Investor Presentation April 2016 Cautionary Statement This - - PowerPoint PPT Presentation

Investor Presentation April 2016

2 This presentation may contain forward-looking statements with respect to Killam Apartment REIT and its

• perations, strategy, financial performance and condition. These statements generally can be identified

by use of forward-looking words such as “may”, ”will”, “expect”, “estimate”, “anticipate”, “intends”, “believe” or “continue” or the negative thereof or similar variations. The actual results and performance

• f Killam Apartment REIT discussed herein could differ materially from those expressed or implied by

such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulation and the factors described under “Risk Factors” in Killam' annual information form and other securities regulatory filings. The cautionary statements qualify all forward- looking statements attributable to Killam Apartment REIT and persons acting on its behalf. Unless

• therwise stated, all forward-looking statements speak only as of the date to which this presentation

refers, and the parties have no obligation to update such statements.

Cautionary Statement

3

Killam Apartment REIT has $1.8 billion in residential real estate assets in Atlantic Canada, Ontario and Alberta.

Killam Apartment REIT

*manufactured home community **30 day

Apartment units 13,681 MHC* sites 5,165 Market cap $675M Distribution $0.60 Distribution yield 5.2%

• Avg. daily volume**

185K

4

Diversified Real Estate Portfolio

5,090 units

Halifax, NS

1,629 units

Moncton, NB Fredericton, NB

1,394 units

Saint John, NB

1,202 units

• St. John’s, NL

915 units

Charlottetown, PE

906 units

Ottawa, ON

780 units 378 units

Toronto, ON

307 units

London, ON Cambridge, ON

264 units

Calgary, AB

347 units

Non-core Regions

469 units Killam’s MHC portfolio includes 5,165 units in Nova Scotia, Ontario, Newfoundland and New Brunswick.

5

89% 9% 2%

NOI by Sector

Apartments MHCs Commercial

Diversified Real Estate Portfolio

elevatored mid-rise 35% town-houses 2% walk-ups 30% high rise 33%

Apartment NOI by Type of Property

6

Diversified Real Estate Portfolio

Halifax 40% Ontario 16% Moncton 9% Fredericton 9%

• St. John's

8% PEI 7% Saint John 5% Calgary 3% Other 3%

% of Apartment NOI by Core Market

Killam is the dominant Landlord in Atlantic Canada with a 14% market share of the region’s urban centres.

Nova Scotia 50% Ontario 45% NFLD 2% New Brunswick 3%

% of MHC NOI by Province

7

Killam’s Strategy

Killam’s strategy is to maximize its value and long-term profitability by concentrating on three key areas of growth: 1) Increasing earnings from its existing portfolio 2) Expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties 3) Developing high-quality properties in core markets

8

Killam’s Strategy

Maximizing Same Store Earnings

2.6% 5.1% 2.1% 8.4% 4.8% 0.3% 2.0% (0.4%) (0.9%) 4.2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Same Store NOI Growth 2006-2015

Record high natural gas prices in Atlantic Canada impacted NOI growth in 2013 & 2014.

The average NOI growth from Killam’s same store portfolio from 2006 – 2015 was 2.8%.

9

Killam’s Strategy

Annual Growth Through Acquisitions

$16 $45 $167 $200 $103 $125 $36 $3 $115 $106 $85 $121 $160 $54

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Annual Acquisitions

$ millions

10

Killam’s Strategy

Active Development Program

$5.0 $7.6 $14.1 $7.7 $14.7 $35.0 $19.0 $25.3 $25.4 $16.7

$0 $20 $40 $60 $80

Developments Completed Per Year

$ millions

Since completing its first development in 2011, Killam has invested over $120 million in developments. Killam expects to spend between $30 - $60 million per year on apartment developments.

* expectation

11

Killam’s Strategy

Increased Geographic Diversification

0% 5% 7% 8% 11% 14% 19% 2009 2010 2011 2012 2013 2014 2015

% of Apartment NOI Generated Outside Atlantic Canada

84% of the $160 million in acquisitions completed in 2014 were in Ontario and Alberta.

12

Financial & Operating Performance

9.7% FFO Per Share Growth in 2015

$0.69 $0.71 $0.71 $0.72 $0.79 2011 2012 2013 2014 2015

FFO Per Share

Highlights from 2015:

• 9.7% increase in FFO per share.
• Improved AFFO payout ratio to 87.7%.
• 4.2% same store NOI growth.
• Completed and leased up two developments.
• $54 million in acquisitions.
• Achieved interest expense savings, reducing

the weighted average interest rate on mortgages to 3.27% at Dec 31, 2015 from 3.60% at Dec 31, 2014.

• 99.5% shareholder approval for REIT

conversion.

13

Financial & Operating Performance

4.2% Same Store NOI Growth in 2015

2.1% 3.9% 2.2% (0.7%) 3.5% (0.4%) 4.2% 4.1% 4.2%

Same Store Results Year Ended Dec 31, 2015

Revenue Expenses NOI

Apartments MHCs Consolidated

14

Financial & Operating Performance

2.2% Same Store Revenue Growth in 2015

2.9% 2.6% 1.9% 1.8% 1.7% 2.2%

2010 2011 2012 2013 2014 2015

Same Store Revenue Growth

Revenue growth in 2015 is attributable to occupancy gains, increased rents and a decrease in incentive offerings.

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0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Quarterly Change in Same Store Revenue Growth 2010-2015

Average quarterly same store revenue growth of 2.2% from 2010-2015.

Financial & Operating Performance

Above Average Revenue Growth in 2015

16

Financial & Operating Performance

Improved Occupancy in 2015

94.3% 93.6% 94.2% 95.6% 94.7% 94.9% 94.7% 95.8% 95.5% 95.5% 95.3% 95.7% Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15

Quarterly Apartment Occupancy*

$ occupancy as a % of gross potential rents

Average of 95.0% for 2013-2015, * Occupancy based on percentage of residential rent for stabilized properties during the quarter.

17 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4%

Incentives as a Percentage of Rental Revenue

Same Store Apartment Properties

Financial & Operating Performance

$530K Savings in Rental Incentives

18

Financial & Operating Performance

Strong NOI Growth Throughout 2015

• 8.0%
• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Quarterly Change in Same Store NOI 2010-2015

Average quarterly NOI growth of 1.8% from 2010-2015.

19 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20

$ per GJ

Commodity Charge per GJ

Nova Scotia New Brunswick

Commodity prices are fixed in Nova Scotia and floating in New Brunswick, reflected in the price differences.

Financial & Operating Performance

Lower Natural Gas Prices in 2015 Vs. 2014

20

Financial & Operating Performance

Efficiency Projects = Savings

Water Consumption Initiatives

• Installing low-flow toilets will generate annualized savings

and a payback of 2.7 years. Building System Controls

• Installing smart automated controls in the boiler rooms
• f 10 properties, will conserve $75,000 in natural gas

costs each year.

• Payback of 1.7 years.

Efficiency NS Direct Install Program

• Upgrading, in partnership with Efficiency Nova Scotia,
• ver 20,000 LED light bulbs and thousands of low-flow

showerheads in our largest buildings in Halifax will save tenants over $140,000 in electricity costs per year, and Killam over $40,000 in annual water costs.

21

Financial & Operating Performance

Water Savings Initiatives Underway

$- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000

100 200 300 400 500 600 700 800 900 1000

Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Cumulative Savings

Toilet Installs

Killam’s Low-flow Toilet Installs

Number of Toilet Installs Total Cumulative Savings

22

Financial & Operating Performance

Stable Balance Sheet

55.2% 51.6% 52.9% 54.9% 55.7% 2011 2012 2013 2014 2015

Debt as a % of Total Assets

At Dec 31

Dec31, 2015 Dec31, 2014 Total gross debt as a % of total assets 55.7% 54.9% Mortgage debt as a % of total assets 50.4% 49.4% Weighted average interest rate

• n mortgage debt

3.27% 3.60% Weighted average term to maturity 4.2 years 4.4 years Debt service coverage ratio (rolling 12 months) 1.35 1.34 Interest coverage ratio (rolling 12 months) 2.34 2.21 Percentage CMHC-insured apartment mortgages 73% 75%

23

Investment Opportunity

• Stable distributions with improving

payout ratio.

• Trading below net asset value.
• Interest saving opportunities on

refinancings.

• Positioned to benefit from improved

economic growth in Atlantic Canada.

• High quality portfolio with increasing

investment in newer properties and established development program.

• Growth through acquisitions and

development.

24

Investment Opportunity

Stable Distribution & Improved Payout Ratio

$0.56 $0.57 $0.58 $0.58 $0.60 $0.60 $0.60 98% 99% 96% 96% 98% 88% 82% 70% 75% 80% 85% 90% 95% 100% $0.54 $0.55 $0.56 $0.57 $0.58 $0.59 $0.60 $0.61 2010 2011 2012 2013 2014 2015 2016* AFFO Payout Ratio

Killam’s Annual Dividend / Distribution

Dividend/Distribution AFFO Payout Ratio*

*The 2016 adjusted funds from operations (AFFO) payout ratio represents the consensus estimate of 82% based on the current annual distribution of $0.60.

25

$9.00 $9.50 $10.00 $10.50 $11.00 $11.50 $12.00 $12.50 19/08/2015 29/08/2015 08/09/2015 18/09/2015 28/09/2015 08/10/2015 18/10/2015 28/10/2015 07/11/2015 17/11/2015 27/11/2015 07/12/2015 17/12/2015 27/12/2015 06/01/2016 16/01/2016 26/01/2016 05/02/2016 15/02/2016 25/02/2016 06/03/2016 16/03/2016

Killam’s Unit Price Vs. Analysts’ NAV Estimate

Unit Price Analysts NAV

Investment Opportunity

Trading at a Discount to Net Asset Value (NAV)

The average analyst NAV estimate is $12.08 per unit, based on an average cap rate of 5.8%.

Recent KMP.UN trading has been closer to the average analyst NAV per Unit.

26

4.17% 3.43% 3.64% 2.82% 2.56% 3.43% 3.16% 3.30% 3.31%

0% 1% 2% 3% 4% 5% 6% 7% 8% $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 Interest Rate Mortgage Maturities ($M)

Apartment Mortgage Maturities by Year

Mortgage Maturities by Year Weighted Average Interest Rate

Current rate for 5-year CMHC insured debt is approximately 1.9%. Current rate for 10-year CMHC insured debt is approximately 2.4%.

Investment Opportunity

Interest Expense Savings Expected

27

Investment Opportunity

Improved Economics in Atlantic Canada

• 1%

0% 1% 2% Nova Scotia New Brunswick PEI

Real GDP Growth Expected in NS & NB

2013 2014 2015F 2016F 2017F Following a period of low Real GDP Growth, Nova Scotia and New Brunswick are experiencing positive GDP growth as projected by RBC in their March 2016 Provincial Outlook.

Source: RBC Provincial Outlook, March 2016

28

Investment Opportunity

Improved Economics in Atlantic Canada

Halifax is expected to have one of the fastest growing economies in Canada, with 2.9% growth expected in 2016, according to the Conference Board of Canada’s Winter 2016 Metropolitan Outlook.

Driving Growth in Nova Scotia:

• Manufacturing, including shipbuilding
• Construction, including Maritime Link, MacDonald

Bridge and multi-family projects

• Increased non-energy exports, including seafood
• Offshore exploration
• Improved net migration

Driving Growth in New Brunswick:

• Non-energy exports – food and mining
• Manufacturing – food and forestry
• Construction activity – road and bridge construction
• Forestry – fueled by US housing market

29

Investment Opportunity

Improved Economics in Atlantic Canada

3.8% 8.6% 5.7% 4.6% 5.9% 9.0% 3.0% 3.4% 7.4% 5.4% 4.7% 4.1% 8.5% 3.5%

CMHC Vacancy – Fall 2015 Survey

2014 2015

In their Fall 2015 Rental Market Report, CMHC reported lower vacancies in five out

• f six of Killam’s markets in Atlantic Canada vs. an increase in Canada.

Source: CMHC Fall 2015 Rental Market Report

30

Investment Opportunity

Increased Rental Demand Driving Multi Starts

500 1,000 1,500 2,000 2,500 3,000 3,500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Halifax New Construction by Type

Total Starts Average Total Starts Total Apartment/Condo Starts Total Housing Starts

Average total starts

• f 2,379 per year

from 1990-2015. Source: CMHC

The breakdown of new starts is changing to include more multi- family units, reflecting demand from the baby boomer generation.

31

Investment Opportunity

Growing Portfolio of Newer Properties

Killam is expanding its portfolio of high-quality new properties with developments and acquisitions.

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500

2013 2014 2015

Average Capital Spend Per Unit by Building Age

0 - 10 years 11 - 20 years 21 - 30 years 31 - 40 years 41 + years

The per unit annual capital spend is lower for newer properties. The average spend for newer properties was $700 per unit in 2015, compared to $2,600 per unit for buildings

• ver 40 years old.

36% of Killam’s apartment NOI comes from properties built in 2000 or later.

32

2016AFFO/ UnitAccretion(Dilution) 4.0% 4.5% 5.0% 5.5% 6.0% 4.0%

(0.14%) (0.14%) (0.14% ) (0.14% ) (0.14% )

4.5%

0.17% 0.17% 0.17% 0.17% 0.17%

5.0%

0.47% 0.47% 0.47% 0.47% 0.47%

5.5%

0.70% 0.70% 0.70% 0.70% 0.70%

6.0%

0.89% 0.89% 0.89% 0.89% 0.89%

NAV/ UnitPostDevelopment(assuming$12.00predevelopment) 4.0% 4.5% 5.0% 5.5% 6.0% 4.0%

$11.93 $11.90 $11.86 $11.83 $11.80

4.5%

$11.99 $11.96 $11.93 $11.89 $11.86

5.0%

$12.05 $12.02 $11.98 $11.95 $11.92

5.5%

$12.09 $12.06 $12.02 $11.99 $11.95

6.0%

$12.12 $12.09 $12.06 $12.02 $11.99

Yieldto Construct Yieldto Construct CapRateValueatCompletion CapRateValueatCompletion

Investment Opportunity

Developments Contribute to AFFO and NAV Growth

An example of the value of development in today’s market: Assumptions:

• 1. Units developed: 100
• 2. Average Rent: $1,600
• 3. Occupancy: 97.5%
• 4. Operating Margin: 70%
• 5. Debt: 55% LTV
• 6. Interest Rate: 2.3%
• 7. KMP.UN Share Price: $11.50
• 8. Cost to Raise Equity: 3%
• 9. NAV/Unit pre-development:

$12.00 AFFO/Unit and NAV/Unit Sensitivity:

Killam’s target development yields and post development values are in this range.

33

Developments

Robust Development Pipeline

2014 & Q1 2015

Propert y Cit y

Developments Underway The Alexander - Phase 1* Halif ax, NS S

• uthport - Barrington S

treet Halif ax, NS Development Opportunities - 2016 S ilver S pear* Mississauga, ON S aginaw Phase II Cambridge, ON Future Development Opportunities - 2017 and beyond Grid 5 Land* Calgary, AB S pring Garden Terrace Land Halifax, NS The Alexander - Phase 2* Halif ax, NS Carlton Houses Halif ax, NS Medical Arts (S pring Garden) Halif ax, NS 1335 Hollis S treet Halif ax, NS Block 4 S

• t. John's, NL

Topsail Road S

• t. John's, NL

Total Development Opportunities * 50%

• wnership

396 Future development 1,662 40 225

Development Pot ent ial in Unit s

110 106 200 80 30 70 242 70 93

St at us

Under construction, 2017 completion Under construction, Q3-16 completion In design and approval process In design and approval process Approved development agreement Future development As of right Future development Future development As of right Approved development agreement

34

2015 Developments

Saginaw Gardens, Cambridge, ON

• $25.3 million total

development cost ($207,000/door)

• 5.8% yield
• 4.75% cap rate for

IFRS valuation

• 122 apartment units
• Completed June

2015

• Fully leased
• Land for an

additional 93 units located beside Saginaw Gardens

35

2015 Developments

Saginaw Gardens, Cambridge, ON

27 one-bedroom units

• average size:

800 sf

• average rent:

$1,170 ($1.46/sf) 95 two-bedroom units

• average size:

1,050 sf

• average rent:

$1,520 ($1.45/sf)

36

2015 Developments

Chelsea Place, St. John’s, NL

2014 & Q1 2015

• 102 units
• $21.8 million ($213,000/door)
• $1,330 average rent ($1.60/sf)
• 6% yield
• 5.15% cap rate for IFRS
• Completed March 2015
• 100% leased

37

2015 Developments

Successful Developments in 2015

0% 20% 40% 60% 80% 100% Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

Initial Lease-up Occupancy

Chelsea II (April Start) Saginaw (July Start)

$0 $5 $10 $15 $20 $25 $30 $35 Saginaw Chelsea

$5.2M of Fair Value Gains on 2015 Developments

Cost Value

38 Building Description: 142 units - 70 rental, 72 condo Ownership: Killam 50%, Urban Capital 50% Start Date: December 2014 Projected Completion: Q3-2016 Location: Downtown Halifax Construction Cost: $14.7 million, $210,000/door (Killam’s cost) Expected Rents: $1,200-$1,800 ($2.20/sf) Expected Yield: 5.5% Expected Value: 4.75% cap rate

Current Developments

Southport, Halifax, NS

39

Current Developments

Southport, Halifax, NS

40

Current Developments

The Alexander (Phase I), Halifax, NS

Building Description: 242 units, 24 storeys 230 underground parking stalls 6,200 square feet of retail space Ownership: Killam 50%, Partners 50% Start Date: Q3-2015 Projected Completion: 2017 Location: Downtown Halifax across from the waterfront Construction Cost: $35 million, $276,000/ residential door (Killam’s cost) Expected Rents: $1,300 - $3,800 ($2.30/sf) Expected Yield: 5.5% Expected Value: 4.75% cap rate

41

Current Developments

The Alexander (Phase 1), Halifax, NS

Construction of The Alexander began in September 2015.

42

Current Developments

The Alexander (Phase I), Halifax, NS

View from upper floors

43

2015 Acquisitions

Brewery Market, Halifax, NS

2014 & Q1 2015

• Acquisition completed March

31, 2015

• 158,000 square feet of unique

commercial and retail space

• $22.3 million for existing

property

• $5.2 million for 50% interest in

land for development

• 242-unit development “The

Alexander” started in August 2015

• Capacity for 40 additional units

The cap rate on the Brewery Market acquisition was 7%. The Alexander will be built beside the existing Brewery Market.

44

2015 Acquisitions

Brewery Market, Halifax, NS

Tracing its roots back to the early 1800s, the Brewery Market has been fully modernized.

45

2015 Acquisitions

Medical Arts Property, Halifax

2014 & Q1 2015

• $8.4 million
• Closed Aug 5, 2015
• Development

potential for up to 200 units

• 18,000 square feet
• f office space at

$25 per square foot (gross)

• Located across from

Killam’s Spring Garden Terrace

46

2015 Acquisitions

Medical Arts Property, Halifax

Killam’s 1540/1546/1550 Carlton Street site Killam’s Spring Garden Terrace Building Carlton Houses Killam’s Future Development, 98 units/18 storeys Medical Arts Building Site

47

2015 Acquisitions

Vacant Land Beside Grid 5, Calgary

2014 & Q1 2015

• $7.2 million for a 50%
• wnership interest
• Closed Dec 21, 2015
• Development potential

for 396 units

• Located adjacent

Killam’s 307-unit Grid 5 apartment

48

2015 Acquisitions

20 Technology Drive, Saint John

• $8.3 million
• Closed June 17, 2015
• 59 units ($140,000 per unit)
• 6.1% cap rate
• Built in 2014
• $1,200 average rent
• Located beside existing Killam asset

49

Contact Information

Philip Fraser President & CEO 902-453-4536 pfraser@killamreit.com Robert Richardson, FCPA, FCA Executive Vice President & CFO 902-442-9001 rrichardson@killamreit.com Dale Noseworthy, CPA, CA, CFA Vice President, Investor Relations & Corporate Planning 902-442-0388 dnoseworthy@killamreit.com