Earnings Call: Q1 2018

May 10, 2018

Morning, ladies and gentlemen, and welcome to the Killam Apartment REIT First 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 the call is being recorded today, May 10, 2018, at 1 o'clock 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 Apartments REIT's Q1 2018 conference call. I'm here today with Robert Richardson, Executive Vice President Dale Noseworthy, Chief Financial Officer Aaron 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 Kilm Apartment REIT's operations, strategies, financial performance and conditions. The actual results and performance of Killam Apartments 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. Killam had a very good Q1 and made headway on our strategic targets for the year as summarized on Slide 3. Based on strong top line revenue growth, same property NOI increased by 4.8% compared to Q1 2017. Following these results, we have increased our same property NOI target for the year from 1% to 2% up to 2% to 4%. We purchased $125,000,000 $124,000,000 of properties in the quarter, which means we are very close to meeting our minimal $125,000,000 acquisition target for the year. Based on our acquisition pipeline and available acquisition capacity, we expect to complete an additional $25,000,000 to $75,000,000 in acquisitions in 2018. Of the assets acquired in Q1, 73% are located outside Atlantic Canada and Killam expects to generate 27% of its NOI from Alberta and Ontario in 2018. On a full year run rate basis, approximately 28.5 percent of the current portfolio's NOI is coming from outside Atlantic Canada. Saginaw Park, our most recent development in Cambridge opened last month and leasing is going very well with 65% leased of the 93 units. As Dale will elaborate on, we are continuing to manage our level and debt to total asset ratio, and we ended the quarter at 50.2%, which is below our target of 52%. I will now ask Dale to recap our financial position. Thanks, Bill. Slide 4 shows our Q1 2018 financial results. Killam generated FFO per unit of $0.20 up 5.3% from Q1 2017. Same property NOI growth of 4.8%, acquisitions and interest savings contributed to the increase, partially offset by an increase in the average number of units outstanding following the $77,000,000 of equity raised last November. AFFO per unit was up 14% in the quarter, a larger increase in FFO due to the addition of newer high quality assets to the portfolio over the last year. Same property revenue was up 4% as illustrated on Slide 5. Overall, rental rate growth is on the rise. At 2.2%, it's the highest average rate increase in 6 years and 70 basis points ahead of Q1 last year. During the quarter, we achieved 1.5% growth on renewals and 5% growth on unit turns. With apartment occupancy at a 5 year Q1 high, we decreased rental incentives in almost all of our markets. With this strong start to the year, we've increased our revenue projections for 2018, driving our revised NOI guidance. Robert will provide further details on our increased rental rates later in the call. As shown on Slide 6, operating expenses were 3% higher than Q1 2017 as increased heating costs more than offset a decline in general operating costs. Fluctuations in Q1 operating results in the past have been correlated by the cost of heating fuels, including natural gas and oil, coupled with variations in winter temperatures, driving volatility in consumption. Kiln is increasing the efficiency of its buildings to reduce energy intensity and its exposure to commodity prices. As we had expected, utility and fuel expenses were higher in Q1 2018 due in part to higher pricing for natural gas in New Brunswick and higher consumption in January as it was approximately 20% colder in both Ontario and Atlantic Canada. Kiln's Ontario markets continued to see a colder winter in February March and realized consumption increases of 10% to 15%. A milder February March in Atlantic Canada partially offset the increased consumption in Ontario, along with realizing consumption savings from upgrades to boilers in the last year. Killam realized savings of 60 basis points in general operating expenses due to lower insurance premiums and operating cost management initiatives. Property taxes were up 1.5% due to increased assessments. Killam's key debt metrics are highlighted on Slide 7. Total debt as a percentage of total assets was 50.2%, up from year end largely due to mortgages placed on 3 properties acquired debt free in December 2017 and the use of our line of credit to fund the Westmount acquisition in March. Killam continues to show improvements to its interest coverage ratio in Q1. The debt to EBITDA ratio increased in the quarter due to the timing of acquisitions and construction financing on our development. Our pro form a estimate of debt to EBITDA using a full year of earnings from assets acquired over the last year and the lease up of Saginaw Park is 10.4 times. Slide 8 highlights our debt maturity profile, including average apartment mortgages rates by year versus prevailing CMHC insured mortgage rates. Interest rates were lower on refinancings in Q1, contributing to a reduction in same property mortgage interest expense quarter over quarter. As shown on Slide 9, through acquisitions, developments, capital investment and appreciation of existing properties, Killam's real estate portfolio has grown to $2,500,000,000 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 12 basis point tightening in Q1 2018. This decrease in cap rates coupled with NOI growth was reflected in $61,000,000 of fair value gains in the quarter. I'll now turn the call over to Robert, who will provide further details on our operations. Thank you, Dale. Good afternoon, everyone. As shown on Slide 10, Chilum is focused on increasing the value of our business using 3 key strategies: increasing earnings from the existing portfolio, expanding the portfolio and diversifying geographically through accretive acquisitions with an SSS on newer properties and developing high quality properties in Killam's core markets. I will focus on Killam's Q1 operating performance and key revenue and expense management initiatives before turning the call back to Philip to discuss recent acquisitions and our development pipeline. Slide 11 details Killam's strong same property occupancy results for Q1 2018. Both our property management and leasing teams in each of our markets performed very well and continued to deliver occupancy gains. In fact, Q1 2018 delivered near record high occupancy gains. Apart from St. John's News and Land, we saw a nominal 20 basis point slip in occupancy this quarter compared to last year, all other markets reported healthy occupancy increases. Most notably, Charlottetown continues to be fully occupied with expectations that this trend will continue through 2019 given higher rates of international immigration and very little new multi residential supply in the market. As shown on the table, the strongest occupancy growth has been in our Halifax and New Brunswick markets. Overall, Killam reported a consolidated same property occupancy gain of 130 basis points to 96.8% occupied for Q1 2018. As Dale mentioned and as shown on Slide 12, Killam is increasing its weighted average rental rates. On unit turns, we achieved a 5% average rental rate increase, a 300 basis points increase versus Q1 2017. Market demand for quality rental units is high and Killam's portfolio was well positioned to capture this growth. We accelerated our suite repositioning program in 2018 to $3,000,000 up from $1,000,000 invested in 2017. We've identified opportunities to increase rents substantially at certain properties by completing more expensive unit upgrades. Slide 13 and 14 highlights just such an opportunity at our 66 Unit Spruce Grove property in Calgary that we purchased in January 2017. Originally constructed in 1978, the units at Spruce Grove after 40 years were dated and earning below market rents. Killam recognized the opportunity to increase its yield by repositioning units as they turned. And to date, we have repositioned 9 units at an average cost of 27,000 dollars per unit, and these units now are in rental rates that are $3.10 or 22% higher than before repositioning and generate a return on investment of 14%. The property is currently 100% occupied and we continue to reposition units as they turn. Already this year, Killam has undertaken more suite repositionings than we completed in all of 2017. We expect to achieve a rental list list of 10% to 30% of returns on investment exceeding 10%. Slide 15 highlights our 242 Unit Garden Park property in Halifax. Since Killam acquired 100 percent ownership of Garden Park in 2016, we have completed 36 unit repositionings at an average cost of $23,000 per unit. These upgrades have generated an average rental lift of 21% and delivered a 12% return on investment. We've also updated Garden Park's common areas and amenities such as fitness room and rooftop deck, which assists in enabling Killam to earn above average rental lift in the range of 6% to 8% when units that were repositioned 2 to 3 years ago are re leased for the 2nd time. Kartik Park is also 100% occupied and any vacancy relates to the downtime associated with repositioning a unit. In concert with driving revenue growth, Killam is aggressively managing expenses to optimize net operating income returns. As shown on Slide 16, Killam is executing on its 5 year $25,000,000 energy efficiency plan that focuses on energy savings such as the installation of ultra low flow toilets, LED lighting retrofits and heating efficiency projects, utilizing condensing gas boilers and system recommissionings. These projects help mitigate the impact of expense increases from rising energy rates and other inflationary pressures. To date, we have invested approximately $6,000,000 in energy initiatives and have achieved a 24% return, essentially a 4 year payback. Market fundamentals remain strong in our key markets. Slide 17 highlights Halifax's Q1 2018 results. The Halifax market continues to be impressive with revenue and net operating income increasing by 4.1% and 3.4% compared to Q1 2017. The city's population continues to increase due to the arrival of new Canadians along with interprovincial migrations. Although there has been an increase in housing starts in recent years, particularly in the multifamily sector, population and economic growth suggests that the new product will continue to be absorbed and CMHC forecasted vacancy at 3.3% for 2019. Killam's Halifax economic vacancy for the Q1 of 2018 was only 2.5%, a 150 basis point improvement over a year ago. And based on current trends, we expect to maintain Halifax's occupancy in the 97.5% range for Q2. Slide 18 shows New Brunswick's consolidated Q1 2018 results for all 3 major cities, namely Moncton, Fredericton and St. John. We are pleased to report New Brunswick occupancy is the highest in 9 years at 96.4%. Combined, this quarter, New Brunswick grew revenue by 6.4% and NOI by 10.3%, both fueled by average rents increasing 2.6% and offering only onethree of rental incentives when compared to Q1 2017. This province is also successful in offsetting higher natural gas pricing this heating season by reducing water consumption from the recent installation of low flow toilets in many properties and lower insurance premiums. Stronger occupancy in New Brunswick over the past quarter is due primarily to influential and international migration and demand from downsizing boomers. With an improving provincial economy, the number of New Brunson occurs exiting the province has also slowed. These factors, combined with Killam's well located properties, have been a catalyst for higher occupancy. Looking at Ontario's performance on Slide 19. Revenue in Ontario increased by 4% over Q1 last year due to a 2.5% increase in average rental rates and a 160 basis point improvement in occupancy. A good example of Killam's success in leasing is our 739 unit Kanata Lakes portfolio, where we took over full responsibility for leasing from the vendor in January 2017, when occupancy was 88.8%. For Q1 2018, occupancy at this project was 97.6%, almost 900 basis points better than before we took over. Net operating income in Ontario for Q1 2018 was 3.8% better quarter over quarter and we anticipate continued strong performance in the coming quarters given solid economic growth in our Ontario markets, a rising population and increasing demand for apartments. We are seeing our resource focused markets at St. John's and Alberta exhibiting a resurgence with positive NOI gains of 3.6% and 8.1%, respectively, for Q1 2018. Fundamentals are improving compared to last year in both provinces, and we expect higher occupancy and the ability to increase rents in these markets for 2018. I'll now hand you back to Philip to provide details on our acquisitions and new developments this quarter. Thank you, Robert. Slide 20 details our acquisition activity for the Q1 of 2018. Killam acquired $124,000,000 in Q1 as we continue to focus on expanding our portfolio through accretive acquisitions in Ontario and Alberta. 2 of the 4 acquired assets in the quarter were land purchased for future development. Slide 21 shows Killam's newest Halifax asset, the Killam. On February 28, Killam completed the purchase of the 12 story, 110 apartment 110 Unit Apartment Building Located on the Dartmouth Waterfront in Halifax. This $33,000,000 purchase is the only rental building in a 4 building complex with the other 3 buildings being condo buildings. Turning to Slide 2223. Killam acquired a prime mixed use office and retail property with additional land for multifamily development in Waterloo, Ontario for $77,800,000 in late March. Westmount Place is a very well located property that is close to downtown Waterloo, the Universities of Waterloo and Wilfrid Laurier, the recreational complex and public library. The tenant base for Westmount Place includes national tenants, representing 84% of their revenue, including Sun Life Financial and a new TNT grocery store, which is scheduled to open in the fall of 2018. The weighted average lease term for all Westmount tenants is 8 years. Slide 24 shows an example of what the future multi residential development opportunity at Westmount Place may look like. We intend to focus on the significant opportunity the site offers and have already started the planning process for a 3 tower totaling 5.60 units. We are seeking to increase pedestrian connectivity and green space throughout the site, along with energy and stormwater waste management designs to complement the planned multi residential developments. Killam is targeting commencement of construction of the first phase within the next 24 months. Slide 25 shows the Calgary development opportunity acquired during the quarter. Killam purchased a 40 percent interest in a 33,000 square foot development site for $7,200,000 on 4th Avenue Southwest in Calgary with their grid 5 property partners. The site is a premier location in downtown Calgary, adjacent to our 307 Unit Grid 5 Apartment Building. We, with our partners, expect to build 3 multi residential high rise buildings, up to 1,000 units on the combined sites over the next 7 to 9 years. The project is in the planning and approval process stage. Slide 26 shows a 1.8 acre development site in Downtown Kitchener, which includes small office building and heritage house that was purchased for $6,000,000 during the quarter. This property is in the design and planning phase with plans to develop 163 unit apartment building. We continue to focus in this market given its high growth and proximity to Toronto. We have a strong relationship with the general contractor that has constructed our 2 Saginaw developments and expect to engage them for this development. On the development front, Saginaw Park, as shown in Slide 27, is now complete and opened its doors to tenants on April 1. The 93 units 7 story development includes several design features that improve the tenant experience and promote efficiency. Examples include condo quality kitchens, bathroom fixtures, smart locks and separately metered water. The project costs were approximately 25 point $5,000,000 resulting in an all cash yield of approximately $5,400,000 creating $8,500,000 of value. The building is currently 65% leased and is expected to be fully leased within the next 6 months. We are continuing to advance the Alexander and Frontier developments. Details on the Alexander and progress photos are included on Slide 28. Killam has a 50% interest in the Alexander development and expect to increase its ownership to 100%. On October 1, 2017, the first residents moved into the Alexander's 4 level podium, and we expect to be completely completed by September of 2018. As detailed on Slide 29, the Frontier project that we are co developing with RioCan in Ottawa is progressing on schedule. The first phase of the 23 storey tower, 227 Unit building is now finished in terms of the concrete structure. We have funded the equity component of the tower and the balance of the capital for the first phase is expected to be drawn from construction financing. Frontier is scheduled to be completed in Q2 of 2019. The Frontier development is worthy noting for a couple of reasons. It is the first building we are developing that will have geothermal heating and separately metered water, where the tenants will pay for their water consumptions. This is the way of the future, increasing our operating margin per building and reducing our environmental footprint. Geothermal means no carbon taxes because we are not using natural gas. Our next project shown on Slide 30 is the Silver Spear II 128 Unit Development in Mississauga, which is adjacent to our existing 199 Unit Building. I am pleased to report that the final approvals have been received, and we expect to break ground in Q4. Construction is expected to take 24 months with a $45,500,000 budget with an anticipated all cash yield of 5.4%. We are continuing to progress the projects in our pipeline. A full list of our development sites is included on Slide 31. As I mentioned at the beginning of the call, Q1 2018 was a very successful quarter for Killam. Our focused strategy is leading to increased earnings, conservative balance sheet, capital flexibility and one of the newest and highest quality apartment portfolios in Canada. This concludes the formal part of the presentation, and we will now open up the call for questions. Your first question comes from Mark Rothschild with Canaccord. Your line is open. Thanks and good afternoon everyone. Maybe in regard to the improved guidance for same property NOI growth, Clearly, things have gone well in pretty much almost all of your markets. Can you maybe just talk about what changed in the past few months that maybe you didn't see a few months ago? Or is it just that you were maybe being a little conservative then and things are playing out how you thought? Sure. So I'll take that one. So I'd say that we've seen as you would have seen over the last 2 years, we've seen strong occupancy gains. So when we sat here in the fall working on our budget and looked at the improvements we've had over year year over year and knowing that we wanted to push a little bit harder on the rental rate increases, it was a lot to do with occupancy saying, geez, you know what, it feels it's going to be hard to beat. And what we've seen is the fundamentals are strong, which we're seeing across the country. And obviously, we've made improvements to the occupancy occupancy and that is the difference. And I think when we look now, Halifax was over 97% occupied in Q1. So I think now we're thinking differently to say there is still room for improvement and on the rental rate increases as well. We are getting more lift on the especially on the turns, but on renewals too. As we mentioned in the call and in the MD and A, we're spending more to really reposition some units to get those bigger lifts. So it's I think all those factors coming together, but it's recognizing that the demand is strong across and that there is still room for improvement more than we had anticipated when we rolled out the budgets in the fall. And then maybe just following up on that with your experience in these markets and with these properties, do you think that the occupancy demand when we say peak, like I think that the demand drivers are there's legs to them. So I don't see that this I think that we're going to see this strength for a while. Supply comes into play here, but I would say, we are our forecast out continues to show strength. So I think that there is still room. Yes. I mean, Merck, I mean, three points that sort of reinforce what you just asked. One is that with population growth, a lot of people are going to be full in terms of the apartment business. Job creation creates demand for apartments. Those two things we see a lot of. I mean, you know that the federal government has increased the quota in terms of new Canadian. That is a huge driver of what everybody is experiencing right across the board in terms of why occupancies are going across the country. We see real job creation that continues with population and jobs, especially here in Halifax. And the third is that, yes, you can sort of dampen that with a lot of new supply, but a lot of supply coming on is taking a lot longer and costs are going up. So I mean that combination, I think it really does bode well for the next few years in terms of the outlook on the apartment sector. And just to layer on the changing demographic, population is older and they're looking for an alternative to owning a single family home and we're seeing that all the time. Okay, great. And then maybe just one more question in regards to developing in Calgary. Should we look at that as you just being more bullish on the market? I know you've thought in the past, but would you be developing if it wasn't going to be such a long time frame to maybe complete a development project? Is that bullish on the market now or just that you think that there will be a continued recovery over the next couple of years? I think there will be continued recovery over the next 2 years. Okay, great. Thanks a lot. Thank you. Your next question comes from Jonathan Kelcher with TD Securities. Your line is open. Thanks. Good afternoon. Just on the just sticking with the development and I guess more lease up on Saginaw Park. Have you managed your lease up any differently given the rent controls that the government brought in last year? Is there any different way you're doing it than you otherwise? Yes, I think the answer is that you're not willing to sort of lease for quickness and with the understanding that you could maybe increase rents 5% the next year, the first turn of the new tenants. So therefore, the going in rent, you are looking at it from a rent revenue maximization point of view. Okay. And then that's like 6 more months for the other 35%, is that really a function of that or is It's a function of the demand. I mean, we say we got 65% leased. They haven't moved into the building. That's that comes in every month through May, June, July. Okay. And then on the Westmont property, what would the total development cost for that be? Well, I mean, right now, in today's construction costs, I mean, it would be fairly simple. I mean, if you take whatever the number that we want to get times roughly $300,000 a door. But knowing where costs are going, I mean, you got to sort of it's probably not completely realistic, all things being equal, by the time you do the number 2 or number 3. Okay. And would you look for partners for that development or were you guys going to go that with yourselves? I don't think so. Not at this stage. I mean, really, I mean, this is an opportunity where the land was included in the purchase price. So basically we have to spend nothing is for free, but there's a cost base associated with what you're going to have to allocate. But at least it's not like buying the site down the road where it is cost and that's day 1 because we had to purchase it. Okay. And just for Dale, I guess, or anybody, but do you guys have a target debt to EBITDA that you're shooting for? I think we'd like to see it come below 10%. Certainly, we like the trend of going down, but we haven't set a target for a couple of years, but certainly continue to move down. Okay. Thanks. I'll turn it back. Your next question comes from Ewen Born with Ashland. Your line is open. Thank you. Good afternoon. I just had a quick question regarding the average rent growth. Do you expect that growth to be sustainable in the foreseeable future? Or is it should we interpret Q1 as kind of an exceptional quarter and growth should slowly should slow down a little bit for the rest of the year? No, Steve. We would say that, that would be sustainable for the foreseeable future. I mean, the fact that we achieved it in Q1, which is traditionally a quarter where you don't get to move the rents very much, would tell us that there's more strength in the balance of the year. As we come through the summer into the fall, we'll be able to move rents more because there's a man that will be that much higher. Okay, great. And I also have a question on the development your development projects. Do you have any concerns regarding the development yield and possibly in terms of development costs? And should this affect your strategy in terms of targeted regions, projects, etcetera? The answer to that question is, I think it's almost like the person you just sort of asked. I mean, do we have concerns? The answer is yes, we have concerns that everything every time we go into the ground to build. The returns will vary depending on the type of product you're building in the location. So everything is basically analyzed in terms of that actual project and where it's located relative to the trades and what is going on in that sort of market relative to is there pressure on the cost? Is there upside on the rents? Because I mean, you could argue that if you are building in Toronto, all you've seen is movement on the rents the last 2 or 3 years. And really, the most important thing would have been to be in the ground building 2 years ago. Other markets will have changed. So the answer is probably yes on those in earning gas for it, we're analyzing, we're looking at it and it's also fluid. Okay, okay, good. All right, that's it from me. Thank you. Thanks. Your next question comes from Matt Kornack with National Bank Financial. Your line is open. Hi, guys. Just a quick follow-up to Stefan's question there. I mean, are you seeing it seemed to be the point made on the RioCan call that costs have been going up at different rates throughout the country, with Toronto obviously being one of the higher growth rates. Have you seen costs go up to the same degree in Ottawa and Halifax and elsewhere and Calgary? Again, I think that the answer for our experience in Ottawa is that the cost that we started with, we haven't had much pressure at all on that project for the last year, and we're only really a year away from finishing it. We'll be able to answer that differently once we start to go out for pricing of Phase II. But the Phase I is essentially locked in. The increase in Halifax, there has been pressure on a couple of the trades and there's been pressure on a couple of the trades in Cambridge for sure. Concrete and mechanical, we've seen relatively large right now compared to the last 3 years ago on those 2 sub trades. And has land been an issue? Or has land remained fairly stable cost wise within those markets? It's been fairly stable. Okay. And then on Westmont Place, do you have a plan for the existing retail and office structures longer term as well? Or is it just to add the residential on the development site that you've highlighted and then keep the retail center essentially as is? Well, I mean, it's right now the plan because the leases are relatively long term, it's as is. I mean, you've got 188,000 square foot 4 story office building occupied by Sunlight and a brand new grocery anchor retail on the other side. I mean, what we're looking at is how do we enhance the experience, the visual look of the retail from a landscaping point of view, from a sort of a tenant mix and then also keeping our main tenant happy and seeing what their future needs and demands are going to be. But overall, there's an integration coming once we start the development of the multi res in the years to come in terms of just more integrating retail into this sort of office componentretail. I mean, we just don't want a great big huge parking lot that you walk across. I mean, we'll be designated parking or walking lanes for people. So I mean, so the answer is, we would consider 10 years long term. So it's the asset can stay as is and we'll develop our multifamily around it. Value of that asset is it has over 1,000 employees, better than 1,000, probably closer to 1200. And so they would be great tenants for our new developments. Yes. And vice versa, your tenants are going to be good retail shoppers potentially for the center as well, right? Yes. And is this a one off or do you anticipate looking at more projects similar to this type? The answer would be, hopefully, it won't be a one off, but there's nothing in our sort of near future behaving like it right now. I mean, I don't think these opportunities are that common, especially the location of this. This is a very well located asset in that city. Fair enough. Thanks, guys. Your next question comes from Mario Saric with Scotiabank. Your line is open. Hi, good afternoon. I wanted to come back to the Central Calgary development that you referenced and kind of similar to Mark's question at the onset. In terms of pushing forward with development, like is development feasible at today's rents? Or would you have to see kind of market rents come up 5%, 10%, 15%, 20% to make it economically feasible? When you ask today's rents, I mean, you're talking you're giving us the lag period of a 1 to 2 year design permitting and then 2 years to build. Is that correct? Right. So let's say rents don't go anywhere for 2 years relative to where they are today. We're still going to be 3 to 4 years out before we could actually put somebody in the first phase. We still have planning, design, approval, and then it will be a 2 year plus build out. So even at today, where we see what we're I mean, you'll be able to see where rents are from we reported what we did in Alberta, the other apartment, public traded companies. And I think you'll and this year will be the year that you'll see probably see stabilization and the start of the moving of the rents. And especially when the last month and a half, you've got oil back over 60, 65 going to 70. I've already heard that there's already starting the ramp up of basically looking for those jobs in Downtown Calgary. So if that's the case, then what it can quickly turn, but from anybody's point of view, 4 years is quite a long time and we should be able to see some level of growth over those 4 years. And then depending on final costing, I think you'd be able to basically lease up a 200 to 300 unit building in Downtown Calgary, brand new. Okay. That makes sense. And when you're looking at sites in Alberta today, is the competition primarily coming from other entities that are looking to build a presence in Alberta or is there a lot of local demand for There's locals, especially the sort of the smaller concrete well located buildings. But all the other funds and players or public traded entities that we're out looking in the 2 cities in Alberta. Okay. Maybe shifting gears just to the repositioning or the increase in scope for the repositioning activity, 10% to 20% returns are very attractive. You've got a 15,000 suite portfolio give or take. How much could you potentially do given you tend to want a bit of a newer portfolio than some others? How extensive has that process been in terms of identifying and repositioning of size within the portfolio? What do you think you can do over the next 3 to 4 years? Yes. So, Mario, we don't have a total inventory of which ones are. We know that we're looking at north of 200 units to reposition in 2018 and we'll go from there. I'd say that, that would be a fairly common number running forward. As we're doing repositionings, the portfolio continues to age a bit, so they'll come to us. But we can see in virtually every market, if we're prepared to spend the money, we can see better than a 10% return for sure and sometimes as much as 30%. Okay. And then are you finding Mario, I just want to add a bit to that. When we look at total unit count, so certainly when we look at the value of our NOI that's coming from our newer assets, 35%. But when you look at unit count, we do have a number of older assets. So when we look at the run rate of being able to reposition those, as Rob mentioned, in our different markets, We're working with our property managers to identify those buildings where we can invest the money and get those lifts. And we are coming up they are coming back with some that we would not have originally expected, and we are trying them out and seeing success. So I think that the more we expand this program that it's deeper than we would have originally thought. So I think that people are looking for the new reposition properties and we've got a good few years of opportunities there. That's not how we talk, we'll have a more robust number to discuss, but it will be significant. Okay. I was just curious to see whether the opportunities that you're finding now are assets that you repositioned 4 to 5 years ago and it's just the location of these assets are so strong that it makes sense to do more for different things within the suites or whether it's assets, I would say, kind of inferred that perhaps weren't touched 4 to 5 years ago, but because of changing market dynamics, they are now candidates to put money into? I'd say like touched, but not too so maybe we would have redone the kitchen cabinets. But now we're talking about more extensive like you would have seen the one we did at Silver Spear, maybe opening up the walls, doing more. The kitchens and the bathrooms are usually those are a big focus for us. And so when we do that level of repositioning, we can certainly see big gains. Okay. And then just last question on my end, and I may have missed it in the disclosure, but can you give us a bit of an update in terms of the shipbuilding contract in Halifax and the kind of expected job growth kind of over the next 4 to 5 years? So the word is when they start the combat vessels, that should take another, I think, it's between 50750 new jobs will come in. That's the biggest part of the contract. The Arctic Patrol vessels had a certain level of jobs, and I think it's around 1500 to 2000, but it will go up to closer to 3000 with the combat vessels when they come on. That's in a couple more years, right? Yes, 2020? Yes. Yes. And I think in addition to that, we're seeing job growth on the IT sector, the financial sector banking. So shipbuilding is great, but there's a lot of other things on the go here with oceans and lots of other stuff. So I think when you look at all those together, lots of job growth opportunities in this market. Yes. So Dale makes actually a great point in terms of the ocean cluster for Canada is centered here. So that was a big win. And I think that funding total funding is going to be over $500,000,000 There's the Ocean Frontiers Institute at Dow and that's over $220,000,000 There's the Cove project, which is $50,000,000 There is a lot of big projects on in the city and a lot of it centered around the ocean. So that's great for us and it has to be here, which is this is where the ocean is. They can go to BC, but it's better here. Okay. Any sense like in Halifax anecdotally what type of wage growth your tenants are seeing? Wage growth, I don't have any. We don't I don't think we have any current stats on that. Although I do know even just from talk around town and what we're seeing is that there are I'm hearing it's a little bit harder for people to get the people that they're looking for. So certainly, there's more openings. And so I expect that that is going to lead to the now being in wage growth? There's more competition for talent. And yes, I think it will be inflation plus. Okay. Thank you. Thank you. Thank you. This concludes Q and A session for the conference. I'd now like to turn it back to Philip Frazier for any closing remarks. Thank you. I would like to thank everybody for listening and participating today, and we look forward to being back here for the Q2 conference call in the 1st week in August. Thank you.