Q3 2021 Canadian Apartment Properties Real Estate Investment Trust Earnings Call

Hello, everyone and they've warm welcome to the Canadian apartment properties REIT third quarter 'twenty 'twenty. One results conference call. My name is some might not and I'll be coordinating yokel today. If you would like to register a question. During your presentation. You may do so by pressing star like my one on your telephone keypad with that I have the pleasure of handing over to you.

David Miller. Please go ahead Mr Mills.

Thank you Simona and partly the hosts that.

Thank you for this before we begin let me remind everyone that the following discussion.

Good comments that constitute forward looking statements about expected future events, and the financial and operating results of cap rate.

Our actual results may differ materially from these forward looking statements such statements are subject to certain risks and uncertainties discussions concerning these risk factors forward looking statements and the factors and assumptions on which they are base can be found in cap rates regulatory filings, including our annual information form and MD&A, which can be obtained at SEDAR dot com.

Now I'll turn things over to Mark <unk>, President and Chief Executive Officer. Please go ahead.

Thanks, David.

Morning.

And thank you for joining us Scott Pryor, our Chief Financial Officer is also with me this morning.

Let's get started.

As you can see on slide four we continued to generate solid quarterly performance this year.

They look for increased gains in our key metrics going forward as we work our way out of the Covid pandemic.

Revenues were up driven by the contribution from our acquisitions increased monthly rent and continuing high occupancies.

Stabilized NOI increased again.

As did our N S F O all while maintaining a very strong payout ratio of 58, 8%.

Our growth also remains accretive to unit holders with NFL Boe per unit up three 6% in the quarter.

Turning to slide five we look forward to another record year in 2021 as our performance through the first nine months showed solid gains.

All of our key benchmarks were up over last year, including revenues NOI and N S. F O.

With that that's a Boe per unit rising over 3%.

We continue to generate solid and accretive growth for our unit holders.

It is also important to note that we have experienced very few collection issues through the pandemic.

To date, we have collected over 99% of our rents as we work with our residents to understand their issues and to ensure that we collect on a timely basis.

Looking ahead, we expect to see further increases in Occupancies accelerated growth and much improved operating performance as we gradually return to more normal markets and operations.

From an operating perspective, our ability to generate solid performance in both good and bad times is clearly demonstrated by the results of our stabilized portfolio as you can see on slide six.

Occupancies improved again in the third quarter, while net average monthly rents continue to increase.

Our track record of organic growth also continues with same property NOI up a solid two 1% while maintain maintaining a strong NOI margin of over 66, 1%.

We believe we are turning a corner with the successful vaccine rollout and a return to more normal markets.

Our leasing and marketing programs continue to generate increasing occupancies as you can see on slide seven.

After almost two years the operating under significant pandemic restrictions. Our occupancy has remained highly stable rising to just under 98% at.

At September 30th.

Can also see that our bad debt as a percentage of total revenues have remained low throughout the pandemic at under 1%.

We expect Occupancies will steadily improve through the balance of this year and as the pandemic eases. We are already seeing an increased interest in in person and online potential resident visits.

With strong and accelerating demand for affordable high quality and spacious suites.

Another positive sign is the rent increase we are seeing on sweet turnovers and increased churn that we've experienced over the last two quarters.

As you can see on slide eight rents were up 6% on turnover in the third quarter on higher churn rates continuing the positive trend since we bottomed out at the height of the pandemic in Q1.

Looking ahead, we are experiencing more in person and online visits and we expect we will start to see more higher mark to market rent increases in the quarters ahead.

Moving us toward the higher levels of increases we generated prior to when the pandemic set in.

As we've stated before our renewal increases continued to be affected by rent freezes implement implemented last April to help our residents work through the pandemic looking.

Looking ahead, however, rent guideline increases of one 2% in Ontario, and one 5% in D. C are good signs.

Importantly, we will be implementing these increases in both markets effective January one 2022.

Capturing a full year of these guideline increases in both provinces.

Currently represents about 55% of our total NOI.

It's a positive sign.

Turning to slide nine we continue to increase the size and scale of our property portfolio.

In 2020, we added 3262 suites insights for $820 million.

So far this year, we've acquired 3122 suites and sites the majority in our key GTA NBC markets are.

Our acquisition pipeline remains strong and robust and despite the cap rate compression that we expect to generate further accretive growth in the quarters ahead.

In September we also sold 87 noncore suites for $52 5 million and we continue to evaluate our total portfolio to assess whether recycling certain capital will contribute to more accretive growth.

I will now turn things over to Scott for his financial review.

Thanks Mark.

Can see honest slide 11, our balance sheet and financial position continue to strengthen through the third quarter with a conservative debt to gross book value and continuing high liquidity or.

Our over $1 2 billion in Canadian unencumbered properties provide additional liquidity should it be needed.

And in addition, we had $243 million available through our credit facilities and $138 million in cash at quarter end.

In total we were to access all of these sources of capital we have available liquidity of over $1 3 billion and even if we did that our leverage ratio would still remain a very conservative 41%.

Looking at our financing through the first nine months of the year, we locked in at very low interest rate and a two 2% on a refinancing and top ups and extended our term them charity.

We expect we will continue to benefit from the current low interest rate environment for some time unexpected financed a total of approximately $1 3 billion in mortgages in 2021.

And at quarter end over 99% of our mortgages incurred a fixed interest rate.

We were also pleased to see another significant increase in the fair value of our property portfolio.

Increasing 722 million so far this year following a $750 million increase in 2020.

Excluding the impact of net acquisitions operating lease buyouts and foreign exchange.

As you can see on slide 12, we continue to capitalize on the current low interest rate environment.

<unk> interest costs in Canada, and extending the term to maturity.

The ability to capture strong spreads and low interest costs and then the Netherlands is also contributing to our lower overall interest cost and extending the term.

Further to our strong and flexible financial position looking back over the last few years you can see on slide 13 that we have met our goal of maintaining very conservative debt and coverage ratios even through the pandemic.

This conservative approach underpins, the stability and resilience of our business and the sustainability of our monthly cash distributions to you know all of this.

This focus on maintaining one of the strongest balance sheets in our business will continue going forward.

Our mortgage portfolio remains well balanced as shown on slide 14.

As you can see in any given year and no more than 13% of our total mortgages come due thereby reducing risk in a rising interest rate environment.

Looking ahead at our current ability to top up renewing mortgages through 2036, we will provide further significant liquidity.

You can also see that we have considerable opportunity to reduce our long term interest cost in today's attractive interest rate environment.

The current five year, and 10 year estimated rates of approximately $2, three and two 6% or well below expiring mortgage rates of between $2 six and three 4% over the next three or four years.

I'll turn things back to Mark to wrap up.

Thanks Scott.

Looking ahead, we see a number of very positive value drivers that we are confident will generate strong and growing returns for our unit holders over both the short and the long term.

Turning to slide 16, we can see several of these key drivers.

A value that will take place in hold in the months and years ahead.

Our accretive portfolio growth will continue.

Based on our proven and successful asset allocation strategy.

We are experiencing a strong pipeline of acquisition opportunities in our targeted value added apartment and MHC space.

Where we continue to focus on Canada, as three largest cities Toronto Vancouver and Montreal.

Importantly, the low interest rate environment provide significant opportunities to acquire properties with strong cap rate spreads.

To reduce interest costs on our refinancing initiatives.

Our industry, leading balance sheet leverage and liquidity also position us for growth going forward.

We believe that we will also benefit from a number of market trends as the pandemic eases in the months ahead.

Including increased immigration.

A return to the office and in person learning.

And increasingly affordable alternative of our high quality rental portfolio.

Offering as compared to the significantly higher cost of owning a home.

In addition, our ongoing investments in our properties and our operating platform are enhancing the attractiveness and value of our portfolio improving efficiency driving revenue gains reducing costs and helping us meet our ESG goals.

In summary, we remain very excited about our future.

Our focus on the mid tier sector meets increasing demand for affordable high quality homes.

Our predominantly suburban locations so outside of downtown cores, and our larger sized suites townhomes and manufactured housing sites are meeting the needs for renters that are seeking more space.

We're experiencing a strong pipeline of accrete accretive acquisition opportunities and expect to see solid portfolio growth in the quarters ahead.

The continuing low interest rate environment provides significant opportunities to acquire properties with strong cap rate spreads to reduce our interest costs and refinancing initiatives.

In closing I want to once again, thank everyone at cap rate for their hard work and dedication and to our residents for their patience during these challenging times.

Looking ahead, we are confident we are gradually returning to more normal market conditions and will continue our 25 year track record of growth strong operating performance and delivering enhanced value to our unit holders.

Thank you for your time this morning, and we would now be pleased to take any questions that you may have.

Yeah.

If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind you can press star followed by choose to cancel your request when preparing to ask your question. Please ensure that you'll find is unneeded lately.

Our first question comes from Jonathan Chang of TD Securities. Your line is open. Please go ahead Jonathan.

Thanks, Good morning.

Good morning, John.

For first question.

Market you talked about it sounds like a pretty good acquisition pipeline you are selling some assets how should we how should we think about capital recycling with regards to.

Finding your pipeline.

Yeah.

So the.

The acquisitions that we are sorry, the dispositions I should say.

We're seeing cap rates that are.

Start with a one really mid one cap deals and they're not these buildings aren't trading because of their income value of cap rate value their trading because of development potential.

And the Sabra trades that we have done.

You know we're in a great position there because we haven't even started the development process ourselves of the entitlement process, but they were land assemblies.

Where our buildings is happening in great locations. So the reality is if we can continue to sell our cap rates and the ones in buy cap rates in the mid threes will we'll just keep doing that.

Yeah.

And then how should we think about your own development program.

Or is there just enough to go around I guess well.

Well there there's there's lots there, but we're going to continue to do the work.

We've we're inching towards entitlement on several sites.

But I'm cautious right now you know there is the pricing environment. What we're learning is its difficult to get cost commitments on on development that are more than 90 days out their supply chain issues.

I think the cost of things are moving around so you know as we're painting pro forma is there they're really uncertain right now until the supply chain settles down.

I'd be very cautious about proceeding on the opportunities that we have.

But that being said if we continue to find.

Our way of recognizing the land value in some of our buildings with with cap rates trading and the ones. We will we'll continue to look at that.

Okay, and then just switching gears to the operations.

Both the the Toronto and Montreal markets had negative same property NOI this quarter, maybe give a little bit of color on.

What's happening in each of those two markets.

Well I think its what we had predicted.

Q3, we were all hoping to see.

Perhaps more of a hockey stick return, but the trend is extremely positive like it's it seems to be almost daily now we're seeing upticks in traffic in those upticks in traffic and obviously allow us to price our product properly.

But the trend of.

Occupancy you can see in the portfolio now we're now down to.

Almost under 2%.

And that allows us just have confidence with our pricing power going forward. So I think we can look forward to seeing that trend continue into Q4.

It's not it's not slowing down if anything it's escalating.

Okay. Thanks.

I'll turn it back.

Thanks, Jonathan.

Thank you Jonathan our next question comes from Brad Sturges of Raymond James.

Please proceed with your question.

Hi, good morning.

Just a follow on to the commentary there is that.

More of the kind of the key under 30 demographic youre seeing in terms of improving traffic or do you see maybe some other demand drivers starting to come back a bit more like for immigration or even international students.

So I'd characterize the market this way.

The it's now an issue of back to work mandating.

So those under Thirty's. It it's really going to know track very closely the appetite that employers have demand date back to work.

Many employers still haven't done that but it's starting to happen and we're seeing the direct result of that as you know generally speaking in cities were back to work is being mandated or hybrid work or whatever the case may be we're seeing people return to the market.

Secondly on the student phenomenon.

This is speculation completely but we're very optimistic that there will be in class learning in post secondary institutions that don't currently have in class learning and what that might result in if we're being optimistic is enrollments in the second semester.

Normally see so kids that chose to not go to unit postsecondary are continuing their education.

Because it was online and they're staying at home there might be an unusual uptick in activity.

If there's confidence of being class learning in Q2.

On the immigration front.

I wouldn't see the wave has really started yet, but it's got to be reflected in visa applications getting processed and the traffic uptick that we're we're now seeing.

So it's all the factors that I talked about during the presentation, but they're all moving into positive.

Mentum now.

Okay. That's good that's good color in terms of.

Acquisitions.

Ted you know active pipeline.

Focus on the big three cities what would be your.

Appetite for let's say, Alberta, Calgary or.

Or Edmonton, perhaps or is that more on the radar today or are still kind of more of a focus on the on the cities that you've already alluded to.

I think the good operators and those markets are doing really well.

I think that the.

The story for those three markets.

Let's say Edmonton Calgary, if you want me to comment on those.

The the Pan the worst of the pandemic is over and the worst of the oil and gas.

Movements.

There are over I think there is.

Our sense of optimism in those cities because the oil extraction regions that are active are gonna stay octave, it's highly unlikely infrastructure dollars that go into drilling more oil looking at what's happening with the price of oil it's got to be positive there as well.

The issue that I think.

Good multifamily operators are trying to overcome is there is still a lot of new construction product and the quality is is quite a jaw dropping.

So but.

But I would say in general.

Where there is attractive.

Cap rates.

The upside is likely.

Moving in a positive direction there.

Mhm.

And I guess last question in terms of funding future acquisitions, you did a deal on Sinclair west with the vendor taking back stock is that gonna be a component of future deals.

More so than what we've seen in the past or is there more appetite from vendors to take back stock as part of.

Acquisitions.

Yeah, Theres definitely more private.

Vendors in the market now as we've talked about.

The appetite to take cap REIT stock in running an apartment building in a challenging environment has been enough for some vendors to say, we like we like the euro currency.

I'm very open.

To doing.

Deals, where I'm striking a deal at above NAV and.

Avoiding.

Discounting of the stock in dilution to our existing unit holders and the cost of underwriting.

Charges, so fees so effectively at seeing cleared we did a private placement when you think of it.

Without the need to.

<unk> moved to the capital markets and having discounting in the cost of issuing equity.

So we're open to that Theres a limitation.

To what we can do in that regard in our own way of thinking but with something the strategy that we're open to if its going to circumvent a market process and give us that.

Access to.

A deal at attractive values that we may not be competitive in the open market on.

Okay, Great I'll turn it back thanks a lot.

Thanks, Brad.

Yeah.

Our next question comes from John Kim of BMO financial Great. Joanna Your line is open. Please go ahead.

Hi, good morning.

Morning.

Jumping back to the previous question on somebody on the softness on a standby in Toronto and Montreal, It looks like some of the expenses.

And those two markers jumped up quite a bit could you maybe provide a little bit more color. Obviously like I said on the topline those are kind of like directionally, but maybe just on the expense side of things.

I've seen something different there, causing some of that for sure.

You can see a mild uptick that's correct.

As we come out of the pandemic, we're clearly doing a degree of catch up work that was not being done residents werent comfortable to a large extent having work done in the common areas.

We have been in their units during the pandemic.

So is tensions there have eased we have seen an uptick.

In residents wanting to get boxes and residents being comfortable with seeing us do work in the common areas.

We are we also rolled out.

Our portal.

Early in the pandemic, which really gives people the ability to put into service request order 24 hours a day seven days, a week and our mobile crews that work 24 hours seven days a week are able to respond to those so it's really just a matter of are people comfortable with is coming in in a bit of catch up I don't think theres any alarming trends.

Sir.

Okay Alright.

That's good to hear and I guess, thus far how has the leasing Wellington I'm trying to you know in October and thus far in November it has it kind of kept pace.

With what we thought.

I think what we're saying is are.

All the trends are positive you know, we're seeing an uptick in all markets.

And I would just point to all of the drivers of demand that we talked about in the presentation are all very positive.

Okay.

And maybe just switching gears back yet.

On the acquisition side of things right. You mentioned kind of you know given how competitive the current pricing environment as you say well this is kind of the target.

Target for what you guys airplane, you mentioned earlier around three ish cap range would that be sir.

Or are you finding that continuing to compress.

Yeah, well you know we're.

We're we're always trying to price in a perfect world and we move around this metrics 150 basis points of spread between the cost of 10 year money cap rate, where we see with confidence 5% bottom line growth and we will move around that target. If we think theres more bottom line growth and we will want to.

Increased that spread if we think theres less but that is truly the discipline that we're using when we leverage cap REIT debt levels on acquisitions, we don't try to buy acquisitions with leverage we want accretive assets day, one and it is just that discipline and really it's a game of numbers like the.

The acquisition group. This year has again surpassed the underwriting of over 300 deals that we have.

I have gone to the interest and our you know our our success rate is around under 5%, but is resulting in some very very large high quality.

Acquisitions in terms of overall volume.

So we're just highly disciplined.

Yeah, that's helpful and just one last one for me.

Switching to maybe on the regulatory side of things you know with the upcoming election.

Next year in Ontario, and <unk>.

Are you guys thinking potentially there couldn't be anything what are you what is your thinking around potential changes and all that right.

Literary fund.

Okay.

That election.

Alright, I think okay right now.

I think that the.

The narrative is truly becoming a narrative of supply.

And.

I think the predominant.

Housing.

The dialogue is around homeownership affordability.

And I think that.

That will do.

Definitely.

Drive political attention.

But if interest rates are rising and we're seeing some softening of the markets and they're not overheating. The way that they were we will hopefully find yourself in a more balanced housing market and I'm optimistic there.

But our view is that our engagement with government, which is generally positive is around being a part of the supply.

Equation so.

That's all I can really say the political thinking appears to be around supply, which is positive yes, okay. That's for sure.

Okay. That's.

Super helpful. I'll turn it back thanks, guys.

Thanks.

Okay.

Thank you Joanna.

Our next question comes from Matt Logan of RBC capital markets. Please go ahead, Matt.

Thank you and good morning.

Good morning, Matt.

Mark you talked about occupancy yeah, potentially having some room to increase further displayed having very little vacancy in the portfolio already.

When you look ahead, what needs to happen and cap rates portfolio and perhaps the broader market.

Before the business is back to delivering mid single digit organic growth and we're seeing mid teens spreads on new leases.

Yeah.

I think it.

It's back to those drivers of demand again.

The under Thirty's coming back from from home, whether it be to go to school or mandated back to work.

Immigration we've talked about.

The all of the drivers around affordability.

Impairments to being able to buy a home all of these things have got to do with how comfortable people are out shopping for an apartment and living and in core cities again, the suburban portfolio has been relatively unaffected its really core Montreal core Toronto that have been the most impact.

Got it okay. So the trend on all of those drivers is positive and what we've said so many times in the past there was a housing supply crisis.

Before the pandemic hit and there's a housing supply crisis, that's even more exaggerated today not just because there's more people, but because a lot of the supply has left the market and then when we're talking about core Toronto core Montreal, some extent core Vancouver.

Those units that were being rented individually condo units Airbnb units a lot of the owners that suffered a vacancy there sold their units into end user hands. So it's our assertion that the rental pool has actually gotten smaller during the pandemic and as those units of <unk>.

Into end user hands, it's only exaggerated the going forward demand for apartments, but again, it's really driven by those key drivers that we talked about in the presentation.

It's an interesting comment on the on the condo transition when you think about those core markets of Toronto Montreal Vancouver.

Where would they be relative to pre pandemic levels in terms of demand or are we kind of 80% there 90% there or how are we kind of tracking towards a recovery.

I would if we're just using antique total numbers.

I would I would characterize Montreal as 80% there.

Toronto, arguably 90% there, 85% there somewhere in there and Vancouver, 95% to 100% there.

Like that the we saw people come back the most quickly in.

In Vancouver, which is not surprising a lot of the under Thirty's that live in that Vancouver core.

Aren't necessarily kids from BC, they've moved up to Vancouver.

As a place to work.

But it's a it's Montreal definitely.

It's returning lost in Toronto were seeing again daily daily improvements in our traffic.

Maybe just changing gears here for a moment you talked about kind of peeling off individual assets with some some density potential and certainly something that a one and a half cap sounds like a pretty good idea to me.

How big could that disposition program b.

And he kind of what's your outlook for maybe selling some of that density over the next year.

Three years.

I would at this stage characterize it as opportunistic.

In in markets, where we've been fortunate enough to have locations that are part of land assemblies and that has happened to us now.

A couple of times in Toronto.

We are we are comfortable recognizing that value for unit holders.

There are perhaps assets that.

Are no longer strategic because the value add program is highly evolved and if there are cap rates in those markets that we believe are disconnected from value, where we can recycle that capital into more accretive higher upside.

Real estate investments, we're going to do so, but I think the point on our dispositions is just that the value that we've claimed as there is there. It's there on the development front, how we recognize that value in the current state I think it's just sensible to take those extremely low cap rates and <unk>.

Cycled them in the marketplace.

Where we think it's appropriate but I would not characterize this at all as the strategic change at this stage I think we would just call it opportunistic.

Good real estate decision, making.

And in terms of that development potential like how much of that is reflected in cap rates for <unk> I mean, there's 10000 units across the portfolio that you could build.

But maybe just wondering how much is baked in.

Well see.

In our case, it's very.

Difficult to truly recognize the value until the entitlement has happened so when we're talking about are.

Developing on her own wind there is clearly cap rate compression.

Just through the general opportunity when you're in the acquisition market and there is deemed to be development opportunity on some of these transactions that we're seeing it's baked into the cap rate. Okay, you might get a lower cap rate you won't necessarily get get attribution for full value.

So when cap rates case, we're not recognizing the full value until such time that we get clear entitlement otherwise it's.

It's an unfair way to approach things so it's consistent with how.

Our appraisers look at our properties, we take the same general approach, but the exciting thing about the last couple of dispositions is it's clearly demonstrated that we are achieving values far beyond our <unk> attribution and that's a that's just a very positive sign so to answer your question specifically not it's not.

Really until we get to the stage of getting defined entitlement.

And maybe one last one for me Mark I mean, when you say you are trading some of these assets above your <unk> values.

Higher wood, those asset sales be relative to where youre carrying them.

Well again.

Very cautious about how I say this because we only have a couple but.

We were certainly compelled because we were approached and there was a significant spread in those two cases, but it's hardly a portfolio review.

Again, we were not actively marketing those properties. We are identifying properties that are perhaps non strategic at this point.

But we were approached in both cases on those and it was just too too compelling to not to not do and I've got to add that the developers that assembled the land, we're able to get far more density with adding our properties than we would've been able to get on a standalone basis.

So I became very very comfortable that I wasn't giving up any value because our land assembly that we have not done.

Doesn't give us the same density and development opportunity that we could have on our own.

So again, its a great testimony to two good asset, making a good asset allocation.

Both the deals that we have.

Well the one deal we have announced as an operating lease.

Seeing that our operating leases that we have made freehold do you have significant value.

That's great color I appreciate the commentary I'll turn the call back. Thank you.

Thank you Matt. Our next question comes from Matt <unk> of National Bank Financial Your line is open. Please go ahead ma'am.

Good morning.

With regards to incentive usage may be in your portfolio and then in the broader market.

You were able to maintain high occupancy so I'd assume you're maybe using lessons centers at this point, but are you seeing peers, who are trying to fill up more aggressively use them at least now and what do you see in terms of trajectory on that front.

Great question, it's a hard one to answer.

I think that I would characterize our use of incentives as having been wives.

In looking back you know, we the net financial effect of our incentives I think we've generally correlated to be about the equivalent of 1% annualized vacancy loss Scott did those numbers and can provide you more detail.

But the problem is in certain core markets and really Montreal wouldn't be a standout here.

<unk>.

Or are all offering incentives to go and we track that very closely like where we're able to taper off is buildings that we got achieve full occupancy on and regardless of what's happening in the marketplace. We are not using incentives, but where there is a wide use of incentives and we're trying to improve those vacancies were.

Still using them, but I would characterize incentives as a tapering at this point, but with us as.

As we amortize them over a one year period, so they're with us into 2022, but will be bleeding off and hopefully Q4 Q.

Q3 2022.

And then judging from your commentary more broadly I guess as the demand drivers come back in Montreal Toronto.

Those should go to zero and turned into rent growth.

We're about we're achieving both right now like if you look at Scott and you may want to talk about his work, but when you look at what we're doing we're actually look at the quarters and you can see that rent growth on mark to market is definitely there.

Somebody tried to get me to.

Give more color on that I think I gave positive momentum.

But yeah, we're very confident like the drivers of retarding and and I believe you know and it's just through you know feedback we retired from real estate brokerage on the on the private ownership side that a lot of condos went into end user hands and when you look at condo, new developments and condo trades in places like Toronto and Vancouver in particular to certain.

Extending.

Montreal, Theyre not being bought by investors anymore <unk> hundred dollars a foot you can't make viable rental work on mass you know when we were in the $500 a foot condo acquisition market you could make 2500 to 3500 dollar rents work, we're in a very different environment now.

As those investors have made the access I believe we've got a smaller pool of rental out there I certainly know we don't have a larger one.

Any new purpose built has not kept pace with the required housing needs.

That makes sense and yes, I can I can draw on my line here from three 8% at Q1 to six two.

[laughter] Yeah October the trend.

Still consistent with that so I.

I think Ontario, and actually Halifax is a huge driver which would have been.

Not necessarily always the case going back three or five years.

<unk> kind of following and so but actually positive pretty much across the across the country.

And I guess, maybe a last one for me I mean, some of what's come out of this pandemic may be permanent.

What are your thoughts in terms of again markets like Halifax, or you've gone into Corona, Victoria, where there's going to be some retirement community and plays.

What are your thoughts like is there some permanent to what we're seeing and does that impact how you deploy capital going forward.

I think.

Like I'm again, we have to wait for the data to support what I'm, saying, but antique, notably an instinct wise.

I think the pandemic.

It wasn't just serve that has created this labor shortage, which which is really a real thing.

I think it was early retirement to a great extent a lot of people that had contemplated retirement in the next five years escalated those plans to now okay. So that bodes well.

For retirement communities like Cologne Lake Victoria BC.

<unk> city et cetera, okay.

On the domestic University front.

Canadian Kids are definitely wanting to get back to school.

And when the title wave of international students returns and it is significant.

Those markets are going to come under even more pressure. Okay. And then the last theme that I don't see changing in the cap REIT portfolio is the suburbs of the big cities are going to continue to do well because people want more space. So we emphasize the space offering a cap rate through our <unk>.

Houses through our manufactured homes and through our predominantly suburban portfolio and those that thesis is clearly intact and was working extremely well throughout the pandemic. It's when the all the market drivers come back, but I think that we're really going to see a.

A change so I would I think it's safe to not to use your ruler to draw the line I'm not sure I would be using a boomerang right now, but certainly safe to to pay attention to those drivers in and Theres theres not negativity in the market at this stage.

Okay fair enough thanks, guys.

Okay.

Thank you Matt.

Our final question comes from Mike Magee <unk> of <unk> capital.

Capital markets Mike. Please go ahead.

Good morning, Good morning, everybody just one question for me.

Mark just with your your confidence in the outlook.

Which is I think abundantly clear in your comments.

Have you at some point given reconsideration.

<unk> strategy with respect to in suite renovation capital just given the drivers youre seeing or is affordability is still.

Most pressing issue for you going forward.

Well I know you can handicap me for my enthusiasm back because I think most people I know, but my enthusiasm to handicap that but I am optimistic.

I think that Ah.

The renova.

Renovation program.

It's clearly.

Going to see a part of our business plan.

The difficulty a lot of apartment owners, not just cap rate, but a lot of apartment owners have had during the pandemic and now as we come out of it is really doing those renovations practically speaking getting them actually done.

So in a market that hasn't returned to to full force, where we are still competing for residents. It's only sensible that that program slows.

But as we come out of things and the demand drivers return clearly that program.

With sensible.

And even with our renovations in the mark to market rents that we hope to achieve Theres still extreme it's still exportable living it's highly affordable living in great locations and great quality. So I would just say at the end of the day cap rate is not deviated at all from our business plan of focusing on quality homes.

For people to live in.

Okay, and I guess, just ask maybe differently relative to the amount I'd like to be reviewing let's say pre pandemic.

Let's say next year or year, after we're kind of back to that level.

On a on how things play out.

Just given the returns that you can get do you see that as being something you Wanna Amp Amp up further.

Both from a number of units or spend perspective or is it something that would just remain.

Consistent with historical.

I think we would return to historical a lot's going to have to do with the labor shortage situation. A lot is going to have to do with those demand drivers coming full back but.

There's no deviation I would say from our pre pandemic business plan of providing high quality home. So a lot of it has to do with our ability to execute not just the conviction of spending the dollars, but I'm I'm I in my mind, it's turned to no change in strategy here.

Okay, great. Thanks very much.

Thanks, Mike.

Thank you Mike. This concludes today's Q&A, so I would like to hand, you back to Mark Kenny for any closing remarks.

Thank you very much. Thank you to all that took the time to show interest in cap REIT. We we appreciate the support we appreciate the interest any questions I would direct you to reach out to either Scott.

Alright for clarification and wishing you all a.

Uh huh.

Very nice day, and a happy Remembrance day to come thank you.

This concludes the Canadian apartment properties reached that quarter 2021 results conference call. Thank you for joining we hope you have a great rest of your day you may now disconnect your lines.

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