Killam Pulls in $84M in Quarterly Profit During ‘Strongest’ Rental Market in its History
HALIFAX – Locally owned corporate landlords Killam Apartment REIT brought in tens of millions in profit last quarter as an extremely tight rental market allowed it to raise rents, and expenses were lower than expected.
Phillip Frasier is the president and CEO of Killam. In a call with investors on May 4, he said the multi-family rental market in Canada is “the strongest we’ve ever seen in our 21-year history.”
He said Killam’s occupancy rates across its entire portfolio are at 98.6 per cent, squeaking up even higher than the same quarter last year.
The company brought in $84 million in profits over the quarter, up from $60 million over the same period in 2021. It also saw 6.3 per cent growth in its net operating income.
Dale Noseworthy, Killam’s chief financial officer, told investors the company saw a four percent average increase in rental rates over the quarter because of the “strong demand” for rental units.
The company made more money from “ancillary revenue” (things like parking, laundry, and storage) and was able to increase rents by a whopping 14.3 percent on average in units that turned over to new tenants.
That 14.3 per cent number is the highest in the company’s history.
Meanwhile, Killam’s operating costs were up 5.8 percent. Noseworthy said property tax breaks in Nova Scotia and P.E.I., combined with lower-than-expected utility costs, meant costs didn’t cut into company profits as much as expected.
Frasier told investors the company has also adjusted its acquisition strategy in the face of increasing borrowing rates and economic uncertainty.
“During this period, we reduced our acquisition activity because of rising interest rates and focused on improving our liquidity and capital flexibility,” he said.
He added that acquisitions will be an “important” part of Killam’s growth in the future but said “now is not the time to be aggressive on the acquisition front.”
Over the past approximately half a year, Killam has also started selling off some of what it calls its “non-core assets.”
Already, the company has sold two buildings: a 43-unit apartment building in Ottawa for $9.8 million, and “The James” apartment building for $33 million. The James is a 108-unit building on South Street in Halifax.
Frasier said two more sales, worth about $39 million, are also pending and that the company has about $100 million worth of other transactions in various stages of due diligence.
The goal, he said, is to unload some of the company’s older assets that are more expensive to operate and maintain.
Frasier also said provincial government rent control is driving some of its sale decisions. Later in the call, Frasier said Killam doesn’t have many assets it would be willing to sell in Ontario, Alberta, or B.C.
“The bulk of it … will be Atlantic Canada,” he said.
A Killam representative also said the company plans to raise rents in Nova Scotia by more than it traditionally has over the next couple of years to offset rent caps that have been in place since 2021.
Trevor Nichols is Huddle’s editor, based in Halifax. Send him your feedback and story ideas: [email protected].