Now presenting is Stavro. Go ahead. You can go.
You can call me Stav. It is a little easier. Okay. Thank you. Hi, everyone. Good morning. It is great to be here. I think this is one of the best event, maybe the best event for us every year. My name is Stavro Stathonikos. I am the President and CEO of NexLiving Communities. What is NexLiving Communities? We are a multifamily owner and operator. We are profitable. We generate free cash flow. That means we pay a dividend, we buy back shares, and we are highly acquisitive. We operate in secondary markets, high growth markets across Canada. We are sitting here in Toronto, that means not Toronto. I will explain that in more detail. And our buildings are newer. Newer vintage buildings, which means we attract the better tenants. We target the downsizer demographic for our buildings. We think that is the best demographic.
If you look at any single metric on a per share basis or en bloc basis or any metric, we have been the highest growth company in our space over the last one, three, five years. Before we go into talking about the company and our individual metrics, I want to talk about why. Why are we doing this? What did we see? Here I put a chart. I live in Toronto. I am from Calgary, but I live in Toronto. Every market outside of Vancouver and Toronto makes sense to us. Why is that? Here, I will show you. There is a number of metrics here. These are probably just statistics, StatCan metrics that you would look at evaluating the market, whether looking at the housing market and the health. On the top three or four, you will see what it looks like from a renter perspective.
Home prices in Toronto, Vancouver average CAD 1 million. In our markets, it is less than half of that. The rents are double. You can see whether it is a one-bedroom or a two-bedroom, rent levels are double in these major cities. But that does not tell the full story. The apartments are actually half the size. So price per square foot, price per pound, you can see that we are a third the price or a quarter of the price of these large markets. Unemployment rate. So the job market is as healthy or better in the markets that we invest in, relative to these large markets, and that means they attract a higher population. People move there for better opportunity. They move there for better affordability. And you can see that the long-term, 10-year population growth is higher. All we need is equal, but it is higher.
The rents have kept up, right? You look at 10 years, the average rent growth has been 5%. When you are an investor, when you are a landlord, what do you look for, right? Ultimately, every real estate asset is stabilized yield over the cost of debt. We are able to invest in markets that see high growth, and we are not competing with large pools of capital. The multiples that we pay, the cap rates that we pay are better. Order of magnitude, 10%-20% better going in, and usually, we can run them better than the local people, and they get a better lift in the future. The cost of debt, this does not happen anywhere else in capital markets.
Whether you are in downtown Toronto right here on Bay and Queen, or you are in Moncton where we have a large presence, or around Ottawa, or even if you go up, we are not there, but if you go up to the remote, kind of where you put the pin on the map, right? You go to the Yukon, Tuktoyaktuk. You can get the same debt cost that the guy that can get here on Bay and Queen, right? That is because I will talk about that in more detail, but that does not really happen elsewhere in capital markets. We think it makes the investment climate a lot more productive for us. NexLiving. Here is at a glance. We are about 2,000 apartments. Highly occupied, right? The national average, around 4% vacancy. We are at 2%. Our per share FFO. FFO is operating cash flow per share.
It is a very clean metric. Has been over 20% for the last three years. I think it is also for the last four years. You see there on the top, my right, the average age of our buildings is around eight years old. What that really means is we do not see a lot of the CapEx items, right? Our CapEx levels are dramatically lower than kind of older buildings. Our share price, our NAV, and we are trading at a discount, 50% discount. Implied cap rate of 5.5%. Cost of debt today is around 4%, right? There is an attractive kind of spread there. We pay a dividend. We cover our dividend in our cash flow 6x over, right? It is 16% of it. We are not a big dividend payer. We usually use our capital to grow, right? We are also buying back shares right now.
Myself, the board, the people in the company, we own 50% or more than 50% of the shares. Rarely do you get all four. This is, I think, an important slide because you are seeing we got growth, a discount on NAV valuation, right? Free cash flow, so we are not in need of cash flow. We are not coming to the capital markets. A high insider ownership, which means you have alignment with your investors. Here you can see kind of the history. We are a high growth company. Most people think real estate, they think yield and stabilized and kind of a higher dividend. We are actually more focused on growth. On the top, you will see the number of apartments. On the bottom, you will see our EBITDA and NOI. NOI is just the profit at the building level.
It is a very good and clean metric. Any picture you see in this presentation is actually a picture of one of our properties, so you get a flavor of what we own. Here you will see where we are located. We highlighted our markets in blue here, and I have been with the company for five years. A couple of years ago, all these metrics were the same. Average rents were the same across the country. Home prices were the same. The growth was the same across the country. Population growth was kind of the same around the country. Our markets were seeing better population growth back then. But in the last couple of years, we have seen a bifurcation. We have seen people vote with their feet and our markets continue to see high growth. People move there for jobs.
People are investing, creating companies, and these markets are going to benefit from the government spending and focus on defense spending and logistics infrastructure, et cetera. You look at it relative to Canada and relative to Toronto, Vancouver, and we are seeing this bifurcation. I was surprised by this because I did not think it was going to happen so quick. We saw that as a long-term trend, but it is now we are living through it. These are just some announcements. You will see what we see on the ground. No one here will really focus on this. But the Saint John Port , you can see the capital investment that is happening there from space. It is an enormous dredging that is happening. This is a major infrastructure project across Canada. It is a deepwater port. They are competing with Halifax. Both those ports have excess capacity.
Since I have been with the company, the volumes in Saint John have 5x'd, and they are going to continue to double from here. That is just one example. There are data centers going up. There is nuclear power going up. So there is a lot of investment happening in these communities, and that is what we are just highlighting on the slide. Kind of another us versus them. The dark line is, I do not know if it shows up on that screen, but the dark line is our metric relative to the Canadian average. On the left, you will see vacancy. We run a really good business. That is all it tells you. We price our product properly, and we optimize it. It means our product is well-placed in the communities. On the right, you will see the forecast. So the left is historical, the right is kind of looking at the future.
This forecast is based on, I guess, StatCan, but you can see that the forecast for our markets is that we are going to have a higher population growth. The expectations are there. People who are doing this analysis are seeing that these are good markets as well. We see it as well. Get to see some pictures. What I would say is that the little secret, no one talks about this. Normally, everyone here, this is a broad conference. You are not going to see a lot of real estate companies because there are not a lot of capital growth-focused real estate companies in Canada. Certainly not at our size. But if you would meet with most real estate operators, they like to turn around their tenants, and the assumption there is that you get just-in-time pricing, and you get pricing right away.
The problem that we see with that is, and we run our business differently, is there's a heavy burden of CapEx on the building. We can explain this in detail, but broadly speaking, we like to find the best tenants and then keep them with really good services. Our buildings are mostly fitted with a high amenitized package. These are amenities for the tenants that they see value in. We think our leasing process is unique. People see a bunch of generic product. They come to our buildings, and they see this great amenity package, and that stands out, and that allows us to select better tenants and get appropriate pricing for the product we have. You can see the kind of the pictures we'll have. You're not going to see a lot of buildings with massage rooms. You'll see gyms. You'll see community rooms.
You'll see cinema rooms. But we have nurse rooms where we have an agreement with this group, [TytoCare], where you can do a remote diagnosis with registered nurses. We have barbers that become community hubs. We have massage rooms, and we charge rent for those. It's not really a revenue model for us. It really is a way to differentiate our product and show value to the tenants. Most of the revenue comes from the 100 units that you have above it. Here's the team. The operating team. I should put our new hire on there on the left. But the operating team is generally young, hungry. Most of our team, I'll take myself out of this, but most of our team is kind of around 30. A lot of experience in real estate, and so we have a culture at the office.
You're there at 11:00 P.M., when we need to do work. That's great. But on the right, we have purposely assembled a team that knows how to build a business in a secondary market, understands capital allocation, understands real estate. If I kind of go through, maybe you recognize some of these names, but if you're in Toronto, you'll recognize Farm Boy. The founder of that is Jeff York. He sold the Sobeys for CAD 1 billion. It went from CAD 30 million to CAD 1 billion in about 10 years. He's a large shareholder and the chairman of our company. Rick Turner, up until recently, up until the last 12 months, he held the title of having kind of the largest REIT takeouts in Canada, bought by Blackstone, Pure Industrial REIT.
If you invested at the IPO and you held it till the end, over 10 years, including the financial crisis, you would have made a 20%+ IRR, owning that company. So a lot of real estate experience. Bill Hennessey, he runs Colliers for all of Atlantic Canada. It's his business. JP Poulin is a very successful developer based out of Ottawa, and Pomerleau Construction, they're the third-largest construction company in Canada. These people have founded, built, and sold approximately CAD 5 billion-CAD 6 billion of businesses in Canada in secondary markets. We're not a turnaround story. This is a compounding growth story, right? Today really is that, I think that's as of Q2. But you can see the history of our cash flow per share or FFO per share. You can see on the top left there 60% growth, 40% growth.
2024 was anomalous because we made a very large acquisition where we issued shares, so it is a little distorted, but then resumed the growth right away, 30% +, or around 30% going forward. You can see here we drew a line of where we pay our dividend. This is, I think, a major influence I have had in the company. It started out as a dividend growth company, and when I came on board, we changed that. Can you please. Yeah, thank you. So we went from a 50% dividend payout to keeping the dividend stable and growing our cash flow per share, right? You can see now that there is a lot of capital that we generate that we can use to continue to grow. A young portfolio. I mentioned that before, so I am coming back to it.
You can see the top right chart shows our overall CapEx, per unit per year relative to all the public peers where we have data. You can see we are sitting at about 60% below the average. I think that is really important to keep in mind as you look at our metrics, that what that really means is we are able to generate a lot of free cash flow, right? So instead of having to constantly put capital into the building to cycle to achieve that next 10% of pricing, right? We think it is better to keep that capital and then use it to go grow and acquire new buildings, and we run our business that way, and I will show you how that shows up. It is kind of better math.
When you look at the bottom, when you fully load your EBITDA, we run at higher financial leverage deliberately. But when you look at the full burden, which includes kind of the interest, the dividend, kind of what you promised your capital contributors to the company, and you fully load the CapEx, we have a very conservative capital structure. Here, you will see the results. So this is a three-year comparison with all the public peers. You can see our margins are very healthy. A cash on cash that includes CapEx. Our cash flow per share growth is, it just looks like a different industry, right? Because most of the companies are congregated there on the left. The one company with the PRF that we look there, that is a diversified company, so it includes other asset classes that and it is a good business model.
You can see even on the pure multifamily space, we are four times, 400% the growth of the peers. On the bottom left, you will see same-store sales. You will see we are in the middle of the pack. We could have higher growth, but we think it would require more capital, and we think it is bad math, right? So that is how we run our business. You can see the free cash flow yield is there 9%, which in this sector is unheard of. I will be quick here, but these are two case studies. The pitfall real estate people have is they fall in love with our real estate, right? So you ask me kind of what my favorite building we own is. I will ask you, "Well, what did we buy it for, and what is it yielding?" Right?
I think it is important to have that financial mindset when you are making these investments. We do not sell a lot of properties. This is everything we have sold in the last couple of years. You will see roughly a CAD 5.5 million equity check if I combine them, four years later was CAD 18 million. Those are roughly a 35% IRR if you blend these two kind of assets. We are seeing those IRRs today in our existing investments. I talk about REIT takeouts. The only reason I put this slide up is because the blue ones are multifamily. We are seeing this dynamic in Canada where private capital is coming in and taking out the public multifamily names, and that makes sense because the public multifamily is actually all trading at a very large discount to where private capital is pricing it.
My background is M&A and debt restructuring, and I thought this was interesting, so I put it up. I am happy to talk about it more further. I would say that the cap rates are very healthy. The valuations people are paying in the private market are very healthy. Ultimately, these are 50-year assets. So it behooves you to look at it over long periods of time. You can see where we were three years ago. We have tripled our NOI. Our margins are better. Our cash flow per share in that three-year period has doubled. This is not just a story. The results are there. We think we can double again. It is within our opportunity set. Free cash flow, we did not have any effectively three years ago.
Today, we are 9% of our market cap, and we think we can double that or triple that going forward. We have everything in place. We have the team, the capital, the operations to do this. This slide, I am going to stop here. It is kind of a financial, lots of charts, but just look on the left there. Year-end 2025, on our balance sheet, we had CAD 4 million of cash. Today, we have CAD 12 million - CAD 13 million. We did not do an equity raise. We did not do anything. That came from our business. By year-end, we think we will have about CAD 30 million of excess capital. So we are actively looking for acquisitions. I am pretty busy right now. We have seven or eight files open up. The IRRs that we are underwriting are very attractive.
It is just a matter of getting the right transaction for our company right now. Here you can see a forecast. 2026 is 22%, 2027, 34%. I think this is conservative. That is it. That is our company.
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I love the U.S. market.
Such a good comp. So we're looking at this strategy right now. I haven't convinced the board yet, but we're looking at this strategy right now where you can write a $3 million U.S. equity check, and we found 100 of these assets. I'm not going to tell you what it is, but it's a very attractive asset. You write a $30 million check, a $3 million check, and if you do it properly and the execution risk is way lower than what we're currently doing, that $3 million equity check is in your pocket seven to eight months later and you own the asset and it's cash flowing and it's stabilized, and it's attractively positioned in its market. So we're looking at something, yeah.
Any new markets, do you ever run into rent control issues?
Oh, yeah. Tons of it. But look. Sorry, did I cut you off? Is that your. Yeah, sorry. I'm getting signs of no time, so I'm going a little quick. But, look, rent control can be really bad. PEI, and we own a small asset in Winnipeg, we are going to sell that. Those are two really poor, bad markets. We just had a bad experience. We haven't been in PEI, but I know. Rent control does two things. It's a bad policy, by the way. In the U.S., we don't have rent control, and we have lower rents and better affordability. It's a bad policy because it restricts supply getting built. When you're an incumbent in the market and you have rent control, it really isn't that bad because you can still get your growth.
You can still operate your asset, and you don't have a lot of competition, so your product becomes very desirable as time goes by. That's the silver lining, but yeah, generally, we don't like regulation. Talk it out. Yeah.
Looking at your last earnings, everything looks fine.
Thank you.
Gross margin lower from 71% last year to 57%.
Yeah. There is seasonality in our business. We live in Canada, right? There is big, heavy snowfall. You have to get the snow out of your buildings. They get really dirty. People walk in, right? You might have some wind damage. There is seasonality in this business. You might see that. Q2 is a tough quarter. No, Q2 is not. Are you looking at Q2?
Yeah.
Yeah.
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Why are the margins lower in Q2 versus Q1?
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Versus Q2 of 2025. It is possible. I have to remind myself. It is possible Q2 2025 just had an anomalous lift. It was a very, very good quarter. We run at about 61% margin, 62%, generally, on average. But look, we are small, and so you see we do not have a statistically. Larger companies will have smoother outcomes. We are smaller, and so stuff tends to impact us. You will see it. But I am sorry. You stopped me. I do not have the exact answer to that.
Second question is, the contract new booking fall from CAD 16.5 million from 2025, second quarter, to CAD 6 million in 2026. What is causing the drop?
Sorry, say that again. The—
Contract new booking. What is the contract new booking about?
Contract new booking?
Yeah.
Are you saying deposits and prepaids?
Let's say from your Q2 of 2026 press release.
Contract and new booking.
Yeah. Contract new booking.
I don't think that's a line item in our financials. But I would say this, we have occasionally when we work
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I'm sorry?
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I don't know what you're looking at. I'm sorry. I don't think that's in our financials. I'm sorry. We can talk about it on the side. I'm happy to have that conversation with you. But I would say this, we are highly acquisitive. Generally speaking, it's rare for us to issue clean financials. We are constantly putting deposits, buying acquisitions, having acquisition fees. You have to take a long-term view to our financials and look at it over a period of 12 months, 24 months, and just look at the results because we're constantly taking capital out of our business, doing projects to drive that cash flow per share growth. It's again, we're going to go in a period where we're going to make a lot of acquisitions, and they tend to create noise in the financials.
So that, you buy a new building, it might be 50% leased up. All of a sudden, your vacancy rates look horrible, or your margins look off. So that tends to happen when, at our size too, buying 200 apartments, you'd see that. Today, we have the ability to buy 600 apartments or more. So that could affect our financials. But you have a specific question on our financials. I'd love to go through it, and our CFO is going to be here, too.
Okay.
I don't think contract and new bookings. I don't know what that is.
Okay. Last question. Is the adjusted EBITDA
We don't adjust our EBITDA. There's no adjustments. Just EBITDA. Just say just EBITDA.
That's why I asked if it's in the Q2 report.
Yeah.
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You would have to calculate EBITDA. I don't think it's a line item in there.
Is it adjusted?
I don't know what you're looking at. You might be looking at some output from some financial, not directly our financials. We don't publish EBITDA. You can go calculate it. I can tell you how to calculate it. There's no adjustments. It is actually expensed. The way to get there is you just take our NOI and subtract our G&A, and that's our EBITDA. It's very simple. But you clearly have questions. I'm going to find you afterwards, and we'll answer them.
Stavro, I'm a big fan.
Yeah.
It's no longer in the presentation because it's been two years. But the Devcore acquisition was a transformation.
Do you see other potential like that?
Yes.
Has it integrated well? It's two years now. Can you talk a little bit about it and how that, sort of looking forward?
Look, James, you've seen the results. It's what we told you, right, when we did the acquisition. The company is generating a lot of free cash flow. We see other groups who are private, who understand what 20% compounding does over long-term periods. I would say this, most of those groups are typically young guys, right? Because they're like, "Oh my God, if I could compound for the next 20 years." They know. They know, right? And so we are getting a little bit of notoriety in this subculture around compounding in the real estate space. But look, it's expensive to be public, right? And so that's generally the tug and pull, right?
What you're seeing is companies going private. You're not seeing companies going public in this market because the public valuations are lower than the private, and that creates a problem, right? There are groups who are younger, longer-term thinking, right? They're in this space. They have assets. They have great teams, and so we are having those conversations. Matthew.
Is there a larger peer that you try to emulate or that you admire, and if so, what would you do differently or better?
Yeah. Look, I think this model was originally of capital retention, not capital paying. I think the entire sector is going to go to this model. The first company who did it in Canada, and it's even, I would say, in the U.S. is Mainstreet Equities , and they're focused in Western Canada. They're nowhere out east, right? I think I do admire their business model. I think they've done a great job. They focus on a different market. If you look at Alberta, it's not rent control, so you can buy kind of smaller apartment buildings, like six units, 12 units, maybe up to 24 units. Buy them pretty cheaply, fix them up a little bit, raise the rents, and he gets good capital return. I think where we're different, I'm not saying they've grown an incredible business.
I would say it's different is that they end up with a very high CapEx, like the free cash flow after. They get high IRRs, which is driven by timing. They get their capital out very quick, right? As you know, that's a financial kind of alchemy. We can have the same asset, same return, and the timing of cash flows matters on the IRR. We think we get a very equal or as good or better return on equity long term with newer assets, right? I think that's the difference. Thank you. All right. Thank you.