Good afternoon, ladies and gentlemen, and welcome to Boardwalk Real Estate Investment Trust's second quarter 2022 earnings call. At this time, note that all lines are in a listen-only mode, but following the presentation, we will conduct a question-and-answer session. If at any time during the call you do require immediate assistance, please press star zero for the operator. Also note that the call is being recorded on August 10, 2022. I now would like to turn the conference over to Eric Bowers. Please go ahead, sir.
Thank you, Sylvie, and welcome to the Boardwalk REIT 2022 second quarter results conference call. With me here today are Sam Kolias, Chief Executive Officer, Lisa Smandych, Chief Financial Officer, James Ha, President, and Richard Anda, Head of Acquisitions. Please note that this call is being broadly disseminated by way of webcast. If you have not already done so, please visit bwalk.com/investors where you will find the link to today's presentation as well as PDF files of the trust financial statements, MD&A, as well as supplemental information package. Starting on Slide two, we would like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements.
Additional information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly filed documents. I would like to now turn the call over to Sam Kolias.
Thank you, Eric, and welcome everyone to our Q2 2022 conference call. Starting on Slide four, our performance with our GAAP and non-GAAP measures of FFO per unit, profit per unit, net asset value and unit holder equity, and fair value of investment properties all have seen an increase from the prior quarter last year. Slide five, our Q2 2022 FFO per unit growth is at 6.7% from the same quarter last year, reflecting a strong apartment rental fundamentals in our core markets. Slide six, our strategy to create value for all our stakeholders begins with our people. We are positioned and are so grateful for our extraordinary team who continues to innovate and deliver our places, homes for our resident members.
In turn, this leads to leading earnings performance which we believe will continue to result in strong total returns for all our stakeholders. Our strategic focuses are significant organic growth from utilizing our proven platform that focuses on operational excellence to optimize NOI growth. When we pair this with the current improvement in apartment rental market fundamentals on a solid foundation of some of the most affordable rents in Canada, we are well-positioned to accelerate on our organic growth trend. Accretive capital recycling focuses on opportunistic investment into acquisitions, development and investment into our own high quality existing portfolio with a tactical unit buyback. These opportunistic investments, combined with our operational optimization, have positioned Boardwalk for increasing asset values within Boardwalk's diversified and high-quality multifamily portfolio.
Our solid financial foundation provides flexibility on our balance sheet with our growing free cash flow and with CMHC insurance on 96% of our financings, which provides access to low cost mortgage capital with reduced renewal risk. Slide seven, we are in the right place at the right time, delivering solid growth. Boardwalk's existing exposure to strong rental demand, non-price controlled markets with increased immigration, significant organic growth as Alberta and Saskatchewan have some of the most affordable rental rates in the country, with limited new supply versus demand in both international and inter-provincial migration. Rising interest rates, making home ownership more expensive and rising construction costs are all widening the gap between our replacement cost of our assets and our current valuation. Construction levels remain low relative to historic levels and the stronger demand for housing.
In our largest market, Edmonton, the factors that have led to lower occupancy in the past are reversing now and helping to contribute to our overall significant occupancy gains. The economy is opening as restrictions have eased. International migration has returned as well as university students. Blue-collar jobs which can't work from home are now being filled again, and previous oversupply in Edmonton continues to be absorbed by an increase in demand and a flattening of new supply as many builders have moved to BC to build where there is a need for more supply. Overall, new supply in Edmonton continues to remain flat as condo construction has declined sharply, offsetting the sharp increase in rental construction. Apartment rental fundamentals are quickly moving to a low single digit market-wide vacancy, resulting in incentives dropping.
Slide eight, Alberta saw an increase of 15,000 full-time jobs in July, while overall in Canada, jobs decreased by 30,600 as per the most recent jobs numbers published by Statistics Canada. The economy and labor market in Alberta has significantly improved with our jobs minister expecting our economy to bounce back to 2014 levels. Per the Royal Bank of Canada June 2022 provincial report, strong growth is continued to be expected in Alberta with real GDP growth of 5.7%. In addition, Calgary has risen to third in the Economist Intelligence Unit annual list of the world's most livable cities, a record highest ranking, which makes Calgary the most desirable place to live in North America.
Real-time statistics published by the Calgary Real Estate Board reflect home sales in Calgary are moderating relative to a couple months ago, in part due to the recent increase in interest rates. Total sales and median prices remain slightly up so far in August compared to a year ago, reflecting continued strong demand for affordability. In addition to the positive impact that higher commodity prices are providing for our western Canadian markets with Alberta's fiscal budget now balanced, there has been a steady stream of investment and job creating announcements from the emerging technology and clean energy sectors. As of the most recent data, over 106,600 jobs are now vacant and available in Alberta, which is approximately 58% growth in job vacancies since May 2021.
Slide nine shows our large presence in affordable and non-price controlled markets, with Alberta and Saskatchewan representing 62.4% and 10.4% of our portfolio. Boardwalk's current market mark-to-market, which includes the reduction of incentives, averages CAD 145 per month and equates to a significant CAD 55 million revenue opportunity. Slide 10. Our markets and portfolio provide some of the most affordable rents in Canada when comparing to median incomes. In addition, projected population growth in our markets are outpacing new supply, leading to strong apartment rental and housing market fundamentals. Our available supply of affordability are a great opportunity for new and existing Canadians looking for a new affordable place to call home.
Slide 11 shows our retention continues to increase with our lower move-outs and stronger move-ins, leading to occupancy gains, with decreasing turnovers and a rising occupancy of approximately 97.1%. As per our appendix Slide 32, we continue to see more move-ins from out of town as more existing and new Canadians move back to Alberta and Saskatchewan. Slide 12 shows our key operational metrics with actual occupancy of approximately 97.1%. Incentives continue to drop, occupied rent continues to increase, with vacancy loss decreasing in the busier spring, summer season, resulting in an increase in revenue this quarter. Slide 13 shows continual improvement in net new and renewal rental rates. Year-over-year, we have seen significant improvements. With restrictions easing and favorable economic fundamentals, we are seeing growing strength in our apartment rental fundamentals, positioning us to capture our significant mark-to-market opportunity.
On Slide 14, which shows our quarterly sequential revenue growth of 2.2%, a significant increase from previous periods reflecting strong apartment rental fundamentals. This sequential revenue growth is our best quarterly sequential gain since 2008. We would like to now pass the call on to Lisa Smandych, who will provide us with an overview of our portfolio performance, balance sheet and repositioning results. Lisa?
Thank you, Sam. Moving to Slide 15. For Q2, 2022, same property net operating income increased by 2.8% as compared to Q2, 2021. Positive revenue growth was offset by an increase in operating expenses, largely the result of increased wages and salaries and utility costs. In particular, with the increased rental demand in Edmonton during the spring and summer leasing season, the trust incurred higher operating expenses to meet demand, which has positioned our Edmonton portfolio with higher occupancy heading into the fall. We have seen significant occupancy growth and incentive reductions in Edmonton, which will lead to revenue growth in upcoming quarters. For the six months ended June 30, 2022, same property net operating income increased by 2.1% as compared to the same period in the prior year.
Positive revenue growth in all provinces was offset by an increase in operating expenses, largely the result of increased utility costs as noted in Q1, 2022. The trust uses fixed price contracts to balance commodity price volatility, however, is not 100% hedged. For the province of Quebec, year to date NOI has declined by 4%, which is an improvement from the 8.8% decline in Q1, 2022. The majority of this decline is a result of increased expenses driven by increased utility costs and property taxes. The increase in property taxes is due to both an increase in property tax assessments as well as positive tax appeal in 2021, which did not reoccur in 2022. Slide 16 illustrates Boardwalk's mortgage maturity schedule.
Our mortgages are well staggered with approximately 96% of our mortgage balance carrying NHA insurance through the Canada Mortgage and Housing Corporation. This insurance remains effective for the full amortization of the mortgage, and in addition to carrying the government of Canada's backing, provides access to financing at rates lower than conventional mortgages with the current estimated 5-year CMHC rate of 3.7%. Though current interest rates are above the trust maturing rates, the trust maturity curve remains staggered, reducing the renewal amount in any particular year. Despite increases in interest rates, mortgage financing continues to be a low cost of capital available to the trust. Slide 17 summarizes our 2022 mortgage maturities.
To date, we have renewed or forward-locked approximately 60% of our 2022 mortgage maturities, as well as secured CAD 198.4 million in new financing, which included converting our construction loan on Brio to a CMHC-insured mortgage, as well as new financing related to our acquisitions. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates. Moving to the right of the slide, we provide a summary of Boardwalk's available liquidity. The trust is well-positioned with approximately CAD 64 million in cash and subsequently funded financings, as well as an undrawn CAD 199 million operating line. This approximate CAD 264 million in liquidity provides the trust with a flexible financial position. Slide 18. The trust debt metrics continue to improve with an interest coverage of 3x in the current quarter.
This continuous improvement is the result of strong financial performance led by cash flow growth. Slide 19 illustrates the trust's estimated fair value of its investment properties, excluding adjustments for IFRS 16, which totaled CAD 6.7 billion as at June 30, 2022, as compared to CAD 6.4 billion as at December 31, 2021. The slight increase in overall fair value is a result of increases in market rents at select sites and communities as market fundamentals improve, as well as adjustments to the trust vacancy assumption. In consultation with our external appraisers and supported by recent transactions, the capitalization rates used in determining Q2 2022 fair value are unchanged from Q4 2021. Current estimated fair value of approximately 194,000 per apartment door remains well below replacement cost.
Slide 20 provides a summary of the recycling of cash flow towards value-add improvements. To date, we have completed approximately 30% of total suite improvements, while aiming to complete 53% of our total portfolio, common area, and amenity spaces by the end of fiscal 2022. Our focus is to continue to deliver the best product, optimizing our capital allocation for our value add program to our targeted resident member demographic, so we can continue to provide the most exceptional, elevated experience at an affordable price. The result is increased market demand, exceptional value, and appealing returns with sustainable market rent adjustments. Slide 21 illustrates our stabilized renovation return for landmark towers located in London, Ontario, with a return of 16%, which exceeded our internal hurdle rate of 8%. Our renovations continue to garner positive resident member testimonials, driving referrals and higher occupancy.
I would now like to turn the call to Rick Anda to discuss our acquisitions and development. Rick?
Thank you, Lisa. In Q1, Boardwalk has opportunistically invested CAD 117.5 million, with no additional closings in Q2 2022. The Level located in Calgary, highlighted on Slide 22, was acquired for CAD 41.87 million, closed subsequent to the second quarter, 2022. Completed in 2020, the property is 99% occupied and will enhance our portfolio in South Calgary with operating efficiencies given its proximity to our Auburn Landing community. The acquisition has an initial cap rate of 4.75% and included the assumption of CAD 29.2 million of debt at a 3.18% interest rate. The trust continues to be active in sourcing accretive and opportunistic opportunities to expand. Slide 23 provides a brief update on our active development pipeline.
Our Brampton development, 45 Railroad, continues to progress on time and on budget with anticipated delivery of the first tower of the 365-unit marquee community in November 2022. Pre-leasing is underway and we are seeing strong demand. Our Aspire development in Victoria now has an approved development permit and construction is underway. We continue to progress on entitlements at our second development in Victoria area named The Marin. We have received third reading approval from council. Our expectations for yield and cap rate remain unchanged. As previously announced, we have now closed on another development site in Victoria called Island Highway, which will provide an opportunity to develop another estimated 250 units. Our development pipeline presents an opportunity for the trust to expand in under-supplied market of Victoria and scale our portfolio with much needed newly developed communities over time.
I would like to turn the call over to James Ha.
Thank you, Rick. Slide 24 provides our stakeholders with our current and relative view on sources and uses of capital. From a source standpoint, we believe that our growing internally generated cash flow
Property mortgage financing, as well as equity from non-core asset dispositions, currently represent the most attractive sources of capital for opportunities that arise. These capital sources can be used to fund accretive opportunities such as our continued focus on platform innovation, our value-add capital improvement program, new development, opportunistic acquisitions, and the investment in our own high quality portfolio at a discount to intrinsic value through our normal course issuer bid. In the second quarter, Boardwalk purchased and canceled 140,000 trust units at a volume weighted average price of approximately CAD 47. Since the reintroduction of our NCIB in November of 2021, Boardwalk has invested CAD 44.8 million in buybacks and continues to view this investment as an attractive use of proceeds from recent non-core asset sales.
Our team will continue to update our view on capital sources and uses on a regular basis and as market conditions change. Slide 25 provides detail on the exceptional value that Boardwalk's current trust units represent. Boardwalk's current trading price implies a value of approximately CAD 162,000 per apartment door and compares favorably to recent external apartment market transactions. Our NAV of CAD 70 per trust unit equates to CAD 194,000 per apartment door and represents an exceptional opportunity relative to market pricing and remains well below the increasing cost of replacement. Utilizing trailing 12-month property NOI on Slide 26, Boardwalk's current trading price equates to an attractive 5.3% cap rate on trailing NOI and is a significant spread to the current cost of available mortgage capital as well as current capitalization rates seen in transactions in our markets.
With our strong leasing trends and NOI growth in our portfolio through this inflationary expense environment, this cap rate represents an attractive option for the trust to continue to invest in our own high quality portfolio. Slide 27 provides a review and update of our 2022 expectations and guidance. Since the introduction of our 2022 guidance in February, we have seen a significant increase in both interest costs and utility prices and had adjusted our estimates in May to reflect the increased volatility in these line items.
With our strong performance in the second quarter aligning with our expectations for a strong spring and summer leasing season and the completion of 60% of our mortgage renewals to date, the trust is providing an update to our guidance to increase the bottom end of our FFO range with a 2022 forecast of CAD 3-CAD 3.15 per trust unit. Our same property NOI growth guidance is reiterated at 2%-5% with strong revenue growth partially offset by inflation in expenses. Our Boardwalk team is committed to leading in transparency and will continue to update our stakeholders in the event of any change in conditions that may materially impact our forecast.
On Slide 28, our board of trustees has confirmed our monthly cash distribution of CAD 1.08 per trust unit on an annualized basis, which is an 8% increase from the same period a year ago and has been declared for the next 3 months as shown on the slide. Trust continues to have an industry low payout ratio, providing significant cash flow reinvestment, positioning Boardwalk with ample capital for growth. As we continue to grow our free cash flow, our distributions will continue to grow alongside. Lastly, on slide 29, our third annual ESG report released earlier this year highlights and celebrates our team, resident, and community contributions to our collective environmental, social, and governance goals. Our ESG report, along with all our financial reports, can be found on our website at bwalk.com/investors. This concludes the formal portion of our presentation.
I would now like to open up the phone line for questions. Sylvie?
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please slowly press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, simply press star followed by two. If you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please slowly press star one now if you have a question. Your first question will be from Jonathan Kelcher at TD. Please go ahead.
Thanks. Good afternoon. First question, just on the renewals, overall for the portfolio in July, it dipped a little bit to 3%. Is that really just because of Quebec?
Hey, Jonathan, it's James here. You've got it bang on. We've seen that trend similar. You can see it on that slide as well, July last year. That's a result of the volume that comes out of Quebec and our volume of renewals that occur in that province for July first.
Okay. Overall, if I guess starting August, we could sort of think of the portfolio overall at 4%-5% and probably a little like 5% or 5% plus in Alberta?
Yeah, certainly that opportunity. I mean, the trend on the left-hand side there with our Alberta renewals continues to grow. As we talked about at our last conference call in May, our team is targeting adjustments in that 5%-8% range, primarily a result of incentive reductions. Those incentive reductions are a great opportunity for us to continue to grow these leasing spreads and to close the gap in terms of our loss to lease and mark-to-market opportunity.
Okay. Just switching gears to the cost side. I think this is around the time of year that you guys get a good sense on what property taxes are gonna look like. Do you have any color on that?
Yeah. Hi, Jonathan, it's Lisa. You are correct. We have received all of our bills from a property tax perspective. As we had previously articulated, we're looking at about a 3% increase year-over-year, and that's consistent with what we saw with the bills. As we always do, we will look at appealing some of those assessments. However, we don't consider any positive outcomes from those appeals until we have confirmation that they have occurred. Our estimates would not include any of those positive outcomes, potentially.
Okay. Sort of 3% bump. Okay. Just lastly, maybe just on the acquisition that you announced, maybe a little bit of color on that. Was that a marketed deal? Are you guys seeing any other opportunities?
It was an off-market offering. We liked what we saw in terms of its, the age and the quality of the asset.
Jonathan, it's James here. Just to add to Rick's comments, again, the huge appeal there is it was newly constructed, you know, and a great cap rate going in and a creative use of capital. There was some existing financing in place which, you know, allowed for fairly low amounts of cash to close. Most importantly, we're getting some great operating efficiencies in that pocket of town. We have an asset that is just down the street. You know, we'll be able to gain some operating efficiencies and really optimize the cash flow coming from that new acquisition.
Okay. It is fully leased?
Yep.
Sorry.
It is fully leased. It's Sam, Jonathan. Another key part of our decision to acquire is it's just blocks away from the south campus, the health center. That's a major employer, and health continues to increase in investment and jobs. This is a real great strong location with lots of health jobs that are permanent. It's got a real strong demand in that pocket. We're seeing very high occupancy in our Auburn Landing, and it's gonna increase our efficiencies as we discussed because we can operate this new community out of our Auburn Landing community and share resources.
Okay. Was that the developer you bought from?
The developer is Rohit Development. A great relationship with the Rohit Group and us. Great design, great quality construction. The price per door reflects great value for us as well.
As you know, Jonathan, it's James here. Just to add to Sam's comments, we're quite particular in terms of the layouts, as Sam was mentioning. You know, large units, good two bedrooms, great spaces and, again, really aligned with the demographic that we're expecting with that growing south end of the city.
Okay. That's helpful. I'll turn it back. Thanks.
Thanks, Jonathan.
Thank you. Next question will be from Kyle Stanley at Desjardins. Please go ahead.
Thanks. Good afternoon, everyone. What would you point to as the key drivers of the 2.2% sequential same property revenue growth trend that we saw this quarter? You know, like, would it be increased demand from students, job growth, attracting new residents into your markets in Alberta, affordability or, you know, a mix of the above?
The key is affordability, Kyle. You nailed that one, and that is the most significant driver. Our average in-place rents of about CAD 1,200 are a very small compared to the average asking price of rents in Canada are now CAD 1,700 as per the Rentals.ca. That is one of the last internet listing sites that publishes average asking prices across Canada. That is much lower. The average in Canada is much lower than the CAD 3,000 average asking rental price in Toronto and CAD 3,500 average asking price in Vancouver. We're seeing lots of migration from Toronto, Vancouver. The work from home allowing folks to come and move and live in Calgary, the most livable city in North America as per The Economist magazine.
Enjoy our mountains, our source of clean water and air as a result. That is a big driver. This is not a commercial. It's a great place to move to. Secret's out, more and more are moving back to Alberta. Lots of jobs as well. That's the other key driver. There's plenty of jobs to be filled. It's a real great place to be right now.
Okay, thanks. You know, you mentioned in your prepared remarks that the supply curve remains relatively flat in Calgary and Edmonton. I'm just wondering. It's been a few years since the last wave of new supply hit the market. You know, with fundamentals really starting to improve, are you concerned about a potential significant supply response in the near term?
Not yet. Simply because our average rent is still far below the CAD 2,500-CAD 3,000 dollar minimum. As costs rise, that rent requirement is gonna rise as well. That is helping a great deal keep supply abated. It's, you know, been a busy region in BC. Builders are really active in that market, and that's a market that's even more undersupplied, and that's where rents are even higher, and that's really where the resources and where we're seeing the activity. That's normally Alberta focused.
That's very evidently moved to British Columbia when we were on tour in those cities in British Columbia. We can see a lot more activity there than we do here. It's hard to find a crane in Calgary and Edmonton skies now. Very difficult. We saw one the other day, but again, it's few and far between versus the past and other cities.
Just maybe one more for me. The incentive burn-off seems to be continuing at a solid pace here. Is there a level either maybe as a percentage of revenue or total amount you see incentives use bottoming, or is the expectation that they will burn off fully moving forward?
RentFaster.ca is the most popular internet listing site. It's really hard, next to impossible, to find any incentives in Calgary right now, let alone availability. Incentives have completely evaporated in Calgary, for example, because overall the occupancy in Calgary market-wide is around 98%-99%. It's above 97%. Saskatchewan, Regina, Saskatoon, pretty well the same. Calgary clearly is the front-runner right now, and our availability in Calgary is under 1% at the moment. Whenever anybody gives a notice, we rent it right away, mostly by waiting list now. We're seeing a significant drop in incentives in Edmonton simply because our availability in Edmonton is very low single digit.
With that, our incentives are about half of what they used to be, if at all, in some locations that have under 2 or 1% availability. We then eliminate incentives in those communities in Edmonton as well. Incentives are dropping very quickly as we speak all over, and occupancy continues to rise.
Okay. No, that makes sense. That's it for me. I'll turn it back. Thanks very much.
Thanks, Kyle Stanley.
Once again, ladies and gentlemen, as a reminder, if you would like to ask a question, please slowly press star followed by one on your touchtone phone. Your next question will be from Jenny Ma at BMO. Please go ahead.
Hi. Good morning. Good afternoon.
Hey, Jenny. Jenny.
When you held your investor day, about a month ago, you had mentioned that, you know, Calgary has been doing very well and that Edmonton at the time was days or weeks away from having some real pricing power. I think the commentary from the prior question sort of points that direction. Could you expand on that and whether or not that's played out? Maybe an update also on the student demand in Edmonton as they head back to class in September.
At the end of July, we did reach below 2% availability as per our goal and ended up at 1.8% availability. Now we wanna clarify, availability is different than physical vacant units. We can have a physical vacant unit, but it is rented. Availability is more of a leading indicator of what our occupancy is gonna be. Our availability continues to be very low in Edmonton, and it's only the 10th of August. We can see below 2% availability at the end of this month as well and even get closer to that 1% is what we're really shooting for and working on. The incentives as a result are much lower. It is much easier to rent.
Rentals are very strong. You know, we're continuing to see our occupancy rise all over. Last month, to give you an idea, our availability at the end of July was 0.7% for our entire portfolio.
Jenny, it's James. Just to add to Sam's comments here. When we look at Edmonton, you know, our preliminary vacancy for August continues to improve. We are entering that optimal zone that we've talked about in the past, where we can get to that 3%-4% vacancy zone. You see on our leasing spread slide, when we highlight Alberta, you know, that growth that's occurring in Alberta in terms of leasing spreads on both renewal and new leases, a big portion of that is Edmonton and the inflection that we've seen in terms of pricing in Edmonton over the last couple of months.
The biggest opportunity that we have from our mark-to-market is the reduction of incentives there, and so we do anticipate continued growth there, especially, you know, to Sam's point, their availability is declining. Students are moving in as we speak. You know, over the next couple of weeks, we have seen a bit of a closing of that gap between availability and vacancy, as Sam was talking about. That's gonna allow us to turn down incentives over the coming months and quarters.
Okay. It sounds like there are still incentives being offered here and there in Edmonton. Is that correct?
Yeah. Very, very little. It really varies from community to community. I mean, we have several communities that, you know, have very, very low availability and have no incentives being offered, while others.
Okay.
You know, may perhaps have a little more elevated occupancy. We're leasing them up, and we may be offering half a month. You know, maybe up to one month at the most at this juncture. That's very similar in the market as well. You know, we encourage you to look up our peers and our competitors out there. There's not a lot of incentives out there in Edmonton, and that's on the basis of, again, the exceptional affordability. Rentals.ca, as Sam was talking about earlier, you know, CAD 1,200-CAD 1,300 dollar rents. I mean, Edmonton and Calgary have had some of the highest rent growth month-over-month according to Rentals.ca, but yet are some of the most affordable cities in Canada.
Right. Okay. With that in mind, I know Boardwalk has a self-imposed limit in terms of rent renewal rent growth. Are you seeing any impact on turnover in your Alberta markets because market rents are moving so high, or do you think that cadence of turnover is more or less close to historical levels?
Yes. A drop of between 10%-20% of move-outs for reasons to buy and purchase a new home, which is quite significant.
Okay.
We haven't seen that drop in quite a while. To give you an example in Edmonton, for example, we're seeing the biggest drop in move-outs. This month, right now we have 301 move-outs in Edmonton, for example. Last year, this time, we had 489 move-out notices in August last year. That's a significant drop, and we're seeing the biggest drop in move-outs. This is a great question and a great indicator of how the market in Edmonton has changed so quickly and has tightened up so much and the effect of rising interest rates as well. It's a combination, as well as Edmonton is actually the most affordable VECTOM, Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal City.
That compares to those other major Canadian cities. There's no other major Canadian city that offers better value in rental housing than Edmonton right now. We're seeing that have a big effect. There's no other real city that a person can move and find an apartment today. Edmonton is the last major city in Canada where you can still do that. Again, it's not a commercial. Do it quickly because it is filling up fast. If you're gonna move.
Okay. Are you seeing a similar declining trend in turnover in Calgary as well?
I'll pull up, Calgary. It'll just take a few seconds here. Calgary move-outs, 157. Last year was 214.
Okay.
Yeah, it's about a 25% drop in turnover. It's still early in the month. There's late notices that we do see. It's not gonna be as much as the turnover of last year, but again, we have to remind everybody there is gonna be late notices that's gonna add to that turnover amount.
Right.
By month, that turnover amount will be higher. That's good news for renters and people looking for housing because there's always turnover. You know, there's just a requirement of more time that's needed to rent an apartment right now.
Right. Okay, my last question is on same property operating expenses in the Quebec portfolio was up dramatically higher than all the other markets. Was there anything particular happening there or was it more of a one-time phenomenon?
You know what? I think, Jenny, I tried to address some of that, I guess, in my speech remarks. We did see, we have seen pressure on the utility side. The cap-and-trade system in Quebec is a little bit more punitive from a carbon tax than we do see in some of our other provinces. We did have, sort of consistent across the board, a little bit of inflationary pressures on the wages and salary side. That's just, a bit what the markets are demanding, but nothing other than the utilities and property taxes as we spoke to. I think there was nothing else of, sort of, significant to note.
Okay, great. Well, thank you very much. I'll turn it back.
Thank you, Jenny.
Your next question will be from Johann Rodriguez at Industrial Alliance. Please go ahead.
Hey, guys. I had to step away for a bit. I missed a couple questions, so I apologize if this was asked. A couple of your peers have talked, given you know where equity pricing is, about, you know, in terms of capital allocation, maybe capital recycling and selling some assets, you know, to fund parts of the business. Is that something you guys are considering? Are there pockets of the portfolio that you guys would call or consider listing?
Hey, Johan, it's James here. You know, consistent with our strategy or approach over the last few years, you've seen us recycle capital. You know, we're evaluating our portfolio every single day. You know, with non-core assets, we certainly will take advantage of the opportunity to, you know, go into the market, recycle those assets, take that capital and redeploy. You know, similar to, you know, what we've done over the past several months is recycle that same capital into stock buyback. That is a trade that we're happy to do, especially at these price levels. You know, from our standpoint, Johan, I think it's safe to say we're certainly looking at that. We'll evaluate that each and every day, and we'll keep everybody posted on that.
Okay. Just my second question would be, you know, you've seen out east in some of the VECTOM markets some movement on cap rates, you know, upwards, specifically Montreal and Ottawa. You know, I know you guys have said repeatedly that Alberta, both Edmonton and Calgary, are doing really well right now. You haven't moved cap rates this quarter, but is there some sense, either from transaction data or just anecdotally that, you know, in the coming quarters, there's an expectation that you know, cap rates in those two markets or any of the smaller Alberta markets might need to move upwards?
Yeah, we've seen limited transactions so far. There have been some, you know, and I believe we highlight one of them on Slide 25 that did close, just last month. You know, those cap rates remain fairly similar to what they were, you know, prior to what we've seen occur with interest rates, back in March, April. You know, I think one of the key attributes that we have to remember with our Western Canadian markets here is we are seeing some strong rental rate growth and some revenue growth. In addition to, you know, the cap rates that we've had coming into this higher rate environment were already elevated.
It was one of the few markets that had positive leverage relative to the cost of debt capital that has allowed our markets to stay fairly resilient. There is some assets that are in the market, including some from our peers, and so we're excited to see kind of how and where those transact. From a cap rate standpoint, again, knowing that we were a little more elevated coming into this environment certainly gives us, in our markets, we believe anecdotally a better opportunity to remain fairly fixed and not see the same increases that perhaps other markets are.
Okay, thanks. I'll turn it back. Thanks, guys.
Thank you.
Thank you.
Thank you, operator.
Please go ahead.
Thank you, operator. As always, if there are any further questions or comments, please do not hesitate to contact us. With gratitude, we would like to thank our extraordinary team, loyal residents, CMHC, our lenders, our unit holders, and all our stakeholders. It really is all about our people whose huge shoulders we stand, and as leaders, we continue to do everything we can to support continued growth and extraordinary. We really can't thank our extraordinary team and great leaders enough. We are pleased with our improving results on the foundation of exceptional value we continue to provide our resident members, our investors, and all our stakeholders. Our home is much more than a place or a location. Our future is family, where love always lives. What can be more important when choosing where to call home? Thank you again, everyone, for joining us this morning.
God bless us and grant us all peace.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.