Killam Apartment REIT T.KMP.UN

Alternate Symbol(s): KMMPF

Killam Apartment Real Estate Investment Trust (Trust) is a Canada-based residential real estate investment trust. The Trust owns, operates, and develops a $5.3 billion portfolio of apartments and manufactured home communities (MCHs). Its segments include Apartment, MHC, and Commercial. Its Apartment segment acquires, operates, manages and develops multifamily residential properties across Canada. Its MHC segment acquires and operates MHC communities in Ontario and Eastern Canada. Its Commercial segment acquires and operates stand-alone commercial properties in Ontario, Nova Scotia and Prince Edward Island. Its apartment portfolio consists of over 18,801 units, including 1,343 units jointly owned with institutional partners. It owns over 5,975 sites in 40 MHCs, also known as land-lease communities or trailer parks, in Ontario and Atlantic Canada. It owns the land and infrastructure supporting these communities and leases sites to tenants who own their own homes and pay Killam site rent.

TSX:KMP.UN - Post by User

Killam Apartment REIT

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Post by retiredcfon Nov 08, 2024 9:37am

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Post# 36302947

TD 2

SOLID Q3/24 RESULTS LEAVES KILLAM WELL POSITIONED ENTERING 2025

THE TD COWEN INSIGHT

KMP delivered an inline quarter and offered what we view as an optimistic outlook for 2025 with management noting that 5-6% SPNOI growth is an achievable target (8%+ 2024 target reiterated). While market rent growth is slowing/stopped at the top end, mid- market demand remains strong with market rents continuing to grow. We view KMP as well positioned to benefit from this demand.

Impact: NEUTRAL

We forecast 8.9%/7.3%/6.5% SPNOI growth for 2024/25/26. While this is slightly above what management articulated as achievable on the call, we believe there was an element of conservatism (Q1 utility costs are always a swing factor and winter 2025 faces tough y/y comps). Operational metrics remain solid, with Killam achieving +7.9% apartment SPNOI growth and reiterating its 8%+ target for the year. While the current mark-to- market moderated slightly to 22% from 25% q/q, we view this as more a function of new leases capturing the existing gain-to-lease vs. any negative change in market rent growth. Although management noted several dips in Q3 vacancy, these appear more transitory in nature as the one property in London has been leased up post Q3, Calgary is largely asset specific owing to new supply KMP has brought on, while Victoria is a work in progress. We believe overall demand for mid-market properties remains sound and expect 98%+ occ.

Ramping Up Disposition Target to $100-$150mm Annually. With $47.7mm of asset sales completed YTD and more identified for Q4 closings, management is on target to exceed its 2024 $50mm target. The REIT expects to increase this capital recycling pace going forward. Near term, we expect more sales in PEI as KMP looks to exit this market over time. Disposition proceed will likely be targeted towards a combination of debt reduction, share buybacks, and future acquisitions, with the pace of acquisitions increasing in 2025.

Developments. With Nolan Hill now 88% leased and the remaining two 2024 development lease up projects fully leased, management expects a $3.2mm ($0.026/unit) contribution to FFO in 2025 from developments (turning an earnings headwind to tailwind). Demolition work at The Wissler development (128 units in Waterloo, ON) has begun. Management expects to break ground on 1-2 projects annually.

Forecasts — Earnings Growth to Accelerate. Consistent with other apartment REITs we have reduced our 2024-26 AFFO/unit estimates for KMP by ~1% on lower NOI assumptions. That said, our forecast has 8%/9% AFFO growth in 2025/26, up from 4% in 2024. Our NAV/unit is +2.6% to $23.60.