Q2 2021 Boardwalk Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen.
Welcome to the Boardwalk real estate investment Trust second quarter 2021 earnings Conference call. At this time I note that all lines are in a listen only mode, but following the presentation. We will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press star zero for the operator also note that the call is being recorded on Friday August 13th 2021.
And I would like to turn the call over to Mr. James. Please go ahead Sir.
Thank you Sylvia and welcome to the Boardwalk reached 2021 second quarter results Conference call with me here today is Sam call. He is chief Executive Officer, and Lisa manage Chief Financial Officer.
Note that this call is being broadly disseminated by way of webcast.
If you have not already done so please visit be walked dotcom slash investors, where you will find a link to today's presentation as well as PDF files of the Trust's financial statements MD&A as well as supplemental information package.
Starting on slide two we would 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 are detailed in boardwalks publicly filed documents.
I'd like to now turn the call over to Sam Thank.
Thank you James and welcome everyone to our Q2 conference calls starting on slide three we have four strategic pillars for how we are creating value for our stakeholders. Our significant organic growth is derived of higher occupancies with strong rental market fundamentals in our.
Core markets are mark to market is significant and inflation results in a reduction in discounts with much lower rental market vacancies, we continue with our disciplined investment in our value add program further diversifying our brand and product, resulting in increasing market share.
We are accretive lead recycling, our capital with the disposition of noncore assets redeploying this capital into new acquisitions in both geographic and economically diverse markets with higher inflation and recent sales of newly developed multifamily communities in the G.
Our on time and on budget current development in Brampton is highly accretive.
We continue on a solid financial foundation with a strong balance sheet access to low cost C. M. H C ensured financing, which provides interest expense savings and our low payout ratio maximizes free cash flow for accretive reinvestment returns driving our <unk> higher.
We are well positioned to continue our solid track record with the reopening of our economy.
Slide four.
It shows our most recent results and resumption of our guidance reflect the success of our reengineering of our culture service product quality and brand Q2, 2021 at that both per unit grew by five 6% or 75 cents per unit, which include.
<unk> two cents of retirement costs.
Our guidance for the remaining year is for F. F O between $2.80 to.
To $2.92, which includes retirement costs incurred.
As slide five shows we are in the right place at the right time with demand for affordability growing coupled with limited new supply in our core markets, putting boardwalk on a solid foundation for many years of sustainable growth.
We provide the most affordable rents in Canada.
The graph on the REIT shows a shift of higher population and demand growth than new supply in Alberta and Saskatchewan.
Slide six shows our seasonally strong summer leasing season continues to be active with the return of postsecondary students more jobs as per the most recent stats can jobs report, resulting in the increase in demand for affordable housing.
Nope June move outs are seasonally high each year in Quebec.
Slide seven.
Our Q2.2021 key operating metrics show continued revenue gains through a combination of optimizing occupancy rental rates and incentives.
I'll Ping and sustainable gains are occupied rent to a very affordable 1100 and $91 in June our average unit size is a two bedroom unit.
Slide eight shows our rent change on new and renewal leases and how they use up incentives for new rentals has resulted in higher occupancy and sequential revenues as displayed in the purple weighted average line graph.
Spreads continue to remain positive and represent 60% to 70% of monthly lease activity.
Sustainable inflation rental adjustments on renewals are offset sandy inflationary increases in our non controllable expenses.
Positive spreads on new leases are realized when occupancy reaches 97% or higher the trust is positive new leasing spreads in Saskatchewan, Ontario, and Quebec markets. Calgary is ahead of Edmonton on occupancy in both regions are seeing strong rental.
Demand through the summer, resulting in current occupancy of 97, 5% in Calgary and 95% in Edmonton.
With our international borders tentatively scheduled to reopen September 7th we expect a continued strong second half of rentals.
Slide nine shows our significant organic growth opportunity as we stabilize vacancy in all our markets to 97% and higher which allows us to reduce incentives further on both new and renewal leases as depicted Alberta represents the larger.
<unk> annualized revenue opportunity primarily from guest count reductions.
Ontario, and Quebec half mark to market potential on turnover units.
We would now like to pass the call onto leases mandates, who will provide us with an overview of our operating margin financial and repositioning results Lisa.
Thank you Sam moving to Slide 10. In addition to the organic revenue growth opportunity. The trust remains disciplined and focused on managing controllable expenses despite increases in non controllable costs.
This discipline has resulted in declining controllable expenses year over year, and when coupled with our revenue growth potential will allow margins to continue to improve.
On slide 11, we haven't experienced inflection in sequential revenue growth as Q2 was positive as compared to Q1 with improved occupancy and net effective rents increasing we expect this positive sequential revenue growth to continue.
Our Q2.2021 operating results reflect positive NOI growth, and our Quebec, Saskatchewan and Ontario markets.
A drop in NOI for Alberta markets was due to higher non controllable expenses as well as slower winter months and further lockdowns. However, they can see trough in the first quarter of 2021 and as mentioned we are expecting positive revenue growth for the remainder of the year.
Looking at the second half of 2021 we anticipate property tax savings in Alberta will be a tailwind, but both utilities and insurance maybe potential headwinds with increased gas prices utilities could be higher on our 25% non hedged portion however, higher gas prices are positive for the overall economy.
Insurance premiums remain expensive due to continued market supply constraints.
These increases in non controllable costs.
We remain focused on managing our controllable expenses.
Slide 12 illustrates boardwalks mortgage maturity schedule, our mortgages are well staggered with approximately 98% of our mortgage balance carrying any change durrance through 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 curse current estimated five and 10 year teammates see rates of one 7% and 2.3% respectively.
With current rates well below the trust maturing rates mortgage financing continues to be one of the lowest cost of capital available to the trust.
With over 700 million in mortgage maturities for the remainder of 2021 and fiscal 'twenty 'twenty two an 80 basis point interest rate decline on renewal provides annualized financing cost savings of $5.6 million subsequent to 2020 two.
Slide 13 summarizes our progress on our 2021 mortgage maturities.
To date, we have renewed our forward locked approximately 49% of our 2021 mortgage maturities as well as secured $117.9 million in new financing at low interest rates.
Current underwriting criteria in our most recent submissions to see me at sea and our lenders has remained in line with our historically conservative estimates.
Moving to the REIT at the slide we provide a summary of boardwalks available liquidity. The trust is well positioned with approximately 52 million in cash and subsequently funded financings as well as an undrawn $199 million operating line.
This approximate to 52 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.
Lastly, the trusts that metrics continued to improve with an interest coverage of 2.86 in the current quarter.
Slide 14 provides a summary of the recycling of cash flow towards value add improvements to date, we have completed approximately 26% of total suite improvements well aiming to complete 47% of our total portfolio common areas and amenity spaces by the end of 2021.
Our focus is to continue to deliver the best products optimizing our capital allocation for our value add program to our targeted resident member demographic. 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 rent adjustments.
Slide 15 illustrates our stabilized renovation returns for Marlboro manner, and Fort Garry House, both located in Edmonton, Alberta with returns of 13% and 10%, 10%, respectively, which have exceeded our internal hurdle rate of 8%. Our renovations continue to garner positive resident member testimonials dry.
Referrals and higher occupancy I would now like to turn the call to James Hart to discuss our recent acquisitions and dispositions James.
Lisa.
As previously disclosed boardwalk closed on two acquisitions in the second quarter as shown on slide 16.
Mountain view states and world renowned Bam Philberta as a four season tourism destination that has limited housing supply.
The community features high demand two and three bedroom units and currently has no availability there.
Property yields an attractive 5% cap rate and that's further efficiency to our balanced portfolio portfolio.
Our second acquisition in the quarter was Aurora, a recently constructed fully stabilized asset in Victoria B.
<unk> hundred 14 unit property in view Royal is 99% occupied and the accretive 4.25% cap rate represents exceptional value to recent market transactions in the region.
The community features large suites located adjacent to the Victoria General Hospital natural green spaces nearby amenities and is immediately adjacent to boardwalks Eagles Nash development site.
Slide 17 provides a brief update on this Victoria development site and updates on our accretive pardon me are accretive and active development pipeline.
Our Brampton development continues to progress on time and on budget with anticipated delivery of the first tower of the 365 unit Marquis community in the fall of 2022.
Eagle's nest one of our development sites in Victoria is nearing the completion of entitlements with development permit application anticipated in the third quarter.
Slide 18 provides an update on our progress on our capital recycling through the sale of noncore assets on June 30th Trussell to noncore 78 unit community in Edmonton.
The sale price of 9.25 million was in line with the value of the trust had the asset carried out and represents a four 5% cap rate on our recent full year NOI.
Post quarter. The trust also agreed to sell Oak Tower, and 11 story noncore asset in Edmonton for a sale price of $11.8 million.
The sale price of 169000 per door was up off of the trusts I FRS fair value for the asset and equates to a 375% cap rate on most recent full year NOI.
The transaction is scheduled to close in mid September.
These sales of noncore assets provides the trust with the opportunity to high grade and redeploy proceeds towards higher quality and growth opportunities and we look forward to sharing updates on our value enhancing deployment of these proceeds.
Slide 19 provides detail on the exceptional value that boardwalks current trust units represent.
<unk> current trading price implies a value of approximately 154000 per apartment door and compares favorably to both our own and other recent transactions.
The most recent market transaction in Edmonton was a portfolio of over 1500 suburban apartment units the comparative boardwalks, most affordable living brand assets in Edmonton.
Our LTV of $59.35 per trust unit equating to 176 per thousand per apartment door represents an exceptional opportunity relative to market pricing and remains well below the increase in cost of replacement.
Utilizing trailing 12 month property NOI on slide 20, boardwalks current trading price equates to an attractive five 3% 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.
With sequential revenue is increasing the trusses anticipating a return to NOI growth going forward and further increases the attractiveness of our implied cap rate.
These improved multifamily fundamentals increased visibility and the reopening of our economy are providing the trust with the ability to reintroduce our financial guidance as summarized on slide 21.
For the last six months of 'twenty 'twenty. One trust is anticipating a return to same property NOI growth with a range of up to 4%.
This offsets the slight same property NOI decline in the first half of this year, resulting from rental rate restrictions from the pandemic in 2020 the.
Trust anticipates, our track record of F. O growth will continue with a forecasted range of $2.80 to $2.92 sense. Despite the inclusion of two cents of retirement costs incurred this year.
Trust is confident in its forecast for the year. However, please note that a rapid changing conditions may cause these estimates to change.
Our boardwalk team is committed to leading in transparency and will update its stakeholders in the event of any changing conditions that may materially impact our forecast.
On Slide 22, the trust continues to have an industry low payout ratio, providing maximum cash flow reinvestment positioning boardwalk with ample capital for growth.
Trustees regularly reviews, our distribution and with a runway for <unk> growth in our core portfolio Trust is well positioned to return to sustainable distribution increases to its unit holders on an annual basis.
And lastly, slides 23, and 'twenty four provide highlights from our recent ESG reports as well as measurable objectives. The trust is set for the year.
Our team is proud to highlight our continued focus on ESG by continuing to provide a central service of affordable housing to Canadians and striving to improve how we can further improve our environmental and social impact while enhancing our already top rated governance practices.
We look forward to updating or stakeholders on our progress towards these measurable objectives in the coming quarters.
I'd now like to open up the phone line for questions Sylvia.
Yes, Sir.
Ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone you will then hear a three Tom prompt acknowledging your request and if you would like to withdraw your question simply press Star followed by two if you're using a speaker phone. We do ask that you. Please lift the handset first before pressing any Keith.
Please go ahead and slowly press star one now if you have any questions.
And your first question will be from Jonathan culture at TD. Please go ahead.
Thanks, Good morning.
Hum.
First question just on the on the guidance I guess it sounds like property taxes is going to be a tailwind in the back half of this year.
Turning to quarterly sequential revenue growth in Q2.
That's it to keep going well what would keep you guys.
Closer to the low end of the zero to 4%.
Same property NOI over the back half of the year.
Hey, Jonathan it's James here. Thanks for the question, 100% rates on those are sequential revenue of <unk>, 8% in the second quarter.
As Sam mentioned in his prepared remarks, we continue to see growth in occupancy, we're continuing to position ourselves to begin incentive reductions or discount reductions towards the back half of this year and that's giving us the confidence on as Lisa mentioned sequential revenue to continue to grow towards the back half of this year.
With regards to property tax would you ever final bills in now for the second half of the year and Theres a little bit of nuance there given property tax calendar years being from July to June and so as a result of that we are anticipating a decline in property tax for the second half of the year.
At the bottom end of the guidance range really you know given the pandemic environment that exists here today, we certainly want to build in a little bit of cautiousness in the event of any material change in the macro economy, but at this point given kind of eight months of data with with the current guidance range that we have we're fairly.
Comparable with again, our goal and target of meeting at certainly at least the midpoint and aiming to.
Exceed the midpoint of that guidance range.
Okay. So it's just a little bit conservative in case, lockdowns come back or something on for something like that.
That's correct Jonathan.
Okay and then the second question just on the.
I think you said this is James in your prepared remarks, you talked about potentially increasing.
The dividend.
With your minimum payout ratio target, how how close are you guys, having to having to do that and that's something we would see in 2021 or.
Potentially 2022.
Hi, Jonathan it's Lisa so we evaluate that distribution on a regular basis I internally, we certainly do it monthly so we're always looking at sort of our tax forecast and running those projections forward based on <unk> growth. So we as James mentioned the goal will be to provide sustainable increases right. So we want it to be sustainably able to roll over.
On an annual basis going forward. So we'll just do we will keep looking at it I don't think we know exactly our timeline or what's sort of depend on some of our dispositions or other capital recycling because to your point, we want to maintain as much free cash flow as we can so we will keep those low payout ratios to maintain that free cash flow.
Yeah.
Okay.
That's it for me I'll turn it back thanks.
Thanks Jordan.
Next question will be from Matt Logan at RBC capital markets. Please go ahead.
Thank you and good morning.
Good morning, Matt.
Sam there certainly seems to be a stampede of leasing activity in Alberta.
When you look towards the back half of the year and the <unk>.
Turn off of incentive starting to incur would that imply kind of getting to a 97% plus occupancy by December.
And if so what does that translate into in terms of potential same property NOI growth in 2022.
That came out at Fam, and we're over 97% occupancy everywhere, except for Het Min Chen at 95 and with.
The stampede of rentals in Edmonton, we are looking at 97% occupancy in Edmonton.
By as soon as a next couple of months, so before Christmas, especially with the international demand reopening in September that is going to.
The result in a big backlog of folks that are waiting to come back and Edmonton in particular is a big beneficiary of international migration and and so Edmonton will be it will continue to be an even bigger star than the northern <unk>.
<unk> already has for us.
In the back half and that will essentially put all of our our markets over 97% occupancy and her entire occupancy will be back to where it was pre COVID-19, Matt, which is essentially where going back to the future before COVID-19 and that's pretty well, what we're seeing and pre COVID-19, we are seeing 4% to eight person.
<unk>.
Renewals and new lease rates, which essentially is recovering inflation and that's that's what where we're looking to do and we're actually seeing that today in Saskatchewan, 48%.
Between our renewals in new rentals.
It's what we're seeing today in Saskatchewan.
That's good color and in terms of the same property NOI growth does that kind of imply a mid single digit growth rate in 2022 or could that be perhaps a bit better.
Hey, Matt It's James Yeah, again, similar to what Sam was saying you know certainly pre pandemic revenue is going to be a significant driver here our input for that same property NOI. Obviously on the controllable expenses I think our team has done a fantastic job and we will continue to do a great job of exercising discipline and looking for it.
<unk> ways to save on our controllable expenses, we have a good property tax headwind as Jonathan had mentioned earlier for this year, but that remains again, a non controllable costs that we'll have to watch really closely.
It just sounds point similar to what we were doing pre pandemic if we can.
Getting to that position, where we're starting to obtain 4% to 8% leasing spreads on rentals, that's going to really position us well to do what we were doing pre pandemic and so if you look at pre pandemic and that was a mid single digit same property NOI growth, which in this interest rate environment was delivering double digit up.
Appreciate that maybe just changing gears.
In your press release, you had a number of comments on the transactions in the market.
What does that translate into or potential cap rate compression in the back half of the year.
Yeah. Thanks, Matt.
Really been great to see kind of that price discovery that everybody has been waiting for in our in our core markets and it was great to see that those transactions occurred post quarter or our own included as well as we just disclosed with our old tower sale.
And so in partnership with our external Appraisers, we're gonna have a really close eye on that.
Going forward for the second half of the year, but similar to the trends you're seeing frankly across the country, we're seeing cap rate compression pretty well across the country in all major markets and Edmonton Calgary Regina Saskatoon included and so working with our third party external appraisers, we would anticipate the potential for us.
Some cap rate compression here and there.
Back half of the year.
And can you tell us what the cap rate on the tower sale was.
We did it was a $3.75 on a most recent calendar year NOI.
I appreciate that.
That's good for me I'll turn the call back to thank you very much.
Matt.
Next question will be from Joel Chen of BMO. Please go ahead.
Hi, good morning.
Good morning.
Just maybe circling back on the capital recycling front do you see more opportunities for the back half of the year.
We are deploying how long do you think about the redeployment of those proceeds.
Thank you Joanne, yes, we see lots of opportunity and we're.
We're super excited about our development, which is really accretive and especially our wood frame walk up and especially where cap rates are leveling down at in Victoria. The wood frame walk up success, we've had in Calgary and Regina.
It's being applied into two sites that we purchased a one fully zoned and one that's just going into the zoning.
And the value that we're creating.
From the pre zoning and land purchase right through to the development is extremely accretive and provides.
Potential future access of free cash flow.
Like we're seeing our partner Rio can accessing cash flow by the most recently announced sales of the most recent developments that were completed in Toronto and and so we're we're super excited about the new development in these supplies are sustained.
Our markets.
And that's where we see the biggest value creation going forward, especially with the wood frame walk up we can build a wood frame community within 12 months refinance out of it.
And even sell some of it to provide all of the equity for the multifamily community that that we keep and so it's super exciting to get into that.
Fine tuning and reengineering of our redevelopment and and create the capital we need in our development program for newly developed multifamily community sites were Super excited about it I'll just add to that Joanna I think our team's done a great job in terms for the acquisitions that we've made as well.
Uncovering these opportunities or acquisition in Victoria.
Aurora acquiring that at four and a quarter cap like I mentioned in my earlier in our prepared remarks.
Seeing cap rates transact very recently at well below that similar with our Kitchener Waterloo acquisitions that we made earlier this year looking for those accretive opportunities for us to high grade and redeploy capital I mean, you know them.
More but we can't get enough of that and so yeah. We will continue with this kind of active capital recycling, where we're able to pair these noncore assets and deploy that to towards accretive a higher quality growth profiles. Thank you James we really can't give enough credit to our in house design and REIT development and repositioning.
<unk>.
We are miles ahead of our competitors with our redesigned value add program for instance, London, Ontario were seen incentives in competitors rents and we have no incentives are vacancy in our Kitchener Waterloo London.
And Cambridge marketplaces, and that's a perfect example of and the performance that we're seeing and the results.
The NOI growth.
That we're seeing out of our eastern reposition programs are super exciting. We have just returned from Quebec last week, we have so much excess.
Empty land in Quebec City, and Montreal for that and so the empty land that we have got US really excited last week to again more wood frame walkup.
<unk> infill potential there with land already bought and paid for so we are.
Yeah, we're very excited with all the lessons we've learned with development at <unk>.
Took us a while to figure out the nuances of new development and where in turbocharge mode with new development and creating capital that is self sustainable and in recycling.
A phenomenal top shelf.
Self sustaining.
The development program.
Oh great.
And maybe just shifting gears.
We saw some pick up on.
How should we think be thinking about.
The use of incentives towards back half of the year.
Here or should we be seeing that kind of slowly turned out I guess.
Yeah, we're seeing really what we've never seen before.
Peak.
Wave of rentals.
People are coming back home.
Back home to Alberta.
Back home to Saskatchewan.
And when we are downtown Calgary Theres lots of people there when we're on deer foot trail, it's bumper to bumper in the morning bumper to bumper, even at three o'clock well before the $4.30 whistle and and so there are more people moving back home to Alberta.
Saskatchewan than we've ever seen and so that will create a much higher occupancy with that we're gonna be a very disciplined we're going to continue to be flexible and we're going to see.
Some significant decreases in our reductions which are going to allow us to recapture inflationary increases that we're all seeing and that that is how we see the future is is a sustainable adjustment, where we can continue on a rock solid.
<unk> of affordability to deliver years and years and years of rock solid <unk> and NOI growth and that's that's what we've reengineered our ourself to do is to be the best value proposition in the entire market and stay there and that's that's.
We're looking at our future Yeah, Joanne I think our occupancy is key for those incentives and so it is as I mentioned earlier, we've seen examples of that even in Saskatchewan, REIT, Saskatchewan, we've seen that occupancy reaching.
Our reach and exceed that 97% target we've seen the broad market occupancy there increase in other words vacancy decline and that's positioned us to deliver those sustainable incentive reductions on both new and renewals Calgary as I mentioned, you know, we're sitting at 97, 5% occupancy.
Market continues to tighten in terms of vacancy in Calgary, and we're positioning ourselves now to convert those new leasing spreads with much reduced discounts from what we were doing in the past I mean, it is not far behind REIT that maintains at.
95% occupancy, we're gaining on that occupancy each and everyday.
And that's an all in advance of this big.
Migration growth that we're all expecting here across Canada frame once we start to see a return to migration and more permanent residents that's going to further tighten housing markets across the country and.
As I mentioned I mean, not at that incentive opportunity really is a significant mark to market opportunity for us for the foreseeable future Joanna It Sam again, and we're also seeing jobs jobs jobs and folks that we speak with are all.
Advertising in other jurisdictions in the country to again.
Attract people to come back home and still be big job vacancies that we have and were struggling to fill the job vacancies there are way more jobs than folks applying and and that's great news for our continued future as well because job growth.
Fuel of population growth and we're seeing that.
Big Big way.
And everybody has seen that.
But especially here in Alberta, Saskatchewan, where we're seeing.
A big competition for applicants because theres a lot of jobs to choose from.
Right.
Okay, that's helpful and yeah definitely.
I'm excited for the back half of the year and that's it for me I'll turn it back thanks, everyone.
Thank you so much John Thank you.
As a reminder, ladies and gentlemen, if you do have any questions. At this time. Please slowly press star followed by one on your Touchtone phone and your next question will be from Mario Sarak at Scotiabank. Please go ahead.
Hi, good morning.
Good morning.
Just a.
Coming back to the occupancy and in Calgary and Edmonton.
You've invested a lot in data analytics organization a couple of years.
What would you say is your estimated market vacancy or market occupancy in Calgary to kind of come off your portfolio, but the broader market today, what does that spread look like today.
Now we are as you know Mario one and you can see that didn't see me see data slides. So I think we've moved to the appendix, but you know we pride ourselves on consistently.
Beating the market in terms of occupancy.
I would say today in Calgary were about 100 basis points above the market.
Similar to Edmonton and so today at 97, just over 97% and that would make market vacancy right around 4%. That's a nice balance in terms of that housing market for it.
Percent vacancy really allows that.
That rebalance of kind of the between renter, a renter's market versus the community provider market and as we've already seen in our most recent rentals on new leasing we've already seen kind of that return in terms of where the early day return of new leasing spreads being positive here in Calgary.
Hi, Mario exam, we get.
Daily rental reports from some communities.
And some of our leasing activity updates our leasing in Calgary with zero incentive.
Yeah.
Okay.
How would you how would that 100 basis point pre.
Premium occupancy today.
What's your sense in terms of what that would look like.
Pre pandemic.
Pretty quickly within a fairly similar yeah.
Yeah, very consistent very consistent every time, we go back and again compare our occupancies versus CMA sees occupancies, it's fairly static right around that 100 basis points. The one exception to that likely would have been in mid 2020, when during the beginning of the pandemic when we strategically really started.
<unk> to gain market share.
I would say since then again, we're back to kind of that 100 basis point range.
Got it.
Okay.
Sorry.
A little bit of feedback as well there's another community in Calgary that has record back to back rentals and that's what we call a rental that's occupied and currently.
Currently rented and having income.
And rented for the first of the following month.
Back to back so the existing resident moves out a day before the new resident moves in so we essentially lose zero revenue out of our back to back. So we are seeing a rise in back to backs in Calgary, Regina and Saskatoon, because there is no vacant units to rent anymore.
Understood.
Within the guidance that you offered.
What is the implied.
Occupancy in the abacavir.
10%.
Okay, and you mentioned you can go to or the company.
Yeah.
Our our guidance certainly is going to be portfolio wide, you know and so that's going to be a component of everything together I think Sam gave some really good color in terms of what we're expecting for and what we are anticipating in terms of portfolio occupancy and yes, we absolutely intend.
For that occupancy and see that occupancy continuing to grow for the balance of the year.
Alright.
Okay.
In terms of the investment market.
If we have to generalize.
Puberty in Alberta in particular, let's say pre pandemic.
It was a $100.
Where would you say that <unk> was started this year and where do you think it is now.
Sure.
Yes.
The broader market the broader market, but not necessarily like what boardwalks underwriting in terms of acquisitions.
Alberta, but if the broader market was the freed up to 100, but pre pandemic.
How how far did it decline in terms of a decline in investment volumes.
Multi restaurant in Alberta.
We're in kind of the depths of it depends on.
Where where would that be like how much of a group.
Improved or accelerated.
So are you asking about transaction volume in Alberta.
Yes.
Yeah I mean.
Transaction volume, if we're speaking specifically about an investment volume in multifamily I mean, I think we've seen that slow down significantly for everybody right during the pandemic.
We're seeing the early days of that returning I mean again, we've seen that with our own transactions, we've seen it with <unk>.
<unk> transactions at 1500 unit portfolios that transacted in Alberta.
A little more activity now I mean, even in our own inquiries him and her and her own potential noncore asset dispositions.
Theres more velocity I mean, it's pretty tough to gauge it on a on a relative.
Hundred dollar example, but what we can say is that activity has certainly has returned theres a lot more optimism. There is a lot more interest I mean, where else where else in the country can you acquire assets at cap rates that have a four handle on it that have self regulation in terms of and NOI.
Trajectory, that's that's quite positive going forward.
So to answer your question I would say, yes, Mario I would say investment activity has increased.
Much more than it than what we saw during the pandemic.
Okay does it feel like it.
Oh go ahead of where we were pre pandemic, which I will return back to more more and they're still talking about there.
Sam Mario absolutely ahead.
Everybody as far as buyers are now scrambling to find product and its getting very difficult with almost all inventory being sold and it's okay.
It's getting very very difficult to find anybody that wants to sell this time because of the significant improvement in the apartment rental fundamentals seller.
Sellers are disappearing.
Buyers are lining up.
In terms of the characterization of the incremental buyer.
Okay.
How prevalent are new first time buyers.
Alberta today.
Historical average.
One buyer we saw.
From Edmonton.
A counter cyclical buyer that move from Edmonton to Phoenix.
He recently sold everything in Phoenix came back to Edmonton and is buying Edmonton and.
Transacted with us wants to buy more.
And it has more capital to reinvest out of Eric.
Arizona and into Edmonton.
And that is just one of many smaller apartment community providers that want to be.
The next.
Larger community provider and so there is a lot of smaller apartment communities that are young that are very very successful.
Very hands on.
And we see big opportunity with the smaller smaller community providers that are solid.
Great community providers that that.
We give a phenomenal opportunity for them to grow and then in return we have capital recycle and move on to other other developments and acquisitions.
Acquisitions.
<unk> that are better suited for us so it's really a win win win.
Situation, where we're talking with a lot more local.
Moller owners right now and it's and it's exciting for everybody.
Great. Okay. Thank you for the color that's it for me.
Mary I think we could probably sum up to the local owners understand what's happening.
And the.
The out of town investors are just not here they have no boots on the ground to really know what's happening because it's hard to imagine Stephen Avenue mall with a ton of people and if you're not here in Calgary seeing that it's hard to imagine plus 15 people.
All over restaurants pretty well all made it.
There is there is there.
There's people in our downtown and that actually is our biggest turnaround as our downtown multifamily communities are essentially one 2% vacancy its the biggest turnaround we've seen and that's a result of our reopening and the tough decisions are.
Our leadership has made to continue to be safe and to continue to live.
As normal as possible lives and we're seeing that big pickup in activity the new startups, we can't.
Say enough, how many new startups are coming and relocating.
Two Alberta, as well and so that that's all feeding into.
Very positive multifamily.
Fundamentals.
Yes.
That's what we're trying to get through but it seems like valuations are coming up and I was just curious to what extent kind of northern Alberta additional investors had been driving those valuation prior or is that something that is still to come.
Thanks for color.
Yeah.
Non Alberta are missing the boat.
Yes.
Right now.
We really really really really see Alberta is that.
Right place at the right there.
We see that now more than we've ever seen it so we'll make that call and we're on record for that and happy to be sold.
Okay.
Thank you next question will be from yes, Thank Paul Laurentian Bank. Please go ahead.
Good morning.
Yeah.
So both tower transaction, what was the average occupancy in that building over the last one year.
Over the last year, you know, it's certainly true through the pandemic you would've been representative of our portfolio was improving.
You know that occupancy was again, if you look at our Remington portfolio over the last 12 months would have been right around the 90, 495% over the past for a while.
Okay.
And the sale of the London property, just want to understand what the rationale.
What's the rationale there is.
I'm, sorry, yes, which property.
London property that you sold a property in London, Ontario.
We did not know our two noncore asset sales, we're both in Edmonton.
Saudi upgrading to lithium and it looks like.
Sorry about that.
Yeah.
You talked about walk up development projects and.
Oh, you're excited about.
Potentially a portfolio has.
Can you maybe talk about what.
Is this something new that the.
Thinking about.
No.
Yeah.
What changed your mind.
The first walk up development, there's almost 10 years old in Calgary.
And for the longest time, we would never built because of the risks and the inexperience and so what we did he has built something very small.
And learn a lot and we learnt how many shingles, we need for a walk up we learned how many square feet of dry wall, we learnt who to trust who to partner up with and we've built phenomenal relationships and partnerships that.
No every single Red Penny that goes into a new development and can build.
A walk up in their sleep and have built it.
<unk> of units over and over and so that has taken US 10 years to do.
And so this isn't this is like any other overnight success. It takes.
Years and years to have and that's the brief history of our wood frame walk up development success.
Success, and they're highly accretive highly accretive and they are original developments, we've almost financed entirely out of with very very economical.
Our cost of capital, which has seen we'd see back cost of capital and it's a win win provides more supply.
For the marketplace and it renews, our product as well and just to be clear you asked I mean development has always been part of our capital allocation opportunities I think part of the reason why you know we're we're mentioning it here is you have recent.
<unk> like Breo.
Which is now completed and now stabilized.
Can you give us that opportunity to yeah.
Financing repatriate, some equity and redeploy that equity again to future developments and so Victoria, we have another project that.
Just Barry nearing development permitting stage and we'll be looking to continue to backfill that future development pipeline. So that we can consistently.
Can you add value through our developments thank.
Thank you James.
I'm just going to add to that yes, Breo was mentioned and that's a perfect example, with what happens with new development.
Started breo are estimated cost with a lot lower than what we actually.
Completed at four and now the completion cost of Breo is super cheap compared to the construction costs, we're seeing and so everything changes and the significant inflation that we keep on seeing in new construction year in year out all of a sudden makes us look a lot better now.
Embryo by the way is a 100% occupied and and our partner Rio can mentioned that we reached 100% occupancy in northwest Calgary sooner than the young and Eglinton.
Newly developed a rental community.
In Toronto, and so we have experienced that over the development cycle. There is a significant change in prices that were locked in and that's that's the importance of making sure our contracts are locked in and our partners.
Our our super on cost control and delivering on time on budget like we're seeing in Brampton and we're seeing the exact same.
Value creation in Brampton occur now with construction cost continuing to escalate and our costs being locked in and that value that we're creating is growing and growing as we complete this community and and so.
Sure.
Just scratching the surface.
With this program many other multifamily private.
Providers have a high bred.
Development.
Slash ownership model and these private companies create capital and are Super capital efficient.
And self sustainable and have grown and grown and grown and some of the most successful private multifamily community providers have this exact hybrid model.
Right No no I wasn't.
I had a few of the Calgary projects, but when you talked about Quebec.
It's like you're thinking of going.
Across your portfolio revenue.
And that model.
Is that something that you guys are considering.
Take that model and apply anywhere else.
And so Quebec for example.
Thank you for bringing Quebec.
A big repositioning we're doing in Quebec, which is creating significant value as the conversion of our seniors community in Quebec City to a regular multifamily community. This is this is cutting our operational cost by hundreds of thousands of dollars because we're converting.
The multifamily that cap rate is dropping significantly and when we looked at Alaska.
And that's star in French and that certainly is a star example of our repositioning capability that we've completely reengineered and moved way ahead of our peers with respect to our specifications and the value that we create with our repositioning program and walked it.
That site and there is a huge acreage or are many acres of empty land.
At our last or community and we're like Wow. This is this is amazing and with the.
<unk>, we have economically building this low frame.
<unk>.
It's what we call in house and no brainer we.
We went to our other town.
Townhouse community that in a very high end residential community residential prices are rising as we have all seen.
Single family home price increases so there's a big demand for larger 234 bedroom unit layouts.
And one of our Quebec communities.
And so it's it's location specific every location is unique within a sub market and region and.
We're revisiting everything with that new land.
And seen a lot of opportunity.
Okay. Thank you.
Thank you yeah. Thanks.
Okay.
At this time I would like to turn the call back over to Mr. <unk>. Please go ahead Sir.
Thank you operator, and as always if there are any further 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 C. M. A C. Our lenders in all of our stakeholders. It really is all about our amazing team of heroes.
Who is huge shoulders, we stand and as later as we continue to do everything we can to support continued growth and extraordinary really can't thank our amazing team and great leaders enough.
We're pleased with our improving results on a foundation of exceptional value. We continue to provide our resident members our investors and all our stakeholders. Our home is much more than a place our future it's family where love always lift what can be more important when choosing where to call home. Thank you again, everyone for joining.
This morning, and May God Bless us all with healing health and peace through all times, we now close with a summary of our call.
<unk> is back in Alberta.
Thank you.
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 yourself a good weekend.
Yeah.
[music].
Okay.
[music].
Yeah.
[music].
Okay.
Yeah.