Canadian Apartment Properties Real Estate Investment Trust

Good morning, and welcome to today's Canadian Apartment Properties Conference Call. My name is Bailey, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, David Mills. David, please go ahead.

Thank you, operator, hardly the host, but before we begin, let me remind everyone that the following discussion may include comments that constitute forward-looking statements about expected future events and the financial and operating results of CAPREIT. Our actual results may differ materially from these forward-looking statements, as such statements are subject to certain risks and uncertainties. Discussions concerning these risk factors, the forward-looking statements, and the factors and assumptions on which they are based can be found in CAPREIT's regulatory filings, including our annual information... annual information form at MD&A, which can be obtained at cdar.com. And I'll turn things over to Mr. Mark Kenney, President and CEO.

Thanks, David. Good morning, everyone, and thank you for joining us. Scott Cryer, our Chief Financial Officer, is also with me this morning. While we are pleased with our performance in the fourth quarter, we did experience certain increased costs that led to a smaller than expected increase to our quarterly NFFO. The key change was an acceleration of repair and maintenance costs in the quarter as we started to play catch up after two years of reduced spending due to COVID related restrictions on our property activities. And increasing expense, interest expense on the acceleration of CMHC mortgage amortization NFFO per unit was impacted by the 1.8% increase in the number of units outstanding in the quarter. The unexpected increase in Omnicron caseloads across the country also led to increased uncertainty in some of our markets. However, we believe we are now working our way through this situation. Having said this, revenues were up almost 7% driven by the contribution from our acquisition. increased monthly rents, and continuing high occupancies, driving a 3% increase in our NOI. Turning to slide five, we booked another solid year in 2021. All of our key benchmarks were up, including revenues, NOI, and NFFO, and we continued to generate solid and accretive growth for our unit holders. It is also important to note that we have experienced very few collection issues through the pandemic. To date, we have collected over 99% of our rents as we work with our residents to understand their issues and ensure we collect on a timely basis. Our payout ratio remains stable despite the significant 5% increase in monthly cash distributions last September. Our strong performance through the pandemic allowed us to increase our distributions while maintaining a very conservative payout ratio. Looking ahead, we expect to see further increases in occupancies, accelerated growth, and much improved operating performance as we work our way out of the Omicron pandemic and gradually return to more normal markets and operations. From an operating perspective, our ability to generate solid performance in both good and bad times is clearly demonstrated by the results from our stabilized portfolio, as you can see on slide six. Occupancies improved again in the fourth quarter, while net average monthly rents continued to increase. Our leasing and marketing programs continue to generate increasing occupancies, as you can see on slide seven. After two years of operating under significant pandemic restrictions, our occupancy has remained highly stable, rising to over 98% at year end. You can also see that our bad debts as a percentage of total revenues have remained low throughout the pandemic. While we did experience some issues with our commercial portfolio last year due to the pandemic, the residential portfolio continues to track its historical level of bad debts. A key factor in our ability to generate solid returns during the pandemic is the solid increase in rents on turnover we are achieving, as shown on slide 8. Clearly, turnovers continue to be impacted by the ability of residents to move or personally visit our properties. However, an almost 6% increase on turnover in the Canadian portfolio is a solid result, with rent increases moving higher sequentially through each quarter in 2021. It is also important to note that our churn is increasing up to 22% from 19% last year, a good sign that we should see more mark to market rent increases in the quarters ahead. Our increasing churn rate up significantly from pre-pandemic periods speaks well for our ability to achieve higher mark to market rent increases going forward. Renewals continue to be affected by the rent increase freezes legislated in Ontario, British Columbia, and other regions. But looking ahead, we are pleased to see Ontario's 2022 guideline increase of 1.2% and 1.5% in British Columbia. CAPREIT has served notice to over 45% of Canadian tenants across the weighted average rental increase was 1.3% effective January 1, 2022, capturing a full year of increased income. As of year end, Ontario and BC represented approximately 56% of our total NOI. Nova Scotia has cap rent increases at 2% for apartments and 1% for MHCs in 2022. And we will be monitoring how we can implement these increases through 2022. As mentioned, we experienced a solid and positive trend in rent increases on turnover each quarter since we bottomed out at the height of the pandemic in Q1 last year, as shown on slide nine. With churn also rising beyond pre-pandemic levels, the lower turnover numbers in Q4 is normal. As you can see in the past, few families want to relocate during the holiday season. Looking ahead, we are experiencing more in-person and online visits and expect we will start to see more higher mark-to-market increases in the quarters ahead, moving us towards the higher levels of increase we generated prior to when the pandemic set in. Through most of the last two years, our ability to invest in our properties was also significantly curtailed by the pandemic and our focus on conserving cash. Through the latter months of 2021, we ramped up our efforts to further enhance the value and income producing potential of our property portfolio. As you can see on slide 10, we targeted in-suite and common area improvements last year, ensuring our properties remain the most attractive in our markets and provide residents with safe and comfortable homes. Our investments in energy saving initiatives is also reducing costs and helping us improve our environmental footprint. a key goal of our ESG program. All of these key investments serve to increase NOI more quickly compared to other investment categories. Turning to slide 11, we continue to increase the size and scale of our property portfolio. Through 2021, we acquired 3,744 suites and sites, the majority in our key GTA and BC markets. Our acquisition pipeline remains strong and robust, and despite cap rate compression, we expect to generate further accretive growth portfolio in the quarters ahead. We also sold 593 non-core suites for $143 million, the majority in the GTA, where we are achieving very strong returns selling to experienced property developers wanting to develop downtown locations. We continue to evaluate our total portfolio to assess whether recycling certain capital will contribute to more accretive growth. I'll now turn things over to Scott for his financial review.