Canadian Apartment Properties Real Estate Investment Trust

Hello and welcome to the Canadian Apartment Properties REIT fourth quarter 2023 results conference call. My name is Alex, I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. And I'll hand it over to your host, Nicole Dolan, Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Before we begin, let me remind everyone that during our conference call this morning, we may include forward-looking statements about expected future events and the financial and operating results of CAPREIT, which are subject to certain risks and uncertainties. We direct your attention to slide two and our other regulatory filings for important information about these statements. I will now turn the call over to Mark Kenney, President and CEO.

Thanks, Nicole, and good morning, everyone. Joining me this morning is Stephen Koh, our Chief Financial Officer. and Julian Schoenfeldt, our Chief Investment Officer. Let's start with a quick overview of our operational performance. On slide four, you can see that our occupancies held high all year, with 99% of our suites in Canada occupied on December 31st, 2023 and 2022. Across our Canadian residential portfolio, occupied AMR was $1,516 as of year end, which represents an increase of 8.2% since 2022. This market-driven growth reflects the increasingly tight rental fundamentals that we're continuing to experience across Canada. This past year, demand for affordable rental accommodation grew higher again. As our population expands further, and the housing gap widens. Later, I'll speak more on the work that CAPREIT's been doing to help turn around the trajectory of this crisis. Turning to slide five, I'll take a moment to go through our financial results for the fourth quarter. Our strong rent growth throughout 2023 drove the 5.9% increase in operating revenues, while our NOI was up by 7.4% as compared to Q4 of 2022. This was achieved despite the size of our portfolio, having a net decrease of over 2,000 suites and sites during the year, a result of our repositioning initiatives that Julian will expand on shortly. Combined with our prudent cost control measures, which remain a top priority for us, we are pleased to report a 90 basis point increase in our NOI margin to 64.9% for the fourth quarter. I'd like to remind everyone that this includes higher repairs and maintenance costs associated with our capital allocation strategy. This year, we started scaling back on in-suite and common area capital expenditures, and we reallocated a part of that into additional repairs and maintenance work. This was a strategic initiative that we implemented in response to the tight rental market that we're now operating in. This capital redeployment increases our property operating costs as compared to 2022, which negatively affects our margins. However, it lowers our overall capital expenditure and this positively impacts our long-term cash returns. We're looking forward to seeing the merits of this property management strategy show in our future financial results. FFO increased by 2.2% compared to Q4 2022 due to our organic growth, as well as lower trust expenses, partially offset by higher interest rate costs. Along with accretive purchases made on our NCIB program in early 2023, our FFO for diluted unit was up by 3.8% to 60.2 cents for the fourth quarter of 2023. Referring to slide six, we've included some key financial metrics for the year ended December 31st, 2023, which I'll briefly highlight. Strong rent growth increased operating revenues by 5.8%, and combined with cost mitigating measures, net operating income grew by 6.5%. NOI margin for the total and same property portfolio increased by 40 and 30 basis points respectively to 65% and 65.3% for 2023. Again, organic growth, lower trust expenses, and accretive NCIB repurchases all positively contributed to growth in our FFO per diluted unit, which was partially offset by interest rate increases. The result was a 2.9% increase in FFO per diluted unit to $2.39.6 for year ended December 31, 2023. We maintained our annual rate of distribution steady at $1.45 per unit and our FFO payout ratio was 60.5% for 2023. On slide 7, we summarized our current strategy, and we're very proud of the progress that we've made on that in 2023. CAPREIT's strategy has always been centered on the creation of value for our unit holders. However, our operating environment has changed in recent years, and we've established a new and improved addition of our strategy to align with that. Today, our objectives revolve around the modernization of our portfolio and the recycling of capital in order to create value. I'll let Julian and Stephen expand on these initiatives, but an overview. We've been very focused on optimizing our portfolio and operational efficiencies. That means we're disposing of our older non-core properties and we're reinvesting the net proceeds into strategically aligned new build rental apartment properties in Canada. We've also been investing in our NCIB program, depending on the capital market conditions and the other opportunities available for capital redeployment, such as paying down higher interest debt. In 2023, we invested $101 million in our NCIB program to repurchase and cancel approximately 2.2 million trust units at significant discounts to NAV. Our development program is another increasingly important component of our strategy. We've been working on the identification, entitlement, and sale of our excess land to developers, which not only generates incremental funding that we can then reinvest in our core business, but it also helps to contribute to the supply of new homes for Canadians. I'll now turn things over to Julian to provide a more detailed update on our strategic progress.