Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Occupancy rates increased year over year to 96.2%, indicating strong demand for high-quality communities.
- Rental rates showed strong growth with an 8.4% increase for the total portfolio and 6.8% for the same property portfolio.
- Total portfolio revenue growth for Q2 was 4.8%, with same-property revenue increasing by 7.6%.
- FFO increased by 17.9% to $23.1 million, and AFFO per unit increased by 19%, driven by increased NOI and reduced financing costs.
- Successful execution of refinancing strategy reduced the weighted average interest rate by six basis points to 3.37%, benefiting financing costs.
Negative Points
- Dispositions during the quarter negatively impacted revenue growth.
- Occupancy in the Greater Vancouver area saw a small increase in vacancy year over year.
- Fair value loss of $34.6 million due to an increase in cap rates, despite strong operational performance.
- Turnover rates remain high in certain regions, which could impact stability.
- CapEx spend has been lower than previous years, which might affect long-term value creation.
Q & A Highlights
Q: Could you elaborate on the flexible leasing strategy mentioned in your prepared remarks?
A: The strategy involves being dynamic with pricing and staying on top of market trends in different regions to maximize both occupancy and revenue.
Q: How are you thinking about occupancy trends for Q3, especially in the context of the foreign student visa cap?
A: We are optimistic and expect occupancy trends to be similar to previous years. We haven't seen any indications that the foreign student visa cap will significantly impact our portfolio.
Q: What drove the lower turnover spread this quarter compared to last?
A: The lower turnover spread was mainly driven by higher turnover in areas like Ottawa and Montreal, which are closer to post-secondary institutions. This resulted in more frequent lease renewals and smaller gains on lease.
Q: Are you seeing any changes in student demand in Ottawa similar to Montreal?
A: Student demand in Ottawa is trending normally and is on pace with last year and pre-pandemic years. Ottawa tends to see leasing activity a bit earlier than Montreal.
Q: What are your thoughts on the current transaction market and potential acquisition opportunities?
A: We are seeing some increased activity in the transaction market, but there remains a gap between vendor expectations and buyer willingness. We are open to deploying capital through joint ventures and are monitoring market conditions closely.
Q: How do you view the recent trends in rent growth and the potential impact of immigration on demand?
A: While the pace of rent growth may be moderating, we still expect market rents to grow at a healthy rate. Household formation continues to outpace new supply, suggesting ongoing upward pressure on rents.
Q: How much acquisition firepower do you have on your balance sheet currently?
A: We have roughly $360 million in acquisition capacity and prefer to use joint ventures to stretch this further. We also have a disposition program that could generate an additional $50 million in net proceeds.
Q: Are you considering entering any new markets?
A: Not at this time. We are focusing on opportunities in our core markets and would only consider new markets if there is a significant improvement in our cost of capital.
Q: What are your expectations for CapEx spend for the rest of the year?
A: CapEx spend will be lower than in 2023. This is partly due to the completion of many repositioning projects and a focus on maintaining a high return on investment for any new capital expenditures.
Q: How do you view the NCIB program going forward?
A: We will continue to use the NCIB program on a leverage-neutral basis, balancing share buybacks with other capital allocation opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
