KILLAM APARTMENT REIT ANNOUNCES Q3-2024 OPERATING PERFORMANCE AND FINANCIAL RESULTS AND A 2.9% DISTRIBUTION INCREASE
HALIFAX, NS, Nov. 6, 2024 /CNW/ - Killam Apartment REIT (TSX:KMP) ("Killam") today reported its results for the three and nine months ended September 30, 2024.
"Killam demonstrated continued strength and positive earnings growth in the third quarter of 2024. We are pleased to report funds from operations (FFO) of $0.33 per unit, a 3.1% increase from Q3-2023," noted Philip Fraser, President and CEO. "Killam's diverse portfolio delivered same property NOI growth of 7.4% and a 100 bps [basis point] same property operating margin expansion.1
"We remain committed to strengthening our balance sheet and are pleased with the progress achieved this year. We have successfully improved key debt metrics, including bringing down our debt to normalized EBITDA [earnings before interest, tax, depreciation and amortization] to 9.86x and reducing our debt as a percentage of total assets to a historic low of 40.7% as of September 30, 2024. In addition, with access to approximately $167.4 million through our credit facilities and cash on hand, an active disposition program, and access to construction financing, we have financial flexibility to fund our growth plans.
"With robust mark-to-market spreads across the portfolio, we are optimistic about our continued ability to drive earnings growth. Alongside anticipated strong top-line growth from our existing property portfolio, positive year-over-year contributions from our recently completed developments should grow our earnings."
Q3-2024 Financial & Operating Highlights
Reported net income of $62.7 million compared to $68.3 million in Q3-2023. Killam recorded fair value gains on investment properties of $51.3 million in Q3-2024, compared to fair value gains of $38.5 million in Q3-2023. The fair value gains on investment properties in Q3-2024 were a direct result of strong NOI growth.
Generated net operating income (NOI) of $64.4 million, a 6.4% increase from $60.5 million in Q3-2023.
Achieved a 5.9% increase in same property revenue compared to Q3-2023 and generated 7.4% same property NOI growth compared to Q3-2023.1
Earned FFO per unit of $0.33, a 3.1% increase from $0.32 earned in Q3-2023.2
Earned adjusted funds from operations (AFFO) per unit of $0.28, consistent with $0.28 in Q3-20233, and reduced the rolling 12-month AFFO payout ratio by 100 basis points (bps) to 71%, from 72% in Q3-2023.2
Increased the same property operating margin by 100 bps to 68.7%, from 67.7% in Q3-2023.
Ended the third quarter with debt as a percentage of total assets of 40.7%, the lowest level in Killam's history.
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1 Same property NOI is a supplementary financial measure. An explanation of the composition of these measure can be found under the heading "Supplementary Financial Measures."
2 FFO, AFFO, FFO per unit, AFFO per unit and AFFO payout ratio are non-International Financial Reporting Standards (IFRS) measures that do not have a standardized meaning according to IFRS and, therefore, may not be comparable to similar measures presented by other issuers. For information regarding non-IFRS measures, including reconciliations to the most comparable IFRS measure, see "Non-IFRS Measures."
3 The maintenance capital expenditures used to calculate AFFO and AFFO payout ratio for the three and nine months ended September 30, 2023, were updated to reflect the maintenance capex reserve of $1,025 per apartment unit, $300 per manufactured home community (MHC) site and $1.00 per square foot (SF) for commercial properties that were used in the calculation for the 12 months ended December 31, 2023.
Three months ended September 30,
Nine months ended September 30,
(000s)
2024
2023
Change
2024
2023
Change
Property revenue
$93,788
$89,534
4.8 %
$272,069
$261,292
4.1 %
Net operating income
$64,416
$60,515
6.4 %
$179,361
$167,555
7.0 %
Net income
$62,732
$68,349
(8.2) %
$304,425
$266,345
14.3 %
FFO (1)
$40,468
$39,234
3.1 %
$108,521
$105,722
2.6 %
FFO per unit (diluted) (1)
$0.33
$0.32
3.1 %
$0.88
$0.87
1.1 %
AFFO (1)
$35,103
$33,787
3.9 %
$92,293
$89,218
3.4 %
AFFO per unit (diluted) (1)(2)
$0.28
$0.28
— %
$0.75
$0.73
2.7 %
AFFO payout ratio, diluted (1)(2)
61 %
63 %
(200) bps
70 %
71 %
(100) bps
AFFO payout ratio, rolling 12 months(1)(2)
71 %
72 %
(100) bps
Same property apartment occupancy (3)
97.9 %
98.4 %
(50) bps
Same property revenue growth (3)
5.9 %
6.0 %
Same property NOI growth (3)
7.4 %
8.7 %
(1) FFO, FFO per unit, AFFO, AFFO per unit, and AFFO payout ratio are non-IFRS measures. A reconciliation from net income to FFO and a reconciliation from FFO to AFFO can be found under the heading "Non-IFRS Reconciliation."
(2) The maintenance capital expenditures used to calculate AFFO and AFFO payout ratio for the three and nine months ended September 30, 2023, were updated to reflect the maintenance capex reserve of $1,025 per apartment unit, $300 per MHC site and $1.00 per SF for commercial properties that were used in the calculation for the 12 months ended December 31, 2023.
(3) Same property apartment occupancy, same property revenue, and same property NOI are supplementary financial measures. An explanation of the composition of these measures can be found under the heading "Supplementary Financial Measures."
Debt Metrics as at
September 30, 2024
December 31, 2023
Change
Debt to total assets
40.7 %
42.9 %
(220) bps
Weighted average mortgage interest rate
3.45 %
3.22 %
23 bps
Weighted average years to debt maturity
4.0
3.9
0.1 years
Interest coverage ratio(1)
2.97x
3.10x
(4.2) %
Debt to normalized EBITDA (1)
9.86x
10.29x
(4.2) %
(1) Interest coverage ratio and debt to normalized earnings before interest, tax, depreciation and amortization (EBITDA) ratio are non-IFRS ratios. An explanation of the composition of these measures can be found under the heading "Non-IFRS Ratios."
Summary of Q3-2024 Results and Operations
Generated Same Property NOI Growth of 7.4%Killam generated same property NOI growth of 7.4% during Q3-2024, along with a same property operating margin increase of 100 bps. This growth was driven by a 5.9% increase in same property revenue and only a modest 2.6% increase in same property operating expenses. Same property revenue growth is the result of a 7.2% increase in apartment rental rates year-over-year, coupled with increased ancillary revenue and offset slightly by a 50 bps increase in vacancy. Killam's turnover levels remain healthy, and in the third quarter, the average rental rate increase on unit turns exceeded 20% for the second consecutive quarter; with wide mark-to-market spreads, Killam has generated the largest rental gains on unit turns in its operating history. The weighted average rental rate increase on units that renewed and turned in Q3-2024 ...
