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

Investor Presentation January 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

Apartment units 13,655 MHC* sites 5,165 Market cap $630 M Distribution $0.60 Dividend yield 5.9%

• Avg. daily volume

116 K

*manufactured home community

4

Diversified Real Estate Portfolio

5,064 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 48% Ontario 46% NFLD 3% New Brunswick 3%

% of MHC NOI by Province

7

Killam’s Strategy

1) Maximize earnings from the existing portfolio. 2) Expand the portfolio and diversify geographically through acquisitions. 3) Develop 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%) 4.3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1-Q3 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 – 2014 was 2.7%.

9

Killam’s Strategy

Annual Growth Through Acquisitions

$16 $45 $167 $200 $103 $125 $36 $3 $115 $106 $85 $121 $160 $53

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 $33.0 $19.0 $25.3 $21.5 $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 $100 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

* expectation

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

12

Financial & Operating Performance

9.3% FFO Per Share Growth YTD in 2015

$0.53 $0.54 $0.59 Q1-Q3 '13 Q1-Q3 '14 Q1-Q3 '15

FFO Per Share Growth Q1 – Q3 2015

Primary drivers of FFO growth in 2015:

• 4.3% same store NOI

growth

• Acquisitions and

developments

• Interest expense savings
• n refinancings

13

Financial Performance

4.3% Same Store NOI Growth YTD

2.2% 4.2% 2.4% (0.4%) 3.4% 0.0% 4.2% 4.8% 4.3%

Same Store Results 9 months ended Sept 30, 2015

Revenue Expenses NOI

Apartments MHCs Consolidated

14

Financial & Operating Performance

2.4% Same Store Revenue Growth in 2015

2.9% 2.6% 1.9% 1.8% 1.7% 2.4%

2010 2011 2012 2013 2014 Q1-Q3 2015

Same Store Revenue Growth

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

15

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

Historic Change in Same Store Revenue Growth 2010-2015

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

Financial & Operating Performance

Three Quarters of Above Average Growth

16

Financial & Operating Performance

Improved Occupancy Levels in 2015

94.3% 93.6% 94.2% 95.6% 94.7% 94.9% 94.7% 95.8% 95.5% 95.5% 95.3%

Apartment Quarterly Occupancy Levels

Average apartment

• ccupancy from 2013-

2015 is 94.9%

Same store average rents are up 1.2% over the last year and incentives are down 50 basis points.

17

Financial & Operating Performance

Improved Occupancy Levels in 2014 & 2015

60 basis point occupancy improvement in Q3 2015

• Vs. Q3 2014.

92% 93% 94% 95% 96% Q1 Q2 Q3 Q4

Apartment Occupancy by Quarter

2013 2014 2015

18

Financial & Operating Performance

$460K Savings in Rental Incentives

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

A decrease in incentive offerings has contributed to same store revenue growth.

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

$ per GJ

Commodity Charge per GJ

NS Natural Gas NB Natural Gas

Financial & Operating Performance

Lower Natural Gas Prices in 2015 Vs. 2014

20

Financial & Operating Performance

Propane Offers Energy Saving Opportunities

0% 10% 20% 30% 40% 50% 60% 70% $- $5 $10 $15 $20 $25 $30 $35 $40

Aug 2014 Sept 2014 Oct 2014 Nov 2014 Dec 2014 Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 June 2015 Jul 2015

Percent Savings with Propane Fuel Price /GJ

Per GJ Cost of Propane Vs. Natural Gas1

NS Gas NB Gas Propane NS Savings Potential NB Savings Potential 1) Historic natural gas pricing is based on Killam’s total natural gas costs per month divided by total consumption per month.

21

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.

22

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

23

Financial & Operating Performance

Stable Balance Sheet

55.2% 51.6% 52.9% 54.9% 55.4% 2011 2012 2013 2014 Q3-15

Debt as a % of Total Assets

At Dec 31, except 2015

Sept 30, 2015 Dec 31, 2014

Total gross debt as a % of total assets 55.4% 54.9% Mortgage debt as a % of total assets 50.1% 47.6% Weighted average interest rate

• n mortgage debt

3.32% 3.60% Weighted average term to maturity 4.3 years 4.4 years Debt service coverage ratio (rolling 12 months) 1.37 1.34 Interest coverage ratio (rolling 12 months) 2.33 2.21 CMHC-insured apartment mortgages 74% 75%

24

Investment Opportunity

• Killam is trading at a discount to net

asset value.

• Stable distributions with improving

payout ratio

• 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.

25

$9.00 $9.50 $10.00 $10.50 $11.00 $11.50 $12.00 $12.50

Killam’s Share Price Vs. Analysts’ NAV Estimate

Share/Unit Price NAV per Analysts

Investment Opportunity

Trading at a Discount to Net Asset Value (NAV)

The average analyst NAV estimate is $12.07 per unit, based on an average cap rate of 5.8%.

Recent KMP.UN trading represents a 17% discount to the average analyst estimate of NAV.

26

Investment Opportunity

Stable Distribution & Improving Payout Ratio

$0.56 $0.57 $0.58 $0.58 $0.60 $0.60 $0.60 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 2015 and 2016 adjusted funds from operations (AFFO) payout ratios represents the consensus estimate of 88% and 82% based on the current annual distribution of $0.60.

27

4.20% 3.43% 3.64% 2.82% 2.55% 3.79% 3.16% 3.30% 3.33%

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 Refinanced in 2015 Weighted Average Interest Rate

Investment Opportunity

Interest Expense Savings Expected

Current rate for 5-year CMHC insured debt is approximately 1.7%. Current rate for 10-year CMHC insured debt is approximately 2.4%.

28

Investment Opportunity

Improved Economics in Atlantic Canada

• 1.0%

0.0% 1.0% 2.0%

2012 2013 2014 2015F 2016F 2017F

Real GDP Growth Expected in NS & NB

Nova Scotia New Brunswick

Following a period of low to negative Real GDP Growth, Nova Scotia and New Brunswick are both expected to experience improved GDP in 2016, as projected by RBC in their December 2015 Provincial Outlook.

Source: RBC Provincial Outlook, December 2015

29

Investment Opportunity

Improved Economics in Atlantic Canada

Halifax is expected to have one of the fastest growing economies in Canada, with 3.0% growth expected in 2016, according to the Conference Board of Canada’s autumn 2015 Metropolitan Outlook. 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

New Brunswick:

• Non-energy exports – food and mining
• Manufacturing – food and forestry
• Construction activity – road and bridge construction

Newfoundland:

• Stabilizing of oil production
• Mining expected to increase from 2015 levels

30

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 reporting 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

31

Investment Opportunity

Halifax Vacancy Down Despite Increased Starts

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Halifax Rental Apartment Starts and Completions

Rental Starts Rental Completions

Source: CMHC

32

Investment Opportunity

Increased Rental Demand Driving Multi Starts

500 1,000 1,500 2,000 2,500 3,000 3,500

Halifax New Construction by Type

Single Family Home Row & Semi-Detached Total Apartment

Average total starts

• f 2,424 per year

from 1990-2015. Source: CMHC

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

33

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

2012 2013 2014

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 $575 per unit in 2014, compared to $3,271 per unit for buildings

• ver 40 years old.

33% of Killam’s apartment NOI comes from properties built 2001 or later.

34

2016 AFFO/Unit Accretion (Dilution) 4.0% 4.5% 5.0% 5.5% 6.0% 4.0% (0.40%) (0.40%) (0.40%) (0.40%) (0.40%) 4.5% (0.02%) (0.02%) (0.02%) (0.02%) (0.02%) 5.0% 0.30% 0.30% 0.30% 0.30% 0.30% 5.5% 0.54% 0.54% 0.54% 0.54% 0.54% 6.0% 0.75% 0.75% 0.75% 0.75% 0.75% NAV/Unit Post Development (assuming $12.00 pre development) 4.0% 4.5% 5.0% 5.5% 6.0% 4.0% $11.91 $11.87 $11.84 $11.81 $11.77 4.5% $11.97 $11.94 $11.91 $11.87 $11.84 5.0% $12.03 $12.00 $11.96 $11.93 $11.89 5.5% $12.07 $12.04 $12.00 $11.97 $11.94 6.0% $12.11 $12.07 $12.04 $12.01 $11.97 Yield to Construct Yield to Construct Cap Rate Value at Completion Cap Rate Value at Completion

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. Margin: 70%
• 5. Debt: 55%
• 6. Interest Rate: 2.3%
• 7. KMP.UN Share Price: $10.50
• 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.

35

Developments

Future Development Opportunities

2014 & Q1 2015

Propert y Cit y

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

• ut hport - Barringt on S

t reet Halif ax, NS Development Opportunities - 2016 S ilver S pear* Mississauga, ON S aginaw Phase II Cambridge, ON Future Development Opportunities - 2017 and beyond S pring Garden Terrace Land Halif ax, NS The Alexander - Phase 2* Halif ax, NS Carlt on Houses Halif ax, NS Medical Art s (S pring Garden) Halif ax, NS 1335 Hollis S t reet Halif ax, NS Block 4 S t . John's, NL Topsail Road S t . John's, NL Archibald S t reet Monct on, NB Total Development Opportunities * 50%

• wnership

Approved development agreement Fut ure development As of right Fut ure development Fut ure development As of right Approved development agreement Approved development agreement 93

St at us

Under const ruct ion 2017 complet ion Under const ruct ion Q3-16 complet ion In design and approval process In design and approval process 1, 296 40 225 40

Development Pot ent ial in Unit s

110 98 200 80 30 70 240 70

Killam’s portfolio includes land for the development of 1,300 apartment units.

36

2015 Developments

Saginaw Gardens, Cambridge, ON

• $25.3 million total

development cost

• 5.8% yield
• 4.75% cap rate for

IFRS

• 122 apartment units
• Completed June

2015

• Fully leased
• Land for an

additional 93 units located beside Saginaw Gardens

37

2015 Developments

Saginaw Gardens, Cambridge, ON

27 one-bedroom units

• average size:

800 sf

• average rent:

$1,170 95 two-bedroom units

• average size:

1,050 sf

• average rent:

$1,520

38

2015 Developments

Chelsea Place, St. John’s, NL

2014 & Q1 2015

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

39 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 Yield: 5.5% Expected Value: 4.75% cap rate

Current Developments

Southport, Halifax, NS

40

Current Developments

Southport, Halifax, NS

41

Current Developments

The Alexander (Phase I), Halifax, NS

Building Description: 240 units 24 storeys 230 underground parking stalls 6,200 square feet of retail space Ownership: Killam 50%, Partners 50% Start Date: Q4 2015 Projected Completion: 2017 Location: Downtown Halifax across from the waterfront Construction Cost: $35 million, $276,000/ residential door (Killam’s cost) Expected Yield: 5.5% Expected Value: 4.75% cap rate

42

Current Developments

The Alexander (Phase 1), Halifax, NS

Construction of The Alexander began in September 2015.

43

2015 Acquisitions

Brewery Market, Halifax, NS

2014 & Q1 2015

• Acquisition completed March

31, 2015

• $22.3 million for existing

property

• $5.2 million for 50% interest in

land for development

• 240-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

Killam’s Spring Garden Terrace

46

2015 Acquisitions

Medical Arts Property, Halifax

47

2015 Acquisitions

20 Technology Drive, Saint John

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

48

2015 Acquisitions

20 Technology Drive, Saint John

2014 & Q1 2015

• Insulated concrete form

(ICF) construction

• 19 one-bedroom units
• 40 two-bedroom units
• Average rent of $1,210

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