is shrinking.
And on new developments are getting very difficult to justify given how low rents continue to be just on a big big squeeze.
To develop anything given how how low rents still are.
And our appendix has a page.
Page 59 is the advent of new construction.
Construction and that's a backward looking but when we look out and drive around there are fewer and fewer new developments going on so.
Cranes moving to other cities with higher rents and.
Better economics.
Yes.
The rising construction costs should benefit from supply growth for them.
For luck thereof.
Two to three years from now on terms of completions or just more kind of interested in on what we're starting from a pre pandemic and what sort of come on come on from the market.
He's calling from six two points.
I agree 100% I just wanted to follow up with the West Edmonton.
Full adjustment is between 10 and $14 because we have approximately 173 units. There we only require at 10 to $14 adjustment for all of the improvements that we're doing there on a common areas I just wanted to follow that.
That's it for me. Thank you for your time today.
Thank you Mario.
Thank you and at this time I would like to turn the call back over to Sam.
Thank you for building as always if there are any further questions or comments. Please do not hesitate to contact on with gratitude, we would like to thank our amazing team of heroes are great leaders loyal residents. So you may see our lender and all our stakeholders.
It is really all about our amazing team of heroes, whose huge shoulder if we stand and as leaders. We continue to do everything we can to support continued growth and extraordinary we really cant. Thank our amazing team and great leaders for enough.
Because this is the last conference call that Lisa Russell will be attending as our senior VP of corporate development, giving over 25 years of extraordinary service, we would like to say a very special Thank you Lisa and wish her and her family all of gods choices blessings.
For her retirement and thank her for the huge shoulders. She has provided up to keep standing on we remain very blessed to have her in our bff for Boardwalk family Forever. Thank you. So much Lisa 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 that place our future is family.
I've always live what can be more important when choosing where to call for.
Thank you again, everyone for joining us this morning, and May God Bless us all with healing health and peace through all times.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines have a good weekend.
[music].
Okay.