Killam Apartment REIT

Thank you. Good morning, and thank you for joining Killam Apartment REIT first quarter 2022 conference call.

I am here today with Robert Richardson, Executive Vice President; Dale Noseworthy, Chief Financial Officer; Erin Cleveland, Senior Vice President of Finance; and Nancy Alexander, Vice President of Investor Relations and Sustainability. Slides to accompany today's call are available on the Investor Relations section of our website under Events and Presentations.

I will now ask Nancy to read our cautionary statement.

Thank you, Philip. This presentation may contain forward-looking statements with respect to Killam Apartment REIT and its operations strategy, financial performance conditions, or otherwise.

The actual results and performance of Killam discussed here today, could differ materially from those expressed or implied by such statements. Such statements involve numerous inherent risks and uncertainties.

And although Killam management believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that future results, levels of activity, performance, or achievements will occur as anticipated. For further information about the inherent risks and uncertainties in respect to forward-looking statements, please refer to Killam's most recent annual information form and other securities regulatory filings found online on SEDAR.

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

Thank you Nancy. We are very pleased with our strong financial and operating results for the first quarter of 2022 that included 3.1% increase in seen property NOI growth and a 4.3% increase in funds from operations.

Our 2022 strategic targets are outlined on slide 3 and we have made good progress with all of our targets. Killam has agreed to acquire $116 million in acquisitions year-to-date and 91% of these acquisitions are outside Atlantic Canada, supporting our target to have greater than 35% of our NOI generated from Ontario in Western Canada.

Two of our developments Latitude and The Kay are now open and the lease up is very strong. Dale will take us through the Killam's first quarter financial results followed by Robert who will discuss our revenue and expense initiatives for growing earnings from our existing asset base, as well as the ESG update.

I will conclude with the recap of our acquisitions in development pipeline. I will now hand it over to Dale.

Thanks Phil. Key highlights of Killam’s Q1 financial performance can be found on slide 4.

Killam achieved solid earnings growth in Q1, resulting in net income of $65.7 million compared to $27.4 million in Q1 2021. This increase is attributable to earnings growth from our same property portfolio, acquisitions, completed developments and fair value gains.

FFO per unit for Q1 2022 of $0.24 was up 4.3% from Q1 last year. An AFFO per unit of $0.20 increased 5.3%.

As shown on slide 5, 5.1% growth in revenue was the main driver of NOI growth in Q1. A 220 basis point increase in same property apartment occupancy coupled with a 3.3% increase in apartment rental rate led to this solid revenue increase.

The commercial and MHC portfolios also recorded strong top line growth. Despite inflationary costs that increased operating expenses by 8.2%, Killam recorded a 3.1% increase in same property NOI.

Slide 6 illustrates apartment revenue key performance indicators over the last five quarters. The same property rental rate increase of 3.3% in Q1 2022 was similar to Q1 last year.

Increased rents on unit turns drove this top line growth. As housing demand remains strong across our portfolio, we are seeing market rents continue to increase.

In addition with the tight rental market, we achieve same property occupancy of 98.0% in Q1. Incentive offerings remained below 1% of residential rent, targeted specifically in our Alberta markets where incentive offerings are commonly used.

Excluding Alberta, incentive offerings as a percentage of revenue represented only 0.3% of revenue in Q1. Total same property operating expenses increased 8.2% in Q1.

Please refer to slide 7. The increase was driven by a 21% increase in utility and fuel expenses due to higher natural gas prices across all of Killam’s regions with a weighted average price increase of 39% for the quarter coupled with increased consumption due to colder weather.

Oil and propane costs also increased significantly, up 47% from Q1 2021. As well Killam recorded a 5.5% increase in property taxes also contributing to higher than normal expense growth.

Natural gas and oil costs are most heavily weighted in Q1. In 2021, 43% of Killam's natural gas and oil costs were recorded in the first quarter.

Although gas and oil costs are expected to remain higher than 2021 for the remainder of the year, their waiting on total expenses is not expected to be as significant during the remaining quarters. Killam's debt maturity profile, which can be seen on Slide 8, includes average apartment mortgage rates by year versus prevailing five and 10 year CMHC insured mortgage rates.

With recent increases in bond yields, current borrowing rates are above Killam's weighted average interest rates. I'm pleased to report that we refinanced maturing debt in Q1, with new interest rates below expiring rates.

However, this is not expected to continue looking forward. Killam has $125.7 million of remaining mortgages maturing in 2022, with an average interest rate of 2.72%.

Refinancing at higher rates is expected to lead to increase interest expense. However, this increases expected to be gradual due to the staggered nature of our maturity date.

In addition, the majority of Killam's debt is fixed with only three million of variable rate debt outside of our construction lines. We've been focused on reducing our debt levels, for the last seven years and we end a Q1 with debt as a percentage of total assets of 43.3%, down 170 basis points from 45% at year end.

Following our successful equity raise completed in early February, we also have capital flexibility and in Q1 with approximately $155 million of capital available through our credit facilities. I will now turn the call over to Robert, who will discuss our operating results and initiatives in more detail.

Thank you, Dale. And good morning, everyone.

Please refer to Slide 10. Killam continues to expand its portfolio coast to coast.

And today we own and manage approximately 19,000 apartment units, 5,900 MHC sites in 39 communities and approximately 1 million square feet of commercial real estate. We keep our employees, residents, commercial tenants and unit holders top of mind when we execute Killam's long term growth strategy.

Specifically growing earnings from our existing portfolio, acquiring a creative properties as we diversify our portfolio geographically, and developing energy efficient high quality properties in our core markets. Killam's made excellent progress with each of these three growth strategies to date in 2022, despite higher energy costs and Realty tax increase.

Today, I will focus on Killam's first strategic priority growing earnings from our existing portfolio based on strong operational performance that optimizes revenues and manages expenses. Phil, will then conclude the formal part of this call with an update on new acquisitions and development.

Slide 11 highlights Killam's revenue growth, for the quarter by property segment. All three business segments of our portfolio performed well and showed the resiliency in Q1 2022, achieving 5.1% overall revenue growth.

The demand for apartments remains strong, with consistently high occupancy throughout the portfolio. In Q1 2022, Killam's occupancy increased 220 basis points, to 98% compared to the same quarter in 2021.

Killam's MHC portfolio generated revenue growth at 3.3%, with higher site rents and improved insolvent revenue being the two key contributors. The nine resort properties in the manufactured home community segment only operate May through October each year, so they do not impact Q1 revenue figures.

Presently, we are experiencing tremendous demand for the resort bookings throughout 2022, with near zero vacancy expected in Ontario and our new Brunswick resorts, are also forecasting record occupancy. Clearly, Canadians are becoming more comfortable coming together in groups.

Our 1 million square foot commercial portfolio includes three large properties, plus other smaller properties located primarily in Halifax and Manton. Together they contributed 2.5 million or 5.5% of Killam's NOI for Q1 2022.

The brewery market is a 146,000 square foot retail and office property in downtown Halifax, that is over 92% occupied. Westbound place located in Waterloo is a 300,000 square foot retailed and office property having 98% occupancy.

And our largest commercial property Royalty Crossing, is a 383,000 square foot enclosed mall in Charlottetown, that is now 92% occupied up 400 basis points in occupancy since the summer of 2021. Our new 4,500 square foot Sephora, will open the next month and we have secured a new recipe restaurant, as well as we are building a new BMO branch on the pad.

This property has lots going forward and it's going to grow as we go forward through 2022. The commercial segment achieved 6.9% revenue growth quarter-over-quarter, due to a higher rental rates and improved occupancy.

Our suite repositioning program is one of Killam's revenue optimizing levers for the apartment segment. We have increased a number of repositionings each year, for the last five years and expect to complete 600 suite repositionings this year, to meet market demand across the portfolio.

We take pride in how our property and capital project teams have fine-tuned the renovation of suite finishing processes. This provides our residents, with a high quality product that addresses demand for upgraded suites that are both functional and sustainable.

The repositioned units lease quickly with residents typically committed before the work is complete. The maximum downtime to reposition a unit is 28 days and Killam invests an average of $29,000 per suite.

The renovated suites earn as average 13% unlevered return on investment. With 150 suites repositioned in Q1 2022, we are on track to meet this year's target and expect to realize an additional $2 million in annualized revenue for the apartment portfolio.

Killam has a long term opportunity to reposition another 5,500 suites in our portfolio, as they become vacant over time. Further, this repositioning opportunity continues to cycle forward at the property's age.

The other essential component of our earnings growth is expense management. Please refer to slide 12.

With increasing costs, due to inflation and taxes, expense management has become even more critical. We closely monitor and analyze our property tax bills and appeal tax assessments as necessary.

Most recently New Brunswick raised assessments on Killam's properties by an average of 23% in 2022. The government agreed to review this increase and the final average increase is now 15%.

Killam will appeal these higher taxes. To help combat outsized tax increases and higher inflation, we are investing to improve economies of scale as we expand geographically.

With more units in each market, we can leverage relationships with suppliers and contractors, both regionally and in many cases nationally. Investments to achieve energy efficiency are also a priority at Killam.

Increasingly, Killam's commitment to sustainable practices throughout our portfolio pay dividends by lowering the consumption of fossil fuels, as we utilize photovoltaic panels and geothermal heat and air conditioning where feasible, especially in new construction. Further, submetering of water usage at the suite level has proven to save approximately 25% on water costs.

Killam has a responsibility to lower its carbon footprint and expects to invest a minimum of $8 million in energy related projects in 2022 to help meet our ESG goals, plus offsetting a portion of inflation impacted operating costs. Slide 13 is an infographic that encompasses the work we do to ensure our properties have a positive impact in our communities and minimize Killam's impact on the environment.

Since 2016, Killam has invested over $33 million in energy projects that make our portfolio more resilient, cost effective and use fewer non-renewable natural resources. By investing in renovation, sustainable solutions such as renewable energy and property level technology, we create a better home for our residents.

We're investing in over 400 electric vehicle chargers to meet the demands of our current residents, to also prepare for the increasing use of electric vehicles in the future. We are also pursuing building certifications that promote the best operating practices to deliver our residents industry-leading suites that promote even better health comfort and safety.

Yesterday, we published our 2021 ESG report and these ESG goals are shown on slide 14. We have already highlighted the environmental objective of Killam's ESG strategy.

Regarding social commitments, Killam has a civic duty to be a contributor to the affordable housing solution. We increased our supported and affordable housing portfolio by 108 new units to now total 850, representing 5% of our portfolio.

Killam is an active partner with many non-profit housing and government agencies, as well as other charitable organizations. In 2021, we increased our paid employee volunteer time to three days, enabling more time for our team to be directly engaged in our communities.

On the governance side, we believe a supportive and inclusive workplace benefits all employees. We commission a diversity and inclusion survey with an independent third party supplier, the Canadian Center for Diversity and Inclusion, to identify our employee diversification and assist Killam as we continue our equity, diversity inclusion and accessibility for all journey.

The partnership with CCDI has been invaluable, as our expert training advice and knowledge is very helpful. As well, continue to report and submit our ESG data to rating agencies to ensure we are meeting expectations and continually improving.

For more information on Killam's ESG work, please visit our website at killamreit/esg.com to download our 2021 report. Slide 15 shows that, in addition to our 2021 highlights report covers all our material ESG topics and has detailed information on our energy management, greenhouse gas emissions and climate related projects.

Killam's energy consumption and greenhouse gas emissions have been externally verified and more fulsome data tables contains the pertinent information. They're attached at the end of the ESG report.

I will now hand you back to Philip to provide an update on our developments and acquisitions.

Thank you, Robert. As stated earlier, we have started the year with $116 million of new acquisitions.

On February the 16th, Killam completed the acquisition of four unit apartment property in Halifax for $3.5 million. This building is adjacent to other Killam properties on Spring Garden Road and completes the lot consolidation for the planned future development, known currently as Medical arts.

On March the 7th, Killam completed the acquisition of a 24 unit apartment property in Waterloo for $7.9 million. The 46 [ph] building complex is located on a 1.2 acre property and has future development potential for up to 300 units.

On March the 17th, Killam completed the acquisition of a 5,000 square foot retail Plaza, containing three quarters of an acre, located adjacent to our Northfield Garden property in Waterloo for $3.9 million. This property, combined with surplus land already owned, will provide an opportunity to build up to 150 residential units in the future.

Slide 17 shows Craig Flower House, a 49 unit apartment property in the greater Victoria area that we purchased for $14 million or $286,000 per unit on March 31st. The property is fully occupied and has an average monthly rent of $1,123 per unit.

This acquisition marks the third for Killam in the greater Victoria area. On April 29th, we acquired 671 and 665 Woodbury Street located in Guelph Ontario for $25 million, $21 million for the residential building and $4 million for the adjacent lot.

671 Woodbury Street is a 12 story 84 unit concrete building that contains a mixture of one, two and three bedroom units. The average monthly rent is $1,218 and is currently 98% leased.

Subsequent to the quarter end, Killam has agreed to acquire two properties in Courtney DC for a total of $55.6 million. These assets are shown on slide 19 and 20.

The shores, located at 1849 and 1876 Riverside Lane contain two four-story wood frame buildings, containing 94 units. This new property has the mixture of one, two and three bedroom units and is fully leased with an average monthly rent of $1,641.

The residents located at 621 Crown Island, Boulevard contains one four-story wood frame building with 56 units. This is a new property that is a mixture of one and two bedroom units.

It is fully leased with an average monthly rent of $1,608. We expect to close both acquisitions during the third week of May.

These acquisitions will increase Killam's portfolio and Vancouver Allen to 516 units. One of the key areas of focus starting in 2022 was the completion in lease up of our developments.

The Latitude, which opened up in January is now 61% leased. The Kay, which just recently opened on April the 4th is already 57% leased.

And the Luma opening in June is currently 11% pre-leased. We anticipate these developments to contribute $2.2 million in NOI in 2022.

Slide 22 shows the rendering of the first two completed projects and the three remaining developments expected to be completed this year. Previously mentioned, two developments Latitude and The Kay have added an additional 232 units to our portfolio.

Overall, these five developments will add $240 million of high quality properties to our portfolio. Slides 23 to 27 show renderings progress photos in key financial information on the Luma, 168 unit development in Ottawa.

The Governor, a 12 unit development in downtown Halifax and Civic 66, 169 unit development in Kitchener. To conclude, we are very pleased with our Q1 performance, given that even by Canadian standards it was a long and cold winner.

I would like to thank our employees for the hard work and dedication during the Q1 period. We are optimistic for the future and we will continue to execute on our priorities and create value for all of our unit holders.

Thank you. I will now open up the call for questions.

Thanks. Good morning.

First question, just on the utility costs. Roughly, how much of that was related to the colder winter versus how much was related to the cost increase?

Just trying to get a sense of what we should think about utility costs going up for the rest of the year?

Hey Jonathan. I think, overall, when you look Atlanta Canada being a bigger piece, I think the rate increase was the biggest component.

Certainly some weather, but we saw as well as disclosed in the MD&A, some pretty significant increases in the cost of Nat gas, especially in Nova Scotia year-over-year. And then I think, that is likely to continue throughout the year.

It'll come down a bit after the winter for sure, but year-over-year comparison we would expect it to stay high.

Okay. So if you were, if overall was north of 20 in Q1, you'd expect 15-ish?

Is that the way to think about it?

I'd say that's reasonable. Yes we'll see.

It's going to change a bit by month in the spring versus the summer but I think that's reasonable place to start.

Okay. And then just secondly on the increase in interest rates and cap rates.

Have you seen any change yet in cap rates? And maybe just remind us your thought process on underwriting?

Because I noticed to the acquisitions that cap rates that are below current CMHC rates?

To answer the question, obviously we've seen the increase in the interest rates. The cap rates right now I would say no.

I mean there is starting to be a period where some of these properties are being marketed where the pricing is going. The properties that we bought I would say that they are full of upside potential in the next 12 to 24 months for sure.

And depending on even whatever the cost of the debt is for those properties, relatively speaking at 21 and $14 million $35 million it's a very, very small part of our overall portfolio. I just see that the reason why we bought them is because they have good growth potential in the years to come.

Okay. And then more generally speaking, if you'd be comfortable buying at cap rates that are equal to the tenure if you do see good growth in the assets?

Well, I think the bigger question is that again coming out of the fourth quarter being actively looking for product, executing and knowing the time lag it takes to look at a property, get it under contract and close. Basically where we are today, what we're looking at, you're looking at it from an underwriting point of view in a different environment.

So I think the question is a good question but the overall answer is we just got to wait and see what the next quarter to basically 180 days looks like from an acquisition point of view.

Okay. That’s helpful.

I’ll turn it back. Thanks.

Thank you. Good morning.

Good morning.

I wanted to touch on the higher rates as it pertains to how you look at the development. When you look at the pipeline you're targeting the 4% to 5% range but as you look out to future projects with this sudden and material increase in rates, are you thinking about moving those parameters or changing how you underwrite these projects and how you proceed with it?

And maybe the timing? Maybe share some thoughts on that front.

Well, I think we've actually for the 10 to 11 years that we've been building product on our own balance sheet, we've enjoyed very low-interest rates. And so that the overall cost of that line item has been virtually like has been very, very small.

Knowing that you're basically front-loaded in terms of your equity and you tend to get a lot of the cost at the back 20% of any development. So I think the bigger issue right now is looking out and basically figuring out where the pricing is going to the overall total development cost question.

And right now we have never seen such huge increases in construction cost. And I'm saying that in today's environment, not even three or four months ago, and especially not compared to two years ago when we started the current development projects that we are almost completing as we speak.

So the interest rate is definitely one question or one issue that we have to look at but it's really the overall cost and how much everything else has increased in the last basically three months.

Okay. So I guess when you're underwriting these then would you be looking for an even bigger buffer to guard against these risks?

I'm just thinking if there's a bit of a philosophical change in terms of how you approach future development projects or maybe is it too early for that?

I don't think it's too early. I think fundamentally it's the question where is pricing going in today's environment?

If you start to look at a project or even if you're trying to get a real budget in today's environment. And we really see it's a combination of a bunch of issues why pricing has really, really increased.

And right now you could say that there's an underlying element of it which is the commodity, which actually ends up being natural gas and oil. And will that come down over time?

And I think long term the answer is yes. So that should relieve some of these real costs that we incur.

The other is just basically some of the trades are taking advantage of their pricing power because the demand is so strong for their services. And really what's going to happen is that the construction side, which is the last thing the government wants to see is going to slow down, because people like ourselves are going to say, we got a great project.

We own the land, but maybe we can wait a year or two to see these pricing price points come down.

Okay. So maybe looking at the other side of the equation here, what are you seeing in terms of rental rates?

I guess, there's a few that have come online recently, are you getting rents that are at the higher end of your pro forma? And maybe do you see any sense that higher rents could offset some of these higher construction costs as well?

We are definitely seeing that we are meeting our pro forma's and exceeding them in all of our developments. There is such strong demand for new product.

Okay great. Just turning to the debt maturities over 2022 and 2023, it looks like they're about just over half that are CMHC insured.

So when you look at the near-term stack do you expect to refinance the majority of that like a higher percentage with CMHC debt? And maybe you can comment on what is the differential that you're seeing on the all in cost for CMHC versus non-CMHC insured debt?

I think, Dale's going to answer that.

Okay. Sure.

So, I'd say, mostly we are refinancing with CMHC. And we have been adding CMHC on some, that were not previously CMHT insured.

So that will continue throughout for the rest of 2022. In terms of the spread, it has come in, in terms of the conventional versus CMHC, the latest I'd heard I think we're probably at around 70 to 80 basis point differential.

So we'll still look to do CMHC when we can. And just to highlight too on the payment time for the second half of the year, just most of it we've already it was early actually in the first half of Q2.

So most of our, I'd say, two-thirds of our remaining re-financings have already been fixed. So our exposure is quite limited actually beyond those, for the second half of the year.

So that's positive for us in this volatile environment.

Okay great. And I guess as a proportion of the non-CMHC insured debt, like, how much of that do you think will convert to CMHC?

Was it a matter of just stabilizing some of them, or there are other attributes that didn't have CMHC or maybe that's how they were acquired? Just maybe give us a sense of, how much more could be CMHC insured.

I think overtime it's reasonable to expect that almost all of it will be. Sometimes when we acquire things that just the different circumstances timing or other longer term growth plans with the property may cause us not to put CMHC.

I think it's reasonable overtime that most will as long as the pricing still we have that advantage.

Okay great. Thank you very much.

I'll turn it back.

Thank you.

Thanks everyone and good morning. Just two questions from my end.

First off on the property tax outlook for the rest of the year, I know you got the lower assessments and you'll continue to fight them, but obvious, in addition to that, I guess the government announced a rebate on the provincial portion. So I'm just curious, if those events are included in your Q1 expense accrual, or if we can expect a little bit of relief over the next several quarters, once you incorporate these events?

They are included.

They are included.

They are. Okay.

So Q1 would be a good run rate for the rest of the year then, without any appeals -- successful appeals?

Yes.

We decided not to express it.

Yeah. Okay.

And then, just maybe if you guys could give us a little bit of color. Just curious, as to what you're seeing in New Brunswick and Nova Scotia specifically with the temporary rent caps that have been introduced.

Are you seeing a material impact on turnover? And how does that compare currently to maybe what you would've experienced 12 or 24 months ago?

Thanks.

We're not seeing a material impact, but there it is decreasing, but it's not material. And it's a trend that's been continuing for the last four or five years.

So we find ourselves at about 24 25% turnover. And it used to be 33.

Okay. That's it for me.

Thank you.

Thank you, Mike.

Hey guys. Just a quick follow-up on the turnover side of things, was there anything or would you say this quarter would be impacted by Omicron and just the pandemic in terms of a bit lower figures?

And then, also maybe if you could answer that, but also talk to what you're seeing in the spring leasing market so far in your various markets in terms of you don't have much vacancy to fill, but rental rates et cetera.

I don't think COVID or Omicron in particular has been a big impact in this year so far. I don't think it's caused people to stay in the same location and not in a big way anyways.

For your second part of that question Matt, I think maybe we all have contributed to it, but overall it's extremely strong the leasing. And the few pockets that we had higher than what we wanted in terms of vacancy being Disneyland, Ottawa and even Alberta, the spring leasing has been extremely strong.

Okay. And Ontario as well starting to see I mean you guys didn't have much in the cities but starting to see some pickup in strength there as well.

Especially in Ottawa the rest of our portfolio in Ontario has been very, very strong with really low vacancy. And I'll call it a surprise, but really it isn't surprise the leasing on the new developments is going extremely well.

Good. And then on -- sorry.

No, I was going to add to that a little bit Matt. It's Nancy.

I was just going to say too like yes. So, there's been a little bit of acceleration of what we've seen in market rent across the board in the last couple months even since the quarter ended.

But just to remember the first quarter for us especially of the 6,000 units that were renewed or turned 87% of them were renewals, right? So, it was a quarter that was really concentrated with renewals there's so many in Ontario and PI, so it's a very concentrated quarter.

So, you would see that average rent in that quarter but it would even out throughout the year.

Okay. Now that makes sense.

And on the Courtney market can you speak to what you like about it? Obviously the assets look like they're very high quality in the market.

But what was the justification for moving there? Is there an opportunity to do more on Vancouver Island and BC more broadly?

Well, I'll say a couple words and I'll turn it over to Rob who's actually out there in two of them before we made the offer. We look at that island of 780,000 to 800,000 people which is the size of new Brunswick and that distance in that area between Courtney and Victoria.

I mean it's all a very livable sort of world in terms of lots of nice little communities midsize communities. And it's basically very, very weather wise.

It has virtually no winter. It's green year round and people want to live there.

And so from us to have basically bookends from the top to the bottom and in between is opportunities in the future in terms of our MHC side of the business, but also other apartment markets. And that fundamentally is one of the big reasons why I'm happy to be investing on Vancouver Island.

Yes, the entire corridor is attractive north to south. It works well.

Courtney co-marked anchored by the military base has an excellent base for employment. There's a lot of tech stuff going on in that area as well.

And the assets themselves are very well constructed attractive. And their least up times where Phil was commenting earlier about how quickly it is happening here but on Vancouver island right now it's even faster.

It's a matter of weeks. There's such demand such pent-up demand for purpose-built multifamily.

So, it's great.

Okay, perfect. That's great color.

And the last one for me just on the financing side. There's a little bit of daylight between the five and 10-year bond yield right now and obviously there's been a pretty steep rise.

Are you inclined to go shorter in terms of financing at this point? Just maybe we don't all believe these interest rates I don't know what your philosophy is there.

Well, again, you're right, because for a good part of the last 90 days, it's been virtually seven, eight, 13 basis points spread. And we don't really have anything today that we got to make that decision on but that is obviously something that we'll be looking at as well through the rest of this year.

Okay. Thanks.

Appreciate the answers.

Thanks. So, just to follow-up on your investment stance and you talk about wait and see until to see what prices go.

But let's just say six months from now we are still in the same situation high construction costs skinny investing spread are you a buyer at today's prices or do you need the prices to go lower in order to move forward? And then maybe what do you think about buying your stock here?

Well, I think I'll answer your last question first. I mean the question about buybacks we will continue to review where we are relative to our NAV and basically in real time to see when does that make sense?

And also we'll be reviewing the trend in the industry. How many people are putting them in place?

The first part of your question basically what I see and I could be wrong is that for well capitalized companies like ourselves and even better capitalized companies like the pension funds they are still active buyers out there for a very high quality product. When you go down the food chain a bit, there are a lot of merchant builders or some that will basically figure out that they might be a little offside in terms of rising cost and even the cost to carry.

And I think over the next six to 12 months as we really see the effect of these higher interest rates trickle through the economy and through projects there's going to be opportunities. So, therefore there's a little bit of a wait and see opinion basically developing from within Killam’s shop.

Okay. Sorry.

I was more referring to just buying income producing assets today as opposed to building.

But even that it means the same. It's the...

Same answer? Okay.

Yeah. I mean there's one half of the equation out there for the long-term owner that has no debt.

He doesn't see it that way and he can still wait. There's a lot of product out there that has been built recently or has been bought in fairly recent times with a lot of leverage.

Those are the basically potential opportunities.

Okay. And then, just a quick one.

I was looking at the expense growth across the different markets and the portfolio in the quarter. Ottawa, Kitchener, Waterloo, they seem to be on the lower end 4% or 5%.

And then, the Atlantic markets the expense growth in the quarter was in the 10% to 12% range. I was wondering is there anything specific -- any specific drivers for those differences?

It's all about the gas and oil. I'd say that that's it.

And Newfoundland stands out this quarter, because it uses electric. It's all electricity, so it didn't have that exposure.

So, we would've seen much. It's a bigger piece spend in that gas and oil.

That's the story And property taxes.

All right.

We got hit.

Okay.

Right? That's definitely made a difference in the quarter in Atlantic versus other regions.

Okay. Thank you.

Hi, thank you. Maybe just coming back to the investment philosophy, that's been touched on a couple of times.

So, to paraphrase, it sounds like you think maybe cap rates can chop a little bit, if there's a bit of pressure on merchant builders and et cetera. Is the expectation from maybe higher cap rates going forward a function -- solely a function of the uptick in interest rates?

Or are you seeing, what I'd characterize as uncertain government policy or regulatory environment as leading to potentially higher equity risk premiums that are being attached to the sector by the private side not the social public, but with the private buyers that you're competing against? Is it's only a function of interest rates moving up or is there a bit of uncertainty on the regulatory environment that's potentially driving capital?

I think I don't know that I agree with a lot of what you just said on a lot of points. But I think the point that I'm trying to get across is that one I really might our belief of where cap rates are going, I think it's a little bit too early to tell.

What I'm trying to get across is that, there's some individual projects and assets that will start to struggle and therefore, you can take advantage of that if the owner has to sell. It mean the high quality assets are still going to demand the cap rate that is currently asking or is traded on recently, especially in the larger urban centers.

There could be a little bit of a trickledown effect in some markets. But -- and again, I think it's a little bit too early to tell.

The correlation between interest rates and cap rates the one thing that I'm not really agreeing with is the direct correlation that as interest rates go up, you're going to basically see cap rates move in these markets. And I say that because, we still have a supply issue in terms of new housing in the multifamily and in the single family.

And I don't see that part of the equation being fixed in any short period of time. So the pressure and demand for these assets will be there this time around.

Okay. Yeah.

I can appreciate that historically the correlation between cap rates and interest rates, that's actually been fairly low, so I got that point. I guess what I'm trying to understand is the sustainability of flat acquisition cap rates spreads in the market going forward.

But again, I think the message, again, we've communicated today is that from a total dollar acquisition, I don't really see a lot in our pipeline to finish out this year. And it's a little bit too early to see what 2023 is going to bring or 2024.

Our focus is on finishing up our developments, looking to see if we can actually start the next one. And basically, that's all I'm saying in terms of where we are in terms of acquisitions.

And even if there are a couple that come your way that you want to, I mean, these are 10 15 $20 million on a $4.6 billion $4.7 billion asset base. I mean the safe thing to assume, we're not going to go buy a $500 million or $1 billion portfolio at a three cap.

So, no, I wasn't referring to, specifically I was just saying the broader market sustainability of transaction.

I mean, again, I can only really comment on what we're going to do.

Okay. Just maybe one other question, in terms of the developments the 169 million of completions expected in 2022, what's roughly the amount of fair value gain taken on those projects to date versus the total anticipated?

Good question. Do we have that handy?

I would say, I would assume that, we're probably-well not assume, I mean, we're probably about we would've probably taken about a third of the fair value. To date, we've been taking it over the piece, but we remain on the conservative side until, it's least up and we really have clarity in terms of the stabilized NOI on that.

So expect more to come on fair value gains for those.

Okay. Thank you.

Thank you.

Hey, good morning, guys. Beyond utilities and property tax you managed to hold the expense line pretty much in check.

Do you expect to be able to hold the line on expenses for the remainder of the year? Are you seeing broader pressure and where are you seeing that pressure if so?

I think, we'd expect in the latter part of the year, a slight tick up in those costs. There's pressures on contract services and wage growth across the board.

So, we're obviously working to manage those, but we would expect a slight pickup from what we saw in Q1.

And what would be a good run rate, whether it be relative to Q1 or annual growth versus the prior year?

Yeah, probably in the 4% to 5% range.

And turning to your lists on unit terms you're hitting new highs yet, I think 8.5% in the quarter. Do you expect this to accelerate throughout the remainder of the year as market rents outpaced guideline and allowed increases in rent controlled markets?

We think, it'll steady. It'll go steady.

We won't see an acceleration of it.

Okay. Thanks.

That's I'll turn it back.

Well, I want to thank everybody for listening and participating today. And we look forward to reporting our second quarter results, which will be the first week of August.

Thank you very much.