Thank you very much, and I'd like to say thank you to everybody for joining us today on Q1 results call for Morguard North American Residential REIT. Joining me today, we have Rai Sahi, Chairman and Chief Executive Officer; we have Angela Sahi, Senior Vice President, in-charge of Canadian Operations; John Talano, Senior Vice President, in-charge of U.S.

Operations; Beverley Flynn, Senior Vice President, General Counsel; and Chris Newman, Chief Financial Officer. So I'll now turn the call over to Chris for some comments before we open it up for questions.

Thank you, Paul. As is customary, I'll provide comments on the REIT's financial position and performance.

In terms of our financial position, the REIT completed the first quarter of 2022 with total assets amounting to $3.7 billion higher compared to $3.5 billion as at December 31, 2021, resulting from a fair value increase on the REIT's income-producing properties of approximately $247 million. The value increase is a result of cap rate compression realized on most of our U.S.

portfolio as well as increases in underwritten NOI in both the U.S. and Canadian properties.

The REIT finished the first quarter with $31.2 million of cash on hand and $60 million advanced to Morguard Corporation under its $100 million revolving credit facility, providing the REIT with $160 million available under the credit facility. The REIT completed the first quarter with $1.1 billion of long-term debt obligations.

And as at March 31, 2022, the REIT's overall weighted average term to maturity was 4.7 years, a decrease from five years at December 31, 2021, and weighted average interest rate remained unchanged at 3.31%. The REIT's debt to gross book value ratio improved to 37.3% at March 31, 2022 down compared to 40.2% at December 31, 2021.

And the REIT's IFRS net asset value at $34.89 per unit as at March 31, 2022 compared to the current market price of approximately $19 reflects a compelling entry point for our investors. Turning to the statement of income.

Net income was $171.1 million for the three months ended March 31, 2022 compared to $27.4 million in 2021. The $143.7 million increase in net income was primarily due to a higher fair value gain on real estate properties of $219.3 million relative to the gain recorded during 2021 and was partially offset by an increase in the fair value loss on Class B LP Units of $39.3 million, reflecting an increase in the REIT's unit price during the first quarter and an increase in deferred income tax expense of $37 million correlating with the increase in fair value on the REIT's U.S.

properties. IFRS net operating income was $17.4 million for the first quarter of 2022, an increase of $2.2 million or 14.8% compared to 2021.

The change of foreign exchange rate amounts to $0.6 million of the overall $2.2 million variance to last year. And on a same property proportionate basis, NOI in the U.S.

increased by US$2.4 million or 16% as an increase in revenue from AMR growth and lower vacancy was partially offset by higher operating expenses. NOI in Canada decreased by $0.4 million or 3.2% mainly due to higher operating expenses, partly offset by growth in AMR and lower vacancy, and the change in foreign exchange increased NOI by $0.8 million.

Interest expense increased by $2.8 million for the first quarter of 2022 compared to 2021, primarily due to an increase in the non-cash fair value loss on the convertible debentures conversion option of $2.6 million and an increase in interest on mortgages of $0.3 million. The REIT's first quarter performance translated into basic FFO of $18.3 million, an increase of $2.7 million or 17.2% when compared to 2021.

And on a per unit basis, FFO was $0.33 per unit for the three months ended March 31, 2022, an increase of $0.05 compared to $0.28 per unit in 2021. The increase in FFO per unit was due to the following: and on a same-property proportionate basis in local currency, an increase in NOI from higher AMR and lower vacancy, partly offset an increase in interest expense and trust expenses overall had a $0.03 per unit positive impact and a change in the foreign exchange rate had a $0.01 per unit positive impact, primarily resulting from an increase in FFO generated from the U.S.

properties. And an increase from the contribution of the REIT's development property, which reached stabilized occupancy in October 2021 had $0.01 per unit positive impact.

The REIT's FFO payout ratio was 53.8% for the three months ended March 31, 2022, a very conservative level, which allows for significant cash retention. Operationally, the REIT's average monthly rent in Canada increased to $1,556 or 3.1% compared to 2021, reflecting the quality of our Canadian portfolio.

During the first quarter, the Canadian portfolio turned over 3.7% of total suites and achieved 15.5% AMR growth on suite turnover. In addition, approximately half of the REIT's Ontario properties received a 1.2% guideline increase during the first quarter as a result of last year's rent increase.

While in the U.S., same-property AMR increased by 9.6% compared to 2021, having an average monthly rent of US$1,566 at the end of March 31, 2022, as the REIT continued its strong performance benefiting from strong market fundamentals across many regions. The REIT's occupancy in Canada finished the first quarter of 2022 at 93.8% compared to 93.6% at March 31, 2021.

During the first and into the second quarter, we began to see increased leasing activity and the number of suites leased. Occupancy has improved during April and currently sits at 94.4%.

Same-property occupancy in the U.S. of 96.2% at March 31, 2022 was higher than 95.1% at March 31, 2021, continuing the positive momentum experienced last year.

During the three months ended March 31, 2022, the REIT's total CapEx amounted to $3.9 million that included revenue enhancing in suite improvements, common area, and exterior building as we also continue to ensure we maintain the structural and overall safety of our properties. And the REIT's collection of rental income during the three months ended March 31, 2022 continues to be materially in line with our historical collection rates.

At this time, I'll turn the call back over to the moderator for any questions.

Thank you, and good afternoon. Maybe starting down in the U.S., obviously a really, really good result out of the U.S.

portfolio. Almost 10% rent growth or what are you guys seeing so far, how much longer you think you can kind of push rents at this level.

And has there really been any pushback from tenants on in markets where there is been some of the larger increases?

Thanks. John, do you mind handling that question?

Not at all. I would say that our biggest gains have been in Florida and those we're not getting a whole lot of pushback, we are very strong with our occupancies.

A lot of it has to do with the residential housing market. So folks are selling their homes and quite frankly, don't have a place to go.

So they are moving in with us. Those are by far the strongest, it is still going strong, but I think as interest rates rise that will – that will soften a bit.

We are also getting very strong results in most areas across the country to a lesser extent. But right now, we are not getting pushbacks and we put out our renewals about 120 days out.

So that could give you a perspective, those are coming in our occupancies are good. We don't have a significant amount of turnover headed over the next several months.

Okay. And then on the – I think you guys announced that you've agreed to dispose of two assets.

Just wondering to get some color around the genesis of those dispositions and if there's any other dispositions coming down the pipe?

Yes. This is Paul.

I'll start John, maybe I'll turn it over to you. I mean, I don't think it's any secret.

Lorne, what we are seeing is, really unprecedented demand for multifamily properties, particularly in Sunbelt states. So we're sort of taking the opportunity, while that demand is there to – a little bit of the portfolio and generally these are properties where we see challenges down the road, whether it's because of age or competitive factors in the market, so that's really kind of the rationale behind it.

John, is there anything else you wanted to add specifically on that?

Just that there are older properties, as Paul mentioned, some capital coming down the pike sooner than later, and an opportunity to reduce the overall age of the portfolio and make sure that we have some nice relevant product going into the future.

Okay. And then maybe just following on that is, are there any markets or any sort of acquisition opportunities you're seeing that you can recycle the capital into?

Yes. We're actively looking in all of our existing markets, and we're touching a few new ones, but I can't comment exactly on everything we're looking at, but we're very active and looking to source some new deals.

Okay. Great.

Thanks so much for the color, everyone. I'll turn it back.

Thanks, guys. So just on those two assets, what's the – what were the cap rates on those assets?

From a cap rate perspective, like if you, I mean, the only thing I'm going to comment on is measuring it on trailing income. So based on trailing income, Jimmy, these would be three caps, like very low threes.

Low threes. Okay.

And then – so when I look at the remaining assets, if I understand correctly, so those are older assets, potentially more competition coming down later on. So the remaining assets, you only got one in Atlanta now, and then a couple in New Orleans.

Is there, you guys are marking them up at, I believe cap. And so is there any – is this just conservatism that you've built into your values or is it that it's based on a more stabilized, higher rent?

How do we think about that?

Yes. I mean, a) there's definitely a bit of conservatism built into it.

I mean, b) we would look – typically we would look for several quarters of evidence in the transaction market before we make a move on cap rates. So we're starting to see is that evidence, so we wouldn't sort of – wouldn't necessarily take it all the way down to a three say for the other Atlanta properties.

You'd want to see, like I said, a bigger body of evidence before you sort of take it to that extent. So that that's generally a rationale in our thinking on those Cap rates.

Yes. That makes sense.

Although like other transactions that presume the market is reasonably deep, like, would they not be in that same type of range?

Yes. They're in that range, but again, we're just – we're looking for a bigger body of evidence over a longer period of time.

Not to say that that transaction evidence is not there. The other thing to do is we don’t think it's going to last forever, right.

So everyone, including our auditors are in agreement. We don't want to see cap rates get compressed to three.

And especially in the interest rate environment, two quarters from now, they could be back to four and a half and you get that whipsaw. So everybody's, pretty much on the same page, you take them down gradually as opposed to, taking them down on a steep curve.

And Jimmy further to add. Combined with Q4, we've moved them about 50 to 75 basis points between the two quarters.

So we have moved them relatively quick recently. As Paul says, we're going to maybe wait and see in the next quarter or two of what the market's telling us.

Yes. That makes sense.

And just on that sort of you guys have been doing this for a long time, like, based on your experience, how do you see the asset pricing trending from here on given the rise in rates, on both sides of the border. I'm curious to know how, how you thinking about that over the next little while.

Yes. I mean, the boil has to come off because you can't – today you'd be financing those assets at negative leverage, right.

With fixed interest rates being pretty meaningfully higher than the cap rates that I mentioned a couple of minutes ago. So I mean, the boil has to come off.

We talked to a lot of prospective purchasers of these assets, there are some cash buyers out there, but everybody to some extent needs leverage. So we see the slowing down, I don't know if it's one quarter, two quarters, three quarters from now, but we definitely see it slowing down at some point.

Okay.

But there is a lot of cap, there is a lot of capital chasing the assets as evidenced by the pricing.

Right. Okay.

And would in terms of the use of proceeds, I know there's cross-border issues that could happen in tax issues with share buyback. You are going to buyback one of the auctions that you'd contemplate in terms of use of proceeds?

Yes. We have an NCIB open, we haven't been very active on it, but it's something that we're looking at and thinking about.

The REIT is still very liquid in Canada, so there's no constrains from that perspective and we'll likely look to redeploy the capital from the sales within the U.S. rather than repatriating.

Okay. Thank you.

Thanks. Afternoon, everyone.

Just a quick question on that debt refinancing on the Palm Beach County asset, looks like you materially increased that refinance. Was that rate at 419 a reflection of a higher LTV?

Or is that just kind of where the market has moved to?

More the latter, just kind of where the market has moved to, everybody knows USTs have traded up just like the GOCs have. And these are kind of getting priced out at a pretty typical spread, 150, 160 over plus, there's a bit of cost in there, you are trying to lock these rates kind of 90 days forward.

So there's some friction costs with the lender, which more or less like an embedded kind of hedge. So, yes, I mean, I think that's typically the rate these days.

Okay. So I guess that it does kind of tie back into Jimmy's question about where cap rates have gone, where you guys see them going to and what Paul said about the negative here.

I guess that's the environment we're in. In terms of those asset sales, if you do not avail yourself of a 1031 role, would you have triggered a taxable gain on those?

Yes. I mean, there will be taxable income for sure just based on the sale price, right.

Okay. So they were above your – were they above your carrying value?

Yes.

They were. Okay.

That's it for me. Thanks, guys.

Thank you.

Okay. Thank you, again.

We would like to thank everybody for attending the results call today, and we will speak to you next quarter. Thank you.