Killam Apartment REIT Investor Presentation January 2017 1 - PowerPoint PPT Presentation

Killam Apartment REIT Investor Presentation January 2017 1

Cautionary Statement Cautionary Statement This presentation may contain forward ‐ looking statements with respect to Killam Apartment REIT and its operations, 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 of 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 otherwise 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. 2

Killam Apartment REIT About Killam Apartment REIT Killam Apartment REIT is a growth ‐ oriented Canadian real estate investment trust. Killam owns, manages and develops multi ‐ family residential properties in Atlantic Canada, Ontario and Alberta. Killam's portfolio includes $1.9 billion in real estate assets, including 13,952 apartment units and 5,165 manufactured home community (MHC) sites. Market cap 1 $860M Annual distribution $0.60 NOI By Province Distribution yield 5.0% Net Operating Income (NOI) Avg. daily volume 133K 3% 6% by Sector 8% 2% 9% Nova Scotia New Brunswick 43% Apartments Ontario MHCs NFLD 18% Commercial PEI Alberta 1) Includes exchangeable units 89% 22% 3

Why Invest in Killam Why Invest in Killam  Clearly defined strategy – growth from same property portfolio, acquisitions and developments.  High ‐ quality portfolio with investment in newer properties.  Growing funds from operations (FFO) & adjusted funds from operations (AFFO) per unit.  Stable distributions with improving payout ratio.  Strengthened balance sheet with increased flexibility.  Interest saving opportunities on refinancings.  Established development program with robust development pipeline.  Positioned to benefit from economic growth in Atlantic Canada and population growth in Central Canada. 4

Killam Apartment REIT Clearly Defined Strategy Killam’s strategy is to maximize its value and long ‐ term profitability by concentrating on three key areas of growth: #1 #2 #3 Increasing earnings from its Expanding the portfolio and Developing high ‐ quality existing portfolio diversifying geographically properties in its core markets through accretive acquisitions, with an emphasis on newer properties 5

Killam Apartment REIT Clearly Defined Strategy #1) Increasing earnings from the existing portfolio. Historic Same Property Revenue Growth • Revenue Growth Improved occupancy 2.9% 2.6% • Growing rental rates 2.2% + 1.9% 1.8% 1.8% 1.7% • Reduced incentives Expense • Capital upgrades Management • Quality product & service = • 90% tenant satisfaction Increased Net rating Operating Income Apartment Quarterly Occupancy (NOI) $ occupancy as a % of gross potential rents 1 95.8% 95.8% 95.7% 95.7% 95.6% 95.6% 95.5% 95.3% 94.9% 94.8% 94.7% 94.7% 95.1% Average 94.3% 94.2% 93.6% 1. This measures dollar occupancy achieved and is typically ~1% lower than occupancy on a unit count basis at the 6 end of each quarter, but is better management information.

Killam Apartment REIT Clearly Defined Strategy #1) Increasing earnings from the existing portfolio. Revenue Growth • Energy initiatives • Employee training • • Water saving programs Investment in technology + • Maximizing economies of • Tenant education Expense scale Management = Same Property NOI Growth 2007- 2016 Increased NOI Average Growth of 3.0% 8.4% Killam has increased 5.1% 4.8% 4.7% 4.2% its same property NOI an average of 3.0% 2.1% 2.0% per year over the last 0.3% (0.9%) (0.4%) 10 years. * Record high natural gas prices in Atlantic Canada impacted NOI 7 growth in 2013 & 2014.

Killam Apartment REIT Clearly Defined Strategy #2) Expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties. Apartment Units & MHC Sites Annual Apartment NOI $ millions 15,000 $100 Alberta Apartment Ontario Units $80 Atlantic Canada 10,000 MHC Sites Units/sites $60 $40 5,000 $20 $ ‐ 0 Killam's strong operating platform can support a larger Since its first acquisition in 2002, Killam’s portfolio has grown and more geographically diverse portfolio. Increased annually through acquisitions. Killam is expanding its portfolio by investment in core markets outside Atlantic Canada acquiring centrally located buildings in urban markets, increasing its will enhance Killam's diversification and exposure to ownership in Ontario and Alberta, and adding to its established urban centres in Canada that have higher population portfolio in Atlantic Canada. growth. 8

Killam Apartment REIT Clearly Defined Strategy #3) Developing high-quality properties in its core markets. Killam augments its external growth opportunities with Developments Completed Per Year developments. Killam has invested over $130 million in $ millions developments since its first project was completed in 2011. $80 With an experienced team and a development pipeline of over 1,200 units, developments are an important $17 $60 component of Killam’s growth. $40 $25 $25 $20 $35 $19 $24 $8 $14 $8 $15 $5 $0 * forecast Killam can develop to yields higher than those achievable through acquisition, contributing to net 9 asset value (NAV) growth per unit.

Killam Apartment REIT Clearly Defined Strategy Over $130 million of developments completed. 63 units ‐ Halifax, NS 49 units ‐ Charlottetown, PEI 101 units ‐ Fredericton, NB 47 units – Charlottetown, PEI 71 units – St. John’s, NL 102 units – St. John’s, NL 10 70 units – Halifax, NS 122 units ‐ Cambridge, ON

High ‐ Quality Portfolio Killam has one of the newest apartment portfolios in Canada; 37% of Killam’s apartment NOI comes from properties built in 2000 or later. Apartment NOI by Year of Construction Management believes that increasing Killam’s ownership in new, high ‐ quality buildings will result in long ‐ term demand for its properties, reduce annual capital requirements related to deferred maintenance, and transform Killam’s portfolio into one of the highest quality portfolios in 18% 23% Canada. 2010 and newer The annual capital spend Average Capital Spend Per Unit by 2000 ‐ 2009 per unit is lower 1990 ‐ 1999 Building Age for newer properties. For 1980 ‐ 1989 19% example, Killam’s For the years ended Dec 31 1970 ‐ 1979 average spend for Pre 1970 properties 0 to 10 years $3,000 23% old was $700 per unit in 2015 compared to $2,000 9% $2,600 per unit for 8% $1,000 buildings over 40 years old. $0 2013 2014 2015 Overall, Killam’s average capital spend was $2,178 0 ‐ 10 years 11 ‐ 20 years 21 ‐ 30 years per apartment unit in 31 ‐ 40 years 41 + years 2015. Killam is growing its portfolio of high ‐ quality properties by focusing on developments and acquiring newer properties. 11

Growing FFO & AFFO per Unit 9.7% FFO Per Share Growth 2015 YTD FFO & AFFO FFO & AFFO FFO and AFFO per unit Per Unit Per Unit growth has been For the nine months ended Sept 30 For the years ended Dec 31 attributable to: FFO AFFO FFO AFFO • same property NOI growth $0.79 $0.65 • interest expense $0.59 $0.72 $0.58 $0.71 $0.54 $0.51 savings $0.68 $0.46 • accretive acquisitions $0.61 $0.60 • developments 2013 2014 2015 2014 2015 2016 12

Improving AFFO Payout Ratio 88% AFFO Payout Ratio in 2015 Killam’s Annual Dividend/Distribution & Payout Ratio Dividend/Distribution AFFO Payout Ratio 98% $0.61 100% 81% 96% $0.60 95% AFFO $0.60 88% 90% Payout $0.59 85% Ratio at $0.59 80% Sept 30, 80% $0.58 75% 2016 75% $0.58 $0.58 $0.60 $0.60 $0.60 $0.60 $0.57 70% 2013 2014 2015 2016* 2017* *The 2016 and 2017 adjusted funds from operations (AFFO) payout ratio represents the consensus estimate based on the current annual distribution of $0.60. 13