Boardwalk Real Estate Investment Trust (BOWFF) CEO Sam Kolias on Q1 2022 Results - Earnings Call Transcript

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Boardwalk Real Estate Investment Trust (OTCPK:BOWFF) Q1 2022 Conference Call May 10, 2022 9:00 AM ET

Company Participants

Eric Bowers – Vice President, Corporate Analysis

Sam Kolias – Chairman and Chief Executive Officer

Lisa Smandych – Chief Financial Officer

James Ha – President

Rick Anda – Head-Acquisitions

Conference Call Participants

Jonathan Kelcher – TD Securities

Jenny Ma – BMO

Matt Kornack – National Bank

Mike Markidis – Desjardins

Operator

Good morning, ladies and gentlemen and welcome to the Boardwalk Real Estate Investment Trust, First Quarter 2022 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on May 10, 2022.

I will now like to turn the conference over to Eric Bowers. Please go ahead.

Eric Bowers

Thank you, Marinda. And welcome to the Boardwalk REIT’s 2022, first quarter results conference call.

With me here today are Sam Kolias, Chief Executive Officer; Lisa Smandych; Chief Financial Officer; James Ha, President; and Rick Anda, Head of Acquisitions.

Please note that this call is being broadly disseminated by way of webcast. If you have not already done so, please visit bwalk.com/investors or you will find a link to today's presentation, as well as PDF files of the trust’s financial statements, MD&A, and supplemental information package.

Starting on Slide 2, we would like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements. Additional information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly filed documents.

I would like to now turn the call over to Sam Kolias.

Sam Kolias

Thank you, Eric. And welcome everyone to our Q1 2022 conference call.

Starting on Slide 4, our strategy continues to deliver solid results with our GAAP and non- GAAP measures of FFO per unit, profit per unit, net asset value in unit holder equity and fair value of investment properties, all seen an increase from the prior quarter last year and last quarter.

Slide 5, our Q1 2022 FFO per unit growth is up 4.6% from the same quarter last year, despite inflationary pressures.

Slide 6, our strategy to create value for our stakeholders begins with our people. We are positioned and are so grateful for our extraordinary team who continues to innovate and deliver our places homes for our resident members. In turn, this leads to leading earnings performance, which we believe will continue to result in strong total returns for all our stakeholders.

Our strategic focuses are significant organic growth from utilizing our proven platform that focuses on operational excellence to optimize NOI growth. When we pair this with the current improvement in apartment rental market fundamentals, we are well positioned to accelerate on our organic growth trend. Accretive capital recycling focuses on opportunistic investment into acquisitions, development, and investment into our own, high quality, existing portfolio with a tactical unit buyback. These opportunistic investments combined with our operational optimization have positioned Boardwalk for increase in asset values within Boardwalk’s diversified and high quality multi-family portfolio.

Our solid financial foundation provides flexibility on our balance sheet with our growing free cash flow and with CMHC insurance on 95% of our financings, which provides access to low cost mortgage capital with reduced renewal risk. Excuse me.

Slide 7. We are in the right place at the right time with a positive outlook on value and multi-family fundamentals, Boardwalk’s existing exposure to strong rental demand, unregulated markets with increased immigration, significant organic growth as Alberta and Saskatchewan of some of the most affordable rental rates in the country with limited new supply versus demand in both international and interprovincial migration.

Boardwalk has compelling value currently trading well below our intrinsic value of $68 per trust unit, declining inventories of homes, rising home prices and rising construction costs are all widening the gap between our replacement costs of our assets and our current valuation. Construction levels remain low relative to historical levels with a stronger demand for housing. Positive leasing momentum in our core markets is increasing revenues and asset values with increasing operating income.

In our largest market, Edmonton, the factors that have led to lower occupancy in the past are reversing now and helping to contribute to our overall occupancy gains. These factors are the omicron wave, restrictions have now been lifted, the cold weather, spring and summer is now here, university students are now returning, blue collar jobs, which can't work from home are now being filled again and international migration is now returning with travel restrictions easing, and the oversupply in Edmonton is being absorbed by an increase in demand and a flattening of new supplies many builders have moved to BC to build where there is a need for more supply.

Overall, new supply in Edmonton remains flat as condo construction has declined sharply, offsetting the sharp increase in rental construction. With apartment rental fundamentals balancing market vacancy has dropped resulting in stabilized pricing. The current trend reflects demand will soon outpace supply in Edmonton similar to our Southern Alberta market by summer, with upward inflationary pressure on prices.

Slide 8. The economy and labor market in Alberta has significantly improved with our jobs minister expecting our economy to bounce back to 2014 levels. Real time statistics published by the Calgary Real Estate Board reflect home sales in Calgary continue to be strong with total sales and average prices up so far in May, reflecting continued strong demand for affordability. In addition to the positive impact that higher commodity prices are providing for Western Canadian markets with Alberta's fiscal BA budget now balanced, there has been a steady stream of investment and job creating announcements from the emerging technology in clean energy sectors. As of the most recent data over 88,000 jobs are now vacant and available in Alberta, which is approximately 30% growth in job vacancies since April last year.

Slide 9, shows our large presence in affordable and self-regulated markets with Alberta and Saskatchewan representing 62.4% and 10.4% of our portfolio. Boardwalk’s current mark-to-market, which includes the reduction of incentives averages $145 per month and equates to a significant $55 million revenue opportunity.

Slide 10, our markets and portfolio provides some of the most affordable rents in Canada when comparing to average income. In addition, average projected population growth in our markets are outpacing new supply, leading to strong apartment rental and housing market fundamentals. Our available supply and affordability are a great opportunity for new and existing Canadians looking for a new affordable place to call home. CTV National News on Sunday, reverted that Alberta now has the most affordable gasoline prices at a $1.61 a liter as of last Sunday.

Slide 11 shows our retention continues to increase with our lower move-outs and stronger move-ins leading to occupancy gains. With decreasing turnovers and arising occupancy of approximately 96.6%. As per our appendix Slide 32, we are seeing more move-ins from out of town as more existing and new Canadians move to Alberta and Saskatchewan.

Slide 12 shows our key operational metrics with actual occupancy of approximately of 96.6%. Incentives continue to drop, occupied rent continues to increase with vacancy loss increasing slightly in the slower winter season still resulting in an increase in revenue this quarter versus last year.

Slide 13 shows continual improvement in net rental rates. New lease over lease rates are now positive. Our total portfolio new and renewal leases are climbing higher. Year-over-year, we have seen a significant improvement. With restrictions easing and favorable economic fundamentals, we are seeing growing strength in our apartment rental fundamentals, positioning us to capture our significant mark-to-market opportunity.

We would like to now pass the call on to Lisa Smandych, who will provide us with an overview of our portfolio performance, operating margins, balance sheet and repositioning results. Lisa?

Lisa Smandych

Thank you, Sam.

Moving to Slide 14, as compared to Q4 2021 revenue growth for Q1 2022 was flat. Similar to Q4, Q1 is a historical slower season. And in addition, Q1 2022 was impacted by colder than usual winter and the Omicron variant. As compared to Q1 2021 same property revenue grew by 2.1%. Looking at future quarters the Trust expects positive sequential revenue growth, driven by increased occupancy and increasing net rental rates as previously highlighted by Sam.

For Q1 2022 same property net operating income increased by 1.2% as compared to the same period in the prior year. Positive revenue growth was offset by an increase in operating expenses, largely the results of increased utility costs. The Trust uses fixed price contracts to balance commodity price volatility. However is not a 100% hedged and also experienced increased utility consumption in Q1 2022 as compared to the prior year. During Q1 2022 the province of Saskatchewan received a large credit from favorable restructuring of its cable and internet program with a Saskatchewan provider. This led to a decrease in operating expenses when compared to Q1 2021.

On Slide 15, consistent with prior years, the Trust remained disciplined and focused on managing its controllable expenses despite increases in non-controllable costs, resulting in margin improvement of 50 basis points in 2021. The Trust remains focused on managing its controllable expenses and when couples with our revenue growth potential will allow margins to continue to improve.

Slide 16, illustrates Boardwalk's mortgage maturity schedule. Our mortgages are well staggered with approximately 95% of our mortgage balance carrying NHA insurance through the Canada Mortgage and Housing Corporation. This insurance remains in effect for the full amortization of the mortgage and in addition to carrying the government of Canada's backing provides access to financing at rates lower than conventional mortgages with the current estimated five-year CMHC rates of 3.7%. During the months of March and April and continuing to today bond yields have increased resulting in current interest rates above the Trust maturing rates. However, the Trust maturity curve remains staggered reducing the renewal amount in any particular year. Despite increases in interest rates, mortgage financing continues to be a low cost of capital available to the Trust.

Slide 17 summarizes our 2022 mortgage maturities. The dates we have renewed or forward locked approximately 16% of our 2022 mortgage maturities, as well as secured $147.9 million in new financing which included converting our construction loan on BRIO to a CMHC-insured mortgage as well as new financing related to our acquisitions. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates. Moving to the right of the slide, we provide a summary of Boardwalk's available liquidity. The Trust is well positioned with approximately $56 million in cash and subsequently funded financing as well as an undrawn $199 million operating line. This approximate $256 million in liquidity provides the Trust with the flexible financial position.

Slide 18, the Trust debt metrics continue to improve with an interest coverage of 2.99 in the current quarter. This continuous improvement is the result of strong financial performance led by cash flow growth.

Slide 19 illustrates the Trust estimated fair value of its investment properties excluding adjustments for IFRS 16, which totaled $6.6 billion as at March 31, 2022 as compared to $6.4 billion as at December 31, 2021. The slight increase in overall fair value is the results of increases in market rents at select sites and communities as market fundamentals improve. Current estimated fair value of approximately $193,000 per door remains well below replacement costs.

Slide 20 provides a summary of the recycling of cash flow towards value add improvements. Today we have completed approximately 28% of total suite improvements, while aiming to complete 53% of our total portfolio, common areas and amenity spaces by the end of fiscal 2022. Our focus is to continue to deliver the best product, optimizing our capital allocation for our value add program to our targeted resident member demographics so we can continue to provide the most exceptional elevated experience at an affordable price. The result of increased market demand, exceptional value and appealing returns with sustainable market rent adjustments.

Slide 21 illustrates our stabilized renovation return for Beddington Court located in Calgary, Alberta with a return of 13%, which exceeds our eternal hurdle rate of 8%. In addition, this asset was awarded the 2021 building of the year for under a 100 units by the Calgary Residential Rental Association. Our renovations continue to garner positive resident member testimonials, driving referrals and higher occupancy.

I would now like to turn the call to Rick Anda to discuss our acquisitions and development. Rick?

Rick Anda

Thank you, Lisa.

Year to-date Boardwalk has opportunistically invested $117.5 million to acquire two communities highlighted on Slide 22. Both the Peak Estates in Canmore and Ardglen Place in Brampton were acquired in Q1 2022 and are performing in line with our expectations. Canmore located in Alberta is a very tight rental market and is unregulated similar to our nearby bath properties. Ardglen Place is located near our 45 Railroad property and will help us improve our operating efficiencies in advance of the lease up of our new property. These acquisitions were financed with $79.4 million in debt at 3% interest rate. The Trust continues to be active in sourcing accretive and opportunistic opportunities to expand.

Slide 23 provides a brief update on our active development pipeline. Our Brampton development continues to progress on time and on budget with anticipated delivery of the first hour of the 365-unit marquee community in Q4 2022. Our aspire development is directly adjacent to our Aurora acquisition in Victoria, and now has an approved development permit. We continue to progress on entitlements at our second development in the Victoria area, named The Marin. Our expectations for yield and Capri remain unchanged. We have removed conditions on another development site in Victoria, which will provide an opportunity to develop another estimated 250 units.

I would like to now turn the call over to James Ha.

James Ha

Thank you, Rick.

Slide 24 provides our stakeholders with our current and relative view on sources and uses of capital. From a source standpoint, we believe that our growing internally generated cash flow property mortgage financing, as well as equity from non-core asset dispositions currently represent the most attractive sources of capital for opportunities that arise. These capital sources can be used to fund accretive opportunities such as our continued focus on platform innovation, our value add capital improvement program, new development, opportunistic acquisitions, and the investment in our own high quality portfolio at a discount to intrinsic value through our normal course issuer bid. In the first quarter Boardwalk purchased and canceled 137,500 Trust units at a volume weighted average price of $55.25. Since the reintroduction of our NCIB in November of 2021 Boardwalk has invested $31.6 million in buybacks and view this investment as an attractive use of proceeds from recent non-core asset sales. Our team will continue to update our view of capital sources and uses on a regular basis and as market conditions change.

Slide 25 provides detail on the exceptional value that Boardwalk current Trust units represent. Our current trading price implies a value of approximately $164,000 per apartment door and compares favorably to recent apartment market transactions. Our NAV of over $68 per trust unit equating to $193,000 per apartment door represents an exceptional opportunity relative to market pricing and remains well below the increasing cost of replacement.

Utilizing trailing 12-month property NOI on Slide 26 Boardwalk's current trading price equates to an attractive 5.1% cap rate on trailing NOI and is a significant spread to the current cost of available mortgage capital as well as recent capitalization rates seen in transactions in our markets. With a strong outlook to our leasing trend into the spring and summer months, and NOI growth in our portfolio through inflationary expenses, this cap rate represents an attractive option and the potential for the Trust to continue to invest in our own high quality portfolio.

Slide 27 provides a review of our 2022 expectations and guidance. Since the introduction of our 2022 guidance in February, we have seen a significant increase in both interest costs and utility prices and have adjusted our estimates for the balance of the year to reflect these increased non-controllable costs.

To summarize the Trust is anticipating same property NOI growth of between 2% and 5% and FFO per unit performance of between $2.95 and $3.15 per trust unit. This tweak an increased range in our estimate for FFO growth is being utilized given the volatility we have seen in interest rates. Our Boardwalk team is committed to leading in transparency and will continue to update our stakeholders in the event of any change in conditions that may materially impact our forecast.

On Slide 28 and following our previously announced 8% increase in our distribution, our monthly cash distribution of $1.08 per trust unit on an annualized basis has been declared for the next three months as shown on this slide. The Trust continues to have an industry low payout ratio providing significant cash flow reinvestment, positioning Boardwalk with ample capital for growth. As we continue to grow our free cash flow, our distributions will continue to grow alongside.

Lastly, on Slide 29, we have published our third annual ESG report that highlights and celebrates our team, our residents, and our community contributions to our collective environmental sustainable and governance schools. Our ESG report along with all our financial reports can be found on our website at bwalk.com/investors.

This concludes the formal portion of our presentation, and would now like to open up the phone line for questions. Miranda?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question is going to be coming from Jonathan Kelcher with TD Securities. Please go ahead.

Jonathan Kelcher

Thanks. Good morning. First question just on Edmonton, Sam you spend a little bit of time in your prepared remarks talking about it. How can we sort of think about the sort of progression of occupancy in that market over the next couple of orders?

Sam Kolias

So Jonathan, last month our vacancy started out at 7%, ended up at 5%, it dropped 2%. This month our rentals over move outs are on track to drop another 2% and June is just as strong as a month as May, so that will get us to 1% or 2% vacancy by the end of June on availability. It takes a month for residents to move in. So rentals that we are making right now, typically move in at the end of the month and next month. And so we will have a very high occupancy that we haven't seen in a while in our entire portfolio, because the only real vacancy we have left is in Edmonton and that will get us up above the 97% to the 98% total occupancy.

Jonathan Kelcher

Okay. That sounds good. And then I guess the sort of related question is once you do get up there, you can start to push a little bit on renewals and you are getting good traction now. But how high do you think they can go? Do you think you can get 6%, 7% in Alberta?

Sam Kolias

We are getting that already in Southern Alberta, we're getting higher actually. On new leases in Southern Alberta and Saskatchewan we're getting inflationary increases of between 7% and 9% on new leases. On our existing renewals we are seeing a slight move up from 4% to 6% to 5%, 7%. And so we're, yes, we're seeing more inflationary reflected increases of about 7% – 7%, 8%.

Jonathan Kelcher

Okay. That's helpful. I'll turn it back. Thanks.

Sam Kolias

Thank you.

Operator

Your next question would be coming from Jenny Ma with BMO. Please go ahead.

Jenny Ma

Wondering if you could talk a little bit about the in migration to Alberta and what's driving increased rental demand, and if there's any differences you're seeing in Calgary versus Edmonton, is this a lot of people from Ontario and BC moving into Alberta for a lower cost of living and how much of it is from international immigration? How much of it is sort of natural increases in demand in the local markets?

Sam Kolias

Thank you, Jenny. We're seeing a lot of folks from Toronto as published by our local Calgary Herald newspaper that is in discussion with realtors and builders that are seeing more folks move from Toronto to Calgary and Edmonton. And so we continue to see strong sales in the multiple listing that's current and daily in Calgary and monthly in Edmonton. And Edmonton's very similar to Calgary and we're also now seeing a lot more international migrants. We are receiving our Ukraine refugees and that's starting to increase in pick-up because of international travel restrictions and the – the application process is improving. It still needs to be improved. And the speed of processing international migrants is still challenging and on the slower side. And so as that picks up and improves, we'll see a continued increase throughout the summer of international migrants as well. And words out Edmonton is the only real significant city with vacant apartment units. They won't be for long next couple month's vacancy will essentially disappear and we'll start renting turnover, apartments, like we are in the rest of our markets.

Jenny Ma

Thank you. So Edmonton's basically the new Calgary?

Sam Kolias

It is and there's a reason. Edmonton is a blue collar city and hiring and activity starts in the head office and then spending then flows into the field and the workforce. And so there's a lot of hiring in the workforce, discussions with our friends and family that are in the energy sector, "are hiring like crazy", but the problem is it's really, really difficult to find people because there's a shortage of workers. And so that's really the difficulty. It's not jobs, everybody is creating jobs now. And we're seeing that in our energy producers as well. And so there's lot of jobs, there's some apartments still left in Edmonton, not that this is a sales call or anything, but it won't last that's for sure.

James Ha

Will do not lasting. I'll just add there, Jenny its James. I mean, in addition in Edmonton has, as we know a significant post-secondary institutions as well, right? So you have university of Alberta, you have MacEwan University, we've got NAIT, and we've got three cohorts of students that should be coming back this summer as well. And to Sam's point we are anticipating a busy summer leasing season for all these students and these migrant workers and the new immigrants that are coming into the city.

Sam Kolias

We also saw and welcomed the New Unicorn; Neo Financial broke the $1 billion mark here in Calgary.

Jenny Ma

Right.

Sam Kolias

And the province of Alberta just released a study recommending an increase of education, institute and expansion into the empty office which would increase the supply of educated and smart workers, which is desperately needed by all companies. We've got a big shortage of tech workers, and that really will further accelerate the growth in tech that we are seeing in Alberta. And so this empty office is becoming a great opportunity to increase the supply of educated folks that that will naturally increase the demand of companies coming here to hire educated workers, a higher supply of educated workers. So we're – yes, we're seeing – we're firing on all cylinders.

Jenny Ma

That's great. Now I just wanted to dig a little bit deeper because Sam, you mentioned that Calgary and Edmonton are similar and certainly similar in size, but then you also alluded to Edmonton being more of a blue collar market. So would you say that for some of the, I guess out of province demand, are people choosing Edmonton over Calgary because of a widening cost differential, like they're kind of coming to Alberta a bit agnostic on where they go, or would you say that the typical migrant toward Calgary and Edmonton are somewhat different and that Edmonton has unique drivers or is it really spill over from Calgary getting fuller and more expensive?

Sam Kolias

So the demographic in the workforce in Edmonton absolutely attracts more trades and labor force, workforce population demographic where Calgary with the head office and the more white collar demographic attracts that demographic, and yes that that is a result of that. And also the student population is much bigger. The educational facilities in Edmonton are much bigger UofA is bigger than UofC and Grant McKeon College, NAIT, the secondary education in Edmonton is a larger population than it is in Calgary as well.

James Ha

Jenny, its James here. Just add to Sam's comments, affordability is exceptional, right in Edmonton, both on the family home side, on the rental rate side. And again for those looking for that affordability, looking for a little more purchasing power for that incremental dollar, Edmonton and Calgary are quite attractive cities amongst other cities in Canada.

Jenny Ma

For sure. Okay. And then looking at your debt stack I know Boardwalk traditionally kept a lower weighted average term on the mortgages but we've seen rates move obviously, with the spread narrowing between five-year and 10 year CMHC and giving – given the outlook for interest rates. Are you more inclined to be longer term focused on more mortgage renewals, or are you like to kind of stick to your five-year renewal and, and keep sort of like a mid-to low-to-mid single digit weighted average term?

James Ha

Hey, Jenny, it's James. As always priority number one is going to be to ladder that maturity curve that we have, you all that said with the volatility that we've experienced in the market. Your five years seems to be the bread and butter in terms of where volumes are and where the most attractive credit spreads? All that said to your point with the flatness of recurring current yield curve, there is attractive pricing a little bit longer, whether that's 6, 7, 8, 9, 10, I think you'll find us balance that depending on what's available in that market, as you know, we're in the market every single month. But given this current maturity curve, you'll likely see us do something fairly diverse for the balance of the year, somewhere between five and 10, depending on attractiveness, any given in any given month.

Jenny Ma

Okay, great. That's it for me then? I'll turn it back.

Sam Kolias

Thanks.

Operator

Your next question would come from Matt Kornack with National Bank. Please go ahead.

Matt Kornack

Hi guys. Just wanted to follow-up on Sam's commentary about this Southern Alberta market. And just in the context of, I guess it's Slide 13 the difference between renewal and new leasing spreads in Alberta, would those comments with regards to Southern Alberta be indicative of April trends or is that what you are expecting further into the spring?

And then I guess at what point given those comments, should we expect kind of market rents to catch up with the incentive reductions you're getting on renewals,

James Ha

Hey Matt it's James here. In Southern Alberta as – yes, to Sam's point, I mean new leasing spreads are quite positive in Southern Alberta. In fact, they have exceeded our renewal spreads in the month of April. So we're talking kind of mid-to-high single digits on, actually high single digits on new leasing spreads. And on renewal spreads as you see reflected on Slide 13, that is the Alberta average. The Alberta average is very close to 5%, right? So Southern Alberta and Northern Alberta are actually very similar on renewal. What we're seeing in Southern Alberta is really strong pricing on the new leasing front.

Matt Kornack

And then I guess with regards to Edmonton, given the occupancy gains, you've noted. I mean, obviously there is a lag in terms of rental. Should we expect the new leasing environment there, I guess, maybe that's a 2023 item in terms of getting there? And are you using incentives at this point in new leases in Edmonton?

James Ha

Hey, Matt, it's James. Yes, on new leasing spreads, again, we're very close to seeing that inflection. In fact, on new leasing spreads, in our most recent month, we were very close to flat. To Sam's earlier point, we're picking up occupancy every single day in Northern Alberta. And this is in advance of our really busy summer leasing season, in advance of those three cohorts of students that are coming back, in advance of huge population growth from our federal immigration policies. And so we would actually anticipate new leasing spreads in Edmonton to turn positive as we continue to build occupancy that is a 2022, summer 2022 event.

Matt Kornack

Okay. And then bringing all of that together, there's still a bit of a wide range in same-property NOI growth outlook. Is that mostly cost related or is that just a question around just how strong the spring and summer releasing is going to be in these markets?

Lisa Smandych

Hi Matt, it's Lisa. Why don't we dig down a little bit into our expense expectations, I guess, as we're looking at that same-store guidance range? Just to provide more color and then we can elaborate on the revenue side. So, overall, from an operating expense bucket, which would include wages and salaries, repairs, and maintenance, advertising, insurance, those costs, we are anticipating a 3% to 4% growth in those operating expense lines. The utilities, as evidence sort of by what we saw at Q1 with the higher gas prices that we're seeing on that curve, we have forecasted those utilities to increase with a year-over-year growth of call it 7% to 9%. And then property taxes were forecasting around 3%.

So overall, I mean, we are expecting some cost pressures most definitely. But do anticipate, especially in this world of inflation, we are doing as much as we can in a pretty good job we think of still managing those controllable expenses. And then on the revenue side, maybe James could add some color.

James Ha

Yes. So Matt, I think, just to add to Lisa's points, our same property NOI guidance range, we've actually tightened from what we had originally had. I mean, there remains some gap for that more volatile expense environment that Lisa was referring to. But if we look at on the revenue side, you can see it in the trajectory and we disclosed that in our press release, you can see what's happening with leasing spreads, you can see what's happening with occupancy, there was a significant pickup in May, right? Our preliminary occupancy for May is very close to 97%. And again, as Sam pointed out, the trajectory on that occupancy continues to be very positive.

Matt Kornack

Okay. And I guess one more on guidance and then one more after that, but in terms of the adjustment to guidance, was that mostly a Q1 item and your outlook for the remainder of the years is pretty much as it was, or is there anything else that kind of gave you caution other than the expenses that you've noted at this point?

Eric Bowers

Yes, on same-property NOI, it's really just the utility expenses. We have Q1 reflected again, if we look at the leasing momentum that we have, it's quite strong. On the FFO front, I mean, it's those interest costs, right? Interest costs have moved a 100 basis points on us since we reported our results in February. That was a significant impact frankly for the entire industry and the entire sector. And we're not excluded from that.

Matt Kornack

Yes. No, fair enough. We've captured that in our numbers. And then just on the buyback, I think, it was tied to asset sales, but given where the share price has gone and what you think the value of your units are, is there the potential now to do more on that front? And maybe jiving into that just investor sentiment around Alberta, given that it is a market you can capture inflation in.

Sam Kolias

As we said, Matt, in our prepared remarks, I think, our NCIB or an investment in our own call it our own portfolio at a 5.1 plus percent cap rate, we just can't find apartments at those price levels, it's $160,000 a door. I mean, again, transactions that we're seeing are well above that. We'll continue to evaluate our allocation opportunities each and every single day. But reiterate that that we believe that especially at these price levels that an investment in our own portfolio is a great use of our capital.

Matt Kornack

Fair enough. Thank you.

James Ha

Matt, we also plan more dispositions towards the end of the year to recharge the capital, the equity capital to repurchase less expensive equity capital, or more expensive equity capital. We still are seeing pretty steady cap rate in the private markets. So we believe there is opportunity to continue selling some of our non-core assets and using that equity to purchase our less expensive equity capital.

Matt Kornack

Fair enough. Make sense and appreciate all the color.

Operator

[Operator Instructions] Your next question will be coming from Mike Markidis with Desjardins. Please go ahead.

Mike Markidis

Hi there. Thanks everybody. Hello, just pretty bullish comments that you guys had on the rent spreads, pardon me, catching up in Northern Alberta to where they are in Southern Alberta. And I guess if things continue on the track that they're on currently, would it be safe to say that barring unexpected a stabilized annual revenue growth for Alberta in excess of 5% is realistic to think about for 2023?

Sam Kolias

Well, that's what the rentals, and occupancy gains, and net lease over lease on new leases and existing leases are reflecting actually higher than that right now in our market with around 1% or 2% vacancy. The only market that that's higher is Edmonton. And we are seeing, as we discussed, rentals above move outs, that'll get us to that 1% or 2% vacancy mark in Edmonton by the end of June. So, we'll have 1% or 2% vacancy in all our core markets at this current rate of rentals. And at that point in time, what we're seeing in our other markets, Southern Alberta and Saskatchewan, are new lease of about 8% as of April, a little bit higher this month currently. And so, we’re – yes, that is about it. It's a high single digit reflecting, more inflationary amounts, current inflationary amounts.

Mike Markidis

Okay, thanks. Quick one for Lisa, your, your G&A expense, your administration expense if I look at year-over-year, I just average your quarterly numbers for 2021, it was down pretty substantially. What should we be – was there anything delayed in there? Or I guess asked differently, what should we be thinking about in terms of a run rate for the rest of this year?

Lisa Smandych

Yes, that Q1 run rate is likely a rate that you could use going forward for the remainder of the year. We are really managing that those administrative costs as much as we can. And so we do anticipate that G&A will be a little bit lower this year.

Mike Markidis

Okay, perfect. And last one for me before I turn it back, just on the topic you guys highlighted the favorable benefit of the restructuring of the cable and internet provider in Saskatchewan. Can you remind me, is that something that is included in the leases or is that recovered from your tenants?

Sam Kolias

Hey, Mike. In Saskatchewan, we have different programs across our various provinces. In Saskatchewan it is something that we have provided our residents. We're working with our partner there to move towards something similar to what we have in Alberta, which is one where we are not, as a community provider, providing that on behalf of our residents. But in the meantime, in between time, we did have a very favorable restructuring of our contract there that saw a significant decline in the cost of that service for our residents.

Mike Markidis

Right. And my memory's a little foggy. Can you – I mean, this was initiated, I think, from a couple of years ago. Do you remember what the change was in terms of what you did in Alberta and how that might be rolled out in Saskatchewan?

Sam Kolias

Yes, so in Alberta really we have a partnership with our teleco providers with which we provide very unique pricing to our residents here in Alberta. And we benefit from that with again, from a revenue share with our partner there. In Saskatchewan, it is a structure where we are procuring internet services and providing that to our residents. And again, the price of that, or the cost of that has changed with its most recent contracts.

Mike Markidis

And do you think there is an opportunity to transition Saskatchewan onto a model similar to Alberta in the not too distant future, or is that still something that's further away?

Sam Kolias

Yes, likely in the next two to three years, again, we're working with our, partner there in Saskatchewan to move towards that. But again, in the meantime, we move between time, so that’s a significant savings versus what we had previously.

Mike Markidis

Yes, got it. Okay. Thanks very much.

James Ha

Thanks, Mike.

Operator

There are no further questions at this time. You can please go ahead.

Sam Kolias

Thank you operator. As always, if there are any questions or comments, please do not hesitate to contact us. We would like to say a very special thank you to our retiring trustee of 15 years, Mr. [indiscernible] and a warm welcome to our new trustee, Mandy Abramson. With gratitude, we would like to thank our extraordinary team, loyal residents, CMHC, our lenders, our unit holders, and all our stakeholders. It really is all about our people whose huge shoulders we stand and as leaders, we continue to do everything we can to support continued growth and extraordinary. We really can't thank our extraordinary team and great leaders enough.

We are pleased with our improving results on a foundation of exceptional value we continue to provide our resident members, our investors, and all our stakeholders. Our home is much than a place or a location. Our future is family where love always lives. What can be more important when choosing where to call home?

Thank you again, everyone for joining us this morning. God bless us and grant us all peace.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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