Earnings Call: Q1 2021

May 6, 2021

Morning, ladies and gentlemen, and welcome to the Killam Apartment Real Estate Investment Trust First Quarter 2021 Financial Results Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, May 6, 2021. I would now like to turn the conference over to Philip Fraser, President and CEO. Please go ahead. Thank you. Good morning and thank you for joining Killam Apartments REIT's Q1 2021 Conference Call. I am here today with Robert Richardson, Executive Vice President Dale Noseworthy, Chief Financial Officer Aaron 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 statements. Thanks, Phil. This presentation may contain forward looking statements with respect to Killam Apartment REIT and its operations, strategies, financial performance, conditions and otherwise. The actual results and performance of Killam discussed here could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding forward looking statements. 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 at SEDAR. Unless otherwise stated, all forward looking statements made today speak only as of today's date. Unless otherwise stated, All forward looking statements speak only as of the date of which this presentation refers and the parties have no obligation to update such statements. Thank you, Nancy. We are pleased with our financial and operating results for Q1 2021. Our employees' commitment to our residents over the last 15 months has been exceptional, and we are very hopeful that the speed of vaccinations will increase throughout May June, and the number of cases across the country will trend down. Our 2021 targets were introduced In the Q4 2020 MD and A and are outlined on Slide 4, showing the year to date performance. We have made good progress in Q1 with all of our targets, which reinforces our strategy and commitment to the long term viability and sustainability of our core markets. Dale will take us through the Killam's 1st quarter financial results, followed by Robert, who will discuss our initiatives for growing our existing asset base. I will conclude with Thanks, Phil. A summary of Killam's Q1 2021 financial performance can be found on Slide 5. We started the year with strong financial results, highlighting the underlying strength of our key markets. In addition, in Q1, we added 2 33 new units to our portfolio in Calgary, along with a small property in Moncton and 3 pieces of land adjacent existing Killam assets for future development. We achieved 4.5 percent FFO per unit growth and 5.6 percent AFFO per unit growth in Q1. Please refer to Slide 6. FFO and AFFO growth was attributable to increased NOI from strong same property performance and incremental contributions from recent acquisitions and completed developments. This growth was partially offset by a 5.2% increase in the weighted average number of units outstanding. Killam's same property portfolio achieved NOI growth of 3.1 percent and a 60 basis point improvement in operating margin. Rental rate growth remains strong compared to Q1 last year, driving overall same property revenue growth of 2.1% in the quarter. Operating expenses increased only modestly as higher property taxes and general operating expenses were modestly offset by a reduction in utility costs. Clive's Slide 7 highlights key drivers of our 2.1% increase in same property revenue in Q1, including rental rate growth, occupancy and incentives. Overall, rental rates in March 2021 were up 3.3% compared to March 2020. As this is a March to March measure, it captures the impact of all leasing activity in the last year. In the MD and A, we also highlight recent leasing trends, including the rental increases, which came into effect during Q1. Although recent rental increases on unit renewals in Q1 were lower than the Q1 last year because of current provincial rent freezes and restrictions, We achieved healthy lifts on turns in Q1, including 4.4% on regular turns and 26.4% on repositioned units. Killam's same property apartment portfolio achieved 96.6 percent occupancy in Q1, a 100 basis points lower in Q1 2020, but in line with the healthy occupancy we experienced prior to the record highs of 2019 2020. Decreased occupancy was largely property specific and I'm pleased to report that we're seeing improving occupancy trends post Q1. Incentive offerings remain limited and focused primarily in Alberta, St. John's and very specific properties with occupancy challenges. Overall, Killam reported incentives of 60 basis points of total residential rent for the quarter, relatively in line with the last few years. Slide 8 breaks down operating expenses by category. General operating expenses were up 3.3% compared to Q1 last year, largely due to increased wages for frontline staff and higher insurance premiums. Property tax expense increased 3.2% from Q1 twenty and Investments wherever possible to minimize these increases. These higher operating expenses were largely offset by 6.1% savings in Heating, Fuel and Utilities. These savings were a combination of lower natural gas pricing in New Brunswick and Nova Scotia and decreased natural gas consumption due to milder winter weather and the continued rollout of energy efficiency projects. We also realized a decrease in electricity expense related to savings from LED lighting retrofits, warmer temperatures and a reduction of utility being included as part of a tenant's monthly rent. Slide 9 highlights our debt maturity profile, including average apartment mortgage rates by year versus prevailing CMHC insured mortgage rates. We realized a 55 basis point reduction in interest rates on The $10,600,000 of mortgages that were refinanced in Q1 2021 and expect continued opportunities to refinance at lower rates for mortgages coming up for renewals throughout the year. Slide 10 includes key balance sheet metrics. We are maintaining a conservative balance sheet and ended the quarter with debt as a percentage of total assets of 45.5 percent, below our target for the year of less than 47%. In addition, Killam finished the quarter with acquisition capacity of over $240,000,000 We're well positioned to execute on our growth plans for the year. I will now turn the call over to Robert, who will provide color on our rating initiatives. Thank you, Dale, and good morning, everyone. Growing earnings from our existing portfolio was a key component of Killam's strategy. Decision to move rents takes into consideration the financial demands on our tenants and the evolving economic climate in our communities and globally. Killam's portfolio of properties benefits from the deployment of the innovative approaches that grow our revenues and manage our expenses. Slide 11 highlights 4 key initiatives we are executing at Killam to grow net operating income from existing properties. Killam offers a range of housing options in each of its markets. We have always maintained a very responsible approach to increasing rents for existing tenants. Killam's portfolio has a wide selection of locations, unit sizes and layouts throughout its urban markets and suburban communities, With an average rent of $1.42 per square foot or $11.33 per unit For Killam's same property portfolio, this represents considerable value and accommodates a diverse group of residents and potential tenants. Please refer to Slide 12. As previously noted, same property rental rates improved 2.9% for the Q1. Renewing rents averaged 1.3% increase for the quarter versus 2.1% in Q1 2020. Please note, Nova Scotia renewal increases are currently capped at 2% during the state of emergency in the province, and both Ontario and BC have temporary rental rate freeze is in effect. These measures are expected to dampen rental rate growth on renewals for most of 2021. And as a consequence, The majority of Killam's rental growth this year is expected to come from unit terms. The blue bar chart on Slide 12 shows the average rental rate growth by quarter And further, provides a breakdown of the rent achieved on renewals with the green line and on turns with the gray line. The chart on Slide 13 provides additional details on rental rate growth for renewing tenants by month for the past 24 months. These charts demonstrate that Killam's mark to market opportunities remain strong and based on a 29% Annual turnover can be realized in a relatively short time. The pandemic has not mitigated Kilometers' determined focus on its suite repositioning program, an impressive revenue growth lever for Killam. After successfully upgrading 4 95 suites in 2020, We have targeted 550 repositionings for 2021. Details are provided on Slide 14. During Q1 2021, Killam invested $3,400,000 in unit repositionings, completing 149 unit upgrades and achieved an average unlevered return on investment of 12% based on an average renovation cost of $25,500 per unit. I want to highlight Killam only undertakes repositioning as units become vacant. We emphasize minimizing the downtime for renovation work and provide our residents with the best finishes based on appeal, functionality and durability. The return on cost per unit varies slightly quarter to quarter depending on the mix of units repositioned across the portfolio. These capital investments not only achieve Rental growth, but also improved the efficiency and market acceptance for Killam's properties. On the expense side, we are investing in expense Saving initiatives to deliver strong returns on investment. Killam's 2021 energy plan It's important as we are determined to lower Kiln's utility and heating costs, decrease consumption and reduce Kiln's carbon footprint. On April 1, 2021, we released our 2020 ESG report, which details how Killam incorporates environmental, social and governance principles and its operating and business strategies. With oversight from Killam's Board and championed internally by management's sustainability committee, Much progress was made on our ESG journey in the past year. Please see Slide 16 for highlights. Along with our energy initiatives, we added more rigor to our energy and greenhouse gas data by commissioning an independent review. This ensures we have an accurate baseline for measuring our performance in the years ahead. We advanced our culture of diversity and inclusion by partnering With the Canadian Centre For Diversity and Inclusion, it required mandatory diversity training for all management employees, as well as a host of additional training for our entire team. We have much more work planned for 2021. We understand the housing affordability issues in Canada and we are committed to being part of the solution. For example, with our purchase of Nolan Hill in January, we now have more than 8 25 subsidized affordable housing units across our portfolio. In addition, we donate furnished suites to hospitals in our markets and contribute financially to an array of community organizations. We enhanced our public ESG disclosure, reporting in accordance with all three global reporting standards, giving more attention to Killam's material ESG aspects in our business. And lastly, we set out 5 to 10 year medium term ESG targets as shown on Slide 17. We will work towards and measure our progress against these targets annually. Adjustments to these targets may occur with more time, information and the evolution of technology as we pursue carbon neutrality for Killam's portfolio in the long term. I want to finish my comments by speaking to Killam's COVID-nineteen management and emphasize that Killam's priority continues to be the health and safety of its residents and employees. We have a pandemic illness plan and a wide range of policies and procedures to reduce and or mitigate the spread of the virus. Our committed employees across the country adapted quickly to changing circumstances, we're very grateful for their dedication and good work. We support them by offering additional flexibility in work schedules and increased compensation for our frontline employees. I will now hand you back to Philip to provide an update on our development and acquisitions pipeline. Thank you. Thank you, Robert. Slide 19 shows the 2 purchases completed in early 2021. Both were disclosed with our Q4 of 2020 results in February. On the Nolan Hill development, we placed mortgage financing through CMHC's rental and Financing Initiative and have 78 units at 70% of the market rent. This is Killam's most recent commitment to increasing affordable housing for the Alberta market. We are now in the lease up phase of this development along with the lease up of 2 new developments in Charlottetown. Slide 20 graphs the strong lease up of all three developments. The Shorefront in Charlottetown opened in October 2020 and is now 78% leased. Nolan Hill opened the end of January and is 75% leased with less than 5 market units remaining to be leased. The remaining units are affordable units, which we expect to have fully leased in the near term as we finalize our affordable housing partnerships. Lastly, the Harley opened in March and after just 2 months is 63% leased. We expect All three developments to be fully stabilized by Q3 2021. The 349 new high quality units Added to Killam's portfolio in the past 6 months, again reinforces how Killam's development pipeline continues to be a key driver of net asset value creation. 5 developments are currently underway in Ottawa, Mississauga, Kitchener and Halifax. Slide 21 shows the approximate 500 units over the 5 projects, which will add $237,000,000 of new product over the next 18 months. These properties will start delivering FFO Growth in 2022. Construction activity progressed as scheduled on all projects with only slight delays experienced due to various levels of restrictions and lockdowns in each province relating to the COVID-nineteen. We have seen some increases in construction costs. For example, slight increases in costs at the Latitude shown on Slide 22. Fortunately, we are building in markets where the demand is strong and market cap rates compression is still allowing for a healthy 50 to 150 basis point spread between construction yields and market cap rates. The K on Slide 23 remains on budget. Pre leasing activity is being done on both the K and the Latitude. We are excited about Civic 66 in Kitchener. That is shown on Slide 25. And we know this product is in high demand in the downtown Kitchener area. The footings are poured and construction is progressing on budget and schedule. As well, we have broken ground on The Governor, a unique luxury project in Downtown Halifax that is adjacent to The Alexander. The 242 Unit Apartment Building that we built in 2018. The Governor has 3,500 Square Feet of ground floor commercial space and 12 large units. There are only 2 or 3 units per floor and is a very unique product offering that will complement the brewery market and Halifax Waterfront neighborhood. For reference, Slide 27 breaks down Killam's future development opportunities totaling approximately 3,100 units that are in various stages of development or predevelopment. This pipeline continues to give us great opportunities for value creation for Killam in the future. To conclude, I am pleased with our year to date progress and all the strategic priorities and ESG initiatives. We placed great effort on being a strong corporate citizen and creating value for all our unitholders. Thank you. I will now open up the call for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. First question comes from Mark Rothschild at Canaccord Genuity. Please go ahead. Thanks and good morning everyone. Can you maybe give some more detail on some of your markets that are more exposed to Students and foreign students such as maybe I don't know if you have more exposure perhaps in London. And then in that context, maybe it's too early to talk about What your expectations are for the fall to the extent that lockdowns are eased and students could go back to school? Hi, Mark. Yes, right now, I mean, most of our biggest exposure would be in Halifax, Peninsula Halifax. And as you mentioned, we do have one asset in London that very much caters to students. So, what we're seeing is Demand from students coming back to both those markets. So based on the trending we're seeing, we expect to have some Year over year gains when we look to September in our student focused markets. So the trending is looking good in both of those markets. Okay, great. Then with the utility costs, which obviously were lower this quarter, when I look at Your comments regarding natural gas versus electricity, would it be fair to say that, perhaps the electricity, the improved cost the lower cost would be Occurring words for natural gas, it will be more volatile? I think that some of the electricity will be recurring as We're moving some of those electric charges, tenant electricity to tenants. Some of the electricity was weather related because we do have some Some of the savings is because of the energy efficiencies we put in, but we did have the pricing, the actual cost of gas was lower quarter over quarter. So that won't necessarily be recurring. So I think it's a mix for both of them. Okay, great. Thank you so much. The next question comes from Jonathan Kelcher at TD. Please go ahead. Thanks. Good morning. First off, just on the Rob, you talked about turnover being 29% on average. How is that trending thus far in 2021? We came in for this quarter at 5.4% and that's very consistent for last 3 years. So it's we're on track. We think it will trend down a bit as we go through this year. We finished last year just around 29%, but we think we might Gain on that. Okay. A gain as in closer to 25%? No, not going to go that well. It doesn't change that. Okay. But that direction, that direction. Yes. I think it will come in 129 is my guess. Okay. And what would you estimate your current mark to market is? We think it's something like 10% to 15% would be the percentage that were a little less than our optimum Sometimes it's high 20. It would vary through the portfolio, but if I was to pick an average, I'd go 15%. Okay. That's helpful. And then just switching gears On the acquisition front, there's obviously a number of portfolios out there. Would you guys expect to be Involved in any of those larger portfolios or would you expect to sort of go continue to go more on a one off basis? Hi, Jonathan. Do you what are you referring to? Well, there is a story in The Globe Last week or the week before about the multi $1,000,000,000 portfolios. There are rumors of other larger portfolios out there. Just curious as to whether you guys would be involved in bidding on those or Just sort of stick to your more traditional where you guys just kind of find some off markets and some one off deals? Yes. No, that's fair. I think the answer is since the beginning of the year, there's been mid sized portfolios, I'll Call them at that level. And I think that we've been trying. Some of them, the answer is no. Some of them, it's yet to be determined. But I think the large one that you're talking about that I read in Globe and Mail, We're not part of that. And one of our strengths is off market relationships with developers and we'll continue with that part of the program as well. Okay. Thanks. I'll turn it back. Thank you. Thank you. The next question comes from Matt Logan at RBC. Please go ahead. Thank you and good morning. It's great to see some of your recently completed developments The developments, We are pleasantly surprised with the rate of leasing up the Calgary asset, but really The trend is suburban is strong and we see that in Calgary with our other assets that are not in the downtown core. And we would also if we had a project in Edmonton leasing up, we would probably be saying the same thing where suburban Assets, there is more current demand than the downtown urban course. And then the 2 in PEI, I can honestly say that if anything, we're a little bit Sort of behind a typical new build in Atlantic Canada and I would blame that on COVID-nineteen and the restrictions and everything else that's going on. I mean, I think we're doing very well With the understanding that we are still in state of emergencies and lockdowns in a lot of the provinces. And in terms of the lockdowns and the rent increase in Ontario, do you think that keeps a lid on your top line growth at around 2% this year? Well, I mean, we're there's a couple of parts. One is we see on average the turnover. So If it's vacant, we have the ability to look at it and assess the market in terms of what the rent is going to be. But it's interesting where We came out in the last basically 8 to 9 weeks, it's been very strong leasing from our point of view Right across the board. And we are basically believing that was the sort of The pent up demand and everybody's sort of outlook for the remaining part of the year and where COVID is going, But as soon as the Ontario 3rd wave came into, we saw a little bit of slowdown because it just Restricts people's movements and activities. And we're in one now here in Nova Scotia. And it really we haven't seen it yet, but if this continues more than what is expected, which is only a couple more weeks, maybe the end of May, It will start to slow down. So there is a correlation between the 2. So some encouraging signs, but hopefully once we get vaccines Rollout is in the back half of the year. We can hopefully see some of that again. Go ahead. Matt, I was just going to mention that the disclosure that would put me in MD and A where we talk about The $2,900,000 we've actually seen achieved in Q4 in Q1 rather is kind of representative of the impact with those restrictions. Because when we look at the lease renewals, those are what actually came into effect in the quarter when the restrictions were in place. When you look at what to expect for the year, I think that that's Probably a good starting point because that includes restrictions imposed because of COVID. That's great color. Appreciate all that. And maybe just changing gears when we think about the margins, maybe just circling back on some of Mark's comments with The utility cost, is it possible we could see some modest margin expansion continue in the balance of the year? Would that be a fair assessment? I think we have the potential for that. I think that Q1 is where we really see that those energy costs make the biggest difference. But as we continue to make top line growth and continue to manage the expenses, I think there's opportunity for that. I appreciate the commentary. I'll turn it back. Thank you. Thank you. The next question comes from Joanne Chan at BMO Capital Markets. Please go ahead. Hi, good morning, everyone. Just maybe on that with some of the recent restrictions that have been put in place and obviously a very healthy rebound in organic growth this quarter And obviously, on track to achieve your 2021 targets, but just wondering how should we be thinking about the trend in that given some of the recent measures that were put in place and some of the recent spikes in cases in Atlantic Canada. I think what's happening is there is a recent spike, but Also, the vaccine is rolling out and I think that that will overcome this spike. And so our expectation is by June, July is the latest. We should have a fairly open market. That won't be an issue. Our leasing has maintained serious momentum through the last 9 weeks. We've had almost record numbers of weekly leasing averaging about 113 units per week, which is very strong for this time of year. So I'm optimistic we can get through this without very much impact from this recent lockdown. Okay. That's good to hear. And maybe just shifting, I guess, to the repositioning program. Obviously, you guys have remained very well on track. But just wondering, With some of the rise in development, a lot of the costs inflation that you're hearing, is that changing any sort of Your decision making with respect to the repositioning program at all or do you still expect to remain on target? No, we expect to remain on target, but you're right to highlight that. I mean, there is some cost escalation and it's also just product availability. So for us, white goods It's more difficult to get product. We had stockpiled a fair number, so that put us in a good place. But we don't have to watch the cost of going as we go forward. The market acceptance for these renovated units is tremendous and we don't want to miss the opportunity. So we'll find a way to get it that Okay. And maybe just the last one for me with respect to on the acquisition side. Is there are you seeing more opportunities right now that fit your criteria kind of in the Ontario market or kind of I would say that So far this year, there's been a lot of opportunities right across the country. The what's for sale There's a lot more year to date compared to last year year to date. So it's just a matter of sort of sifting through and figuring out what you think you can buy and what fits in the best. Okay, got it. Okay, that's it for me. Thanks very much. I'll turn it back. Thank you. Thank you. Next question comes from Matt Kornack at National Bank Financial. Please go ahead. Hi, everyone. Just a follow-up on that point with regards to acquisition opportunities. Are you seeing these opportunities in all markets that pricing that are any markets that pricing that makes sense? It sounds like there's a fair bit of product, but there's also a fair bit of buyers in terms of people looking at it and pricing has been fairly aggressive. But are there any markets where maybe there are more sellers than necessarily buyers that would provide a pricing opportunity? No. I think there's lots of opportunities. There is tremendous depth on the buying side And the pricing is basically it is what it is. You look at it just look at the single family home Market right now, right across the country and how much that's gone up. And there is a correlation again in the relationship between that and where pricing is going for the multifamily. And we talk a lot about affordability of rents, but I mean your home market or your large Halifax has seen home prices increase pretty precipitously. What are your thoughts there in terms of the longer term implications on Rental markets generally, I mean as home prices move in the way that they have? Well, I think it strengthens the rental market for us. And back to acquisitions, what are your thoughts On buying more sort of retail properties with intensification opportunity or looking at maybe Some stuff that's a little bit more creative. And it seems like development for you at least from a cost of capital standpoint is still a pretty attractive Place to put incremental dollars? Yes. I mean, I think we have from a pipeline of development opportunities, I mean, our 2 Largest retail or commercial assets, Charlottetown and Waterloo. We've got enough opportunity around those assets to fulfill a lot of our future development on the apartment site straight up. And so that's why we bought them and We're working very hard in both locations. So with that in mind, there's no other new market, new commercial type of Opportunities that we're looking at. And last one for me, just in terms of the status Your larger projects in Ontario, is there any update on the timing of those and when you'd be going ahead with phases How about them? Well, we're not we have 2 more phases up And all while with RioCan and we're not really working a lot on the 3rd phase. We want to get this 2nd phase Finish and start moving people in. We are in the application process in Waterloo. We're still working on that. So once we get that first one, that will be multiple years and we Fully expect to be able to do 3 to 4 phases down there once we start the first one. And sorry, last Timing wise, when would you at this point anticipate potentially getting started on that project? Waterloo? Yes. We have hoped to be able to come pretty close to breaking ground this year. Okay. Great. Thanks. That will be at the very, very end of the year for sure. Thank you. The next question comes from David Crystal at Echelon Capital Markets. Please go ahead. Thanks. Good morning. Just looking at your same property occupancy and some of the comments and answers to a few of the other Questions. You mentioned leasing volumes, there's some pent up demand and there's kind of sizable leasing volumes post quarter. Where do you see same property occupancy trending in the coming quarters? Obviously, lockdowns kind of throw a wrench in everything. But it kind of held steady after first dipping in Q2 2020. Would it be fair to say we should See year over year improvement in the remainder of the year? I would say that yes, We do expect 2% or 3% gain. I was going to say just as one of the markets that has been suffering a little bit It's Newfoundland and we've seen some really good gains in that marketplace over the last 3 months and we expect that to continue through the rest of the year. And kind of in that context, the Lifts on turnover, obviously, the lifts on renewal are impacted by freezes or caps. The lift on turnover was in the kind of 7%, 8% range for the last three quarters. Is that a good Expectation going forward assuming that the same number of repositionings take place? I think that's reasonable to assume, yes. Okay. And so I guess if I'm kind of looking at say 3% rent growth and flat to potentially Positive spread on occupancy. It looks like we could see organic Growth in the 3% plus range for the back half of the year, would that be fair? I think based on those assumptions, that's reasonable. Yes. Okay, great. That's it for me. I'll turn it back. Thank you. Thank you. Next question comes from Mario Saric of Scotiabank. Please go ahead. Thank you. Good morning. Just coming back to the near record leasing that you highlighted over the past 8 to 9 weeks, Is that simply would you characterize that as simply being pent up demand during the pandemic? Is it kind of typical Seasonality or are you seeing any other unique trends materializing? I don't know, where are they? Think a couple of universities coming out and saying they're going to have in person classes has prompted some of that. Anybody that was on the sidelines would like to secure their accommodations for September. So we're sure that's a component of what's going on. But overall, in the markets, it seems there's a fair bit of, I think, enthusiasm. So people are looking to move around. The recent change with the couple of additional lockdowns is unfortunate, but it's not going to stop the momentum. Think that there is dependent demand. People are looking around and they're prepared to move and we offer good profit. So I think it's moving in the right direction Overall. And on the student leases in London and Halifax, can you just remind us of the typical structure With respect to the leases and when those typically kick in for a usual September school session? You should kick in May. We start leasing as we come into the New Year. Students go home, especially the ones that are in residence and they start speaking to their parents and as units come up for the early part of the year and we get a few and then it just Ramp shop before they leave campus in September, it's before they leave campus, pardon me, in April. A number of them locked down their accommodations for For the year, we don't typically do 9 month deals, although that's more like the school year. We would do annual deals across the board in our buildings, and that's That's the way that some of them may sublet during the summer, Mario, but that's the structure we have. Okay. Then my last question, just turning to the mark to market on Slide 13. It sounds based on the previous commentary that The expectation is for that to maybe come up a little bit on the strength of the leasing market. Just with respect to the Q1 mark to market, Is it fair to say that there is some kind of incremental self regulation in that 4.4% Or was it simply a function of the vacancy increase on a year over year basis that drove it a bit lower than what we're typically seeing? I think there's a component of self regulation there. At this time, nobody wants to be open front On raising rents too aggressively, I think that's probably the right thing to do in this market. But there is the opportunity to as units come vacant, We will move them when the market success is there. Okay. And then the I guess the 10% to 15% mark to market That you highlighted, are there any notable market rent changes quarter over quarter Within the geographies or are the market runs pretty stable? I can't highlight one for you off the Yes, Mario, it's Nancy here. Yes, I would say that Honestly, there's really no notable changes from market to market. I mean, Halifax would have a bigger spread and other markets We have very little at this point, but overall when we're looking at it, it always changes what's in place versus what kind of units releasing in each of the month. But I would tell you that it has remained pretty much steady as is over the course of the 1st 4 months of 2021. Okay. Thank you. Next question is from Dean Wilkinson at CIBC. Please go ahead. Thanks. Good morning, everyone. Hello, Dean. Phil, the Governor, That's quite the project. I mean, that's something we'd see here in Yorkville. What was the decision around and I realize it's 12 units, but what kicked off the thought of introducing that kind of product? And Is there a demand for sort of $7,000 plus a month units in Halifax and When that's done, that's probably a sub-three cap asset? Well, we're performing at above the 3. So That's not what we believe we're going to be able to achieve on this asset. And the answer is yes. I mean, if you look at the way that Basically, the new rental market sort of grows, typically a lot of the buildings. And even back in the 1960s when they built buildings, the penthouse floor, the top two floors were larger units And basically charge more rent. And so even today, a lot of the designs are like that. And what we recognize and see is that there is competition right now in the market That would be achieving the same rents per square foot that we're going to look to achieve right now in the downtown market. And what is what we look at it is that it was a small sort of a piece of land with restrictions in terms of the height. And we know that what it is, it's a complement to The Alexander. And so look at it as just another extension to what that building is. So from a service point of view, amenity, Everything else around it, it all blends into it. And as opposed to putting in smaller units at the same per square foot Pricing, the decision was larger ones and we think we'll be able to achieve it Quite, the outlook is quite strong. Right. I mean, as I recall, my memory is starting to go a little, You do have some larger size suites in some of your buildings that are Absolutely. Quite updated, right? Yes. And there are comparable rents for that. Okay. Well, I can't wait to see this thing once Thank you. There are no further questions. You may proceed. Guess we're not hearing any more questions. No further questions. You may proceed at this time. Okay. Well, I would just like to say thank you very much for listening and participating today on our Q1 2021 conference call and we look forward to being back here in August for Q2. Thank you very much. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.