Earnings Call: Q4 2019

Feb 13, 2020

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Killen Apartment REIT's 4th Quarter 2019 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Mr. Philip Fraser, President and CEO, you may begin your conference. Thank you. Hello and thank you for joining Killam Apartment REIT's and year end 2019 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, Bill. This presentation contains forward looking statements with respect to Killam Apartment REIT's operations, strategies, financial performance and conditions. The actual results and performance of Killam Apartment REIT could differ materially from those expressed or implied in such statements. These statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from those expressed include, among other things, general economic and market factors, competition, changes in government regulations and factors described in the Risk Factors section of Killam's annual information form and other securities and regulatory filings. This cautionary statement qualifies all forward looking statements attributable to Killam and the persons acting on its behalf. Unless otherwise stated, all forward looking statements are as of the date of this presentation and the parties have no obligation to update such statements. Thank you, Nancy. I am pleased to report another very strong year for Killam. We achieved net income of $284,000,000 compared to $175,000,000 in 20.18 and earned funds from operations of $0.98 per unit, a 4.3% increase from 2018. We were successful in meeting our strategic targets in 2019 and summarized on Slide 4. Performance from our same property assets has been strong and met our same property NOI growth target with a 4.1% growth overall. We completed $191,000,000 in acquisitions consisting of 6 40 apartment units, 359 manufactured home community sites and additional 200,000 square feet of retail space in 4 provinces. As well, we recorded $244,000,000 in fair value gains, growing the portfolio to $3,300,000,000 at year end. We met our target to earn 30% of our 2019 NOI from outside Atlantic Canada. Our development plans are on track with the frontier completed in June 2019 and 4 developments currently underway, including the K in Mississauga, Latitude in Ottawa, the Shorefront in Hurley in Charlottetown. We are maintaining a strong balance sheet with conservative debt levels ending the year at 43.4 percent debt to total asset ratio. I will now ask Dale to recap our financial results. Thanks, Bill. Our strong financial results in 2019 continued a trend of healthy earnings growth. Slide 5 recaps Kiln's growth over the past 5 years. We've achieved positive improvements in all key financial metrics over this period. NOI has increased steadily and FFO per unit has grown by a compound annual growth rate of 5.5%. Over the same period, Killam has reduced the AFFO payout ratio to 82% and increased its distribution 3x. I'm pleased to report that yesterday, the Board approved an additional 3% increase, making it 4 years in a row of distribution growth. 2019 results are highlighted on Slide 5. Film generated FFO per unit of 0 point 4.3% from 2018. This growth was driven by increased earnings from strong same property performance and incremental contributions from acquisitions and developments, partially offset by higher financing costs and a 10% increase in the weighted average number of units outstanding. Q4 results were also strong, as highlighted on Slide 6. Killam achieved 8.7% growth in FFO per unit and 16.7% growth in AFFO per unit. Similar to the year end results, strong same property performance was the main contributor to this growth. Also contributing to the quarterly results was a decrease in deferred financing costs versus Q4 2018. Overall occupancy and rental rate growth continues to trend higher. Slide 7 highlights key revenue metrics for the year. Occupancy was very strong at 97.3%, rents were up 3.6% and incentives were down. Strong fundamentals paired with our revenue enhancing programs are driving top line growth. We also remain focused on expense management. Total same property expenses were up 2.4% for the year as shown on Slide 8. We experienced a 3.5% increase in general operating expenses, which included additional costs associated with rolling out our expanded CRM and leasing platforms. We continue to benefit from energy efficiency investments, realizing less than 1% growth in utility and fuel expenses in the year. Property taxes were up 2.4%. We were successful in numerous tax appeals to help mitigate increasing tax rates and assessment values. We continue to manage our balance sheet conservatively as highlighted on Slide 9. Debt as a percentage of total assets improved to 43.4 percent and we realized improvements in debt to normalized EBITDA. Capital flexibility is a priority and we were successful at increasing our pool of unencumbered assets last year and repaying our highest rate debt. Slide 10 highlights our debt maturity profile. Based on current market conditions, we expect to refinance at lower interest rates this year on mortgage renewals. As shown on Slide 11, Killam's real estate portfolio grew to $3,300,000,000 In addition to acquisitions and developments, we recorded $244,000,000 in fair value gains in 20 19, including $110,000,000 in Q4. These gains were attributable to strong NY growth and cap rate compression, primarily in Halifax, Ontario and on the MHC portfolio. Halifax was the focus of cap rate compression in Q4. An increase in demand for apartment product in Halifax from both local and institutional investors was highlighted with strong interest for the 1500 Unit Quadrille portfolio marketed in Q4. Investors are attracted to the city's solid apartment fundamentals, including strong population growth and record low vacancy rates. I'll now turn the call over to Robert, who will provide details on our operating performance this year. Thank you, Dale. Good morning, everyone. As shown on Slide 12, Killam's long term strategy continues to focus on increasing both funds from operations and net asset value by executing on its 3 core strategies, namely: increasing earnings from the existing portfolio, expanding the portfolio and diversifying geographically through accretive acquisitions with an emphasis properties and thirdly, developing high quality properties in Killam's core markets. Dana will speak to Killam's 2019 operating performance, concentrating on key revenue and operating initiatives before turning the call back to Philip to discuss our development pipeline and recent acquisitions. KILT's existing $3,300,000,000 portfolio includes 16,325 apartment units, 5,800 MHC Sites and 800,000 Square Feet of Commercial Space. We are committed to maximizing unit holder value. Our strong same property NOI performance in 2018 2019 are largely attributable to our ability to grow revenues. Slide 13 charts Killam's rental rate trends over the past 3 years. We have generated consistent revenue growth each quarter for the past 8 quarters as we implement Killam's revenue enhancing programs. In the last quarter of 2019, we delivered overall same property rental rate growth of 3.6 percent, a 90 basis point increase versus Q4 2018 and double the 1.8% increase reported in Q4 2017. Approximately 70% of our tenants renew their leases each year. These 11,000 tenants delivered an average gain of 2.1%, up 40 basis points over Q4 2018. However, Killam's best rental return is with units rented to new tenants on turnover. This quarter, film delivered 5.8% rental rate growth on new leasing, ensuring rents are brought to market, which is a 50 basis point improvement versus the same period in 2018. Killam's value proposition and market conditions have never been stronger as we experienced record occupancy levels in many of Killam's core markets. Market demand for Killam's new and newly renovated rental units is healthy across the portfolio and in response, film has accelerated its suite repositioning program as highlighted on Slide 14. In 2019, we upgraded and repositioned 3 4 units that are expected to generate an aggregate $1,000,000 in additional net operating income. The average cost these units is $25,000 per unit, and we typically earn a 13% unlevered return. It is interesting to note that earning higher returns on upgraded units is not restricted to specific geographies or properties as we have this opportunity throughout Killam's portfolio. Given these superior returns, Killam will increase its unit repositioning program in 2020 to upgrade and reposition upwards of 500 units. This should improve Killam's approximately 300,000 additional units for repositioning. Once these are completed, we expect to earn an estimated $10,000,000 in additional annualized rental revenue, representing an approximate $210,000,000 increase in net asset value. We expect the upgrade and repositioning opportunity to cycle with time, providing additional units to renovate every year. Top line growth combined with expense management remains a key priority, but additional metrics that are more subjective, but just as critically important, our superior customer service, technology gains and enhanced analytics. Killam seeks continuous improvement and provides the tools to enable its staff to perform efficiently. Please refer to Slide 15. We invest in progressive and innovative processes as we leverage and develop our operating and financial platforms All Kill employees have smartphones Altium employees have smartphones and or tablets that help deliver faster response times to our tenants' inquiries, enhance staff efficiencies and reduce paper work, all saving time and money. So for example, we have implemented mobile maintenance work orders and property inspection apps that improve response times, decrease paperwork and save finite resources by replacing the need for multiple paper copies. In early 2019, we successfully implemented our customer relationship management software that enables Killam to Maine to make the best of rental opportunities and minimize vacancy. Our prospective tenants have the ability to book appointments and complete applications online. With more of the data entry being driven by our tenant prospects, our leasing teams have additional time to focus on excellent customer service. In the early months of 2020, we are improving our business intelligence platform to make data analytics even more timely and accessible across the company. User friendly dashboards of real time data are being rolled out to property management teams to drive leasing decisions, improve rental decisions and focus on expense management. Other key operating initiatives at Killam include active management of expenses to optimize net operating income in conjunction with sustainability. Please see Slide 16. Killam just completed 3rd year of its 5 year $25,000,000 energy efficiency plan focused on energy savings. These projects help to lessen Killam's carbon footprint, while mitigating the impact of expense increases from rising energy rates and other inflationary pressures. For the past 4 years, film has internally tracked its portfolio's energy intensity on an expense per square foot basis along with its carbon dioxide emissions. In 2019, we commissioned a 3rd party baseline greenhouse gas audit, ensuring our metrics are consistent with benchmarks and benchmarks against the leading green multi residential companies in North America. We are fully committed to being amongst the leaders in ESG for multi residential REITs and completed our initial GRES submission in 2019. We worked diligently on our operating platform as well as our new developments to reduce Killam's environmental footprint, ensure effective and ethical governance and are investing to maintain sustainable economic growth and enhance our public disclosure. Slide 17 profiles strong same property rental rate growth and NOI growth by region for 2019. The importance of geographic diversification is evident in this slide as it highlights the strength of the NOI growth in Ontario, Halifax, New Brunswick, 3 principal cities as well as Charlottetown. Newfoundland economy has been challenging for the past 3 years given its focus on offshore oil. For 2019, Hilton St. John's vacancy increased by 150 basis points year over year. However, on a positive note, average rents improved by 120 basis points. There are more signs of encouragement in the market. Unemployment declined 130 basis points in 2019, helping the unemployment rate reach its lowest level in 5 years at 11%. Further, RBC's December 2019 provincial outlook report that the Newfoundland economy is expected to report growth of 2% in 2019 and 1.1% for 2020. In Alberta, Edmonton same property results consist of 2 properties acquired in 2017, Weisbury and Tisbury. These properties are taking longer to stabilize than expected, but if Q4 2019 is a reliable indicator, we may be turning the corner. Same property occupancy improved 2 10 basis points and NOI grew 15% versus Q4 2018. We also own the Vibe and The Link in the Edmonton market. The Vibe is newly constructed, 178 unit property purchased in mid-twenty 18 that is currently 94% leased. The Link is newer still and was purchased in Q4 2019 as 105 units and is 86% leased. We are confident Killam's modern Edmonton portfolio will perform well in 2020. We're also pleased with our 531 unit Calgary portfolio, Its performance in Q14 Q4 twenty nineteen was impressive. Same property occupancy improved 60 basis points to 97.4 percent occupancy, and average rental rates showed a healthy 3.9% increase. CMHC's October 2019 housing market report forecasts further declines in vacancy for 2020 2021 based on improving fundamentals and stronger population growth expected in Calgary. I will now hand you back to Philip to provide details on our acquisitions and new developments this quarter. Thank you. Thank you, Robert. Slide 18 details our acquisition activity for the year. 56% of the capital deployed in 2019 was in Alberta and Ontario as Killton continues to execute on its strategy of increasing the percentage of our NOI that is generated outside Atlantic Canada. Slide 19 details our annual acquisition history with $191,000,000 of assets acquired in 2019. We exceeded our mineral acquisition target for the year. During Q4, Killam purchased the 48 unit property in Moncton, New Brunswick as shown on Slide 20. The property consists of a new 4 story wood frame apartment building costing $5,000,000 and shares a parking lot with an existing Killam apartment building. The property is currently 100% occupied. This acquisition increased Killam's portfolio in Mountain to over 1800 units. Slide 21 shows the link, an 8 story concrete apartment building located in the growing southwest portion of Edmonton that we purchased in late November. This newly constructed building contained 105 units with 163 underground parking stalls and a large rooftop patio. The average unit size is 8 30 square feet and has condo quality finishes. Slide 22 and 23 show our first acquisition in 2020 with Kiln continuing to geographically diversify its portfolio by acquiring its 1st apartment building in BC. The purchase of this 161 unit property for $54,000,000 was funded with cash on hand. Christy Pointe Apartments features 5 2 story buildings and 4 2 story townhouse buildings on a waterfront peninsula with over 6,000 feet of direct water frontage. Located in the sought after View Royal neighborhood, the property is close to transit, highways, shopping, hospitals and schools. This property is currently 99% occupied and contains ample office space that Killam will use in establishing its Victoria operating platform. Longer term, there is potential to redevelop the property in phases building 780,000 square feet of buildable area for an additional 312 units or a total of 4 73 units. On January 31, we acquired a 54 unit building in Halifax, Nova Scotia, adjacent to our existing Killam apartment building in the Clayton Park neighborhood. The purchase price was $8,800,000 and the property is currently 100% occupied and is easily absorbed in our Halifax platform. Since our development program started 8 years ago, we have completed over 10 project 10 development projects in 5 provinces consisting of 1100 units at a cost of approximately $280,000,000 Slide 26 shows the 228 Unit Development Frontier, which is co developed with RioCan and opened in June 2019. Frontier was completed on budget and is currently 97.4% leased. Slides 2728 show renderings of the Latitude, the 2nd phase of the Ottawa project with RioCan. We broke ground in Q2 2019 on the Latitude and the expected completion date is in late 2021. Details and progress photos of our Shorefront development located in Charlottetown are shown on Slides 2930. The demand for new product in Charlottetown is substantial and we expect to start the pre leasing in the next couple of months for a mid-twenty 20 opening. The KA Mississauga broke ground in 2/3/2019 with rendering showing on Slides 3132. This 120 unit development has a $56,000,000 budget with anticipated 5% all cash yield. Construction will take 24 months and the expected completion date is in mid-twenty 21. Finally, we continue to refine and advance our development pipeline. Killam has 2 additional developments slated to break ground in 2020. The Governor, a unique 12 unit luxury building adjacent to our Alexander apartment building in Halifax and a 170 unit building in Kitchener. A full list of our development pipeline is included on Slide 34. It is worth noting that over 70% of Killam's future development pipeline that is scheduled to be completed in the next 5 years is located in Ontario and Alberta. To conclude, 2019 was a very good year for Killam on many fronts with strong operating and financial performance. We also were successful in enhancing our enterprise risk management program, our new and our new ESG initiatives. With regards to senior management succession planning, we promoted 3 individuals to the vice president level and 3 individuals from the vice president to the senior vice president level. For 2020, we will continue to accelerate our suite renovation program, utilize data analytics across our organization, invest in technology for our operating platform as well of our buildings and new developments. Killam has always taken responsibility of corporate citizenship seriously and our core values over the last 20 years have helped drive our commitment to the environmental, social and governance issues that impact us today. We are aware of the increasing importance ESG is to all our stakeholders and we want to continue to position ourselves as leaders in sustainability amongst our real estate peers. This concludes the formal part of the presentation and we will now open it up the call for questions. Thank And the first question is from Mark Rothschild from Canaccord. Please go ahead. Thanks, Dan. Good morning, everyone. In the guidance for same property NOI of 3% to 5% for the year, can you talk a little bit more about the components of that? And in particular, to what extent is turnover slowing in some of your markets? And would that just be offset by stronger rent growth? And on turnover, is there a difference in what you're seeing now in Ontario versus, let's say, Halifax? Mark, I mean, I'll answer one part of that question. I think the answer is when you get markets that are 1% in vacancy, the turnover is less, it is decreasing. So obviously, the turnover is a lot lower in the sort of the GTA Toronto and even most of Ontario for us. And it is lower now in PEI. That's one part of what you're asking, I think. And Dale, what about the other components of where the 3 to 5 is going to be made up? Yes. So and just expanding a bit on turnover. So even talking about that decrease, we still even in Halifax, we're still fairly healthy compared to some other areas in Canada. So in Halifax, overall, we've seen our turnover decrease probably 5 50 basis points per year over the last few years. But Halifax, we're still at about 30 churn. So as it's tighter, as Phil mentioned, we might see that come down further. But we still right now have a fairly healthy churn in most of our markets. But in we are definitely seeing very low numbers in our assets in especially around the GTA area. I mean, I think some are sub-ten percent is what we're seeing. So definitely some decreases there. But when we look at that top line growth, I think that it is primarily about rental rate growth. When we look, there's some markets that we will see some occupancy gains we expect this year. Some of the ones that Rob talked about in terms of Alberta, I think we have some upside on occupancy year over year and Newfoundland and some others. But when we're at some pretty high levels at some other markets. So it's going to be rental rate growth is definitely a big part of the top line growth for the year ahead. Thank you. The next question is from Jonathan Kelcher from TD Securities. Please go ahead. Thanks. I guess just sticking with the guidance, where do you see cost pressures coming for 2020? And are you mostly done with the CRM costs? We are, yes. So I think year over year, we would have when we looked at expanding our leasing teams and absorbing the incremental costs associated with CRM, those would have been pretty fairly shown throughout the year in 2019. I think maybe by March, I'd say we had our full leasing component, so we might have a couple of months there. But really, the majority of it was absorbed in 2019. We think there may be some pressure on taxes. Municipalities look to be a little aggressive in places, so we'll see that and perhaps insurance. Thank you. The next question is from Johan Rodrigues from Raymond James. Please go ahead. Hi. I was just wondering, given your entry into BC this post 2019, what does that 30% bucket kind of look like in a few years? Are you looking to grow mostly in Ontario and Alberta? Or do you expect to grow more into BCP or even into any other new markets? The answer is we want to grow in Ontario for sure. We also want to grow in Alberta. And if we can expand and grow presence in BC, we'll do that as well. It is about diversification. So if we our objective is to increase that 30 up to 35 to go into 37 over the next few years. And that's it's only going to get done if we continue to grow in Ontario plus Alberta and additional growth in BC. A lot of our growth in Part of a development in Calgary that is starting underway now, which will give us new product in the next couple of years. Okay. And what is the savings or ROI that you guys expect in the $5,000,000 of energy efficiency investments? Around 15% and sometimes as much as 20%. It's about on the good ones, it's a 5 year payback and sometimes it goes as high as 7. At 10 year paybacks, you slow down a bit, but that's kind of the range we operate in. Okay. And then last question. Can you quantify the NOI that's being generated by those developments on Page 25? Of all of our developments in the past? Yes, the ones that have been completed. I'd say, what if you want to make to ballpark it, I think you could take the cost to build and assume yield of 5.5% and a margin of 72. I don't have the numbers right in front, but I think that that's probably when we talk of averages, that's probably a reasonable estimate. Okay. Thanks. I'll turn it back. Thank you. The next question is from Matt Kornack from National Bank Financial. Please go ahead. Good morning, guys. Good morning. With regards to the mortgage financing, I mean, interest rates have obviously punched a bit here early in the year. Have you done any early rate locks to lock in this year? Because I think sort of late last year, you probably would have been maybe a little bit higher on where interest costs were. So I'm wondering if you're taking advantage of this now or you'll just renew them as they come due? No, they're we're renewing them as they come due for sure. But I think we've got some pretty good rates on the manufacturing home communities for the 1st part of the year that we did just sort of normal sort of renewals rates that we've never seen, which is very exciting. And we do have some pretty big ones in Q1. So from a timing perspective. We'll log in some low rates. Yes. Fair enough. We'll have discussions what those options are, but we'll see. Sure. With regards to Canada, I think there was some commentary that due to supply, there was a brief increase in vacancy in that market. Is that just an anomaly or is it something you're seeing more broadly as guys start to build more products? That's unique. It's the developer that we bought the buildings from in phases actually just opened up the building across the street. It was like 2 50 units. So there is still a relationship probably with some of the original tenants that he knew. And so that's what we're talking about there. But as soon as that building gets absorbed, we're very comfortable that our buildings will be back up to 100%. Fair enough. And then on the leverage front with regards to your guidance, it sounds like you expect it to tick up a bit, but longer term, you want to bring it down to below 45%. Is that a function of acquisitions and development that it would pick up? Or I'm just wondering how you see the arc deploying capital? So and if you think of the timing of when we did our big equity raise at the end of last year, so the our debt at the end of the year would reflect the timing of that without full deployment of acquisitions on a leveraged basis. So when we look at our expectation for the year, we're kind of expect to bump around between current levels and kind of 45% depending on what happens. And so Okay. So not a huge amount of acquisition activity would be expected with the current capital structure. Obviously, you can issue equity to purchase more, but we shouldn't be modeling a ton of incremental acquisition activity without equity. I think we've got flexibility for capital for some of that, but I think that in order to look at big acquisition, I think that that's fair. Okay, perfect. Thanks guys. Thank you. The next question is from Alex Lyon from Desjardins Capital Markets. Please go ahead. Good morning. My first question here is relating to the fair value gain in investment properties. I was wondering what was the fair value gain attributable to the Halifax portfolio and maybe whether or not you can comment on the methodology used there and sort of how influential the QuadReal transaction was on that and whether there was any sort of conservatism built in to leave room on the table for further cap rate compression? Well, sure. So Halifax, so overall for the year, Halifax is about 120 ish. Fair value gains in the quarter was about 100 and cap rate compression was a fairly big part of that. And looking at the QuadReal transaction, it did even in advance of that, we had seen evidence of the cap rate compression actually a couple of other quarters prior to that. So but hearing about a 4% cap rate or so on that QuadReal really did force us to relook at what these values are with. When you talk about conservatism, I think it's important to remember that when we do IFRS fair values, it's on an asset by asset basis. We can't look at portfolio premium. So there was discussion around that. The 4% on QuadReal, is there a portfolio premium or not? Lots of debate whether there is and how much that is, but we would have taken that into consideration. And in addition to that, the NOI growth was also a big contributor to our growth in total fair value, not only for Halifax, but across the portfolio for the year. So as we continue to grow top line and NOI, we've seen that be part of our fair value gains. And every year, we're finding this process a little more, but so Q4 is at year end, a time that we really step back and look at some of our stabilized NOI adjustments, which was part of all the numbers that came into play in Q4. But HealthEquity was a big part of the story, and we'll see what happens in the future. Okay. Thank you. My next question is relating to the Frontier development. Just wondering what the NOI contribution was during the quarter? We don't have a rate on hand, but again, we're talking about leasing in terms, which is a little bit slightly different than move ins, but it was positive for the quarter. Yes. We'll get it for you. And in Q4, it would have been first time, we would have seen the positive there, at least from an FFO perspective too, when you look at the debt associated with that. So that's a big contributor of FFO per unit growth as we look for 2020, should be a big year of growth from the frontier from a NOI and an earnings perspective, FFO perspective. Okay. And then last one for me. I think in the Q2, you guys had mentioned that there was some change in accrual accounting for the utility bills. So I was just wondering if there was any positive variance within NOI during the quarter relating to that change in accounting policy? So I think in the Q2, you guys had mentioned there was half a million. I would say that we did our best this quarter to do an apples to apples comparison. So when we show the NOI growth in Q4, it is looking at similar periods year over year from an earnings perspective from an expense perspective from utility. When you look at utility expenses for the full year 2019 to 2018, both are based on 12 months of earnings, though of expenses, rather. So I would say that the change in the way we accrued for it is not we adjusted for that in Q4 essentially to make sure that it's apples to apples. But FFO always is flowing through as we expand. Sure. Okay. Thanks. Erin has a comment here. Yes. Just your question on back on Frontier for the NOI contribution. So far, 50%, it was $350 in the quarter. Okay, perfect. Thanks. I'll turn it back. Thank you. The next question is from Mario Saric from Scotiabank. Please go ahead. Hi, good morning. Good morning. Just coming back to the 3% to 5% guidance, can you talk about how much NOI margin expansion is expected at the midpoint? I'd say we expect some NOI margin expansion, but it might not be as big as this past year. Got it. Okay. And then on the top line revenue with turnover coming down, the ability to push rental renewal becomes increasingly important. How do you see that 2.1% growth on renewal changing over time and how much, let's say, self regulation is built into that 2.1% there? I mean, I think that we do have a fair bit of self regulation there. And what we do is we look and we're increasingly using data analytics to make sure we understand the market conditions, but we also are looking building by building and property managers and leasing staff looks tenant by tenant to consider different circumstances and trying to understand which units are far, far below market. But those tenants that have been here a very long time, that's taken into consideration as well. So we will be measured in moving those rents to market in a responsible way. But certainly 2.1% is a responsible number, I mean, barely inflation. So we've been consistently doing that. Yes, no, absolutely. Regarding the data analytics, has enough time passed now that it's had any kind of impact to your rent setting policy at this stage? And how should we think about the contribution of data analytics to kind of revenue maximization? It does assist us. I think on the renewals in particular, we're able to look at those with more scrutiny. So we're using it to assist us there. But overall, what we're taking opportunity is with vacant units in particular, we'll move the rents more. But with and also when we're redeveloping or renovating units, we're seeing decent increases there. So it's a mix of all three as we go forward. But we're sensitive to the market and where we are with moving rents upward. I do think that we've started to see the increase, but we do have more potential in next year. And part of it is using data analytics to look not just at a property level, but the unit type in each property and being able to easily look at that to say, if there's no vacancy at all in a 2 bedroom unit, even though the building might carry a little bit, those assets kind of looking unit by unit and just to understand some of those drivers and different what time of it's just going to provide it's just going to provide that much more. So I do think that we've started to see it. It's just going to be help us further. And adding to that location in the building, whether it's on the 1st floor or the top floor or other considerations we would have. And then in terms of the unit, whether it's the flooring type and if it's been upgraded, we would alter the rents appropriately. All of that sounds really interesting. So on the whole, when you look at the portfolio rent today versus market, what would you estimate the mark to market within the portfolio is today assuming kind of a regular CapEx spend on turn as opposed to a renovation, like a full scale renovation? So we think there's probably to get to market throughout the entire portfolio, a 10% to 15% increase across the board would probably do that. Okay, great. Thank you. Thank you. Thank you. The next question is from Dean Wilkinson from CIBC. Please go ahead. Thanks. Good morning, everyone. Hi, Dean. I guess, for Phil, when you look at that longer term target of sort of getting high-30s percent outside of Eastern Ontario, There's a lot or Eastern Canada. There seems to be a lot of money sort of going across the country buying up apartment assets that started on the West Coast and it's now clearly landed in the East Coast. And you're seeing the cap rate compression and perhaps over time we may even get conversion just because that's the cost of debt no matter where you are in Canada. Could you envision a situation where you could be selling some of those Halifax based assets at a cap rate that people perhaps 2 years ago wouldn't have even contemplated and moving it back towards maybe the more central or western part of the country and sort of accelerating that through? And how much would the tax hit on any sale like that be an impediment to doing something like that? Well, I mean to try to answer that question, I mean it's about when you look at it today and if you truly believe that the assets are scarce and they're not that hard to sort of there's you can trade, but what are you really trading for? The fact that we've owned a lot of these assets in Atlantic Canada for a long time, There is they produce relatively speaking the returns are very good. And as long as there's job creation and population increase, then is the expectation that the assets will be able to at whatever level generate more income over time. And when you so to try to answer back into the question you're saying is, if you're trying to get to a more balanced, geographically speaking of where our NOI is coming from. The way that we tend to look at it is if we can't buy because conditions are so competitive in Ontario, and I wouldn't say they are as competitive out west, there's lots of product right now in Alberta and surprisingly in BC, we can build that part of what we're trying to do in Ontario. And again, I mean it's an interesting position we're in where we're not 100% reliant on acquisition, especially older stock that is really, really sought after in Ontario because in our mind, just like when we said, well, we really like those assets that we passed on in Halifax, we still see opportunity in this market because we have land ready to develop. So our development side of our company provides us with the growth in a way to actually get out and balance geographically where we're going to make the NOI. I guess I'm going to ask this question knowing that you can't answer it. Have private equity or other players knocked on the door looking around at some of your assets? I would say no. Well, you have to, right? I guess Toronto is not the center of the universe. Halifax has got something going forward too. That's it for me. Thanks guys. I'll hand it back. Thank you. And your next question is a follow-up from Alex Leon from Desjardins Capital Markets. Go ahead please. Hi, Alex. Alex, your line is open. You may proceed with your question. Yes, that's a mistake. It shouldn't be on there. Thank you. There are no further questions at this time. You may proceed. Again, we'd like to thank everybody for listening and participating today and we look forward to being back here for Q1 in May. Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.