Earnings Call: Q4 2020

Feb 11, 2021

Good morning, ladies and gentlemen, and welcome to the Killam Apartment Real Estate Investment Trust Q4 2020 Year End 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. Also note that this call is being recorded on Thursday, February 11, 2021. And I would like to turn the conference over to Philip Fraser. Please go ahead. Thank you. Good morning and thank you for joining Killam Apartment REIT's Q4 year end 2020 conference call. I'm 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 statement. Thanks, Phil. This presentation may contain forward looking statements With respect to Killam Apartment REIT and its operations, strategy, financial performance, conditions and otherwise, the actual results and performance by the inherent risks and uncertainties surrounding forward looking statements. For further information about the inherent risks and uncertainties In respect of forward looking statements, please refer to Killam's most recent annual information form and other security regulatory filings found online on SEDAR. Unless otherwise stated, all forward looking statements made today speak only as of today's date. Killam has no obligation to update such statements unless required under applicable securities law. Unless otherwise stated, all forward looking statements Thank you, Nancy. Despite the headwinds and uncertainties of 2020 brought us, our employees rose to the challenge and we achieved 2.3% same property NOI growth and 2% FFO per unit growth. Our strategy and commitment to the long term viability of our core markets has remained unchanged. Increasing earnings from our existing portfolio is a key component of our strategy. We do this in a very responsible way, considering the current financial demands of our tenants, communities and global environment. Our portfolio is benefiting from the innovative ways we are growing our revenue and managing our expenses. We are diversifying our portfolio geographically through accretive acquisitions with over $200,000,000 in acquisitions in 2020 and $70,000,000 year to date in 2021. We met our targets to achieve 32% NOI outside Atlantic Canada in 2020 and we will continue to look for additional assets in our Ontario markets as well Calgary, Edmonton and Victoria. In addition, Killam's development pipeline continues to be a key driver of net asset value creation, adding high quality properties to Killam's portfolio each year. In 2020, Killam opened the Shorefront in Charlottetown. Nolan Hill in Calgary opened in January And Harley is coming online next month. We have included our original 2020 strategic targets In our year end documents and measured our performance against them as shown on Slide 4. We were able to achieve all targets with the exception of same property NOI growth, which was slightly lower than our 3% to 5% target prior to COVID-nineteen. Our targets for 2021 are also disclosed, including a sustainability target of ensuring we invest a minimal of $5,000,000 and energy initiatives to assist in attaining our long term goals of reducing greenhouse gas emissions and increasing our renewable energy sources. Dale will take us through the Killam's financial results followed by Robert, who will discuss our initiatives for growing our existing asset base. I will conclude with a recap of both acquisitions and development pipeline. I will now hand it over to Dale. Thanks, Phil. Highlights of film's 2020 financial performance can be found on Slide 5. Notwithstanding challenges this year, we achieved solid earnings growth, attribute to the resiliency of our portfolio, our key markets and our team. In 2020, Killam generated FFO per unit of $1 up 2% from 20.19 and AFFO per unit of $0.83 up 3.7%. These gains were driven by solid earnings from our same property portfolio from acquisitions and stabilized developments. 2020 continues a strong record of performance. Slide 6 recaps key financial metrics over the past 5 years. We're proud of our consistent FFO per unit growth, while also greatly increasing the size and quality of the portfolio and maintaining a conservative balance sheet. NOI has increased steadily and FFO per unit has grown by a compound annual growth rate of 3.8%. Killam's current AFFO payout ratio of 82% has improved from 91% 5 years ago, while distributions have increased 4 times during the same period. As we continue to execute on our growth strategy, our total assets Have grown by an impressive compound annual growth rate of 17.4 percent to $3,800,000,000 today. Slide 7 shows our Q4 results. FFO and AFFO per unit were both flat in the quarter as 0.9% growth in same property NOI and earnings from acquisitions and developments were offset by an increase in the weighted average number of units outstanding following July's equity raise. The portfolio shows strength with same property revenues up 2.2%, including a 3.4% increase in apartment rents and 3.8% top line growth from the MHC portfolio. These gains were partially offset by an uptick in apartment vacancy. Same property apartment occupancy was a healthy 90 6% in Q4, but down 100 basis points from historically high occupancy rates in Q4 twenty nineteen. Same property operating expenses were up 4.4% in the quarter, mainly due to higher compensation for our on-site staff, Increased insurance premiums and a 4.4% rise in property taxes. Annual same property portfolio results are shown on Slide 8. Overall, same property revenues were up 2%, but these gains were not consistent throughout the portfolio. The apartment sector led with 2.4% growth. This was partially offset by reduced revenues for the MHC and commercial portfolios, both of which reflect the impact of COVID-nineteen. Delayed openings and reduced activity at our 9 seasonal MHCs resulted in an overall annual revenue reduction for the MHC portfolio of 0.8%. This overshadowed the strength of Killam's 30 Permanent MHCs, which generated 2.7 percent revenue growth in the year. The decline in the seasonal portfolios revenue and NOI is short term. Our commercial portfolio was down in 2020 following participation in the secret program. Same property expenses were up Slide 9 breaks down operating expenses by category. Higher general operating expenses, Including increased salaries for on-site staff and a 4.6% rise in property taxes were partially offset by a 5.9% reduction in utility and heating fuel costs. Overall, NOI was up 2.3% for the year. Additional details on Killam's 2020 apartment revenue results are highlighted on Slide 10. Occupancy declined 40 basis points overall from an all time high in 2019. The biggest declines were seen in St. John's and Ottawa. St. John's is feeling economic pressure from softness in the oil sector, while Ottawa was impacted by reduced demand linked to COVID-nineteen And increased supply in the immediate neighborhood of our largest property in the region. Other markets remain resilient with our 3 New Brunswick markets And PEI achieving relatively consistent occupancy levels year over year. In Halifax, we recorded only a modest 50 basis point decline in annual occupancy, much of which relates to student focused properties near the universities, which have historically had little to no vacancy. Overall, incentive offerings remains limited and focused primarily in Alberta, St. John's and very specific properties with occupancy challenges. Overall, Killam recorded incentives of 40 basis points of total residential rent for the year, very much in line with the last 2 years. As previously noticed, same property rental rates were up 3.4%. Although a slight decline from 2019, Rents were trending higher by the Q4 of 2020, showing signs of momentum leading into 2021. Slide 11 shows rent growth by quarter. The top growth breaks down the rent achieved on renewals, the green line, and turns, the gray line, as well as the total average rental rate shown on the blue bars. As shown here, with strong gains on turns, Killam's mark to market opportunities remain strong. The bottom graph on Slide 11 provides additional details on rental rate growth and renewals by month for the past 24 months. Killam's decision to delay issuing notice of future rent increases in the months of April through July impacted rent growth for renewals in Q2 and Q3, but growth was a gain realized in the 4th quarter. Note that Nova Scotia renewals are currently capped at 2% during the state of emergency in the province and Ontario and BC currently have freezes in effect, muting rental growth on renewals for most of 2021. With these restrictions, most of Killam's rental growth in the year ahead will come from unit turn. Killam's unit turnover remains healthy at 28.8% in 2020, well above Canada's National average. Slide 12 highlights our debt maturity profile, including average apartment mortgage rates by year versus prevailing CMHC insured mortgage rates. Based on current market conditions, we expect to refinance at lower interest rates in 2021, continuing to reduce our weighted average interest rate. In addition, we expect to generate net proceeds of approximately $50,000,000 from our 2021 refinancing program. Slide 13 includes key balance sheet metrics. We are maintaining a conservative balance sheet and ended the year with debt as a percentage of total assets of 44.6%, well below our target of less than 47%. We also ended the year with expanded capital flexibility following a $40,000,000 increase Thanks to our operating line in late 2020. Following the funding of recently announced acquisitions, Capital flexibility remains high with acquisition capacity of $250,000,000 We are 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 key operating initiatives and value delivery to our residents. Thank you, Dale, and good morning, everyone. Before discussing our current operating initiatives and strategy, I would like to begin by acknowledging That 2020 was a challenging year for many businesses and likewise for most people. The stress created by forced isolation, the fear of the unknown And the heartbreak of being separated from loved ones can be crippling. And yet, faced with all of this on a personal level, As well as their daily work caring for over 40,000 residents, Killam's 700 employees continue to work diligently and adapt to this evolving pandemic. In recognition, GOME continues to compensate its frontline staff with extra pay. We respect and greatly appreciate the excellent care they extended to our apartment residents as well as our MHC and commercial tenants. Despite COVID-nineteen, rent collection has remained exceptionally strong for Killam throughout 2020. Killam collected 99.7 percent of all rents for the year, including gross billed commercial rents. This aligns with Killam's historical Bad debt loss, which tracks at less than 30 basis points of total revenues. We do not expect any material change in rental defaults in 2021. Killam's existing portfolio totals over 17,000 apartment units, 5,900 MHC sites 750,000 square feet of commercial space, not including 150,000 square feet of ancillary retail related to the apartments. Killam's commercial segment accounts for approximately 5% of its total net operating income. We have worked closely with our commercial tenants under the Canadian government CEQA program and recorded a $300,000 reduction in commercial revenue related to this initiative. In addition, Killam separately negotiated pandemic related rental abatements with a number of commercial tenants, and these also totaled $300,000 To deliver value to our unitholders, we have a continuous focus on growing same property net operating income. Slide 14 details a number of levers Killam can use to grow income. I will speak to these in the next few slides. In late December, we received the results of Killam's annual tenant survey conducted by our 3rd party provider, Narrative Research. Narrative tells us Killam's 2020 survey had an impressive response rate of 30%. And the overall tenant satisfaction rating of 87% is markedly better than the industry benchmark for multi residential owners. It is worth noting Kount's overall tenant satisfaction rating has ranged between 87% and 90% for the last 8 years. In terms of satisfaction with their apartment units, Killam received an 89% satisfaction Rating, a very positive outcome. Our residents tell us they enjoy living at a Killam property and consider their clean affordable housing to be good value. Renting remains a very attractive alternative when compared to homeownership given the high cost of upkeep, maintenance, taxes and insurance for single family housing. Please refer to Slide 15. Killam offers a range of housing products in each of its markets, from long standing properties providing a clean safe housing option to newly constructed luxury buildings with modern finishes and a multitude of amenities. Killam's portfolio has a wide selection of locations, unit sizes and layouts in each of its urban and suburban communities. With an average rent of $1.42 Per square foot across the portfolio, this represents remarkable value and accommodates a diverse group of residents and potential tenants. Canada Mortgage and Housing Corporation's measure of housing affordability is a sheltered cost to income ratio, which sets the affordability threshold at 30% Before tax median household income. When we compare Killam's rents to the 30% shelter cost to income metric in each of Killam's core markets, It underscores the fact Killam's average rents are well within CMHC's threshold ranging from 15% to 25% of median household income in our markets. This housing affordability discussion is very germane, even more so when many Canadians are experiencing the greatest financial and mental pressures in recent memory, Killam recognizes it has a civic duty to be a contributor to the affordable housing solution. Not only does Killam provide very affordable living options generally, but Killam is an active partner with many non profit housing and government agencies such as the YWCA, Irving Housing Initiatives and Centers For Addiction and Mental Health to deliver more than 750 subsidized units in our communities. Looking forward, we continue to pursue opportunities that provide additional affordable housing. For example, Last month, we closed on a 233 Unit Nolan Hill development in Calgary. By participating in CMHC's rental construction finance initiative, Killam was able to provide 78 units or 1 third of the units at Nolan Hill at rental rates that are 70% of market rates. This was possible by utilizing CMHC financing for a $41,000,000 mortgage, accessing 10 year money at the low interest rate of 1.95 percent. Killam released their annual rental market housing report last week, Reporting on rental statistics across Canada as of October 2020. Due primarily to restrictions on immigration during the year, Vacancy rates have increased nationally and rental rate growth has slowed, but not all markets have been impacted to the same degree. I would like to speak briefly to the strength of Killam's largest market, Halifax. CMHC reported vacancy in Halifax increased 90 basis points from October 2019 October 2020 and stood at 1.9%. This was the lowest vacancy rate for cities in Canada at that time. CMHC also noted that despite a lack of immigration and post secondary schools moving to more online teaching, the Halifax market still needs new supply. The graph on Slide 16 compares Killam's Halifax portfolio's average in place rent to the market rent for the last 14 months, all on a dollar per square foot basis. In place rent is the average monthly rent Killam's Halifax tenants pay that month. Market rent is the average rent being achieved by Kiliman leases to new tenants during that same month. As can be seen with this chart, New leasing is providing a healthy average $0.18 per square foot more than in place rents. Although this delta fluctuates from month to month due to the number of new leases and unit types leased, overall, mark to market opportunity has remained consistent during the pandemic, and a 10% to 15% market to market opportunity exists. Chilum has also benefited from Halifax's market resiliency at its 160,000 square foot brewery market adjacent its Alexander Residential property overlooking the Halifax Harbour. The brewing market is an iconic asset, A 200 year old jewel in our city and then added over 30,000 square feet of new retail and office leases this past year. The demand for Killam's new and newly renovated apartment units also remains strong across the portfolio in 2020, and work on Killam's Suite repositioning program continued unabated. We finished the year with 4 95 suites repositioned, just 5 less than originally budgeted as highlighted on Slide 17. It costs an average $25,000 to reposition a unit, But when you earn a 30% unlevered return on investment, it makes perfect sense. Based on the market's demand for repositioned suites, For 2021, Killam is targeting a minimum of 550 units to be completed. Overall, Killam currently has 5,000 additional units that can be repositioned and this opportunity continues to cycle forward as the properties age. An example of a very successful repositioning program for Killam As shown on Slide 18, this is Bronson, a 43 unit property in downtown Ottawa that was built in 1968 and has dated finishes. By replacing the flooring and updating the kitchens and bathrooms, the product offering for this building changed and Killam realized on average Rental increases of 35%, representing a 20% return on its $31,000 per suite investment. I will emphasize that Killam only undertakes repositionings as units become vacant, as we are not proponents of evicting tenants to facilitate unit repositionings. Killam has fine tuned the process of repositioning its units over the past 3 years To right size the upgrade, minimize the downtime for renovation work and provide our residents with the best finishes based on appeal, functionality and durability. Slide 19 shows a repositioned unit at Cambridge Place, a 63 unit building in Moncton, New Brunswick. The unit highlighted won the Best Unit Renovation of the Year award from the Canadian Federation of Apartment Associations in 2020. Suite renovations are a component of Killam's overall $70,000,000 annual capital budget plan with important investments being made to address building envelopes that mean windows, roofs and cladding, heating plants, Plumbing upgrades, curb appeal and landscaping as well as energy projects. Please see Slides 20 21. Killam has a 3 year rolling capital plan that is executed by our capital projects and operations team. This capital Maintains and improves the efficiency, marketability and management of Killam's portfolio. The increasing capital investment each year as shown on Slide 21 speaks to Killam's willingness to invest in revenue enhancing and expense saving initiatives that deliver excellent returns on investment, Keep our tenants pleased to call Killam's portfolio their home. Killam's $5,900,000 energy plan 2021, it's important as we continue to focus on lowering Killam's utility and heating costs, decrease consumption And pursue Killam's smaller carbon footprint. In 2021 energy plan sorry, the 2021 energy plan consists of 94 projects From our solar panel installs to boiler upgrades, that should provide Killam with an estimated $900,000 in annual operating savings and a 6.5 year average payback. With traditional energy efficiency projects such as LED lighting retrofits And installation of low flow water devices nearing completion across Killam's portfolio, we are now investing in buildings Building data analytics. As noted on Slide 22, Killam is analyzing its energy data and using technology to inform how we operate our portfolio. From smart metering to understanding and shaping peak electrical demand consumption, we are collecting and analyzing data with our business intelligence platform to make better decisions. We made mention on our Q3 call in November of our GRES ESG rating participation. We now have our results, and we are very pleased to say that we have improved our initial 2019 submission by 32% or 15 points. This provides Killam with a 2 star designation for its 2020 submission, along with a green star rating for achieving more than 50% on both performance and our approach to managing our goals. As well, Kilmer earned a B rating For the public disclosure GRES survey, outperforming its GRES peers that earned a global scoring average of C. We are committed to enhancing and accelerating our comprehensive ESG program and recently set quantitative targets to lower our greenhouse gas emissions as well as increase our use of renewable energy. Adjustments to these targets will occur with more information and time As we wish to align ourselves with the Paris Climate Accord in the coming years to ideally and ultimately achieve carbon neutrality, I will now hand you back to Philip to provide an update on our development and acquisitions pipeline. Thank you, Robert. Slide 23 summarizes Killam's acquisition activity for the year. 56% of the capital deployed in 2020 was in British Columbia in Ontario. During Q4, Killam closed 2 acquisitions located in Moncton that were announced With our Q3 2020 results in November, we purchased 171181 Leopold, a new 107 Unit Wood Frame property as shown on Slide 24, for $17,600,000 This property is 97% occupied 2 unit property that we closed on November 13, 2020. Killam has started 2021 with $71,000,000 in acquisitions. Slide 26 shows the 233 Unit Nolan Hill development in Northwest Calgary. Killam purchased the remaining 90% interest on January 21 for $49,500,000 Along with Killam's original 10% interest, the total cost was $54,300,000 and we recorded a $700,000 fair value gain upon purchase. Killam secured financing through CMHC's rental construction financing initiative. This national housing strategy program that is delivered through CMHC supports rental housing projects to encourage affordable new supply for middle class families across Canada. We are offering 78 units at 70% of market rents. As Rob already mentioned, this aligns with our approach to help alleviate the need for affordable housing in the country. 3 building property opened in January And lease up is progressing nicely as noted on Slide 28. On February 1, we purchased a 23 unit building located in Moncton for $5,600,000 This 4 story concrete building shown on Slide 29 Has a mix of 1 and 2 bedroom units that are 100 percent occupied and Monken's strong rental market at an average of $1.43 For Square Foot, it is well located in the downtown core and easily absorbed into our operating platform. With regards to development, construction activity progressed nicely in 2020. Slide 30 shows a rendering of the 6 projects that are currently underway, which will add 5.35 units $240,000,000 of high quality On Slide 32 received its occupancy permit on October 1 and tenants started to move in during Q4 2020. Leasing activity has increased since the beginning of the year and we are currently 55% leased, which we are pleased with given the backdrop of COVID-nineteen and the restrictions we are living with. The Harley, which is 24% pre leased, is expected to receive its occupancy permit by February 20, And we will be welcoming residents on March 1. Progress photos are shown on Slides 3334. For progress on the Latitude, please turn to Slides 3536. The concrete structure is complete with both the masonry internal wall framing done up to the 20th floor. Because of the number of COVID-nineteen related slowdowns during the year, We now expect the project to be 2 to 3 months delayed with a completion date in Q1 2022. The K in Mississauga is progressing along as planned and should be completed by year end. Details of this development are on Slide 37 and progress shots on Slide 38. Our 169 unit development known as Civic 66 in Kitchener started in late 2020. We have almost completed the geo Thermal bore drilling and footings are starting this week. Target completion date is late 2022. As well, we have broken ground on the Governor, a 12 unit luxury project in Downtown Halifax that is adjacent to Alexander in the brewing market. Slide 42 breaks down Killam's future development opportunities totaling approximately 3,100 units that are in various stages of development or predevelopment. This pipeline gives us great value creation for Killam in the coming years. To conclude, we are proud of the performance in 2020 and confident that we will continue to execute on our priorities and create value for all our unitholders during 2021. Thank you. I will now open up the call for questions. Thank You will then hear a 3 tone prompt acknowledging your request. And your first question will be from Jonathan Kelcher at TD. Please go ahead. Could you unmute your line, Jonathan? Sorry about that. Good morning. First question, Martin, just on your acquisition target for 2021 at Does that include Nolan Hill given that we've known about that one for a while? No, it doesn't. That includes Nolan Hill. And hopefully we'll be able to exceed it, but for now it's $100,000,000 Okay. And you've already done 70 of it, right? Yes. Okay. And then and on Nolan Hill, 31% leased. How many of those leased units are the affordable ones? And could you maybe give a little color on how that program works? Like I'm assuming it's not just anybody can get the affordable units. You're correct on that. So To date, the majority of the leases have been at market and we are still finalizing the details with a couple of charities that we will That they will be helping us provide tenants that would be qualifying Underneath the program in terms of their income. Okay. And is that program Something that you'd look at using for some of your other development projects? There is actually one that we're thinking of in New Brunswick right now in Moncton, but the other ones in Ontario, we haven't Currently, the answer would be no to that. Okay. And then just Lastly, and I'll turn it back, but just on the guidance, Dale, like the property tax was a pretty good jump in 2020. What's your outlook for increases in 2021? Yes, that's the big question. So we would expect It may look similar to what we've seen in this past year. We'll be working hard to appeal those when they're not reasonable. But Based on what we the information we have today, we're kind of looking at a similar type increase for this year, but hopefully comes in lower. Okay. So your 2% plus same property NOI is sort of assuming 4% to 4.5% increase in property tax? Yes. Okay. Thanks. I'll turn it back. Thank you. Next question will be from Matt Logan at RBC Capital Markets. Please go ahead. Thank you and good morning. Good morning. Hi, Hat. It's great to see the sustainability metrics as Part of Killam's strategic targets, can you talk a little bit about what the expected ROI is on your renewable power initiatives And what type of investment it would take to achieve your 10% renewable power target? The first answer to your first question is we are looking at a target of 10% return On the existing solar panel installs that we currently have underway, roughly that Total is about $2,850,000 It's the 800 to 900 kilowatts of power that we'll be able to produce. So we're looking at roughly about $200,000 of energy produced or electricity produced. So that is very attractive and a lot of that is in PEI where we have the highest rate, it's about $0.20 a kilowatt. So it makes it pretty easy to approve those and then What's left is actually just getting it done and getting it installed and then hooked up to the grid. The second part of your question was? Okay. Good morning. Yes. So Matt, it's Nancy. Our longer term target right now is 10% to 15% reduction in our greenhouse gas. And we know that along we're not the only ones motivated to reduce our greenhouse gas along with all of our utility providers, so we feel very conservative about being able to target that with our current approach to our energy projects. And We're scoping out all of our buildings across the provinces to figure out where the best payback is and how we can go about Becoming more renewable, but so both those goals, more renewable as well as reducing greenhouse gas seem fairly attainable The way we currently invest our capital initiatives and of course continuing then to dig deeper and see if we can become a little bit more aggressive With our approach in the coming years as everybody looks towards becoming reducing that carbon footprint. I think we've also stated that This current round of solar panel installs in Halifax and in Charlottetown Would represent about 14% of our electricity consumption and bill for Halifax and PEI. It's great color. In terms of your GRESB rating, Can you talk a little bit about what drove the improvement in your 2020 results? And what it would take to maybe move that up a notch next year? For sure. So for us, 2019 was our first initial submission. So There is a lot of disclosure things that had to happen between the initial year. A lot of the stuff we had already been doing, but just not having Yes, some of the formal structures in place. On the management side of that, having the right procedures in place, we've come a long way making sure that it's formalized. And as well as really measuring and managing our all of our energy and water waste and water And tracking that, that's a big part. And then to keep moving that, it's about for us, it's about building certifications, the residential space that was It has not been as big as it has been in the commercial space. So for us, it will be to continue to monitor, reduce our like for like greenhouse gas and increase our billing certifications. Excellent. And maybe just changing gears to your renewal spreads. Can you tell us what the metrics were in Q4 excluding the suite renovations? Sorry, Matthew, can you say that again, please? The renewal spreads on suite turnover in Q4, Excluding the renewals excluding the suite renovations? Just like the normal 4th suite turn. 5.7% On the current without reposition, yes. And I guess when we think about market rents in Atlantic Canada, Would it be fair to say they've been generally stable over the past few months and perhaps even moving a little bit higher? Yes. We've been we've seen that spread stay pretty consistent and we've been able to put those increases True, so I'd say stable to increasing. Well, I appreciate all the color. That's all for me. I'll turn the call back. Thank you. Great. Thanks. Thank you. Your next question will be from Brad Sturges at Raymond James. Please go ahead. Hi, good morning. Hi, Brad. Maybe just starting with the guidance discussion, just To talk a little bit more about your expectations for occupancy for over the course of the year, when you're baking in the sort of over 2% same property NOI growth, What are you assuming in terms of the occupancy trend, I guess, first half of the year and into the back half of twenty twenty one? So I think overall, we think that we have some improvement to make In occupancy overall for the year, you would have seen that we've got some markets that have carried more vacancy than this past year with St. John's a prime example and we're seeing that turnaround nicely with increased focus and some initiatives there. Same with Alberta assets. We're looking at the marketing program to make sure we're making some headway there. And we've got lots of markets that are remaining very stable. You look at the Maritimes and Ontario as well across most of our portfolio and Victoria, the markets are looking strong. So we think we have an opportunity to make a little bit of an improvement in terms of our occupancy Year over year. 1st 6 weeks would indicate that, right? Yes. The trends are moving in the right direction. That's helpful. And with Nolan Hill, just to go back to that, what would be your timeline right now to reach occupancy stabilization? And does that Diaper between the two types of units? We were Planning that it would take roughly a year to lease up based on the sort of the overall conditions Of Alberta. And we are pleasantly surprised the strength of the leasing activity coming Knowing that it's only been roughly about 6 weeks. So we're hoping that by roughly the beginning of the fall that we'll be close To almost up to a 90%, 95% occupancy in that property. Great. And maybe just lastly, just to go back to the questions on acquisitions. Is it fair to say you're within that minimum term? Is that just assuming Predominantly more tuck in acquisitions within Atlantic Canada and you're not assuming at this stage More material acquisition activity outside of Atlantic Canada or how should we think about that target range? Well, I think it's we have to sort of again take a just a sort of an overview that we're still in A lockdown and COVID-nineteen is still with us. And so the activity that we had last year was a result of really the work that we put in the year before. So we actually had visited those properties, the time it takes the leg to put them under contract to do the due diligence then close, they tended to fall into Q1 of last year, especially the assets out west. And so with this restriction, it's almost coming up to a year that In Atlantic Canada, most of us at this table right here have not traveled once in the year coming up to it. So our expectation is that maybe by Q3, we'll be able to travel freely throughout Canada. And when we do that, It's going to open up more opportunities to stuff that we're looking at just by the packages that come to our desk or talking to brokers. So really what that is trying to say is that for the next 4 months, 5 months until everybody gets their vaccine Shott, we're going to be a little bit sort of handicapped getting out there and looking at properties. Okay. That's quite helpful. Thanks a lot. I'll turn it back. Thank you. Next question will be from Mike Markidis at Desjardins. Please go ahead. Looking back at your Slide 16 and your in place versus market rent spreads for Halifax previous Okay. If we had to move forward with a cap on temporary cap, I should say, on the renewal side in Nova Scotia this year. Is this should I take this slide to say that you guys would be able to push your Rents, generally speaking, up to that mark to market opportunity on renewal as well or how should I be thinking about that? So I think when we look at that as a balance that looks at repositioning as well. I think that when you look 2019 On regular turns in Halifax, we were up 7% last year on regular turns In the Halifax market. So and then repositionings, we added we were up Over 20%. So you look at that balance, I mean, I think that looking at that together, not unreasonable, I think 10% callbacks. Okay. So that does factor in the capital and the unit terms? It does. And the way that that's measuring it, it's Capturing the actual lease per square foot of everything we leased in that month. So some of those have repositioned units, some of them don't. So it's not all repositioned. It is it's a balanced metric. So it's an indicator. I don't think we would say it's for sure exactly that exact number, but it's kind of looking at that trend over time. So I think that is lots of upside and we've been able to achieve that in 2020 and we expect to be able to continue to do so in 2021 on turn. Okay. Okay. And I guess state ultimately, if you didn't see any change in the market rents, and I know it depends on what's rolling in versus And you're releasing all that kind of stuff. But if you were doing sort of that 7% on new leases, would you be Push on renewals that hard or is it something where it's a renewing tenant you just try and maybe not take everything all at once? On renewals, I mean, we've got are you saying once the cap comes off? Yes. I was just like theoretically, if the cap wasn't there, I'm Trying to get a sense of where you've been overall portfolio wide sort of I mean 10% to 15% is the mark to market opportunity you Disclosed, which I totally accept and no question. I'm just looking historically at your churns. Most of our growth is going to be coming from the turns. That 2% is really when we look at our whole portfolio overall, 2% is pretty close to what we've been doing overall. So I'd say it's going to be a balance, but that number is I mean, Mike, it's going to take this year and a bit of next year in terms of the economy recovering 100%. So It's not lost on us that the people that are living in our buildings mean that there's not going to be a lot of big rents Pushed through at this time and not that there ever has been with the 20 years of the history of Killam. Right. Okay. No, that's fair comment. Thank you, Kirk. Just with respect to Nolan Hill, got your comments on Louisa. Can you just I think the answer is no, but is there an NOI bridge on that property or no, you accept the slight drag, I guess? On acquisitions. Sorry, what's that? By the NOI bridge. But is there any income guarantee in place? An income guarantee? No. No. No. Okay. That's it for me. Thanks and congrats on a strong quarter and stronger. Thank you. Next question will be from Matt Kornack at National Bank. Please go ahead. Hi, guys. Good morning. Just quick follow-up on that line of questioning with regards to rent spreads. You've kind of held Your renewal spreads at around 2%. It sounds like it's essentially self imposed rent control to some extent there. But what would your sense be in terms of market rent growth in your markets at this point, presumably given Wider turnover spreads, market rents are increasing at greater than 2%, your thought on that spread? Are you sort of asking when you say markets? I mean, are you talking like Ontario? I mean, there's Well, no, I mean the bulk of your portfolio, I guess, is Nova Scotia, New Brunswick. I mean our market rents there growing at obviously more than inflation, but 3%, 4%, Ontario, we've seen significant rent growth for a period of time in the market relative to rent control levels. But I'm wondering, Have you seen an acceleration in market rent growth in Atlantic Canada? It's not an exception, but I'd say continue to what we've been seeing in the last modest growth. And it really now that we're measuring this With all the leasing, it depends on seasonality a bit too. But I'd say More of what we've seen over the last few years. I don't think a huge acceleration, but I think continued modest growth. Okay. And With regards to your renovation program, it sounds like you're planning on expanding that. So clearly, you're seeing demand for the renovated product. Interested in your thoughts there. Is that 550 suites, Do you think you could do more than that or is that kind of the annual cap at which you'd like to operate? It's our projection for 2021. Would we like to do more than that? We probably would, but there are some limitations. And I think coming out of 2020, there were issues with delivery of suite fixtures and appliances. So that's we think there's a chance that that also be an issue for us going through 2021. So $550,000,000 is a working number, If we find ourselves with the opportunity, we certainly would do more. And I guess in terms of the market opportunity, if you could do the full I understand that that's not possible given turnover, etcetera. But is there demand essentially for the full, I think it's Couple 1,000 plus units today or is the market not there yet and this is a reasonable figure in that context? Market is not the limit. The demand is there. And if we could deliver more, we could do more. Okay, fair enough. Dale, with regards to the OpEx and the COVID related costs on Employment, can you give a sense as to what the dollar figure is there? And should we expect that 2021, There'll be similar type benefits to your employees given that COVID still here at least for the first half of the year, but who knows about the second half? So I think when we look at dollar with what we increased, it's probably around $700,000 to $800,000 for the year and increased costs when we look at That total component, some of that will carry forward because we've we're keeping part of that increase Throughout the year, so certainly at the height in April, May, June, July, that number was higher, but We've kept some of that increase throughout and we'll continue to do so. So I think that part of that continues, but not to the full extent. Okay, fair enough. And then Results for COVID, there'd be other costs that are impacting our results for 2020 with the Seagra For commercial tenants and for the drop in seasonals because of demand. So when we kind of look at all those, those are some other components that once As we get through this pandemic, that should those should come back. I think the discussion Here on the MHC side is we're optimistic because the protocols were in place in 2020 That we could open eventually, but I think they're in place now. We can open hopefully, Ontario will be the biggest place where we can start in May and have people Attend to their MHC site. So we're optimistic that we can we'll have a good year there. It will come on earlier. And then I think the state of emergency in the various provinces is going to be one of the triggers. And when that's lifted with the inoculations going forward, That would also we'd take a look at the compensation for our staff and adjust accordingly. Okay. And looking at your Residential portfolio, I mean if you look at Q4 2020 versus Q4 2019, I mean renewal and turnover spreads were essentially the same. So is the issue, the gap on the residential portfolio, would it be students in select markets in terms of occupancy at this point? Because it seems like functionally, There's been almost no impact on operations outside of a little bit of occupancy dip. We believe that you're correct. It is primarily students. Okay, fair enough. International students. And that hopefully, well, we'll see, Paul, hopefully. Yes, we're optimistic. I think most universities are saying that they're going to be open for in class in person classes. So that'd be excellent. And when would those international students typically do their like do you think they'll lease in the spring or would they wait until August, it's at least. I think the ones that are organized will call us probably in May, May, June and the ones that aren't organized, it's not unusual to have some show up and go. We're looking for a place and it works. Okay. We'll find a way to accommodate them. Sounds good. Thanks, guys. Thank you. Next question will be from Joanne Chen at BMO Capital Markets. Please go ahead. Hi, good morning. Maybe just a follow-up on you guys, maybe just a follow-up on the rental, not to hammer it too much, but it's obviously encouraging to see The 2021 guidance with respect to same property NOI growth and you allude to the gap that's still in between in place and market rents in Halifax, but maybe if you could just provide some color on the recent CMHC report. They did note that the occupied rent units Had higher average rents compared to the vacant units in most rental zones except for Peninsula South and North. Could you maybe comment on what Perhaps what they're seeing and is this a difference in the type of assets? So when you look at Peninsula, One thing, that's where we're seeing that student, right? That's where the universities are. When you look at our when we break out our Halifax, where we're seeing an increase In vacancy, it is on Peninsula. It's buildings that for years did not have a vacant unit because they were so close to the university and we've Carry vacancy throughout this year. So that they and the newer ones that are built on the peninsula, the rents are higher and the units Smaller and we know with COVID that there's people moving out to some of the larger units. So I think there's 2 factors that are Causing that and I'd say we're seeing some of that in our portfolio. When we look outside of Peninsula, our Dartmouth assets and Clayton Park, We're pushing 99%, 98.5%, 99% occupancy. So we have a lot of buildings that are full. I mean the numbers are still high relative really quite still high on Peninsula, but compared to where we were, they're off a bit. So I think that that's it's a factor Of the proximity to offices and to the universities, that's the story there. Okay. Got it. And maybe just on that, you did mention in terms of the unit turns, but you guys remain above The average, what do you think the trend is for in 2021? Do you think it's going to remain kind of steady from what you saw in 2020 or you expect it to pick We think it will remain steady to what we saw in 2020. And maybe just one last one for me. With respect to the acquisitions, in terms of some of the things that you're looking at now, Would you say that the cap rates are kind of similar to year to date to some of the recent transactions you've done? Or do you think there's Probably likely even for further compression. I would say that there's still huge demand For all the product right across the country and if anything there is still pressure downwards on cap rates And that's here in Atlantic Canada, it's here in it's absolutely in Ontario and out West. Okay. Okay. I'll turn it back there. Thanks, guys. Thank you. Thank you. Next question will be from Howard Lyon at Veritas Investments. Please go ahead. Good morning. Thank you. I just want to ask about the suite reposition and follow-up on that. You've expanded the program, look, It's been successful. I guess given the some of the occupancies and rents have diverged maybe across the country, Is Nova Scotia should we still see the majority of those renovations being completed in Nova Scotia because that's where your Major opportunity status or should we see some of that shift, some of that mix shift in 2021? No, it's actually very interesting question because what we see is throughout the portfolio And virtually every building has the ability when a unit comes vacant, there's enough demand for an upgraded unit. So it's coast to coast. Okay, good. So we'll see so most of it will still be in Nova Scotia then, I mean just for this year? We're not saying that. It's spread out evenly across the country. The demand, it is across the country. Okay, okay. So it's more about availability of when the tenant moves out or when it's time to do the restructuring? I think you should look kind of weighted average Where our unit count is and spread it out that way. It really is being kind of based on where the units are, Opportunity and rent. Every market, that's the interesting thing. Every building has the ability to earn more rent with a renovated unit. That's universal. And I'd say looking forward, maybe a little bit more heavily outside of Halifax only because Halifax is where we kind of started with the repositioning as This past year and a half, we've been rolling out in New Brunswick and other markets. We've got those relationship contracts That is more underway there. So when we look at that growth from this year to next, a lot of that will be outside of the Halifax market. Okay. No, that's great color. Thanks for that. And then just on the guidance, I guess there were some comments in the MD and A for the guidance that maybe occupancy might see a slight DIP continued in 2021, but then I guess maybe when you're thinking about the back half of this year, if all goes well, hopefully that It will come back and is that should we expect maybe occupancy to be flat overall? So I mean, I think that we think that with improvements in the second half of the year and especially, I mean, this is a Question on these international students' timing for coming back and universities opening up. Should all that stuff come together, I think we have the opportunity to have some improvement And see year over year, but COVID, we'll see what happens on those restrictions. One of the interesting realities with the universities Is that some are stating that they've had increased enrollment for the winter term. And the expectation is that there should be increased demand for the semester in the fall. So it will be good for the marketplace generally. Right, right. And I guess we're still hearing To see if the schools are going to open up their classes for the fall. I guess they haven't made that decision yet. In Atlantic Canada, I think the trend is they're planning for it. We'll see based on what we're seeing currently. Unless something goes wrong with the vaccination and the rollout, the plan definitely is to be open For in person classes in the fall semester of this year. Yes, that'd be good news for all of us to be able to Good for a lot of businesses. Yes, for sure. Thanks so much for the answers and I'll pass the line. Thank you. Thank you. Great. Thanks. Next will be Yash Sankpal at Laurentian Bank. Please go ahead. Yes. Good morning. Good morning. Hi, Ann. Just wanted to take a look at your Slide 31. Are those numbers those figures you have shown, are those like the total costs or Are you planning to spend that money? I don't think so, but just want to confirm. Yes, they would be total cost. Okay. So how much would you spend this year And next year on your development projects and how much of that would be through your construction loans and The rest would be out of pocket, I guess. Almost all through construction loans when we look at our construction. Well, the majority because the equity is in the ground for almost all of our projects now. So from a cash flow perspective, most of that cash, Almost all for 2021 is coming from construction facilities. Well, I mean, if you go down through the list, Latitude is on construction financing Now the equity is in the project. Civic 66 has a little bit more cash, but firstly, We're almost there. Luma, all the money is in and the governor is budget is only another $2,000,000 to $3,000,000 Okay, that's good. And what would be your outlet this year, total outlet For development projects, including the construction financing and everything? So without so sorry, are you still looking for the net Cash outflow net of construction financing or free construction financing? Net of construction financing, it's minimal. So without No, including construction financing, how much will we invest In our new developments. Okay. So probably $20,000,000 to $30,000,000 in that range. In that range, yes. So, yes, dollars 20,000,000 to $30,000,000 Okay. All right. And your MSC portfolio, I was surprised to see the strength. So is there anything are you seeing any specific trend that is happening there? Are people preferring MSCs or apartments? Any color there? Well, I think the color As we see it, and again, overall, the year round parks did very well in 20 20. We talked a number of times around why the seasonal parks had a Sub per year and a lot of that had to do with the fact that we couldn't open them up and there was restrictions from the borders of tourists coming in from Quebec and Ontario. What we see is actually a fairly strong demand for increased Sort of occupancy in a number of the parks, whether they're in Ontario or Atlantic Canada, to the point where For many years, we used to have some years up to 30 to almost 50 home sales per year. And that has sort of Trickled down through just a handful in the last couple and we have already pre ordered 10 homes for Nova Scotia, and that's all we could get commitments for because the demand for that type of product It's now basically a year to year and a half wait and we're looking to see that we can get a commitment for The product in Ontario, which is quite hard. So we see a huge increase in demand for that product and we do have Expansion potential in a couple of our parks in Ontario that we're looking at and looking to put place new homes And a couple of them as well. So I think it's going to be a pretty interesting year for that side of our business. Do you think it's a reflection of is happening in the overall housing market? The way home prices have been up? Yes, I think it's a combination of that. It's a combination of Being in the COVID-nineteen environment for over a year, A lot of these sort of opportunities or communities are becoming more attractive for a whole Segment of the population. And I mean, if you can retire and have a nice home to live in, in Listowell, which is Just sort of north of Kichner Waterloo and that's it's fairly attractive these days. Okay. That's good. And then, 42 Yes, just wanted to sorry. Yes, I just we just I was a bit light on my estimate of cash on the developments this year, Because it's netted against construction financing, when we're looking at our net cash outflow, we look at a bit differently. So it's probably $60,000,000 plus. There's a lot happening on construction. Yes. No, it's a bit light there. So when we look at the investments we're going to be putting in on those projects, it is we got a lot happening this year. Okay. And the incentives that you're offering, just wanted to understand what is happening in the overall market? What your competitors are doing? Are you seeing I heard some people telling me That 1 to 2 months worth of rent is being offered. Are you seeing that kind of aggressive And that is being offered? In very specific market, SAGE is not generally across the board. And I would say on average For any markets where we do have it, it would only be kind of a 1 month. I think downtown Alberta is where we're seeing the most aggressive incentives. That would be it. Right. Sequentially, I saw your Calgary occupancy was down 150 bps, I think. Yes, certainly. Yes. Although I think It's looking better actually in the last 6 weeks. It's another market that's shown better. So We're hopeful it's firming up. Yes. Our downtown Alberta assets That's where we're seeing that. It's not the suburban, it's the downtown assets. Right. And is it a reflection of aggressive incentives being offered or It's low demand that is driving that? I think it's Demand that's causing that. So that's one market where we're looking closely at the incentive offerings and we have increased our incentive offering For those downtown assets to be able to compete with what's going on there in the market. That's it from me. Thank you. Thank you. Thank you. And at this time, we have no further questions. Please proceed. Well, that concludes our conference call for the Q4 and year end for 2020. We thank everybody for participating today and we look forward to Q1 results in early May. Thank you. 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.