Q4 2024 Canadian Apartment Properties Real Estate Investment Trust Earnings Call

Operator: Hello everyone and welcome to Canadian Apartment Properties REIT fourth quarter 2024 results conference call.

Hello, everyone and welcome to the Canadian apartment properties right fourth quarter 2000, <unk> results conference call.

Operator: My name is Lydia and I'll be your operator today.

Lydia: My name is Lydia and it'll be all right.

Operator: After the prepared remarks, there'll be an opportunity to ask questions. If you'd like to participate in the Q&A, you can do so by pressing star followed by 1 on your telephone keypad.

After the prepared remarks, there'll be an opportunity to ask questions.

I'd like to participate in the Q&A you can do so by pressing star followed by one on your telephone keypad.

Nicole Dolan: I'll now hand you over to Nicole Dolan, Investor Relations, to begin. Please go ahead.

Speaker Change: I'll now hand, you over to Nicole Dolan Investor Relations to begin. Please go ahead.

Nicole Dolan: Thank you, Operator, and good morning, everyone. Before we begin, let me remind everyone that during our conference call this morning, we may include forward-looking statements about expected future events and the financial and operating results of cap REIT, which are subject to certain risks and uncertainties. We direct your attention to slide two and our other regulatory filings for important information about these statements.

Nicole Dolan: Thank you operator, and good morning, everyone before we begin let me remind everyone that during our conference call. This morning. We may include forward looking statements about expected future events and the financial and operating results of Capri, which are subject to certain risks and uncertainties. We direct your attention to slide two and our other regulatory.

Speaker Change: Filings for important information about these statements.

Mark Kenney: I will now turn the call over to Mark Kenney, President and CEO. Thanks, Nicole, and good morning, everyone. Joining me this morning is Stephen Co, our Chief Financial Officer, and Julian Schonfeldt, our Chief Investment Officer.

Speaker Change: I'll now turn the call over to Mark Kenny President and CEO. Thanks, Nicole and good morning, everyone. Joining me. This morning is Stephen Ko, our Chief Financial Officer, and Julian Shawn Hill, our Chief investment Officer.

Mark Kenney: I want to get started by highlighting the unprecedented level of transaction activity, which we completed during the past year. As you can see on slide 4, in 2024, we sold 385 million of non-core apartments in Canada, $715 million in manufactured home community sites, and $1.4 billion of properties in Europe, and $138 million worth of equity in IRS. These non-core and ancillary divestments generated a combined $2.6 billion in gross proceeds. We used part of that capital to pay down $401 million in total credit facility debt, which strengthened our balance sheet. We also reinvested $670 million into the acquisition of strategically aligned, purpose-built apartment properties in Canada, and a further $327 million into our value-enhancing NCIB program.

Speaker Change: I want to get started by highlighting the unprecedented level of transaction activity, which we completed during the past year.

Speaker Change: As you can see on slide four in 2024, we sold $385 million of noncore apartments in Canada $715 million and manufactured home community sites, and one 4 billion of properties in Europe, and $138 million worth of equity.

Speaker Change: And I read.

Speaker Change: These non core and ancillary divestments generated a combined $2 6 billion in gross proceeds we use part of that capital to pay down $401 million in total credit facility debt, which strengthened our balance sheet, we also reinvested $670 million.

Speaker Change: The acquisition of strategically aligned purpose built apartment properties in Canada, and a further $327 million into our value enhancing.

Speaker Change: Ivy program.

Mark Kenney: In the case of our property dispositions, we've been selling at prices that are at or above previously reported fair value, which we believe validates our reported net asset value. We have then been buying recently constructed rental buildings at strong pricing per square foot that is significantly below replacement cost, while also investing in our own high-quality platform and business through trust unit buybacks at prices that represent steep discounts to NAV.

Speaker Change: In the case of our property dispositions, we have been selling at prices that are at or above previously reported fair value, which we believe validates our reported net asset value. We had then been buying recently constructed rental buildings at strong pricing per square foot that is significantly below replacement.

Cost, while also investing in our own high quality platform and business through trust unit buybacks at prices that represent steep discounts to NAV. We're very pleased with this progress, especially in an environment that continues to face uncertainty and ever changing financial.

Mark Kenney: We're very pleased with this progress, especially in an environment that continues to face uncertainty and ever-changing financial and capital market conditions.

Speaker Change: And capital market conditions.

Mark Kenney: If you turn to slide five, you will see the significant ground we've covered on divesting from fragmented business segments and reinvesting into our core residential portfolio in Canada. As we entered 2024, approximately 15% of our consolidated portfolio comprised investments that are ancillary to our main business as a provider of Canadian rental apartment properties. We are proud to have reduced that to only 6% as of year-end. We have also identified a minority portion of our apartment portfolio in Canada that we consider non-core, based on a variety of risk-return factors driving relative underperformance. We're reducing this exposure and continuing to target the disciplined sale of these older legacy properties.

Speaker Change: If you turn to slide five you will see the significant ground, we've covered on divesting from fragmented business segments and reinvesting into our core residential portfolio in Canada as we entered 2020 for approximately 15% of our consolidated portfolio.

Speaker Change: Comprised of investments that are ancillary to our main business as a provider of Canadian rental apartment properties. We are proud to have reduced that to only 6% as of year end. We have also identified a minority portion of our apartment portfolio in Canada. So if we consider non core based on a variety of.

Speaker Change: Risk return factors driving relative underperformance, we're reducing this exposure and continuing to target the disciplined sale of these older legacy properties.

Mark Kenney: In turn, we're increasing our allocation towards recently constructed rental properties that will enhance the diversification of our portfolio and strengthen our long-term earnings profile. Being able to purchase these newer buildings at significant discounts to replacement costs means that the development is still prohibitive.

Speaker Change: In turn we're increasing our allocation towards recently constructed rental properties that will enhance the diversification of our portfolio and strengthen our long term earnings profile being able to purchase these newer buildings at significant discounts to replacement cost means that the development is still prohibitive.

Mark Kenney: And moving forward, we'll be pursuing the ongoing execution of our proven repositioning strategy. Regarding the rest of our rental apartments in Canada, these remain core to our business. We have a unique pan-Canadian portfolio of primarily regulated properties that typically have lower turnover and higher mark-to-market increases, combined with a smaller allocation toward more recently constructed, generally unregulated apartments, which tend to have the inverse in turnover and rental uplift trends. These diversified components together provide an optimal runway of long-term growth and stability in returns, which positions us well to withstand short-term swings in market dynamics.

Speaker Change: And moving forward, we will be pursuing the ongoing execution of our proven repositioning strategy regarding the rest of our rental apartments in Canada. These remain core to our business, we have a unique pan Canadian portfolio of primarily regulated properties the tip.

Speaker Change: <unk> had lower turnover and higher mark to market increases combined with a smaller allocation toward more recently constructed generally unregulated departments, which tend to have the inverse in turnover and rental uplift trends these diversified components together.

Speaker Change: Provide an optimal runway of long term growth and stability and returns which positions us well to withstand short term swings in market dynamics.

Julian Schonfeldt: I will now turn it over to Julian to further expand on our capital allocation program. Thanks, Mark. Slide 7 shows you the significant progress we've made on our portfolio repositioning effort, not just in 2024, but over the course of the past couple of years. As of December 31, 2024, we had 15% of our total portfolio represented by recently constructed rental properties, and this is up from only 5% just five years ago. Over the same period, we reduced our exposure to ancillary segments to 6%, as Mark mentioned, down from 17% as of December 31, 2019. Slide 8 contains the $385 million worth of our non-court legacy dispositions completed in Canada in 2024.

Speaker Change: Now I will turn it over to Julian to further expand on our capital allocation program.

Julian: Thanks, Mark Slide seven shows the significant progress we've made on our portfolio repositioning efforts not just in 2024, but over the course of the past couple of years as of December 31, 2024, we had 15% of our total total portfolio represented by recently constructed rental properties and this is up from.

Julian: Only 5% just five years ago over the same period, we reduced our exposure to ancillary segment, 6% as Mark mentioned down from 17% as of December 31 2019.

Julian: Slide eight contains a $385 million worth of our non core legacy dispositions completed in Canada in 2020 for these.

Julian Schonfeldt: These older properties have relatively higher capex burdens and operating costs, along with a host of other attributes that ultimately made them candidates for disposition. Importantly, this past year we were pleased to have transferred $124 million of our rental apartments to the hands of several non-profit organizations that are focused on maintaining the affordability of these homes in perpetuity. In addition, we just announced the closing of our 717 suite portfolio sale to the City of Montreal's Affordable Housing Initiative for $103.8 million. Contributing to the alleviation of Canada's housing crisis is a key priority for us, and transferring more of our well-maintained, quality buildings to organizations and programs established to preserve safe, affordable, and enjoyable residential housing for Canadians is one of the ways in which we can help with the solution.

Julian: These older properties have relatively higher capex burden and operating costs, along with a host of other attribute that ultimately made them candidates for disposition.

Julian: Importantly, this past year, we were pleased to transfer $124 million.

Julian: Of our rental apartments to the hands of several nonprofit organizations that are focused on maintaining the affordability of these homes in perpetuity.

Julian: In addition, we just announced the closing of our 700 Seventeens suite portfolio sale to the city of Montreal Affordable housing initiative for $103 8 million.

Julian: Contributing to the alleviation of Canada's housing crisis is a key priority for us and transferring more of our well maintained quality buildings to organization and programs established to preserve safe affordable enjoyable residential housing for Canadians is one of the ways in which we can help with the solution.

Julian Schonfeldt: We are equally as pleased to be supporting the Canadian housing ecosystem through the investment of our capital into newer purpose-built rental properties. Slide 9 showcases how much of that we did in 2024. Constructed over the course of the last few years by reputable developers, these on-strategy apartment buildings are situated in the hearts of our highest-performing Canadian region that boasts the most robust long-term fundamentals. These properties were largely stabilized upon acquisition at relatively affordable rent levels and optimal mark-to-market potential, and they come with a diverse and sophisticated resident base, superior energy efficiency, and low capital investment requirements.

Julian: We are equally as pleased to be supporting the Canadian housing ecosystem through the investment of our capital into newer purpose built rental properties slide nine showcases how much of that we did in 2024 constructed over the course of the last few years by reputable developers. These on strategy of carbon buildings are.

Julian: Situated in the Hearts of our highest performing Canadian region that boasts the most robust long term fundamentals. These properties were largely stabilized upon acquisition at relatively affordable rent levels and optimal mark to market potential and they come with a diverse and sophisticated resident base superior energy efficiency and low.

Julian: Capital investment requirements.

Julian Schonfeldt: If you turn to slide 10, we've provided a snapshot of our latest capital reallocation activity. We just announced the acquisition of these two recently constructed rental apartment properties in Western Canada for an aggregate $97.6 million, alongside two non-core dispositions for $96.8 million in combined gross proceeds. These mid-market rental properties fit perfectly into our targets of portfolio positioning, and we're acquiring them at an age where they provide an ideal balance of embedded value and growth potential with affordable rent averaging in the high $2 per square foot range. These transactions demonstrate that we're continuing to sell our non-core legacy properties at prices that are at or above previously reported fair values, while also being able to purchase well-located, high-quality buildings at meaningful discounts to replacement costs.

Speaker Change: If you if you turn to slide 10, we've provided a snapshot of our latest capital reallocation activity. We just announced the acquisition of these two recently constructed rental apartment properties in Western Canada for an aggregate 97 6 million.

Speaker Change: Alongside two noncore dispositions for $96 $8 million in combined gross proceeds.

Speaker Change: These mid market rental properties fit perfectly into our target the portfolio positioning and we're acquiring them at an age where they provide an ideal balance of embedded value and growth potential with affordable rents averaging in the high $2 per square foot range. These transactions demonstrate that we're continuing to sell our non core legacy properties.

Speaker Change: <unk> at prices that are at or above our previously reported fair values, while also being able to purchase well located high quality building at meaningful discounts to replacement cost our capital allocation plan works and we're looking forward to further upgrading the quality of our platform in Canada in 2025.

Julian Schonfeldt: Our capital allocation plan works, and we're looking forward to further upgrading the quality of our platform in Canada in 2025. As much as we've been reiterating the merits of our strategy, as well as substantiating the value of our trust through our non-core dispositions, which we're completing at premium pricing, we're further demonstrating our conviction through accredibly investing in our own portfolio via our NCIB program. Summarized on slide 11, we spent approximately $300 million in trust unit buybacks in the fourth quarter alone from mid-November onward at prices that were, on average, 20% below our year-end NAB of approximately $56.

Speaker Change: As much as we've been reiterating the merits of our strategy as well as substantiates the value of our trust through our non core dispositions, which were completed completing a premium pricing. We're further demonstrating our conviction through accretively investing in our own portfolio via our NCI program summarized on slide 11, we saw.

Speaker Change: Spent approximately $300 million in trust unit buybacks in the fourth quarter alone from mid November onwards at prices that were on average 20% below our year end NAV of approximately $56.

Julian Schonfeldt: Despite all the macroeconomic, political, and capital market uncertainties impacting the sector, we believe this speaks to the confidence which we have in our business, our strategy, and the long-term fundamentals of the multi-residential industry in Canada.

Speaker Change: Despite all the macroeconomic political and capital market uncertainty impacting this factor. We believe this speaks to the confidence, which we have in our business our strategy in the long term fundamentals of the multi residential industry in Canada.

Mark Kenney: With that, I will now turn the call back over to Mark. Thanks, Julian. Turning to slide 13, you will see that our average monthly rent was up, reaching $1,636 on December 31, 2024, across all occupied apartments in Canada. This represents 8% growth over prior year, reflecting increases in renewals and robust uplifts on turnover. That evidence is the meaningful mark-to-market value we have contained throughout our portfolio. Our Canadian residential occupancies were slightly down to 97.5% as of year-end. This is related to temporary softening in the market, which recently entered a phase of higher vacancy, reduced uplifts on turnover, and increased use of leasing incentives.

Speaker Change: With that I will now turn the call back over to Mark. Thanks, Julien turning to slide 13, you will see that our average monthly rent was up reaching $636 on December 31, 2024 across all occupy departments in Canada. This represents 8% growth over prior year.

Mark Kenny: Reflecting increases in renewals and robust uplift on turnover that that evidence the meaningful mark to market value, we have contained throughout our portfolio.

Mark Kenny: Our Canadian residential Occupancies were slightly down to 97, 5% as of year end. This is related to temperature temporary softening in the market, which recently entered a phase of higher vacancy reduced uplift on turnover and increased use of leasing incentives. This trend is resulting from a variety of factors, including.

Mark Kenney: This trend is resulting from a variety of factors, including, but not limited to, reduced demand from non-permanent residents and international students, a temporary increase in purpose-built rental supply, and legislative changes shifting short-term rentals into the long-term market. That said, at Capri, we have always maintained a strategic focus on vacancy mitigation, even throughout the pandemic. And this current cycle will be no different.

Mark Kenny: But not limited to reduced demand from non permanent residence in international students a temporary increase in purpose built rental supply and legislative changes shifting short term rentals into the long term market.

Mark Kenny: That said at cap rate, we have always maintained our strategic focus on vacancy mitigation even throughout the pandemic and this current cycle will be no different with the majority of our residential apartments and Canada represented by regulated legacy properties that contain significant embedded value.

Mark Kenney: With the majority of our residential apartments in Canada represented by regulated legacy properties that contain significant embedded value, along with the many tried and tested management strategies that we have in place to maintain high occupancy and optimize revenue, we are well positioned to continue achieving steady rental growth during this transitory period.

Mark Kenny: Along with the many tried and tested management strategies that we have in place to maintain high occupancy and optimize revenue we are well positioned to continue achieving steady rental growth. During this transitory period I will now turn the call over to Steven to further expand on our financial results.

Stephen Co: I will now turn the call over to Stephen to further expand on our financial results. Thanks, Mark. Turning to slide 14, let's run through our fourth quarter performance. Despite the recent uptick in vacancies, operating revenues were up by 1.5%. This reflects the robust increases in monthly rents on turnovers and renewals that we're continuing to realize. On the expense side, property operating costs were up for several reasons, specific details of which we've outlined in our financial report. These include certain situational, higher-than-normal repairs and maintenance costs incurred during Q4, primarily in Quebec and the GTA. In addition, we have elevated bad debt across most Canadian regions due to factors such as rising cost of living and, to a lesser extent, certain non-permanent residents leaving Canada without settling their debts.

Steven: Thanks, Marc turning to slide 14, let's run through our fourth quarter performance.

Steven: Despite the recent uptick in vacancies operating revenues were up by one 5%. This reflects the robust increases in monthly rents on turnovers and renewals that we're continuing to realize.

Steven: On the expense side property operating costs were up for several reasons specific details of which we have outlined in our financial report.

Steven: These includes certain situational higher than normal repair and maintenance costs incurred during Q4, primarily in Quebec in the GTA. In addition, we have elevated bad debt across most Canadian regions due to factors such as rising cost of living and to a lesser extent certain non permanent residue.

Steven: Leaving Canada without settling their debts. We're also spending more on advertising and legal fees as part of our strategy to combat this temporary market driven increase in vacancy and to collect our overdue rents as.

Stephen Co: We're also spending more on advertising and legal fees as part of our strategy to combat this temporary, market-driven increase in vacancy and to collect our overdue rent. As a result, our NOI margin for the total portfolio was 64.4% for the three months ended December 31st, 2024, down from 64.9% in the comparative quarter. However, we're pleased to have grown FFO by 2.1% while our diluted FFO per unit was up even higher by 3.3% to 62.2 cents for the fourth quarter, having been supplemented by creative NCIB repurchases and cancellations. Our FFO payout ratio was 59.8% for the current period, which decreased from 60.4% in the prior year period, inclusive of the 3% bump in our distribution to $1.50 per unit annualized.

Steven: As a result, our NOI margin for the total portfolio was 64, 4% for the three months ended December 31, 2024 down from 64, 9% in the comparative quarter.

Speaker Change: However, we're pleased to have grown <unk> by two 1%, while our diluted <unk> per unit was up even higher by three 3% to $62 <unk> for the fourth quarter haven't been supplemented by accretive NCI be repurchases and cancellations.

Speaker Change: Our <unk> payout ratio was 59, 8% for the current period, which decreased from 64% in the prior year period inclusive of the 3% bump in our distribution to $1 50 per unit annualized.

Stephen Co: Results for the full year are shown on slide 15. On the Canadian Same Property Portfolio, we saw a similar dip in occupancy to 97.5% at period ends with growth in AMR remaining robust at 6% across occupied suites. In line with that, our current our same property NOI grew by 6% for the year ended December 31st, 2024. However, we expect that to moderate to within our more normalized long term range in the upcoming year. Our same property and total portfolio margins were up 20 basis points and 70 basis points respectively, though we do anticipate our margins to remain relatively stable in 2025.

Speaker Change: Results for the full year as shown on slide 15 on the Canadian same property portfolio. We saw a similar dip in occupancy to 97, 5% at period end with growth in EMR remaining robust at 6% across occupied suites and.

Speaker Change: In line with that our current our same property NOI grew by 6% for the year ended December 31, 2024, However, we expect that to moderate to within our more normalized long term range in the upcoming year.

Speaker Change: Our same property and total portfolio margins were up 20 basis points and 70 basis points, respectively, though we do anticipate our margins to remain relatively stable in 2025.

Stephen Co: This organic growth contributed to the 5.8% increase in our diluted FFO per unit to $2.53, with our payout ratio improving to 57.9% for 2024.

Speaker Change: This organic growth contributed to the five 8% increase in our diluted <unk> per unit to two.

Speaker Change: $2 53, with our payout ratio improving to 57, 9% for 2024.

Stephen Co: I will now briefly run through our financial position. Referring to slide 17, we paid down a considerable amount of debt in 2024 at year-end. We had $500 million in available capacity on our acquisition and operating facility, along with $65 million available on our greenhouse gas reduction facility. We secured this in the past year to finance, at favorable interest rates, a portion of our costs relating to proposed sustainable energy efficiency projects to reduce GHG emissions at certain legacy properties. We remain proactive in managing our mortgages in Canada, which have one of the longest weighted average terms of maturity in our peer universe at five years as of December 31st, 2024.

Speaker Change: I will now briefly run through our financial position.

Speaker Change: Referring to slide 17, we paid down a considerable amount of debt in 2024 at the end at year end, we had $500 million in available capacity on our acquisition and operating facility along with $65 million available on our greenhouse gas reduction facility. We secured this in the past.

Speaker Change: Year to finance at favorable interest rates, a portion of our costs related to proposed sustainable energy efficiency projects to reduce <unk> emissions as certain legacy properties.

Speaker Change: We remain proactive in managing our mortgages in Canada, which have one of the longest weighted average term to maturity in our peer universe at five years as of December 31, 2024, we also affects 100% of our Canadian interest rate interest costs are currently at a weighted average interest rates at three 2%.

Stephen Co: We also fixed 100% of our Canadian interest rate, interest costs, sorry, currently at weighted average interest rates at 3.2% as of December 31st, 2024. On slide 18, you can see that we continue to methodically stagger our mortgage maturities to minimize renewal risk, and we have no more than 13% of our Canadian mortgages reaching maturity in any single year. Turning to slide 19, we lowered our leverage in 2024 with a total debt-to-gross book value of 38.4% as of current year-end, down from 41.6% as of December 31st, 2023. On the same property portfolio at current valuations, we expect this ratio to hold at around this level throughout 2025.

Speaker Change: As of December 31, 2024.

Speaker Change: On Slide 18, you can see that we've continued to methodically stagger, our mortgage maturities to minimize renewal risk and we have no more than 30% of our Canadian mortgages, reaching maturity in any single year.

Speaker Change: Turning to slide 19, we lowered our leverage in 2024 with a total debt to gross book value of 38, 4% as of current year and down from 41, 6% as of December 31, 2023 on a same property portfolio at current valuations we expect this ratio.

Speaker Change: To hold at around this level throughout 2025, however, it is subject to change with any significant transactions or portfolio revaluations.

Stephen Co: However, it is subject to change with any significant transactions or portfolio revaluation. Our coverage ratios also remain conservative and this flexible financial structure ensures we are able to execute on our strategy and maximize unit order value.

Speaker Change: Our coverage ratio has also remained conservative and this flexible financial structure ensures we are able to execute on our strategy and maximize unitholder value.

Stephen Co: Finally, on slide 20, we summarize the impact of our capital reallocation strategy on the operational side. We're focused on growing our cash returns and with the ability to realize consistently robust top-line rental growth in recent years, we have been strategically scaling back on total expenditures in order to further enhance our cash return. In short, we're spending less and earning more. In 2024, our spend on common area and in-suite capital improvements, which are capitalized on the balance sheet, was down 21 percent. We've reallocated a portion of that into incremental repairs and maintenance costs, which negatively impacts our margin.

Speaker Change: Finally on slide 20, we summarize the impact of our capital reallocation strategy on the operational side, we're focused on growing our cash returns and with the ability to realize consistently robust topline rental growth in recent years, we have been strategically scaling back on total expenditures in order.

Speaker Change: To further enhance our cash flow in short, we're spending less and earning more and.

Speaker Change: In 2024, our spend on common area and sweet capital improvements, which are capitalized on the balance sheet was down 21%, we reallocated a portion of that into incremental repairs and maintenance costs, which negatively impacts our margin.

Stephen Co: Accordingly, other property operating costs increased 5% for the year ended December 31, 2024, with R&M comprising the majority of them. Overall, however, we are spending less money combining these two categories. We reduced total expenditures by 6% for the year ended December 31, 2024, as compared to the previous year. In absolute terms, this is equivalent to approximately $20 million in reduced net spending in 2024, after already saving approximately $20 million in 2023, despite the cost inflationary environment in which these reductions have been achieved. We are also enhancing our free cash flow through our portfolio repositioning efforts, as our newer acquisitions have a significantly lower CapEx profile than our legacy assets.

Speaker Change: Accordingly, other property operating costs increased 5% for the year ended December 31, 2024 with R&M comprising the majority of this all overall however, we are spending less money combining these two categories. We reduce total expenditures by 6% for the year ended December 30 <unk>.

Speaker Change: One 2024 as compared to the previous year and.

Speaker Change: In absolute terms this is equivalent to approximately $20 million in reduced net spending in 2024 after already saving approximately $20 million in 2023, despite the cost inflationary environment in which these reductions have been achieved we are also enhancing our free cash flow through our portfolio repositioning efforts.

Speaker Change: As our newer acquisitions have a significantly lower capex profile than our legacy assets in total between our cash reallocation and portfolio recycling initiatives capital improvements in Canada decreased by 14% in 2024 as compared to 2023.

Stephen Co: In total, between our cash reallocation and portfolio recycling initiatives, capital improvements in Canada decreased by 14% in 2024 as compared to 2023. That said, given recent softening in certain capital rental markets, additional discretionary capital may be opportunistically deployed in short-term to manage vacancies through this temporary cycle. However, on the whole, we are well on our way to a future for CapRe in which we are generating self-sustaining free cash flow and all our objectives are currently in place. are aligned with that objective.

Speaker Change: Ed given recent softening in certain cap REIT rental market additional discretionary capital may be opportunistically deployed in short term to manage vacancies through this temporary cycle. However on the whole we are well on our way to a future for cap rate in which we are generating self sustaining free cash flow.

Speaker Change: And all of our objectives are currently in place.

Mark Kenny: Are aligned with that objective on that note I will turn the call back to mark to wrap up.

Mark Kenney: On that note, I will turn the call back to Mark to wrap up. Thanks, Stephen. Looking back on the year, it's been nothing short of transformational for Capri, and we are pleased with the strong progress we have made on our vision of becoming a better quality business. As we move forward in 2025 with an affordable weighted average rent per square foot of approximately $2 across our total Canadian residential portfolio, as of year-end, we are well-positioned to withstand what we consider to be a temporary short-term reset in supply-demand dynamics. We are returning to a more balanced market and long-term fundamentals remain robust for the residential rental industry in Canada.

Mark Kenny: Thanks, Steven looking back on the year, it's been nothing short of transformational for cap rate and we are pleased with the strong progress. We have made on our vision of becoming a better quality business as we move forward in 2025 with an affordable weighted average rent per square foot of approximately $2.

Mark Kenny: Across our total Canadian residential portfolio and as of year end, we are well positioned to withstand what we consider to be a temporary short term reset in supply demand dynamics. We are returning to a more balanced market and long term fundamentals remain robust for the residential.

Mark Kenny: <unk> rental industry in Canada cap rate is one of the most geographically diversified housing providers with our coast to coast presence and a unique mixture of primarily older legacy properties combined with our limited exposure to recently built apartments all of which.

Mark Kenney: Capri is one of the most geographically diversified housing providers with a coast-to-coast presence and a unique mixture of primarily older legacy properties combined with a limited exposure to recently built apartments, all of which creates a buffer against the effects of localized rental market swings that are not new to this industry. Apartments are historically counter-cyclical, and ultimately we anticipate ongoing steady demand for our professionally managed, high-quality rental properties. Regardless of what lies ahead, we will stay focused on the execution of our strategy while also regularly re-evaluating that strategy as our operating environment inevitably changes. We are proud of our all-around performance this past year, and we would like to thank all of our stakeholders for their ongoing support.

Mark Kenny: <unk> a buffer against the effects of localized rental market swings that are not new to this industry.

Mark Kenny: Apartments are historically counter cyclical and ultimately we anticipate ongoing steady demand for our professionally managed high quality rental properties, regardless of what lies ahead, we will stay focused on the execution of our strategy while also regularly.

Mark Kenny: <unk> reevaluating that strategy as our operating environment inevitably changes we are proud of our all round performance. This past year and we would like to thank all of our stakeholders for their ongoing support to underscore that yesterday, we announced an additional 3% increase in our disc.

Mark Kenney: To underscore that, yesterday we announced an additional 3% increase in our distribution to $1.55 per trust unit annualized, effective for our next year. Distribution Declaration, which we believe demonstrates our ongoing confidence in the future.

Mark Kenny: Tribunal <unk> to $1 55 per trust unit annualized effective for next.

Mark Kenny: Distribution declaration, which we believe demonstrates our ongoing confidence in the future. We have never had a better team in place and we are excited to continue building a better business for our residents our people and our unit holders for many years to come with that thank you for your time this.

Mark Kenney: We have never had a better team in place, and we are excited to continue building a better business for our residents, our people, and our unit holders for many years to come.

Mark Kenney: With that, thank you for your time this morning, and we would now be pleased to take your questions. Thank you.

Mark Kenny: Morning, and we would now be pleased to take your questions.

Operator: Please press star followed by the number 1 if you'd like to ask a question, and ensure your devices are muted locally when it's your turn to speak.

Speaker Change: Thank you ladies question followed by the number one if you'd like to ask a question and answer all your devices Amit likely when it's open.

Jonathan Kelcher: Our first question today comes from Jonathan Kelcher with TV Cowan. Please go ahead, your line is open. Thanks. Good morning. Morning, John. Just on the occupancy, 97.5 is fairly low for you guys. Can you maybe outline some of the strategies? I think Stephen talked a little bit about increasing capital spend, are you doing incentives? Like, what are you doing to sort of push that back up north of 98%? And how are those strategies going?

Speaker Change: Our first question today comes from Jonathan <unk> with TD Cowen.

Speaker Change: Please go ahead your line is open.

Jonathan: Thanks, Good morning.

John: Good morning, John a question.

Jonathan: So just on the occupancy.

Jonathan: 97 <unk>.

Jonathan: Fairly low for you guys and maybe outline some of the strategies I think.

Jonathan: Steve can talk a little bit about the increase in capital spend or are you doing instead of like what are you doing to sort of push that back up north of 98% and empower those strategies.

Mark Kenney: Well, thanks for the question, Jonathan. You know, in an attempt to rent maximize, we were getting into really the idea of holding units to maximize rent. And as we bumped up against, I'll say, seasonality factors and other sort of geopolitical things that are happening in Canada with permanent residency, we eased off on that strategy and absolutely have found the market going forward. Like, what we're discovering is we bumped up against the height of affordability, which is not unexpected, but the rental market remains very much alive. And that's why we're so confident of what we see going into the new year.

Jonathan: Well thanks for the question Jonathan.

Jonathan: And in an attempt to rent maximize.

Jonathan: We were getting into.

Jonathan: Really the idea of holding units to maximize rent and as we bumped up against <unk> seasonality factors and other sort of geopolitical things that are happening in Canada with permanent residency.

Jonathan: Eased off on that strategy and absolutely a talent the market going forward like what we're discovering is we bumped up against the height of affordability, which is not unexpected but the rental market remains very much alive and that's why we're so confident of what we see going into the new year.

Jonathan Kelcher: Okay, so fair to say that we should see an increase in occupancy in Q1. Yes, it's a matter of striking the right balance with affordability, and with that, obviously the Canadian housing market remains in crisis, and it can be easily regulated with pricing. Okay, so then it would be fair to assume, I guess, that the 13.5% you did of uplifts in Q4 probably comes down a little bit as you fill up the unit. Yes, and we are hopeful and starting to see initial signs of making up part of that ground with increased turnover. So obviously, exposing the portfolio to more churn even at lower levels can yield a hopefully even better result.

Jonathan: Okay. So fair to say that we should see an increase in occupancy in Q1.

Speaker Change: Yes, it's a matter of striking the right balance of affordability and with that obviously the Canadian <unk>.

Speaker Change: Housing market remains in crisis, and it can be easily regulated with pricing.

Speaker Change: Okay. So that so then it would be fair to assume I guess that the 13, 5% you did up uplifted in Q4, probably comes down a little bit.

Speaker Change: The as you fill up the units.

Speaker Change: Yes.

Speaker Change: We're hopeful and starting to see initial signs of making up part of that ground with increased turnover. So obviously exposing the portfolio to more churn even at lower levels can yield.

Speaker Change: We even better results.

Jonathan Kelcher: Okay, and then switching gears here on on this position, you guys noted a $400 million target for 2025. Does that include the the 200 million, the roughly 200 million that's that's already closed? Thanks, Jonathan. Yeah, this was the last couple of years, we're targeting 400 million. It does include the ones that that have happened so far in the year. We're cognizant of striking a balance between advancing the capital allocation strategy and not flooding the market.

Speaker Change: Okay and then.

Speaker Change: Switching gears here on dispositions, you guys noted that $400 million target or.

Speaker Change: On a five does that include the the 200 million the roughly 200 million Thats already closed.

Speaker Change: Thanks, Jonathan Yeah.

Speaker Change: Over the last couple of years were targeting $400 million. It does include the ones that.

Speaker Change: That have happened so far in the year.

Speaker Change: We're cognizant of striking a balance between advancing the capital allocation strategy and not flooding the market.

Mark Kenney: © The Ultimate Parody Site! Okay, fair enough. Would you expect to match the sales with acquisitions? Or do you think acquisitions can be a little bit higher depending on what happens with e-res over the balance of the year? Yeah, we didn't guide on that, so I'm going to be a little bit careful with that, but generally speaking, with proceeds that come in through dispositions or other sources that you've mentioned, we're always evaluating between debt repayment and acquisitions and NCIB, and it's a dynamic process, so... There's a reason we didn't guide for it, as the money is coming in.

Speaker Change: Striking that right balance.

Speaker Change: Okay fair enough.

Speaker Change: Would you expect to match the sales with acquisitions, where you think acquisitions can be a little bit higher depending on what happens with <unk>.

Speaker Change: He has over over the balance of the year.

Speaker Change: Yes.

Speaker Change: We didn't guide on that so I'm going to be a little bit careful with that but generally speaking with proceeds that come in through dispositions or the other.

Speaker Change: Sources as you've mentioned.

Speaker Change: We're always evaluating between debt repayment and acquisitions in CIB, it's a dynamic process. So.

Speaker Change: There's a reason we didn't guide for it.

Speaker Change: At the moneys coming in.

Jonathan Kelcher: We promise to remain disciplined and opportunistic on the buy side, as well as the sell side. But it is difficult to predict. We know what the typical run rate has been, but we will remain disciplined in our decision making. Okay, thanks.

Speaker Change: Make the best decision for the company at that time on the opportunities I would just build on that that we promised.

Speaker Change: We remain disciplined and opportunistic on the buy side as well as the sell side.

Speaker Change: But it's hard it is difficult to predict we know what the typical run rate has been.

Speaker Change: But we will remain disciplined in our decision making.

Speaker Change: Okay. Thanks, I'll turn it back.

Jonathan Kelcher: I'll turn it back.

Speaker Change: Thanks.

Brad Sturges: Our next question comes from Brad Sturges with Raymond James. Please go ahead. a good morning. Morning, Brad.

Speaker Change: Our next question comes from Budd <unk> with Raymond James. Please go ahead.

Speaker Change: Hey, good morning.

Brett: Good morning, Brett.

Brad Sturges: To go back on the occupancy discussion for a bit, you know, given that you have been increasing the weighting towards new builds, does FAM tend to have a bit higher turnover? Does that change your thinking around what target occupancy should look like for the entire portfolio if you kind of blend legacy and sort of the increasing exposure to new build? Well, Brad, thank you for that observation. Because yes, we know that in the new construction assets, there really is not the same dynamic going on with turnover. We're seeing 40 to 45% churn, which we would expect.

Brett: Just to go back on the occupancy permit.

Brett: Given that you have been increasing.

Brett: The weighting towards Newbuild.

Brett: Some tend to have higher turnover does that.

Brett: Change your thinking around what target occupancy should look like for the entire portfolio. If you kind of blend legacy.

Brett: The increasing exposure to newbuild.

Well, Brian Thank you for that observation because yes.

Brett: We know that in the new construction assets. There really is not the same dynamic going on with turnover, we're seeing 40% to 45% churn, which we would expect and when youre churning that kind of volume and maintaining market rents.

Brad Sturges: And when you're churning that kind of volume and maintaining market rents, it's, it's, you've got briefer windows a period of time. So that is all built into the proformas when we do an acquisition. And that increase in vacancy would have definitely been modeled. So you are seeing a bit of that effect.

Brett: You've got briefer windows a period of time, so that is all built into the pro forma when we do an acquisition and that increase in vacancy would have definitely.

Brett: <unk> model. So you are seeing a bit of that effect.

Brad Sturges: But I, you know, not part of your question, but I can't help myself but throw it in. These new buildings, I want to go to the cash flow discussion when we're talking about these new construction assets. Because despite the higher churn, and despite maybe minor upticks in vacancy, we just don't have the capital expenditure that we used to talk about all the time. And CapReit is really experiencing true improved cash flow. And we have to keep reiterating this to investors that we are focused on living on retained earnings. And we see a path where we can do even beyond that, if we keep this quality story going.

Brett: But.

Brett: Not part of your question, but I can't help myself, but throw it in these new buildings.

Brett: Wanted to go to the cash flow discussion when we're talking about these new construction assets because despite the higher churn and despite maybe minor upticks in vacancy. We just don't have the capital expenditure that we used to talk about it all the time and cap rate is really experiencing true improved cash flow and we have to keep reiterating this to investors.

Brett: We are focused on living on retained earnings and we see a path where we can do even beyond that if we keep this quality story going so yes, there is a bit of a trade off with new construction assets with more slightly elevated vacancy that was budgeted for that does ultimately bleed into the overall portfolio, but that's what we mean.

Brad Sturges: So yes, there's a bit of a trade off with new construction assets with more slightly elevated vacancy that was budgeted for that does ultimately bleed into the overall portfolio. But that's what we want, because we're focused on cash flow.

Brett: Because we're focused on cash flow.

Brad Sturges: Okay, that makes sense. And obviously, you kind of highlighted the drivers in terms of why demands may be a little bit reduced in the short term.

Brett: Okay.

Brett: I'm.

Brett: Obviously, you've kind of highlighted the drivers in terms of demand maybe a little bit reduced in the short term just how do you how do you think market rents at all or.

Brad Sturges: Just how do you think market rents evolve or trend more specifically, I guess, over the next few quarters? Like, do we get to into the spring and summer and see kind of more of a return to growth? Or how do you think about that right now?

Brett: Trends more specifically I guess.

Brett: Few quarters like do.

Brett: Do we get to.

Brett: In the spring and summer and see.

Brett: More of a return to growth or how do you think about that right now.

Mark Kenney: I think all the multi-family providers out there are navigating a couple of factors that happened in Q4. This shock of, you know, non-permanent residents abruptly having to leave, and international students, and seasonality, the threat of tariffs, people aren't even, like, moving because they just don't know what the future holds. I think we've seen a cease and a bit of an unexpected slowdown in Q4, but it's all of those bumping up against affordability. There is a housing crisis in Canada, and when we find the right level of affordability for folks, we absolutely have a demand for our product.

Brett: I think all the multifamily.

Brett: Providers that there are navigating a couple of factors that happened in Q4 this shocking.

Brett: Terminate residents of roughly having to leave an international students and seasonality.

Brett: The threat of tariffs people aren't even moving because they just don't know what the future holds I think we've seen a fees.

Brett: And it did have an unexpected slowdown in Q4, but it's all of the pumping up against affordability. There is a housing crisis in Canada, and when we find the right level of affordability for folks we absolutely have the demand for our product all of the multifamily.

Mark Kenney: All of the multi-family people do, quite frankly. But it's a matter of, at this point, being extremely nimble by the number of visits, lease conversions, really a day-by-day, and finding the right balance of affordability. And when you do that, we lease up quite quickly. We've seen extremely strong response in January, which is traditionally the slowest month in the year. And we have found that when we price dynamically and appropriately, there is incredible demand in the marketplace. You know, we still are seeing rents rising in Canada. We don't have regression on rents. We just have slightly less on uplift.

Brett: People do quite frankly, but it's a matter of at this point being extremely nimble by the number of visits lease conversions really a day by day and finding the right balance of affordability and when you do that we lease up quite quickly. We've seen extremely strong response in January which is traditionally the slowest months in.

Brett: In the year and we have found that when we price dynamically and appropriately there is incredible demand in the marketplace. We still are seeing rents rising in Canada. We don't have regression on on rents we just have.

Brett: Slightly less on uplift and that's a message to the market that I think really needs to be understood. Our revenues are rising.

Mark Kenney: And that's a message to the market that I think really needs to be understood. Our revenues are rising.

Speaker Change: Okay makes sense I'll turn it back thank you Mark.

Kyle Stanley: I'll turn it back. Thank you.

Speaker Change: Thanks, Brett.

Kyle Stanley: Next we have Kyle Stanley with Desjardins. Please go ahead. Thanks.

Speaker Change: Next we have Paul Stanley with Zelman.

Speaker Change: Please go ahead.

Kyle Stanley: Good morning, guys. Mark, you commented that, you know, offsetting the lower new leasing spread could be higher turnover. And I know you've touched on this in the past. You know, we did see that pick up for 2024, which was great to see, but how much of that in your view would have been, you know, just given the portfolio skew towards new build product versus, you know, an actual shift in turnover, you know, for your for your core assets? And then, you know, how do you maybe see that trending into your head?

Speaker Change: Thanks, Good morning, guys.

Speaker Change: Mark you commented that offsetting the lower new leasing spread could be higher turnover and I know you've touched on this in the past.

Speaker Change: We did see that pick up for 2024, which was great to see but how much of that in your view would have been just given the portfolio skewed towards newbuild product versus.

Speaker Change: An actual shift in turnover.

Speaker Change: For your core assets and then how do you maybe see that trending in the year ahead.

Kyle Stanley: Another great question and it is so appropriate we may have to provide more feedback to the market on this because the dynamics of new construction are definitely different than the dynamics in value-add but our goal is you know I continue to stay to cash flow improvements that we're actually producing. What we can expect Kyle is market specific dynamics so for example in places like Toronto as more condos come online that will just add to the supply and no doubt as we've seen rents are falling in condo product you'll see a loosening up of people holding their leases and it would be logical and historically reflective for us to say that will result in an increase in turnover we just don't know until it happens.

Speaker Change: That's another great question and it is still appropriate we may have to provide.

Speaker Change: More feedback to the market on this because the dynamic new construction are definitely different than the dynamics in value add but our goal as I continue to state as cash flow improvements that we're actually producing.

Speaker Change: What we can expect Kyle is market specific dynamics. So for example in places like Toronto as more condos come online that will just add to the supply and no doubt as we've seen rents are falling and condo product, you'll see a loosening up of people holding their leases and it would be.

Speaker Change: Logical and historically reflective for us to say that will result in an increase in turnover. We just don't know until it happens. This spring is when real decisions get made.

Kyle Stanley: The spring is when real decisions get made so we'll we'll it's we don't see seizing anymore and a slow down in people giving up their leases and turning over what we are seeing is is obviously more competition in the market which is healthy for the turnover dynamic they just don't work lockstep they're not like exactly correlated one lagging the other but if we see you know rent sort of moderating on uplift traditionally historically you've always seen an increase in turnover that follows I'll call it a quarter thereafter. Okay, now that makes sense. And it's helpful.

Speaker Change: We will if we don't see any.

Speaker Change: Any more than a slowdown in people, giving up their leases and turning over what we are seeing is is obviously more competition in the market, which is healthy for the turnover dynamic. They just don't work lockstep theyre not like exactly co related one lagging the other but if we see rent sort of.

Speaker Change: Moderating uplift traditionally historically, you've always seen an increase in turnover that fall is I'll call. It a quarter thereafter.

Speaker Change: Okay, no that makes sense.

Speaker Change: Helpful.

Kyle Stanley: Just the last question for me is you've already touched on kind of capital allocation focuses and you know, hit on acquisition activity. Obviously, we're very active on the buyback in the fourth quarter, quarter to date, that looks like it's slowed a little bit.

Speaker Change: The last question for me is you've already touched on kind of capital allocation.

Speaker Change: Focuses and hit on acquisition activity. Obviously, you were very active on the buyback in the fourth quarter quarter to date that looks like it slowed a little bit.

Kyle Stanley: Just wondering, you know, how are you thinking about the NCIB as, you know, a capital deployment target in the year ahead? Well, the NCIB has been an incredibly effective tool, as we've all discussed, but what we're seeing is, you know, opportunity on the horizon and de-levering and staying, keeping the balance sheet strong to act on those opportunities is, I think, our prediction here. You know, this talk of tariffs and the uncertainty in Canada, sort of coast to coast, and I'll say the Toronto condo market, all of these things, for us, are spelling, you know, the groundwork for opportunity.

Speaker Change: Just wondering how are you thinking about the CIB.

Speaker Change: Our capital deployment targets in the year ahead.

Speaker Change: We will be in CIB has been an incredibly effective tool as we as we've all discussed but what we're seeing is opportunity on the horizon and de levering and staying keeping the balance sheet strong to act on those opportunities is I think.

Speaker Change: Our prediction here.

Speaker Change: There is talk of tariffs and the uncertainty in Canada sort of coast to coast and I'll see the Toronto condo market. All of these things for us are spelling the groundwork for opportunity so keeping our balance sheet strong and making sure we're de Levered and ready to act is something that we also.

Mark Kenney: So keeping our balance sheet strong and making sure we're de-levered and ready to act is something that we also very much value.

Speaker Change: Much value.

Kyle Stanley: Okay, thank you for that. I will turn it back.

Speaker Change: Okay.

For that I will turn it back.

Matt Kornack: Thanks. Next we have Matt Kornack with National Bank Financial. Please go ahead, your line is open. Good morning, guys. Just with regards to your comment around optimizing rents, it was noticeable that some of the markets that you've seen the occupancy erosion in are arguably, I mean, Nova Scotia is one of them. That's a pretty strong market. Was that just a question of maybe getting ahead of what you were trying to achieve on some of those spreads and mispricing? Or how should we think of it? Because I'd assume that that market, you'd see some increase in occupancy going forward.

Speaker Change: Thanks.

Speaker Change: Next we have not gone up with National Bank Financial. Please go ahead. Your line is open.

Speaker Change: Good morning, guys.

Speaker Change: With regards to your comments around optimizing rents it was noticeable that some of the markets that you've seen the occupancy erosion and arguably I mean, Nova Scotia is one of them.

Speaker Change: That's a pretty strong market was that just a question of maybe getting ahead of what you were trying to achieve on some of those spreads and mispricing or how should we think of it because I would assume that that market you'd see some increase in occupancy going forward.

Mark Kenney: Yeah, you know, every, every portfolio has slightly different dynamics. We're in downtown for Halifax portfolio, which has a heavy tilt to students. And in anticipating any sort of change on the international student front, we want to make sure we're on strong footing. We're feeling exceptionally confident about how we've managed ourselves through the, not just the fourth quarter, but going into the first quarter. And it's again, only a matter of finding, finding the market. So our portfolio tends to have a little bit more lean towards students because of the downtown nature, but we're doing exceptionally well on that, on that lease up front.

Speaker Change: Yeah.

Speaker Change: Every portfolio has slightly different dynamics were in downtown core.

Halifax portfolio, which has a heavy tilt to students and then anticipating any sort of changed on the international student front, we want to make sure on strong footing.

Speaker Change: We're feeling the exceptionally confident about how we've managed ourselves through the not just the fourth quarter, but going into the first quarter.

Speaker Change: Again, only about refining finding the market. So our portfolio tends to have a little bit more lean towards students because of the downtown in nature, but we're doing exceptionally well on that on that lease upfront.

Mark Kenney: The only other thing I would kind of point out, sorry to interrupt there, is that Halifax in particular, we'd absolutely reached peak rents. If you look back historically at what had happened, you know, in Halifax, we were like, the results were quite astonishing actually, so it's not surprising we've had to moderate to find the market.

Matt: And just to turn it over to Matt.

Matt: The only other thing I would kind of point it sorry to interrupt there is that Halifax in particular, we'd absolutely reach peak rents. If you look back historically at what has happened in Halifax, we were like the.

Matt: The results were quite astonishing actually so it's not surprising we've had to moderate define the market.

Mark Kenney: Yeah, and I guess on the same vein to a market, Ontario is one that everybody's been pointing to, but your occupancy there is held up relatively well, but you haven't been able to get rent growth because of the allowable rent increase. Presumably, that's a place where you've got locked in kind of mark-to-market potential and you'd like to get a bit of turnover, but maybe there in BC to some extent, but interested in your thoughts on kind of the ability to get at some of this embedded rent growth in the value-add portfolio, the legacy portfolio. Well, I'm really glad that you made reference to Ontario, especially their GTA portfolio, because, you know, we're constantly fielding questions about, you know, Headline in the news of condo rents and our portfolio is very different than I'll say the condo rent market We have a lot of core legacy highly affordable property in the GTA It's widespread.

Yeah, and I guess.

Matt: The same vein to a market Ontario's one that everybody has been pointing to your occupancy there has held up relatively well, but you haven't been able to get rent growth because of the allowable rent increase presumably that's a place where you've got locked in kind of mark to market potential and you'd like to get some of the hip turnover, but maybe there.

Matt: N D C to some extent.

Matt: Interested in your thoughts.

Matt: And kind of the ability to get at some of this embedded rent growth and the value add portfolio or the legacy portfolio.

Matt: I'm really glad that you made reference to Ontario, especially their GTA portfolio.

Matt: Because.

Matt: Possibly fielding questions about.

Matt: The headline in the news a condo rents in our portfolio is very different than I'll say the condo rent market. We have a lot of core legacy highly affordable property in the GTA.

Mark Kenney: It's in you you'll see in Toronto when with the condo deliveries There'll be sort of acute deliveries in the downtown core and our portfolio is actually quite suburban and and because it's embedded Legacy and then it's a very very different market for us and we are quite protected from the you know the onslaught of sort of a condo impact not to mention our larger units if you just look at the The the nature of the unit sizes Capra does primarily a two and three bedroom apartment portfolio in the GTA and really through Ontario So what we hope, and what we're seeing, is that with these new supply deliveries, that people in the suburbs will start to look for alternatives.

Matt: It's widespread.

Matt: Youll see in Toronto.

Matt: With the condo deliveries will be sort of acute deliveries in the downtown core and our portfolio is actually quite the suburban and because it's embedded legacy and then it's a very very different market for us and we are quite protected from the onslaught of sort of a condo.

Matt: The impact not to mention our larger units if you just look at the.

Matt: The nature of the unit sizes cap rate is primarily a two and three bedroom apartment portfolio in the GTA and really through.

Matt: Ontario.

Matt: So what what we hope.

Matt: And what we're seeing is that with these new supply deliveries that people in the suburbs will start to look for alternatives, maybe there'll be homebuyers prices reached the right point and that will sort of free up some of that deeply embedded value in our in our Ontario portfolio.

Mark Kenney: Maybe they'll be homebuyers if prices reach the right point, and that will sort of free up some of that deeply embedded value in our Ontario portfolio.

Mark Kenney: Fair enough. I think there was some discussion on capital allocation with regards to how you're thinking about the development potential within the portfolio, as well as whether or not the focus is going to be on purchasing new assets exclusively, or if you would potentially look at some value-add older product. I don't know if your views have evolved there, or is it pretty similar to where you've been in the past?

Matt: Fair enough.

Speaker Change: I think there was some discussion on capital allocation with regards to how you're thinking about the development potential within the portfolio as well as kind of whether or not the focus is going to be on purchasing new assets exclusively or if you would potentially look at some value.

Matt: Older product to I don't know if you have if.

Matt: If your views have evolved there or is that.

Speaker Change: Pretty similar to where you've been in the past.

Mark Kenney: I'm really glad this is coming up. Our development program is something that we've been talking about for a long time, and really our focus is around entitling our lands, and I want to clarify, you know, development doesn't make sense right now. It doesn't make sense for anybody, but for us to have those entitled lands ready to have optionality in the future to maybe build out a pipeline of our own in the future, we're talking years down the track, is something that's important for us. We may choose to do other things. We've recently, with the guidance of our board, looked at our opportunities, and we're pursuing an asset-by-asset strategy when it comes to development.

Matt: I'm really glad this is coming up.

Matt: Our development program is something that we've been talking about for a long time and really our focus is around entitling our lands.

Matt: And I want to clarify.

Matt: Development doesn't make sense right now it doesn't make sense for anybody but for us to have those entitled lands ready to have optionality in the future to maybe build out a pipeline of our own in the future. We're talking years down. The track is something that's important for cap rate, we may choose to do other things we've recently with the <unk>.

Matt: <unk> of our board looked at our opportunities and we're pursuing an asset by asset strategy. When it comes to development. We're just laying the groundwork for the future 2025.

Mark Kenney: We're just laying the groundwork for the future, not 2025, like the future, call it 5 to 10 years out. Why are we doing that? Well, we continue to buy assets that we think are 30% below replacement costs. So, why would we even remotely consider development when we're able to buy high-quality apartments with no development risk, with tenants in place at 30% below replacement costs? And this is the crisis that Canada is going to face.

Matt: The future call it five five to 10 years.

Matt: Why are we doing that well we continue to buy assets that we think are 30% below replacement cost. So why would we even remotely consider development when we're able to buy high quality apartments with no development risk with tenants in place at 30% below replacement cost and this is the crisis. The candidate is going to face so.

Mark Kenney: So, Capri, just to be absolutely clear, does not have development ambitions in the now, but we are getting ready for the future, and that's great optionality as a pipeline of growth in the years to come.

Matt: Cap rate just to be absolutely clear does not have development ambitions in the now, but we are getting ready for the future and thats, great Optionality as the pipeline of growth in the years to come.

Matt: No.

Mark Kenney: On the value-add, Matt, I'm sorry, I lost my train of thought there. We had some feedback on this, and again, I'm very glad that you're asking the question. When I was asked where the opportunities are in the marketplace right now, I made reference to the fact that a lot of institutions are focusing on new construction only. And that has created, for some private operators, an opportunity in value-add. We're seeing cap rates rise in value-add. That's an observation on the market. CapREIT has not signaled a change in strategy at all. CapREIT is reaffirming our strategy of everything we've just talked about in the last hour here now.

Matt: Makes sense.

Matt: Me too.

Matt: On the value add I'm, sorry lost my train of thought there.

Matt: We had some feedback of this and again I am very glad that you are asking the question.

Matt: I was asked where the opportunities are in the marketplace right now I've made reference to the fact that a lot of institutions are focusing on new construction only.

Matt: And that has created for some private operators an opportunity and value add.

Matt: We're seeing cap rates rise is in value add.

Matt: So.

Matt: That's the that's an observation on the market cap rate has not signal a change in strategy at all cap rate is being reaffirming our strategy of everything we've just talked about in the last.

Matt: The hour here now we are focused on new construction assets. We are focused on cash flow of Capri. We are focused on living on retained earnings for the very first time, the cap rate and we're going to deliver value for our unit holders a cap rate.

Mark Kenney: We are focused on new construction assets, we are focused on cash flow at CapREIT, we are focused on living on retained earnings for the very first time at CapREIT, and we are going to deliver value for our unit holders at CapREIT.

Mark Kenney: I appreciate the clarification there.

Matt: Makes sense I appreciate the clarification. There are lot last one for me just in terms of the transaction market.

Matt Kornack: Last one for me, just in terms of the transaction market. I mean, I think something that's been lost in kind of the trading in the public markets is the fact that you do have access to CMHC insured financing. The spreads are exceptionally tight. They don't move very much in bad economic times. But are you seeing capital start to come back?

Matt: I mean, I think something that's been lost in kind of the trading in the public markets is the fact that you do have access to <unk> financing. The spreads are exceptionally tight they don't move very much in bad economic times.

Speaker Change: But are you seeing capital.

Speaker Change: Start to come back and compete against you and some of these transactions or how should we think about the flow of capital back now that I mean for you in most of your peers, you're actually probably limited if any headwind on the interest rate front now.

Mark Kenney: and快ient'soeign in some of these transactions or how should we think about the flow of capital back? Now that , for you and most of your peers, you're actually limited if any headwind on the interest rate front now and you can get a bit of a spread in the market from a capital grade of that.

And you can get a bit of a spread in the market from a cap rate standpoint.

Mark Kenney: Yeah, well, this is another great, great point. And thank you, Matt, for bringing attention to it like CMHC guarantees our renewals. And that is something I don't think even US investors fully appreciate. Like we are never out looking for capital on mortgage renewal, we have that guarantee, we have very low spreads. That is why our leverage in Canada is slightly higher in multi-families than our US peers. We have the guarantee of mortgage renewal.

Speaker Change: Yeah, well. This is another great great point, and thank you, Matt for bringing attention to it like seem HC guarantees are renewals that is something I don't think even U S. Investors fully appreciate like we're never out looking for capital and mortgage renewal we have that guarantee we have a very low spreads that is why our.

Speaker Change: Leverage in Canada, and slightly higher in multifamily than our U S. Peers, we have the guarantee of mortgage renewal that being said cap REIT has positioned the balance sheet for growth for opportunity and we have one of the lowest leverage.

Mark Kenney: That being said, CapReit has positioned the balance sheet for growth, for opportunity, and we have one of the lowest leverage balance sheets now in the country. So not only do we have CMHC, we've got lots of capacity here, should the right opportunities show up. So we're in the competition front. A lot of the institutions, I'm going to call it, have got other problems with other asset classes. And while they're sort of, you know, the activity that they are doing is around new construction assets, but it's somewhat limited. And that is why we're still able to find opportunities in that part of the market.

Speaker Change: Balance sheets now in the country. So not only do we have see MHC, we've got lots of capacity here should the right opportunities show up so.

Speaker Change: In the competition front a lot of the institutions that are going to call. It has got other problems with other asset classes and while there are sort of.

Speaker Change: The activity that they are doing is around new construction asset, but it's somewhat limited and that is why we are still able to find opportunities in that part of the market. There is extremely low trading volumes on value add property and it's not institutions at all where traditionally was it's private.

Mark Kenney: There is extremely low trading volumes on value-add property, and it's not institutions at all where it traditionally was, it's private. And so the nature of the capital is very, very different today than it once was. The private kind of buyers are focused on value-add, the institutional type buyers are focused on new construction, and CapReit has a focus on both.

And so the nature of the capital is very very different today than it once was the private kind of buyers are focused on value add the institutional type buyers are focused on new construction and cap rate has a focus on on both.

Matt Kornack: Great. Thanks.

Speaker Change: Great. Thanks, I appreciate the color.

Matt Kornack: Appreciate it, Nicola.

Jimmy Shan: Our next question comes from Jimmy Shan with RBC Capital Markets. Your line is open. Thanks. In terms of the non-permanent resident leaving your apartment... Are you starting to track that? Do you have a sense of kind of what the direct impact is of that, of the NPRs leaving your portfolio? how that might unfold over the course of the year. Jimmy, we are heavily reliant on anecdotal for privacy reasons. We're really not allowed to track a lot of these things. We do track, like our peers track, reasons why people are moving to try to figure out ways to address problems, if any, in a property.

Speaker Change: Our next question comes from Jimmy <unk> with RBC capital market. Your line is open.

Speaker Change: Thanks in terms of the non permanent resident leaving your apartments.

Speaker Change: We're starting to track that do you have a sense of kind of what the direct impact as well.

Speaker Change: That NPR, so anything your portfolio.

Speaker Change: How that might unfold over the course of the year.

Speaker Change: Jimmy.

Speaker Change: We are heavily reliant on anecdotal for privacy reasons, we're really not allowed to track.

Speaker Change: A lot of these things.

Speaker Change: Do track like our peers track reasons why people are moving to try to figure out ways to address problems if any.

Speaker Change: In our property and what we have seen in the coast to coast.

Jimmy Shan: And what we have seen is a coast-to-coast effect of non-permanent residents suddenly giving notice and leaving. And Stephen made mention of it, even walking away in some cases from receivables. And that would be a jolt effect of sort of the changes. But like I think I may have said it on the last call, I've never witnessed this before in my time in this business where you have non-permanent residents abruptly leaving the country. So the jolt effect, we believe, has for the most part passed in that regard. But again, we've got those population growth slides in our investor deck that are just quite, they're almost impossible to understand the policy of what government was actually doing at the time.

Speaker Change: Fact of non permanent residents suddenly, giving notice and leaving and Steven made mention of it even walking away in some cases from receivables.

Speaker Change: And that would be a dual effect of sort of the changes, but I think I may have said it on the last call I've never witnessed this before in my in my time in this business, where you have non permanent residents abruptly leaving the country.

Speaker Change: The jolt effect, we believe has for the most part.

Speaker Change: In that regard.

Speaker Change: But again, we've got those population growth slides in our investor deck that are just quite as they are almost impossible to understand the policy of what at what government was actually doing at the time, but it's dramatically up and dramatically down and that creates shocks and for us that chalk.

Mark Kenney: But it's dramatically up and dramatically down. And that creates shocks. And for us, that shock revealed itself, albeit in a very minor way, in the fourth.

Speaker Change: Revealed itself, albeit in a very minor way in the fourth quarter.

Speaker Change: Okay.

Jimmy Shan: And you think, you think that quote unquote, jolt is that that's over, or again, not seeing as much as you can gauge that it's accelerating that pace of departure, your sense is that that's not I'll show you how quick it is. It really started showing up in November and we started getting the feedback on TERD that it was non-permanent residents abruptly leaving and that effect continued into December. And then the feedback in January and the beginning of February has been a moderation of that effect. So I don't know that it's over, government has to, I don't know the effects of immigration quite frankly and how the instruments are used to get people to leave the country.

Speaker Change: And you think.

Speaker Change: Do you think that.

Speaker Change: Clinically that's over or again, not seeing as much as you can gauge.

That it's accelerating that pace departure.

Speaker Change: Is that that's not the case.

Speaker Change: Do we.

Speaker Change: Sure you know cricket is it really started showing up in November and we started getting the feedback on <unk> that it was not permanent residents abruptly, leaving and that affect continued into December.

Speaker Change: And that was and then the feedback in January and the beginning of February has been a moderation of that effect.

Speaker Change: So I don't know that its over government has to I don't know the effects of immigration quite frankly, and how the instruments are used and kept people to leave the country. I don't think we have enforcement in the country, where people will be rounded up I think you've got the first wave of people that have had their permanent pieces revoked and they have chosen to respect that and leave.

Mark Kenney: I don't think we have enforcement in the country where people are being, you know, rounded up. I think you've got the first wave of people that have had their permanent visas revoked and they have chosen to respect that and leave. Now the ability for government to have those that have been asked to leave that aren't, I don't know, I can't speak to that, I don't really know enough about it. It's a strange dynamic that we've never faced before. But I can express moderation in this effect of like abrupt up and leaving of non-permanent residents.

Speaker Change: Now the ability for governments to have those that have been asked to leave that aren't I don't know I can't speak to that I don't really know enough about it it's a strange dynamic that we'd never faced before but I can I can express moderation in this effect of like abrupt up and leaving of non permanent residents.

Jimmy Shan: Okay. And then last question for me would be to sort of given everything you've talked about in terms of occupancy, lease spreads and R&M expense, what would be your same property NOI growth expectation for 2025? So, Jimmy, I think in terms of same-property NOI growth, I mean, I think I kind of spoke about it, kind of our long-term average in terms of what we expect, but, you know, there are a lot of uncertainties around the revenue side, higher vacancy, you know, tariffs, impact probably, there's tenant incentives, et cetera, and market rents, so there's a little bit of uncertainty, I can't really pinpoint it, but I would just say generally the long-term average is where we're comfortable.

Speaker Change: Okay.

Speaker Change: And then last question for me would be to sort of given everything.

Speaker Change: You've talked about in terms of occupancy lease spreads in R&M expense.

Speaker Change: What would be your same property NOI growth expectation for 25.

Jimmy: So Jimmy I think in terms of same property NOI growth.

Jimmy: I think I kind of spoke about it it's kind of our long term average in terms of what we expect.

Jimmy: But.

Jimmy: There are a lot of uncertainties around.

Jimmy: The revenue side.

Jimmy: Higher vacancy tariffs.

Jimmy: Impact probably.

Jimmy: There is tenant incentives et cetera, and market rents, so theres a little bit on the certainty I cant really pinpoint it but I would just say generally the long term averages. We're we're we're very comfortable with.

Mark Kenney: I would say this Jimmy, I'll use this opportunity, Stephen used that word tariff, you've heard it come up on the call a couple of times here now, we are not directly impacted by tariffs, we are on the cost side when it comes to things like appliances or U.S. imported input, but it's very, very minor, and in fact, you know, we're not, nobody's going to celebrate shocks to the Canadian economy, but because apartments are counter-cyclical, we're very well positioned to actually benefit from any sort of, you know, dramatic changes in unemployment, again, something we're not celebrating, but history tells us that when things are uncertain, rentals do very, very well, and so when I look in balance on the effects of what we've got going on here, because we're not in development, we don't intend to be in development, our cost inputs in terms of tariffs are really, really not highly impacted, so I don't know that if the market's yet sorted out, you know, tariff-protected investments or not, but we view Capri as not being frontline impacted by tariffs, and in fact, a potential beneficiary of a very unfortunate situation.

Jimmy: I wouldn't see this JV will use this opportunity.

Jimmy: Steven use that were tariff you've heard it come up on the call. A couple of times here now we are not directly impacted by tariffs. We are on the cost side when it comes to things like appliances or or U S imported input, but it's very very minor and in fact, we're.

Jimmy: Nobody's going to celebrate shocks to the Canadian economy, but because apartments are counter cyclical, we're very well positioned to actually benefit from from any sort of dramatic changes in unemployment again, something we're not celebrating but history tells us that when things are uncertain rentals do very very well.

Jimmy: And so when I look in balance on the effects of what we've got going on here because we're not in development, we don't intend to be in development, our cost inputs in terms of terrorists or really really not highly impacted so I don't know that if the markets yet sorted out.

Jimmy: Tariffs protected investments or not but we view cap rate as not being frontline impacted by tariffs and in fact, a potential beneficiary of a very unfortunate situation.

Mike Markidis: Okay, thank you.

Jimmy: Okay. Thank you.

Jimmy: Yeah.

Mike Markidis: The next question comes from Mike Markidis with BMO Capital Markets. Your line is open. Thanks, operator. Good morning, guys. Just on I don't know if you have them off the top of your head, but do you happen to have your January leasing stats handy just in terms of where your spread has come in for the first month of the year? I'm not sure if we even guide on that. I can... www.canadianapartmentproperties.ca In crisis, and homes are desperately needed, on the uplift numbers, we'd have to, we can't really speak to it. Okay. I think, Stephen, you mentioned, I think, if I heard you correctly, that you expect the margin to be relatively stable on the same property basis next year?

Mike Mckee: The next question comes from Mike Mckee desk with BMO capital markets.

Speaker Change: Your line is open.

Mike Mckee: Thanks, operator, good morning, guys.

Mike Mckee: Just on.

Speaker Change: The I don't know if you have them off the top of your head, but do you happen to have your January leasing stats handy just in terms of where you are spread has come in the first month for you.

Mike Mckee: We.

Mike Mckee: I'm not sure if we even guide on that.

Speaker Change: I can.

I can tell you we have confidence in our ability to find that affordability ceiling and when we hit that ceiling.

Speaker Change: There is a very very strong market.

Speaker Change: So on the occupancy front, we are extremely extremely comfortable.

Speaker Change: Comfortable that the market gain market is still.

Speaker Change: Uh huh.

Speaker Change: In crisis and homes are desperately needed.

Speaker Change: The uplift numbers.

Speaker Change: Wed have to we can't really speak to it.

Speaker Change: Okay.

Stephen Ko: I think Stephen you mentioned.

Stephen Ko: You correctly that you expect the margin to be relatively stable on a same property basis next year.

Stephen Co: Yeah, that's correct. Are you able to talk about what sort of land you've unbroken?

Stephen Ko: Yes, that's correct.

Speaker Change: Are you able to talk about what type of I'm sorry.

Stephen Co: Sorry, Mike, I'm sorry to interrupt you there, but I do want to speak to, like, You know, off X growth is is a big, big component of that utilities. And we've seen a colder winter relative to last year. So that would influence where off X growth is. But I would say generally where we see margins going to be relatively flat. So just taking the, you know, expectation, just seeing on the utility side, and I know it's a bit of a wow factor, but what sort of broad bucket for Total OpEx would you expect inflation to range in for 2025?

Stephen Ko: Sorry, just.

Stephen Ko: Sorry, Mike I, just sorry to interrupt you there, but I do want to speak to like.

Stephen Ko: Opex growth is.

Speaker Change: A big component of that is utilities, and we've seen a colder winter relative to last year. So that would influence where opex growth is but I would say generally where we see.

Stephen Ko: Margin.

Stephen Ko: It's going to be relatively flat.

Stephen Ko: So just taking the expectation we're seeing on the utility side and I know, it's a bit of a wild factor but.

Speaker Change: What sort of broad bucket or total Opex would you expect completion to arrange in 2021.

Stephen Co: I would say it would be, you know, generally mid-single digits. But, you know, as, you know, Mark kind of alluded to at the beginning of the call, you know, when we look at total capital expenditure spend, we look at a CapEx as well. And we have really done a fantastic job in reducing the total capital expenditure spend with the combination of, you know, combine R&M with the in-suite and common area cost, CapEx. So, cash flow has really improved over time. And that's what our focus is. Especially in operations, we really focus on the dollars a dollar and don't worry about the accounting treatment.

Stephen Ko: I would say it would be.

Speaker Change: Generally mid.

Stephen Ko: Mid single digits, but.

Stephen Ko: Yes.

Stephen Ko: More kind of alluded to it.

Stephen Ko: At the beginning of the call.

Stephen Ko: When we look at.

Stephen Ko: Total capital expenditure spend we look at Capex as well and we have really done a fantastic job in reducing the total capital expenditure spend with a combination of combined R&M with with the in Sweden common area cost Capex. So cash flow has really improved over time.

Stephen Ko: And that's what our focus is especially in operations, we really focus on the dollar's a dollar and don't worry about the accounting treatment, it's really that cash flow return that we're focused on.

Stephen Co: It's really that, you know, cash flow return that we're focused on. Really, I call it negative inflation. At the end of the day, Mike, negative inflation of costs. When you look at our total expenditures, they're way down. And when we're focusing on that accounting line of R&M, yeah, so Stephen is guiding correctly on that, obviously. But it's all about cash flow for cap rates. Got it. And the 327, just to clarify, that's the Canadian resi portfolio of CapEx for 2024. or, sorry, CapEx Plus office. Yeah, sorry, that's total. That's total. That's consolidated, including all. Got it.

Stephen Ko: Really negative.

Negative inflation at the end of the day, Mike negative inflation of cost when you look at our total expenditures that are way down and when we're supposed to see kind of that accounting line of R&M, Yes, Steven is guiding correctly on that obviously, but it's all about cash flow for cap rate.

Stephen Ko: Got it and then the 327 just to clarify that's the Canadian resi portfolio on a capex for 2021.

Stephen Ko: Alright, sorry, Capex plus opex.

Stephen Ko: Yeah, sorry battery total.

Stephen Ko: Those total as total as consolidated total.

Stephen Ko: Yeah.

Stephen Co: And it's not same property.

Speaker Change: Got it and it's not same property. Okay. So I mean, obviously then up to I think maybe I would be very useful to see any sort of what the Canadian portfolio is I guess.

Stephen Co: Okay, so I mean, obviously, then up to, I think, yeah, it'd be very useful to see sort of what the Canadian portfolio is, I guess. And then, yeah, I guess we would just continue that. Would you expect the same sort of trajectory down in 2025 when you look at those two components? Well, we're finding real efficiency, but the goal is cash flow, and expenditures are down at CAPRI. So, we will continue to make overall expenditures go down at CAPRI, whether it be on the R&M and CAPEX side. We are committed to efficiency, and a dollar is a dollar.

Stephen Ko: And then.

Stephen Ko: And then I guess, we will just continue that would you expect the same sort of trajectory down in 2025, when you look at those two components.

Stephen Ko: While refining real efficiency, but the goal is cash flow and expenditures are down in cap rate. So we will continue to make expense overall expenditures.

Stephen Ko: Go down to cap rate, whether it be on the R&M Capex side, we are committed to efficiency in a dollar is a dollar we are not focused on an accounting we are focused on unit holder value.

Stephen Co: We are not focused on accounting. We are focused on unit holder value. Yeah, absolutely. Makes sense.

Stephen Ko: Yeah absolutely.

Stephen Co: Okay, and this is the last one. Stephen, do you have to nab off the top of your head what the annualized carbon tax expense is, just in the event that that was something to do? Yeah. Yeah, we looked at it. I would say the last 12 months, it would have been approximately $6.5 to $7 million is how much we paid in carbon. Okay, looks like that goes away. Thanks so much. Yeah, sorry, with HST, I don't know if you were asking that. Oh, with the HS. Got you. Okay. Thanks so much.

Speaker Change: Totally makes sense, okay, and just last one.

Stephen Ko: Stephen do you happen to have off the top of your head what the annualized.

Speaker Change: Annualized carbon tax expenses, just thinking about that.

Speaker Change: Something to me.

Speaker Change: Yes, we looked at it.

Speaker Change: I would say for the last 12 months 12 months.

Speaker Change: It would've been approximately six $5 million to $7 million is how much we've paid a carbon tax.

Speaker Change: Okay.

Speaker Change: Thanks, so much.

Speaker Change: Yes, sorry, with HFC I don't know if you are asking a lot too.

Speaker Change: Okay with the HFF gotcha, okay. Thanks, so much.

Stephen Co: Thanks, Mike.

Mike Mckee: Thanks, Mike.

Mario Saric: Our next question comes from Mario Saric with Scotiabank. Your line, Jason. Hi, thank you and good morning. I want to just circle back on, I wanted to circle back on the distribution increase. So I hear you in terms of part of the motivation seems to be that you want to signal confidence to the market regarding your operational outlook, given all the flux and negative sentiment, broadly speaking on multifamily space today. That said, I don't think we've seen two increases within six months since 1998, if I'm correct. You have some incremental capital to deploy and deal with near-term vacancy, and you've been active on the share buyback.

Speaker Change: Our next question comes from Mario <unk>.

Mike Mckee: Alright with Scotia Bank.

Mike Mckee: Your line is open.

Mike Mckee: <unk>.

Mike Mckee: Hi, Thank you and good morning.

Mike Mckee: I wanted to just circle back on with it.

Mike Mckee: I wanted to circle back on the distribution increase so.

Mike Mckee: So I hear you in terms of apartment motivation seems to me that you want to signal a.

Speaker Change: Confidence in the market regarding your operational outlook, giving them all the flux in that negative sentiment.

Mike Mckee: Rob Me speaking of multifamily space today.

Mike Mckee: I don't think we've seen two increases within six months 1998, if I'm correct.

Mike Mckee: You have some incremental capital to deploy in the near term vacancy and you've been active on share buyback.

Mario Saric: You focus on routine earnings.

Mark Kenney: So I'm just wondering if you can maybe flesh out a bit more the decision to boost the distribution. Yeah, yeah, you know... We also had a couple of years where we didn't do any distribution increase. Things were in transition during those periods of time. Unit holders value, their distribution increases, and we were in those periods of transition and uncertainty during COVID, where we did, for years, no distribution increase. And that was a change for Capri. We are absolutely affirmed on our cashflow. Our payout ratio has never been more healthy. We have confidence in the Canadian market, and we have extreme confidence in our strategy.

Speaker Change: Teen earnings. So I'm just wondering if you can maybe a question a little bit more.

Mike Mckee: The decision to distributions.

Speaker Change: Yes, yes.

<unk>.

Speaker Change: We also had a couple of years or we didn't do any distribution increase and <unk>.

Speaker Change: Things were in transition during those periods of time unit holders value through distribution increases and we.

Speaker Change: We're in that those periods of transition and uncertainty during Covid, where we did for years no distribution increase.

Speaker Change: And that was a change for cap rate.

Speaker Change: We are absolutely affirmed on our cash flow our payout ratio has never been more healthy we have confidence in the Canadian market and we have extreme confidence in our strategy and it is absolutely in the bandwidth to give unit holders with unit holders are asking for which is the <unk>.

Mark Kenney: And it is absolutely in the bandwidth to give unit holders what unit holders are asking for, which is a moderate increase in distribution. So we're managing ourselves through that strategy.

Moderate increase in distribution, so we're managing ourselves through that strategy.

Mark Kenney: You know, you can look back, and we had some conversations when we first started talking about our strategy, especially in the US, where we were told you cannot do a high-grading strategy without dilution. And they said they'd never heard of that before, and we said, watch us do it. And so we went through the process of doing a high-grading strategy, and like with billions of dollars of capital recycling, and we are extremely comfortable with where we're landing. It's not without its peril. So the entire focus for us is to create unit holder value.

Speaker Change: <unk>.

Speaker Change: You can you can look back and we had some conversations when we first started talking about our strategy, especially in the U S. Where we were told you cannot do a high grading strategy without dilution and they said they'd never heard of that before and we say watch us to do it and so we went through the process of doing a high grading strategy.

Speaker Change: With billions of dollars of capital recycling and we are extremely comfortable with where we're landing it's not without its apparel so the entire.

Speaker Change: Focus for US is to create unit holder value, we have gone through our major sort of transformation in 2024, we have extreme confidence in the outlook. Our payout ratio has never been more healthy we're sitting on cash and we feel really really good about what's coming up in 2025 and I'm not excited.

Mark Kenney: We have gone through our major sort of transformation in 2024. We have extreme confidence on the outlook. Our payout ratio has never been more healthy. We're sitting on cash, and we feel really, really good about what's coming up in 2025. And I'm not excited about, you know, sort of effects to the Canadian economy, but like I said, apartments are counter-cyclical, and we've been through these cycles, I've been through these cycles, and we know what to do.

Speaker Change: Sort of <unk>.

Speaker Change: Effects to the Canadian economy, but like I said apartments are counter cyclical and we've been through these cycles I've been through these cycles and we know what to do.

Mario Saric: Okay, that's pretty clear.

Speaker Change: Okay, that's pretty clear thank you for that.

Mario Saric: Thank you for that.

Mario Saric: And so just coming back to the operations and incentives. I know it's really very building specific or regionally specific. But if we step back, I think there's this notion that incentives are being offered everywhere by everyone.

Speaker Change: And so just coming.

Speaker Change: Coming back to the operations and incentives.

Speaker Change: I know, it's a really very building specific or regionally specific but if we step back I think.

Speaker Change: This motion.

Speaker Change: That's something we're being offered everywhere by everyone. If we step back.

Mario Saric: If we step back, you have a sense of like, what percentage of your buildings or portfolio would be seeing incentives being offered at say, like a five to 10% clip today, or in Q4? Yeah, that that that that is a building specific Mario and it's targeted incentives, where you know, there's I would say higher vacancy or temporary higher vacancy. So it's hard to tell.

Speaker Change: So like what percent of your building your portfolio would be see incentives being offered at something like that.

Speaker Change: Like a 10% clip today or in Q4.

Speaker Change: Yes.

Speaker Change: That is a building specifics Mario and its targeted incentives.

Speaker Change: Sure.

Speaker Change: <unk>.

Speaker Change: I would say higher vacancy or.

Speaker Change: Temporary higher vacancy so it's hard to tell.

Mark Kenney: It's we don't Provide that disclosure, but that's something that we're working on. We have a ton of marketing strategies. We're focused on ensuring that we're retaining our tenants, where they're paying, you could say, high market rent. So we have various strategies that we're deploying, as Mark has alluded to earlier. So yeah, it's really tenant or, you could say, building specific. Not specific to any region.

Speaker Change: We don't provide that disclosure, but thats something that we were working on we have a ton of marketing strategies.

Speaker Change: We're focused on ensuring that.

Speaker Change: We are retaining our tenants where there is they are paying.

Speaker Change: Paying you can say high market rents.

Speaker Change: We have various strategies that we're deploying as mark has alluded to earlier so.

Speaker Change: Yes, it's really tenant or you can say building specific.

Speaker Change: Not specific to any region.

Speaker Change: Yes.

Mario Saric: Okay, and then my last question just Mark, coming back to the comment that rents are going up, and people are failing to recognize that, because you are capturing a pretty, pretty solid mark to market above historical average, I'd imagine a double digit still marked a very focused on asking rents, as you may know, what is What is your sense in terms of The Asking Rent trajectory in the broader market over the next three, four months, given the fact that, as you mentioned, we're in an affordability crisis, the cost of owning versus renting is still well above average.

Speaker Change: Okay, and then last question just coming back to the comment that rents are going up.

Speaker Change: When people are feeling to recognize but.

Speaker Change: Because you are capturing a pretty pretty solid mark to market above historical average I would imagine that double digit still.

Speaker Change: Must be very focused on asking rents.

Speaker Change: No.

Speaker Change: What is your sense in terms of.

Speaker Change: The asking rent trajectory in the broader market over the next three or four months.

Speaker Change: Given the fact that as you mentioned warning affordability crisis.

Speaker Change: Owning versus renting full well above average spreads well above historical average.

Mark Kenney: That spread is well above historical average. So like, what do you what do you think in terms of downside protection to asking rents fall? Well, thanks for the question, Mario, and the observation. You know, we've got to do a better job of explaining that we're seeing asking rent pressure, definitely not revenue pressure. Our rents are rising on turnover, our renewals are rising, and we're in a really, really good place.

Speaker Change: So.

Speaker Change: What do you what do you think in terms of downside protection to asking rents going forward.

Speaker Change: Well, thanks for the question Mario and the observation.

Speaker Change: We've got to do a better job of explaining that we're seeing asking rent pressure definitely not revenue pressure. Our rents are rising on turnover or renewals are rising and we're in a really really good place.

Mark Kenney: I think that I'm cautious only because I can't remember a quarter when so many different things came to be. Like, it's not every day Canada has 25% tariffs against its biggest trading partner come upon us, and non-permanent residents packing up and leaving, and, you know, a winter season that we haven't seen in a while. People are just, it's uncertainty right now. But what we absolutely know is that CMHC made that call that we need three and a half million additional homes by 2030. That's five years from now.

Speaker Change: Think that.

Speaker Change: I'm cautious only because I can't remember a quarter when so many different things came came to be like it's not everyday Canada has 25% tariffs against its biggest trading partner come upon us now.

Speaker Change: Non permanent residents packing up and leaving and a winter season that we haven't seen in a while the people are just.

Speaker Change: Certainly right now, but what we absolutely know it CME C made that call that we need $3 5 million additional homes by 2035 years from now candidate is in massive massive housing crisis and yet theres. All these confusing factors like in the short term, we're looking at Toronto condo.

Mark Kenney: Canada is in massive, massive housing crisis, and yet there's all these confusing factors. Like, in the short term, we're looking at some Toronto condo deliveries. That's great, but what's happening out there to development? So, we've gone across the country, and it's pens down on proformas from coast to coast and building. Now, that has effects.

Speaker Change: Deliveries, that's great, but what what's happening there to development. So we've got across the country and its turns down a pro forma is from coast to coast and building.

Speaker Change: That is a fact so.

Mark Kenney: So, I'm getting off slightly on a tangent here, but the dynamics of the market are great. What we found is, and this was really only in January we discovered this, is that incentives aren't always effective. People want the guarantee of that rent. So, you actually get a better result in terms of occupancy management when you just let people know what the rent is going to be. Most renters aren't planning to just stay for a year, so they deduct the cost. That's trickery, in my mind, in many cases. And people just want certainty, especially when it comes to renting.

Speaker Change: I'm getting off slightly on a tangent here, but the dynamics of the market are great. What we found is and this was really only in January we discovered this is that incentives arent always effective people want the guarantee of that of that rent. So you actually get a better.

Speaker Change: Our result in terms of occupancy management. When you just let people know what the rent is going to be most renters are planning to just Steve for a year. So the depth of college.

Thats trickery in my mind and in many cases and people just want certainty, especially when it comes to renting so I for one have.

Mark Kenney: So, I, for one, have really been challenging internally here our use of incentives, and I'd rather find the right affordably rent levels to maximize occupancy, to maximize revenues, knowing that our rents are going up.

Speaker Change: <unk> been challenging internally here or use of incentives and I'd rather find the right.

Speaker Change: Orderly rent levels to maximize occupancy to maximize revenues knowing that our rents are going up.

Speaker Change: Yeah.

Mario Saric: Okay, that's it for me. Thanks, guys.

Speaker Change: Okay.

Speaker Change: So for me thanks, guys.

Speaker Change: Yeah.

Dean Wilkinson: Thanks. And our next question is from Dean Wilkinson with CIBC, please go ahead. Thanks. Morning, guys. Mark, this might be a continuation of that same question for Mario. A lot of the common narrative seems to treat rent as a generic commodity. And, you know, when I look at, you know, particularly, say, your GTA assets at $1,782 a month, depending on the source, and there's a lot of sources, you know, that's probably some 30% below where condo rents are, and that's where the pressure is. Do you have a sense of what that historical spread has been?

Speaker Change: Thanks.

Speaker Change: And our next question is from Jamie Wilkinson.

Speaker Change: Paul.

Speaker Change: Please go ahead.

Speaker Change: Thanks, Good morning, guys.

Speaker Change: Good morning, Mark it might be is to continue rate might be a continuation of that same question for Mario.

Speaker Change: A lot of the common narrative seems to treat rent as a generic commodity and when I look at particularly say your GTA assets seven 782 a month.

Speaker Change: Depending on the source and Theres a lot of sources.

Speaker Change: Probably some 30% below where we're condo rents are and that's where the pressure is.

Speaker Change: You have a sense of what that historical spread.

Dean Wilkinson: And is this just a case of the condo rents really got ahead of themselves and the purpose built? I think, you know, the market seems to be losing track of, you know, say, slide 13 in your investor day.

Speaker Change: Has been and is this just a case of the condo rents really got ahead of themselves in the purpose built.

Speaker Change: The market seems to be losing track of say slide 13 in your investor deck.

Mark Kenney: Okay, so the first thing I'd say when I go to the grocery store, apples cost different prices than bananas, because apples and bananas are two different things. They're both fruits, but they're different. When you look at condo rent, and you're looking at a 500 square foot condo in downtown Toronto, and comparing that to a three-bedroom apartment somewhere on the Yonge Street Corridor, you are not looking at the same thing. And when the market goes and looks at these rental.ca numbers and say, look, rents are down for 500 square foot condos, and 500 square foot condos are coming to the market in unprecedented numbers, and the pressure is there, it doesn't mean the three-bedroom family is thinking about renting a 500 square foot condo.

Speaker Change: Okay. So the first thing I'd say when I go to the grocery store apples cost different prices in bananas, because apples and bananas are two different things there both routes, but theyre different when.

Speaker Change: When you look at Condor rent and Youre looking at a 500 square foot condo downtown Toronto, and comparing that to a three bedroom apartment somewhere on the Street corridor you are not looking at the same thing and when the market goes and looks at these rental dossier numbers and say look rents are down for 500 square foot condos and 500 square foot condos are coming to the <unk>.

Speaker Change: In unprecedented numbers and the pressure is there it doesn't mean the three bedroom family is thinking about renting a 500 square foot condo just doesn't mean that so I understand the need to kind of look at market dynamics, but you got to dig dig dig deeper to understand what is actually really happening. So what we are seeing a cap rate as rents are going up.

Mark Kenney: It just doesn't mean that. So I understand the need to kind of look at market dynamics, but you got to dig, dig, dig deeper to understand what is actually really happening. So what we are seeing at Capri is rents are going up. Now, yes, we will reach affordability at some point, and there's only so many roommates you can put in an apartment to get absolute high rents in three-bedroom apartments, and we may have hit that ceiling. But we remain extremely comfortable with the mix of our portfolio, with those legacy assets, and new construction. Yeah, it just it seems that there's this sort of overarching narrative that you're right, it is apples and bananas.

Speaker Change: No, yes, we will reach affordability at some point and Theres only so many roommates you can put it in department to get absolute high rents and three bedroom apartments, and we may have hit that that ceiling.

Speaker Change: But we remain extremely comfortable with the mix of our portfolio with those legacy assets, a new a new construction.

Speaker Change: Yes. It just seems that there is this sort of overarching narrative.

Speaker Change: Youre right it is apples and bananas.

Mark Kenney: Just on the issue of, you know, the non-permanent residents moving out and whatnot, and again, it's anecdotal. I'm assuming that you are backfilling that space at significantly higher rent. So the absence of them is not necessarily a bad thing. No, I would like we're not celebrating people leaving the country. But when you have apartment churn, it allows us to access potentially higher rent. So obviously depends on lease term. But yeah, like we're, it's very hard. in January and February to call kind of apartment churn because of our climate here in Canada. But the dynamic seems to be setting itself up for increased churns.

Speaker Change: Just on the issue.

Speaker Change: The non permanent residents moving out and.

Speaker Change: And what not and again, it's anecdotal.

Speaker Change: I'm, assuming that you are back filling that space at significantly higher rents. So the absence of them is not necessarily a bad thing.

Speaker Change: No.

Speaker Change: Like we're not celebrating people, leaving the country, but when you have apartment churn it allows us to access potentially higher rental obviously depends on lease term, but yeah. We're it's very hard.

Speaker Change: In January and February to call kind of apartment churn because of our climate here in Canada.

Speaker Change: The dynamic seems to be setting itself up for increased churns and for our legacy portfolio. That's very very good news very good news.

Mark Kenney: And for our legacy portfolio, that's very, very good news.

Mark Kenney: Very good.

Mark Kenney: That's it. I'll go ahead. Thanks, guys. Thanks, team.

Speaker Change: Yes, that's it that's all I had thanks guys.

Speaker Change: Thanks, Dave.

Mark Kenney: Thank you.

Mark Kenny: Thank you we have no further questions in the queue. So I'll turn the call back over to Mark Kenny for any closing comments.

Mark Kenney: We have no further questions in the queue, so I'll turn the call back over to Mark Kenney for any closing comments. Yeah, I'd like to thank everybody for your time today, and if you have any further questions, please do not hesitate to contact us at any time. Thank you again, and have a great day.

Mark Kenny: Yes, I'd like to thank everybody for your time today and if you have any further questions. Please do not hesitate to contact us at any time. Thank you again and have a great day.

Operator: This concludes today's call. Thank you for joining. You may now disconnect your line.

Mark Kenny: This concludes today's call. Thank you for joining you may now disconnect your line.

Mark Kenny: [music].

Mark Kenny: Okay.