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Apartment REIT – Fund President Q1 2023 Update Transcript


Watch the Apartment REIT – Fund President Q1 2023 Update

Ray Punn: [00:00:25] I’m pleased to provide you with Skyline Apartment REIT‘s update for quarter one, 2023. I’m joined by Matt Organ, President of Skyline Apartment REIT. Matt, thanks for joining me today.

Matthew Organ: [00:00:34] Thanks for having me, Ray.

Ray Punn: [00:00:35] Matt, can you walk our investors through the Apartment REIT’s financial summary and provide any insights from the last quarter?

Matthew Organ: [00:00:41] Certainly. It’s been a fantastic quarter so far. Our gross market rent, which is basically our actual rent plus the market rent on our vacant units, is about $3 million ahead of budget so far through Q1. So, that’s extremely exciting given it is the first quarter, which is traditionally our slowest quarter of the year, being the winter months. So, we’ve got fantastic income growth on that side. Our expenses have come in below budget in Q1 as well, which resulted in an overall net income gain above budget of about $3.3 million.

Ray Punn: [00:01:17] Thanks for sharing that, Matt. So in the current economic environment, what’s the outlook for the Fund for the remainder of the year and going into 2024?

Matthew Organ: [00:01:24] Ray, the outlook is extremely positive. Coming out of the first quarter with really strong results. For the remainder of the year, we’ve got a lot of positive things happening. We’ve got a tremendous income growth, which I mentioned. Interest rates still are obviously top of mind and on everyone’s radar. And a lot of our mortgages are based off the mortgage bond rate, and that continues to fluctuate. So, we’re being very proactive and watching those rates move around and taking advantage of rate lock situations where we can. But I will say this: most recently over the last month, the last three mortgages that we renewed were well below what we estimated those rates would be. We’re still able to secure five-year CMHC mortgage rates somewhere between 3.5% and 3.75%. So, by historical standards, those are still really good rates, and again, the key being that they’re much lower than what we estimated those mortgages would renew at, which translates into more income to the bottom line. The demand for housing obviously still remains extremely strong. About two thirds of our product is in Ontario, and currently at this point, Ontario is about 500,000 units of housing short for the demand right now, and an estimated 1,000,000 short over the next 10 years. So, the demand for rental is going to be there, obviously. And simply by operating our units and turning over those suites, we’re capturing that Mark to Market gain on each one, with current Mark to Market, again, about $430. So, every time a suite turns, we’re capturing that income, which is leading to that strong income growth and giving us those positive financial results.

Ray Punn: [00:03:12] Matt, on the topic of Mark to Market, can you walk our investors through what that means to the Fund and what that means to them as an investor?

Matthew Organ: [00:03:19] Certainly, Ray. So, when we talk about Mark to Market rent, or Mark to Market gain, or loss to lease, we’re simply saying that if a tenant moves out today and a new tenant moves in tomorrow, the average gain per month per suite at this point in time is $430. So, we’re just simply trying to define what that means on every move-out versus every move-in as it translates to the investor. So, capturing that $430 per month on average as we do suite turns, that translates into $430 x 12 months. That’s the rate gain that you get upon every suite turn. So, that’s how we define Mark to Market. So, how does that benefit the investor? It’s quite simple. At the end of the day, as we make those gains and we make those suite turns, it translates into more income, holding the same cap rate on a valuation basis throughout the year. More income translates into Unit Value growth and more distributable income.

Ray Punn: [00:04:19] So, Matt, with the $430 Mark to Market, in theory, what does that mean to the Fund?

Matthew Organ: [00:04:24] Well, if we were to turn over every suite, in theory, what it means is that essentially you’re capturing that income. What that income translates into, in terms of Unit Value, is about an extra $2.3 billion in shareholder equity. So, when you look at our current shareholder equity, a little bit over $2 billion at a $27.75 Unit Price, in theory, you would be doubling or a little more than doubling the Unit Value. So, you could potentially have a Unit Value north of $55 per share, or per Unit, by simply turning over every suite, which obviously isn’t going to happen tomorrow. But we still have an average turn rate of about 21% a year. So, theoretically, within a five-year span, if every one of those tenants cycled out and new tenants cycled in, it gives you an indication of where our Unit Value could lie.

Ray Punn: [00:05:15] Matt, thanks for joining me today.

Matthew Organ: [00:05:16] Great to be here, Ray.

Ray Punn: [00:05:18] Skyline Apartment REIT is currently open for new investment. If you have any questions, connect with your Skyline Wealth Management Advisor, or email us at Thanks for watching.