Good morning, ladies and gentlemen, and welcome to the Killam Apartment REIT's second quarter 2018 financial results conference call. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. Please note that this call is being recorded today, August 9th, 2018, at 9:00 A.M. Eastern Time. I would now like to turn the meeting over to your host for today's call, Philip Fraser, President and Chief Executive Officer. Please go ahead, Mr. Fraser.
Hello. Thank you for joining Killam Apartment REIT's Q2 2018 conference call. I am here today with Robert Richardson, Executive Vice President, Dale Noseworthy, Chief Financial Officer, Erin Cleveland, Vice President of Finance, and Nancy Alexander, Senior Director of Investor Relations. 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 contains forward-looking statements with respect to Killam Apartment REIT's operations, strategy, 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 strong quarter for Killam. We achieved several second quarter financial and operating all-time highs for Killam. The highest second quarter occupancy, the lowest debt to asset in our history, and a continual improvement in our NOI margin, to name a few. We have made headway on our strategic targets in the first half of the year, as summarized on slide 4. Based on strong top-line revenue growth, same property NOI increased by 6% compared to Q2 2017 and 5.5% year to date. Following these results, we have revised our same property NOI target for the year from 1%-2%, up to 3%-5%. We purchased CAD 124 million of properties in the first quarter, and subsequent to the end of Q2, we have acquired or committed to acquire another CAD 51 million of properties.
We expect to close a minimum of CAD 225 million of acquisitions in 2018. Of the assets acquired or committed to date, 81% are located outside Atlantic Canada, and Killam expects to generate 27% of its NOI from Alberta and Ontario in 2018. Bégin Park, our most recently completed development in Cambridge, opened in April, and 74 of the 94 units are leased. The Alexander development in Halifax will open in September, and we expect to break ground at our Mississauga development later in the fourth quarter. I will now ask Dale to recap our financial results.
Thanks, Phil. Slide five shows our Q2 2018 and year-to-date financial results. Killam generated FFO per unit of CAD 0.25, 8.7% higher than Q2 2017. Year to date, we generated CAD 0.45 in FFO per unit, an increase of 7.1%. Our strong same-property NOI growth and acquisitions contributed to the increase, partially offset by higher administration costs and an increase in the average number of units outstanding. AFFO per unit was up 5.3% in the quarter and 12.5% year to date. Same-property revenue was up 4.1% in both the quarter and year to date, as illustrated on slide six. Overall rental rate growth continues to trend higher. The 2.4% increase achieved in Q2 is the highest average rate increase in over six years, 20 basis points higher than Q1 and 80 basis points ahead of Q2 last year.
During the first half of the year, we achieved 1.6% growth on renewals and 4.9% growth on unit turns. We've also decreased rental incentives, down 20 basis points year-over-year. With this strong revenue trend, we have revised our revenue projections for the second half of 2018, contributing to our increased NOI guidance for the year. As shown on slide seven, operating expenses were only 0.9% higher than Q2 2017 and up 1.9% for the first half of the year. The modest increases were driven by higher utility and fuel costs resulting from increases in both consumption and variable pricing during the heating season. Property tax expense remained relatively flat as we continue to appeal tax assessment increases whenever possible. Savings in general operating expenses were due to lower insurance costs and operating cost management initiatives.
In total, Killam's same-property NOI margin improved by 110 basis points and 90 basis points for the quarter and year to date, respectively. Killam's key debt metrics are highlighted on slide eight. Total debt as a percentage of total assets was 48.0%, 70 basis points lower than year-end. Our interest coverage ratio of 3.18 times has increased over the past four years, and debt to EBITDA was 1.85 times at quarter end. This was impacted by the timing of recent acquisition and contributions from financings on our developments. Normalized for annualized earnings from recent acquisitions and developments, debt to normalized EBITDA is 10.2 times. Slide nine highlights our debt maturity profile, including average apartment mortgage rates by year versus prevailing CMHC insured mortgage rates.
Interest rates were lower on refinancing in the first half of 2018, and we expect to refinance apartment maturities in the second half of the year at rates lower than the weighted average interest rate on maturing debt of 3.76%. Beyond 2018, we anticipate higher interest rate rates on mortgage refinancings. We have laddered our debt maturities and reduced overall leverage to lessen the exposure to rising interest rates. As shown on slide 10, through acquisitions, developments, capital investment, and appreciation of existing properties, Killam's real estate portfolio has grown to CAD 2.5 billion in value. We are acquiring and developing new high-quality assets in prime locations. This, along with strong market fundamentals, has translated into compression in the weighted average cap rate of our portfolio, including a 15 basis point tightening since year-end.
This decrease in cap rates, coupled with strong revenue growth, is reflected in CAD 85 million of fair value gains so far in 2018. I'll now turn the call over to Robert, who will provide details on our operating performance this quarter.
Thank you, Dale. Good morning, everyone. As shown on slide 11, Killam continues to execute on its strategy to increase the value of our business, namely increasing our funds from operations and net asset value based on three key priorities. Increase earnings from the existing portfolio. Two, expand the portfolio and diversify geographically through accretive acquisitions with an emphasis on newer properties. Number three, the development of high-quality properties in Killam's core markets. I will focus on Killam's operating performance year-to-date and our key revenue and expense management initiatives before turning the call back to Philip to discuss our development pipeline and recent acquisitions. With Killam's existing portfolio of 15,000 apartment units, 5,200 MHC sites, and our expanding commercial base, we are focused on maximizing unitholder value.
Slide 12 highlights the key areas we concentrate on when we deliver creative and innovative programs to achieve our goals of FFO and NAV growth. Metrics that are more subjective, such as superior customer service, technology gains, and enhanced analytics, are equally important and not overlooked. For the last four years, Killam has received a 90% tenant satisfaction rating from our annual tenant survey, which is independently managed by Corporate Research Associates. These results reflect the care and committed service delivered by our team of skilled employees each and every day. Killam's human resource and property management teams are working together to hire and retain excellent employees that understand Killam's core values and are focused on tenant satisfaction.
Killam seeks continuous improvement and provides the tools to enable our staff to perform most efficiently by using leading technologies for leasing, property management, and property maintenance. Slide 13 details Killam's strong same property occupancy results for Q2 2018. Both our management and leasing teams in each market performed exemplary and continued to deliver record-high portfolio occupancy the second quarter of 2018. Apart from one property in Calgary, all markets reported healthy occupancy increases. Note that Charlottetown continues to be fully occupied, with expectations that this trend will continue through 2019, given the higher rates of international immigration and very little new multi-residential supply in the PEI market. Overall, Killam reported consolidated same property occupancy 96.9% in Q2, a 90 basis point improvement from Q2 2017. Killam is increasing rents on unit turns. Overall, we achieved a 4.9% average rental increase, a 160 basis point improvement versus year-to-date 2017.
Market demand for quality rental units remains robust, and Killam's portfolio is well-positioned to capture rental growth. In response to this opportunity highlighted on Slide 14, we have accelerated our suite repositioning program in 2018 to CAD 3 million-CAD 4 million and 200 units upgraded, up from CAD 1 million invested and 43 units upgraded in 2017. Year-to-date 2018, 70 reposition units are completed or underway, with completed units yielding an average return on investment of 14% and an average monthly rental increase of CAD 245. With 200 repositionings in 2018 and 300 repositionings planned for 2019, we expect to generate an aggregate of CAD 1.5 million in revenue growth from the upgrades. Following a portfolio review, we have identified approximately 3,000 units for repositioning. Once completed, this is expected to translate into an estimated CAD 9 million in additional annualized same property revenue and approximately CAD 170 million in increased NAV.
The average cost to reposition a unit is expected to be approximately CAD 20,000, or CAD 60 million in total. Slides 15 through 19 highlight examples of the opportunities we are capturing this year at 30 various properties across our portfolio. Slide 16 shows our One Oak property in the Halifax area. Built in 1969, this mid-rise property has 146 units and overlooks a beautiful city park and Sullivan's Pond. The neighborhood is seeing an influx of millennials with many retail shops and restaurants locating nearby. A CAD 23,000 investment with a focus on kitchen, bathroom, and flooring upgrades results in an average monthly rental lift of CAD 190, equating to a 14% ROI. Slide 17 shows our Lorentz Apartments in Moncton. A 102-unit building that was also built in 1969. The average rent for a two-bedroom was only CAD 760 per month.
With a CAD 25,000 investment, we can earn rent of CAD 415 per month more, yielding a 20% ROI. Slide 18 highlights Tobin Street in downtown Halifax, a 47-unit property built 25 years ago. By updating kitchens, flooring, and bathrooms for an average of CAD 25,000 per unit, we moved rental rates CAD 270 per month and generate a return on investment of 13%. Slide 19 shows our 199-unit Silver Spear property in Mississauga. We identified the opportunity to increase returns at this property two to three years ago and have repositioned 60 units to date, continuing to maximize value as units turn. Our average investment is CAD 21,000 per unit, achieving a 30% average rental lift and a 24% ROI. I must point out that slide 19 does not highlight Killam's photography talents whatsoever, as a renovated Silver Spear unit shows much better in person.
That is why these units, once renovated, earn over CAD 400 per month in rental lift. All these properties show little to no vacancy, but we continue to reposition units as they turn. Overall, we expect to achieve a monthly rental lift of CAD 250 per month and returns on investment exceeding 12%. In conjunction with driving revenue growth, Killam is actively managing expenses to optimize net operating income. As shown on Slide 20, Killam is executing its five-year CAD 25 million energy efficiency plan focused on energy savings, such as the installation of ultra-low flow toilets, LED lighting retrofits, and heating systems utilizing condensing gas boilers and plant recommissionings. These projects help mitigate the impact of expense increases from rising energy rates and other inflationary pressures. To date, we have invested approximately CAD 6 million in energy projects and have achieved a 24% return, essentially a four-year payback.
Slide 21 highlights our commitment to advancing technology. Technology has been key to growing a traditionally staid bricks and mortar business in the 21st century. Killam has embraced technology and invested in our online property management personnel, enabling Killam to integrate new and innovative technologies as our business continuously evolves. All Killam employees have smartphones or tablets that enhance staff efficiencies, reduce paperwork, save time and money, and deliver faster response times to our tenant inquiries. We have rolled out mobile maintenance work orders, property inspection apps, and are currently fully integrating our front-end online leasing, marketing, and customer relationship software. This gives us the ability to maximize rental opportunities, further reduce vacancy, and deliver the high quality of service that our prospects and tenants have come to expect.
Having real-time access to this data is key to ensuring we can rapidly analyze our markets, tenants, prospects, vendors, and better enables Killam to make informed and more accurate operating decisions. The market fundamentals remain strong in our key markets. Slides 22 to 24 highlight the Halifax, New Brunswick, and Ontario markets, and all three markets performed very well in Q2 2018, generating excellent occupancy and NOI growth as shown. Killam's portfolio continues to perform very well, and we are confident we will deliver continued growth for the foreseeable future. I'll now hand you back to Philip to provide details on our acquisitions and new developments this quarter.
Thank you, Robert. Slide 25 details our acquisition activity year to date. Killam acquired CAD 124 million in Q1. Subsequent to the end of Q2, we continue to expand our portfolio another CAD 51 million in accretive acquisitions in Ontario and Alberta, either acquired or committed, bringing the total to CAD 175 million year to date. Slides 26 and 27 show our new Edmonton asset, The Vibe Lofts, that will close within the next couple of weeks. This asset is a new six-story, 178-unit apartment building located just west of the downtown Edmonton core. CAD 47 million purchase offers tenants condo-quality finishes, 10-foot ceilings throughout, and a variety of in-house amenities, including a collaboration lounge, yoga studio, gym, and rooftop patio. The average monthly rent is CAD 1,444 at CAD 2.35 per square foot and is currently 78% leased.
Turning to slides 28 and 29, Killam acquired a 10% interest in a 13.6-acre development site in Nolan Hill, a suburb in Northwest Calgary, for CAD 2 million. We have agreed to purchase the first phase of 233 units at a purchase price of CAD 55 million when completed in 2020. We will be responsible for the lease-up of the buildings and take possession upon completion. The agreement also provides us with the first right to purchase the remaining three phases of the project. Slide 30 highlights a seasonal MHC park that Killam purchased last month for CAD 2 million. This is a 137-site, 22-acre seasonal property, and is located in Carleton Place, Ontario, which is just adjacent to Killam's Lakewood Estates MHC. Allowing us to easily absorb the management of this property with our existing platform.
On the development front, Saginaw Park, as shown in slides 31, 32, and 33, is now complete. We opened its doors to tenants in April. The 94-unit, seven-story development includes several design features that improve the tenant experience and promote efficiency. Examples include condo-quality kitchens, smart locks, and separately metered water. We have recognized CAD 4.9 million in fair value gains related to Saginaw Park, reflecting the value created from our development program. The building is currently 79% leased and is expected to be fully leased by the end of the year. We are excited about the upcoming completion of The Alexander development in Downtown Halifax. Details of The Alexander and progress photos are included on slide 34. Killam has a 50% interest in The Alexander development and expects to increase its ownership to 100% in the near future.
The tower will be open next month. We are already over 80% leased for the entire building. Progress is on track with the Frontier development in Ottawa, a project we are co-developing with RioCan, as detailed on slide 35. First phase of the 23-story tower, 227-unit building, will have geothermal heating and separately metered water, increasing our operating margins and reducing our environmental footprint. The building is on schedule to be completed in Q2 2019. A rendering of the second phase is shown on slide 36. We are in the design and approval stages for this project. Our next project, shown on slide 37, is Silver Spear II, a 128-unit development in Mississauga, which is adjacent to our existing 199-unit building. The final approvals have been received. We expect to break ground in December or early January of next year.
Construction is expected to take 24 months with a CAD 47.4 million budget and anticipated all-cash yield of 5.25%. Slide 38 shows renderings of 163-unit building for our Downtown Kitchener land that was purchased in Q1. We are currently in the design phase and will be excited to start another project in the Kitchener-Waterloo-Cambridge area. Finally, we continue to advance our development pipeline. A full list of our development pipeline is included on slide 39. It is worth noting that 70% of Killam's development future pipeline is outside of Atlantic Canada, as we continue to grow our presence in Ontario and Alberta. To finish, Q2 has been a very good quarter, with strong operating and financial performance. Our focused strategy is leading to increased earnings, a stronger balance sheet, more geographical diversification, and one of the highest quality apartment portfolios in Canada.
This concludes the formal part of the presentation. We will now open up the call for questions.
At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mark Rothschild from Canaccord. Your line is open.
Thanks. Morning, everyone.
Morning.
Hi. With the revised guidance for same store NOI and the impressive numbers that you've had, how much of this was you maybe being a little conservative earlier in the year? Maybe what changed in some of those Eastern Canada markets that the fundamentals have improved so much?
I'd say that two things. One, perhaps we were a bit conservative starting the year. Having seen very impressive occupancy gains in the last couple of quarters, as we looked out, when we would have been doing the budgets last year, thinking it would be hard to beat those again. I'd say, we talked about last quarter, that with the strength that we are seeing, we are now saying that vacancy even today potentially has the opportunity to go a little bit higher. I think that that was part of it. As well, we have been more actively seeking higher rent increases, increasing our use of analytics and working with our property management teams to help drive those higher increases on rents.
When we look at the rental growth, occupancy is better than we would have projected for the year-to-date and for the quarter, the rental increases are as well, and part of that is just actively managing that differently. Looking, as Rob talked about with the repositionings, as we are just getting going on that, I don't think that is driving the increase in a big way yet, it is really changing our mindset in terms of what can we be getting for market rent with some more capital investment as well. In addition, the fundamentals remain strong, and New Brunswick is a prime example. When we look more historically, New Brunswick had a south patch for four years because of some starts came ahead of people back probably five or six years ago. It just took a little while to lease that up.
Where we are now in terms of vacancy in New Brunswick is back where we were, just more in line with the norm, except for that blip that we saw in the last few years. I'd say that we are seeing strength across the markets, it is all those factors together.
Okay, thanks. You sort of started talking about this, and maybe this is a question for Rob, you are getting some really good returns on the capital you are investing. To what extent can you expand that program? You probably don't need to get such high returns to justify the cost of additional capital to upgrade some properties. Are you looking at doing more of this, or is this really the maximum amount that you see that makes sense?
No, Mark, we do more. Our big limitation is occupancy, funny enough, in that we're virtually fully occupied at 97%, going to 98%. It's difficult to get our hands on some of the units, so we have to work around that. That's one of the big drivers. Then in the other units on renewals, we will do work, and we've done work, and we will move rents there as well.
I'd say just add to that, in spending more time in looking at the opportunities for the portfolio, I think that even in the last quarter to have identified now 3,000 units, that the opportunities are extensive. When we look at some properties that we wouldn't have originally had on the books in terms of repositionings, we are finding that those properties that are 20, some of the ones we showed, Tobin Street's a prime example, 20, 25 years old. We're seeing those very positive returns. I think that's the program.
Lorenza is a good example.
Yeah.
There's a property in Moncton, and moved the rents CAD 400.
Yeah
tremendous lift. Investing something between CAD 20,000 and CAD 25,000, which I always liked that building. It was a very clean building. This is an opportunity to reposition and complete.
Okay, great. Thanks so much.
Your next question comes from the line of Jonathan Kelcher from TD Securities. Your line is open.
Thanks. Good morning.
Good morning, Jonathan.
Morning.
First, on the Nolan Hill forward purchase agreement. What's the pro forma yield on that development?
The first one will be about a five and a quarter.
Okay. How involved in, or were you involved in any of the design or the construction parameters on that?
We're heavily involved in it in terms of looking to sort of the minimal standards that we're looking for in terms of kitchen finishes, bathroom finishes. There's a standard from the product. Our partner is Cidex out there. We are 10% owners, and so we do have basically a lot of input at this stage.
Okay. Was that the thought process behind buying in the 10%?
Yes. Obviously, it's like buying in. Basically, we got to fund our 10% of this first phase. We get 10% of the profit as well when it's sold to us.
Okay. Just turning to acquisitions. You're now saying a minimum of CAD 225. You're at CAD 175. I'm guessing that means you guys have a pretty good pipeline for the back half of the year. Where are you seeing the most opportunities?
You know what? It's a good question. The answer is we're seeing a few opportunities we're looking at in Atlantic Canada. Again, I was talking to you even last quarter about PEI, there's a few selective opportunities in New Brunswick. Obviously, we like the Southwest Ontario. Toronto is very rich relative to where the pricing is today. Outside there's opportunities. Then, not surprisingly, there's opportunities both in Edmonton and Calgary.
Okay.
It's right across the board.
Yeah. I'm guessing that'd be a mix of newer property and older property as well?
That's correct.
Okay, thanks. I'll turn it back.
Thank you.
Thank you.
Your next question comes from the line of Dean Wilkinson from CIBC. Your line is open.
Thanks. Morning, everyone.
Hi, Dean.
Hi, Dean.
Rob, just circling back to the comment you made, it's difficult to get your hands on suites to do the renovations. Have you guys noticed sort of with the burn-off of the incentives and where your occupancy levels are, any discernible trend in the amount of suite turns you're seeing? Would 32-35, your historical, be a number that we could expect going forward, or is that grinding lower?
Yes, you're right, Dean. It's down a little bit than what we're typically used to seeing. Closer to 30 than, say, 32 or 33. It's a tight market, which is a good opportunity to move rent.
Is there anything you can do to, I guess it's a tough question, try to get that number back up? If people want to renew, they want to renew. You can push it as much as you can, but I guess this is something that everyone's facing in-
Right.
-the markets as hard as they are.
Accepting that, we're still turning something like 4,500 units or so, right?
Yeah.
Like a third of the portfolio. So there's opportunities. I don't want to overstate that. That is one of the limitations, and I think everybody in the sector right now is facing it, is the ability to get the unit back and get it renovated.
No, that makes sense. That's it. My other questions have been answered. Thanks.
Okay.
Your next question comes from Kyle Stanley from Desjardins. Your line is open.
Good morning, everyone.
Good morning, Kyle.
Hi.
I was just wondering if you could provide a bit more color or disclosure on the positive impact from the property tax assessments we saw this quarter, and maybe kind of how you're looking at that going forward.
Sure. Nancy, you want to take this one?
Yeah. Kyle, for our property taxes, for same property, I would tell you that we would normalize for any big tax appeals and stuff that we have. Overall, we have a pretty successful ongoing property tax
Assessment program where we're always appealing and looking at chances and opportunities to do so. That's going on. On a run rate basis, we're seeing that our assessment levels are off, or our reassessments are offsetting any rate rise in property taxes. Halifax, pretty flat for the year. We were able to successfully offset that. New Brunswick, small increases.
Okay, that's perfect. Thank you. I guess just the last one, I'm not sure if you're able to, but would you be able to disclose the cap rate on the recent Vibe transaction?
That is on a pro forma basis, about 4.7%.
4.7. Okay, perfect. That's it for me, thanks.
All right.
Your next question comes from the line of Matt Kornack from National Bank Financial. Your line is open.
Good morning, guys.
Good morning.
I'm not sure if you're going to be able to answer this, but, as it's still early days in the new administration, are there any rumblings in terms of changes under the Conservative government in Ontario on rent control or anything along those lines at this point?
We have heard absolutely nothing.
No.
Okay. As you look to rent growth at 2.5% or so, it sounds like there's the opportunity to potentially push that higher. Atlantic Canada, a lot of those markets are not rent controlled. To what extent are you sort of gaining goodwill by keeping rents on renewals lower than market rents would be? How do you roll that out over the next couple of years? Are you taking it essentially over a two-year period in terms of getting people to stay and not expensing the CapEx, but getting rent lifts on those units?
You're right to highlight goodwill, it matters in the marketplace. One of the big things we've been able to do this year is it's a mindset. When you see other costs rising in the market, when you look nationally how rents are moving, it makes it more palatable in our marketplace to see the rents go up, where historically they haven't moved as fast. There's some catch-up to be done. When you see one of the buildings, I'm going to highlight Moncton again, but it was CAD 760 a month for a two-bedroom unit, and heated. There's ample opportunity. We're moving them through. The other thing that we've highlighted over the last number of years is that not all vacancy is created equal, such that you might have a building with, say, 5% vacancy.
The reality is that certain models are completely full, and maybe the vacancy is all concentrated in one type. In communicating with our staff on-site and our leasing staff, we've highlighted that and said we would expect that we can move those rents on those other units. We'd expect those to move up. We're being heard there, and we're making progress with it. We're doing a fair bit internally to monitor that and to compensate our staff for moving the rent. That's what we're doing.
I would assume, there's been some press recently on, I think it's Toronto downtown specific, but AGI is being pushed back by tenants on a mass basis. I would assume given that your rent increases have been fairly reasonable, you haven't had any sort of those situations within the Ontario portfolio at this point.
We have not.
On the financing side, you've spoken to the fact that interest rates are a bit above where your in-place levels are at this point. In terms of term, there's not much spread between 5- and 10-year government bond yields. I would assume the goal is to push out term at this point, irrespective of the rate.
Yes, I think so.
Yeah, that's true. Just like the pending purchase in Edmonton will be 10 years.
Okay. That makes sense. Just one last question with regards to the 3,000 units on 15,000. Do you have a sense as to how much of the portfolio at this point is at sort of new, modern, doesn't-need-any-work type standards? Because you have one of the newer portfolios with less CapEx involved in a lot of those units. Wondering what portion of the portfolio you would consider at this point to be in modern sort of fully occupied state.
I'd say it's interesting when we look at our portfolio and when we look at actual units, that when we look at the newer product, it's probably 25% of our unit base, although that accounts for a much bigger piece of our NOI and our revenue.
Right.
When we look at our portfolio overall. I think that's probably, ballparking it, around 25% would be the two that we wouldn't be doing anything to, and then the rest, there's opportunities. 3,000 we've identified are the ones where we really feel that we can move it.
Meaningful way
looking at that target ROI of 10%. Yeah.
Another comment to that would be, I would hope that any building that we own that's less than 10 years, it would be in that category that is up to current standards, and it doesn't really need
Yeah
renovations of any sort to sort of increase the rents.
Right.
That's a fairly good piece of our portfolio as well.
Yeah.
Sure.
We operate in a very competitive market in terms of new construction, so we've always maintained our assets. Matt, you were here recently. You had a chance to tour them. They're in good shape. The 3,000 we identified are the ones where we see the biggest opportunities for the investment. Across the board, we do have the ability to move the rents based on the quality of the property already.
Is it fair to say that the amount of CapEx that you have to put in is less than some of your peers? Because the total CapEx spend on those units that you're looking to do and the returns are pretty good, but it's nowhere near the sort of significant CapEx profiles that are being rolled out in some of your peers to achieve returns that are even less than what you're getting.
Sorry, I didn't mean to cut you off. I think that speaks to the average age of our portfolio. It is that much newer, so therefore we do have that benefit. I would say this, in Atlantic Canada, it's been competitive. We didn't have rent control, so the people continued to maintain their assets or new assets were being built. That necessitated that others in the marketplace up their game. We've always been on top of it, and so our properties don't need as much.
Fair enough, congrats on a strong quarter, guys.
Again, if you would like to ask a question, please press star followed by the number 1 on your telephone keypad. Your next question comes from the line of Yash Sankpal from Laurentian Bank. Your line is open.
Good morning.
Hi, Yash.
Just on the Alberta market, I know it's not a big part of your portfolio, but if you could provide some color around the rental market there, it'd be great.
I'd highlight Edmonton for us. Our Pittsburgh and Waverley properties have really started to gain significant traction in terms of leasing. We're seeing that market stronger. Of the two main centers in Alberta, Edmonton seems to be leading in terms of its market, a little stronger, but we're confident in Calgary as well. Those markets are showing signs of life, and we're seeing rental increases. Pretty happy about it.
Okay. Yeah, that's all for me. Thank you.
Thank you.
Okay.
There are no further questions at this time. I will now turn the call back to the presenters.
Once again, we'd like to thank everybody for listening in today and asking questions, and we look forward to being back here at the end of Q3 for our next conference call. Thank you.
This concludes today's conference call. You may now disconnect.