Q3 2023 Boardwalk Real Estate Investment Trust Earnings Call

Good day, ladies and gentlemen, and welcome to the Boardwalk real estate investment Trust.

What are you trying to 23 earnings call at this time all lines are in a listen only mode.

During the presentation, we'll conduct a question and answer session.

If at any time during this call you require immediate assistance. Please press star zero for the operator.

This call is being recorded on November eight 2020.

I would now like to turn the conference over to Mr. Erik Bauer VP of finance and Investor Relations.

Please go ahead Sir.

Thank you Laura and welcome to the Boardwalk REIT 2023 third quarter results conference call.

With me here today are Sam Coleus, Chief Executive Officer, James Hall, President leaves Us manage Chief Financial Officer, and Samantha Coleus gun Senior Vice President of corporate development and governance.

Please note that this call is being broadly distributed by way of webcast. If you have not already done. So please visit us at <unk> Dot Com slash investors, where you will find a link to today's presentation as well as PDF files of the trust's financial statements and MD&A.

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 operation and its actual performance may differ materially from those in any forward looking statements.

Additional 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 coal, Yes. Thank you Eric and welcome everyone to our Q3 2023 conference call starting on slide four our strong performance with our GAAP and non-GAAP measures of F. F O per unit net asset value and unit holder equity has seen an increase from the same.

Quarter of the prior year or September 30th 2022, and profit seen decreased quarter over quarter due to reduced fair value adjustments slide five our culture from our humble beginnings of 1984, our resident members are at the top of our organization our leaders put our team.

First in our team puts our resident members first got it by the Golden rule, we have a peak performing customer service culture that creates exceptional results I would like to now pass it over to Samantha Coleus Guy.

Thank you so much that slide six our strategy to create value for our stakeholders begins with our people.

Are so grateful for our extraordinary team and family, who continue to innovate and deliver our places posed by a resident member where love always lit.

Our strategic focus is our best in class organic growth from our strategic decision made several years ago to implement a distribution policy, which maximizes free cash flow reinvestment back into our communities Leverages, our proven team and platform to deliver the best service and value to our resident members, which was.

In optimized NOI growth when we pair all of this with the improvement in apartment rental market fundamentals in our core market on a solid foundation on some of the most affordable rents in Canada, we are well positioned to continue to deliver best in class organic growth.

Accretive capital recycling focuses on opportunistic investment into acquisition disposition development and investment into our own high quality existing portfolio with the tactical unit buybacks when appropriate to also increase free cash flow.

Compelling value from our strategic decision to diversify our product offerings into three distinct brands affordable living enhanced value community and affordable luxury lifestyle. This strategic decision combined with our maximizing our free cash flow and reinvestment back into our communities has positioned boardwalk.

As a leader in multifamily community providers with growing free cash flows.

Our solid financial foundation provide flexibility on our balance sheet with a minimum distribution policy, which maximizes available capital from our growing funds from operations for reinvestment back into our communities with our ladder of mortgage renewal approach and see MH the insurance on 96% of our financing this continues to provide.

Stability and access to low cost mortgage capital with reduced renewal risk.

Slide seven.

We are delivering leading growth boardwalks existing exposure to strong rental demand non price controls market with record immigration significant organic growth as Alberta has some of the most affordable rental rates in the country with limited new supply versus demand from both international and interventional migration or SAR.

<unk> Financial Foundation in partnership with the MHC allows us to provide some of the most affordable rents in Canada.

With rising interest rates, making homeownership more expensive and rising construction costs all widening the gap between our replacement cost of our assets and our current valuation.

Construction levels in our core markets remain low relative to anticipated household formation with record high immigration into our core Alberta market.

All of our apartment rental fundamentals continue to improve with higher revenues as a result of our significant improvement in inflationary adjustments, coupled with essentially no new incentives on new and renewing leases.

All of our markets have near 99% occupancy and strong apartment rental fundamentals.

Slide eight shows the significant magnitude and scale on a historic level of continued all time record high immigration into our largest region, Alberta from both inter provincial and international migrants, calling Alberta.

This significant migration reflects the affordability that Alberta provides relative to other provinces, coupled with significant job vacancies are federal government recently reaffirmed the same permanent resident targets for next year and into 2026.

Slide nine shows interventional migration sources into Alberta for current year 2016, and 2006, most into prevention of migraine are coming from Ontario, and Quebec with a big increase from BC, reflecting a migration into more affordable housing in Alberta from higher housing cost in Ontario and BC.

Slide 10 shows strong overall employment growth in Alberta, along with how diversified new jobs are helping with the diversification of the Alberta economy.

Slide 11 shows, Alberta, leading economic growth from high commodity prices, resulting in budget surpluses that will go towards debt repayment and savings contributions for future investment.

All of that will also result in smaller interest cost for our Alberta government.

Slide 12, some headlines that reflect a diversifying economy for Alberta, Alberta. The economy remains strong. In addition, there are many major projects under development in the province of Alberta, which will further promote more job opportunities in the future.

<unk> 13 shows our large presence in affordable and non price controlled market with Alberta, and Saskatchewan, representing 62, 1% and 10, 3% of our portfolio respectively.

Boardwalk has the highest Canadian concentration of non price control departments amongst our public REIT peers.

Boardwalk current mark to market, which includes the reduction of incentive averages $177 per suite and equates to approximately a $69 9 million dollar revenue opportunity.

Slide 14 shows our high affordability as defined by the MHC and our core Edmonton and Calgary market with rents well below 30% of median rental household income.

To the right of the affordability chart is a graph, which shows occupied rents in Alberta are still tracking below both Alberta and Canadian CPI index inflation, there remains a significant gap between occupied rents and the changeover consumer price index over the last eight years.

Boardwalk brands continue to provide exceptional value versus consumer price index over the last eight years.

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<unk> a graph on the left which shows significant imbalance between strong demand or immigration versus supply or new builds in the yellow black and grey with demand or migration accelerating further in our core Edmonton and Calgary marketplace. It far outstripping new supply to the right a graph showing how high construction costs remain.

Hold on persistent higher interest rates.

Slide 16 shows high occupancy now close to 99% as a result of strong apartment rental fundamentals and our leading diversified product offering in all our key markets move.

Move outs versus last year are also dropping as our retention and value proposition continues to increase it is important to compare same month over previous months last year because of seasonality.

Slide 17 shows our key operational metrics with high occupancy lower incentives higher occupied rents, resulting in higher revenues for the quarter, reflecting our key strategic decisions made to maximize free cash flow and diversify our product offering yielding significant financial performance.

Slide 18 shows steady net new and renewal rental rates within our breath friendly centric renewal rate bad keeping our retention high our turnover inexpensive low year over year, we have seen a significant improvement.

Lease spreads or renewals are strategically moderated to keep providing resident friendly affordable housing options in our core markets, while lowering our cost and steady operational results a win win for all our stakeholders.

Slide 19 shows a growing two 6% sequential quarterly revenue gains an increase from two 3% in the previous quarter.

We would like to now pass the call onto leases mandate, who will provide us with an overview of our portfolio performance and balance sheet Lisa.

Thank you Samantha moving to slide 20 for Q3 2023 same property net operating income increased by 12, 1% as compared to Q3 2022 with revenue growth of eight 9% for the nine months ended September 32023 same property net operating income increased by 12.

7% with revenue growth of eight 6%.

Ed mentioned the trust largest market so our revenue growth accelerated to nine 6% in Q3, 2023, and nine 3% for the nine months ended September 32023, as compared to Q3 2022, and the nine months ended September 32022, respectively.

Operating expenses increased by three 6% in Q3, 2023, and two 7% for the nine months ended September 32023, primarily the result of increased wages and salaries repairs and maintenance and utilities as a result of higher rates. The team remains committed to ensuring focused and disciplined when managing controllable operating expenses.

Slide 21 administration costs increased by $2 million in Q3 of 2023 as compared to Q3 2022, while also create increasing 900000 as compared to Q2 2023.

This increase was mainly driven by inflationary wage adjustments at the beginning of 2023 as well as larger bonus accruals recorded in Q3 2023 as a result of the Trust's financial performance deferred unit based compensation increase due to the increase in the number of participants as well as the cost of the program.

Slide 22 illustrates boardwalks mortgage maturity schedule of our.

Our well staggered with approximately 90%, 96% of our mortgage balance carrying any J insurance 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 financing at rates lower than conventional mortgages, but the current estimated.

Five year, and 10 year seeming to see rates of four 7%.

The current interest rates or a bump to trust maturing rates. The trust maturity curve remains staggered reducing the renewal amount in any particular year Lastly, the trust has an interest coverage of $2 88 in the current quarter.

Slide 23 summarizes our 2023 mortgage program overall, we have renewed our forward locked $327 2 million as well as secured $72 5 million of new financing at an average rate of four 5% and an average term of seven years included in these financings was $106 million of conventional mortgage finance.

King, which were renewed on shorter terms to allow for them to be replaced with female she financing. Upon next renewal. In addition, the trusts obtained $46 5 million of CME C financing at $3 eight 9% and a seven year term for its acquisition of the view in Victoria, British Columbia current underwriting criteria in our most recent submissions to see me.

C and our lenders has remained in line with our historically conservative estimates moving to the right. It aside we provide a summary of boardwalks available liquidity. The trust is well positioned with approximately $56 4 million in cash and subsequently funded financings as well as an undrawn $196 million operating mine. This approximate 200 for.

<unk> 2 million in liquidity provides the trust with a flexible financial position.

Slide 24 illustrates the trust estimated fair value of its investment properties, excluding adjustments for Ifr 16, which totaled $7 4 billion as at September 32023, as compared to $6 8 billion as at December 31, 2022, the increase in overall fair value as a result of increases in market rents at select sites and <unk>.

Immunities as market fundamentals improve as well as the Victoria acquisition, well being slightly offset by an increase to capitalization rates as discussed on the next slide current estimated fair value of approximately 216000 per apartment door remains below the replacement cost.

Moving to slide 25 in consultation with our external appraisers, the capitalization rates or cap rates used in determining Q3 2023 fair value were increased from both Q2 2023 in Q4 2022.

Third adjustments remains the trusts, Ontario, and Quebec assets as well as Calgary and Edmonton to reflect the higher interest rate environment as it does every quarter. The trust will continue to review completed asset sales transactions and market reports to determine if adjustments to cap rates are necessary. Most recent published calcrete reports suggest that the cap rates being utilized by <unk>.

The trust for calculating fair value are within their estimated ranges I would now like to turn the call to Jim talked to highlight our capital allocation developments and the trust exceptional value James Thank you Lisa.

Our maximum cash flow retention strategy remains key to our ability to opportunistically invest and compound returns for stakeholders and as a result, our growing cash flow is increasing our available capital deployment towards growth. While also further improving our leverage metrics.

We continue to seek opportunities for growth with our focus today on our value add capital improvement program.

Sourcing strategic and accretive acquisitions, and continuing our new development and under supply of housing markets.

For the quarter, we are pleased to share an update on our capital deployment, starting on slide 26, which provides an update to our progress on our value add repositioning and renovation program.

Common area and amenity renovations have positioned our communities to offer the best value service and experience to our resident members and a key contributor to boardwalk success in both competitive as well as strong market conditions.

For 2023, our team is on pace to complete 11 common area and amenity renovations, resulting in over 60% of our total suites benefiting from our repositioning program.

In addition, our suite renovation program continues to be opportunistically used to improve and enhance our offering for residents.

Our existing vertically integrated platform provides us with the unique ability to quickly and cost effectively complete these renovations.

With limited availability in the current strong demand for housing our ability to reduce days vacant or a significant differentiator of our boardwalk communities.

With low availability in our markets and additional initiatives. We are undertaking is the conversion of existing storage and administrative spaces and our communities into rental suites.

This initiative aligns with their platform optimization and to date, we have added 17 units to the market.

By investing in small renovations to turn sweets from administrative use back into principal units, we will add much needed additional housing in our communities.

We are currently under construction for an additional six units and are in the early stages of assessing feasibility earn up to an additional 57 units in Alberta.

On slide 27, we provide an update to our ongoing development pipeline Chad housing in supply constrained markets. We are pleased to share that the lease up of the first tower of our 45 Railroad development is complete with 100% occupancy and rental rates at the upper end of our original expectations.

The second tower has now received occupancy permit and our team is progressing through leasing with a total of 56 or one third of the units already rented todays.

This project was delivered on time and on budget and we are projecting a development yield at the upper end of our forecasted range.

Our Victoria development pipeline presents an opportunity for the trust to contribute new housing units, while also creating strong value for our stakeholders aspire is our first of three developments in Victoria we.

We are progressing on completing our foundations for this 234 unit development, which is located adjacent to our existing Aurora community that remains fully occupied.

This development will continue to scale, our Victoria presence alongside our existing communities, which includes our recently disclosed acquisition of the view, which closed at the end of April.

Switching to our current valuation slide 28, 28 pardon me highlights the exceptional value that Boardwalk trust units represents at our trading price, which implies a value of approximately 194000 per apartment door.

This compares favorably to the substantive transactions that have occurred in the external market.

So our estimated cap rates or higher reflecting the higher cost of mortgage financing or an EV has increased alongside our strong NOI growth and is estimated to be approximately $82 per trust unit, which equates to just 216000 per apartment door and represents an exceptional opportunity relative to market pricing and <unk>.

<unk> well below the increase in cost of replacement.

On slide 29, boardwalks trading price equates to an attractive four 9% cap rate on our trailing NOI.

With our double digit NOI growth the forward cap rate at this price is in the mid fives and provides a significant spread to the current cost of mortgage capital and transactional cap rates in private markets.

With favorable fundamentals strong leasing trends and leading NOI growth our current valuation represents exceptional value alongside our strong runway for earnings growth.

Our updated guidance outlook reflects the strong trends and are highlighted on slide 30.

Boardwalks third quarter operating performance continued to be strong rep.

Revenue growth was towards the upper end of our expectation with near full occupancy and strong leasing spreads.

Operating expenses were on the low end of our expectations with our optimization efforts ongoing in non controllable expenses, such as utilities coming in at the low end of our prior expectations.

This has allowed us to increase the bottom end and tightened our same property NOI growth range to 12.5% to 14% growth for the year.

Has the strong same property NOI performance compounds into the fourth quarter. Our recent acquisitions and developments are also outperforming our expectations interest rates, though higher are well within our forecast that interest earned on cash is above our expectations and our G&A optimizations have assisted us in allowing.

A translation to a forecasted double digit growth rate for ethical per unit.

For the year to trust is tightening and upwardly revising our 2023 <unk> per unit guidance to $3 52 to.

To $3 60 per trust unit.

Our team is committed to leading and transparency and we'll continue to update our stakeholders in the event of any change in conditions that may materially impact or forecast.

On Slide 31, our board of Trustees has confirmed our monthly cash distribution of $1 17 per trust unit on an annualized basis for the next three months.

Our distributions have increased alongside of growing cash flow, while maintaining our industry low payout ratio, providing significant cash flow reinvestment in positioning boardwalk with ample capital for growth.

As is customary the trustful review any necessary regular distribution increase to meet our minimum requirement and adjust accordingly, with our fourth quarter results.

Lastly on slide 32, we are proud to share our continued improvement to our grasp score, which highlights our focus and continual progress towards leading sustainability stewardship.

Our grasp score at 71 is an improvement from last year and we are proud to have been ranked first amongst our peer group in public disclosure.

Two our boardwalk team and all our stakeholders for accomplishing this amazing recognition.

This concludes the formal portion of our presentation and we would be happy to answer any questions Laura.

Yes.

Thank you, Sir ladies and gentlemen, we will now begin the question and answer session. So do you have a question. Please press star followed by the number one I need a touchtone phone again, that's star followed by the number one you'll have to be tone comped acknowledging your request should you wish to decline from the polling process. Please press star.

<unk> followed by the number they can't.

If youre using a speaker phone please lift your handset before pressing any case.

We have our first question coming from the line of Jonathan Chang hunting.

Colin Please go ahead.

Hi, there.

First question just on.

On on market rent growth.

How do you how do you see that trending into 2024, and how long do you think and keep sort of at the same.

Pace going.

Hey, Jonathan it's James your market rent growth has been quite consistent you know a certain certainly a way to track that would be with our leasing spreads.

As we've talked about we are strategically moderating the pace of adjustments with those.

Market rent adjustments and to date.

We have been accomplishing leasing spreads inside of that targeted range, specifically in Alberta between 10% to 15%.

Smith had pointed out in our prepared remarks affordability continues to be the best in the country right here in Alberta.

So we believe that this approach is going to create a longer runway for us with these continued market rent adjustments.

Okay.

And then I guess just on.

The same property expenses.

The growth in Edmonton was.

On the expense side was a lot lower than that and your other larger markets can you maybe give a little bit of color on that.

How do you expect that to trend into next year.

Sure Hi, Jonathan it's Lisa.

And as this group would know they really benefited from a platform optimization program. So the way that optimization, specifically looked at when we had associate sleep. The organization did we need to replace positions will be really managed with turnover going down in occupancy going up can could we maximize or optimize.

With our platform and so the benefits you're seeing on the expense side is directly related to that platform optimization. The other mines, just not having such a large presence didn't have the same opportunity for the expense savings, but still would have seen some through that optimization, so moving into 2024.

The timeline to get to the automation and optimization will be what impact 2024 results and so it sort of would have happened through the year largely at the beginning of the year. So you might expect.

More inflationary side adjustments as we look at 2024.

Okay.

So basically you are.

You've got the coal for mostly the full benefits of that right now and in 2024 statistically more inflation type growth the way to think about it yes.

Maybe a little bit of benefit trickles into Q1 of 2024, but then yes. It would move more towards inflationary don't get us wrong no. We're always going to look to see how can we continue to optimize that platform.

While you're waiting, though Ted Council also looking at technology and other opportunities to ensure we keep those expenses as long as we can.

For sure.

I'll turn it back thank you. Thanks.

Thanks, Jonathan.

Our next question comes from the line of Myles sorry from Scotiabank. Please go ahead.

Hi, good afternoon.

One or the first question just on capital allocation I may have missed it looks like you may have removed kind of your uses and sources of capital that little matrix.

If you put in the presentation a couple of quarters ago. So just curious to see whether the pause.

Listening on the various uses and sources of capital have changed.

Specifically like.

With your free cash flow today, what is looking like the most attractive risk adjusted return in terms of deployment.

Hi, Mario its James no change to the view of those sources and uses certainly.

As is our stakeholders will know we certainly takes a priority and have a business model that focuses on growing free cash flow that is the cheapest form of capital and that's allowing us to make capital allocation decisions each and everyday.

As we pointed out in our prepared remarks, we're continuing to focus on reinvesting back into our portfolio, where we can.

<unk> developed great yields from repositioning and rebranding and renovated suites where appropriate.

That said, we continue to have cash on our balance sheet as Welland, Lisa reminds us of her wording great cat great interest rates.

For having that cash on the balance sheet and so we're also looking at opportunities to deploy.

Towards accretive acquisitions, when those opportunities do come so certainly certainly.

No significant change to our view on the sources and uses Mario.

In addition to that.

Because there hasnt really been any changes we've been.

Speaking to it in our prepared remarks.

Got it okay.

And then just on the accretive acquisitions, how would you characterize the environment today versus three months ago in terms of opportunities to transact at a valuation that makes sense.

Yes, I think.

Interest rates, where they were or even a month ago, we saw interest rates on a CPC front north of 5%.

Sorry.

Sorry.

Where are we cutting out Mario.

You did briefly but youre back.

Perfect.

Thank you.

Last thing I heard was north of 5%.

Yeah, so interest rates pardon me.

We're north of 5% not that long ago honestly, MHC front or at least we certainly saw.

Fewer transactions, even listings come up at that juncture today, we see interest rates on the seafront sub 5% is.

As Lisa pointed out with our discussions with appraisers and even.

With their own fair value estimates of cap rates.

For us, we're using a 5% cap rate within our own portfolio and so with interest rates coming off certainly we believe that that's going to start to.

Perhaps unlock.

Some opportunities in the transaction market, but to date, even characterizing versus today versus three months, which was your original question.

Not a lot of activity still to date and so from our standpoint, though we believe that that's what's going to create that opportunity for us in sourcing those accretive opportunities.

Got it.

Some of your peers are more focused on new construction some more focus on value add how would you characterize.

Your acquisition appetite in terms of the type of product that you're most interested in.

Mario at Sam and what we're always looking to allocate into is what's going to create the most value we have an exceptional.

Capability to repurpose rebrand and reposition existing communities and we've demonstrated that significant value creation with our own communities.

So we've got in house capability vertical.

Integration that allows us to quickly re transform older community. So that's a huge.

Source of value creation, and the biggest source of how we've created the most amount of value over the last several years.

The new construction, we've created significant value with as well with our construction partners.

And.

That will continue to be a avenue of.

Value creation, but not as significant as what we've seen with our organic growth.

Market is.

A much higher interest rate market, especially for builders right now who are using variable rate financing that typically is close to double digits, that's creating a lot of pressure on the developers.

And much greater incentive to sell and be more flexible on when these new developments are sold.

Versus holding on to them and refinancing out of like the past with lower interest rates than most realize this already but that we're seeing more opportunity.

Come to us as a result of the higher borrowing costs developers are having to pay to finish the development and so it's really important for developers to sell sooner versus later to realize the internal rates of returns are.

Our hurdle rates that that they've set many years ago or a couple of years ago before the project under.

Under construction so.

We're seeing we're seeing opportunities.

With higher overall cap rates is everybody's seeing higher cap rate, we love higher cap rates why because it's higher free cash flow higher returns in a much quicker payback as well so we're seeing an environment more traditional as to when we really grew.

Rapidly in.

Start our initial.

10, 20 year peer.

<unk> of growth.

That's the same environment. We're in now are similar with higher cap rates higher returns and higher paybacks. So it's a lot more exciting time for us because it's back to the future higher a higher returns.

Yeah.

Okay.

Just maybe one follow up on that.

So the acquisitions or development opportunity that you see how do you think about the balance sheet today in terms of your does the.

<unk> or your debt to EBITDA, However, you want to answer it.

Or are you are you interested or are you open to increasing leverage a little bit to fund. Some of these acquisitions is funding of acquisitions, where transactions predicated on selling some assets.

Or.

This equity financing kind of play a role into the opportunities that you see going forward.

Back to the future again, when we first started as a private.

Private company and even a public company, we reinvested, 100% of our free cash flow and we're pretty close to that now at 70% Mario So our biggest source is free cash flow.

Our proven track record of how we grew from 16 units to close to 40000 units with very very little.

Equity issuance over that period.

<unk> balance sheet, we always like to.

Strengthen and and.

Using that now is more expensive. So it's less preferable and is the reason why we would transact more and see more transactions and.

Our focus in on on our non core assets that are not going to perform as much as the new acquisitions or development opportunities that we're in and so we're looking more to recycling our capital and high grading our assets and more importantly high <unk>.

Aiding our free cash flow and everything that that we're looking at we're asking how is that going to increase our free cash flow in the more free cash flow, we generate obviously the more capital we often at hand, that's at a very low cost that we can continue generating even more free cash flow and so that really is our focus is.

Then back to the future and using.

Free cash flow focus.

<unk>.

At least expensive source of capital that we can reinvest back into our communities are our acquisitions, our development programs and continue to create the best product service and value for our residents at the very end of the day.

Got it that's really helpful. Tim.

My last one just really quickly I know the story is transitioning more towards a market rent growth story as opposed to incentive burn off.

But just from a modeling perspective.

This has really been coming to us with an average of $10 to sweep per quarter give or take a couple of dollars.

That type of burn off.

Reasonable expectation through the end of 'twenty four such that the existing $35 three six solar incentive per suite average essentially comes down to zero by earlier next year.

That is a reasonable expectation Mario again, where the trends that we're seeing year to date are are continuing in the marketplace, where we can speak to.

New and renewal spreads on a forward basis as our team is negotiating and having discussions with our residents and we're continuing to see a similar pace within our targeted range, which would imply a similar incentive burn off trend as you were suggesting Mario.

Yes.

Okay. Okay.

Thank you thank you Mario.

Our next question comes from the line of Kyle <unk> from <unk>. Please go ahead.

Thanks afternoon, everyone.

Maybe just building on your Opex outlook commentary from earlier based on everything Youre seeing on the Opex side as well as on the leasing demand front as we head into year end and maybe a bit early but anything to suggest you see a material slowdown in organic growth in 2024.

From an operating expense side point or from NOI, sorry, just making sure.

Yes, more from an NOI perspective, I mean, obviously taking into account what you just said on Opex I think it was fairly positive, but I'm just when you bake. It altogether. What are you what are you thinking on the NOI growth.

Okay.

Yes overall, Kyle we certainly we certainly expect that we're going to see some positive NOI growth. When we move into 2024, I think James shared some color sort of when answering jonathan's question about where we're seeing with revenue from an extent expense standpoint, you're correct and we certainly look at managing those controllable expenses at this juncture specifics from an NOI.

<unk> category, we don't anticipate any sort of we would anticipate normal inflationary type adjustments when we're looking at expenses for 2024.

So yes overall NOI growth is expected when we think of 2024.

Okay, probably not a material slowdown from the strong growth we've seen this year, which is which is great.

Next question bit of a broader question, but.

Focus has primarily been on Alberta over the last several quarters and obviously rightfully. So just given the strength, but operating results in Saskatchewan and have also been really strong as of late so I'm. Just wondering can you talk about your thoughts on the portfolio in Saskatchewan, maybe the contributors to that growth, what's driving what's driving it.

Your outlook, maybe with regards to leasing demand rental growth in the markets that you're in.

Pallet Sam in Saskatchewan.

As our inspiration and our first peak performer and strongest team and results for the longest period of time why.

Saskatchewan.

Team again, we stand on big shoulders, and leadership is exceptional and extraordinary in and started to produce.

Exceptional results with a a very big focus on retention.

And high occupancy.

All of the things we're seeing in all our markets right now we saw in Saskatchewan.

A while ago sketch one.

The affordability is even higher than.

Then Alberta, the most affordable place and we're happy you're bringing Saskatchewan up and our teams.

Pickle.

Tickled pink.

That we're talking about Saskatchewan right now is our team listens to our calls because it's an exceptional place to live.

And we're seeing extraordinary demand.

Far outpaced supply and what we.

We saw in Saskatchewan.

With respect to high demand for food high demand for resources, all the things our planet and we need high demand because affordability has to be in front of energy and food just as much as housing and so that's what we're really seeing.

A big demand for affordable food and energy of which Saskatchewan is a is a big contributor to those two other essential products and services that we all rely on them and we're seeing exceptional growth and will that continue for.

Many years to come we.

Completed at our board meeting where.

Hearing about.

Low cost of production of our central resources like potash came up in our boardroom and and the capacity to produce that with old production.

That's been developed very costly.

To produce.

These resources and because we've got.

A huge advantage of the infrastructure that that is already producing that the cost of increasing that production because of inflation costing.

Even more now and so we've got a big advantage.

That we're producing what our world and planet needs.

More affordably than anybody else's and so we've got a long long ways to go on a big runway.

Because of all the all the essential.

Our resources in food that we have that that our world is increasingly needy. So.

That's a long answer to that question, but it's a reflection of.

How we feel about our future and how it is reflected in economic reports by economists and our particular region. We absolutely are at the best place at the best time, and we see that happening for quite a while going forward just because of the.

Geopolitical.

Events that we're seeing.

And the interruption of the.

These are essential resources and products that we're seeing and so where we're in a great. We're in the best spot.

Perfect. So thank you for the thorough response I will turn it back.

Thank you Kyle.

We have our next question coming from the line of Mike Mccormack from BMO. Please go ahead.

Thanks, operator.

Railroad congrats on the recent success, so far and for delivering the project on time and on budget can you remind us what the total cost basis for development.

Approximately 150 million, but net net.

I think it's closer to 200 million 100 between 115 200, yes.

Okay and is that does that at 100% of our boardwalk centers.

That's not 100%.

Alright, perfect. Thank you.

So I guess theres construction debt on that project. When do you think you'll be in a position to take that out.

Mike It's James here.

We're in conversation with our lender in terms of.

The best opportunity for that certainly you see me to see.

Transitioning that over to see me to see would be a priority for us. Good news is that lease up is going really well on tower two we're already.

Third of the way through tower too and so the quicker that we can set up the quicker we can transition that over to a twist and gets insured loan.

Ideally, we can see that occur sometime over the next quarter or two.

Okay perfect.

And I guess, just I'm not too familiar with your partner spread would.

I guess.

They look to be more of a.

More of a developer them as opposed to a long term owner of rental assets.

Do you have any thoughts in terms of is there a plan for them to exit this asset once it's stabilized or do you expect it to be a long term hold with the partnership continue as is for prolonged period of time.

Our partnership here with Redwood and we certainly don't want to I don't want to speak for them, but.

Similar to our other partnerships.

This is a long term hold for both parties shoulder to shoulder, where we are creating long term value with this asset.

Okay great.

And are you not.

That's all I got thanks, so much great quarter.

Okay. Thank you Mike.

We have our next question coming from the line of <unk> fan from RBC. Please go ahead.

If you look at the leasing activity in the quarter.

In Alberta.

How did the new lease rents compare within renewal rent not the spread but you're absolutely right. So there, but at the same or.

Or the renewal rents lagging in your words like quite a bit.

Hey, Jamie it's James New lease rents are slightly higher I mean, certainly when we look at these spreads new lease spreads are higher as a result, but theyre not theyre not materially different you know it's not like.

There are more price control markets, where there are big differences between new leases versus renewals.

In our Alberta, Saskatchewan market, there is a slight difference.

On that aggregate rent for new leases, but the differential is nowhere near what it is in non price control markets are pretty price control markets.

Yes, okay.

And so then a follow up on the rent growth comment the Q&A.

For next year.

So is it that you think that next year the spread that you're currently seeing the seven to nine or we know all of the 10 to 15 new.

You think that's sustainable.

But at the same pace next year, despite the base being higher or.

I mean, what what you said there.

Yes, I mean look our approach of focusing on retention is lowering our operating costs.

It's sustainable for our residents.

It's allowing us to frankly maximize and optimize our NOI on the new lease fronts. This target of 10% to 15%. We certainly believe it is sustainable because you know as Samantha had in her prepared remarks affordability continues to be some of the best here in the country.

So when we look at supply and demand fundamentals, we certainly believe that there is a long runway here for.

Rental rate growth and adjustments.

Okay Jimmy.

Jimmy Slide 35.

Q3.

In total we're.

We're at 2382 move outs this year our.

Q3 last year were at 2839, so we've made this adjustment as low as possible.

At that eight 9% and we saw a pretty significant drop in move outs and a much higher retention why there's nowhere else to go. So what is the market rent is the question when there is no vacancy.

How is that determined when we don't have vacant unit other than the brand new units. There is there is vacancy in brand new units.

And they're typically between two and $3000 a month depending.

Depending if it's a one or two bedroom apartment.

And Thats, a vacant unit somebody could move into.

Easily today and that that's really the availability that we're seeing but for existing <unk>.

Portable apartments were all being very responsible.

And taking a long road and the resident friendly approach road.

Two to minimize our adjustments as much as we possibly can to keep our affordability.

Affordability advantage keep are our brands and our retention high and satisfaction high and it's working and delivering great results too. It really really is a win win win and we see this happening and sustainable is a key word and we see this being <unk>.

Sustainable over the next two three.

Here's and it's impossible to predict the future because.

Because we don't know what the future is but but were.

As everybody can can feel and hear we're confident about the sustainability of our results.

Thank you.

Thank you.

Our next question coming from the line of firearm Citibank. Some farmer. Please go ahead.

Thank you operator, and good afternoon everybody.

Apologies. If this has already been asked before and when it's been answered, but I was just wondering in terms of the broader dynamics in terms of the macro announcements of GST and other favorable announcements on the housing front.

Are you seeing a shift in sentiment from developers and people in the market towards <unk> versus <unk>.

Yes.

I'm sorry, it's James I.

I can start on this certainly we.

Applaud our government's shift towards starting to.

Incentivize the supply side of.

This housing shortage that we have I think certainly in.

In markets like Alberta, where there is.

Provincial portion of that GST, I think that incrementally will help but at the end of the day.

Sadly interest costs. Some pointed out earlier are still quite high construction costs are still continuing to increase and so we believe we will start to see.

Some additional supply response given.

That improved news. However, we have we have not seen it yet to date it just.

Sadly as Sam pointed out it is.

Tough to pencil.

Tough to pencil development on the purpose of the rental side.

Sometimes you want to add on that GST from.

It's great news and great.

Proven public policy that creates affordability and we always.

Light too.

Re re affirmed when we can never remind everybody the law of supply and demand is not a theory, it's a law when we reduce the price and the taxes of anything.

We reduced that.

The cost of it.

And increase the affordability and increase the supply of it.

And so we applaud our policymakers for making the right moves to create more affordable housing for all Canadians and this is a great big first step it's like Neil Armstrong.

Armstrong.

Big quote a small step for man, but one big step for mankind. It really is a big step for affordability and in the right direction and we have to continue to move in that direction.

With our public policy and reduce taxes on something that we need more off and Thats housing and so we're so happy to see that that's.

A big kudos to our government.

And our policymakers and you know.

What we need more of it that is for sure.

And.

It's good.

Good to see.

For all Canadians.

This move and we believe the right move going forward, we will continue to happen.

Because we trust in our relationships and our policymakers and making the best decision. When we all have the best information and we all work together and this is a.

Reflection of how that does work when we do work together share the information what works.

The right decisions for the best decisions are always made.

Thanks for that color guys.

Just found that combining this comment of the difficulty that Matt.

But Tom your commentary about recycling are there some markets, where you see which are the easier or maybe more nuclear to all but it is a purpose built vacuum market versus others and you probably considered.

Lightening up in some markets wasn't anything somebody does.

Yeah.

Where.

We're really.

<unk>.

A.

Competitive market housing provider and that's where we're seeing the best most affordable rents and the best.

Biggest opportunities create value is in and its in a marketplace like Alberta and Saskatchewan.

There, where we can do what we do best.

That's bill about that.

Operate and deliver.

Housing because it's because it's a competitive marketplace that we're in and we believe being in a competitive marketplace is the best place to be and so.

That's going to continue to be our focus is is in competitive marketplaces that includes by the way brand newly built communities in Ontario for example that are competitive.

And.

R R.

Art.

Provided by market participants because of the regulation that's different for new supply than it is on existing supply.

And so it can be in a in a regulated market that's not with new supply.

And so yes, we are we.

We still we still feel and see and are producing the best results in our core markets and see that for the foreseeable future it though.

Thanks for that color James I'll turn it back.

Thanks, Mike.

Thank you we have your next question coming from the line of Dean Wilkinson from CIBC. Please go ahead.

Thank you and good afternoon, everyone.

I'm sorry.

Last quarter, we kind of spoke a little about.

Individual condo investors coming into the market and we're seeing an influx of listings in the GTA.

How does that dynamic look there and are you still sort of seeing upward pressure on those individual units and does that kind of putting some more pressure to the upside on the asking rents there that that I guess ultimately filters through to your product as well.

Well, it certainly creating more supply and we remind everybody in and refer to the Canada margin housing.

Site.

That housing is a continuum.

And there's a great graphic on affordable housing and how any new supply benefits everybody why because if theres a resident in an affordable unit and.

Promotion happens that resident moves into a more expensive unit that more expensive unit same thing happens in that resident in the more expensive unit moves into a brand new condo thats more expensive Fe and the.

The condo owners.

Owners get promotions and move into a new home and and so the continuum helped increase supply period, so any new supply regardless of where it is in the continuum is a positive for everybody because it's all interlinked and so overall.

It's essential we built more supply period, and it's essential we have public policy that lets developers do it developers do built what we're seeing.

In the United States right now we saw in Alberta, Deane, the oversupply developers will build until theres too much building and supply that's what developers do and and that creates support ability and we're seeing in the United States rents flatten out right.

Because there's so much new supply so are our competitive market works, it's not perfect. It's not instinct, but it works out a whole lot better than regulations that are 100% as what the evidence clearly shows and so.

We're happy to see condominiums pickup why because theyre really affordable we.

Toward.

Our site a couple of weeks ago at the University and one of the developers is sharing their pre sailing condos in the northwest where we built Breo for example at $700 a foot for a wood frame condominium.

That's incredible compared to what we built breo for.

We've created a lot of value that's exciting and those those 700 a foot.

Condos and the University are really affordable compared to the million million and half dollars bungalows better.

Selling in Brentwood surround and the University of Calgary, So everything is relative.

And the condominiums are definitely seeing an increase in price, but we're also seeing an increase.

Our continue or actually a steady amount of bill because it's tough to get.

Trades, it's tough to increase construction capacity as what still has to challenge because it's tough to find.

Carpenters and trades people are still hard to find and we have to promote or trades.

And increase that supply in an immigration policy, we're seeing a lot of construction and trades come in we're hiring and a lot of the new immigrants are working at our sites renovating new new siding, where at one of our communities in Edmonton and met with a lot of our Ukrainian.

Brothers from other mothers that were are helping us rebuild our siding there and so lots of carpenters and skilled people coming in from our Ukraine is what we're seeing and so we're in it.

Really happy.

That we are figuring out how to how to increase supply, but not fast enough, but that's one thing that we have to all work on.

It's never it's never fast enough as it I guess.

Nine most dangerous words in the English language, you're still align from the government and I'm here to help.

Thanks for the color Sam I'll turn it back.

Thank you we have to remember Dean we the people for the people by the people love. The people. We are the government we have to remember that we have to all work together.

That we do.

Thank you Dean.

Thank you there are no further questions at this time I'd now like to turn the call back over to Mr. Sam Collier for final closing comments.

Laura 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 extraordinary team loyal resident CMA Sea, our lenders our unit holders and all of our stakeholders. It's really is all about our people whose huge shoulders we.

Continue to stand on and as leaders we continue to do everything we can to support continued growth and our extraordinary we really can't thank our extraordinary team and great leaders enough. We're pleased with our improving results on a foundation of exceptional value service and experience. We continued to provide our resident members.

Our investors and all our stakeholders home is where our heart is our heart is where our family is and our family is where love always lips welcome home to love always our future family what can be more important when choosing where to call home. Thank you again, everyone for joining us this morning.

We honor all our fallen heroes during this remembrance and lest we forget the life sacrifice for the freedom, we all have God bless us and now more than ever grant us all piece.

Ladies and gentlemen, this concludes today's conference call cycle. We thank you for participating and ask Mr. Please disconnect your lines have a lovely day.

Sure.

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