Q1 2024 Killam Apartment REIT Earnings Call

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Operator: Good morning, ladies and gentlemen. Welcome to the Killam Apartment Real Estate Investment Trust first quarter 2024 financial results conference call. At this time, all lines are in a listen-only mode.

Good morning, ladies and gentlemen, welcome to the Killen apartment real estate investment Trust first quarter 2024 financial results Conference call. At this time all lines are in a listen only mode.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on May 8th, 2024. I would now like to turn the conference over to Mr. Philip Fraser, President and CEO. Please go ahead.

Operator: Following the presentation, we will conduct a question and answer session.

Operator: If at any time during this call you need assistance. Please press star zero for the operator.

Philip D. Fraser: This call is being recorded on May eight 2024, I would now like to turn the conference over to Mr. Philip <unk>, President and CEO. Please go ahead.

Philip D. Fraser: Thank you. Good morning, and thank you for joining Killam Apartment REIT's first quarter 2024 conference call. I am here today with Robert Richardson, Executive Vice President, Dale Noseworthy, Chief Financial Officer, and Erin Cleveland, Senior Vice President of Finance. Slides to accompany today's call are available on the investor relations section of our website under events and presentations. I will now ask Erin to read our cautionary statement.

Philip D. Fraser: Thank you good morning, and thank you for joining killing the apartment REIT first quarter 2024 conference call.

Philip D. Fraser: I am here today with Robert Richardson Executive Vice President, David Noseworthy, Chief Financial Officer.

Erin Cleveland: And Erinn, Cleveland Senior Vice President of Finance.

Erin Cleveland: Slides to accompany today's call are available on the Investor Relations section of our website under events and presentations.

Erin: I'll now ask Aaron to read our cautionary statement.

Erin Cleveland: Thank you, Philip. This presentation may contain forward-looking statements with respect to Killam Apartment REIT and its operations, strategy, financial performance, or otherwise. The actual results and performance of Killam discussed here today could differ materially from those expressed or implied by such statements. Such statements involve numerous inherent risks and uncertainties, and although Killam Management believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that future results, levels of activity, performance, or achievements will occur as anticipated.

Erin: Thank you Philip this presentation may contain forward looking statements with respect to kill them apartment, REIT and its operation strategy financial performance conditions or otherwise.

Erin Cleveland: Actual results and performance of Kellum discussed here today could differ materially from those expressed or implied by such statements.

Erin Cleveland: Such statements involve numerous inherent risks and uncertainties and although Killen management believes that the expectations reflected in the forward looking statements are reasonable there can be no assurance that future results levels of activity performance or achievements will occur as anticipated for further information about the inherent risks and uncertainties in respect of forward looking statements.

Erin Cleveland: For further information about the inherent risks and uncertainties in respect of forward-looking statements, please refer to Killam's most recent Annual Information Form and other securities regulatory filings found online on CDAC. All forward-looking statements made today speak only as of the date to which this presentation refers, and Killam does not intend to update or revise any such statements unless otherwise required by applicable securities law.

Erin Cleveland: Please refer to <unk>, most recent annual information form and other securities regulatory filings found online on SEDAR.

Erin Cleveland: All forward looking statements made today speak only as of the date, which this presentation refers and kill them does not intend to update or revise any such statements unless otherwise required by applicable securities laws.

Philip D. Fraser: Thank you, Erin. We are very pleased with our strong financial and operating results for the first quarter of 2021. Killam delivered FFO per unit of $0.26 in the quarter, a 4% increase from $0.25 per unit in Q1 2023. We achieved 10.3% same property NOI growth across the portfolio, which included 10.4% same property NOI growth in our apartment portfolio, 9.8% same property NOI growth in our manufactured home community portfolio, and 9.7% same property NOI growth for our commercial property. Multifamily fundamentals in Canada are very strong.

Erin Cleveland: Thank you Eric we are very pleased with our strong financial and operating results for the first quarter of 2024.

Philip D. Fraser: <unk> delivered <unk> per unit of <unk> 26 cents in the quarter, a 4% increase from 25 cents per unit in Q1 2023.

Philip D. Fraser: We achieved two 3% same property NOI growth across the portfolio, which included 10, 4% same property NOI growth in our Permian portfolio nine 8% same property NOI growth and our manufactured home community portfolio.

Philip D. Fraser: Nine 7% same property NOI growth for our commercial properties.

Philip D. Fraser: Multifamily fundamentals are very strong.

Philip D. Fraser: Our same property apartment occupancy at the end of the quarter was 98, 2%.

Philip D. Fraser: Remained very optimistic about the future of the Canadian winter market and we will continue to focus on our earnings cash flow and the underlying value of our assets.

Dale Noseworthy: And our same property apartment occupancy at the end of the quarter was 98.2%. We remain very optimistic about the future of the Canadian rental market, and we will continue to focus on our earnings, cash flow, and the underlying value of our assets. Dale will take us through our financial results, followed by Robert, who will discuss our apartment and commercial operational results. I will conclude with an update on our current developments and our capital allocation strategy. I will now hand it over to Dale.

Philip D. Fraser: Dale will take us through our financial results, followed by Robert who will discuss our apartment and commercial operational results.

Dale Noseworthy: I will conclude with an update on our current development and our capital allocation strategy I will now hand, it over to Dale.

Dale Noseworthy: Thanks, Bill. Key highlights of Killam's Q1 financial performance can be found on slide five. Killam achieved solid earnings growth in Q1, resulting in net income of $127.2 million, compared to $83 million in Q1 2023. This increase is primarily attributable to $116 million in fair value gains driven by robust same-property NOI growth across our portfolio. As shown on slide 6, growth in revenue was an important driver of Killam's 250 basis point margin expansion in the quarter.

Dale Noseworthy: Thanks, Bill key highlights of <unk> Q1 financial performance can be found on slide five kill Machida solid earnings growth in Q1, resulting in net income of $127 2 million.

Dale Noseworthy: Compared to $83 million in Q1 2023. This increase is primarily attributable to $116 million in fair value gains driven by robust same property NOI growth across our portfolio.

Dale Noseworthy: As shown on slide six growth in revenue was an important driver of <unk> 250 basis point margin expansion in the quarter.

Dale Noseworthy: We're seeing strong rental increases on unit terms. A 5.4% weighted average combined increase in apartment rental rates for those units that turned or renewed in the quarter highlights the strong demand for apartment units across the country. This step down in the weighted average rental rate change from 7.5% in Q4 2023 was anticipated based on Q1, and January in particular, having the highest number of units renewing during the year. This resulted in only 10% of the units that turned or renewed in the quarter being turned, compared to an expectation of approximately 17% for the year.

Dale Noseworthy: We're seeing strong rental increases on unit turn.

Dale Noseworthy: A five 4% weighted average combined increase in apartment rental rates for those units that turned or renewed in the quarter highlights the strong demand for apartment units across the country.

Dale Noseworthy: This step down in the weighted average rental rate change from seven 5% in Q4 2023 with anticipated based on Q1 and January in particular, having the highest number of units renewing during the year. This resulted in only 10% of the unit that turned or renew.

Dale Noseworthy: <unk> in the quarter being turn compared to an expectation of approximately 17% for the year.

Dale Noseworthy: Slide 7 highlights our expense growth by expense type, with a reduction of 0.7% in total same property expenses in Q1. We realized a 10% reduction in utility and fuel expenses due to a mild winter leading to lower energy consumption and low natural gas prices, as well as savings from our energy investment. These savings more than offset a 6% increase in property taxes. General operating expenses were up 1.6% in Q1. Looking forward, we expect operating expenses to be generally in line with inflation for the year.

Dale Noseworthy: Slide seven highlights our expense growth by expense type with a reduction of <unk>, 7% and total same property expenses in Q1.

Dale Noseworthy: We realized a 10% reduction in utility and fuel expenses with the mild winter, leading to lower energy consumption and low natural gas prices as well as savings from our energy investments.

Dale Noseworthy: These savings more than offset a 6% increase in property taxes General operating expenses were up one 6% in Q1.

Dale Noseworthy: Looking forward, we expect operating expenses to be generally in line with inflation for the year.

Dale Noseworthy: Following 10.3% NOI growth in Q1, we have revised our 2024 NOI target to over 8% growth for the year, up from our original target of 6%. As noted, we generated FFO per unit of 26 cents in the quarter, a 4% increase from Q1 2023. It's important to highlight Killam's Q1 FFO per unit growth was impacted by the lease-up phase of our three developments completed last year. However, short-term dilution during the property's initial occupancy is standard for new developments as interest expenses no longer capitalize.

Dale Noseworthy: Following 10, 3% NOI growth in Q1, we have revised our 2020 for NOI target to over 8% growth for the year up from our original target of 6%.

Dale Noseworthy: As Phil noted, we generated <unk> per unit of <unk> 26 cents in the quarter, a 4% increase from Q1 2023.

Dale Noseworthy: It's important to highlight <unk> Q1, <unk> per unit growth was impacted by the lease up phase of our three developments completed last year.

Dale Noseworthy: The short term dilution during the property's initial occupancy is standard for new developments as interest expenses no longer capitalized looks.

Dale Noseworthy: Looking forward, upon stabilization, earnings from these three developments are expected to increase Killam's FFO per unit growth starting in Q3. Slide 8 highlights the expected FFO impact from these developments for fiscal 2024 and 2025. Year-over-year, in 2025, we expect approximately $3.4 million in growth, or $0.07 in FFO per unit, from these developments compared to 2024. We're pleased to show continued growth in our balance sheet in Q1, as debt as a percentage of total assets was 42.1%, down 80 basis points from year-end, as shown on slide 9.

Dale Noseworthy: Looking forward upon stabilization earnings from these three developments are expected to increase <unk> <unk> per unit growth starting in Q3.

Dale Noseworthy: Slide eight highlights the expected <unk> impact from these developments for fiscal 2024 and 'twenty five.

Dale Noseworthy: Year over year, and 2025, we expect approximately $3 4 million in growth or two seven <unk> per unit from these developments compared to 2024.

Dale Noseworthy: We're pleased to show continued growth in our balance sheet in Q1 as debt as a percentage of total assets was 42, 1% down 80 basis points from year end as shown on slide nine.

Dale Noseworthy: We continue to diligently manage our debt metrics and reduce debt to normalized EBITDA from 10.29 times at year-end to 10.16 times at the end of the first quarter. Additionally, variable rate debt as a percentage of total debt remains low at 4% as at March 31st.

Dale Noseworthy: We continue to diligently manage our debt metrics and reduced debt to normalized EBITDA from $10. Two nine times at year end to $10. One six times at the end of the first quarter.

Dale Noseworthy: Variable rate debt as a percentage of total debt remains low at 4% as at March 31.

Robert Richardson: Slide 10 includes average apartment mortgage rates by year versus prevailing CMHC insured mortgage rates. Our mortgage maturities are strategically staggered to avoid overexposure in any one year. In Q1, Killam refinanced $12 million of maturing mortgages with approximately $17.4 million of new debt at a weighted average interest rate of 4.32%, 130 basis points higher than the average rate on the maturing debt. Refinancing at higher rates is expected to lead to increased interest expense.

Dale Noseworthy: Slide 10 includes average apartment mortgage rate five year versus prevailing theme HD insured mortgage rates are.

Robert Richardson: Our mortgage maturities are strategically staggered to avoid over exposure in any one year.

Robert Richardson: In Q1, Killen refinance 12 million of maturing mortgages with approximately $17 4 million of new debt at a weighted average interest rate of 432% to 130 basis points higher than the average rate on the maturing debt.

Robert Richardson: Refinancing at higher rates is expected to lead to increased interest expense. However, this increase is expected to be gradual due to the staggered nature of killing that ladder.

Robert Richardson: However, this increase is expected to be gradual due to the staggered nature of Killam's debt ladder. We have $276 million of apartment mortgage refinancing ahead for the remainder of the year at a weighted average interest rate of 2.91%. As part of our debt management strategy, we're leveraging CMHC programs as mortgages come due with a focus on increasing our CMHC insured coverage, which is now at 79% for our apartment portfolio and 74% of our total portfolio. We are targeting increasing our percentage of CMHC insured mortgages in 2024. I will now turn the call over to Robert, who will discuss our operating results in more detail. Thank you, Dale.

Robert Richardson: We have $276 million of apartment mortgage refinancings ahead for the remainder of the year at a weighted average interest rate of $2, 91%.

Robert Richardson: As part of our debt management strategy, we're leveraging seem HD program as mortgages come due with a focus on increasing our <unk> insured coverage, which is now at 79% for our apartment portfolio and 74% of our total portfolio. We are targeting increasing your percentage <unk> insured mortgages.

Robert Richardson: In 2024.

Robert Richardson: I will now turn the call over to Robert who will discuss our operating results in more detail.

Robert Richardson: Thank you, Dale, and good morning, everyone. As highlighted in Killam's quarterly call since 2020, the combination of population growth, increased government regulations in the form of both temporary and permanent rent control, and increased urbanization have all contributed to the decline in units available for release, also known as vacant units. For example, Killam's long-term annual portfolio turnover rate pre-pandemic averaged 33%. However, by 2030, the turnover rate had declined to 19%, and we expect that percentage to trend lower in 2024.

Robert Richardson: You Dale and good morning, everyone as high 100 tonnes quarterly call. Since 2020, the combination of population growth increased government regulations in the form of both temporary and permanent rent control and an increase of organization have all contributed to the decline in units available for releasing also known as <unk>.

Robert Richardson: For example, <unk> long term annual portfolio turnover rate pre pandemic averaged 33%. However by 'twenty three the turnover rate has declined 19% and we expect that percentage to trend lower in 2024.

Robert Richardson: Slide 11 provides a breakdown of Killam's turnover by core market for Q1 2024 compared to Q1 2023. Given declining turnover rates, the mark-to-market spread between in-place rents and market rents has grown to approximately 25% in Q1 2024, as noted on slide 12. With fewer units turning, it is increasingly important that Killam successfully lease its vacant units at rents that capture this mark-to-market premium. Killam's leasing team performed cost-return analysis as units became vacant.

Robert Richardson: <unk> hundred 11 provides a breakdown of comps turnover by core market for Q1 2024 compared to Q1 'twenty three.

Robert Richardson: Given declining turnover rates for mark to market spread between in place rents and market rents has grown to approximately 25% Q1 2024 and as noted on slide 12.

Robert Richardson: With fewer units turning it is increasingly important accounts successfully leased vacant units at rents that capture this mark to market premium.

Robert Richardson: Leasing team perform cost return analysis as units become vacant the goal is to meet potential tenants expectations in terms of the units level of upgrade when compared to mark to market rents.

Robert Richardson: The goal is to meet potential tenants' expectations in terms of the unit's level of upgrade when compared to mark-to-market rent. With this approach in mind, our 2024 suite repositioning target has been reduced to 300 units. With 70 units repositioned this quarter, we are on target. Killam invested a total of $4.5 million in renewal and repositioning renovations during Q1 2024. This represents a 44% decrease compared to the $8 million invested in total renovations in Q1 2023.

Robert Richardson: With this approach in mind.

Robert Richardson: Our 2024 suite repositioning target has been reduced to 300 units with seven new units repositioned. This quarter, we are on target Kelvin divested a total of $4 5 million.

Robert Richardson: For renewal and repositioning renovations during Q1 2024. This represents a 44% decrease compared to the $8 million invested in total renovations in Q1 2023, the reduction in investment quarter over quarter is attributed to the decrease in unit turnovers.

Robert Richardson: The reduction in investment quarter over quarter is attributed to the decrease in unit turnovers coupled with the opportunity for market-ranked growth without the need for an investment in full suite repositioning. However, Killam's repositioning program remains an important component of Killam's operating strategy.

Robert Richardson: Coupled with the opportunity for market rent growth without the need for an investment in full suite repositioning.

Robert Richardson: Don's repositioning program remains an important component of kilns operating strategy.

Robert Richardson: We are committed to enhancing the value offering to our residents and maintaining the quality of our existing portfolio of properties. In addition to our strong apartment portfolio performance, our MHC and commercial segments continue to contribute positively to our overall performance, as shown on slide 14. Our same property MHC portfolio recorded 9.8% net operating income growth for the quarter, and our commercial portfolio generated 9.7% NOI growth. Killam and his 25% partner have made impressive progress transforming the Charlottetown Mall into the new Royalty Cross. We have attracted strong national retailers, including Sephora, Pandora, The Shoe Company, RWM Company, Pure and Simple, and Samuel and Company.

Robert Richardson: We are committed to enhancing the value offering to our residents in maintaining the quality of our existing portfolio of properties. In addition to our strong apartment portfolio performance, our emergency and commercial segments continued to contribute positively to our overall performance as shown on slide 14.

Robert Richardson: Our same property MHC portfolio recorded nine 8% net operating income growth for the quarter and our commercial portfolio generated $9, 7% NOI growth.

Robert Richardson: Kill them at a 25% partner have made impressive progress transforming the Charlottetown mall into the new royalty crossing.

Robert Richardson: We have attracted strong national retailers, including Sephora Pandora, the shoe company or <unk> company, pure and simple and Samuel Samuel and company. Further royalty crossing is renewed winners dollar Ram lob laws have relocated the bank of Montreal to a new pad sites all in the last three years.

Philip D. Fraser: In addition, Royalty Crossing has renewed Winners, Dollarama, Loblaws, and relocated the Bank of Montreal to a new PAD site all in the last three years. Royalty Crossing will continue to execute its reinvestment strategy in 2024, completing common area upgrades and unlocking strategic expansion and redevelopment opportunities. These include the 8,500 square foot Winter's Expansion to 35,000 square feet, a complete food court renovation to maximize height and access to natural light, converting the 11,000-square-foot stand-alone former office building to a multi-tenant retail strip that faces University Avenue and is already 65% leased, and the development of a 12,700 square foot former indoor tennis facility to 25,400 square feet of leaseable space that should attract a big

Philip D. Fraser: Royalty crossing will continue to execute its reinvestment strategy in 2024, completing common area upgrades and unlocking strategic expansion and redevelopment opportunities. These include the 8500 square foot winners expansion to 35000 square feet.

Philip D. Fraser: A complete food court renovation to maximize hype and access to natural light.

Philip D. Fraser: Converting the 11000 square foot stand alone former office building to a multi tenant retail strip.

Philip D. Fraser: <unk> University Avenue and is already 65% leased in the development.

Philip D. Fraser: <unk> of 12700 square foot former indoor tennis facility to 25, 400 square feet of leasable space that should attract a big box user.

Philip D. Fraser: Our commercial team also continues to find opportunities for organic growth as we analyze existing lease terms at renewal with the objective of recovering more operating costs given current inflationary pressures. This has resulted in over $200,000 in annualized savings. In Q1 2024, our weighted average rental increase on renewed leases saw an 18% increase per square foot across seven leases. As seen on slide 15, since 2021, we have increased our net operating income at this property from $3.3 million in 2021 to $4.7 million in 2023, a 42% increase with a 12% annualized unlevered return on the cost of leasing and upgrades.

Philip D. Fraser: Our commercial team also continues to find opportunities for organic growth as we analyze existing lease terms at renewal with the objective of recovering more operating costs given current inflationary pressures. This.

Philip D. Fraser: This has resulted in over $200000 in annualized savings.

Philip D. Fraser: In Q1 2020 for a weighted average rental increase on renewed leases saw an 18% increase per square foot across seven leases.

Philip D. Fraser: As seen on slide 15 since 2021, we have increased our net operating income at this property from $3 $3 million.

Philip D. Fraser: In 2021 to $4 7 million in 2023% to 42% increase with a 12% annualized unlevered return on cost of leasing and upgrades.

Philip D. Fraser: We have created positive leasing momentum and have increased occupancy from 89% in 2021 to 94% in Q1 2024. We are pleased to see the investment in the property translate into strong revenue and earnings growth. I will now hand you back to Philip to provide an update on our development and disposition activities. Thank you, Robert.

Philip D. Fraser: We are accretive positive leasing momentum and have increased occupancy from 89% in 'twenty, 1% to 94% in Q1 2024.

Philip: We are pleased to see the investments in the property translate into strong revenue and earnings growth I will now hand, you back to Phil to provide an update on our development physician activity.

Philip D. Fraser: During the quarter, we completed two small acquisitions totaling $14 million. On January 31st, we purchased two apartment buildings totaling 50 units in Halifax, Nova Scotia, for $11 million. The buildings are located on Harlington Crescent adjacent to existing Killam assets and contain future redevelopment opportunities. On February 20th, Killam acquired the remaining 60% interest in land for future development adjacent to an existing Killam asset in downtown Calgary for $3 million. We also completed the disposition of the land in downtown Calgary for a sale price of $2.4 million. Subsequent to the quarter end, we expect to close this week the sale of Woolridge Apartments located in Guelph for $19.2 million.

Philip: Thank you Robert.

Philip: During the quarter, we completed two small acquisitions.

Philip D. Fraser: Totaling $14 million on January 31, we purchased two apartment buildings totaling 50 units, who help us Nova Scotia.

Philip D. Fraser: For $11 million. The buildings are located on Harlington crescents adjacent to existing killam assets and continuing future redevelopment opportunities on February 20th kill them acquired the remaining 60% interest in land for future development adjacent to an existing killen asset in downtown Calgary for $3 million, we all.

Philip D. Fraser: Also completed the disposition of the land in downtown Calgary.

Philip D. Fraser: The sale price of $2 $4 million.

Philip D. Fraser: Subsequent to the quarter and we expect to close this week the sale will reach apartments located in growth from $19 2 million.

Philip D. Fraser: As shown on slide 17, we are focusing on the majority of our future development opportunities in the three locations across Canada. Calgary, Kitchener-Waterloo, Cambridge, and Halifax. The entitlement and design process continues to advance for our two future development opportunities in Calgary, Nolan Hill Phase 3 and our fourth and fifth site in downtown. Design work continues on the Wista development in Waterloo, in Phase 2 at West Nile.

Philip D. Fraser: As shown on slide 17, we are focusing on the majority of our future development opportunities and material occasions across Canada.

Philip D. Fraser: Calgary Kitchen, Waterloo, Cambridge in wholesale.

Philip D. Fraser: The entitlement and design process continues to advance for our two future development opportunities in Calgary, Nolan he'll phase III and our <unk>.

Philip D. Fraser: Fourth and fifth site in downtown DC.

Philip D. Fraser: Design work continues on the Westwood development in Waterloo and phase II at Westland.

Philip D. Fraser: The Westmount Square intensification master plan design document for the entire site was submitted to the City of Waterloo on February 26th with the request to build up to 2,000 units. Finally, in Halifax, we are working on, as of right zoning, a 90 unit development at Victoria Gardens, as well as a 150 unit development on vacant land in our Harlington Crescent community. The Harlington Crescent development is a result of the Housing Accelerator Fund program that has encouraged the city to change the zoning and increase density in this neighborhood.

Philip D. Fraser: The West Mountain square and simplification Macerich plan designed for the entire slate submitted to the city of Waterloo on February 26, with the request to build up to 2000 units.

Philip D. Fraser: Finally in Halifax, we're working on as of right zoning 19 unit development at Victoria Gardens, as well as 150 unit development on vacant land in our Harlington Crescent communities.

Philip D. Fraser: Arlington Crescent development as a result of the housing accelerator Fund program that has encouraged the city to change the zoning increased density to this neighborhood.

Philip D. Fraser: Developing high-quality properties in these markets is an important component of Killam's capital allocation strategy, and it also allows us to make a contribution to the housing supply for all Canadians. As seen on slide 18, The Carrick, our 139-unit development in Waterloo, is progressing nicely and is expected to be completed in Q2 of 2025. As shown on slide 19, we started the development of Eventide, an eight-story, 55-unit building in Halifax, Nova Scotia, in February of 2024. The population of Canada has grown from 39.5 million in Q1 2023 to 40.8 million in Q1 2024.

Philip D. Fraser: Developing high quality properties in these markets is an important component of <unk> capital allocation strategy.

Philip D. Fraser: And it also allows us to make a contribution to the housing supply for all Canadians.

Philip D. Fraser: Seen on slide 18, the carrot or 139 unit development in Waterloo.

Philip D. Fraser: Both in nicely.

Philip D. Fraser: As expected to be completed in Q2 of 2025.

Philip D. Fraser: As shown on slide 19, we started the development of <unk> eight story 55 unit building Halifax, Nova Scotia in February of 2024.

Philip D. Fraser: The population of Canada has grown from $39 $5 million in Q1, 2023 $48 million in Q1 2024, an increase of $1 3 million people compound in the housing shortage and the affordability credits during.

Philip D. Fraser: An increase of 1.3 million people, compounding the housing shortage and the affordability crisis. During the last 12 months, the federal government has shifted its attention to this issue, and the recent federal budget has a number of positive features to help address the housing shortage. This would include more money for the Housing Accelerator Fund, providing funding directly to municipalities, which has resulted in a number of municipalities increasing density and zoning changes; accelerate capital cost allowance on new rental properties to 10% from 4%; and increase the amount of debt for the apartment loan construction program.

Philip D. Fraser: During the last 12 months the federal government has shifted their attention to this issue and the recent federal budget has a number of positive features to help address the housing shortage. This would include more money to the housing accelerated funding providing funding directly to municipalities, which have resulted in a number of municipalities increasing density.

Speaker Change: Joining James.

Philip D. Fraser: The accelerated capital cost allowance on new rental properties to 10% from 4%.

Philip D. Fraser: And increase the amount of debt for the apartment loan construction program.

Philip D. Fraser: We are well-positioned to take advantage of these changes. To conclude, the first quarter was a strong start to the year, and we are very pleased with our financial performance. I would like to thank our employees for their hard work and dedication. We are optimistic about the future, and we will continue to execute on our priorities and create value for all of our units. Thank you. I will now open up the call for questions.

Philip D. Fraser: We are well positioned to take advantage of these changes.

Philip D. Fraser: To conclude the first quarter with a strong start to the year and we are there.

Philip D. Fraser: We're pleased with our financial performance.

Philip D. Fraser: I would like to thank our employees for the hard work and dedication.

Philip D. Fraser: We are optimistic for the future and we will continue to execute on their priorities and create value for all of our unit holders.

Speaker Change: Thank you.

Speaker Change: I will now open up the call for questions.

Speaker Change: Thank you ladies.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the number on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any key.

Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will have Tom from technology and your request if you will.

Operator: Using a speaker phone please lift the handset before pressing any case.

Operator: Your first question comes from Mike Markidis at BMO Capital Markets. Please, go ahead.

Operator: Your first question comes from Mike Magee.

Michael Markidis: Capital markets. Please go ahead.

Michael Markidis: Hi, thank you, operator. Good morning, everybody.

Michael Markidis: Alright, Thank you operator, good morning, everybody.

Philip D. Fraser: Bill, I just have a quick question on how you guys are looking at development returns. If I remember correctly last quarter, you mentioned you had favorable financing, I think it's an ALCP or Apartment Construction Loan Program, ACLP, on at least one of your new developments. Is that something you're relying on as you go forward, and I'm just wondering how you think about the appropriate spread on that financing in this environment and just given the higher for longer interest rate environment that we're experiencing?

Michael Markidis: Bill just a quick question on the how you guys are looking at development returns.

Philip D. Fraser: <unk> correctly last quarter, you mentioned you had.

Philip D. Fraser: Favorable financing I think its a plc periodic apartment construction loan program AC LP.

Philip D. Fraser: On at least one of your new developments is that something you're relying on as you go forward and I'm, just wondering how youre thinking about the appropriate spread on that financing in this environment and just given.

Philip D. Fraser: The higher for longer interest rate environment that we're experiencing.

Philip D. Fraser: Good morning, Mike. The answer to the first part of that is that Carrick does have that financing, so that's locked in through the construction period and at the same interest rate, as it turns out. I'm Bernie Manning.

Bill: Good morning, Mike.

Speaker Change: We answered the first part of that is.

Bernie Manning: Sure. It does have that financing so thats locked in through the construction period and the same interest rate as it terms of.

Philip D. Fraser: And the remaining.

Philip D. Fraser: Amount of years over the 10 year term.

Bernie Manning: The other one that we started we are looking to go.

Philip D. Fraser: Big application very shortly on that one as well so really if youre looking at it the interesting thing is is that.

Philip D. Fraser: The interest rates are today, it makes a lot of sense to be able to.

Philip D. Fraser: Locking in using <unk> in this program I think on a go forward basis.

Philip D. Fraser: Depending on how much we can sort of get to the point where we're willing to start, the next wave of developments is actually at a lower cost point in terms of the overall development cost. And so that gives us a little bit more flexibility to go back in, maybe looking at conventional financing, construction financing, along with what the federal government's offering.

Philip D. Fraser: Depending how much we can sort of get to a point where.

Philip D. Fraser: We're willing to start.

Philip D. Fraser: The next wave of developments are actually at a lower cost point.

Philip D. Fraser: Terms of the.

Philip D. Fraser: Overall development cost and so that gives you a little bit more flexibility to go back and maybe looking at conventional financing construction financing along with what the federal government is offering.

Philip D. Fraser: Great.

Philip D. Fraser: Okay, and what would be the advantage? I mean, there's a lower rate on the ACLP. So what would be the advantage of switching back to conventional? If you're in a place where yields are going higher?

Speaker Change: Okay, and what would be the adventure.

Philip D. Fraser: There is a lower rate on the <unk>, so what would be the advantage of switching back to conventional.

Philip D. Fraser: If you are.

Philip D. Fraser: Yields are going higher.

Philip D. Fraser: Well, I think it's all about availability from them. So we will do that. But again, we might get to the point where they're saying that we're out of money, or basically, you've had your share of projects, and maybe it's someone else's term. Okay.

Philip D. Fraser: Well I think its all about availability from them. So we will do that.

Philip D. Fraser: But again that we might get to the point, where they are saying that we were out of money or basically you've had your share of projects and maybe it's someone else's turn term okay.

Philip D. Fraser: Gotcha, so it's based on the availability, not necessarily that there are any restrictions on that financing. Yeah. Okay. Got it. And then for the care, can you remind us where that rate you locked into was and for how long, and were there any specific affordability requirements you had to meet, or was it all sustainability-linked? Yeah.

Speaker Change: Got you. So it's based on the availability not necessarily that there's any restrictions on that financing. Okay got it and then Karen can you remind us where that where that rate you're locked into was and how long and were there any specific.

Philip D. Fraser: Affordability requirements you have to meet.

Philip D. Fraser: Or was it all together.

Philip D. Fraser: The interest rate was 3.08, and that's locked in today, and that's good for 10 years, and we just started that about three months ago. And in terms of affordability, there are

Speaker Change: The interest rate was three eight and that's locked in today and Thats. Good for 10 years, and we just started that about three months ago.

Philip D. Fraser: In terms of the affordability there was.

Philip D. Fraser: 30 units? Approximately. Yeah, that would be below market. Okay, below market.

Philip D. Fraser: 30 units approximately 30 units.

Philip D. Fraser: Some of the below market the market.

Philip D. Fraser: Below the market. Got it, yeah, okay. No, that makes sense. Thank you for that. I think, you know what? I'm going to leave it there and turn it back. That's great. Congratulations on the strong quarter.

Philip D. Fraser: Hello market got it okay.

Philip D. Fraser: No that makes sense. Thank you for that.

Philip D. Fraser:

Philip D. Fraser: Okay.

Speaker Change: I'm going to leave it there and turn it back that's great. Congrats on the strong quarter. Thank you.

Operator: Thank you, Mike. Thank you. The next question comes from Mark Rothschild at Canaccord. Please go ahead.

Speaker Change: Thank you Mike.

Operator: Yeah.

Operator: Thank you. The next question comes from Mark Rothschild Canaccord. Please go ahead.

Mark Rothschild: Thanks and good morning everyone. I realize that for Carrick and some of these projects, you can get some more attractive debt, but in general, I'm just curious about how you think about starting new development projects when it appears that the yields are at a level that's comparable to the cost of debt in many cases. Maybe because of the availability that you guys have for some special loan programs, that's not the case, but I'm just curious how you guys are thinking about that.

Mark Rothschild: Thanks, and good morning, everyone.

Mark Rothschild: I realize for the character you can get some of these projects you can get some more attractive but in general I'm. Just curious about how you think about starting new development projects.

Mark Rothschild: It appears that the.

Mark Rothschild: Yields have just they are at a level, that's comparable to cost of debt and in many cases.

Mark Rothschild: And maybe because of the availability do you guys have for some special loan program. So it's not the case, but I'm just curious how you guys are thinking about that.

Philip D. Fraser: Well, I think I was trying to say, if I didn't say it with Mike, we are looking, number one, to go and apply through the program that's being offered from the Fed for every development. Now, I'm saying that if we don't get it for whatever reasons in terms of availability, then we'll look at what's available relative to conventional construction financing at the time.

Speaker Change: Well I think I was trying to say if I didn't say it.

Philip D. Fraser: Mike we are looking.

Philip D. Fraser: Number one to go and apply through the of the program Thats being offered from the Fed's.

Philip D. Fraser: First on every development no I'm, saying that if we don't get it for whatever reasons in terms of availability.

Philip D. Fraser: Then we will look at what's available relative to <unk>.

Philip D. Fraser: Professional construction financing at the time.

Philip D. Fraser: Okay.

Philip D. Fraser: I guess what I'm kind of asking is, if the rents aren't higher than where they are now or where they were at budgeting for the projects that you're undergoing now, will you still be comfortable going ahead with projects if you can't get any, you know, special low rates like you were able to for the care?

Speaker Change: I guess, what I'm kind of asking is if.

Philip D. Fraser: The rents arent higher than where they are now I guess or where they were budgeting for the projects that you are undergoing now will you still be comfortable going ahead with projects. If you can't get any special low rates like you were able to for the carrier.

Philip D. Fraser: Well, I think the bigger thing is that one is that it depends on the market we're in. It depends on the construction. In terms of the material, whether it's wood frame or concrete, it depends on the overall development cost and what the yield would be, all cash, and that, you look at that, and then you compare it to what's going to be your cost of financing at that time. And the cost of financing on a variable rate is higher than what you could get with conventional CMHC financing, which we will be going to apply for for all projects.

Philip D. Fraser: Well I think the bigger thing is one is that it depends on the market. We're in it depends on the construction.

Philip D. Fraser: In terms of the material, whether it's wood frame or concrete and it depends on the overall development cost.

Philip D. Fraser: What the yield would be all cash and that you look at that and then you compare it to what's going to be your cost of financing at that time.

Philip D. Fraser: And the cost of financing on a variable rate is higher than what you could get with conventional series C financing, which we will be going.

Philip D. Fraser: In applying for for all projects.

Philip D. Fraser: Okay, fine. Let me just move on to a different question.

Speaker Change: Okay fine.

Speaker Change: Let me just move on to a different question.

Philip D. Fraser: The spread between market rents and what you have in place pretty significant both in Halifax, and in Ontario, do you see any potential trade changes and whether it's immigration laws or what's going on which will impact your ability to capture that in one market versus the other like should the pace be comparable.

Philip D. Fraser: The spread between market rents and what you have in place is pretty significant, both in Halifax and in Ontario. Do you see any potential changes, whether it's immigration laws or what's going on, which will impact your ability to capture that in one market versus the other? Like, should the pace be comparable? I think it should be comparable.

Philip D. Fraser: I think it should be comparable. I mean, it's all about turn. And as we know, and have talked about for a number of quarters, turn is coming down.

Philip D. Fraser: I think it should be comparable I mean, it's all about turn and as we know and talked about for a number of quarters churn is coming down. So that is that that is the challenge in capturing those.

Philip D. Fraser: So that is that that is the challenge in capturing those. But outside of that, I think that's the big limiting factor.

Philip D. Fraser: But outside of that.

Philip D. Fraser: I think thats, the big limiting factor.

Speaker Change: Okay, great. Thanks.

Operator: Thank you. The next question comes from Jonathan Kelcher at TD Cowan. Please go ahead.

Philip D. Fraser: Thank you. The next question comes from Jonathan Chang TD Cowen. Please go ahead.

Jonathan Kelcher: Thanks. Good morning. You talked about the drag from your development properties and lease up. Can you estimate or let us know how much that was in Q1?

Jonathan Kelcher: Thanks, Good morning.

Jonathan Kelcher: You talked about the drag from development or development properties in lease up could you estimate third let us know how much that was in Q1.

Dale Noseworthy: When we look year over year, Q1 to Q1, in total, it's about $1.2 million, and that would include the difference in interest that would have been capitalized in Q1 last year. That is the equity, like the full interest, capitalized interest component. So that will get a lot smaller in Q2 and then will flip positive in Q3 and should give us some good runway. Q3 to Q2 next year, especially Q1 next year, so.

Jonathan Kelcher: Okay.

Jonathan Kelcher: Sir when we look year over year Q1 to Q1 in total about $1 2 million and that would include the difference in interest that would've been capitalized in Q1 last year.

Dale Noseworthy: The equity like the full interest capitalized interest component so that will get a lot smaller in Q2, and then we'll flip positive in Q3.

Dale Noseworthy: And should provide us some good runway.

Dale Noseworthy: Q3 to Q2 next year.

Dale Noseworthy: In Q1 next year so.

Dale Noseworthy: We're almost through that. Okay. Great.

Dale Noseworthy: We're almost through that.

Dale Noseworthy: Okay. And then just on the renewal rates that you got in Q1 at 3.7%, with Nova Scotia being high, allowed 5%, were there any issues in getting the full 5% bump there? Okay, that's short and sweet. And then, Next, just on dispositions and acquisitions, I guess, would it be fair to say that the dispositions you see coming for the balance of the year would mostly be in Atlantic Canada?

Dale Noseworthy: Okay.

Dale Noseworthy: And then just on the renewal rates that you got in Q1 at three 7%.

Dale Noseworthy: With <unk>.

Dale Noseworthy: Nova Scotia being.

Dale Noseworthy: Allowance, 5% were there any issues in getting the full 5% bumps there.

Speaker Change: No no.

Dale Noseworthy: Okay shortened suite and then and then.

Dale Noseworthy: Next just on dispositions and acquisitions I guess would it be fair to say that.

Dale Noseworthy: The dispositions you see coming for the balance of the year would mostly be Atlantic Canada.

Dale Noseworthy: Okay.

Dale Noseworthy: Great.

Philip D. Fraser: There's the odd thing that might be outside, but again, the majority will be in Atlantic Canada, and over time, the majority will be even more so in Atlantic Canada.

Dale Noseworthy: There is the odd thing that might be outside but again, it's the majority.

Philip D. Fraser: In Atlantic, Canada, and overtime jewelry will be even more so in Atlantic Canada.

Philip D. Fraser: Okay, so you've identified a number of properties. Okay, and then are you seeing much or anything in the way of backwards? You know, there's obviously that one large portfolio out there. Would you be interested in any parts of it if it ends up getting broken up?

Speaker Change: Okay. So you've identified a number of properties.

Philip D. Fraser: Yes.

Philip D. Fraser: Okay.

Philip D. Fraser: Okay. And then are you are you seeing much or anything.

Philip D. Fraser: Acquisition opportunities.

Philip D. Fraser: Obviously that one large portfolio out there with you.

Philip D. Fraser: Are you interested in any any parts of it if it ends up getting broken up.

Philip D. Fraser: I think it's way too early to tell on that portfolio you're talking about. And right now, there's quite a bit of product that potentially could be for sale. I mean, we're looking, I mean, it helps to look, it helps to see what's available, where sort of pricing is going to be now or in the next, you know, three to six months. But I can say that we're not too active in looking hard to acquire assets in the next three to six months.

Philip D. Fraser: Okay.

Philip D. Fraser: I think that's way too early to tell on that portfolio. You are talking about and right. Now there is theres quite a bit of a product that potentially could be for sale.

Philip D. Fraser: We're looking I mean, it helps to look at that helps to see what's available.

Philip D. Fraser: We're sort of pricing is going to be now or in the next.

Philip D. Fraser: Three to six months.

Philip D. Fraser: But.

Philip D. Fraser: I can say that we're not too active on looking herd to acquire assets in the next three to six months.

Jonathan Kelcher: Okay, that's it for me. I'll turn it back.

Philip D. Fraser: Okay.

Speaker Change: Thats It for me I'll turn it back thanks.

Jonathan Kelcher: Thanks.

Operator: Thank you. The next question comes from Kyle Stanley at Deja Den. Please go ahead.

Jonathan Kelcher: Thank you. The next question comes from Kyle Stanley at Deutsche Bank. Please go ahead.

Kyle Stanley: Thanks. Good morning everyone.

Kyle Stanley: Thanks, Good morning, everyone I just wanted to clarify something in your answer to Mike's question earlier, Phil you just mentioned the next wave of developments running at kind of lower all in development cost just curious if you could elaborate on that a little bit.

Kyle Stanley: I just wanted to clarify something in your answer to Mike's question earlier, Phil. You just mentioned the next wave of developments running at kind of lower all-in development costs. I was just curious if you could elaborate on that a little bit.

Philip D. Fraser: Well, again, I think the sort of carrot we're looking at would have been, as we stated, about $600,000 and that included HST. So when you look out where we're looking, we can still see that mid-rise concrete in the urban centers with a lot of development charges, like around the GTA, maybe some locations in Halifax. It's really urban, that's the price today. I mean, even in Toronto, the price is still between 700 and $800,000. So if you take a look at it and you say, okay, what does the landscape really look like?

Phil: Well again, I think we sort of the carrier would have been.

Philip D. Fraser: As we've stated about $600000 and that included HST.

Philip D. Fraser: When you look out.

Philip D. Fraser: Doug we're looking we can still see that.

Philip D. Fraser: Mid rise concrete in the urban centers with a lot of development charges like around GTA.

Philip D. Fraser: Maybe some locations in Halifax.

Philip D. Fraser: It's a really urban.

Philip D. Fraser: <unk> today, I mean, even in Toronto.

Philip D. Fraser: The pricing is still between 700 and $800. So if you take a look at it and say okay.

Philip D. Fraser: What's the landscape really look like.

Philip D. Fraser: You can look at Alberta, and we're getting pricing to do mid-rise concrete for about $400,000. We're getting pricing to do six-story, five-story wood frame in Halifax for about $400, $400 and a quarter. We're getting about 450 wood frames in Waterloo. So we're just basically looking at all our options, and right now, if I could do the next number of developments in that price range, then I think that's a pretty prudent thing to do.

Philip D. Fraser: You can look at Alberta, and we're getting pricing.

Philip D. Fraser: To do mid rise concrete for about $400000.

Philip D. Fraser: We're getting pricing to do six story.

Philip D. Fraser: Hi story wood frame and Halifax for about 400 400 in the quarter.

Philip D. Fraser: We're getting we're getting about $4 50 wood frame and Waterloo.

Philip D. Fraser: So we're just basically looking at all our options and right now if I could do the next number of developments in that price range, then I think thats, a pretty prudent thing to do.

Philip D. Fraser: And again, it's not like we're going to be doing six of them. I mean, it's one or two at a time. But I think the next wave, that's where some of this pricing is going to come in. And you got to remember that there's no HST on future developments, which has helped a lot.

Philip D. Fraser: And again, it's not like we're going to be doing six of them I mean, it's one or two at a time, but I think the next way that's where some of this pricing is going to come in and you got to remember there is no HST.

Philip D. Fraser: On the future developments, which helps a lot.

Philip D. Fraser: Right now, that makes sense. And actually kind of leads me into the next question; you kind of answered it there by just mentioning the three markets you've identified as your kind of target development markets. Given the dynamics, obviously, you've just kind of given the pricing in each of those markets time to develop, you know, where would you like to focus your efforts more if you were starting something new today? Obviously, we saw you were tied this quarter in Halifax, but just curious if a good option came up in one of those markets where you'd focus.

Speaker Change: Right that makes sense and actually kind of leads me into the next question you kind of answered. It there was just on the three markets you've identified as your kind of target development market given the dynamics, obviously, you've just kind of given the the pricing in each of those markets to develop where would you like to focus your efforts more if you were starting something new today, obviously, besides <unk> been tied this.

Philip D. Fraser: Order in Halifax, but just curious if a good option came up in one of those markets, where you focus first.

Philip D. Fraser: Well, I think logically, we just did Phase 1 to Phase 2 in Nolan Hill in Calgary, so obviously, we're a small part of the ownership structure of that development in its four phases. We're looking at phase three with our partners, which makes a lot of sense. The shuffle of land that we announced in downtown Calgary, excuse me, basically it was land beside grid five, and we sold one parcel and bought out our partners on the other one; we wanted 100%.

Philip D. Fraser: Well I think logically, we just phase one phase two.

Philip D. Fraser: <unk> Hill in Calgary, So obviously.

Philip D. Fraser: We're a small part of the ownership structure on that development and its four cases so.

Philip D. Fraser: We're looking at phase III with our partners, which makes a lot of sense.

Philip D. Fraser: The shuffle of land that we announced in downtown Calgary excuse me.

Philip D. Fraser: Sure.

Philip D. Fraser: And basically it was land beside Griffith five and we sold one parcel.

Philip D. Fraser: And bought out our partners on the other one we wanted a 100% so theres another logical location in the next.

Philip D. Fraser: So there's another logical location in the next, you know, 12 months to 24 months to do something. And then we're actively talking about our property in Waterloo, which is Whistler. And then, after that, are the opportunities that are coming to us a lot faster than we would have thought a year ago, and that's because of the program that the feds have introduced, which is to accelerate sort of zoning and increased density by getting the municipality to change their opinion for cash.

Philip D. Fraser: 12 months to 24 months to do something.

Philip D. Fraser: Then.

Philip D. Fraser: Sure.

Philip D. Fraser: Actively talking about.

Philip D. Fraser: Our property.

Philip D. Fraser: And Waterloo, which is whistler.

Philip D. Fraser: And then after that are the opportunities that are coming to us a lot faster than we would've thought a year ago and that's because of the program that the feds have introduced which is to accelerate.

Philip D. Fraser: Yeah.

Philip D. Fraser: Sort of zoning and increase density by.

Philip D. Fraser: Getting the municipality.

Philip D. Fraser: To change their opinion for cash.

Philip D. Fraser: Right. No, I think that that all makes sense. Just one last one for me.

Speaker Change: Right No I think that all makes sense.

Philip D. Fraser: One last one for me.

Kyle Stanley: Part of the rationale for the kind of 6% same property NOI guidance last quarter was just uncertainty with regard to property taxes. I think, Dale, in the disclosure, you gave good color on kind of how that's trending. Would you say the increase in your guidance to 8% or greater than 8% for the year was more related to, you know, managing through that uncertainty? Or is it stronger revenue growth? Or maybe it was the driver there that gave you more comfort.

Philip D. Fraser: Part of the rationale for the kind of 6% same property NOI guidance last quarter. It was just uncertainty with regard to property tax I think Dale and the disclosure you gave good color on kind of how that's trending would you say the increase in your guidance to 8% or greater than 8% for the year was more related to.

Kyle Stanley: Managing through that uncertainty or is it stronger revenue growth or maybe what was the driver there that gave you more comfort.

Dale Noseworthy: Yeah, I think two things. One is the revenue growth and the rent increases that we're seeing. We are really pleased with the trend that we're seeing and what we forecast for the rest of the year. And certainly, property taxes. I would say not too much has changed on that front. We will get by the end of Q2, and we'll have much more certainty. A bigger piece was the energy cost in Q1. The winter season is always an important one when we look at those net gas costs, so that was positive for us this quarter.

Dale Noseworthy: Yes, I think two things one is the revenue growth in the rent increases that we're seeing.

Dale Noseworthy: We're really pleased with the trend that we're seeing and outlook, but we forecast for the rest of the year and certainly the property taxes I would say not too much has changed on that front, we will get by the end of Q2, we'll have a much more certainty a bigger piece was the energy cost in Q1 winter season is always an important one.

Dale Noseworthy: When we look at those Nat gas cost so that was positive for us this quarter.

Kyle Stanley: Okay, perfect. I will turn it back. Thanks very much.

Speaker Change: Okay, perfect I will turn it back thanks very much.

Operator: Thank you. The next question comes from Sairam Srinivas at Cormark Securities. Please go ahead.

Speaker Change: Thank you. The next question comes from Sarah <unk> device at Cormack Securities. Please go ahead.

Sairam Srinivas: Thanks, operator. Good morning, everybody.

Sairam Srinivas: Thanks, operator, good morning, everybody.

Sairam Srinivas: Guys, just looking at the revenue growth, and I believe one bit of the driver was also a reduction in incentives year-over-year. Can you elaborate a bit on those, you know, the projects that relate to an amount of unwinding that's left to the year? Thanks.

Sairam Srinivas: Looking at revenue growth and I believe one bit of a driver was also a reduction in incentives.

Sairam Srinivas: Sure.

Sairam Srinivas: Can you elaborate a bit on those projects should lead to an amount of unwinding.

Sairam Srinivas: Thanks.

Dale Noseworthy: Primarily Alberta. So, you know, outside of Alberta, we're very limited in terms of our use of incentives. So for the last number of years, before things really heated up in that market, they would have been used quite regularly by us and I think most of the landlords out there. And as Alberta has strengthened, we've definitely seen a reduction in those incentives. So I think it's reasonable to expect that to continue to come down this year. But outside of Alberta, it's pretty limited.

Sairam Srinivas: Primarily Alberta, so outside of Alberta, We're very limited in terms of our use of incentives. So for the last number of years before things really heated up in that market would have been used quite regularly.

Dale Noseworthy: And I think for most of the landlords out there and as Alberta has strengthened we've definitely seen a reduction in those incentives. So I think it's reasonable to expect that to continue to come down this year, but outside of Alberta is pretty limited.

Dale Noseworthy: All right. And Dale, can you just briefly quantify the amount of those incentives?

Dale Noseworthy: Alright.

Dale Noseworthy: David can you just broadly quantifying any of them onto those incentives.

Dale Noseworthy: Well, I could say that in general, in the past, it would have been one month free in Alberta, often really up to about a year ago on both new and renewals, and those ones now we're not, for a majority of properties, we're not doing any incentives.

Dale Noseworthy: Well I can tell you that in general the past it would have been one month free in Alberta, often really up until about a year ago on both new and renewal.

Dale Noseworthy: And those one now we're not.

Dale Noseworthy: The majority of properties, we're not doing any incentives.

Dale Noseworthy: And maybe, looking at the National Housing Plan and its implications, are you seeing all these announcements also maybe make development, the math on development, more attractive?

Speaker Change: Okay that makes sense.

Dale Noseworthy: Just maybe looking at the National housing plan and the applications are you seeing all these announcements also maybe make development Martin development more attractive.

Philip D. Fraser: Yes. I mean, for us in particular, it's about land that we thought would take three to four years to get sort of zoned and ready for development. We can see some of it as of right now in the next three to six months. And if it's vacant land, then it's straightforward to be able to go design a building and maybe potentially start development.

Dale Noseworthy: Yes.

Philip D. Fraser: In terms of for us in particular, it's about land that we thought would take three to four years to get sort of zone and ready for development.

Philip D. Fraser: We can see some of the as of right in the next three to six months and if its vacant land than a straightforward to be able to go.

Philip D. Fraser: Design and building and maybe potentially start development.

Sairam Srinivas: Oh, wow, that's amazing. Maybe you should probably shift the gears towards leasing. If you look at the historical time of maybe leasing up a new development, has that timing essentially changed over the years? Like, are projects being leased faster nowadays? And is it more a function of just the market demand or also incentives in play or any of those sorts?

Speaker Change: Oh Wow that's amazing.

Sairam Srinivas: And maybe you slowly shifting gears towards leasing if you look at historical time, maybe easing up a new development has that timing essentially changed over the years as Blake all participating lease faster nowadays and is it more of a function of just the market demand, but also more incentives in today or any other.

Dale Noseworthy: That's a good question, an interesting one because we've had a number of discussions around that. So I think that, you know, if you look back, a lot of our developments have been in Atlantic Canada, and we have experienced, over the history of our development program, really quick lease-ups between three to six months. If you take a look at

Sairam Srinivas: Those thoughts.

Sairam Srinivas: That's a that's a good question an interesting one because we've had a number of discussions around that so I think that if you.

Dale Noseworthy: Look back a lot of our developments have been in Atlantic Canada.

Dale Noseworthy: And we have experienced over.

Dale Noseworthy: The history of our development program really quick lease ups between three to six months, if you take a look at.

Dale Noseworthy: Ontario, the larger projects that we've been involved in with our partners, they have typically taken about a year. So from that point of view, the Civic 66 is about right on schedule from that point, from that timing. The Governor, it was only 12 units, very high end in Halifax. And basically, we quickly leased up six of the 12. And then winter hit.

Dale Noseworthy: Ontario, the larger projects that we've been involved with our partners. They have typically taken about a year.

Dale Noseworthy: From that point of view the civics 66 is a boat right on schedule from that from that timing.

Dale Noseworthy: The governor it was only 12 units.

Dale Noseworthy: Hi, Ian in Halifax, and basically we had we quickly leased up six of the 12.

Dale Noseworthy: And our target market is essentially folks that tend to go away for the winter. And since we are now into spring, I mean, the activity has really picked up where we have three more leases, and strong interest on the remaining three. So again, that's a bit of a one-off type of look in terms of lease-up ability. And then again, back to where we are out west, you know what? We'll be on target between six to nine months to really get a big din on that one out there.

Dale Noseworthy: And then winter hit in our target market are essentially folks that tend to go away for the winter.

Dale Noseworthy: Yes.

Dale Noseworthy: We are now into spring I mean, the activity has really picked up where we have three more leased and.

Dale Noseworthy: Strong interest on the remaining three so again thats a bit of a one off type of.

Dale Noseworthy: Look in terms of lease up ability and then again back to where we are at west.

Dale Noseworthy: What will be on target between six to nine months to really get a big dent on that one out there.

Sairam Srinivas: That's great, Kala, and Philip. Thank you so much, and I'll turn it back.

Speaker Change: That's great color. Thank you so much and I'll turn it back.

Dale Noseworthy: Thank you. Thank you.

Speaker Change: Thank you. Thank you.

Operator: Thank you. The next question comes from Jimmy Shen at RBC Capital Markets. Please go ahead.

Speaker Change: Thank you. The next question comes from Jamie Shen at RBC Capital markets. Please go ahead.

Jimmy Shen: Thanks. Last quarter, you talked a little bit about seeing some moderation in market rent growth in certain markets. I was wondering, so far in the spring leasing season, what sort of trends are you seeing on that front?

Operator: Thanks.

Jimmy Shen: Last quarter, you talked a little bit about seeing some moderation in market rent growth in certain markets.

Jimmy Shen: I was wondering so far in the spring leasing season, what sort of trends are you seeing on that front.

Robert Richardson: Hi Jimmy. This is Robert. We're seeing the trend just being steady. The demand is there, and we're continuing to lease, and we're capturing a fair bit of the mark-to-market, we're pleased to say.

Jimmy Shen: Hi, Jimmy this is Robert we're seeing that trend just being steady.

Robert Richardson: The demand is there and we're continuing to always happen, we're capturing a fair bit of the mark to market I'm pleased to say.

Jimmy Shen: Right. And by steady, you mean, like, is market rent still growing? Or is it growing at a slower pace? Or at the same study page.

Jimmy Shen: Right and by steady you mean against market rent still growing or is growing slower pace or.

Speaker Change: At the same pace.

Robert Richardson: I would say at the same steady pace.

Jimmy Shen: I would say the same steady pace.

Robert Richardson: Okay.

Speaker Change: Okay Alright.

Robert Richardson: Okay.

Jimmy Shen: And then just to follow up on the acquisition comment, the various products that are on the market, what sort of pricing is being indicated for those portfolios or acquisitions?

Speaker Change: And then just to follow up on the.

Jimmy Shen: The acquisition comment the various products that are on the market.

Jimmy Shen: What sort of pricing.

Jimmy Shen: Our being indicated for those portfolios or assets.

Philip D. Fraser: You know what? I don't know that offhand, Jim. I mean, I honestly... I don't need paper in the room at all, so.

Speaker Change: You know what I don't know that offhand Jim.

Philip D. Fraser: Honestly.

Philip D. Fraser: I don't think any paper in the data room at all so.

Jimmy Shen: I don't know what they're asking, but my guess is that below five, and it's probably right around four.

Speaker Change: I don't know what they are asking but my guess is that it's below five and it's probably right around 4%.

Philip D. Fraser: Right, okay. And so your comment about not being too active is a function of the pricing still being relatively tight versus the development opportunities that you prefer to allocate capital to. Well, I mean,

Jim: Right, Okay, and so your comment about not being too acting as a function of the pricing still being relatively tight versus the development opportunities that you prefer to allocate capital.

Philip D. Fraser: Well, I mean, even that's not fair to say. We don't really know what his portfolio looks like. So, you know, we have no sense of that to make a comment on it. Okay.

Philip D. Fraser: Well I mean, it's even thats not fair to say, we don't really know what the portfolio is portfolio looks like so we have no sense of.

Philip D. Fraser: Of that to make comment on it.

Jimmy Shen: All right. That's it for me. Thanks.

Philip D. Fraser: Okay.

Speaker Change: Alright, that's it for me thanks.

Speaker Change: Thanks, Jamie.

Operator: Thank you. The next question comes from Matt Kornack at National Bank Financial. Please go ahead.

Jimmy Shen: Thank you. The next question comes from Matt <unk> at National Bank Financial. Please go ahead.

Matt Kornack: Hey guys, just a quick follow-up to Jimmy's question with regard to the estimated mark-to-market opportunity. It looks like you had pretty substantial gains in that figure on slide 12, I think it is, for Kitchener, Halifax, Calgary, and Victoria. Is that just the nature of those markets being kind of stronger in terms of population growth relative to next slide? apartment rentals, or is that just a point in time in comparison?

Matt Kornack: Hey, guys just a quick follow up to Jimmy's question with regards to the estimated mark to market opportunity. It looks like you had pretty substantial gains in that figure on slide 12, I think it is for Kitchener, Halifax, Calgary and Victoria.

Matt Kornack: Is that just the nature of those markets being.

Matt Kornack: Stronger in terms of population growth relative to mix.

Matt Kornack: Apartment rentals or is.

Matt Kornack: Is that just a point in time the comparison.

Dale Noseworthy: Part of it's the way we've been measuring that, so just expanding our unit count. So historically, we've been reporting what we've been capturing in terms of what units have turned. So we've done more of a deep dive to look at the true mark-to-market compared to all the units in our portfolio, looking at actual rents compared to estimated market rents based on what we've been seeing.

Matt Kornack: Part of it's the way we've been measuring that so just expanding our unit counts. So historically, we've been reporting what we have been capturing in terms of what units have turned.

Dale Noseworthy: We've done more of a deep dive to look at the true mark to market compared to all the units in our portfolio looking at actual rents compared to.

Dale Noseworthy: And estimated market rents based on based on what we've been seeing so I think that thats the difference and.

Dale Noseworthy: And what we capture is all dependent on what units turn. And we all know there's a number of units that don't turn every year that have long-term tenants that aren't leaving. So it's more representative of the whole portfolio mark-to-market.

Dale Noseworthy: What we capture is all dependent on what units turn unemployed you all know theres number of units that don't turn every year that are long term tenants that aren't that aren't leaving so.

Dale Noseworthy: It's a more representative of the whole portfolio mark to market.

Dale Noseworthy: Okay, no, that's a very helpful distinction. And then just on that, I mean, given where rents have gone and the lack of opportunities, are you seeing a higher propensity for recently rented units to turn than some of these ones where you've got people in place for a longer period of time? And is there a certain number of years after which tenants become stickier, I would say, in this market?

Dale Noseworthy: Okay.

Dale Noseworthy: Very helpful distinction and then just on that.

Dale Noseworthy: Given where rents have gone and the lack of opportunities are you seeing a higher propensity for kind of recently rented units to turn.

Dale Noseworthy: And then some of these ones, where you've got people in place for a longer period of time and is there a certain number of years after which tenants become stickier I would say in this market.

Dale Noseworthy: I mean, I'd say there probably is. A few years ago, we weren't. We were looking at total turnover. We're certainly digging into the details more as we've seen it come down. Even in the slide deck, we report that we've seen a slight downtick in turnover Q1 this year versus last year. So I'd say that, you know, It is coming down, and there are maybe 15 to 20% of units that we looked at last year that turned, we're only there for a year.

Dale Noseworthy: I mean, I would say there probably is a few years ago, we werent.

Dale Noseworthy: We were looking at total turnover, we're certainly digging into the details more as we've seen it come down.

Dale Noseworthy: Even in the slide deck, we report that we have seen a slight downtick in turnover Q1, this year versus last year, So I would say that.

Dale Noseworthy: It is coming down and.

Dale Noseworthy: Now, I don't know that that's any different from past years because we weren't measuring it in as much detail. But I think that those that have been there more recently don't have as much of a mark to market spread, for sure.

Dale Noseworthy: There are maybe it's 15% 20% of units that we looked at last year turned were only there for a year now I don't know that that's any different from past years, because we werent measuring it in as much detail.

Dale Noseworthy: But I think that with us.

Dale Noseworthy: That have been there recently, you don't have as much of a mark to market spread for sure.

Speaker Change: But it's a good question.

Dale Noseworthy: in terms of taking a look at our portfolio and seeing what the correlation is between the number of years in the unit and the frequency of turning. We'll take a deeper dive maybe next...

Dale Noseworthy: In terms of taking a look at.

Dale Noseworthy: Our portfolio.

Dale Noseworthy: Okay.

Dale Noseworthy: What the correlation is between a number of years in the unit and the frequency of turning off take and will take a deeper dive maybe next quarter, we can talk about it.

Dale Noseworthy: Yeah, I mean, I'd anticipate that you could actually see a widening mark-to-market spread. You have looked at that, and the mark to market for tenants that have been in the unit over five years is closer to $35,000, for sure.

Speaker Change: Yes, I mean, I would anticipate that.

Dale Noseworthy: Could actually see a widening mark to market spreads because the same units.

Dale Noseworthy: It's done had looked at we have looked at that and the mark to market for tenants that have been in the units over five years is closer to 35%.

Dale Noseworthy: Sure.

Matt Kornack: That makes sense. Thanks. Thanks for that.

Speaker Change: That makes us far more thanks, thanks, Brett.

Operator: Thank you. The next question comes from Dean Wilkinson from CIBC. Please go ahead.

Matt Kornack: Thank you. The next question comes from Dean Wilkinson from CIBC. Please go ahead.

Dean Wilkinson: Would that lower cost come at a lower density, or are you just finding that some of the non-Ontario jurisdictions have more favorable land acquisitions?

Dean Wilkinson: Alright, Thanks, good morning, everybody.

Dean Wilkinson: So I'll just follow up on the development side of things.

Dean Wilkinson: Lower cost.

Dean Wilkinson: That come at that sort of a lower density or are you just finding that some of the states non Ontario jurisdictions have more favorable land acquisition and actual hard construction costs.

Philip D. Fraser: I would say that a lot of it is lower density, for sure, and you like the lower development cost, a big part of it. Development charges have arguably been one of the most inflated components of construction over the past 5-10 years. Have you had any conversations with any jurisdictions that are perhaps acknowledging that and saying maybe there's something we can do to help you build more affordable housing vis-à-vis? You look at the 416. It's probably 30-35% of your construction budget is DCs, or are they just stuck on that, and they're kind of punch drunk on that?

Dean Wilkinson: I would say that a lot of it is lower density for shorten.

Philip D. Fraser: And you like deep.

Philip D. Fraser: Our development cost a big part of it.

Philip D. Fraser: Yes, and I guess that was my second question. Then is development charges have arguably been one of the most insulated components of construction over the past 510 years whenever you want to call. It have you had any conversations with any jurisdictions that are perhaps acknowledging that and saying maybe there is something we can do to help.

Philip D. Fraser: You build more affordable housing vis vis you look in the 401, six it's probably 30% 35% of your construction budget is dcs or are they just stuck on that and they are kind of punch drunk on the money.

Philip D. Fraser: Okay.

Philip D. Fraser: I think you've described it well. That's the way it is.

Philip D. Fraser: Yes.

Philip D. Fraser: I can give you subscribe to.

Dean Wilkinson: Fair enough. That's all I've got. Thanks.

Philip D. Fraser: The way it is.

Speaker Change: Okay Fair fair.

Dean Wilkinson: Fair enough that's all I've got thanks, yes.

Speaker Change: Yes. Thank you.

Operator: Ladies and gentlemen, as a reminder, should you have any questions, please press star 1. This question comes from Brad Sturgis at Raymond James. Please go ahead.

Speaker Change: Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.

Brad Sturgis: Question comes from Brad Sturges with Raymond James. Please go ahead.

Brad Sturgis: Hey, good morning. Just to go back to the market rent growth discussion, in terms of the non-permanent resident immigration policy change, how do you expect that to impact or alter market rent growth as population growth slows over the next couple of years?

Brad Sturgis: Hey, good morning first.

Brad Sturgis: Just to go back to the market rent growth discussion.

Brad Sturgis: In terms of the non permanent rather than <unk>.

Brad Sturgis: Immigration policy changes, how do you use.

Brad Sturgis: How do you expect that to impact or alter market rent growth popular population growth slows over the next.

Brad Sturgis: A couple of years.

Robert Richardson: We're not really expecting it's going to have any change to market rent growth. When we look at our portfolio, it's a relatively small exposure, but there are a lot of other drivers of demand for apartments, so we don't see that as a big risk for market rent.

Brad Sturgis: We're really not expecting it is going to have any.

Robert Richardson: The change to the market rent growth.

Robert Richardson: Okay, when we look at.

Robert Richardson: Our portfolio.

Robert Richardson: Don't have relatively small exposure, but.

Robert Richardson: Theres a lot of other drivers of demand for apartment, though we don't see that as a big risk from our horizon.

Brad Sturgis: With the, I guess, the slowdown a little bit on the suite renovation side, obviously, you noted turnover, but also strategically, maybe not spending as much capital or market rent when growth conditions are quite strong. Are there certain markets where you're allocating less capital to suite renovations right now? Or is it just more of a broad statement across the portfolio?

Robert Richardson: With the I guess the.

Brad Sturgis: The slowdown a little bit on the suite renovation side, obviously, you noted turnover but.

Brad Sturgis: Also strategically maybe not spending as much capital were more market rent growth conditions are quite strong just as there are certain markets, where you're allocating less capital to suite renovations right now or is it just more of a broad statement across the portfolio.

Robert Richardson: There's no standout on that, no standout market. We're seeing it across the portfolio.

Speaker Change: There is no standout on that no standout market, we're seeing it across the portfolio.

Brad Sturgis: Okay, sounds good. I'll turn it back on.

Speaker Change: Okay sounds good I'll turn it back.

Brad Sturgis: Okay.

Operator: Thank you. We have no further questions. I will turn the call back over to you for closing comments.

Speaker Change: Thank you we have no further questions I will turn the call back over for closing comments.

Philip D. Fraser: I would like to thank everybody for listening and participating today, and we look forward to reporting Q2 results the first week of August. Thank you.

Speaker Change: I would like to thank everybody for listening and participating today.

Speaker Change: We look forward to reporting Q2 results.

Philip D. Fraser: First week in August thank you.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.

Speaker Change: Ladies and gentlemen. This concludes your conference for today, we thank you for participating please disconnect your lines.