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Apartment REIT Delivers in Line Q1/23
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Among other metrics, the quarter is notable for a year-over-year increase in net operating income and for record lifts on turnover, noted an Echelon Capital Markets report.

Killam Apartment REIT (KMP.UN:TSX; KMMPF:OTCPK) delivered a Q1/23 that met expectations, reported Echelon Capital Markets analyst David Chrystal in a May 3 research note. Management raised its net operating income growth target for the year.

Echelon maintained its Buy rating and CA$21.50 per share target price on Killam, currently trading at about CA$16.70 per share. This price gap implies a 23% return for investors.

Growth During Q1/23

Chrystal presented several results from 2023's first quarter, which indicate overall year-over-year (YOY) growth.

During 1/23, the Canadian REIT generated net operating income (NOI) of CA$50.8 million (CA$50.8M), a 12% increase over a year ago. Funds from operations (FFO) also were up YOY, by 6%. FFO per unit came in CA$0.25, also reflecting a YOY rise of 3%. This met Echelon's CA$0.249 estimate and the Street's expectation.

"The YOY growth was driven by organic NOI growth [and] offset in part by rising interest expense and a higher unit count," Chrystal wrote.

Same-property NOI growth in Q1/23 was 6.3%, and this exceeded the high end of management's initial full-year 2023 target for it of 3–5%, noted Chrystal. Accordingly, the company revised its target to 5%-plus given the "positive outlook for rental demand as well as easing cost pressures."

Takeaways From Q1/23

Chrystal listed the main points of the REIT's Q1/23 financial and operational results.

The quarter was noteworthy for a new record in the percentage of turnover lifts: 14.3%. This, along with average lifts on renewal of 2.3%, resulted in a blended average increase of 3.8%.

Gains in occupancy continued in Q1/23. Same property occupancy was 98.6%, up YOY by 80 basis points.

The mark-to-market opportunity within the REIT's portfolio is about 20%, according to management's estimate, and is expanding.

Operational expenses eased and should continue to let up, which will allow for margin growth.

The REIT's capital recycling program is paying off. Dispositions of about CA$43M in Q1/23 yielded CA$27M-plus in net cash to the REIT. It used part of these funds to pay off some of its outstanding variable-rate debt.

"With another CA$100–150M of additional potential sales under various stages of due diligence, management expects to exceed its original goal of CA$100M for the year," Chrystal wrote.

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Important Disclosures:

1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

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Disclosures for Echelon Capital Markets, Killam Apartment REIT, May 3, 2023

Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate.

Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.

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Canadian Disclosures: To make further inquiry related to this report, Canadian residents should contact their Echelon Wealth Partners professional representative. To effect any transaction, Canadian residents should contact their Echelon Wealth Partners Investment advisor.

U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.

Company: Killam Apartment Real Estate Investment Trust | (KMP.UN-TSX)

I, David Chrystal, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report. 


The Analyst had an onsite visit with the Issuer within the last 12 months, October 2022, Halifax property tour.

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