Good morning, ladies and gentlemen. Welcome to the Killam Apartment Real Estate Investment Trust Second Quarter 2023 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, August 10, 2023. I would now like to turn the conference over to Mr. Philip Fraser, President and CEO. Please go ahead.
Thank you. Good morning, and thank you for joining Killam Apartment REIT's Second Quarter 2023 Conference Call. I am here today with Robert Richardson, Executive Vice President; Dale Noseworthy, Chief Financial Officer; and Erin Cleveland, Senior Vice President of Finance. Slides to accompany today's call are available on the Investor Relations section of our website under Events and Presentations. I will now ask Erin to read our cautionary statement.
Thank you, Philip. This presentation may contain forward-looking statements with respect to Killam Apartment REIT's intraoperational strategy, financial performance conditions, or otherwise. The actual results and performance of Killam discussed here today could differ materially from those expressed or implied by such statements. Such statements involve numerous inherent risks and uncertainties, and although Killam management believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that future results, levels of activity, performance, or achievements will occur as anticipated. For further information about the inherent risks and uncertainty in respect to forward-looking statements, please refer to Killam's most recent annual information form and other securities regulatory filings found online on SEDAR. All forward-looking statements made today speak only as of the date which this presentation refers. Killam does not intend to update or revise any such statements unless otherwise required by applicable securities law.
Thank you, Erin. We are very pleased with our strong financial and operating results for the second quarter 2023. Killam delivered FFO per unit of CAD 0.30 in the quarter, a 7.1% increase from CAD 0.28 per unit in Q2 of 2022. We achieved 7.9% same property NOI growth across the portfolio, which included 7.8% same property NOI growth in our apartment portfolio, 3.8% same property NOI growth in our manufactured home community portfolio, and 15.7% same property NOI growth for our commercial properties. We ended the quarter with a 43.1% debt-to-total asset ratio, the lowest in our operating history, and continue to focus on strengthening our balance sheet through our capital recycling program and the positive lease-up momentum on our recently completed developments.
As we continue to capture the mark-to-market opportunities on unit turns, we have exceeded our 3%-5% NOI growth target in the first half of the year and expect to exceed 6% for 2023. Dale will now take us through our financial results, followed by Robert, who will discuss our ESG initiatives. I will continue with an update on our current and recent development and capital allocation strategy. I will now hand it over to Dale.
Thanks, Phil. Key highlights of Killam's Q2 financial performance can be found on slide 6. Killam generated strong earnings growth in the quarter with net income of CAD 114.5 million, a 66.7% increase compared to Q2 2022. This increase is primarily attributable to fair value gains on investment properties of CAD 96.2 million, a direct result of revenue and NOI growth across the portfolio. Killam's average same property apartment rental rate at June 30th, 2023, was CAD 1,318, up 4.3% from a year earlier. Slide 7 highlights the consistent growth in Killam's average apartment rental rate, with the portfolio's average rent up 26% from five years ago. Slide 7 also provides a summary of the age of the portfolio and the distribution of average rents by unit count.
The impact of Killam's long-term strategy of developing and buying new assets is highlighted, with 33% of Killam's apartment units built in the last 10 years and a total of 46% built in the last 20 years. As the chart on the bottom left of the page highlights, our portfolio is well diversified from a rent range perspective. The top chart on slide 8 breaks down the rental growth achieved on renewals and turns by quarter, reflecting the rent increase for tenants whose leases renewed in the quarter and for new tenants who moved into a unit in the quarter. We're pleased to report continued momentum on rental gains, with Q2 turns and renewals achieving a combined 5.5% rent growth. With rent control in place across 60% of our portfolio, we are capturing market rent rates when a unit turns.
We realized a 14.7% increase on turns in Q2, our highest spread to date. We're seeing rental growth across the portfolio, with our Toronto and Kitchener- Cambridge-Waterloo properties leading the pack, followed by Victoria. Rent growth continues to be strong in Halifax and in our other Atlantic Canadian markets. Turnover levels are decreasing across the country for Killam and for all apartment owners. Our turnover was 22% last year, and we are anticipating our 2023 turnover to be around 18%. Slide 9 provides a summary of turnover by our core markets over the last three years. It highlights the range of turnover levels across the country, including how much higher it is in non-rent-controlled markets. Turnover in Alberta, New Brunswick, and Newfoundland remains healthy, generally above 25%. Slide 10 shows our total same property operating costs up 0.7% in the quarter, contributing to our strong NOI growth.
Killam benefited from lower natural gas and oil pricing in the period, which offset almost all increases in water and energy costs. I'm pleased to report that natural gas costs in Nova Scotia and New Brunswick remain below last year's levels at this time. We are expecting to see quarter-over-quarter savings in Q3 also. We recorded a 2.3% decrease in property taxes in Q2, primarily attributable to lower New Brunswick and PEI property taxes. The decline in property taxes and PEI is due to property tax subsidies to help offset the 0% rent control for 2023. The decrease in New Brunswick was driven by a reduction in regional mill rates. General operating costs were up 3.2% in the quarter, a more moderate increase than we realized in Q1. Although we continue to see inflationary pressures, operating cost pressures appear to be moderating.
As seen on slide 11, our MHC properties had a solid performance in Q2, achieving 3.8% same property NOI growth. Additionally, our commercial portfolio delivered an impressive 15.7% same property NOI growth, relating to increased occupancy of 94.7% coupled with higher rental rates on renewal. Overall, with consistent performance in Q2 and following a strong Q1, we're forecasting to exceed our 3%-5% NOI growth target, with new guidelines increasing this target to over 6% for the year. On the balance sheet, we're pleased that our disciplined focus on reducing leverage has allowed us to achieve the lowest debt-to-total assets ratio in our operating history, ending the quarter with 43.1%. Our debt-to-normalized EBITDA continues to move in the right direction, ending at 10.9 times at June 30th, down from 11.21 times at year-end. Please refer to slide 12 for these debt metrics.
We're focused on strengthening our balance sheet and reducing variable-rate debt and have been meeting our internal debt reduction targets. During the first half of the year, we successfully reduced the balance on our credit and construction facilities by CAD 68.7 million, down 32% from CAD 215 million at December 31, 2022. This reduction was achieved through the reallocation of funds from dispositions and from permanent financing placed on recently completed developments. Subsequent to quarter-end, permanent CMHC financing was placed on Civic 66, further reducing our variable-rate debt by another CAD 57 million. Killam achieved the maximum points available for energy efficiency eligibility under CMHC's MLI Select program at this property, enabling us to lock in permanent CMHC-insured financing before full lease-up and at attractive terms.
Based on our projected asset sale and debt financing program, we anticipate having the majority of our operating and construction lines repaid by the end of the year. Slide 13 shows our average apartment mortgage rates by year versus prevailing CMHC-insured mortgage rates. Our mortgage maturities are strategically staggered to avoid overexposure in any one year. For the remainder of 2023, Killam has CAD 102 million of mortgages maturing with an average interest rate of 3.25%. I will now turn the call over to Robert, who will discuss our latest initiatives outlined in our recently published ESG report.
Thank you, Dale, and good morning, everyone. In June, Killam released its 2022 ESG report outlining many of our sustainable initiatives since constructing our first LEED-certified property 10 years ago. We have identified numerous opportunities to reduce our carbon footprint, resulting in many positive outcomes that include conservation of resources and reduction in energy costs. In 2022, Killam reduced like-for-like greenhouse gas emissions 2.7% and our carbon intensity ratio by 6.7%, both from their 2020 baseline levels. As a result of this progress and to prepare for upcoming regulatory requirements advanced by the Task Force on Climate-related Financial Disclosures, better known by the acronym TCFD, Killam adopted new long-term targets for 2023. Please see slide 14. We are committed to reducing Killam's carbon intensity 15% by 2030, coupled with establishing formal greenhouse gas emission reduction goals using science-based targets by 2024.
We recognize the importance of reducing Killam's carbon footprint and are using related cost savings from lower commodity consumption to further fund our initiatives. As part of our sustainability program, we are integrating smart building technologies such as Building Automation Systems, or BAS, as part of our preventive maintenance work. Refer to slide 15, please. To date, 19 of our properties have been upgraded to use the BAS central server connected to the properties. This enables our team to remotely monitor and diagnose a building's energy systems performance. Therefore, we can identify operational issues sooner with exception reporting and lessen the time and cost required to address problems. This reduces our greenhouse gas emissions as well since inefficiencies are identified sooner. Currently, we are integrating an additional 20 buildings for connection to our BAS server this year.
The implementation of smart building technology and preventive maintenance measures have resulted in savings in our utility and repairs and maintenance costs across the portfolio. These expense management processes enable Killam to maintain its carbon reduction momentum while simultaneously improving operating margins. In Q2 2023, our overall same property operating margin increased by 160 basis points to 64.5% for the quarter. As part of our journey to prepare Killam's assets for net-zero emissions by 2050, our operations team is working with consultants across the country on energy modeling, improved envelope design, and longer-term phase mechanical upgrades. As a building's infrastructure approaches its end of life, we are modeling how and where we can replace old equipment with new, more efficient systems. Collaboration by Killam's engineering team with consulting engineers and architects helps identify suitable technologies and best practices for decarbonization.
Implementation is achieved with coordinated effort across all departments overlaying our operations, acquisitions, finance, and sustainability teams. We have learned there is a strong correlation between Killam's largest greenhouse gas emitting properties and those requiring capital investment. Killam has balanced the capital investment, return on investment, and estimated greenhouse gas savings to realize optimal returns. Killam considers the timing of these upgrades with mortgage refinancings to access CMHC programs that reward a reduction in carbon emissions. I will now hand you back to Philip to provide further details on our renewable energy projects and an update on our development and disposition activity.
Thank you, Robert. During the quarter, Killam invested CAD 2.8 million in energy initiatives. In 2020, Killam started investing in solar energy production. We currently have solar panels installed at 18 properties across Nova Scotia, PEI, Ontario, and Alberta. Our current production capacity of 1,800 megawatt-hours per year produces approximately 4% of our operationally controlled electricity, moving us closer to our goal of 10% by 2025. This year, we plan to invest CAD 1.5 million in solar and currently have five additional solar projects underway that are expected to produce an additional 690 megawatt-hours per year. We have also been active in rolling out electric vehicle charging stations, with 260 units installed across 39 properties.
This number continues to grow. We are committed to investing CAD 1 million in EV chargers installations in 2023, targeting over 400 chargers across 50 properties, with all our new developments being built to incorporate this technology. Killam has completed CAD 82 million in dispositions year to date, with proceeds allowing us to reduce our floating-rate debt. With completed dispositions in Ottawa, Halifax, and Charlottetown, and five additional properties expected to be unconditional by September 2023, Killam plans to exceed its capital recycling target by the end of the year. Our development pipeline further supports our focus on improving our liquidity and capital flexibility, which saw two properties reach substantial completion subsequent to quarter-end. Our CAD 94 million of developments completed year to date is composed of The Governor, currently 33% leased, highlighted on slide 20, and Civic 66, currently 43% leased, highlighted on slide 21.
Additionally, both properties are built with several advanced green technologies that will reduce operating costs, greenhouse gas emissions, and our exposure to energy pricing. Our 2022 completed developments, The Kay and Latitude, have similar features and are currently performing at operating margins over 70%. We have two active developments, the second phase of Nolan Hill, highlighted on slide 23, and The Carrick on slide 24. The second phase of Nolan Hill, a three-building development in Calgary, is well underway and is expected to be completed by January of 2024. Killam holds a 10% interest in the second phase, with a commitment to purchase the remaining 90% for CAD 65 million upon completion. We expect to acquire the first building in September and the following two buildings in Q4. This will add an additional 234 units to our Alberta portfolio.
The Carrick, which is expected to be completed in the first half of 2025, will add 139 units adjacent to our existing commercial property in Waterloo. Looking forward, with Canadians' current immigration target of approximately 500,000 individuals per year, Killam recognizes that development of new housing is a key factor in solving the housing crisis. Our development pipeline remains a fundamental component to our growth strategy, distinguishing us from our peers and allows us to grow our portfolio in strong markets. In 2022, Halifax was the second fastest-growing region in the country, and as such, our housing starts must keep pace. Killam is currently working on long-term planning for large redevelopment sites in Halifax and Waterloo, where additional density can be achieved through the planning process with minimal disruption to our existing tenants. To conclude, we are very pleased with our Q2 performance.
I would like to thank our employees for their hard work and dedication. We are optimistic for the future and will continue to execute our priorities and create value for all of our unit holders. Thank you. I will now open up the call for questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Jonathan Kelcher at TD Cowen. Please go ahead.
Thanks. Good morning. First question, Phil, just on the five unconditional properties you expect to be unconditional by September, what's the rough dollar amount and number of units on those?
Well, again, understanding that they are not unconditional, so they're still in the due diligence period, but it'd be roughly about $80 million and maybe up to between 500 and 600 units.
Okay. You're mostly East Coast or Eastern Canada?
Yes, mostly East Coast, if not the largest percentage of it, for sure.
Okay. Are you looking at buying any new assets, maybe recycling some of the proceeds into that, or just Nolan Hill kind of covers?
Nolan Hill is primarily the largest asset that we're looking at.
Okay. Rob, on the BAS, is that something that you guys will eventually roll out to all properties, and is there any sort of how much does it cost per property or however you guys look at it?
We will roll it out throughout the portfolio. What it costs, it depends on the buildings. Some are older, some are newer. It really is customized to each property. We're seeing benefits from it, and it makes perfect sense. 250 buildings, difficult to do without automation.
Yeah, correct. I agree. Then just lastly, Dale, on the Civic 66, what rate did you get on the CMHC financing?
It was 4.34 for 10 years.
Okay. That's it for me. I'll turn it back. Thanks.
Thank you.
Thanks, Jonathan.
Thank you. The next question comes from Michael Markidis at BMO Capital Markets. Please go ahead.
Good morning, Killam team. Dale, I think you mentioned that rent growth that you were seeing was largest in Toronto, Kitchener Cambridge, and Waterloo. I'm maybe just confirming that point and then maybe dovetailing on that. If you could talk to what you're seeing in terms of market rent growth, whether it's steady pace, moderating in Halifax and New Brunswick, please?
I would say moderating to accelerating in Halifax. I mean, we're not seeing it go down on a market rent perspective. I'd say when I think of the last couple of quarters, we've been able to achieve that. Kind of depends on the market, but stable to accelerating.
Okay. Great. Obviously, there's a lot of variability and volatility in your OpEx line, and no one's got a great crystal ball. How do you guys think of, or do you think of, what sort of the revenue growth profile on the same property basis of your portfolio looks like next year?
Well, I think that we're pretty optimistic that it will accelerate next year because when we look at the acceleration we're seeing throughout this year, and you got to think out 12 months, how that rolls, so that's going to be a positive. With the 5% renewal rate in Nova Scotia compared to 2% and looking at the number of units we have, those two things alone should lead to stronger rent growth next year.
Okay. Great. Phil, you've been really successful on your asset sale program. Some might say more successful on a relative basis than perhaps some of your peers. I was wondering if you had any thoughts as to why you've been able to act so quickly and what's driven your success versus I mean, we've heard some commentary from others that financing is quite challenging and that maybe walking back a little bit from the capital recycling story. Maybe you could just provide some thoughts on your success there.
I think that there's, from our point of view, we've never been a seller. The fact that there's and there is a larger group of emerging landlords in Atlantic Canada, and I would like to believe that if we put a property for sale, the fact that we've owned it for a long time relative to the condition of it, the quality of the tenants, that there is quite an attraction. For many years, we've always had inquiries, "Do you want to sell something? If you do, let me know." I think there's been a bit of pent-up demand from our ownership. That aside, there is a very positive outlook for the rental market in Atlantic Canada. Basically, we're happy. Now our deals hurt to close, absolutely. The interest rate environment is not helping.
The lack of basically services relative to doing environmental work is there's a shortage, which is prolonging some of these deals. We're willing to work with the folks that we've engaged with to sort of dispose of these assets.
Okay. Thank you. That's helpful. The last one from you before I turn it back. You've got a good long-term development runway in your portfolio. Cost of capital and other factors have obviously slowed the start process thus far. Hearing that, perhaps there may be some demand from institutional players out there to participate in developments. Is joint venturing to help facilitate the start of your development pipeline something that you consider or explore at this point?
Well, again, I know the industry as a whole continues to look for other sources of capital. Partnerships are great. I mean, we have partnerships today. At the same time, where we are, we think we can grow right now on our own balance sheet, especially with the recycling of a few properties. This is a huge sort of influx of capital that we can recycle. If we are going to take that money and eventually put it into the ground with the next development or the one after that, then the amount that you tend to spend the first year or so before you go into your construction line is very manageable at this level. Right now, we're not looking at it very seriously, but we always would never turn down the opportunity to talk to somebody.
Okay. I mean, obviously, you've got a target for this year, but if the market doesn't change, would asset sales still be on your priority list in 2024?
I think I've said a couple of times before, on a go-forward basis, we will always look to review and sell assets into the future. This will be part of what we do.
Okay. It's a good reminder. Thanks so much.
Thanks.
Thank you. The next question comes from Kyle Stanley at Desjardins. Please go ahead.
Thanks. Morning, everyone. Maybe just going back to John's questions just on acquisitions. I know obviously your focus, as you mentioned, is Nolan Hill, but I'm wondering, are you actively underwriting new opportunities in the market right now? Maybe what are you seeing out there, and at what point do you maybe start to become more offensive with your capital going forward? As I think, Dale, you mentioned in your prepared remarks that by year-end, you hope to have most of your variable-rate debt dealt with.
We are not actively underwriting any deal that has been presented by any of the brokerage houses on a marketing basis across the country. We are looking at them just for interest's sake to see where the market is. Right now, like I said, concentrating on our development side, we're concentrating on the disposition of a number of assets. We're spending way more time looking at the development deal flow and how to accelerate some of these projects to get them to the point of being able to go into the ground. The other part of this equation is the amount of energy and time it takes to even get a current costing on some of the projects. The third part of it is the long-term, larger development play.
We have a number of locations where we can add significant density, like the Westmount Place in Waterloo. That's taken up a lot of our time. Now, if there happens to be a little house next door to one of these development sites, yeah, we're going to buy it. It's a very small one-off adding to the land play.
Okay. I think that makes a lot of sense. You do have a lot of opportunity in the existing portfolio. Maybe next, just today, obviously, again, talking about reducing the variable-rate debt exposure, is that still your best use of proceeds? Just looking for maybe thoughts on potentially using the NCIB a bit more as we go forward through the year.
Yeah. Right now, it is. I mean, you're talking it's no secret. It's gone from essentially 2% up to about 7%. If we can quickly reduce that line of credit, our acquisition line, then we're going to be in really good shape from a liquidity point of view, from a debt leverage point of view, and from just pure flexibility to look at future opportunities.
Okay. Fair enough. Just the last one, just looking for your thoughts on maybe the expectation for stabilization at each of The Governor and Civic 66, more for, I guess, our modeling purposes.
As always, during the lease-up period, there will be a bit of a drag as we're no longer capitalizing interest. I'm sure you're aware of that. Looking forward, when we look at those two combined, from an FFO perspective, we're probably about CAD 1.5 million stabilized. From an NOI perspective, we're probably CAD 4 million-CAD 4.5 million stabilized for those assets. Probably closer to the yeah, we'll work on that.
Perfect. Thank you very much. I will turn it back.
Thank you.
Thank you. Next question comes from Matt Kornack at National Bank. Please go ahead.
Hey, good morning, guys. Just a follow-up to Kyle's questioning there. In terms of timing, was there any NOI attributable to either The Governor or Civic 66, positive or negative, in Q2?
No, it actually didn't move into it still was in IPOC until July 1st. We've just moved it into investment properties. Looking forward to the rest of the quarter, it will be we expect negative until probably the end of this year.
Okay. Then in terms of stabilized occupancy, spring leasing season, or do you think you'll stabilize it in advance of the spring?
On both of them?
Yeah. I think The Governor is a bit more.
Yeah. The Governor is a little bit different. I think with Civic 66, we've got 73 leases out of the 169 or sites, not sites, units released. We would be, optimistically speaking, that we should be almost full by the end of the year.
Okay. That's helpful. Then just with regards to the market rent growth question, next year, at least in Nova Scotia, you do get to go to 5% on renewals. Do you think that 5% represents kind of market rent growth? The mark-to-market potential will stabilize at least in that province, or do you still think that market rent growth is expanding at above that? Then, I guess, on turnover, how are you thinking about suite renovations at this point in terms of driving kind of above that number?
I understand your question. The 5%, I mean, just that's not getting us, I don't think, close to market rent. I think we're going to continue to see lots of opportunity on turn. Even after that, we get that 5% bump. I think that those suite renovations, there's still lots of opportunity there, and we're looking at it as market rents are increasing. What we see is that the ability to really move those rents and kind of change the value offering of those units, it continues to make sense. I think it's reasonable to expect similar levels to what we've done this year when we look at repositions beyond this year.
Yeah. Makes sense. Last question, just with regards to supply, I mean, the population growth that you've had out east is pretty staggering. Has there been a supply response at this point from kind of the local development contingent, or is it facing challenges elsewhere in terms of just putting product up, making the numbers work, etc.?
I don't think it's accelerating at this time. The forecast is for roughly 6,000 units to come online over the next eight, nine months. I think that that's going to hold steady for the foreseeable future. If interest rates continue to rise, fewer builders will show up. There is tremendous demand. We have to find that balance so they can work together.
Okay. Fair enough. Thanks, Phil.
Thank you.
Thank you. The next question comes from Gaurav Mathur at iA Capital Markets. Please go ahead.
Thank you, and good morning, everyone. Just one quick question. Phil, to your earlier comments about the buyer pool increasing as you're looking to dispose assets, would it be fair to say that the vendor pool is also increasing at the same time? How's that affecting the bid-ask spread as these assets come to market?
Sorry, I didn't catch the last little bit of the buyer pool that you which was framing your question. Could you repeat that, please?
Of course. My question is, as you see the buyer pool increase, are you also seeing an increase in the vendor pool? How's that affecting the bid-ask spread for the assets that come to market?
Okay. I mean, that's a good question. I don't actually see a lot of other assets for sale in Atlantic Canada.
Okay. What would you say about the bid-ask spread at the moment? Is that starting to narrow a bit, or is it mostly the same as you've seen through the start of the year?
I think it's the same. I think a lot of the owners, if I was to go knock on the door and say, "I'd like to buy that asset," there's quite a spread of what I'd pay versus what they think it's worth.
Okay. Great. Thank you for the call. I'll turn it back.
Thank you.
Ladies and gentlemen, as a reminder, should you have any questions, please press star one. Next question from Sairam Srinivas at Cormark Securities. Please go ahead.
Thank you, Operator. Good morning, everyone.
Good morning.
Just going back to Gaurav's line of questioning and your comment on the dispositions, just looking at the profile of the buyers, can you comment on the kind of buyers you're seeing out in the market, institutional versus retail, and how have you seen that evolve over the last 12 months?
I think really the only comment is that they are the it's a combination of older, smaller, well-established owners looking to acquire because they've been able to sort of basically retain a lot of their earnings and have the cash and the willingness to continue to increase. Then there are sort of the newer entities that have their own access to capital, and they want to sort of grow in this region. It's a combination of that. Obviously, it's not our peer group, the other publicly traded REITs.
I guess REITs are also not institutional, right?
Yeah.
Fair enough. Thanks, guys. Thanks for the call. I'll turn it back.
Thank you. The next question comes from David Cristal at Echelon Capital Markets. Please go ahead.
Thanks. Good morning. Just quickly on the upcoming Nolan Hill acquisition, can you comment on expected yield and how that has changed given rent increases over the course of since locking in the purchase price?
Yeah. I mean, good question. We're not going to say exactly because we're just starting to lease. The question itself, it really is about how much it has gone up since we did agree to purchase this and start to build this basically a year and a half ago. If we had modeled this, the pricing around a five, it has gone up substantially since that time. It's going to be we'll be able to give you really color on it third quarter once we basically close and start the leasing of what the market is out there. It's up substantially since we did our underwriting.
Okay. Fair. On your same property NOI target, obviously, bumped it up to 6%. You're already trending year-to-date north of 7%. Do you see any risk to that 7% coming down or any risk on the OPEX side in the back half of the year? Is the over 6% really a kind of open-ended talk?
I think that's a good way to look at it. I mean, we think that probably 2%-2.5% kind of on the expense side is probably right now what it's looking like. With the continued top-line growth, I think we feel fairly we feel very confident with the over 6%.
Okay. Then maybe last one on the mark-to-market upside. I mean, it's been growing since the start of the quarter. It's now in the, I think, 25%-30% range. Is this a good indication of where we should expect lift on turnover to trend? It's obviously hitting records and rising rapidly, but should we expect to keep seeing it trend higher?
I think that's reasonable. It's hard to get the full number because it all depends on where the units turn. When we're looking at the weighted average mark-to-market, certainly some of those markets we've talked about in Ontario have some of the highest, but yet the lowest turn. It just depends on where those units are turning. The trend that we've been presenting, we think can continue in terms of the increasing on-turn.
Okay. Great. Thanks. I will turn it back.
Thank you. There are no further questions. I will turn the call back over for closing comments.
At this time, I would like to thank everyone for listening and asking questions today. We look forward to the third quarter conference call in November. 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.