ANNUAL
REPORT
2020
KILLAM APARTMENT REIT
MISSION
To have caring staff deliver
clean, safe, quality housing to
tenants who are proud to call
our properties home.
CORE VALUES
• Build Community
• Do the Right Thing
• Creative Solutions
• Curb Appeal
• Strong Customer
Relationships
STRATEGY
Killam’s strategy to maximize
its value and long-term
profitability is focused on
three key priorities:
• Increasing earnings from
its existing portfolio,
• Expanding the portfolio and
diversifying geographically
through accretive
acquisitions which target
newer properties, and
• Developing high-quality
properties in its core
markets.
About Killam
PROFILE
Killam Apartment REIT
(Killam) is a growth-oriented
real estate investment trust
which owns, operates,
manages and develops
multi-family apartments,
manufactured home
communities (MHCs) and
commercial properties.
Killam’s real estate portfolio
is located in Atlantic Canada,
Ontario, Alberta and British
Columbia.
89%
6%
5%
Net Operating Income by Segment
APARTMENTS | MHCs | COMMERCIAL
23%
20%
39%
7%
5%
4%
2%
Net Operating Income by Province
NS | ON | NB | AB | PE | NL | BC
7
16
Letter to Unitholders
ESG Update
Management’s Discussion
& Analysis
Financial Statements
Five Year Summary
19
84
116
2 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
2 K I L L A M A PA R T M E N T R E I T | 2 0 1 9
The Kay, Mississauga
2020
Highlights
2.3%
Same Property
NOI Growth
2.0%
Growth in FFO per Unit
3.7%Growth in AFFO per Unit
44.6%Debt as a Percentage of
Total Assets as at
December 31, 2020
$211Min Acquisitions
Completed
$76MInvested in
Developments
$47MFair Value Gains on
Investment Properties
32%Improvement in ESG
Score(1)
(1) In second annual GRESB Submission
The Kay, Mississauga
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 3
K I L L A M A PA R T M E N T R E I T | 2 0 1 9 3
Financial and Operating
Highlights
(Value in thousands, except per unit amount and portfolio information)
As at and for the years ended
2020
2019
2018
Operations
Property revenue
$261,690
$242,164
$215,959
Net operating income (NOI)
$164,662
$152,336
$135,712
Net income
$146,040
$283,525
$175,171
Funds from operations (FFO) (1)
$104,678
$93,884
$81,808
FFO per unit (diluted)
$1.00
$0.98
$0.94
Adjusted funds from operations (AFFO) (2)
$86,816
$76,768
$66,275
AFFO per unit (diluted)
Distributions declared per unit
AFFO payout ratio
Financial Position
Total assets
Total liabilities
Total equity
$0.83
$0.68
82%
$0.80
$0.66
82%
$0.76
$0.64
84%
$3,776,560 $3,380,100 $2,824,406
$2,008,302 $1,777,773 $1,655,456
$1,768,258 $1,602,367 $1,168,950
Units outstanding (3)
107,314
102,017
90,212
Total debt as a percent of total assets
Interest coverage ratio
44.6%
3.36x
43.4%
3.20x
49.8%
3.22x
Normalized debt to EBITDA
10.78x
10.15x
10.62x
Portfolio Information
Apartment units
MHC sites
17,048
16,325
15,883
5,875
5,786
5,427
Commercial square footage
750,000
739,000
551,000
Average rent per apartment unit
$1,184
$1,126
$1,076
Average rent per MHC site
$260
$261
$254
(1) FFO and applicable per unit amounts are calculated by Killam as net income
adjusted for depreciation on an owner-occupied building, fair value gains (losses),
interest expense related to exchangeable units, gains (losses) on disposition,
deferred tax expense (recovery), unrealized gains (losses) on derivative liability,
internal commercial leasing costs, interest expense related to lease liabilities,
insurance proceeds and non-controlling interest. A reconciliation between net
income and FFO is included on page 49 of this annual report.
(2) AFFO and applicable per unit amounts and payout ratios are calculated by Killam as
FFO less an allowance for maintenance capital expenditures, commercial leasing
costs and straight-line commercial rents. A reconciliation from FFO to AFFO is
included on page 51, and the calculation of the maintenance capex reserve is
included on page 50.
(3) Units outstanding at December 31, 2020 include 103,212,327 REIT units and 4,101,520
exchangeable units.
4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
4 K I L L A M A PA R T M E N T R E I T | 2 0 1 9
Civic 66, Kitchener
Civic 66, Kitchener
8
6
0
$
.
6
6
0
$
.
0
0
1
$
.
8
9
0
$
.
4
9
0
$
.
0
9
0
$
.
6
8
0
$
.
4
6
0
$
.
2
6
0
$
.
0
6
0
$
.
16 17 18 19 20
Funds from
Operations
per Unit
(diluted)
4
7
3
$
.
2
3
3
$
.
0
8
2
$
.
8
2
2
$
.
4
9
1
$
.
16 17 18 19 20
Value of
Real Estate
Portfolio
($ billions)
16 17 18 19 20
Distribution
per Unit
%
9
2
6
.
%
9
2
6
.
%
8
2
6
.
%
5
1
6
.
%
1
0
6
.
16 17 18 19 20
Operating
Margin %
%
5
3
5
.
%
8
9
4
.
%
7
8
4
.
%
6
4
4
.
%
4
3
4
.
%
3
9
1
.
%
3
4
2
.
%
9
2
2
.
%
6
6
1
.
)
%
5
2
(
.
16 17 18 19 20
16 17 18 19 20
Debt as a
% of Total
Assets
Total
Unitholder
Return
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 5
2020 Performance Summary
and 2021 Strategic Targets
GROW SAME PROPERTY NOI
2020 Target: 3% to 5%
2020 Performance: 2.3%
2021 Target: >2%, subject to COVID-19 related
restrictions being lifted by Q3-2021.
EXPAND THE PORTFOLIO THROUGH
ACQUISITIONS
2020 Target: Acquire a minimum of $175M.
2020 Performance: Acquired $211M.
2021 Target: Acquire a minimum of $100M.
DIVERSIFY GEOGRAPHICALLY
2020 Target: Earn >32% of 2020 NOI outside
Atlantic Canada.
2020 Performance: 32% of 2020 NOI was from
outside Atlantic Canada.
2021 Target: Earn >32% of 2021 NOI outside
Atlantic Canada.
STRENGTHEN THE BALANCE SHEET
2020 Target: Maintain debt as a % of assets ratio
below 47%.
2020 Performance: 44.6% as of December 31, 2020.
2021 Target: Maintain debt as a % of assets ratio
below 47%.
DEVELOP HIGH-QUALITY PROPERTIES
2020 Target: Complete Shorefront and start two
additional projects.
2020 Performance: Completed Shorefront, broke
ground on Civic 66 and acquired 50% interest in the
active Luma development.
2021 Target: Complete 166 units (two buildings)
and break ground on two additional developments
(>150 units).
IMPROVE SUSTAINABILITY
2020 Target: Increase Killam’s GRESB rating
by 15 points.
2020 Performance: Realized a 15-point or 32%
improvement.
2021 Target: Minimum $5M investment in energy
initiatives to reduce Killam’s carbon footprint.
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Shorefront, Charlottetown
Letter to Unitholders
Dear Unitholder,
I am pleased to report Killam’s financial and operating highlights
for 2020. Although it was an unprecedented year with many
uncertainties, I am very proud of our 700 employees who worked
diligently and adapted to the COVID-19 pandemic, keeping our
tenants safe and informed.
The multi-family rental
business remained resilient
during the pandemic.
Despite seeing pockets of
softness given a decrease
in immigration, a shift to
work from home and on-
line university classes for
students, demand overall remained strong for quality rental product
across the country. We achieved 2.3% same property net operating
income growth and earned $1.00 per unit FFO, a 2% increase from
$0.98 per unit in 2019.
Our strategy and commitment to the long-term viability of our core
markets remains unchanged. We are committed to growing Killam’s
value and long-term profitability by concentrating on three key areas of
growth:
1) increasing earnings from our existing portfolio;
2) expanding our portfolio and diversifying geographically through
accretive acquisitions, which target new properties; and
3) developing high-quality properties in our core markets.
Investing in our Existing Portfolio
Increasing earnings from our existing portfolio is a central component
of our strategy. We invest in revenue-enhancing and expense-saving
initiatives that deliver excellent returns on investment and keep our
tenants comfortable and pleased to call their Killam property home.
Overall, Killam’s same property
portfolio achieved net operating
income growth of 2.3% in 2020.
Our suite renovation program is an
important and growing initiative
that meets the market’s demand for
modern units. We have fine tuned the
process of repositioning units over
the past three years to optimize the
upgrade and minimize the downtime
Killam’s same property
portfolio achieved
net operating income
growth of 2.3% in
2020.
for renovation work, in order to provide our residents with the best
finishes based on appeal, functionality, and durability. We do this in
a responsible way, considering the current financial demands of our
tenants, our communities, and the global environment. We upgrade
only those units that are vacant and do not engage in any programs to
influence unit turn through aggressive rent hikes or incentive offerings.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 7
We have identified over 5,000 units in our portfolio that can benefit from this renovation program and will
invest in these units as they become vacant over the next eight to ten years.
Market demand for these newly renovated units remained healthy across the portfolio during the year. In
2020 we repositioned 495 units, representing approximately 10% of the units that turned, and 3% of our total
portfolio.
Portfolio Growth Through Acquisitions
We completed $211 million in acquisitions and continued to execute on our strategy of
increasing the percentage of earnings generated outside Atlantic Canada. We purchased
two properties in Victoria, BC, for $114 million, totaling 315 units. This enabled Killam
to enter the strong Victoria market, and to have the presence coast-to-coast. We also
expanded our presence in the Moncton market by acquiring two newly built properties,
adding 271 units ($72.6 million) to our portfolio. Acquisitions in 2020 also included
$9.8 million of land for future development, including a 50% interest in the land for the
Luma development with RioCan in Ottawa.
$114 million in
acquisitions in Victoria,
BC, expanding our
portfolio coast-to-
coast.
Developments Driving Value
Development remains an important part of our growth strategy, and one that
distinguishes us from our peers. Killam completed one development in 2020, Shorefront, a 78-unit building
located in Charlottetown, and we finished the year with six active developments underway. Our development
portfolio is strategic, with current projects in Mississauga, Ottawa, Kitchener, Charlottetown and Halifax. We
are excited to complete and lease up these new buildings over the next two years. With a total projected
With developments
underway of $220
million representing
523 units, these
properties will bring
meaningful growth to
Killam's portfolio.
investment of over $220 million and 523 units, these properties will bring
meaningful growth to Killam’s portfolio.
Two projects, Nolan Hill (233 units), in Calgary, and 10 Harley (38 units),
in Charlottetown, were completed in Q1 2021 and The Kay (127 units), in
Mississauga and Latitude (209 units), in Ottawa should be completed in late 2021.
Part of the Affordable Housing Solution
The need for safe and affordable housing has been highlighted by many
Canadians during the past year. Killam takes its role as a responsible corporate
citizen seriously and is committed to being a contributor to the affordable
housing solution. Our diverse portfolio offers a range of product in each of
our markets, including longstanding proprieties that provide clean, safe and
affordable housing options. Killam is also an active partner with many non-profit
housing and government agencies, such as the YWCA, urban housing initiatives,
and centre for addiction and mental health, to deliver more than 750 subsidized units in our communities.
We recently expanded our portfolio of affordable units with the completion of the Nolan Hill development
and utilized CMHC’s Rental construction financing initiative. This project will provide quality, affordable living
options for 78 households. We look forward to pursuing additional affordable housing opportunities across
our core markets.
Commitment to Sustainability
Other key operating initiatives include the active management of expenses to optimize
net operating income in conjunction with sustainability. I am exceptionally proud of
the enhancements to Killam’s sustainability efforts over the past year as well as the
advancement of Killam’s ESG-related reporting frameworks and disclosure. Killam has a
long history of investing in energy initiatives, and we are committed to position Killam as
a leader in sustainability amongst our multi-residential real estate peers. We made our
second GRESB ESG submission in 2020 and achieved a 32% improvement over our initial
submission in 2019.
We achieved a 32%
improvement in
our 2020 GRESB
submission.
8 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
We are being bold in our environmental targets, including reducing our greenhouse gas emissions by 15%
by 2030, and producing a minimum of 10% of Killam’s electricity needs through renewable sources by 2025.
Adjustments to our sustainability targets will likely occur with more information and as technology evolves
as we work to align ourselves with the Paris Climate Accord in the coming years to ultimately achieve carbon
neutrality. Please refer to Killam’s comprehensive ESG report on our website to learn about the many
sustainability highlights and achievements from 2020, as well as our longer-term goals.
Innovative Culture
Our people are the backbone of all our successes at Killam. Our core values
are the foundation of our culture, which emphasize our inclusive and innovative
work environment. Killam’s exceptional culture has been publicly recognized;
Killam was named one of Canada’s Most Admired Corporate Cultures for 2020,
a distinction which is held for a three-year period. We have also been honoured
with several other company culture, top employer and employee recommended
workplace awards in the past year. Based on our employee satisfaction
survey conducted during 2020, 87% of employees believe Killam enables a culture of diversity. Further, to
strengthen our diversity and inclusion program at Killam, we have partnered with the Canadian Centre for
Diversity & Inclusion. One hundred percent of our management team completed D&I training in 2020, with
much awareness and learning to continue in the coming years.
Our people are the
backbone of our
successes at Killam.
Embracing Technology
We continue to embrace change and invest in technology across the organization. The pandemic has
highlighted the value of our past investments in remote working technology and enabled us to deftly adapt
to working from home. In addition, our expanded use of data analytics and on-line customer service offerings
are changing how we do business in very positive ways. We will continue to invest capital and time to further
evolve our processes. I am confident this will lead to efficiencies, expense management and earnings growth.
I am especially excited about our technology investments related to energy efficiencies at our properties.
Late last year we installed solar photovoltaic (PV) panels at 11 properties in PEI and Halifax, and we have
more to come in 2021. Geothermal heating and PV panels are becoming the norm at our new developments,
as is unit-level metered water. These investments are the future of apartment developments, and will lead to
efficient, low emission and high-margin properties.
2021 Outlook
As our provincial governments roll out plans for the distribution of vaccines across the country, we remain
focused on the health and safety of our tenants, employees and the communities in which we operate.
We are optimistic that we are on the road to reopening the economy and the long-term fundamentals for
our business are unchanged. However, we continue to keep a close watch on potential challenges to our
business including increased regulatory risks, retaining and attracting top-notch talent, market volatility, and
a changing investor base.
In closing, I would like to thank you for your interest and investment in Killam. Killam’s annual Unitholders’
meeting will be held on May 7th, 2021, at 10:30 AM Atlantic Time at 3700 Kempt Road, Suite 100, Halifax,
Nova Scotia. I encourage you to join via webcast, if possible.
Yours truly,
Philip Fraser
President & CEO
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 9
GROWING EARNINGS
FROM KILLAM'S
EXISTING PORTFOLIO
Increasing earnings from its existing portfolio
is an important part of Killam’s strategy to
maximize long-term value for its unitholders. With
population growth and demand out-pacing the
housing supply in many of our core markets over
the past few years, Killam started 2020 with both
record-high occupancy and rental rate growth.
Despite headwinds caused by the COVID-19
pandemic, Killam’s core markets continued their
positive momentum in 2020. Killam recorded 2.0%
revenue growth from its same property portfolio.
Impacts of COVID-19 include lost revenue due
to delayed rent increases related to rent increase
suspensions during Q2, reduced activity at Killam’s
nine seasonal MHCs due to delayed openings
and travel restrictions, lower commercial rent
following participation in the Canadian Emergency
Commercial Rent Assistance program and
increased compensation for Killam’s front-line
workers. Despite these challenges, expenses
increased modestly, resulting in 2.3% overall same
property NOI growth.
Killam's respositioning program continues to
expand, upgrading 495 suites in 2020. The
program is meeting the market demand for new
high-quality finishes across its portfolio. By fine
tuning the process to optimize the upgrades and
minimize the downtime for renovation work, Killam
provides its residents with the best finishes based
on appeal, functionality, and durability.
1 0 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
1 0 K I L L A M A PA R T M E N T R E I T | 2 0 1 9
%
3
7
9
.
%
1
7
9
.
%
8
6
9
.
%
6
6
9
.
%
9
5
9
.
%
6
3
.
%
4
3
.
%
7
2
.
%
8
1
.
%
6
1
.
.
.
.
.
%
8
4
%
6
3
%
1
4
Same Property Average
%
Rental Rate Growth
0
4
Despite COVID-19 related
restrictions, rental rate growth
%
was a healthy 3.4%. Continued
3
2
rental rate growth is due to
strong market fundamentals
and Killam’s revenue-enhancing
programs.
.
16 17 18 19 20
16 17 18 19 20
16 17 18 19 20
%
3
7
9
.
%
1
7
9
.
%
8
6
9
.
%
6
6
9
.
%
9
5
9
.
16 17 18 19 20
%
8
4
.
%
1
4
.
%
0
4
.
%
6
3
.
%
3
2
.
%
3
7
9
.
%
1
7
9
.
%
8
6
9
.
%
6
6
9
.
%
9
5
9
.
%
6
3
.
%
4
3
.
%
7
2
.
%
8
1
.
%
6
1
.
16 17 18 19 20
16 17 18 19 20
16 17 18 19 20
40 Weldon, Moncton
Suite upgrades are an important part of Killam’s
value creation and growth strategy. This is a
63-unit property in downtown Moncton that
was built in 1995 and had dated finishes. By
replacing the flooring and updating the kitchens
and bathrooms, the product offering for this
building changed, and Killam realized an
average rental increase of 22%, representing an
11% return on its $30,000 per unit investment.
This suite was the winner of the CFAA’s best unit
renovation for 2020.
%
6
3
.
%
4
3
.
.
.
.
Same Property
%
7
Apartment Occupancy
2
%
Killam’s same property
8
%
apartment portfolio recorded
1
6
1
solid occupancy of 96.8% in
2020. Occupancy levels continue
to be particularly strong in our
suburban markets and Maritime
cities during COVID-19.
16 17 18 19 20
%
8
4
.
%
1
.
4
%
0
4
.
%
6
3
.
%
3
.
2
16 17 18 19 20
Same Property
Net Operating Income
Growth
Same property NOI increased
2.3% in 2020 due to solid
revenue growth, and expenses
increased by only 1.4%. Killam
achieved a 20 basis point
improvement in its operating
margin to a record high of
63.5%.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 1
K I L L A M A PA R T M E N T R E I T | 2 0 1 9 1 1
GROWING EARNINGS
THROUGH ACQUISITIONS
Acquisitions have always been an integral
property and added to its portfolio of
part of our growth strategy. In 2020, we
development land.
acquired $211 million of assets, adding 650
Killam continued to execute its geographic
apartment units to our portfolio. We entered
diversification strategy with more than half
the British Columbia apartment market for
of the equity deployed in 2020 in British
the first time, acquiring 315 units in Victoria,
Columbia and Ontario. During the year, 32%
and further expanded our presence in Halifax
of Killam’s NOI was generated outside Atlantic
and Moncton. Killam also acquired an MHC
Canada, up from 30% in 2019.
containing 89 sites, a small commercial
88 Sunset
Killam expanded its Moncton
portfolio in 2020 with the $55
million purchase of 88 Sunset,
a new seven-storey, 162-unit
apartment building. Still in its
initial lease-up, the property
has large units averaging
1,420 square feet and
expansive amenity spaces.
1 2 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
Christie Point
Christie Point Apartments in Greater Victoria was acquired for $54 million
and features 161 units on a waterfront peninsula with over 6,000 feet of
direct water frontage. This site includes redevelopment potential for an
additional 312 units for a total of 473 units.
171 & 181 Leopold
Killam was pleased to
purchase these new
buildings in Moncton in
Q4-2020. The two new
four-story, 107-unit wood
frame buildings were
purchased for $17.6 million
and were easily absorbed
into Killam’s strong
operating platform in this
growing New Brunswick city.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 3
Crossing at Belmont
The Crossing at Belmont was Killam’s
second acquisition in the greater
Victoria market. Purchased in April
2020, the newly completed 156-unit
concrete property has a mixture of
one and two bedroom units. It was
successfully fully leased by Q3-2020.
The property has many amenities
and is adjacent to a new grocery-
anchored retail centre.
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) GROWING THROUGH
DEVELOPMENTS
Developing high-quality properties in our
core markets is an important component
of Killam’s growth strategy. To date,
Killam has completed over $300 million in
development projects totalling more than
1,300 units in 12 development projects
completed between 2011 and 2020.
We continued to advance our
development pipeline in 2020 with
minimal delays caused by COVID-19.
In October, Killam completed the 78-unit
Shorefront property in Charlottetown.
We ended the year with six active
developments underway in Mississauga,
Ottawa, Kitchener, Halifax and Charlottetown.
These developments will add an additional
535 units to Killam’s portfolio in the next
18-24 months.
Killam has an experienced development team
and growing pipeline of more than 3,000
units across Canada that will continue to be a
significant lever for Killam’s earnings growth
and value creation.
The Kay, Mississauga
127 units
$57.0 million
Q4-2021 completion
168 units(1)
$44.3 million
Q2-2022 completion
Luma, Ottawa
(1) Killam has a 50%
ownership interest.
1 4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
Latitude, Ottawa
209 units(1)
$42.0 million
Q1-2022 completion
The Governor, Halifax
12 luxury units
3,400 SF commercial
Q4-2022 completion
(1) Killam has a 50% ownership interest.
38 units
$10.4 million
Q1-2021 completion
10 Harley,
Charlottetown
169 units
$69.7 million
Q4-2022 completion
Civic 66, Kitchener
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 5
2020 Environmental, Social
& Governance Update
From the Chair of the Governance
& ESG Committee
I am proud of Killam’s leadership and continued progress with its ESG initiatives.
Included in this year’s Annual Report are many of Killam’s recent initiatives and
achievements, as well as its forward-looking targets. Killam has incorporated
environmental, social and governance principles into its culture, operations, and business
strategy. Killam is contributing positively to the future and we are pleased to have the
opportunity to share these successes on the following pages.
We would like to welcome you to read our full ESG disclosure in our 2020 ESG Report,
which can be found on our website at killamreit.com/esg.
– Manfred Walt
Killam’s 2020 ESG report can
be found on Killam’s website
at killamreit.com/esg
2020 Goals and Performance
ENERGY CONSUMPTION
GOAL
Invest up to $7M in
energy-efficiency initiatives
including 1,000 kW of new
solar panel installations.
PERFORMANCE
$5.2M invested in energy-
efficiency projects including
880 MW of solar installs at
11 properties in PEI and NS.
RATING PARTICIPATION
GOAL
Increase GRESB rating by
15 percentage points.
PERFORMANCE
Increased GRESB rating by
15 percentage points or
32% improvement over its
initial submission in 2019.
SOCIAL INITIATIVES
GOAL
Increase employee
volunteer days by 25%.
PERFORMANCE
Due to COVID-19
pandemic, volunteer
opportunities were
minimal. Defer goal to
post pandemic.
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1 6 K I L L A M A PA R T M E N T R E I T | 2 0 1 9
Killam’s ESG Targets
Killam has committed to ambitious but realistic ESG targets to work towards in the medium
term. These goals aim to mitigate expense growth, continue towards good corporate
citizenship and create long-term value for its stakeholders. Management will review these
periodically to confirm alignment with its materiality assessment. Killam is scoping out its
long-term carbon emission targets and developing a plan to move to net-zero carbon
emissions and is hopeful to disclose further details as technology and innovation evolves.
ENVIRONMENTAL
• Reduce GHG emissions
by 15%(1) by 2030.
• Produce a minimum
of 10% of electricity(2)
through renewable
energy sources by 2025.
SOCIAL
• Increase employee
volunteer hours by 25%
by 2025.
• Increase current number
of affordable housing
units by 20% by 2025.
• Pursue building
• Maintain resident
certifications across a
minimum of 20% of
Killam's portfolio by
2025.
satisfaction score above
85% annually.
GOVERNANCE
• Continue to participate
in GRESB survey
annually, targeting a
minimum increase of
5% each year to reach
GRESB 4 Star ranking by
2025, and continue to
expand ESG disclosures.
• Increase the diversity of
employees, including
a 25% increased
representation of
employees who identify
as racialized, as persons
with a disability, and as
LGBT2Q+ by 2025.
(1) Scope 1 and 2 emissions from 2020 levels.
(2) Operational controlled electricity.
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ESG 2020 Highlights and Achievements
E
S
Killam installed solar photovoltaic panels at
11 properties, generating 880 MWh
of renewable energy annually.
Installed two
beehives at one
of Killam’s properties
as a pilot project.
Implemented a green cleaning policy
for procurement and use throughout
its properties.
Completed an independent review of
its 2020 greenhouse gas
inventory.
Supported affordable housing with
more than 750 subsidized
units through community
partnerships.
Achieved an 87% resident
satisfaction score.
Donated over
$375,000 in cash and
in-kind gifts to support
organizations across Canada.
Achieved an 84% employee
satisfaction score.
Partnered with the
Canadian Centre
for Diversity and
Inclusion.
G
Formed a
Diversity
and Inclusion
Committee
to assess and make
improvements to
Killam's current
practices and policies.
Enhanced
emergency
response
preparedness plans
at all properties.
Aligned Killam's strategy and
targets with the
UN's Sustainable
Development Goals.
Reported in accordance with
GRI reporting standards.
Began monitoring
suppliers’
compliance with
Killam’s internal ESG
minimum standards.
Completed second GRESB submission,
achieving a green star rating
and a 32% increase from its
initial score.
Developed longer-term
sustainability targets.
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2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
TABLE OF CONTENTS
PART I
Business Overview
Basis of Presentation
Declaration of Trust
Forward‐looking Statements
Non‐IFRS Financial Measures
PART II
Key Performance Indicators
Financial and Operational Highlights
Summary of 2020 Results and Operations
COVID‐19 Impact on Operations
Strategic Targets
Outlook
PART III
Business Strategy
Committed to ESG
Portfolio Summary
Unique Portfolio Features
Core Market Update
PART IV
2020 Financial Overview
‐Consolidated Results
‐Apartment Results
‐MHC Results
‐Commercial Results
PART V
Other Income and Expenses
‐Other Income
‐Financing Costs
‐Depreciation Expense
‐Administration Expenses
‐Fair Value Adjustments
‐Deferred Tax Expense
PART VI
Per Unit Calculations
Funds from Operations
Adjusted Funds from Operations
Adjusted Cash Flow from Operations
PART VII
Investment Properties
Investment Properties Under Construction
Land for Development
Capital Improvements
Mortgages and Other Loans
Unitholders' Equity
Liquidity and Capital Resources
48
49
49
52
53
55
55
57
60
63
64
PART VIII
Quarterly Results & Discussion of Q4 Operations
65
PART IX
Selected Consolidated Financial Information
Risk Management
Critical Accounting Policies and Significant Accounting
Judgments, Estimates and Assumptions
Future Accounting Policy Changes
Disclosure Controls, Procedures and Internal Controls
Related Party Transactions
Subsequent Events
71
71
76
77
77
78
78
20
20
20
21
21
22
23
24
25
26
27
28
30
31
32
33
36
36
37
44
45
46
46
46
47
47
47
48
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART I
Business Overview
Killam Apartment REIT ("Killam", the "Trust", or the "REIT"), based in Halifax, Nova Scotia ("NS"), is one of Canada's largest
residential landlords, owning, operating, managing and developing a $3.8 billion portfolio of apartments, manufactured home
communities ("MHCs") and commercial properties across seven provinces. Killam was founded in 2000 to create value through the
consolidation of apartments in Atlantic Canada and MHCs across Canada. Killam entered the Ontario ("ON") apartment market in
2010, the Alberta ("AB") apartment market in 2014, and the British Columbia ("BC") apartment market in 2020. Killam broke ground
on its first development in 2010 and has completed twelve projects to-date, with a further five projects currently under
construction.
Killam’s strategy to drive value and profitability focuses on three priorities:
1) Increase earnings from the existing portfolio;
2) Expand the portfolio and diversify geographically through accretive acquisitions, targeting newer properties; and
3) Develop high-quality properties in its core markets.
The apartment business is Killam’s largest segment and accounted for 88.8% of Killam’s net operating income ("NOI") for the year
ended December 31, 2020. As at December 31, 2020, Killam’s apartment portfolio consisted of 17,048 units, including 968 units
jointly owned with institutional partners. Killam's 206 apartment properties are located in Atlantic Canada's six largest urban centres
(Halifax, Moncton, Saint John, Fredericton, Charlottetown and St. John's), Ontario (Ottawa, London, Toronto and Kitchener-Waterloo-
Cambridge), Alberta (Edmonton and Calgary), and British Columbia (Greater Victoria). Killam is Atlantic Canada’s largest residential
landlord, owning a 13% total share of multi-family rental units in these core Atlantic markets. Killam plans to continue increasing its
presence outside Atlantic Canada through acquisitions and developments; however, it will continue to invest strategically in Atlantic
Canada to maintain its market presence.
In addition, Killam owns 5,875 sites in 39 MHCs, also known as land-lease communities or trailer parks, in Ontario and Atlantic
Canada. Killam owns the land and infrastructure supporting these communities and leases sites to tenants who own their own homes
and pay Killam site rent. The MHC portfolio accounted for 6.5% of Killam’s NOI for the year ended December 31, 2020. Killam also
owns 749,661 square feet (SF) of commercial space that accounted for 4.7% of Killam's NOI for the year ended December 31, 2020.
Basis of Presentation
The following Management's Discussion and Analysis ("MD&A") has been prepared by Management and focuses on key statistics
from the annual consolidated financial statements including the notes thereto and pertains to known risks and uncertainties. This
MD&A should be read in conjunction with the Trust's audited consolidated financial statements for the years ended December 31,
2020 and 2019, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB"). These documents, along with Killam’s 2019 Annual Information Form, are
available on SEDAR at www.sedar.com.
The discussions in this MD&A are based on information available as at February 10, 2021. This MD&A has been reviewed and
approved by Management and the REIT's Board of Trustees.
Declaration of Trust
Killam's investment guidelines and operating policies are set out in Killam's Amended and Restated Declaration of Trust ("DOT")
dated November 27, 2015, which is available on SEDAR. A summary of the guidelines and policies is as follows:
Investment Guidelines
• The Trust will acquire, hold, develop, maintain, improve, lease and manage income-producing real estate properties;
• Investments in joint ventures, partnerships (general or limited) and limited liability companies are permitted;
• Investments in land for development that will be capital property for Killam are permitted; and
• Investments that would disqualify Killam as a "mutual fund trust" or a "unit trust" as defined within the Income Tax Act (Canada) are
prohibited.
Operating Policies
• Overall indebtedness is not to exceed 70% of Gross Book Value, as defined by the DOT;
• Guarantees of indebtedness that would disqualify Killam as a "mutual fund trust" or a "unit trust" as defined within the Income Tax
Act (Canada) are prohibited; and
• Killam must maintain property insurance coverage in respect of reasonable potential liabilities of the Trust.
As at December 31, 2020, Killam was in compliance with all investment guidelines and operating policies.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Forward-looking Statements
Certain statements in this MD&A constitute "forward-looking statements". In some cases, forward-looking statements can be identified
by the use of words such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate”, "potential", "continue" or the
negative of these terms or other comparable terminology, and by discussions of strategies that involve risks and uncertainties. Such
forward-looking statements may include, among other things, statements regarding: uncertainties and risks arising as a result of the
spread of the COVID-19 pandemic, including uncertainty surrounding disruptions to financial markets, regional economies and the world
economy; the financial condition of Killam's tenants and the ability of Killam’s tenants to pay rent; interest rate fluctuations; market
values; impact on financial results including impacts relating to rental rate growth expectations and rent collection; pace and scope on
future acquisitions, construction, development and renovation, renewals and leasing; and the availability of capital to fund further
investments in Killam's business. Readers should be aware that these forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated or implied, or those
suggested by any forward-looking statements, including: the effects, duration and government responses to the COVID-19 pandemic
and the effectiveness of measures intended to mitigate the impact of COVID-19, national and regional economic conditions and the
availability of capital to fund further investments in Killam's business. Further information regarding these risks, uncertainties and other
factors may be found under the heading "Risk Management" in this MD&A and in Killam's most recent Annual Information Form. Given
these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements contained, or incorporated by
reference, in this MD&A.
By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific,
that contribute to the possibility that the predictions, forecasts, projections and various future events may not occur. Although
Management believes that the expectations reflected in the forward-looking statements are reasonable, there can be no assurance that
future results, levels of activity, performance or achievements will occur as anticipated. Neither Killam nor any other person assumes
responsibility for the accuracy and completeness of any forward-looking statement, and no one has any obligation to update or revise
any forward-looking statement, whether as a result of new information, future events, circumstances, or such other factors that affect
this information, except as required by law. The forward-looking statements contained herein are expressly qualified by this cautionary
statement. The forward-looking statements in this document are provided for the limited purpose of enabling current and potential
investors to evaluate an investment in Killam. Readers are cautioned that such statements may not be appropriate and should not be
used for any other purpose.
Non-IFRS Financial Measures
Management believes these non-IFRS financial measures are relevant measures of the ability of the REIT to earn revenue and to
evaluate Killam's financial performance. Readers are cautioned that the below noted non-IFRS measures should not be construed as
alternatives to net income or cash flow from operating activities determined in accordance with IFRS, as indicators of Killam's
performance, or sustainability of Killam's distributions. These measures do not have standardized meanings under IFRS and therefore
may not be comparable to similarly titled measures presented by other publicly traded organizations.
• Funds from operations ("FFO"), and applicable per unit amounts, are calculated by Killam as net income adjusted for depreciation on
an owner-occupied building, fair value gains (losses), interest expense related to exchangeable units, gains (losses) on disposition,
deferred tax expense (recovery), unrealized gains (losses) on derivative liability, internal commercial leasing costs, interest expense
related to lease liabilities, insurance proceeds, and non-controlling interest. FFO are calculated in accordance with the REALPAC
definition, except for the adjustment of insurance proceeds as REALPAC does not address this adjustment. A reconciliation between
net income and FFO is included on page 31.
• Adjusted funds from operations ("AFFO"), and applicable per unit amounts and payout ratios, are calculated by Killam as FFO less an
allowance for maintenance capital expenditures ("capex") (a three-year rolling average of historical capital spend to maintain and
sustain Killam's properties), commercial leasing costs and straight-line commercial rents. AFFO are calculated in accordance with the
REALPAC definition. Management considers AFFO an earnings metric. A reconciliation from FFO to AFFO is included on page 33.
• Adjusted cash flow from operations ("ACFO") is calculated by Killam as cash flow provided by operating activities with adjustments for
changes in working capital that are not indicative of sustainable cash available for distribution, maintenance capital expenditures,
commercial leasing costs, amortization of deferred financing costs and non-controlling interest. Management considers ACFO a
measure of sustainable cash flow. A reconciliation from cash provided by operating activities to ACFO is included on page 34. ACFO is
calculated in accordance with the REALPAC definition.
• Earnings before interest, tax, depreciation and amortization ("EBITDA") is calculated by Killam as income before fair value adjustments,
gains (losses) on disposition, income taxes, interest, depreciation and amortization.
• Interest coverage is calculated by dividing EBITDA by interest expense, less interest expense related to exchangeable units.
• Debt service coverage is calculated by dividing EBITDA by interest expense, less interest expense related to exchangeable units, and
principal mortgage repayments.
• Debt to normalized EBITDA is calculated by dividing interest-bearing debt (net of cash) by EBITDA that has been adjusted for a full year
of stabilized earnings from recently completed acquisitions and developments.
• Same property results in relation to Killam are revenues and property operating expenses for stabilized properties that Killam has
owned for equivalent periods in 2020 and 2019. Same property results represent 90.3% of the fair value of Killam's investment
property portfolio as at December 31, 2020. Excluded from same property results in 2020 are acquisitions, dispositions and
developments completed in 2019 and 2020, non-stabilized commercial properties linked to development projects, and other
adjustments to normalize for revenue or expense items that relate to prior periods or are not operational.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART II
Key Performance Indicators
To assist Management and investors in monitoring Killam's achievement of its objectives, Killam has defined a number of key
performance indicators to measure the success of its operating and financial performance:
1)
2)
3)
FFO per Unit – A standard measure of earnings for real estate entities. Management is focused on growing FFO per unit.
AFFO per Unit – A standard measure of earnings for real estate entities. Management is focused on growing AFFO per unit.
Payout Ratio – Killam monitors its AFFO and ACFO payout ratios and targets improved payout ratios. The ACFO payout ratio is a
measure to assess the sustainability of distributions. The AFFO payout ratio is used as a supplemental metric. Although Killam
expects to sustain and grow distributions, the amount of distributions will depend on debt repayments and refinancings, capital
investments, and other factors, which may be beyond the control of the REIT.
4)
Same Property NOI – This measure considers Killam’s ability to increase its same property NOI, removing the impact of recent
acquisitions and dispositions, developments and other non-same property operating adjustments.
5) Occupancy – Management is focused on maximizing occupancy while also managing the impact of higher rental rates. This measure
is a percentage based on dollars of lost rent from vacancy divided by gross potential residential rent.
6)
Rental Increases – Management expects to increase average annual rental rates and tracks average annual rate increases.
7) Debt to Total Assets – Killam's primary measure of its leverage is debt as a percentage of total assets. Killam's DOT operating
policies stipulate that overall indebtedness is not to exceed 70% of Gross Book Value. Debt to total assets is calculated by dividing
total interest-bearing debt by total assets.
8) Weighted Average Interest Rate of Mortgage Debt and Total Debt – Killam monitors the weighted average cost of its mortgage and
total debt.
9) Weighted Average Years to Debt Maturity – Management monitors the weighted average number of years to maturity on its debt.
10) Debt to Normalized EBITDA – A common measure of leverage used by lenders, this measure considers Killam’s financial health and
liquidity. In normalizing for recently completed acquisitions and developments, Killam uses a full year of stabilized earnings.
Generally, the lower the debt to normalized EBITDA ratio, the lower the credit risk.
11) Debt Service Coverage Ratio – A common measure of credit risk used by lenders, this measure considers Killam’s ability to pay both
interest and principal on outstanding debt. Generally, the higher the debt service coverage ratio, the lower the credit risk.
12)
Interest Coverage Ratio – A common measure of credit risk used by lenders, this measure considers Killam’s ability to pay interest
on outstanding debt. Generally, the higher the interest coverage ratio, the lower the credit risk.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Financial and Operational Highlights
The following table presents a summary of Killam’s key IFRS and non-IFRS financial and operational performance measures:
For the years ended December 31,
2020
2019
Change (2)
Operating Performance
Property revenue
Net operating income
Net income
FFO (1)
FFO per unit – diluted (1)
AFFO (1)
AFFO per unit – diluted (1)
Weighted average number of units outstanding – diluted (000s)
Distributions paid per unit (3)
AFFO payout ratio – diluted (1)
Portfolio Performance
Same property NOI (1)
Same property NOI margin (1)
Same property apartment occupancy
Same property apartment weighted average rental increase (4)
As at December 31,
Leverage Ratios and Metrics
Debt to total assets
Weighted average mortgage interest rate
Weighted average years to debt maturity
Debt to normalized EBITDA (1)
Debt service coverage (1)
Interest coverage (1)
$261,690
$164,662
$146,040
$104,678
$1.00
$86,816
$0.83
104,503
$0.68
82%
$242,164
$152,336
$283,525
$93,884
$0.98
$76,768
$0.80
95,914
$0.66
82%
$147,372
$144,030
63.5%
96.8%
3.4%
63.3%
97.2%
3.6%
8.1%
8.1%
(48.5) %
11.5%
2.0%
13.1%
3.7%
9.0%
3.1%
— bps
2.3%
20 bps
(40) bps
(20) bps
2020
2019
Change (2)
44.6%
2.69%
4.6
10.78x
1.57x
3.36x
43.4%
2.90%
120 bps
(21) bps
4.5
0.1 years
10.15x
1.57x
3.20x
6.2%
—%
5.0%
(1) FFO, AFFO, AFFO payout ratio, debt to normalized EBITDA ratio, debt service coverage ratio, interest coverage ratio, and same property NOI are not
defined by IFRS, do not have standard meanings and may not be comparable with other industries or entities (see "Non-IFRS Financial Measures").
(2) Change expressed as a percentage, basis point ("bps") or years.
(3) The Board of Trustees approved a 3.0% increase in Killam's distribution on an annualized basis to $0.68 per unit effective for the March 2020
distribution.
(4) Year-over-year, as at December 31.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Summary of 2020 Results and Operations
Portfolio Growth from Acquisitions
Killam completed $211.1 million in acquisitions in 2020, bringing its total portfolio to $3.8 billion. Killam added 650 apartment units to
its portfolio by entering into the BC apartment market for the first time, acquiring 315 units in Victoria and further expanding its
presence in Halifax and Moncton. Killam also acquired an MHC containing 89 sites, a small commercial property and development
land, totalling $12.0 million. Killam continues to execute on its geographic diversification strategy and increased the percentage of
NOI generated outside of Atlantic Canada to 32%, up from 30% in 2019. Over 56% of the equity deployed in 2020 was in British
Columbia and Ontario.
FFO per Unit Growth of 2.0% and AFFO per Unit Growth of 3.7%
Killam generated solid FFO and AFFO per unit growth in 2020. FFO per unit was $1.00 in 2020, 2.0% higher than 2019. AFFO per unit
increased 3.7%, to $0.83 compared to $0.80 in 2019. The growth in FFO and AFFO was attributable to an increase in same property
performance, and contributions from recent acquisitions and stabilized developments, partially offset by a 9.0% increase in the
weighted average number of units outstanding.
Positive Same Property NOI Growth
Killam achieved 2.3% same property NOI growth during the year, with apartments up 2.6%, offsetting a 0.2% decline from the MHC
portfolio. Overall, same property revenues were up 2.0% and expenses were up only 1.4%, compared to 2019. Impacts of COVID-19
were felt in the year, including delayed apartment rent increases following rent increase suspensions during Q2, reduced activity at
Killam’s nine seasonal MHCs, lower commercial rent following participation in the Canadian Emergency Commercial Rent Assistance
(CECRA) program, and increased compensation for Killam's front-line workers.
Repositioning Program Continues to Generate Above-average Returns
During 2020, Killam invested $14.5 million in unit repositionings, completing 495 unit upgrades, up 63% from 304 units completed in
2019. The average unlevered return on investment ("ROI") on unit repositionings completed during the year was 13.0%, based on an
average renovation cost of $25,000 per unit. Repositioned units completed in 2020 are expected to generate approximately $1.5 million
in additional NOI on an annualized basis and approximately $30 million in Net Asset Value ("NAV") growth at current capitalization rates.
Refinancing at Low Rates Contributed to Earnings Growth
Killam benefited from lower interest rates on mortgages refinanced in 2020. During the year, Killam refinanced $219.1 million of
maturing mortgages with $297.1 million of new debt at a weighted average interest rate of 1.83%, 85 bps lower than the weighted
average interest rate of the maturing debt. Killam was also able to take advantage of low interest rates for acquisitions, placing debt on
acquisitions in the fourth quarter of 2020 at a weighted average interest rate of 1.9%.
Substantial Development Activity
Killam continues to advance its development pipeline, with five active developments underway at year-end totaling 711 units (523 units
representing Killam's percentage ownership) for an expected total investment of $310 million (Killam's investment $223 million). During
2020, Killam invested $76.1 million in its active development projects and completed its Shorefront development, a 78-unit building
located in Charlottetown, PE. Shorefront was substantially complete in Q4 and is currently 55% leased. Killam's 38-unit 10 Harley project
is 95% complete and the building is expected to open by the end of February. Killam's 10% interest in the 233-unit Nolan Hill
development project was also substantially complete at year-end, and Killam closed the acquisition of the remaining 90% of the project
in January 2021.
Environmental, Social and Governance (ESG) Focused Initiatives
Killam is continuing to work towards reducing its impact on the environment and ensuring its buildings are sustainable and resilient to
climate change. Killam’s ongoing energy efficiency capital investments program has been updated to include the installation of solar
photovoltaic panels as a part of Killam's renewable energy targets. In late 2020, solar panels were installed at 11 existing properties, for
an investment of $1.2 million, with an additional $2.5 million budgeted in 2021. Management completed its second GRESB rating in
2020, realizing a 32% improvement over its initial 2019 submission. From this process, many new ESG initiatives continue to be rolled
out, such as building certification applications, sustainable supply chain management policies and enhanced diversity and inclusion
practices.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
COVID-19 Impact on Operations
On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic. Since the onset of the pandemic,
Killam has focused on ensuring the continued health and safety of its employees, tenants, stakeholders and communities. Killam
responded quickly and executed on its Pandemic Illness Plan to help lessen the spread of COVID-19.
Due to the inherent uncertainty surrounding disruption from COVID-19, it is not possible to forecast with certainty the duration and full
scope of the economic impact and other consequential changes the pandemic may have on Killam's business and operations, both in the
short term and medium term. However, we are encouraged by the resourcefulness of our staff and resiliency of our revenue base.
All Killam's apartment properties, permanent MHCs and the essential retail tenants remained operational during the third and fourth
quarters. As COVID-19 persists, Killam will continue to act and support its tenants in accordance with direction provided by the federal,
provincial, and municipal governments.
Due to the economic uncertainty facing many Canadians during the initial emergency measures associated with the pandemic, Killam
waived the collection of rental increases from April to July 2020 for lease renewals, in addition to the waiving of both NSF and late fees.
During Q3-2020, Killam waived increases for July but reinstated the increases beginning in August or September for most properties.
Killam also delayed distribution of rental increase notices to tenants between March and May 2020. As the required notice period to
increase rents is a minimum of three months in most provinces across Canada, Killam did not begin collecting rental increases pertaining
to these notices until Q4-2020.
Overall, rent collection remained strong in 2020, with rent collection rates as follows for the year ended December 31, 2020:
% Collected (1)
Apartments
MHCs
Commercial
Total (weighted average)
2020
99.9%
99.6%
98.5%
99.7%
(1) % collected takes into consideration CECRA government funding, rent deferrals and rent abatement.
Killam worked with tenants who were financially impacted by COVID-19 during the year and where relevant, consistent with provincial
directives. Historically, Killam has had less than 0.3% of revenue uncollected, and at this time management does not expect a material
increase in rental defaults in 2021. Killam continues to offer a rent deferral program to assist residential tenants facing financial hardship
due to COVID-19, working with residents on a case-by-case basis.
Killam also works closely with its commercial tenants under the CECRA program. Killam's commercial tenant base makes up a relatively
small portion of Killam's overall business, with the commercial portfolio accounting for approximately 6.0% of total revenues and 4.7%
of Killam's total NOI for the year ended December 31, 2020. Killam filed CECRA applications for approximately 40 commercial tenants
and recorded a reduction in commercial revenue of $0.3 million during the year related to the program. Killam also provided various
commercial tenants rental abatement during 2020 to help mitigate the impact of the pandemic with an impact of $0.3 million on
commercial revenue.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Strategic Targets
Growth in Same Property NOI
2020 Target
2020 Performance
2021 Target
Longer-term Target
Expanded Portfolio
2020 Target
2020 Performance
2021 Target
Longer-term Target
Geographic Diversification
2020 Target
2020 Performance
2021 Target
Longer-term Target
Development of High-quality Properties
2020 Target
2020 Performance
2021 Target
Longer-term Target
Strengthened Balance Sheet
2020 Target
2020 Performance
2021 Target
Longer-term Target
Sustainability
2021 Target
Longer-term Target
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Same property NOI growth of 3% to 5%.
Killam achieved same property NOI growth of 2.3% in 2020, slightly below its
2020 target as a result of COVID-19.
Same property NOI growth over 2%, subject to COVID-19 related restrictions
being lifted by Q3-2021.
Same Property NOI growth averaging 2% - 4%.
Complete a minimum of $175 million in acquisitions.
Killam exceeded its target, completing $211.1 million in acquisitions.
Complete a minimum of $100 million in acquisitions.
Grow the portfolio to over $5.0 billion by the end of 2025.
Earn at least 32% of 2020 NOI outside Atlantic Canada.
Killam generated 32% of 2020 NOI outside Atlantic Canada.
Earn over 32% of 2021 NOI outside Atlantic Canada.
Earn over 36% of NOI generated outside Atlantic Canada by 2025.
To complete the Shorefront development, and break ground on two
additional development projects.
Killam met its development target, completing the 78-unit Shorefront project
in October 2020, while also breaking ground on its Civic 66 development and
acquiring a 50% interest in the active Luma development in Q3-2020.
To complete the construction of two buildings totalling a 166 units and break
ground on two additional developments totalling a minimum of 150 units.
To complete a minimum of $250 million in developments between 2021 and
2025.
Maintain debt as a percentage of assets ratio below 47%.
Debt as a percentage of total assets was 44.6% as at December 31, 2020.
Maintain debt as a percentage of assets ratio below 47%.
Reduce debt as a percentage of assets below 40% by the end of 2025.
Minimum investment of $5.0 million in energy initiatives in 2021 to reduce
Killam's carbon footprint and increase sustainability.
Reduce Killam's GHG emissions by 15% by 2030 and produce a minimum of
10% electricity through renewable sources by 2025.
8
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Outlook
Demand for Apartments Remains Strong
Killam's 2020 same property NOI growth was impacted by the COVID-19 pandemic, mainly due to the waiving of rental increases,
suspension of rental increase notices, and a reduction in revenue at Killam's seasonal resorts. Despite these constraints, demand for
apartments remains robust and Killam continues to execute on its value-enhancing initiatives. Management is seeing stable to increasing
market rents across the majority of its portfolio, which is expected to lead to continued top-line growth. This growth may be partially
offset by a government-imposed rental rate freeze in Ontario in 2021, and a potential uptick in vacancy in the year ahead. With ongoing
pandemic restrictions, Killam may see occupancy levels decline slightly in certain markets and student-focused properties. Management
will closely monitor demand drivers across the portfolio and adjust leasing efforts accordingly.
Continued Expansion of Suite Repositioning Program
Management is committed to its repositioning program. Following the success of 2020's program of 495 suite renovations, management
plans to expand the program further in 2021, targeting 550 repositions. In addition, Killam is improving efficiencies and targeting
improved performance metrics in the year ahead, including the percentage of repositionings completed in 28 days. Suite repositionings
represent unit upgrades above $10,000. Killam targets an ROI of at least 10% and monthly rental rate increases of 10%–30% upon
completion of the renovation. A review of Killam's portfolio has identified a minimum of 5,000 units having repositioning potential.
Investments in Energy Efficiency Programs to Reduce CO2 Emissions and Offset Rising Operating Costs
Investments in energy and water-saving initiatives, and operational efficiencies, are expected to continue to reduce Killam's energy
consumption and offset rising operating costs, including property taxes and insurance. Killam has invested $16.4 million to reduce the
carbon footprint of its buildings through the installation of low-flow water fixtures, boiler, ventilation and cooling system upgrades, and
the retrofit of temperature control and lighting systems over the last four years. Management is planning to invest a minimum of $5.0
million in new efficiency projects in 2021, including increased investment in solar panels. These projects should contribute to same
property NOI growth by lowering consumption and improve Killam’s sustainability metrics.
Interest Expense Savings on Refinancings
Killam’s mortgage financings and renewals progressed on schedule in 2020, in terms of both timing and upfinancing opportunities.
Looking forward, with $141.2 million in mortgages maturing in 2021, management expects to up-finance approximately $50.0 million of
cash and, based on current interest rates, reduce its overall weighted average interest rate.
Growth through Accretive Developments
Development remains an important component of Killam's growth strategy. Killam currently has five developments underway, for a total
of 523 apartment units at a total cost of approximately $223.4 million and an expected weighted average yield of approximately 5.0%.
The majority of the capital required for these developments is being funded through construction loans. In addition, Killam acquired the
remaining 90% interest in the Nolan Hill development early in 2021, adding another 233 units to its portfolio. The completion and
stabilization of these projects are expected to contribute positively to Killam’s future FFO per unit growth.
Well-positioned for Future Acquisitions
Killam finished 2020 with acquisition capacity exceeding $330 million following a $40 million increase in its credit facility in December.
Following the closing of the remaining 90% interest in Nolan Hill and acquisitions of land for future development in early 2021,
Management expects its acquisition capacity to be over $250 million. Management remains focused on growing its portfolio in Ontario
and Western Canada and is actively looking for acquisition opportunities in these markets.
Diverse Tenant Demographics Contribute to Stable Occupancy
Killam's tenant base includes a diverse mix of tenants, including young professionals, seniors, empty nesters, families, and students.
Since the onset of COVID-19, Killam has experienced relatively stable occupancy in most of its markets, however, Killam has seen
increased vacancy in St. John's, Newfoundland, Kanata (Ottawa) and downtown Calgary. The diversity of Killam's tenant base is expected
to contribute to continued stable occupancy overall. The following chart illustrates Killam's 2020 tenant demographic by age.
2020 Tenant Demographic by Age
75 Plus, 10.8%
Under 20, 1.7%
65 to 75, 9.7%
20 to 25, 11.9%
55 to 65, 10.0%
25 to 35, 28.1%
Under 20
20 to 25
25 to 35
35 to 55
55 to 65
65 to 75
75 Plus
35 to 55, 27.8%
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 2 7
9
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART III
Business Strategy
Increase Earnings from the Existing Portfolio
Killam increases the value of its portfolio by maximizing revenue and managing expenses. To achieve NOI growth, Killam must manage
three critical factors: occupancy, rental rates and operating costs. Killam focuses on providing superior customer service and employee
training, using technology and analytics to drive leasing and marketing, maximizing rental rates on renewals and completing unit
renovations and repositionings, to maximize revenue on turns. Operating cost management is focused on energy efficiencies,
technology investments, economies of scale, risk management, and staff and tenant education.
Killam has increased same property NOI by an average of 2.4% per annum over the past decade; in the last five years, Killam has
averaged 3.8% growth.
Historic Same Property NOI Growth
4.0%
3.6%
4.8%
4.1%
2.3%
2016
2017
2018
2019
2020
Expand the Portfolio through Acquisitions
Killam is expanding its portfolio through the acquisition of centrally located buildings in its target markets of Ontario, Alberta and most
recently British Columbia, and continuing to add to its established portfolio in Atlantic Canada. Acquisition activity varies by year
depending on opportunities and access to capital. In 2020, Killam acquired $211.1 million in assets. On average, Killam has acquired over
$122.0 million of properties annually since its first acquisition in 2002.
Killam operates one of Canada's newest apartment portfolios and targets the acquisition of newer properties as modern, high-quality
buildings are in greater demand by tenants and require less maintenance capital to operate.
Annual Acquisitions ($ millions)
$200
$167
$103 $125
$45
$16
$36
$3
$115 $106 $85
$121
$160
$54
$72
$315
$200
$191 $211
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2 0 1 4
2 0 1 5
2 0 1 6
2 0 1 7
2 0 1 8
2 0 1 9
2 0 2 0
Annual Acquisitions
Average
2 8 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
2 8 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
10
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Develop High-quality Properties in Core Markets
Killam enhances its organic and acquisition growth opportunities with development. Killam started developing apartments in 2010 and
has completed twelve projects to-date, investing over $300 million to construct nearly 1,300 units. Killam has an experienced
development team who hold architectural and engineering degrees, that oversee all projects. New property construction enables Killam
to control the quality and features of its buildings. Killam targets yields of 4.5%–5.5% on development, and expects to build at a 50–150
bps discount to the market capitalization rates ("cap-rates") on completion, creating value for its unitholders. Killam currently has a
development pipeline of approximately 3,000 units.
Apartment Developments Complete ($ millions)
$105
$69
$5
$—
$33
$14
$15
$5
$38
$22
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Diversify Geographically through Accretive Acquisitions
Geographic diversification is a priority for Killam, and it is focused on increasing the amount of NOI generated outside Atlantic Canada.
Killam is targeting expansion in selected markets including Ottawa, the Greater Toronto Area, Southwestern Ontario, Calgary, Edmonton
and Victoria. Killam's strong operating platform can support a larger and more geographically diverse portfolio. Increased investment in
Ontario and Western Canada will enhance Killam's diversification and exposure to the urban centres in Canada, which traditionally have
higher rates of population growth.
% of Killam's NOI Generated Outside Atlantic Canada
Apartment
MHC
Commercial
6%
6%
4%
8%
4%
11%
4%
16%
4%
17%
4%
19%
2%
3%
3%
4%
22%
23%
3%
3%
26%
2012
2013
2014
2015
2016
2017
2018
2019
2020
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 2 9
11
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Committed to ESG
Killam takes its responsibility regarding corporate citizenship seriously, with its core values of Build Community and Do the Right Thing
guiding its commitment to ESG programs and initiatives.
Killam believes that effective corporate governance is critical to its continued and long-term success and contributes to maximizing
Unitholder value. The Trustees know that commitment to sound governance practices is in the best interest of Killam stakeholders and
contributes to effective and efficient decision-making.
Killam has a long history of investing in energy efficiencies. When natural gas was first introduced to the market in Atlantic Canada in
2004, Killam was an early adopter. Today 58% of its properties are heated with natural gas, a much cleaner fuel than furnace oil. Starting
in 2016, Killam commenced a five-year, $25.0 million energy-efficiency program, focused on reducing its greenhouse gas emissions,
gaining operating efficiencies and lowering operating costs. In the past five years, Killam's green projects include the installation of solar
panels, installation of electric vehicle (EV) chargers, air-sealing apartment units, installation of low-flow toilets and LED lighting retrofits
across the entire apartment portfolio. This is in addition to the installation of solar, EV chargers and geothermal heating systems in new
developments.
Giving back has always been an important part of being a responsible corporate citizen at Killam. Killam invests in its communities
through various programs and initiatives, and partners with non-profit housing agencies to provide more than 750 subsidized apartment
units throughout its portfolio. The focus on fostering a sense of community is a priority at Killam.
Killam is committed to providing a supportive and inclusive workplace for all employees. Employees are encouraged to develop their full
potential and use their unique talents, maximizing the efficiency of Killam’s teams. Killam recognizes the enrichment that comes from
employee diversity and inclusion, including a strengthened corporate culture, improved employee retention and the benefit of different
perspectives and ideas.
Killam’s ESG Oversight Committee provides guidance and ensures the integration of ESG into Killam’s strategic objectives. In addition,
management regularly reports progress against ESG targets to the Board’s Governance & ESG Committee.
Sustainability Policy
Killam has a sustainability policy detailing its commitment to ESG practices. The policy applies to all Killam employees. It is supported by
the Governance and ESG Committee and approved by the Board of Trustees.
The following is Killam’s commitment to ESG, included in the ESG policy:
• Invest in new technology and initiatives to increase sustainability and lower our carbon footprint across the portfolio with a focus on
reducing waste, greenhouse gas emissions and water usage.
• Support and invest in our employees through training and development opportunities and providing access to a safe and positive
workplace.
• Provide outstanding customer service and a sense of community at our properties.
• Support community initiatives in the communities in which we operate, with an emphasis on affordable housing.
• Establish and implement robust governance policies and practices.
• Report annually on our ESG programs, new initiatives and performance against targets.
• Review our annual ESG benchmark ratings (from various industry bodies) and target areas for improvement each year.
ESG Progress
Killam continues to research and invest in initiatives to reduce its greenhouse gas emissions. Along with its annual energy efficiency
program, Killam commenced installation of photovoltaic solar panels in 2020 at 11 of its properties, generating 880 MWh of renewable
energy with a 10% ROI. As well, Killam participated in its second GRESB assessment, achieving a 32% increase from initial score and a
green star ranking.
Based on Killam's 2020 greenhouse gas emissions, new longer-term targets have been developed. Management is targeting to reduce
Killam's carbon footprint by 15% in the next 10 years and to use renewable energy sources to replace other fossil fuel for a minimum of
10% of its supply over the next 5 years. Killam will continue to monitor progress and adjust these targets in future years, acknowledging
the complexity and many external factors that contribute to Killam's overall goal of reducing its greenhouse gas emissions. Killam is
committed to being a part of the communities where it operates and to decreasing its carbon footprint and its overall impact on climate
change.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Portfolio Summary
The following table summarizes Killam's apartment, MHC and commercial portfolios by market as at December 31, 2020:
Apartment Portfolio
Units (1)
Number of
Properties
NOI ($) (2)
NOI (2)
(% of Total)
Nova Scotia
Halifax
Sydney
New Brunswick
Moncton
Fredericton
Saint John
Miramichi
Ontario
Ottawa
London
Cambridge-GTA
Newfoundland & Labrador
St. John's
Grand Falls
Prince Edward Island
Charlottetown
Summerside
Alberta
Calgary
Edmonton
British Columbia
Victoria
Total Apartments
Nova Scotia
Ontario
New Brunswick
Newfoundland & Labrador
Total MHCs
Prince Edward Island
Ontario
Nova Scotia
New Brunswick
Total Commercial
Total Portfolio
5,814
139
5,953
2,073
1,529
1,202
96
4,900
1,216
523
818
2,557
915
148
1,063
1,064
86
1,150
531
579
1,110
65
2
67
36
23
14
1
74
9
5
6
20
12
2
14
20
2
22
3
4
7
$56,104
$1,312
$57,416
$12,636
$11,735
$6,668
$651
$31,690
$10,642
$5,409
$11,008
$27,059
$6,334
$662
$6,996
$7,123
$612
$7,735
$5,277
$6,167
$11,444
34.1%
0.8%
34.9%
7.8%
7.1%
4.0%
0.4%
19.3%
6.5%
3.3%
6.7%
16.5%
3.8%
0.3%
4.1%
4.3%
0.4%
4.7%
3.3%
3.7%
7.0%
Manufactured Home Community Portfolio
315
17,048
2
206
$3,808
$146,148
2.3%
88.8%
Sites
2,749
2,284
672
170
5,875
Number of
Communities
17
17
3
2
39
Commercial Portfolio (3)
Square
Footage (4)
191,511
306,106
218,829
33,215
749,661
Number of
Properties
1
1
5
1
8
253
NOI ($) (2)
$4,807
$5,460
$217
$368
$10,852
NOI ($) (2)
$1,361
$4,510
$1,379
$412
$7,662
$164,662
NOI (2)
(% of Total)
2.9%
3.3%
0.1%
0.2%
6.5%
NOI (2)
(% of Total)
0.8%
2.8%
0.8%
0.3%
4.7%
100.0%
(1)Unit count includes the total unit count of properties held through Killam's joint arrangements. Killam has a 50% ownership interest in two apartment
properties in Ontario, representing a proportionate ownership of 484 units of the 968 units in these properties. Killam manages the operations of all
the co-owned apartment properties.
(2)For the year ended December 31, 2020.
(3)Killam also has 175,800 square feet of ancillary commercial space in various residential properties across the portfolio, which is included in apartment
results.
(4)Represents Killam's ownership, which includes a 50% interest in commercial properties located in Nova Scotia and Prince Edward Island, managed by
the co-owners.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 3 1
13
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Unique Portfolio Features
Atlantic Canada's Market Leader
Killam is the single largest multi-residential landlord in Atlantic Canada, with a 13% market share of apartments in its core markets as of
December 31, 2020. A large portfolio in each core market provides advantages, including brand recognition, a diverse selection of
apartments in each city, improved operating margins from economies of scale and the ability to attract and retain top management
talent.
Market Share and Apartment NOI (%)
% of Apartment NOI
Killam's Market Share
38%
11%
9%
15%
8%
17%
17%
22%
5%
4%
12%
5%
Halifax
Moncton
Fredericton
Charlottetown
St. John's
Saint John
Relatively Modest Exposure to Rent Control
Over 70% of Killam's current apartment portfolio is not impacted by permanent rent control, allowing Killam to move rents to market
rates annually in these regions. Prince Edward Island, representing 5.3% of Killam’s apartment NOI, is the only province in Atlantic
Canada with rent control for apartments. In November 2020, Nova Scotia announced temporary rent restriction measure, limiting rental
increases on lease renewal to 2%, to address the economic impact of the COVID-19 pandemic. Killam's Nova Scotia portfolio accounts
for 39.3% of apartment NOI. These measures are in place until the provincial state of emergency is lifted, or until February 2022,
whichever is sooner. At this time, Management does not expect Nova Scotia to move to a permanent rent control model.
Killam's Ontario portfolio, accounting for 18.5% of apartment NOI, is subject to rent control. In response to the COVID-19 pandemic, the
Ontario government passed legislation to freeze rents at 2020 levels in 2021 however, landlords can move rents to market on a unit-by-
unit basis as they become vacant. Killam's newest market, British Columbia, making up 2.6% of Killam's apartment NOI, also has rent
control and the government announced a maximum allowable rental increase of 1.4% in 2021. British Columbia also announced a rent
increase freeze in response to COVID-19. The freeze is currently in effect until July 10, 2021. Ontario and Nova Scotia both have rent
control for MHCs, however, in both provinces, rent controls do not apply to new tenants.
In all of the regions impacted by rent control, owners may apply for above-guideline increases ("AGIs") to offset significant capital
expenditures. Killam analyzes each property on a regular basis, considering its location, tenant base and vacancy, to evaluate the ability
to optimize rents on renewal and on turn. Management has increased its focus on applying for AGIs in Ontario, where increases above
the annual guideline are supported by significant capital investments in Killam's assets.
CMHC-insured Debt Available for Over 85% of Killam’s Portfolio
Apartment owners are eligible for CMHC mortgage loan insurance. These policies eliminate default risk for lenders, resulting in lower
interest rates than those available for conventional mortgages. Approximately 85% of Killam's apartment debt is CMHC-insured. As
mortgages are renewed and new properties are financed, Killam expects to increase the percentage of apartment mortgages with
CMHC-insured debt. CMHC insurance is not available for commercial properties or the owners of MHCs; however, the financing is
available to manufactured home owners, increasing the affordability of these homes.
Focused on Customer Service
Annually, Management engages an independent market research firm to measure tenants’ satisfaction through an online survey (3,450
respondents in 2020). Killam’s 2020 survey results support Killam’s focus on service, with tenants giving Killam an impressive 87%
satisfaction rating. Killam takes pride in offering tenants well-maintained properties, responding to service requests in a timely manner
and providing an attractive housing value proposition. In-house educational programs and adoption of new technology enhance
employees’ skills to provide exemplary service to current and prospective tenants.
Geographic Diversification
Killam is focused on increasing its geographic diversification through the acquisition and development of properties in its core markets in
Ontario, Alberta and British Columbia. Killam’s current apartment portfolio consists of 2,557 apartment units in Ontario, up from 225
units in 2010 when Killam first entered the market, and includes properties in Ottawa, Toronto, London, and Kitchener-Waterloo-
Cambridge. Killam has also assembled a portfolio of 1,110 units in Calgary and Edmonton and recently closed the acquisition of the
remaining 90% interest in a joint development project in Calgary, adding an additional 233 units to its Alberta portfolio in January 2021.
In January 2020, Killam acquired its first apartment property in Greater Victoria, BC, and now owns 315 units in the province. In addition
to apartments, 39% of Killam’s MHC sites and 41% of Killam's commercial square footage is located in Ontario.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Below Market Rents
Management estimates market rental rates are approximately 10-15% higher than Killam's total apartment weighted average rents.
Killam's weighted average rental rate was $1.37 per square foot for the year ended December 31, 2020. The differential between market
and in-place rents reflects Killam's current affordability within its markets, as well as opportunities for rental increases when natural
turnover arises.
Core Market Update
Halifax
Thirty-four percent of Killam’s NOI is generated by its Halifax apartment properties. Halifax is the largest city in Atlantic Canada and is
home to 17% of Atlantic Canadians. The city's rental market totals 54,100 units, with an additional 3,200 rental units currently under
construction. According to CMHC's 2020 Rental Market Report, the Halifax rental market although slowing, remains tight and in need
of increased supply. Halifax’s diverse economy generates 54% of Nova Scotia’s GDP and is home to 44% of the province’s population.
With six degree-granting universities and three large community college campuses, Halifax has approximately 39,600 full-time
students, including 7,100 international students. Halifax’s employment base is diversified, with the largest sectors focused on public
service, health care, education, and retail and wholesale trade. Halifax is home to the largest Canadian Forces Base by number of
personnel, and the Department of National Defence is the city's largest single employer.
Scotiabank’s October 2020 Provincial Pulse report notes that while Nova Scotia experienced lower population growth in 2020 as a
result of the pandemic, a significant increase in infrastructure spending is expected to offer short-term support for Nova Scotia's
growth outlook. Despite the challenges reflected by decreased GDP and employment rates for 2020, the report notes Halifax remains
Atlantic Canada's high value service sector hub, showing resilience with greater capacities for work to be carried out remotely. The
economic outlook forecasts year-over-year gains in 2021 for Nova Scotia's GDP growth, employment rates and Consumer Price Index.
According to RBC's December 2020 Provincial Outlook, Nova Scotia's employment is quickly returning to pre-crisis levels, with 97% of
pandemic job losses recovered by November 2020. Nova Scotia is expected to see enhanced public-sector capital investments, which
will stimulate the province's economy, and provide an additional boost to employment in 2021. RBC projects provincial GDP to grow
4.3% in 2021, after contracting by 4.4% in 2020.
Over 300 companies are participating in ocean-sector businesses in Nova Scotia, with more than 80 innovators of new, high-tech
products and services. The Ocean Frontier Institute provides funds for ocean research and advancement for faculty at Dalhousie
University, creating new opportunities for Dalhousie researchers. There is tremendous opportunity to leverage science and technology
in Canada's ocean sectors, furthering the knowledge-based ocean economy. Canada's Ocean Supercluster aims to build Canada's ocean
economy into one of the country's most significant and sustainable economic segments, through federal government and private sector
co-investment totalling more than $300 million over the next four years.
The following chart summarizes Halifax's population growth from 2005 to 2020, the most recent year for which detailed population
growth data is available:
Historical Population Growth, Halifax
Annually from July 1 - June 30
10,000
8,000
6,000
4,000
2,000
—
500,000
400,000
300,000
2 0 0 4
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2 0 1 4
2 0 1 5
2 0 1 6
2 0 1 7
2 0 1 8
2 0 1 9
2 0 2 0
Population
Population Growth
Source: Statistics Canada
Halifax's population growth in each of the last three years was 1.9%, 2.2% and 2.0%, primarily driven by immigration and urbanization.
Over this three-year period, Statistics Canada has reported that Halifax's overall population grew by over 26,500 people. The slight
decrease in population growth from July 1, 2019 to June 30, 2020, compared to July 1, 2018 to June 30, 2019, is attributable to the
pandemic, resulting in decreased immigration year-over-year. RBC's December 2020 Provincial Outlook predicts immigration to resume
once immunization is well underway and return to pre-pandemic levels by the end of 2021.
Statistics Canada reported net provincial migration in 2020 was 1,600, with the past five years seeing positive migration. Halifax has seen
an increase in international immigration, representing 64% of Halifax's population growth in 2020.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 3 3
15
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
According to CMHC's Rental Market Report, released in early 2021, Halifax currently has over 3,000 rental units under construction.
CMHC's report states rising home prices coupled with record-low inventory are negatively impacting affordability for first-time home
buyers, likely slowing the transition from rental to homeownership. CMHC's Rental Market Report reported Halifax's vacancy rose by
0.9% to 1.9% for 2020, compared to 1.0% in 2019. Halifax saw the highest vacancy in its downtown core and south peninsula, an area
with high concentrations of students, reflecting the impact of the city's major universities offering their programs online and less
international travel. Vacancy rates were higher in older and less expensive units, highlighting demand for renovations and
redevelopment. Despite a lack of international immigration due to COVID-19 restrictions, net interprovincial migration has remained
strong, increasing 8.0% in the second quarter of 2020, compared to the same period of 2019.
The following chart summarizes Halifax's housing start activity from 2007 to 2020:
Halifax Total Housing Starts
Total Singles/Semi-Detached/Row
Total Starts
Average Total Starts
Total Apartment/Condo Units
Apartment Vacancy
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
l
e
u
a
V
x
e
d
n
I
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Source: CMHC
New Brunswick
Nineteen percent of Killam’s NOI is generated by apartments in New Brunswick's three major urban centres – Fredericton, Moncton
and Saint John. Fredericton is the provincial capital and home to the province's largest university and a significant public sector
workforce. Moncton is the province's largest city and is a transportation and distribution hub for Atlantic Canada. According to RBC's
December 2020 Provincial Outlook, New Brunswick's economy suffered in 2020 with a projected 4.2% decline in GDP, however, the
outlook for 2021 is positive, with expected growth of 4.0%. RBC reports New Brunswick's labour market is recovering with 92% of job
losses, as a result of the pandemic, recovered by fall 2020. Moncton, Fredericton and Saint John represent 8%, 7% and 4% of Killam's
2020 NOI, respectively.
According to CMHC, New Brunswick's vacancy was 3.1% in October 2020, compared to 2.6% in 2019. Increased vacancy is partially a
result of new supply, approximately 2,200 units were completed in 2020.
St. John's, Newfoundland
Four percent of Killam’s NOI is generated in St. John's, Newfoundland. RBC's December 2020 Provincial Outlook reported
Newfoundland's economy is projected to see a 4.6% decline in GDP in 2020. Newfoundland's labour force made a strong recovery,
being the only province where employment has returned to pre-pandemic levels by November 2020. However, due to the timing of
large projects finishing up and newer ones being cancelled, this momentum is not expected to continue.
Prince Edward Island
Killam has a 17% share of the Charlottetown market, the provincial capital and the economic centre of Prince Edward Island. The
Charlottetown apartment market accounted for 4% of Killam’s total NOI in 2020. According to RBC’s December 2020 Provincial
Outlook report, PEI’s economy is expected to be the first to recover to pre-COVID levels in 2021, with economic growth of 4.2%
forecasted. While economic damage was less severe in PEI than seen in other provinces, the province is projected to see a 3.7%
decline in GDP for 2020. CMHC reported Charlottetown vacancy of 2.2% in October 2020, an increase of 100 bps from October 2019,
as the market appears to be responding to 1,100 new units entering the market in 2020, with only 415 absorbed in the year.
Ontario
Killam's Ontario apartment portfolio generated 17% of NOI in 2020. RBC’s December 2020 Provincial Outlook reported Ontario
experienced the largest economic contraction in history, a decline of 5.6%, as a result of extended and frequent lockdowns
throughout the province. However, Ontario's economy is expected to lead all provinces in terms of growth in 2021, with immunization
ramping up, an annual growth rate of 5.5% is projected. Overall, Ontario vacancy per CMHC was 3.2% for October 2020, up from 2.0%
in October 2019.
3 4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Ottawa
According to CMHC’s 2020 Rental Market Report, Ottawa's vacancy rates have risen to 3.9% compared to 1.8% in October 2019, as
survey estimates indicate the number of newly occupied units increased by 887, while supply was nearly double at 2,316 units. The
vacancy rate rose more significantly in centrally located areas as compared to outer suburban areas, as a result of reduced student and
young professionals demand for units in the city's core. Despite increased vacancy, rents grew for all bedroom types, with average rent
for a two-bedroom unit increasing 5.2%.
Kitchener-Waterloo-Cambridge
Known as Canada's Silicon Valley since the 1980s, the region saw vacancy rates decrease between 2014 and 2017 from 3.0% to a low of
1.9% in October 2017. In October 2020, CMHC reported vacancy of 2.1% unchanged compared to October 2019, with 2,422 new units
entering the market in 2020. Vacancy rates declined in most zones, however, Waterloo's vacancy rate increased from 1.6% in October
2019 to 2.9% in October 2020, due to newly added units and pandemic related online study. CMHC attributes steady rental demand
during 2020 to Canadian Emergency Response Benefit and Employment Insurance payments allowing tenants to continue paying rent.
London
The London primary rental market saw an increase in overall vacancy, from 1.8% in 2019 to 3.4% in 2020, as CMHC reported new supply
was met with absent demand. CMHC's 2020 Rental Market Report reported a decline in net international migration levels as the driving
force for lack of demand for new units.
Greater Toronto Area
According to CMHC’s 2020 Report, GTA's vacancy rate increased from 1.5% in 2019 to 3.4% in 2020. The highest vacancy rates are
located in Toronto's downtown core, with bachelor units at 5.5% vacancy, as COVID-19 restrictions have increased desire for larger and
less centrally located units. The pandemic resulted in muted immigration in the GTA, with the closure of international borders impacting
population growth, with 30,000 fewer immigrants and 11,000 fewer non-permanent residents in Q2-2020 compared to Q2-2019.
Alberta
Seven percent of Killam's NOI was earned in Alberta. RBC's December 2020 Provincial Outlook reported Alberta experienced the worst
one-year decline on record, projecting an 8.3% decline in Alberta's economy. Recovery of Alberta's economy is expected to take
longer than most Canadian provinces, while 4.5% growth is projected for 2021, RBC predicts it could take until 2023 to fully reverse
2020's damage. Increased oil production and capital investments into the energy sector are expected to have positive impacts on the
economy in 2021.
Calgary
In its 2020 Rental Market Report, CMHC reported 6.6% vacancy for Calgary, up from 3.9% in October 2019, as economic downturn
weakened demand. Calgary experienced weakened demand due to increased rental supply, job losses due to the COVID-19 pandemic
and the eroded oil market, and negative net migration as a result of an outflow of interprovincial migration and reduced immigration.
Average rent remains consistent with October 2019, indicating landlords are keeping rental rates the same while incentivizing tenants
through non-price measures to remain competitive, such as free utilities, cash bonuses and free rent.
Edmonton
In Edmonton, CMHC reported 7.2% vacancy in October 2020, versus 4.9% in October 2019, with stable average rent year-over-year.
Vacancy was higher in the city centre as well as among newly constructed units, which had an average rent 31.2% higher than existing
units of all ages. These higher rents resulted in increased vacancy among newer units, reporting a vacancy rate of 12.0% in October
2020. CMHC reported demand for rental units has weakened over the past year as a result of the pandemic and the drop in oil prices,
with over 121,000 jobs lost in the first half of 2020.
British Columbia
Killam entered the BC market in 2020, which made up 2% of NOI in the year. RBC's December 2020 Provincial Outlook projects a 5.3%
contraction in BC's GDP for 2020, with positive outlook for 2021. Despite the pandemic, work on major capital projects in the province
continued with minimal disruption in 2020, including construction on the Coastal GasLink pipeline and the LNG Kitimat project. The
LNG Kitimat project is expected to hit its peak construction phase in 2021, creating 3,000 jobs. RBC expects strong capital investment
and a rebound in major industrial sectors in 2021, predicting a 33-year high growth rate of 5.1%.
CMHC reported 2.2% vacancy for Victoria in October 2020, compared to 1.0% in October 2019. Rental demand slowed as the
COVID-19 pandemic resulted in economic downturn and virtual working/schooling allowed renters to move further away from the
city's core or combine households for affordability.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART IV
2020 Financial Overview
Consolidated Results
For the years ended December 31,
Total Portfolio
Same Property
Non-Same Property
Property revenue
Property operating expenses
General operating expenses
Utility and fuel expenses
Property taxes
Total operating expenses
NOI
Operating margin %
2020
$261,690 $242,164
$232,074 $227,577
2019 % Change
8.1%
2020
2019 % Change
2.0%
2020
$29,616
2019 % Change
103.0%
$14,587
41,610
23,240
32,178
$97,028
37,602
23,515
28,711
$89,828
$164,662 $152,336
62.9%
62.9%
10.7%
(1.2) %
12.1%
8.0%
8.1%
— bps
35,876
20,968
27,858
$84,702
34,616
22,293
26,638
$83,547
$147,372 $144,030
63.3%
63.5%
3.6%
(5.9) %
4.6%
1.4%
2.3%
20 bps
5,734
2,272
4,320
$12,326
$17,290
58.4%
2,986
1,222
2,073
$6,281
$8,306
56.9%
92.0%
85.9%
108.4%
96.2%
108.2%
150 bps
The resiliency of Killam's portfolio drove same property NOI growth for the year ended December 31, 2020. This strength, along with
contributions from acquisitions and developments, resulted in 8.1% NOI growth for the year.
Same property results included properties owned during comparable 2020 and 2019 periods and represent 90.3% of the fair value of
Killam's investment property portfolio as at December 31, 2020. Non-same property results include acquisitions, dispositions and
developments completed in 2019 and 2020 and commercial assets acquired for future residential development.
Same property revenue grew by 2.0% for the year ended December 31, 2020, as compared to the same period of 2019. Same property
revenue growth in 2020 was lower than recent years due to the impact of COVID-19, including decreased revenue at Killam's seasonal
MHC resorts as a result of delayed spring openings and lower transient revenue, lower rental rate increases on renewals, and
participation in the CECRA program for commercial tenants. Despite these short-term pandemic related impacts, strong rental rate
growth on unit turns and continued strength in Killam's core markets generated overall same property revenue growth.
Total same property operating expenses increased 1.4% for the year ended December 31, 2020. The increase was largely driven by a
4.6% increase in property taxes as a result of higher assessments, which Killam actively appeals whenever possible, offset by a 5.9%
decrease in utility and fuel expenses as a result of reduced consumption from energy efficiency projects, decreases in natural gas pricing
across Killam's three largest regions and a decrease in the inclusion of unit electricity as part of the monthly rent. Overall, same property
NOI grew by 2.3% for the year ended December 31, 2020.
Operating Margin %
59.1%
60.1%
61.5%
57.4%
62.8%
62.9%
62.9%
2014
2015
2016
2017
2018
2019
2020
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18
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Apartment Results
For the years ended December 31,
Total
Same Property
Non-Same Property
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Property revenue
$228,915 $211,558
8.2%
$207,282 $202,489
2.4%
$21,633 $9,069
138.5%
Property operating expenses
General operating expenses
Utility and fuel expenses
Property taxes
34,269
20,537
27,961
30,689
21,081
25,050
11.7%
(2.6) %
11.6%
31,124
19,201
25,287
29,363
20,574
24,228
Total operating expenses
$82,767
$76,820
7.7%
$75,612
$74,165
6.0%
(6.7) %
4.4%
2.0%
3,145
1,336
2,674
1,326
507
822
$7,155 $2,655
NOI
$146,148 $134,738
8.5%
$131,670 $128,324
2.6%
$14,478 $6,414
137.2%
163.5%
225.3%
169.5%
125.7%
Operating margin %
63.8%
63.7%
10 bps
63.5%
63.4%
10 bps
66.9%
70.7%
(380) bps
Apartment Revenue
Total apartment revenue for the year ended December 31, 2020, was $228.9 million, an increase of 8.2% over the same period of 2019.
Revenue growth was augmented by contributions from recently acquired and developed properties and higher rental rates.
Same property apartment revenue increased 2.4% for the year ended December 31, 2020, driven by increased rental rates, partially
offset by a 40 bps decrease in occupancy. Killam's tenant base includes a diverse mix of tenants, including young professionals, seniors,
empty nesters, families, and students. Since the onset of COVID-19, Killam has experienced relatively stable occupancy in most of its
markets, however, Killam has seen increased vacancy in St. John's, Kanata (Ottawa) and downtown Calgary.
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19
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Apartment Occupancy Analysis by Core Market (% of Residential Rent) (1)
For the years ended December 31,
# of Units
2020
2019
Change
(bps)
2020
2019
Change
(bps)
Total Occupancy
Same Property Occupancy
Nova Scotia
Halifax
Ontario
Ottawa (2)
London
Cambridge-GTA
New Brunswick
Moncton
Fredericton
Saint John
Newfoundland and Labrador
St. John's
Prince Edward Island
Charlottetown (3)
Alberta
Calgary
Edmonton
British Columbia
Victoria (4)
Other Atlantic
y
c
n
a
p
u
c
c
O
98%
97%
96%
95%
94%
93%
5,814
97.8%
98.3%
(50)
97.8%
98.3%
(50)
1,216
523
818
2,073
1,529
1,202
94.1%
96.8%
98.0%
98.1%
97.8%
96.7%
93.0%
97.5%
98.5%
98.3%
97.9%
96.8%
110
(70)
(50)
(20)
(10)
(10)
93.7%
96.8%
98.1%
98.5%
97.9%
96.7%
96.6%
(290)
97.5%
98.5%
98.3%
97.9%
96.8%
(70)
(40)
20
—
(10)
915
87.6%
91.5%
(390)
87.6%
91.5%
(390)
1,064
97.0%
99.5%
(250)
99.4%
99.4%
—
531
579
315
469
94.4%
93.5%
95.3%
93.8%
96.5%
94.7%
89.8%
(30)
370
N/A
97.1%
97.0%
N/A
(330)
(50)
95.2%
94.8%
N/A
93.8%
96.8%
94.5%
89.8%
70
500
N/A
N/A
97.1%
(330)
97.2%
(40)
Total Apartments (weighted average)
17,048
(1) Occupancy as a percentage of residential rent is calculated as vacancy (in dollars) divided by gross potential residential rent (in dollars) for the period.
(2) Same property occupancy in Ottawa is down year-over-year as a result of vacancy at Killam's Kanata properties, related to new product delivered to
the market in the area during Q4-2019.
(3) Total occupancy for Charlottetown was impacted by Shorefront, a recently completed 78-unit building, which opened in Q4-2020 and is in the initial
lease-up phase.
(4) Killam owns two assets in Victoria, BC, one of which was undergoing initial lease-up during 2020, impacting total occupancy during the year.
For a detailed discussion on changes in occupancy levels during the quarter, refer to page 24 of this MD&A under section "Apartment
Same Property NOI by Region".
Historical Same Property Apartment Occupancy & Rental Incentives (as a % of Revenue)
Occupancy %
Rental Incentives (as a % of Revenue)
96.1%
96.5%
97.7%
97.2%
1.0%
96.8%
0.8%
Q 1-2016
Q 2-2016
Q 3-2016
Q 4-2016
Q 1-2017
Q 2-2017
Q 3-2017
Q 4-2017
Q 1-2018
Q 2-2018
Q 3-2018
Q 4-2018
Q 1-2019
Q 2-2019
Q 3-2019
Q 4-2019
Q 1-2020
Q 2-2020
Q 3-2020
Q 4-2020
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0.6%
0.4%
0.2%
0.0%
20
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Average Rent Analysis by Core Market
As at December 31,
Nova Scotia
Halifax
Ontario
Ottawa
London
Cambridge-GTA
New Brunswick
Moncton
Fredericton
Saint John
Newfoundland and Labrador
St. John's
Prince Edward Island
Charlottetown
Alberta
Calgary
Edmonton
British Columbia
Victoria
Other Atlantic
Average Rent
Same Property Average Rent
# of Units
2020
2019
% Change
2020
2019
% Change
5,814
$1,184
$1,140
3.9%
$1,184
$1,140
3.9%
1,216
$1,798
523
818
$1,371
$1,556
$1,753
$1,314
$1,493
2.6%
4.3%
4.2%
2,073
$1,046
$926
13.0%
1,529
$1,064
$1,018
1,202
$882
$844
4.5%
4.5%
$1,762
$1,371
$1,570
$933
$1,046
$882
$1,712
$1,314
$1,505
$894
$999
$844
2.9%
4.3%
4.3%
4.4%
4.7%
4.5%
915
$1,006
$992
1.4%
$1,006
$992
1.4%
1,064
$1,080
$1,011
6.8%
$1,025
$1,011
1.4%
531
579
$1,263
$1,476
$1,241
$1,484
1.8%
$1,288
(0.5) %
$1,441
$1,266
$1,449
1.7%
(0.6) %
N/A
1.5%
3.4%
Total Apartments (weighted average)
17,048
$1,184
$1,126
315
469
$1,729
$924
N/A
$910
N/A
1.5%
5.2%
N/A
$924
N/A
$910
$1,150
$1,112
Same Property Rental Increases – Tenant Renewals versus Unit Turns
Killam typically turns approximately 30% to 32% of its units each year, with the trend declining in recent years, including 2020, where
turnover levels were down 160 bps from 2019, at approximately 29%. Upon turn, Killam will typically generate rental increases by
moving rental rates to market and, where market demand exists, by upgrading units for unlevered returns of 10%–15% on capital
invested. During 2020, Killam saw a 20 bps decline in its same property weighted average rental rate increase, to 3.4%, compared to
3.6% for the same period of 2019. This decline was driven by lower rental increases on lease renewals as noted in the chart below.
For the years ended December 31,
Lease renewal
Unit turn – regular
Unit turn – repositioned(2)
Rental increase (weighted avg)
2020
2019
Rental
Increases
1.7%
5.7%
27.3%
3.4%
Turnovers &
Renewals (1)
71.2%
26.3%
2.5%
Rental
Increases
2.1%
5.8%
28.5%
3.6%
Turnovers &
Renewals (1)
69.6%
28.5%
1.9%
(1) The percentage of total units renewed and turned during the year is based on the number of units at the end of the year.
(2) The weighted average rental lift on the units repositioned is based on the 495 units re-leased during the year ended December 31, 2020.
Due to the economic uncertainty facing many Canadians during the emergency measures associated with the pandemic, Killam waived
the collection of rental increases from April to July 2020 for lease renewals with increases being reinstated beginning in August or
September for most properties. Killam also delayed distribution of rental increase notices to tenants between March and May 2020. As
the required notice period to increase rents is a minimum of three months in most provinces across Canada, Killam did not begin
collecting rental increases pertaining to these notices until Q4-2020. It was these measures to assist Killam's tenants during the height of
the pandemic that resulted in a decline in rental increases on lease renewal in 2020.
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21
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Number of Renewals and Rental Increases on Renewal (%)
3.00%
2.00%
1.00%
—%
2,000
1,000
—
M arch-19
January-19
April-19
February-19
M ay-19
June-19
M arch-20
Novem ber-19
Decem ber-19
January-20
Septem ber-19
April-20
October-19
July-19
February-20
August-19
M ay-20
June-20
Novem ber-20
Decem ber-20
Septem ber-20
October-20
July-20
August-20
Increase on Renewal (%)
Unit Count (Renewal)
The following chart illustrates Killam's same property rental rate growth over the past four years.
Apartments - Historical Same Property Rental Rate Growth
6.5% 6.5%
7.2% 7.4%
9.3%
8.7%
8.3%
7.9% 8.2%
5.0% 4.8% 5.3%
3.3% 3.7% 3.4%
1.5% 1.6% 1.7% 1.8% 2.2% 2.4% 2.5% 2.7% 2.9% 3.2% 3.4% 3.6% 3.4% 3.5%
0.6% 0.6% 1.0% 1.5% 1.6% 1.7% 1.8% 2.0% 2.0% 2.1% 2.0% 2.1% 2.4%
2.0%
1.2%
0.6%
2.8% 3.3%
1.8%
10.0%
5.0%
—%
2
-
Q 1
7
1
0
Q 2
7
1
0
2
-
2
-
Q 3
7
1
0
2
-
Q 4
7
1
0
2
-
Q 1
8
1
0
2
-
Q 2
8
1
0
Q 3
8
1
0
2
-
Q 4
8
1
0
2
-
Q 1
9
1
0
2
-
Q 2
9
1
0
2
-
Q 3
9
1
0
2
-
Q 4
9
1
0
2
-
Q 1
0
2
0
2
-
Q 2
0
2
0
2
-
Q 3
0
2
0
2
-
Q 4
0
2
0
2
-
Upon Lease Renewal
Upon Unit Turn - Combined
Combined Average Increase %
Percentage of Units Turned by Month
6.0%
4.0%
2.0%
—%
n
a
J
b
e
F
r
M a
r
p
A
y
M a
n
u
J
u l
J
g
u
A
t
p
e
S
t
O c
v
N o
c
D e
2018
2019
2020
4 0 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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22
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Apartment Expenses
Total operating expenses for the year ended December 31, 2020, were $82.8 million, a 7.7% increase over the same period of 2019, due
primarily to incremental costs associated with recent acquisitions and developments, property taxes and general operating expense
increases. The operating margin increased 10 bps, as lower utility costs and revenue optimization more than offset incremental
operating costs.
Total apartment same property operating expenses for the year ended December 31, 2020, were 2.0% higher than the same period of
2019. The increase was driven by increased wages for front-line staff, higher insurance premiums, and property tax expense increases of
4.4%, over the same period of 2019. These increases were partially offset by decreased utility costs of 6.7%. These savings are
attributable to lower natural gas pricing and consumption savings as a result of energy-efficiency initiatives and lower unit electricity
costs.
Apartment Utility and Fuel Expenses – Same Property
For the years ended December 31,
Natural gas
Electricity
Water
Oil & propane
Other
Total utility and fuel expenses
2020
2019
% Change
$5,770
$6,849
6,970
5,471
936
54
7,203
5,116
1,350
56
$19,201
$20,574
(15.8) %
(3.2) %
6.9%
(30.7) %
(3.6) %
(6.7) %
Killam’s apartments are heated with natural gas (58%), electricity (33%), oil (5%), steam (2%), geothermal (2%) and propane (less than
1%). Electricity costs relate primarily to common areas, as unit electricity costs are typically paid by tenants, reducing Killam’s exposure
to the majority of Killam's 5,500 apartments heated with electricity. Fuel costs associated with central natural gas or oil-fired heating
plants are paid by Killam.
Utility and fuel expenses accounted for approximately 25% of Killam’s total apartment same property operating expenses for the year
ended December 31, 2020. Total same property utility and fuel expenses decreased 6.7% for the year ended December 31, 2020.
Same property natural gas expense decreased by 15.8% for the year ended December 31, 2020. The decrease in natural gas expense
was primarily attributable to decreases in commodity prices in Nova Scotia and Ontario of 22% and 18%, as well as a reduction in both
delivery charges and commodity price in New Brunswick, resulting in a 6% decline in that province for the year. Increased efficiencies
from boiler upgrades as well as above-average temperatures during the heating seasons also contributed to reduced consumption
levels.
Electricity costs were 3.2% lower for the year ended December 31, 2020, primarily due to a reduction of unit electricity being included as
part of a tenant's monthly rent in certain regions given strong market fundamentals, more than offsetting rising rates.
Water expense increased by 6.9% for the year ended December 31, 2020. The increase is primarily due to increased consumption as a
result of tenants being at home more during the COVID-19 pandemic.
Heating oil and propane costs decreased by 30.7% for the year ended December 31, 2020, compared to the same period of 2019, as a
result of lower oil prices.
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23
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
4.6%
4.6%
(2.3) %
1.8%
0.2%
5.0%
5.5%
8.0%
5.9%
(8.1) %
(8.1) %
1.4%
1.4%
(4.9) %
5.5%
0.8%
(2.5) %
2.6%
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Apartment Same Property NOI by Region
For the years ended December 31,
Property Revenue
Property Expenses
Net Operating Income
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Nova Scotia
Halifax
Ontario
Ottawa
London
Cambridge-GTA
New Brunswick
Moncton
Fredericton
Saint John
$82,012
$79,480
3.2%
($27,920) ($27,756)
0.6%
$54,092
$51,724
82,012
79,480
3.2%
(27,920)
(27,756)
0.6%
54,092
51,724
12,817
12,878
(0.5) %
(4,271)
(4,130)
(2,852)
(2,679)
(4,851)
(4,484)
3.4%
6.5%
8.2%
8,546
5,387
9,806
8,748
5,293
9,791
(11,974)
(11,293)
6.0%
23,739
23,832
(0.4) %
8,239
7,972
14,657
14,275
35,713
35,125
18,666
18,177
17,800
17,123
12,432
12,030
48,898
47,330
3.3%
2.7%
1.7%
2.7%
4.0%
3.3%
3.3%
(8,080)
(8,091)
(0.1) % 10,586
10,086
(7,054)
(6,933)
1.7%
10,746
10,190
(5,738)
(5,829)
(1.6) %
6,694
6,201
(20,872)
(20,853)
0.1%
28,026
26,477
Newfoundland & Labrador
St. John's
9,770
10,044
(2.7) %
(3,401)
(3,115)
9,770
10,044
(2.7) %
(3,401)
(3,115)
Prince Edward Island
Charlottetown
Alberta
Calgary
Edmonton
11,916
11,748
11,916
11,748
1.4%
1.4%
(4,800)
(4,729)
(4,800)
(4,729)
5,837
7,898
5,928
7,506
13,735
13,434
(1.5) %
(1,933)
(1,824)
5.2%
2.2%
(2,726)
(2,604)
(4,659)
(4,428)
9.2%
9.2%
1.5%
1.5%
6.0%
4.7%
5.2%
Other Atlantic locations
5,238
5,328
(1.7) %
(1,986)
(1,991)
(0.3) %
6,369
6,369
7,116
7,116
3,904
5,172
9,076
3,252
6,929
6,929
7,019
7,019
4,104
4,902
9,006
3,337
$207,282
$202,489
2.4%
($75,612) ($74,165)
2.0%
$131,670
$128,324
Halifax
Halifax is Killam's largest rental market, contributing approximately 41% of apartment same property NOI for the year ended
December 31, 2020. Same property apartment revenue increased 3.2% for the year ended December 31, 2020, as a result of a 3.9%
increase in average rental rates, partially offset by an uptick in vacancy and the waiving of rental increases for April, May, June and
July.
Total operating expenses for the year ended December 31, 2020, were 0.6% higher than the same period of 2019. Expense growth in
the period was nominal as increased insurance premiums and higher realty taxes were mostly offset by reduced utility costs. The net
impact was a 4.6% increase in NOI for the year ended December 31, 2020.
Ontario
Killam's Ontario portfolio generated approximately 18% of apartment same property NOI for the year ended December 31, 2020.
Revenue increased by 1.7%, driven by a 3.6% increase in average rental rates, partially offset by a decrease in occupancy. Overall, the
decrease in occupancy can be attributed to the reduction in immigration and lockdown measures in Ontario, as a result of the
COVID-19 pandemic. In addition, the decline in Ottawa was further impacted by increased supply in the immediate neighbourhood to
Killam's Kanata assets in late 2019. Management expects to see quarter-over-quarter gains in 2021.
Total operating expenses increased 6.0% for the year ended December 31, 2020, compared to the same period of 2019. This was
primarily due to higher utility costs as a result of increased electricity and water consumption, increased realty taxes and higher front-
line staffing costs for increased compensation related to COVID-19. In aggregate, same property NOI decreased 0.4% for the year
ended December 31, 2020.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
New Brunswick
Killam's apartments in Moncton, Fredericton and Saint John accounted for approximately 21% of apartment same property NOI for the
year ended December 31, 2020. In aggregate, same property revenue increased 3.3% for the year ended December 31, 2020, following
rental rate growth in Fredericton, Saint John and Moncton of 4.7%, 4.5% and 4.4%, respectively, partially offset by a slight uptick in
vacancy in Saint John for the year.
For the year ended December 31, 2020, total operating expenses increased a modest 0.1% compared to the same period of 2019. A
reduction in utility costs as a result of lower natural gas pricing and reduced unit electricity costs was offset by salary increases for
front-line workers and higher insurance premiums and realty taxes. Overall, New Brunswick achieved an impressive 5.9% increase in
same property NOI for the year ended December 31, 2020.
Newfoundland and Labrador
Killam's St. John's properties accounted for approximately 5% of apartment same property NOI for the year ended December 31, 2020.
Same property revenue decreased 2.7% compared to the same period of 2019. While rental rates increased by 1.4%, occupancy was
390 bps lower year-over-year. Lower occupancy in the region is due to economic pressure that has been further impacted by
COVID-19. The region has seen reduced activity in the offshore oil sector as well as declines in other natural resource sectors, on which
the Newfoundland economy is heavily reliant.
Total operating expenses for the year ended December 31, 2020, were 9.2% higher than the same period of 2019. The increase in
operating expenses was primarily due to higher staffing costs related to an expansion of the property management and leasing teams
and higher insurance premiums. In aggregate, same property NOI was 8.1% lower for the year ended December 31, 2020.
Prince Edward Island
Killam's Charlottetown portfolio contributed approximately 5% of apartment same property NOI for the year ended December 31,
2020. Overall, Charlottetown achieved 1.4% revenue growth attributable to rental rate growth as occupancy levels remained strong
at over 99%.
Total operating expenses for the year ended December 31, 2020, were 1.5% higher compared to the same period of 2019. The
increase in operating expenses was primarily due to higher realty taxes and insurance premiums, slightly offset by lower oil costs.
Overall, Charlottetown achieved a 1.4% increase in NOI for the year ended December 31, 2020, compared to the same period of 2019.
Alberta
Killam's Calgary properties accounted for approximately 3% of apartment same property NOI for the year ended December 31, 2020.
Calgary same property revenue decreased 1.5%, compared to the same period of 2019, despite rental rate growth of 1.7% and a 70
bps increase in occupancy, due to decreased parking revenue at Killam's downtown Calgary asset (Grid 5) and increased rental
incentive offerings. Total operating expenses for the year ended December 31, 2020, increased 6.0%, due to increased staffing costs,
higher realty taxes and increased utility costs. Overall, Calgary realized decreased NOI of 4.9% for the year ended December 31, 2020.
Killam's Edmonton portfolio accounted for 4% of apartment same property NOI for the year ended December 31, 2020. Same property
revenues increased 5.2%, as a result of a 500 bps increase in occupancy. Total operating expenses increased 4.7% for the year ended
December 31, 2020. The increase in operating expenses was primarily due to the addition of on-site leasing staff, higher realty taxes
and higher utility costs as a result of increased water consumption. Overall, Edmonton achieved increased NOI of 5.5% for the year
ended December 31, 2020.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
MHC Results
For the years ended December 31,
Total Portfolio
Same Property
Non-Same Property
2020
2019 % Change
2020
2019 % Change
Property revenue
$17,393
$16,806
Property operating expenses
6,541
6,342
NOI
$10,852
$10,464
3.5%
3.1%
3.7%
$16,663
$16,800
6,158
6,270
$10,505
$10,530
(0.8) %
(1.8) %
(0.2) %
2020
$730
383
$347
$6
72
($66)
2019 % Change
Operating margin %
62.4%
62.3%
10 bps
63.0%
62.7%
30 bps
47.5%
—%
The MHC business segment generated 6.5% of Killam's NOI for the year ended December 31, 2020. Overall, same property NOI
decreased by 0.2% for the year ended December 31, 2020, due to a short-term decline in income from Killam's seasonal resort
portfolio as a result of COVID-19. The following table breaks down the same property revenue, expenses and NOI generated by
Killam's permanent MHCs and seasonal resorts during the year.
N/A
N/A
N/A
—
For the years ended December 31,
Property Revenue
Property Expenses
Net Operating Income
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Permanent MHCs
$11,800
$11,493
2.7%
($4,222)
($4,156)
Seasonal Resorts
4,863
5,307
(8.4) %
($1,936)
($2,114)
1.6%
(8.4) %
$7,578
$7,337
2,927
3,193
$16,663
$16,800
(0.8) %
($6,158)
($6,270)
(1.8) %
$10,505
$10,530
3.3%
(8.3) %
(0.2) %
For the year ended December 31, 2020, same property permanent MHCs generated a 3.3% increase in NOI, with average rent
increasing 2.2% in Q4-2020, to $278 per site compared to $272 per site in Q4-2019. Combined permanent and seasonal MHC
average rent decreased by 0.8%, to $260 per site in 2020 from $262 per site in 2019, and occupancy remained stable at 97.8%,
consistent with 2019.
Killam's nine seasonal resorts were impacted by restrictions put into place by public health officials to curb the spread of COVID-19.
As a result, Killam delayed opening its seasonal resorts and also had restrictions in place on transient camping, resulting in a 8.4%
decrease in same property revenue for the year ended December 31, 2020 compared to the same period of 2019. Travel restrictions
associated with the quarantine requirements for travellers from outside Atlantic Canada also contributed to lower revenue at
Killam's New Brunswick seasonal resorts. The reduction in seasonal revenue was partially offset by lower same property operating
expenses, which decreased 8.4% primarily due to decreased administration costs.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Commercial Results
For the years ended December 31,
Total Portfolio
Same Property
Non-Same Property
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Property revenue
$15,382 $13,800
11.5%
$8,129
$8,288
(1.9) % $7,253
$5,512
Property operating expenses
7,720
6,666
15.8%
2,932
3,111
(5.8) %
4,788
3,555
NOI
$7,662
$7,134
7.4%
$5,197
$5,177
0.4 %
$2,465
$1,957
31.6%
34.7%
26.0%
Killam's commercial property portfolio contributed $7.7 million, or 4.7%, of Killam's total NOI for the year ended December 31, 2020.
Killam's commercial property portfolio contains 749,661 SF, located in four of Killam's core markets. Commercial same property results
represent 45.6% of Killam's commercial square footage and consist of Westmount Place located in Waterloo and three commercial
properties, one of which is Killam's head office, located in Halifax, NS. Same property results do not include properties that were
recently acquired or those that are slated for redevelopment and not operating as stabilized properties.
Total commercial occupancy on a per square foot basis was 91% as at December 31, 2020. Occupancy levels reflect the continued
redevelopment of the Brewery Market in Halifax, which is currently 85.2% leased. The decline in same property commercial revenue
during 2020 was driven by increased vacancy and participation in the CECRA program. During 2020, Killam filed CECRA applications for
approximately 40 commercial tenants and recorded a total reduction in commercial revenue of $0.3 million related to the program.
Killam continues to work with tenants that did not qualify for CECRA on a case-by-case basis, and in certain cases has agreed to
temporary rent deferrals for 60 to 90 days.
Killam self-manages its wholly owned commercial properties. Killam’s commercial leasing activity has continued throughout 2020,
successfully leasing a net new 39,000 square feet of commercial space across the portfolio during the year. Killam has also renewed
40,000 square feet of commercial space during 2020, with a weighted average net rate increase of 4.5%.
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27
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART V
Other Income and Expenses
Other Income
For the years ended December 31,
Other income includes property management fees for jointly held properties, interest on bank balances, and net revenue associated
with the sale of homes in Killam's MHC segment. The 89.4% decrease for the year ended December 31, 2020, was due primarily to
net insurance proceeds received in late 2019 related to a fire that occurred in July 2019 at a 29-unit apartment building and leasing
fees earned in 2019 from the lease-up of the Frontier development.
2020
$641
2019
% Change
$6,059
(89.4) %
Financing Costs
For the years ended December 31,
2020
2019 % Change
Mortgage, loan and construction loan interest
$44,055
$41,954
Interest on credit facilities
Interest on Exchangeable Units
Amortization of deferred financing costs
Amortization of fair value adjustments on assumed debt
Unrealized loss on derivative liability
Interest on lease liabilities
Capitalized interest
671
2,784
3,126
88
483
385
1,266
2,727
3,093
137
235
298
(2,673)
(2,267)
$48,919
$47,443
5.0%
(47.0) %
2.1%
1.1%
(35.8) %
105.5%
29.2%
17.9%
3.1%
Total financing costs increased $1.5 million, or 3.1%, for the year ended December 31, 2020, as compared to the same period of
2019.
Mortgage, loan and construction loan interest expense was $44.1 million for the year ended December 31, 2020, an increase of $2.1
million, or 5.0%, compared to the same period of 2019. Killam's mortgage, loan and construction loan liability balance increased by
$209.9 million over the past twelve months as Killam up-financed maturing mortgages within its existing portfolio and obtained
financing for acquisitions and developments. The average interest rate on refinancings for the year ended December 31, 2020, was
1.83%, 85 bps lower than the average interest rate on expiring debt.
Deferred financing costs include mortgage assumption fees, application fees and legal costs related to financings and refinancings.
These costs are amortized over the term of the respective mortgages. CMHC insurance fees are amortized over the amortization
period of the mortgage. Deferred financing amortization costs increased 1.1% for the year ended December 31, 2020, following
mortgage refinancings and debt placement related to property acquisitions over the past twelve months. This expense may fluctuate
annually with refinancings.
Capitalized interest increased $0.4 million for the year ended December 31, 2020, compared to the same period of 2019. Capitalized
interest will vary depending on the number of development projects underway and their stages in the development cycle. Interest
costs associated with development projects are capitalized to the respective development property until substantial completion.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Depreciation Expense
For the years ended December 31,
Depreciation expense relates to Killam’s head office building, vehicles, heavy equipment, office furniture, fixtures and computer
equipment. Although the vehicles and equipment are used at various properties, they are not considered investment properties and
are depreciated for accounting purposes.
2020
$630
2019 % Change
$720
(12.5) %
Administration Expenses
For the years ended December 31,
Administration
As a percentage of total revenues
2020
2019 % Change
$14,745
$14,881
(0.9) %
5.6%
6.0%
(40) bps
Administration expenses include expenses that are not specific to individual properties, including TSX-related costs, management and
head office salaries and benefits, marketing costs, office equipment leases, professional fees and other head office and regional office
expenses.
For the year ended December 31, 2020, total administration expenses decreased by 0.9%, compared to the same period of 2019, due
to lower restricted trust unit ("RTU") expense and travel related costs. Administration expenses as a percentage of total revenues
were 5.6% for 2020, 40 bps lower than 2019.
Fair Value Adjustments
For the years ended December 31,
Investment properties
Deferred unit-based compensation
Exchangeable units
2020
2019
% Change
$46,885
$244,130
59
(1,590)
7,676
(12,461)
$54,620
$230,079
(80.8) %
103.7%
161.6%
(76.3) %
Killam recognized $46.9 million in fair value gains related to investment properties for the year ended December 31, 2020, compared
to $244.1 million in fair value gains for the year ended December 31, 2019. During 2020, Killam recognized a fair value gain of $53.8
million related to the apartment portfolio due to cap-rate compression, strong demand for units and increased NOI, $1.8 million in fair
value gains on its MHC portfolio and a net $6.1 million gain related to IPUC and land held for future development. These gains were
partially offset by fair value losses related to Killam's commercial portfolio of $14.9 million.
Due to the ongoing impact of COVID-19, it is not possible to forecast with certainty the duration and full scope of the economic impact
and other consequential changes it will have on Killam's business and operations, both in the short term and in the medium term.
Certain aspects of Killam's business and operations that could potentially be impacted include market rents, collection of rental
income, and occupancy, which all could ultimately impact NOI and the underlying valuation of investment properties.
RTUs governed by Killam's RTU Plan are awarded to certain members of Management as a portion of their compensation. Non-
executive members of the Board of Trustees have the right to receive a percentage of their annual retainer in the form of RTUs. This
aligns the interests of Management and the Trustees with those of unitholders. For the year ended December 31, 2020, there was an
unrealized fair value gain of $0.1 million, versus a $1.6 million loss in the same period of 2019, due to changes in the market price of
the underlying Killam trust units.
Distributions paid on exchangeable units are consistent with distributions paid to Killam’s unitholders. The exchangeable units are
redeemable on a one-for-one basis into trust units at the option of the holder. The fair value of the exchangeable units is based on the
trading price of Killam’s trust units. For the year ended December 31, 2020, there was an unrealized gain of $7.7 million, compared to
an unrealized loss of $12.5 million in the same period of 2019, due to changes in the market price of Killam's trust units.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Deferred Tax Expense
For the years ended December 31,
2020
2019
% Change
$9,590
$40,636
(76.4) %
Killam converted to a real estate investment trust effective January 1, 2016, and as such qualifies as a REIT pursuant to the Income
Tax Act (Canada) (the "Tax Act"). The Tax Act contains legislation affecting the tax treatment of publicly traded trusts (the "SIFT
Legislation") and the criteria for qualifying for the real estate investment trust exemption (the "REIT Exemption"), which would
exempt Killam from income tax under the SIFT Legislation. Killam is classified as a flow-through vehicle; therefore, only deferred taxes
of Killam’s corporate subsidiaries are recorded. If Killam fails to distribute the required amount of income to unitholders or if Killam
fails to qualify as a REIT under the Tax Act, substantial adverse tax consequences may occur. Management operates Killam in a
manner that enables Killam to continually qualify as a REIT and expects to distribute all of its taxable income to unitholders, and
therefore is entitled to deduct such distributions for income tax purposes.
Killam's deferred tax expense decreased $31.0 million for the year ended December 31, 2020, compared to the same period of 2019,
primarily due to a reduction in the Nova Scotia provincial tax rate and reduction in fair value gains on investment properties year-
over-year.
PART VI
Per Unit Calculations
As Killam is an open-ended mutual fund trust, unitholders may redeem their trust units, subject to certain restrictions. As a result,
Killam's trust units are classified as financial liabilities under IFRS. Consequently, all per unit calculations are considered non-IFRS
measures. The following table reconciles the number of units used in the calculation of non-IFRS financial measures on a per unit basis:
For the years ended December 31,
Trust units
Exchangeable units
Basic number of units
Plus:
Units under RTU plan
Diluted number of units
Weighted Average
Number of Units (000s)
2020
100,225
4,115
104,340
2019 % Change
9.5%
91,565
4,154
95,719
(0.9) %
9.0%
Outstanding
Number of Units
(000s) as at
December 31,
2020
103,212
4,102
107,314
163
195
(16.4) %
104,503
95,914
9.0%
—
—
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Funds from Operations
FFO are recognized as an industry-wide standard measure of real estate entities’ operating performance, and Management considers
FFO per unit to be a key measure of operating performance. REALPAC, Canada’s senior national industry association for owners and
managers of investment real estate, has recommended guidelines for a standard industry calculation of FFO based on IFRS. Killam
calculates FFO in accordance with the REALPAC definition. Notwithstanding the foregoing, FFO does not have a standardized meaning
under IFRS and therefore may not be comparable to similarly titled measures presented by other publicly traded companies. FFO for the
year ended December 31, 2020 and 2019 are calculated as follows:
For the years ended December 31,
Net income
Fair value adjustments
Non-controlling interest
Internal commercial leasing costs
Deferred tax expense
Interest expense on exchangeable units
Net insurance proceeds
Loss on disposition
Unrealized loss on derivative liability
Depreciation on owner-occupied building
Change in principal related to lease liabilities
FFO
FFO per unit – basic
FFO per unit – diluted
Weighted average number of units – basic (000s)
Weighted average number of units – diluted (000s)
2020
2019 % Change
$146,040
$283,525
(54,620)
(230,079)
(16)
264
9,566
2,784
11
317
40,636
2,727
(48.5) %
(76.3) %
(245.5) %
(16.7) %
(76.5) %
2.1%
(5,022)
(100.0) %
1,257
(100.0) %
—
—
483
146
31
235
147
130
$104,678
$93,884
$1.00
$1.00
104,340
104,503
$0.98
$0.98
95,719
95,914
(105.5) %
(0.7) %
(76.2) %
11.5%
2.0%
2.0%
9.0%
9.0%
Killam earned FFO of $104.7 million, or $1.00 per unit (diluted), for the year ended December 31, 2020, compared to $93.9 million, or
$0.98 per unit (diluted), for the year ended December 31, 2019. FFO growth is primarily attributable to contributions from acquisitions
and completed developments ($6.3 million), same property NOI growth ($3.1 million) and lower interest costs ($1.0 million). These
increases were partially offset by a 9.0% increase in the weighted average number of units outstanding.
Adjusted Funds from Operations
AFFO is a non-IFRS supplemental measure used by real estate analysts and investors to assess FFO after taking into consideration capital
invested to maintain the earning capacity of a portfolio. AFFO may not be comparable to similar measures presented by other real
estate trusts or companies. Management believes that significant judgment is required to determine the annual capital expenditures
that relate to maintaining the earning capacity of an asset compared to the capital expenditures that generate higher rents or more
efficient operations.
Details of Killam's total actual capital expenditures by category are included in the Capital Improvements section on page 39, and
Killam's sources of funding are disclosed in the Liquidity and Capital Resources section on page 46 of this MD&A.
Calculating Maintenance Capex Reserve for AFFO
In February 2017, REALPAC issued "White Paper on Funds From Operations & Adjusted Funds From Operations for IFRS", updating their
guidance on maintenance capital expenditures ("maintenance capex") to be used in the calculation of AFFO and ACFO. Killam has
elected to adopt a maintenance reserve based on a three-year average of the capital invested to maintain and sustain Killam's
properties, an approach endorsed by REALPAC. The following table details Killam's capital investments attributable to value-enhancing
and maintenance projects for each of the past three years:
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Maintenance Capex Reserve - Apartments
Total capital investments
Value-enhancing capital investment
Building
Suite upgrades
Equipment & other
Maintenance capex
Maintenance capex - % of total capital
Number of units (1)
Maintenance capex per unit
Maintenance capex - three-year average
2020
$57,961
(14,055)
(22,956)
(7,704)
(44,715)
$13,246
23%
16,209
$817
2019
$52,861
(17,407)
(18,718)
(1,987)
(38,112)
$14,749
28%
15,513
$951
$900
2018
$39,912
(13,004)
(12,361)
(866)
(26,231)
$13,681
34%
14,685
$932
(1) Weighted average number of units outstanding during the year, adjusted for Killam's 50% ownership in jointly held properties.
Value-enhancing capital investment includes building enhancements, suite upgrades and equipment purchases supporting NOI growth.
Value-enhancing capital classified as building enhancements includes energy efficiency projects and an allocation to represent building
upgrades, including window replacements, and common area and amenity space upgrades. Suite upgrades represent a capital
investment on suite turns with an expected minimum 10% return on investment.
Maintenance capex includes all building improvements and suite renovation investment required to maintain current revenues. For the
year ended December 31, 2020, Killam updated its maintenance capex reserve to reflect the actual capital investment for the most
recent three years (2018–2020), which is equivalent to $900 per unit. Based on this calculation, Management has selected $900 per unit
for its maintenance capex reserve for 2020, which is consistent with the 2019 reserve of $900 per unit. Management will maintain this
reserve in its calculation of AFFO throughout 2021 until the three-year average is updated at year-end with actual results.
The allocations above were the result of a detailed review of Killam's historical capital investment. Significant judgment was required to
allocate capital between value-enhancing and maintenance activities. Management believes these allocations are reflective of Killam's
capital program. The maintenance capex as a percentage of total capital investment decreased in 2020, and this reflects Killam's
increased investment in its suite repositioning program as well as its energy efficiency program, both of which are value enhancing. In
2020, approximately 23% of annual capital investment was attributable to maintaining and sustaining properties.
Maintenance Capex Reserve - MHCs and Commercial
The capital investment specific to the MHC portfolio was also reviewed for the three years ended December 31, 2020, and categorized
into value-enhancing and maintenance capex. Value-enhancing capital investment includes site expansions, land improvements and
NOI-enhancing water and sewer upgrades. Maintenance capex includes capital investment related to roads and paving, as well as the
majority of water and sewer capital invested to maintain the infrastructure in each community. On a per site basis, maintenance capex
has ranged from $295 to $345 over the past three years. Management selected $300 per MHC site for its maintenance capex reserve for
2020, consistent with its 2019 reserve of $300 per site.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Killam began taking a maintenance capex allowance for its commercial properties in 2018. Based on the expected average annual
maintenance capital investment in these assets, Killam has taken an annual capex reserve of $0.70 per square foot in 2018 and 2019.
Killam updated its maintenance capex reserve to reflect the actual capital investment for the most recent three years (2018–2020),
which is equivalent to approximately $0.79 per square foot. Based on this calculation, Management has selected $0.80 per square foot
for its commercial maintenance capex reserve for 2020.
The weighted average number of units, sites and square footage owned during the year was used to determine the capital adjustment
applied to FFO to calculate AFFO:
For the years ended December 31,
FFO
Maintenance capital expenditures
Commercial straight-line rent adjustment
Internal and external commercial leasing costs
AFFO
AFFO per unit – basic
AFFO per unit – diluted
AFFO payout ratio – diluted (1)
Weighted average number of units – basic (000s)
Weighted average number of units – diluted (000s)
2020
2019 % Change
$104,678
$93,884
(16,860)
(16,237)
(555)
(447)
(423)
(456)
$86,816
$76,768
$0.83
$0.83
82 %
104,340
104,503
$0.80
$0.80
82 %
95,719
95,914
11.5%
3.8%
31.2%
(2.0) %
13.1%
3.7%
3.7%
— bps
9.0%
9.0%
(1)Based on Killam's annual distribution of $0.6767 for the year ended December 31, 2020, and $0.65666 for the year ended December 31, 2019.
The payout ratio of 82% for the year ended December 31, 2020, is consistent with the payout ratio for the year ended December 31,
2019. The stability is attributable to a 13.1% increase in AFFO, driven by contributions from acquisitions and developments and same
property NOI growth, offset by the impact of the increase in the weighted average number of units outstanding.
Killam’s Board of Trustees (the "Board") evaluates the Trust’s payout ratio quarterly. The Board has not established an AFFO payout
target.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Adjusted Cash Flow from Operations
ACFO was introduced in February 2017 in REALPAC's "White Paper on Adjusted Cash Flow from Operations (ACFO) for IFRS" as a
sustainable, economic cash flow metric. Upon review of REALPAC's white paper, Management has incorporated ACFO as a useful
measure to evaluate Killam's ability to fund distributions to unitholders. ACFO should not be construed as an alternative to cash flows
provided by or used in operating activities determined in accordance with IFRS.
Killam calculates ACFO in accordance with the REALPAC definition but may differ from other REITs' methods and, accordingly, may not be
comparable to ACFO reported by other issuers. In the calculation of ACFO, Killam makes an adjustment for certain working capital items
that are not considered indicative of sustainable economic cash flow available for distribution. Examples include working capital changes
relating to development projects, sales and other indirect taxes payable or receivable from applicable governments, and changes in the
security deposit liability. ACFO continues to include the impact of fluctuations from normal operating working capital, such as changes to
rent receivable from tenants and accounts payable and accrued liabilities.
A reconciliation from cash provided by operating activities (refer to the consolidated statements of cash flows for the year ended
December 31, 2020 and 2019) to ACFO is as follows:
For the years ended December 31,
Cash provided by operating activities
Adjustments:
Changes in non-cash working capital not indicative of sustainable cash flows
Maintenance capital expenditures
External commercial leasing costs
Amortization of deferred financing costs
Interest expense related to lease liability
Non-controlling interest
ACFO
Distributions declared (1)
Excess of ACFO over cash distributions
ACFO payout ratio – diluted (2)
2020
$123,514
2019
$95,208
% Change
29.7%
(15,892)
(16,860)
(212)
(3,126)
(31)
(16)
$87,377
71,731
$15,646
82%
2,049
(16,237)
(264)
(3,093)
(133)
(11)
$77,519
63,805
$13,714
82%
(875.6) %
3.8%
(19.7) %
1.1%
(76.7) %
45.5%
12.7%
12.4%
14.1%
— bps
(1) Includes distributions on trust units, exchangeable units and restricted trust units, as summarized on page 46.
(2) Based on Killam's annual distribution of $0.6767 for the year ended December 31, 2020, and $0.65666 for the year ended December 31, 2019
Killam's ACFO payout ratio is 82% for the year ended December 31, 2020. Similarly to the AFFO payout ratio, Killam's first quarter typically
has the highest ACFO payout ratio due to the lower operating margin in the period attributable to higher heating costs in the winter
months and the fact the MHC portfolio typically generates its highest revenues and NOI during the second and third quarters of the year.
Cash Provided by Operating Activities and Distributions Declared
As required by National Policy 41-201, "Income Trusts and Other Indirect Offerings", the following table outlines the differences between
cash provided by operating activities and total distributions declared, as well as the differences between net income and total
distributions, in accordance with the guidelines.
For the years ended December 31,
Net income
Cash provided by operating activities
Total distributions declared
Excess of net income over total distributions declared
Excess of net income over net distributions paid (1)
Excess of cash provided by operating activities over total distributions declared
2020
2019
$146,040
$283,525
$123,514
$71,731
$74,309
$95,834
$51,783
$95,208
$63,805
$219,720
$238,253
$31,403
(1) Killam has a distribution reinvestment plan, which allows unitholders to elect to have all cash distributions from the Trust reinvested in additional units.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART VII
Investment Properties
As at December 31,
Investment properties
Investment properties under construction ("IPUC")
Land for development
Continuity of Investment Properties
As at December 31,
Balance, beginning of year
Acquisition of properties
Transfer to assets held for sale
Transfer from IPUC
Capital expenditures and development costs (1)
Fair value adjustment - Apartments
Fair value adjustment - MHCs
Fair value adjustment - Commercial
Impact of change in right-of-use asset
Balance, end of year
2020
2019
% Change
$3,570,198
$3,234,410
128,100
43,620
46,867
39,327
$3,741,918
$3,320,604
10.4%
173.3%
10.9%
12.7%
2020
2019
% Change
$3,234,410
$2,708,617
206,616
185,763
19.4%
11.2%
—
22,117
65,693
53,765
1,820
(14,862)
639
(15,099)
(100.0) %
36,215
71,495
208,624
38,540
(38.9) %
(8.1) %
(74.2) %
(95.3) %
(1,549)
859.5%
1,804
(64.6) %
10.4%
$3,570,198
$3,234,410
(1) Development costs are costs incurred related to development projects subsequent to when they were transferred from IPUC to investment properties.
The key valuation assumption in the determination of fair market value, using the direct capitalization method, is the cap-rate. A
summary of the high, low and weighted average cap-rates used in the valuation models as at December 31, 2020 and December 31,
2019, is as follows:
For the years ended December 31,
Capitalization Rates
Apartments
MHCs
2020
High
7.00%
6.50%
Effective
Weighted
Average
4.67%
5.64%
Low
3.50%
5.00%
2019
High
8.00%
6.50%
Effective
Weighted
Average
4.76%
5.65%
Low
3.25%
5.00%
Killam's effective weighted average cap-rate for its apartment and MHC portfolios at December 31, 2020 was 4.67% and 5.64%,
relatively consistent with the cap-rates as at December 31, 2019. The cap-rate change primarily relates to small cap-rate compression
the New Brunswick and Prince Edward Island markets. The COVID-19 pandemic has resulted in a higher degree of uncertainty
surrounding market values, and management estimated cap-rates at year-end based on the current information available.
Killam reviewed its valuation of investment properties in light of COVID-19 as at December 31, 2020. It is not possible to forecast with
certainty the duration and full scope of the economic impact of COVID-19 and other consequential changes on Killam's business and
operations, both in the short-term and in the long-term. In the long-term scenario the aspects which could be impacted include rental
rates, occupancy and cap-rates, which would impact the underlying valuation of investment properties. Killam has applied judgement in
estimating the valuation given the uncertainties surrounding the economic impact of COVID-19. Key assumptions for the apartment
portfolio include reflecting lower rental rate increases and increased vacancy in regions seeing more significant economic downturn,
including Alberta and Newfoundland. For commercial assets, adjustments were made to lease up assumptions, increased credit
allowances and adjustments to the discount and terminal rates.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
The quantitative sensitivity analysis shown below illustrates the value increase or decrease in Killam's portfolio of apartment properties
given the change in the noted input:
Cap-rate Sensitivity
Increase (Decrease)
(0.50) %
(0.25) %
—%
0.25%
0.50%
Fair Value of Investment
Properties (1)
$3,832,018
3,617,459
3,431,068
3,253,259
3,097,378
Effective Weighted
Average
Fair Value Variance
% Change
4.23%
4.48%
4.73%
4.98%
5.23%
$400,950
186,391
—
(177,809)
(333,690)
12%
5%
—%
(5) %
(10) %
(1) Includes Killam's apartment and MHC portfolios, which are valued using the direct income capitalization method.
2020 Acquisitions - Investment Properties
Property
Christie Point
9 Carrington
Domaine Parlee
1325 Hollis
Crossing at Belmont
3644 & 3670 Kempt Rd
Luma
171 & 181 Leopold
1538 Carlton Street
88 Sunset
Total Acquisitions
Location
Victoria, BC
Halifax, NS
Shediac, NB
Halifax, NS
Langford, BC
Halifax, NS
Ottawa, ON
Moncton, NB
Halifax, NS
Moncton, NB
Acquisition
Date
15-Jan-20
31-Jan-20
Ownership
Interest
100%
100%
23-Mar-20
31-Mar-20
30-Apr-20
15-Jul-20
30-Jul-20
26-Oct-20
30-Oct-20
13-Nov-20
100%
100%
100%
100%
50%
100%
100%
100%
Property Type Units/SF
Apartment
Apartment
MHC
Apartment
Apartment
161
54
89
7
156
Commercial
12,700
Development Land
Apartment
Development Land
Apartment
—
107
—
162
Purchase Price (1)
Income-
producing
Properties
$54,000
8,800
Land for
Development
$—
—
3,950
3,700
60,000
2,500
—
17,600
—
55,000
$205,550
—
—
—
—
4,300
—
1,200
—
$5,500
(1) Purchase price does not include transaction costs.
Christie Point
On January 15, 2020, Killam completed the acquisition of a 161-unit apartment building in Greater Victoria, BC, for $54.0 million. The
property features five two-storey buildings and four two-storey townhouse buildings.
9 Carrington
On January 31, 2020, Killam completed the acquisition of a 54-unit apartment building in Halifax, NS, for $8.8 million.
Domaine Parlee
On March 23, 2020, Killam completed the acquisition of an 89-site MHC park in Shediac, NB, for $3.9 million.
1323-1325 Hollis
On March 31, 2020, Killam completed the acquisition of a 7-unit apartment building in Halifax, NS, for $3.7 million that also includes land
for future development.
Crossing at Belmont
On April 30, 2020, Killam completed the acquisition of a 156-unit apartment complex in Langford, BC, for $60.0 million.
3644 & 3670 Kempt Road
On July 15, 2020, Killam acquired a commercial property located next to its head office for $2.5 million.
Luma
On July 30, 2020, Killam acquired a 50% interest in a parcel of land for development in Ottawa, ON, to jointly develop a 168-unit
apartment building, for $4.3 million.
171 & 181 Leopold
On October 26, 2020, Killam completed the acquisition of a 107-unit apartment building in Moncton, NB, for $17.6 million.
1538 Carleton Street
On October 30, 2020, Killam acquired a parcel of land for development in Halifax, NS, for $1.2 million.
88 Sunset
On November 13, 2020, Killam completed the acquisition of a 162-unit apartment building in Moncton, NB, for $55.0 million.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Investment Properties Under Construction
As at December 31,
Balance, beginning of year
Fair value adjustment
Capital expenditures
Interest capitalized
Acquisitions
Transfer to investment properties
Transfer from land for development
Balance, end of year
Land for Development
As at December 31,
Balance, beginning of year
Fair value adjustment (1)
Capital expenditures
Interest capitalized
Acquisitions
Transfer to IPUC
Transfer from (to) held for sale (1)
Balance, end of year
2020
$46,867
10,184
76,050
1,686
3,968
(22,117)
11,462
$128,100
2020
$39,327
(4,022)
3,339
987
1,237
(11,462)
14,214
$43,620
2019
% Change
$37,163
26.1%
774
1,215.8%
29,341
754
—
(36,215)
15,050
$46,867
159.2%
123.6%
N/A
(38.9) %
(23.8) %
173.3%
2019
% Change
$61,028
(1,663)
5,700
1,513
6,200
(15,050)
(18,401)
$39,327
(35.6) %
141.9%
(41.4%)
(34.8) %
(80.0) %
(23.8) %
(177.2) %
10.9%
(1) During the year, Killam recorded a fair value loss of $6.3 million on development land in downtown Calgary, AB. Killam determined that this parcel of
land for development, previously classified as held for sale, no longer met the criteria for this classification. As at March 31, 2020, Killam reclassified
the land from held for sale to land for development. As at December 31, 2020, the property has a carrying value of $8.1 million (Killam's 40% interest).
Killam's development projects currently underway as at December 31, 2020, include the following five projects:
Property
Location Ownership
Number of
Units (1)
Project Budget
(millions) (3) Start Date
Estimated
Year of
Completion
Percent
Complete
Anticipated
All-cash Yield
Charlottetown, PE
Ottawa, ON
Mississauga, ON
Ottawa, ON
Kitchener, ON
38
10 Harley Street
104
Latitude
128
The Kay
84
Luma
169
Civic 66
Total (2)
523
(1) Represents Killam's ownership interest and number of units in the development.
(2) Killam also held a 10% interest in the Nolan Hill development project in Calgary as at December 31, 2020, totalling 233 units, which is included in IPUC. Killam acquired the
remaining 90% interest in January 2021.
(3) Project budget excluding land costs.
95% 5.00% - 5.25%
56% 4.75% - 5.00%
55% 4.75% - 5.00%
43% 4.00% - 4.25%
21% 4.75% - 5.00%
$10.4
$42.0
$57.0
$44.3
$69.7
$223.4
Q1-2021
2022
Q4-2021
2022
2022
100%
50%
100%
50%
100%
2019
2019
2019
2019
2020
Shorefront
Killam's 78-unit, five-storey, Shorefront development in Charlottetown, PE, reached substantial completion in October 2020. Final
project costs are estimated to be approximately $22.0 million ($282,000/suite), resulting in an all-cash yield of approximately 5.25%, a
50–75 bps premium over the market cap-rate for a similar quality asset. The property is currently 55% leased.
10 Harley Street
Killam's 38-unit 10 Harley project is expected to cost approximately $10.4 million ($274,000/suite). Construction is 95% complete and
the building is expected to open with tenants moving in during Q1-2021.
Latitude
Latitude, the second phase of the Gloucester City Centre development, containing 209 units, broke ground during Q2-2019 and is
expected to be completed in early 2022. The total cost is budgeted at $84.0 million ($42.0 million for Killam's 50% interest). Construction
financing was placed on this project during Q3-2020 and all remaining development costs will be funded through this financing.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
The Kay
The budget for this 128-unit development located in Mississauga, ON, is $57.0 million, or $445,500 per suite, with an anticipated all-cash
yield in the range of 4.75% - 5.00%, approximately a 125–175 bps premium over the market cap-rate for a similar quality asset. The
development broke ground during the third quarter of 2019 and is expected to be completed in late 2021. Construction financing was
put in place during Q2-2020 and all remaining development costs will be funded through this financing.
Luma
On July 30, 2020, Killam acquired a 50% interest in a parcel of land for development from RioCan REIT to jointly develop a 169-unit
apartment building adjacent to the grocery-anchored Elmvale Acres Shopping Centre in Ottawa. Subsequent to this purchase, Killam
invested $9.8 million to reflect Killam's portion of construction costs completed to date. This development broke ground in Q3-2019 and
is expected to be completed in early 2022. Killam’s 50% cost is approximately $44.3 million with a 4.00% - 4.25% yield. Construction
financing was put in place during Q4-2020 and all remaining development costs will be funded through this financing.
Civic 66
In 2018, Killam acquired land in Kitchener, ON, with plans to develop a 169-unit, eleven-storey, apartment building. The budget for
the development is $69.7 million, or $412,000 per suite, with an anticipated all-cash yield in the range of 4.75% - 5.00%,
approximately a 125–175 bps premium over the market cap-rate for a similar quality asset. Killam started construction in July 2020
and it is expected to take 24 months to complete. Killam expects its equity contribution to be completed in the first half of 2021, at
which time construction financing will be placed.
Nolan Hill
Phase 1 of the Nolan Hill development located in Calgary, of which Killam had a 10% interest, broke ground during Q4-2019 and
construction was completed in January 2021. The cost of Killam's 10% interest was $4.8 million and on January 21, 2021, Killam
acquired the remaining 90% interest in the 233-unit three building complex at a fixed price of $49.5 million. Based on the purchase
price of $55.0 million for a 100% interest, Killam recorded a fair value gain of $0.7 million on its 10% interest.
Killam secured financing for the Nolan Hill property through CMHC’s Rental Construction Financing initiative (RCFi), a National Housing
Strategy program that supports rental housing construction projects to encourage a stable supply of rental housing for middle-class
families across Canada. Seventy-eight units at this property have rents at 70% of market rate, averaging $1,014, or $1.20 per square
foot. The remaining 154 units are priced at $1,403 per average unit, or $1.74 per square foot. The property opened in January 2021 and
is currently 31% leased.
Future Development Pipeline
Killam has a robust development pipeline. Fifty-five percent of Killam's development pipeline is outside Atlantic Canada. Killam targets
yields of 4.75% - 5.50% on developments, 50 - 150 bps higher than the expected cap-rate value on completion. Building out the
approximate $1.0 billion pipeline at a 100 bps spread should create approximately $250.0 million in NAV growth for unitholders. Killam
currently has the following land available for future development:
Property
Location
Killam's
Interest
Development
Potential
(# of Units) (1) Status
Estimated
Year of
Completion
Halifax, NS
Waterloo, ON
100%
100%
12 Building permit
140 In design and approval process
Developments expected to start in 2021
The Governor (2)
Westmount Place (Phase 1)
Developments expected to start in 2022-2026
Carlton East & West
Stratford land
Sherwood Crossing
Hollis Street
Gloucester City Centre (Phase 3-4)
Westmount Place (Phase 2-5)
Additional future development projects
Gloucester City Centre (Phase 5)
Kanata Lakes
St. George Street
15 Haviland
Christie Point
Medical Arts
Topsail Road
Block 4
Total Development Opportunities (3)
100%
Halifax, NS
Charlottetown, PE 100%
Charlottetown, PE 100%
100%
Halifax, NS
50%
Ottawa, ON
100%
Waterloo, ON
Ottawa, ON
50%
Ottawa, ON
50%
100%
Moncton, NB
Charlottetown, PE 100%
100%
Victoria, BC
100%
Halifax, NS
100%
St. John's, NL
100%
St. John's, NL
140 In design
175 In design
325 In design
90 In design
200 In design
908 In design
100 Future development
40 Future development
60 Future development
60-90 Future development
312 Future development
200 Future development
225 Future development
80 Future development
3,067
(1) Represents Killam's ownership in the potential development units.
(2) This development is adjacent The Alexander, Killam's recently completed development, and will include 12 large-scale luxury suites.
(3) In addition, Killam has a 10% interest in the remaining three phases of Nolan Hill, totalling another 596 units.
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2022
2024
2024
2024
2025
2025
2025
2028
TBD
TBD
TBD
TBD
TBD
TBD
TBD
TBD
38
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Capital Improvements
Capital improvements are a combination of maintenance capex and value-enhancing upgrades. Maintenance capex investments are not
expected to increase the NOI or efficiency of a building; however, these expenditures will extend the life of the asset. Examples of
maintenance capex include roof, window and building envelope repairs and are in addition to repairs and maintenance costs that are
expensed to NOI. Value-enhancing capital investments are expected to result in higher rents or lower operating costs. These
investments include unit and common area upgrades and energy efficiency projects. Killam's AFFO discussion provides further disclosure
on the allocation between maintenance capex and value-enhancing capex investments.
During the year ended December 31, 2020, Killam invested $65.7 million of capital in its existing portfolio, compared to $62.0 million for
the year ended December 31, 2019. This increase reflects the timing of the completion of larger capital projects year-over-year as well
as increased investment in Killam's repositioning program, partially offset by delays in the start of capital projects as a result of
COVID-19. Capital investment associated with Killam's repositioning program increased in 2020 as demand for these repositioned units
has remained strong. Killam has also increased capital investment associated with its commercial portfolio, specifically with leaseholds
for new tenants at the Brewery Market and curb appeal investments at Westmount Place.
For the year ended December 31,
Apartments
MHCs
Commercial
Apartments - Capital Investment
A summary of the capital investment on the apartment segment is included below:
For the year ended December 31,
Building improvements
Suite renovations
Appliances
Boilers and heating equipment
Other
Total capital invested
Average number of units outstanding (1)
Capital invested - $ per unit
2020
2019
% Change
$57,961
$52,861
4,392
3,340
5,016
4,162
$65,693
$62,039
9.6%
(12.4) %
(19.8) %
5.9%
2020
2019
% Change
$23,290
$25,881
(10.0) %
23,971
18,515
2,995
3,729
3,976
2,700
3,496
2,269
$57,961
$52,861
16,209
$3,576
15,513
$3,408
29.5%
10.9%
6.7%
75.2%
9.6%
4.5%
4.9%
(1) Weighted average number of units, adjusted for Killam's 50% ownership in jointly held properties.
Killam invested $3,576 per unit for the year ended December 31, 2020, compared to $3,408 per unit for the same period of 2019. This
increase is largely attributable to increased suite renovation investments, partially offset by certain larger projects being deferred, as a
result of physical distancing restrictions and the uncertainty surrounding COVID-19.
Killam's focus on development and acquisition of newer properties translates into a lower capital maintenance per unit than many other
apartment owners in Canada. Thirty-six percent of Killam's apartments, as a percentage of 2021 forecasted NOI, were built in the past
10 years, and the average age of Killam's portfolio is 28 years. This portfolio of relatively newer assets allows Killam to focus on value-
enhancing opportunities as the maintenance capital requirements are lower.
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39
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Maintenance capital requirements vary significantly by age of property. As the following chart illustrates, the approximate 2020
maintenance capex for properties built in the past 10 years was $450 per unit vs. $1,140 per unit for units that were 40+ years old.
$1,500
$1,000
$500
$0
Average Maintenance Capital Investment per Unit by Building Age
(Based on 2020 Actual Investment)
990
450
620
710
1,140
0-10 years
11-20 years
21-30 years
31- 40 years
41 + years
Maintenance Capex per unit
As well, the chart below highlights that the total capital investment per unit is less for newer properties (built in the last 10 years),
averaging $1,900 per unit, compared to $4,650 per unit for buildings over 40 years old.
Average Capital Spend per Unit by Building Age
$4,000
$3,000
$2,000
$1,000
$—
2016
2017
2018
2019
2020
0-10 years
11-20 years
21-30 years
31-40 years
41+ years
Building Improvements
Of the $58.0 million total capital invested in the apartment segment for the year ended December 31, 2020, approximately 40% was
invested in building improvements, compared to 49% of the total capital investment for the year ended December 31, 2019. These
investments include exterior cladding and brick work, balcony refurbishments, roof upgrades, sidewalk replacements, common area
upgrades and energy and water efficiency investments, such as air sealing and low-flow toilet upgrades, to increase the quality and
efficiency of Killam's portfolio. The year-over-year variances relate primarily to the timing and deferral of certain larger projects due
to COVID-19 and a slowdown in the completion of common area upgrades as a result of physical distancing requirements.
Suite Renovations and Repositionings
For the year ended December 31, 2020, Killam invested $24.0 million in suite renovations, a 29.5% increase over the total investment
of $18.5 million for the same period of 2019. This increase is due to the acceleration of Killam's repositioning program. Killam
continues to focus on unit renovations to maximize occupancy and rental growth. Killam targets a minimum return on investment of
10% for its suite repositions, earning rental growth of 10%–30%. The timing of suite reposition investment is influenced by natural
tenant turnover, market conditions and individual property requirements. The length of time that Killam has owned a property and
the age of the property also impact capital requirements. During the year, Killam completed 495 unit repositions, with an average
investment of approximately $25,000 per suite, generating an average ROI of 13.0%.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
A summary of the repositioning activities for the year ended December 31, 2020 is set out below:
Region
Nova Scotia
Ontario
New Brunswick
Newfoundland
Alberta
Total (weighted average)
2020 Repositioning Program
Units
Repositioned
Average
Investment per
Unit
342
43
96
5
9
495
$24,300
$35,600
$19,750
$34,200
$33,650
$25,000
Rental Increase
Achieved/
Proposed % (1)
22%
33%
29%
29%
30%
24%
Avg Return on
Investment
Total Remaining
Units Eligible to
Reposition
12%
15%
16%
9%
13%
13%
3,000
500
1,300
150
50
5,000
(1) The weighted average rental lift on the units repositioned during the year is based on the proposed rental rate prior to the unit
being leased. Killam's weighted average rental increase on repositioned units leased during the year ended December 31, 2020 was
27.3%.
In the long term, Killam estimates that the reposition opportunity within the current portfolio is approximately an additional 5,000
units, which should generate an estimated $17.0 million in additional annualized revenue, representing an approximate $340.0
million increase in NAV.
Expanding our Sustainability Focus
Killam continued to execute on its energy efficiency plan throughout 2020. Killam will continue to invest in additional energy efficiency
initiatives, which include the installation of photovoltaic solar panels at select properties and heating efficiencies. Since 2015, Killam has
installed over 11,500 low-flow toilets, saving an estimated 700 million litres of water annually across the portfolio and generating
approximately $1.6 million in water consumption savings. Killam plans to complete more water conservation projects in the future,
however, these projects were put on hold temporarily to reduce interactions with tenants inside their units. Killam also plans to
augment its sustainability programs and improve its GRESB rating. Killam is committed to lowering and reporting on its greenhouse gas
emissions and also completing benchmarking using third-party validation.
MHCs - Capital Investment
A summary of the capital investment for the MHC segment is included below:
For the year ended December 31,
Water and sewer upgrades
Site expansion and land improvements
Other
Roads and paving
Equipment
Total capital invested - MHCs
Average number of sites
Capital invested - $ per site
2020
2019
% Change
$2,164
$1,946
571
1,177
351
129
465
1,507
748
350
$4,392
$5,016
5,855
$750
5,486
$914
11.2%
22.8%
(21.9) %
(53.1) %
(63.1) %
(12.4) %
6.7%
(17.9) %
Management expects to invest between $700 and $950 per MHC site annually. Consistent with the apartment portfolio, a portion of
the MHC capital is considered maintenance capital and a portion is considered value enhancing. Maintenance capital includes costs
to support the existing infrastructure, and value-enhancing capital includes improvements to roadways, work to accommodate future
expansion, and various community enhancements. A portion of MHC capital may be recovered through above guideline increases in
provinces with rent control, leading to increased NOI from the investments.
Total capital invested during the year ended December 31, 2020 was $4.4 million, down from $5.0 million for the year ended
December 31, 2019. The decrease in capital investment is due to timing of various community enhancements and water and sewer
upgrades. As with the apartment portfolio, the timing of MHC capital investment changes based on requirements at each
community.
Commercial - Capital Investment
During the year ended December 31, 2020, Killam invested $3.3 million in its commercial portfolio, compared to $4.2 million for the
year ended December 31, 2019. These investments relate primarily to upgrades and tenant improvements at the Brewery Market as
Killam continues to reposition this property, as well as common area upgrades at Westmount Place.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Mortgages and Other Loans
The table below outlines Killam's key debt metrics:
As at December 31,
Weighted average years to debt maturity
Total debt to total assets
Interest coverage
Debt service coverage
Debt to normalized EBITDA (1)
Weighted average mortgage interest rate
Weighted average interest rate of total debt
(1) Ratio calculated net of cash.
2020
4.6
44.6%
3.36x
1.57x
10.78x
2.69%
2.69%
2019
4.5
Change
0.1 years
43.4%
120 bps
3.20x
1.57x
10.15x
2.90%
2.92%
5.0%
—%
6.2%
(21) bps
(23) bps
Killam’s long-term debt consists largely of fixed-rate, long-term mortgages. Mortgages are secured by a first or second charge against
individual properties. Killam’s weighted average interest rate on mortgages as at December 31, 2020, was 2.69%, 21 bps lower
compared to the rate as at December 31, 2019.
Total debt as a percentage of total assets was 44.6% at December 31, 2020, compared to 43.4% at December 31, 2019. The nominal
increase in total leverage is attributable mainly to the timing of an equity raise in November 2019 and repayment of the outstanding
balance on Killam's line of credit prior to year-end. Management is focused on maintaining conservative debt levels. Total debt to total
assets is sensitive to changes in the fair value of investment properties, in particular, cap-rate changes.
The quantitative sensitivity analysis shown below illustrates the value increase or decrease in Killam's debt to asset ratio given the
change in the noted input:
Cap-rate Sensitivity
Increase (Decrease)
Fair Value of Investment
Properties (1)
Total Assets
Total Debt as % of Total
Assets
Change (bps)
(0.50) %
(0.25) %
—%
0.25%
0.50%
$3,832,018
$3,617,459
$3,431,068
$3,253,259
$3,097,378
$4,028,807
$3,814,248
$3,627,857
$3,450,048
$3,294,167
41.7%
44.0%
46.3%
48.7%
51.0%
(460)
(230)
—
240
470
(1) Includes Killam's apartment and MHC portfolios, which are valued using the direct income capitalization method.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Refinancings
For the year ended December 31, 2020, Killam refinanced the following mortgages:
Apartments
MHCs
Mortgage Debt
Maturities
$205,650
13,432
$219,082
2.63%
3.45%
2.68%
Mortgage Debt
on Refinancing
Weighted
Average Term
Net Proceeds
$274,736
22,398
$297,134
1.76%
2.66%
1.83%
6.7 years
5.0 years
6.6 years
$69,086
8,966
$78,052
The following table details the maturity dates and average interest rates of mortgage and vendor debt, and the percentage of apartment
mortgages that are CMHC-insured by year of maturity:
Apartments
MHCs and Commercial
Total
Year of
Maturity
Balance
December 31
Weighted Avg
Int. Rate %
%
CMHC
Insured
Balance
December 31
Weighted Avg
Int. Rate %
2021
2022
2023
2024
2025
Thereafter
129,089
146,638
203,275
244,726
251,354
582,334
2.46%
86.4%
2.68%
47.9%
3.19%
67.4%
2.70%
92.6%
1.88%
79.0%
2.79%
100.0%
12,089
24,106
31,343
13,169
22,381
—
Balance
December 31 (1)
141,178
3.55%
3.58%
3.78%
3.49%
2.61%
—%
170,744
234,618
257,895
273,735
582,334
$1,557,416
2.65%
85.2%
$103,088
3.41%
$1,660,504
(1) Excludes $7.8 million in variable rate demand loans secured by development properties, which are classified as mortgages and loans
payable as at December 31, 2020.
Apartment Mortgage Maturities by Year
Amount maturing ($)
Weighted average interest rate (%)
)
M
$
(
s
e
i
t
i
r
u
t
a
M
e
g
a
g
t
r
o
M
500
450
400
350
300
250
200
150
100
50
0
2.46%
2.68%
3.19%
2.70%
2.52%
2.85%
2.83%
1.88%
2021
2022
2023
2024
2025
2026
2027
Thereafter
Access to mortgage debt is essential in refinancing maturing debt and financing acquisitions. Management has diversified Killam’s
mortgages to avoid dependence on any one lending institution and has staggered maturity dates to manage interest rate risk.
Management anticipates continued access to mortgage debt for both acquisitions and refinancings. Killam has experienced continued
access to mortgage debt throughout the current COVID-19 pandemic. Access to CMHC-insured financing gives apartment owners an
advantage over other asset classes as lenders are provided a government guarantee and therefore are able to lend at more
favourable rates. As at December 31, 2020, approximately 85.2% of Killam’s apartment mortgages were CMHC-insured (79.9% of
total mortgages, as MHC and commercial mortgages are not eligible for CMHC insurance) (December 31, 2019 - 85.2% and 79.6%).
The weighted average interest rate on the CMHC-insured mortgages was 2.60% as at December 31, 2020 (December 31, 2019 -
2.77%).
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43
Weighted Avg
Int. Rate %
2.56%
2.81%
3.27%
2.74%
1.94%
2.79%
2.69%
8%
7%
6%
5%
4%
3%
2%
1%
0%
I
n
t
e
r
e
s
t
R
a
t
e
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
The following tables present the NOI for properties that are available to Killam to refinance at debt maturity in 2021 and 2022:
2021 Debt Maturities
Apartments with debt maturing
MHCs with debt maturing
2022 Debt Maturities
Apartments with debt maturing
MHCs with debt maturing
Number of
Properties Estimated NOI
Principal
Balance
(at maturity)
39
4
43
$15,820
1,061
$16,881
$126,713
5,987
$132,700
Number of
Properties Estimated NOI
Principal
Balance
(at maturity)
22
9
31
$14,655
3,153
$17,808
$139,744
22,316
$162,060
Future Contractual Debt Obligations
As at December 31, 2020, the timing of Killam's future contractual debt obligations is as follows:
Twelve months ending December 31,
2021
2022
2023
2024
2025
Thereafter
Mortgage and
Loans Payable
$201,345
211,947
257,276
256,140
245,761
495,835
$1,668,304
Construction
Loans (1) Credit Facilities (2)
$41,345
$7,029
—
—
—
—
—
$41,345
—
—
—
—
—
$7,029
Total
$249,719
211,947
257,276
256,140
245,761
495,835
$1,716,678
(1) Construction loans are demand loans that are expected to be replaced with permanent mortgage financing on development completion lease-up.
(2) Killam's $70 million credit facility was amended and extended in December 2020.
Construction Loans
As at December 31, 2020, Killam had access to five variable rate non-revolving demand construction loans, for the purpose of
financing development projects, totaling $134.7 million. As at December 31, 2020, $41.3 million was drawn on the construction loans
(December 31, 2019 - $24.9 million). Payments are made monthly on an interest-only basis. The weighted-average contractual
interest rate on amounts outstanding at December 31, 2020, was 2.37% (December 31, 2019 - 3.32%). Once construction is complete
and rental targets achieved, construction financing will be replaced with permanent mortgage financing.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Credit Facilities
Killam has access to two credit facilities with credit limits of $110.0 million ($130.0 million with the accordion feature) and $10.0
million (December 31, 2019 - $70.0 million (with $20.0 million accordion feature) and $5.0 million) that can be used for acquisition
and general business purposes.
The $110.0 million facility bears interest at prime plus 70 bps on prime rate advances or 170 bps over bankers' acceptances ("BAs").
The facility includes a $30.0 million demand revolver and a $80.0 million committed revolver as well as an accordion option to
increase the $110.0 million facility by an additional $20.0 million. The committed revolver was increased by $40.0 million on
December 23, 2020. The agreement includes certain covenants and undertakings with which Killam was in compliance as at December
31, 2020.
The $10.0 million demand facility bears interest at prime plus 125 bps on advances and 135 bps on issuance of letters of credit in
addition to 50 bps per annum. The agreement includes certain covenants and undertakings with which Killam was in compliance as at
December 31, 2020.
As at December 31, 2020
$110.0 million facility
$10.0 million facility
Total
As at December 31, 2019
$70.0 million facility
$5.0 million facility
Total
Maximum Loan
Amount (1)
$130,000
10,000
$140,000
Maximum Loan
Amount (1)
$90,000
5,000
$95,000
Amount
Drawn
$5,000
2,029
$7,029
Amount
Drawn
$—
—
$—
Letters of
Credit
$—
1,773
$1,773
Letters of
Credit
$—
1,282
$1,282
Amount
Available
$125,000
6,198
$131,198
Amount
Available
$90,000
3,718
$93,718
(1) Maximum loan includes a $20.0 million accordion option, for which collateral is pledged.
Unitholders’ Equity
As Killam is an open-ended mutual fund trust, unitholders of trust units are entitled to redeem their trust units at any time at prices
determined and payable in accordance with the conditions specified in Killam’s DOT. Consequently, under IFRS, trust units are
defined as financial liabilities; however, for purposes of financial statement classification and presentation, trust units may be
presented as equity instruments as they meet the puttable instrument exemption under IAS 32.
All trust units outstanding are fully paid, have no par value and are voting trust units. The DOT authorizes the issuance of an
unlimited number of trust units. Trust units represent a unitholder’s proportionate undivided beneficial interest in Killam. No trust
unit has any preference or priority over another. No unitholder has or is deemed to have any right of ownership in any of the assets
of Killam. Each unit confers the right to one vote at any meeting of unitholders and to participate pro rata in any distributions and, on
liquidation, to a pro rata share of the residual net assets remaining after preferential claims thereon of debtholders.
Unitholders have the right to redeem their units at the lesser of (i) 90% of the market price of the trust unit (market price is defined
as the weighted average trading price of the previous 10 trading days) and (ii) the most recent closing market price (closing market
price is defined as the weighted average trading price on the specified date) at the time of the redemption. The redemption price will
be satisfied by cash, up to a limit of $50 thousand for all redemptions in a calendar month, or a note payable. For the year ended
December 31, 2020, no unitholders redeemed units.
During Q1-2020, Killam increased its monthly distribution by 3.0% to $0.05667, effective for the March 2020 distribution ($0.68 per
unit annualized). Killam's Distribution Reinvestment Plan ("DRIP") allows unitholders to elect to have all cash distributions from the
Trust reinvested in additional units. Unitholders who participate in the DRIP receive an additional distribution of units equal to 3% of
each cash distribution reinvested. The price per unit is calculated by reference to the 10-day volume weighted average price of
Killam's units on the Toronto Stock Exchange preceding the relevant distribution date, which typically is on or about the 15th day of
the month following the distribution declaration.
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45
2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
The following chart highlights Killam's distributions paid and trust units reinvested.
Distribution Reinvestment Plan and Net Distributions Paid
For the years ended December 31,
Distributions declared on trust units
Distributions declared on exchangeable units
Distributions declared on awards outstanding under RTU plan
Total distributions declared
Less:
Distributions on trust units reinvested
Distributions on RTUs reinvested
Net distributions paid
Percentage of distributions reinvested
Liquidity and Capital Resources
2020
2019
% Change
$68,696
$60,795
2,784
251
2,727
283
$71,731
$63,805
(21,274)
(18,250)
(251)
(283)
$50,206
$45,272
30.0 %
29.0 %
13.0%
2.1%
(11.3) %
12.4%
16.6%
(11.3) %
10.9%
Management manages Killam's liquidity to fund major property maintenance and improvements, debt principal and interest
payments, distributions to unitholders and property acquisitions and developments. Killam’s sources of capital include: (i) cash flows
generated from operating activities; (ii) cash inflows from mortgage refinancings; (iii) mortgage debt secured by investment
properties; (iv) credit facilities with two Canadian chartered banks; and (v) equity and debt issuances.
Management expects to have sufficient liquidity for the foreseeable future based on its evaluation of capital resources:
(i)
Cash flows from operating activities are expected to be sufficient to fund the current level of distributions and maintenance
capex.
(ii) Killam currently has access to approximately $120 million of capital under its credit facilities. Killam's acquisition capacity on its
credit facility is over $250 million.
(iii) Mortgage refinancings and construction loans are expected to be sufficient to fund value-enhancing capex, principal
repayments and developments. Killam has $141.2 million of mortgage debt scheduled for refinancing through to the end of
2021, expected to lead to upfinancing opportunities of approximately $50 million.
(iv) Upcoming mortgage maturities are expected to be renewed through Killam's mortgage program. Killam's mortgage program
has remained stable since COVID-19 with renewals proceeding as scheduled.
(v) Unencumbered assets of approximately $75.0 million, for which debt could be placed.
Killam is in compliance with all financial covenants contained in the DOT and through its credit facilities. Under the DOT, total
indebtedness of Killam is limited to 70% of gross book value determined as the greater of (i) the value of Killam's assets as shown on
the most recent consolidated statement of financial position and (ii) the historical cost of Killam's assets. Total debt as a percentage
of assets as at December 31, 2020 was 44.6%.
Killam has financial covenants on its $110.0 million credit facilities. The covenants require Killam to maintain a leverage limit of not
more than 70% of debt to total assets, debt to service coverage of not less than 1.3 times and unitholders' equity of not less than
$900.0 million. As at February 10, 2021, Killam was in compliance with said covenants.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART VIII
Quarterly Results & Discussion of Q4 Operations
Summary of Quarterly Results
An eight-quarter trend highlighting key operating results is shown below:
2020
2019
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Property revenue
$66,845 $66,653 $64,899 $63,293 $62,795 $63,020 $59,198 $57,186
NOI
Net income
FFO
FFO per unit - diluted
AFFO per unit - diluted
$41,702 $43,397 $41,516 $38,047 $39,932 $41,349 $37,510 $33,545
$48,563 $37,465 $21,509 $38,503 $126,805 $46,839 $82,789 $27,092
$26,537 $28,512 $26,617 $23,012 $24,997 $26,247 $23,752 $18,887
$0.25
$0.27
$0.26
$0.22
$0.25
$0.27
$0.25
$0.21
$0.21
$0.23
$0.22
$0.18
$0.21
$0.23
$0.20
$0.16
Weighted average units - diluted (000s)
107,300 105,691 102,620 102,358 99,781 96,044 95,807 91,938
Killam's total property revenue for the three months ended December 31, 2020 was $66.8 million, a 6.4% increase over the same period
in 2019, due to the contributions from recent acquisitions, as well as increased same property revenue. Net income decreased by $78.2
million in the quarter due to a net $29.5 million of fair value gains in Q4-2020, compared to net fair value gains of $115.2 million in
Q4-2019.
Q4 Consolidated Results
For the three months ended December 31,
Total Portfolio
Same Property
Non-Same Property
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Property revenue
$66,845
$62,795
6.4%
$58,468
$57,219
2.2%
$8,377
$5,576
50.2%
Property operating expenses
General operating expenses
12,461
10,056
23.9%
Utility and fuel expenses
Property taxes
4,602
8,080
5,361
7,446
(14.2) %
8.5%
9,842
4,760
7,002
9,033
4,943
6,709
Total operating expenses
$25,143
$22,863
10.0%
$21,604
$20,685
NOI
$41,702
$39,932
4.4%
$36,864
$36,534
9.0%
(3.7) %
4.4%
4.4%
0.9%
2,619
(158)
1,078
1,023
156.0%
418
737
(137.8) %
46.3%
62.5%
42.4%
$3,539
$2,178
$4,838
$3,398
Operating margin %
62.4%
63.6%
(120) bps
63.0%
63.8%
(80) bps
57.8%
60.9%
(310) bps
For the three months ended December 31, 2020, Killam recognized 4.4% NOI growth. Revenue grew 6.4%, offset by total operating
expense increases of 10.0% due to inflationary pressures and the increased size of Killam's portfolio. Consolidated same property
revenue grew 2.2% for the three months ended December 31, 2020, compared to the same period of 2019. Total same property
operating expenses increased by 4.4%, resulting in consolidated same property NOI 0.9% higher in Q4-2020, compared to Q4-2019.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Q4 Same Property NOI
For the three months ended December 31,
Apartments
MHCs
Commercial
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Property revenue
$52,524
$51,480
2.0%
$3,881
$3,634
6.8%
$2,063
$2,105
(2.0) %
Property operating expenses
General operating expenses
Utility and fuel expenses
Property taxes
8,504
4,225
6,364
7,746
4,426
6,107
Total property expenses
$19,093
$18,279
NOI
$33,431
$33,201
9.8%
(4.5) %
4.2%
4.5%
0.7%
1,108
490
180
988
437
171
12.1%
12.1%
5.3%
230
45
458
299
80
431
(23.1) %
(43.8) %
6.3%
$1,778
$1,596
11.4%
$733
$810
(9.5) %
$2,103
$2,038
3.2%
$1,330
$1,295
2.7%
Operating margin
63.6%
64.5%
(90) bps
54.2%
56.1%
(190) bps
64.5%
61.5%
300 bps
Apartment Same Property
Killam’s same property apartment portfolio realized NOI growth of 0.7% for the three months ended December 31, 2020, as compared
to the three months ended December 31, 2019, due to a 2.0% increase in revenues and a 4.5% increase in total property operating
expenses. The revenue growth was generated from a 3.3% increase in the average rental rate, partially offset by a 100 bps decrease in
occupancy for the quarter. Occupancy for the three months ended December 31, 2020, was 96.6%.
General operating expenses increased 9.8% in the fourth quarter of 2020, compared to the same period in 2019, due to higher staffing
costs as a result of front-line bonuses, contract services costs and insurance premiums. General operating expense increases were
partially offset by decreased advertising costs due to strong occupancy in the majority of Killam's core markets.
Utility and fuel expenses were 4.5% lower for the quarter ended December 31, 2020, as compared to the quarter ended December 31,
2019. Electricity expenses were 2.3% lower due to the installation of LED lighting over the past 12 months, in addition to a reduction of
inclusion of unit electricity as a rental incentive. Oil costs were down 40.6%, compared to Q4-2019, as a result of lower commodity
pricing in Killam's major regions and switching select properties to more efficient heating sources. Natural gas expenses were down 8.5%
quarter-over-quarter due to a 16.7% weighted average reduction in natural gas pricing in Killam's Nova Scotia, New Brunswick and
Ontario markets. Property taxes increased 4.2% quarter-over-quarter due to higher property tax assessments and rate increases.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Q4-2020 Occupancy
Apartment Occupancy Analysis by Core Market (% of Residential Rent) (1)
For the three months ended December 31, # of Units
Halifax
Ottawa
London
Cambridge-GTA
Moncton
Fredericton
Saint John
St. John's
Charlottetown (2)
Calgary
Edmonton
Victoria
Other Atlantic
5,814
1,216
523
818
2,073
1,529
1,202
915
1,064
531
579
315
469
Total Apartments (weighted average)
17,048
Total Occupancy
Same Property Occupancy
2020
97.3%
95.0%
97.1%
97.7%
97.0%
98.1%
96.7%
86.7%
90.9%
92.7%
94.5%
98.6%
94.0%
96.0%
2019 Change (bps)
2020
2019 Change (bps)
98.9%
92.5%
98.6%
98.5%
98.8%
98.4%
96.5%
91.4%
99.5%
95.9%
92.2%
N/A
96.0%
97.4%
(160)
97.3%
98.9%
250
94.4%
94.4%
(150)
97.1%
98.6%
(80)
97.8%
98.5%
(180)
98.3%
98.8%
(30)
98.2%
98.4%
20
(470)
(860)
(320)
230
N/A
(200)
(140)
96.7%
86.7%
99.4%
94.0%
95.4%
96.5%
91.4%
99.4%
95.8%
92.5%
N/A
N/A
94.0%
96.6%
96.0%
97.6%
(160)
—
(150)
(70)
(50)
(20)
20
(470)
—
(180)
290
N/A
(200)
(100)
(1) Occupancy as a percentage of residential rent is calculated as vacancy (in dollars) divided by gross potential residential rent (in dollars) for the period.
(2) Total occupancy is impacted by Shorefront, which is undergoing initial lease-up.
Overall apartment occupancy decreased 140 bps to 96.0% in the fourth quarter of 2020, compared to 97.4% for the fourth quarter of
2019. This includes new properties in their initial lease-up. Same property occupancy was 96.6%, a 100 bps decline versus Q4-2019. St.
John's same property occupancy is down 470 bps in Q4-2020, compared to Q4-2019. Lower occupancy in the region is due to economic
pressure that has been further impacted by COVID-19. The region has seen reduced activity in the offshore oil sector as well as declines
in other natural resource sectors, on which the Newfoundland economy is heavily reliant.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Apartment Same Property NOI by Region
Three months ended December 31,
Nova Scotia
Halifax
Ontario
Ottawa
London
Cambridge-GTA
New Brunswick
Moncton
Fredericton
Saint John
Newfoundland & Labrador
St. John's
Prince Edward Island
Charlottetown
Alberta
Calgary
Edmonton
Other Atlantic locations
Property Revenue
Property Expenses
Net Operating Income
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
$20,791 $20,312
20,791 20,312
3,266
2,118
3,708
9,092
4,747
4,562
3,173
3,185
2,055
3,618
8,858
4,618
4,386
3,040
12,482 12,044
2.4%
2.4%
2.5%
3.1%
2.5%
2.6%
2.8%
4.0%
4.4%
3.6%
($7,081)
($6,799)
4.1%
$13,710 $13,513
(7,081)
(6,799)
4.1%
13,710 13,513
(1,102)
(1,055)
(761)
(699)
(1,270)
(1,169)
(3,133)
(2,923)
(1,988)
(1,951)
(1,733)
(1,675)
(1,364)
(1,344)
(5,085)
(4,970)
4.5%
8.9%
8.6%
7.2%
1.9%
3.5%
1.5%
2.3%
2,164
2,130
1,357
1,356
2,438
2,449
5,959
5,935
2,759
2,667
2,829
2,711
1,809
1,696
7,397
7,074
1.5%
1.5%
1.6%
0.1%
(0.4) %
0.4%
3.4%
4.4%
6.7%
4.6%
2,429
2,429
2,516
2,516
(3.5) %
(3.5) %
(874)
(874)
(786)
(786)
11.2%
11.2%
1,555
1,730
(10.1) %
1,555
1,730
(10.1) %
2,992
2,992
2,952
2,952
1.4%
1.4%
(1,205)
(1,196)
(1,205)
(1,196)
0.8%
0.8%
1,787
1,756
1,787
1,756
1.8%
1.8%
1,453
1,965
3,418
1,320
1,489
1,979
3,468
1,330
(2.4) %
(0.7) %
(515)
(675)
(462)
(659)
(1.4) %
(1,190)
(1,121)
(0.8) %
(525)
(484)
11.5%
938
1,027
2.4%
6.2%
8.5%
1,290
1,320
2,228
2,347
795
846
$52,524 $51,480
2.0%
($19,093) ($18,279)
4.5%
$33,431 $33,201
(8.7) %
(2.3) %
(5.1) %
(6.0) %
0.7%
Halifax revenue grew by 2.4% during the fourth quarter of 2020 due to a 3.8% increase in average rental rates. Property operating
expense growth was 4.1%, compared to Q4-2019, due to higher insurance premiums and increased property tax expense, which were
partially offset by lower utility costs. Halifax's Q4-2020 same property NOI increased 1.5% from Q4-2019.
Ontario revenue increased by 2.6%, despite decreased occupancy, as a result of a 3.8% increase in rental rates. Total operating expenses
increased 7.2%, primarily due to increased property taxes, higher insurance premiums and higher utility costs due to increased water
consumption. Overall, Ontario's NOI increased by 0.4% compared to Q4-2019.
Performance in New Brunswick was strong in the fourth quarter, with Saint John, Fredericton and Moncton recording quarter-over-
quarter NOI gains of 6.7%, 4.4% and 3.4%, respectively, as compared to the same period in 2019. Rental rates grew by an average of
4.0% across the province, with a slight decrease in overall occupancy. Property operating expenses increased 2.3% compared to
Q4-2019 as utility expense savings from energy initiatives and lower rates, partially offset higher staffing costs and insurance premiums.
In total, New Brunswick achieved a 4.6% increase in NOI, as compared to Q4-2019.
While Killam's St. John's portfolio saw a slight 1.1% increase in rental rates, occupancy was 470 bps lower over Q4-2019. There continues
to be softness in the Newfoundland economy as a result of reduced offshore oil activity, further impacted by COVID-19. Same property
revenue decreased 3.5% for Q4-2020. Property operating expenses grew 11.2%, primarily due to higher staffing costs related to an
expansion of the property management and leasing teams and higher contract services costs. In aggregate, same property NOI
decreased 10.1% compared to Q4-2019.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
The Charlottetown market remains strong, with same property occupancy of 99.4% and rental rate increases of 1.4% in Q4-2020.
Property expenses were up a modest 0.8% from the same period in 2019, primarily due to higher staffing costs and insurance premiums
offset by lower utility costs. Overall, Charlottetown achieved NOI growth of 1.8% for the three months ended December 31, 2020.
Revenues in Alberta decreased 1.4%, as rental rates were flat quarter-over-quarter and increased incentives were used to combat higher
vacancy in downtown properties. Operating costs increased 6.2% compared to the three months ended December 31, 2019, due to
increased utility costs and higher staffing costs as the leasing team has expanded. In total, NOI was 5.1% lower in Q4-2020 compared to
Q4-2019.
MHC Results
For the three months ended December 31,
Total Portfolio
Same Property
Non-Same Property
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Property revenue
$4,058
$3,624
12.0%
$3,881
$3,634
6.8%
$177
$(10)
N/A
Property operating expenses
General operating expenses
1,151
Utility and fuel expenses
Property taxes
491
198
995
437
172
15.7%
12.4%
15.1%
1,108
490
180
988
437
171
12.1%
12.1%
5.3%
43
1
18
7
—
1
Total operating expenses
$1,840
$1,604
14.7%
$1,778
$1,596
11.4%
$62
$8
NOI
$2,218
$2,020
9.8%
$2,103
$2,038
3.2%
$115
$(18)
N/A
N/A
N/A
N/A
N/A
Operating margin %
54.7%
55.7%
(100) bps
54.2%
56.1%
(190) bps
$—
$—
—%
MHC Same Property
The MHC same property portfolio generated a 3.2% increase in NOI in Q4-2020, compared to Q4-2019. Revenues grew by 6.8% quarter-
over-quarter due to a 2.4% rental rate increase at the permanent MHC communities and increased transient revenue from Killam's
seasonal resorts. This was a result of increased traffic in October. Total same property operating expenses increased 11.4%, or $182.0
thousand, due to higher staffing costs, utilities and repairs and maintenance costs.
Commercial Results
For the three months ended December 31,
Total Portfolio
Same Property
Non-Same Property
2020
2019 % Change
2020
2019 % Change
2020
2019 % Change
Property revenue
$3,845
$3,958
(2.9) % $2,063
$2,105
(2.0) % $1,782
$1,853
Property operating expenses
1,803
1,967
(8.3) %
733
810
NOI
$2,042
$1,991
2.6%
$1,330
$1,295
(9.5) %
2.7%
1,070
$712
1,157
$696
(3.8) %
(7.5) %
2.3%
Killam's overall commercial portfolio saw a 2.9% decrease in revenue and an 8.3% decrease in property operating expenses, resulting in
a 2.6% increase in NOI compared to Q4-2019. The decline in same property commercial revenue during Q4-2020 was driven by
participation in the CECRA program and a slight uptick in vacancy. Expenses decreased in 2020 following internalizing management of
Westmount place in early 2020 in addition to reduced utility costs. The same property results in Q4-2020 include Westmount Place
located in Waterloo and three commercial properties, one of which is Killam's head office, located in Halifax, NS.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Q4 FFO and AFFO
For the three months ended December 31,
2020
2019
% Change
Net income
Fair value adjustments
Loss on disposition
Non-controlling interest
Deferred tax expense
Interest expense related to exchangeable units
Net insurance proceeds
Unrealized gain on derivative liability
Internal commercial leasing costs
Depreciation on owner-occupied building
Change in principal related to lease liabilities
FFO
FFO per unit - diluted
AFFO per unit - diluted
AFFO payout ratio - diluted
Weighted average number of units - basic (000s)
Weighted average number of units - diluted (000s)
$48,563
$126,805
(29,514)
(115,158)
(4,754)
(100.0) %
(61.7) %
(74.4) %
(100.0) %
(111.5) %
(61.1) %
1.8%
(91.0) %
(35.4) %
(38.5) %
(77.8) %
6.2%
—%
—%
28
26
17,278
685
(67)
79
39
36
$0.25
$0.21
80 %
300 bps
99,588
99,781
7.6%
7.5%
—
(3)
6,717
697
—
(6)
51
24
8
$0.25
$0.21
83 %
107,139
107,300
$26,537
$24,997
Killam earned FFO of $26.5 million, or $0.25 per unit (diluted), for the three months ended December 31, 2020, compared to $25.0
million, or $0.25 per unit (diluted), for the three months ended December 31, 2019. FFO growth is primarily attributable to contributions
from acquisitions and completed developments ($0.8 million), same property NOI growth ($0.4 million), and a reduction in interest
expenses ($0.3 million). These increases were offset by a 7.5% increase in the weighted average number of units outstanding from an
equity raise completed in July 2020.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
PART IX
Selected Consolidated Financial Information
For the years ended December 31,
Property revenue
Net income
FFO
FFO per unit - diluted
Investment properties
Total assets
Total liabilities
Distribution per unit
Risk Management
2020
2019
2018
$261,690
$242,164
$215,959
$146,040
$283,525
$175,171
$104,678
$93,884
$81,808
$1.00
$0.98
$0.94
$3,741,918
$3,320,604
$2,799,693
$3,776,560
$3,380,100
$2,824,406
$2,008,302
$1,777,733
$1,655,456
$0.68
$0.66
$0.64
Killam faces a variety of risks, the majority of which are common to real estate entities. These risks include (i) changes in general
economic conditions, (ii) changes in local conditions (such as an oversupply of units or a reduction in demand for real estate in an
area), (iii) changes to government regulations (such as new or revised residential tenant legislation), (iv) competition from others with
available units, and (v) the ability of the landlord or owner to provide adequate maintenance economically.
Real estate is relatively illiquid. Such illiquidity will tend to limit Killam’s ability to rebalance its portfolio promptly in response to
changing economic or investment conditions. In addition, financial difficulties of other property owners, resulting in distress sales, may
depress real estate values in the markets in which Killam operates. Killam’s exposure to general risks associated with real estate
investments is mitigated by its geographic and sector diversification due to investments in apartments and MHCs, and commercial
properties.
Killam is exposed to other risks, as outlined below:
Interest Rate Risk
Interest rate risk is the risk that Killam would experience lower returns as the result of its exposure to a higher interest rate
environment. Killam is exposed to interest rate risk as a result of its mortgages and loans payable; however, this risk is mitigated through
Killam's strategy to have the majority of its mortgages payable in fixed-term arrangements. Killam also structures its financings so as to
stagger the maturities of its debt, minimizing Killam's exposure to interest rates in any one year.
As at December 31, 2020, $56.1 million of Killam's debt had variable interest rates, including four construction loans totaling $41.3
million, amounts drawn on credit facilities of $7.0 million and one demand loan totaling $7.8 million. These loans and facilities have
interest rates of prime plus 0.5% - 1.25% (December 31, 2019 - prime plus 0.55% - 1.0%) and consequently, Killam is exposed to short-
term interest rate risk on these loans.
Liquidity Risk
Liquidity risk is the risk that Killam may not have access to sufficient capital to fund its growth program or refinance its debt obligations
as they mature. Killam manages cash resources based on financial forecasts and anticipated cash flows. The maturities of Killam’s long-
term financial liabilities are set out in note 26 to the consolidated financial statements. Killam staggers the maturities of its debt,
minimizing exposure to liquidity risk in any year. In addition, Killam’s apartments qualify for CMHC-insured debt, reducing the
refinancing risk on maturity. Killam’s MHCs and commercial properties do not qualify for CMHC-insured debt; however, they continue to
have access to mortgage debt.
Credit Risk
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill the commitments of their
lease. Killam mitigates the risk of credit loss through the diversification of its existing portfolio and limiting its exposure to any one
tenant. Credit assessments are conducted for all new leases, and Killam also obtains a security deposit to assist in potential recovery
requirements. Killam’s bad debt expense has historically been less than 0.3% of revenues, and none of Killam’s tenants account for more
than 3% of tenant receivables.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted)
2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Pandemic Risk and Economic Downturn
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The transmission of COVID-19 and efforts to
contain its spread have resulted in international, national and local border closings, significant disruptions to business operations,
financial markets, regional economies and the world economy and other changes to services as well as considerable general concern
and uncertainty. Such disruptions could adversely affect the ability of Killam’s tenants to pay rent and increase Killam's credit risk. In
addition, the COVID-19 pandemic and other outbreaks could materially interrupt Killam's supply chain and service providers, which
could have material adverse affects on Killam's ability to maintain and service its properties. There can be no assurance that a
disruption in financial markets, regional economies and the world economy and the government measures to contain COVID-19 will not
negatively affect the financial performance or fair values of Killam's investment properties in a material manner.
The Trust’s response to the COVID-19 pandemic is guided by local public health authorities and governments. Killam continues to closely
monitor business operations and may take further actions that respond to directives of governments and public health authorities or that
are in the best interests of employees, tenants, suppliers or other stakeholders, as necessary. These changes and any additional changes in
operations in response to COVID-19 could materially impact the business operations and financial results of Killam. The COVID-19 situation
continues to change rapidly and uncertainties remain with respect to the severity and duration of a resurgence in COVID-19 or its variants,
the availability, distribution rates and efficacy of COVID-19 vaccines, the speed and extent to which normal economic conditions are able to
resume and the effectiveness of government and central bank responses. There are no comparable recent events that provide guidance as
to the effect the spread of COVID-19 may have, and, as a result, it is not possible to reliably estimate the duration and severity of these
consequences, as well as their impact on the financial position and results of the Trust for future periods.
Cyber Security Risk
A cyber incident is any adverse event that threatens the confidentiality, integrity or availability of Killam’s information technology
resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized
access to information systems to disrupt operations, corrupt data or steal confidential information. Killam’s primary risks that could
directly result from the occurrence of a cyber incident include operational interruption, damage to its reputation, damage to
relationships with its vendors and tenants and disclosure of confidential vendor or tenant information. Killam has implemented
processes, procedures and controls to mitigate these risks, but these measures, as well as its increased awareness of a risk of a cyber
incident, do not guarantee that its financial results will not be negatively impacted by such an incident.
Increased Supply Risk
Increased supply risk is the risk of loss from competition from new rental units in Killam’s core markets. Numerous residential
developers and apartment owners compete for potential tenants. Although it is Killam’s strategy to own multi-family residential
properties in premier locations in each market in which it operates, some of the apartments or MHCs of Killam's competitors may be
newer, better located, offer lower rents or have additional rental incentives. An increase in alternative housing could have a material
adverse effect on Killam’s ability to lease units and the rents charged and could adversely affect Killam's revenues and ability to meet its
obligations. To mitigate against this risk, Killam has a geographically diverse asset base. Management is expanding this diversification by
increasing Killam’s investment in apartment markets outside Atlantic Canada.
Development Risk
Development risk is the risk that costs of developments will exceed original estimates, unforeseen delays will occur and/or units will not
be leased in the timeframe and/or at rents anticipated. To reduce Killam’s exposure to cost increases, Killam enters into fixed-price
contracts when possible. To reduce the lease-up risk, Killam does market research in advance of each development to support expected
rental rates and premarkets its properties early on in the process, to increase demand for the new developments.
Environmental Risk
As an owner of real estate, Killam is subject to federal, provincial and municipal environmental regulations. These regulations may
require Killam to fund the costs of removal and remediation of certain hazardous substances on its properties or releases from its
properties. The failure to remediate such properties, if any, could adversely affect Killam’s ability to borrow using the property as
collateral or to sell the real estate. Killam is not aware of any material non-compliance with environmental laws at any of its properties.
Killam has made, and will continue to make, the necessary capital expenditures to comply with environmental laws and regulations.
Environmental laws and regulations can change rapidly, and Killam may be subject to more stringent environmental laws and
regulations in the future. Killam mitigates its risk of losses associated with oil tank leaks by enforcing the requirement for appropriate
insurance, performing regular oil tank inspections, and enforcing the removal of oil tanks when homes are sold at its MHC communities.
General Uninsured Losses
Killam carries comprehensive general liability, fire, flood, extended coverage and rental loss insurance with policy specifications, limits
and deductibles customary for the industry. There are, however, certain types of risks (generally of a catastrophic nature) that are
either uninsurable or would not be economically insurable.
Rent Control Risk
Rent control exists in some provinces in Canada, limiting the percentage of annual rental increases to existing tenants. Killam is exposed
to the risk of the implementation of, or amendments to, existing legislative rent controls in the markets in which it operates, which may
have an adverse impact on Killam’s operations. In the provinces in which Killam currently operates, Prince Edward Island, Ontario and
British Columbia have rent controls. As well, Nova Scotia has rent control for MHCs.
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2020 Management’s Discussion & AnalysisDollar amounts in thousands of Canadian dollars (except as noted) 2020 Management's Discussion and Analysis
Dollar amounts in thousands of Canadian dollars (except as noted)
Utility, Energy and Property Tax Risk
Killam is exposed to volatile utility and energy costs and increasing property taxes. Killam has the ability to raise rents on the anniversary
date of its leases, subject to the overall rental market conditions, to offset rising energy and utility costs; however, rental increases may
be limited by market conditions or regulation. Killam invests in energy efficiency initiatives to reduce its reliance on utility costs;
however, Killam remains exposed to price volatility and carbon tax on natural gas and heating oil. Killam has the ability to fix rates
through the use of swap contracts for a portion of its oil and fixed contracts through suppliers for natural gas consumption to reduce the
impact of fluctuations in commodity prices. To address the risk of property tax increases, Killam, along with the assistance of outside
consultants, reviews property tax assessments and, where warranted, appeals them.
Fluctuation and Availability of Cash Distributions
Killam's distribution policy is established pursuant to the DOT and may only be changed with the approval of a majority of unitholders.
However, the Board of Trustees may reduce or suspend cash distributions indefinitely, which could have a material adverse effect on the
market price of the trust units. There can be no assurance regarding the amount of income to be generated by Killam's properties. The
ability of Killam to make cash distributions, and the actual amount distributed, will be entirely dependent on the operations and assets
of Killam, and will be subject to various factors including financial performance, obligations under applicable credit facilities, fluctuations
in working capital, the sustainability of income derived from the tenant profile of Killam's properties and capital expenditure
requirements. Distributions may be increased, reduced or suspended entirely depending on Killam's operations and the performance of
Killam's assets at the discretion of the Trustees. The market value of the trust units will deteriorate if Killam is unable to meet its
distribution targets in the future, and that deterioration may be significant. In addition, the composition of cash distributions for tax
purposes may change over time and may affect the after-tax return of investors.
Ability of Unitholders to Redeem Units
The entitlement of unitholders to receive cash upon the redemption of their trust units is subject to the following limitations: (i) the
total amount payable by Killam in respect of such trust units and all other trust units tendered for redemption in the same calendar
month must not exceed $50,000 (provided that such limitation may be waived at the discretion of the Trustees); (ii) at the time such
trust units are tendered for redemption, the outstanding trust units must be listed for trading on a stock exchange or traded or quoted
on another market that the Trustees consider, in their sole discretion, provides fair market value prices for the trust units; (iii) the
trading of trust units is not suspended or halted on any stock exchange on which the trust units are listed (or, if not listed on a stock
exchange, on any market on which the trust units are quoted for trading) on the redemption date for more than five trading days during
the 10-day trading period commencing immediately after the redemption date; and (iv) the redemption of the trust units must not
result in the delisting of the trust units from the principal stock exchange on which the trust units are listed.
Exchangeable Units
Holders of exchangeable units may lose their limited liability in certain circumstances, including by taking part in the control or
management of the business of Killam Apartment Limited Partnership (“Limited Partnership”). The principles of law in the various
jurisdictions of Canada recognizing the limited liability of the limited partners of limited partnerships subsisting under the laws of one
province but carrying on business in another province have not been authoritatively established. If limited liability is lost, there is a risk
that holders of exchangeable units may be liable beyond their contribution of capital and share of undistributed net income of the
Limited Partnership in the event of judgment on a claim in an amount exceeding the sum of the net assets of the General Partner and
the net assets of the Limited Partnership. Holders of exchangeable units remain liable to return to the Limited Partnership for such part
of any amount distributed to them as may be necessary to restore the capital of the Limited Partnership to the amount existing before
such distribution if, as a result of any such distribution, the capital of the Limited Partnership is reduced and the Limited Partnership is
unable to pay its debts as they become due.
Taxation-related Risks
Killam currently qualifies as a mutual fund trust for Canadian income tax purposes. It is the current policy of Killam to distribute all of its
taxable income to unitholders and it is therefore generally not subject to tax on such amount. In order to maintain its current mutual
fund trust status, Killam is required to comply with specific restrictions regarding its activities and the investments held by it. Should
Killam cease to qualify as a mutual fund trust, the consequences could be adverse.
There can be no assurance that Canadian federal income tax laws in respect of the treatment of mutual fund trusts will not be changed
in a manner that adversely affects Killam or its unitholders. If Killam ceases to qualify as a “mutual fund trust”, Killam will be required to
pay a tax under Part XII.2 of the Income Tax Act ("Tax Act"). The payment of Part XII.2 tax by Killam may have adverse income tax
consequences for certain of Killam’s unitholders, including non-resident persons and trusts governed by registered retirement savings
plans, registered disability savings plans, deferred profit-sharing plans, registered retirement income funds, tax-free savings accounts
and registered education savings plans (“designated savings plans”), which acquired an interest in Killam directly or indirectly from
another Killam unitholder. If Killam ceases to qualify as a “mutual fund trust” under the Tax Act and Killam units cease to be listed on a
designated stock exchange, Killam units will cease to be qualified investments for trusts governed by designated savings plans. Killam
will endeavour to ensure its trust units continue to be qualified investments for trusts governed by the designated savings plans;
however, there can be no assurance that this will be so. The Tax Act imposes penalties for the acquisition or holding of non-qualified
investments by such trusts. Unitholders should consult their own tax advisors in this regard, including as to whether Killam units are
“prohibited investments” for registered retirement savings plans, registered retirement income funds, registered education savings
plans, registered disability savings plans or tax-free savings accounts.
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Certain rules in the Tax Act (the “SIFT Rules”) affect the tax treatment of specified investment flow-through trusts (“SIFT trusts”) and
their unitholders. A trust resident in Canada will generally be a SIFT trust for a particular taxation year for purposes of the Tax Act if, at
any time during the taxation year, investments in the trust are listed or traded on a stock exchange or other public market and the trust
holds one or more “non-portfolio properties” as defined in the Tax Act. Non-portfolio properties generally include certain investments in
real properties situated in Canada and certain investments in corporations and trusts resident in Canada and in partnerships with
specified connections to Canada. However, a trust will not be considered to be a SIFT trust for a taxation year if it qualifies as a “real
estate investment trust” (as defined in the Tax Act) for that year (the “REIT Exception”).
Pursuant to the SIFT Rules, distributions of a SIFT trust’s “non-portfolio earnings” are not deductible to the SIFT trust in computing its
income. Non-portfolio earnings are generally defined as income attributable to a business carried on by the SIFT trust in Canada or to
income (other than dividends) from, and taxable capital gains from the disposition of, non-portfolio properties. The SIFT trust is itself liable
to pay income tax on an amount equal to the amount of such non-deductible distributions at a rate that is substantially equivalent to the
combined federal and provincial general tax rate applicable to taxable Canadian corporations. Such non-deductible distributions paid to a
holder of units of the SIFT trust are generally deemed to be taxable dividends received by the holder of such units from a taxable Canadian
corporation. Such deemed dividends will qualify as “eligible dividends” for purposes of the enhanced gross-up and dividend tax credit rules
in the Tax Act if paid to any individual resident in Canada. Distributions that are paid as returns of capital will not attract this tax.
A trust that satisfies the REIT Exception is excluded from the definition of a SIFT trust in the Tax Act and is therefore not subject to the
SIFT Rules. In addition to the trust being resident in Canada throughout the year, the following five criteria must be met in order for the
Trust to qualify for the REIT Exception:
•
•
•
•
At each time in the taxation year, the total fair market value at that time of all “non-portfolio properties” that are “qualified REIT properties”
held by the Trust must be at least 90% of the total fair market value at that time of all non-portfolio properties held by the Trust;
Not less than 90% of the Trust’s “gross REIT revenue” for the taxation year is from one or more of the following: “rent from real or
immovable properties”, interest, capital gains from dispositions of “real or immovable properties” that are capital properties,
dividends, royalties and dispositions of “eligible resale properties”;
Not less than 75% of the Trust’s gross REIT revenue for the taxation year is derived from one or more of the following: rent from
real or immovable properties, interest from mortgages on real or immovable properties, from dispositions of real or immovable
properties that are capital properties;
At no time in the taxation year can the total fair market value of properties comprising real or movable property that is capital
property, an “eligible resale property”, cash, deposits (within the meaning of the Canada Deposit Insurance Corporation Act or with
a branch in Canada of a bank or a credit union), indebtedness of Canadian corporations represented by banker’s acceptances, and
debt issued or guaranteed by the Canadian government or issued by a province, municipal government or certain other qualifying
public institutions be less than 75% of the “equity value” (in each case, as defined in the Tax Act) of the Trust at that time; and
•
Investments in the Trust must be, at any time in the taxation year, listed or traded on a stock exchange or other public market.
The SIFT Rules contain a “look-through rule” under which a trust could qualify for the REIT Exception where it holds properties indirectly
through intermediate entities, provided that each such entity, assuming it were a trust, would satisfy paragraphs (1) through (4) of the REIT
Exception above. The REIT Exception does not fully accommodate the current business structures used by many Canadian REITs and contains
a number of technical tests that many Canadian REITs, including the Trust, may find difficult to satisfy. The Trust will endeavour to ensure that
the Trust will qualify for the REIT Exception at all times during each taxation year, and each direct and indirect subsidiary of the Trust will
qualify as an “excluded subsidiary entity” (as defined in the Tax Act) such that the Trust will not be a SIFT trust within the meaning of the SIFT
Rules at any time. However, there can be no assurance that this will be so. There can also be no assurance that the investments or activities
undertaken by the Trust in a taxation year will not result in the Trust failing to qualify for the REIT Exception for that taxation year.
If the Trust does not qualify for the REIT Exception for a taxation year, the SIFT Rules will apply to the Trust for that year. Application of
the SIFT Rules may, depending on the nature of distributions from the REIT, including what portion of its distributions is income and
what portion is returns of capital, have a material adverse effect on the after-tax returns of certain unitholders. Such adverse tax
consequences may impact the future level of cash distributions made by the Trust, the ability of the Trust to undertake future financings
and acquisitions and could also adversely affect the marketability of the Trust’s securities.
The REIT Exception is applied on an annual basis. Accordingly, if the Trust did not qualify for the REIT Exception in a particular taxation
year, it may be possible to restructure the Trust such that it may qualify in a subsequent taxation year. There can be no assurances,
however, that the Trust will be able to restructure such that it will not be subject to the tax imposed by the SIFT Rules, or that any such
restructuring, if implemented, would not result in material costs or other adverse consequences to the Trust and unitholders. The Trust
intends to take such steps as are necessary to ensure that, to the extent possible, it qualifies for the REIT Exception and any negative
effects of the SIFT Rules on the Trust and unitholders are minimized.
Other Canadian Tax Matters
There can be no assurance that Canadian federal income tax laws, the terms of the Canada-United States Income Tax Convention, or the
administrative policies and assessing practices of the Canada Revenue Agency will not be changed in a manner that adversely affects the
REIT or unitholders. Any such change could increase the amount of tax payable by the REIT or its affiliates and/or unitholders or could
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Dollar amounts in thousands of Canadian dollars (except as noted)
otherwise adversely affect unitholders by reducing the amount available to pay distributions or changing the tax treatment applicable to
unitholders in respect of distributions. In structuring its affairs, the Trust consults with its tax and legal advisors and receives advice as to
the optimal method in which to complete its business objectives while at the same time minimizing or deferring taxes, where possible.
There is no guarantee that the relevant taxing authorities will not take a different view as to the ability of the Trust to utilize these
strategies. It is possible that one or more taxing authorities may review these strategies and determine that tax should have been paid,
in which case the Trust may be liable for such taxes.
Competition for Real Property Investments
Killam competes for suitable real property investments with individuals, corporations and institutions (both Canadian and foreign) that
are presently seeking, or that may seek in the future, real property investments similar to those desired by Killam. Many of these
investors will have greater financial resources than those of the Trust. An increase in the availability of investment funds, and an
increase in interest of real property investments, would tend to increase competition for real property investments, thereby increasing
purchase prices and reducing yields therefrom. In addition, Killam may require additional financing to complete future real property
acquisitions, which may not be available on terms acceptable to Killam.
Future Acquisitions of Real Property Investments
Unitholders will have no advance opportunity to evaluate the merits and risks of any future acquisitions of real property investments
made by Killam and will need to rely on the experience and judgment of Management. There can be no assurance that any such
acquisitions will be successfully completed. Management and the Board will have responsibility for and substantial discretion in the
making of such acquisitions. Therefore, the future profitability of Killam will depend upon the ability of Management to identify and
complete commercially viable acquisitions.
Zoning and Approval
Future acquisitions and development projects may require zoning and other approvals from local government agencies. The process of
obtaining such approvals may take months or years, and there can be no assurance that the necessary approvals for any particular
project will be obtained. Holding costs accrue while regulatory approvals are being sought, and delays could render future acquisitions
and developments uneconomical.
Dependence on Key Personnel
The success of Killam will be largely dependent upon the quality of its Management and personnel. Loss of the services of such persons,
or the inability to attract personnel of equal ability, could adversely affect Killam's business operations and prospects.
Market for Securities and Price Volatility
There can be no assurance that an active trading market in Killam's securities will be sustained. In addition, the market price for Killam's
securities could be subject to wide fluctuations. Factors such as announcements of quarterly variations in operating results, changes in
interest rates, as well as market conditions in the industry, may have a significant impact on the market price of the securities of Killam. The
stock market has from time to time experienced extreme price and volume fluctuations, which have often been unrelated to the operating
performance of particular companies. At times, following periods of volatility in the market price of some companies' securities, securities
litigation has been instituted against such companies. The institution of this type of litigation against Killam could result in substantial costs
and a diversion of Management's attention and resources, which could harm the Trust's business and prospects.
Co-ownership
Killam has co-ownership of three properties (six buildings), two development projects and two parcels of land for future development
that are subject to joint control and are joint operations. Risks associated with co-ownership include the risk of non-payment for
operating and capital costs from the partner, risk of inability to finance a property associated with a joint venture or limited partnership
and the risk of a partner selling their interest in the properties.
Ground Leases
Four of Killam’s properties, including 6101 South Street and Chapter House located in Halifax, Oceanic Camping located in Shediac, New
Brunswick, and 1033 Queen Street West in Toronto, are subject to long-term ground leases in which the underlying land is owned by an
arms-length third party and leased to Killam. Under the terms of the ground lease, Killam must pay rent for the use of the land and is
generally responsible for all the costs and expenses associated with the building and improvements. Unless the lease term is extended,
the land, together with all the improvements made, will revert to the owner of the land upon the expiration of the lease. The leases are
scheduled to expire in 2040 (there is an option for a ten-year renewal), 2080, 2105 and 2059, respectively. The total ground lease
payments for the year ended December 31, 2020 were $0.3 million (December 31, 2019 - $0.1 million).
Climate Change
Killam is exposed to climate change risk from rising sea levels, natural disasters and severe weather, such as heavy rain and flooding, high
winds, wildfires, blizzards, ice storms and thunderstorms that may cause damage to its investment properties. As weather becomes more
erratic, damage to investment properties may result in increased restoration costs, loss of revenue in the event of business disruption,
potential decrease in property values and increased costs to insure properties against climate related risks. Climate change -related risks are
considered by the Trust as part of its ongoing risk management processes. The materiality of such risks varies among the business operations
of Killam and the jurisdictions in which such operations are conducted. Despite the potential uncertainties and longer time horizon associated
with any such risks, the Trust considers the impacts of climate change-related risks over the short-, medium- and long-terms.
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Legal Rights Normally Associated with the Ownership of Shares of a Corporation
As holders of units, unitholders do not have all of the statutory rights normally associated with ownership of shares of a company
including, for example, the right to bring “oppression” or “derivative” actions against the Trust. The units are not “deposits” within the
meaning of the Canada Deposit Insurance Corporation Act and are not insured under the provisions of that Act or any other legislation.
Furthermore, the Trust is not a trust company and, accordingly, is not registered under any trust and loan company legislation as it does
not carry on or intend to carry on the business of a trust company.
Critical Accounting Policies and Significant Accounting Judgments, Estimates and
Assumptions
Critical Judgments in Applying Accounting Policies
The following are the critical judgments, apart from those involving estimations (see Key Accounting Estimates and Assumptions below)
that have been made in applying the Trust’s accounting policies and that have the most significant effect on the reported amounts in the
consolidated financial statements:
(i) Income taxes
The Trust applies judgment in determining the tax rates applicable to its corporate subsidiaries and identifying the temporary
differences in each of such legal subsidiaries in respect of which deferred income taxes are recognized. Deferred taxes related to
temporary differences arising from its corporate subsidiaries are measured based on the tax rates that are expected to apply in the year
when the asset is realized or the liability is settled. Temporary differences are differences that are expected to reverse in the future and
arise from differences between accounting and tax asset values.
(ii) Investment property and internal capital program
The Trust’s accounting policy relating to investment properties is described in note 2(H) of the consolidated financial statements. In
applying this policy, judgment is applied in determining the extent and frequency of utilizing independent, third-party appraisals to
measure the fair value of the Trust’s investment properties. Additionally, judgment is applied in determining the appropriate classes of
investment properties in order to measure fair value. The Trust also undertakes internal capital improvements and upgrades. Such work
is specifically identified, and the Trust applies judgment in the estimated amount of directly attributable salaries to be allocated to
capital improvements and upgrades of its investment properties.
(iii) Financial instruments
The Trust’s accounting policies relating to financial instruments are described in note 2(N) of the consolidated financial statements.
Critical judgments inherent in these policies related to applying the criteria set out in IFRS 9 and IAS 32 to determine the appropriate
recognition model, i.e. FVTPL, etc., assess the effectiveness of hedging relationships and determine the identification of embedded
derivatives, if any, that are subject to fair value measurement.
(iv) Basis of consolidation
The consolidated financial statements of the Trust include the accounts of Killam and its wholly owned subsidiaries, as well as entities
over which the Trust exercises control on a basis other than ownership of voting interest within the scope of IFRS 10, Consolidated
Financial Statements. Judgment is applied in determining if an entity meets the criteria of control as defined in the accounting standard.
(v) Revenue Recognition
The Trust applies judgment about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a
customer. The Trust concluded that revenue for property management and ancillary services is to be recognized over time because the
tenant simultaneously receives and consumes the benefits provided by the Trust. Rents charged to tenants are generally charged on a
gross basis, inclusive of property management and ancillary services. If a contract is identified as containing more than one performance
obligation, the Trust allocates the total transaction price to each performance obligation in an amount based on an expected cost plus a
margin approach.
Key Accounting Estimates and Assumptions
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting
period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year. Actual results could differ from estimates.
(i) Valuation of investment properties
The choice of valuation method and the critical estimates and assumptions underlying the fair value determination of investment
properties are set out in note 5 of the consolidated financial statements. Significant estimates used in determining the fair value of the
Trust’s investment properties include capitalization rates and stabilized net operating income used in the overall capitalization rate
valuation method. A change to any one of these inputs could significantly alter the fair value of an investment property. Please refer to
note 5 for sensitivity analysis.
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IPUC and land held for development are also valued at fair value, except if such values cannot be reliably determined. In the case when
fair value cannot be reliably determined, such property is recorded at cost.
(ii) Deferred unit-based compensation
The compensation costs relating to deferred unit-based compensation are based on estimates of how many deferred units will be
awarded as well as how many will actually vest and be exercised, as well as valuation models, which by their nature are subject to
measurement uncertainty.
(iii) Deferred taxes
The amount of the temporary differences between the accounting carrying value of the Trust’s assets and liabilities held in various
corporate subsidiaries versus the tax bases of those assets and liabilities and the tax rates at which the differences will be realized are
outlined in note 23 of the consolidated financial statements.
Future Accounting Policy Changes
The following new or amended accounting standards under IFRS have been issued or revised by the IASB; however, they are not yet
effective and as such have not been applied to the consolidated financial statements.
Amendments to IAS 1, Presentation of Financial Statements, Amendments to classification of liabilities as current or non-current
In January 2020, the IASB issued amendments to IAS 1 to specify the requirements for classifying liabilities as current or non-current.
The amendments clarify the definition of a right to defer settlement and specify that the conditions which exist at the end of the
reporting period are those which will be used to determine if a right to defer settlement of a liability exists.
The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments must be applied
retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is
permitted. Killam is in the process of assessing the impact the amendments may have on future financial statements and plans to adopt
the new standard retrospectively on the required effective date.
Disclosure Controls, Procedures and Internal Controls
Management, including the Chief Executive Officer and the Chief Financial Officer, does not expect that Killam’s disclosure controls and
procedures and internal controls will prevent or detect all error and all fraud. Because of the inherent limitations in all control systems,
an evaluation of controls can provide only reasonable, not absolute, assurance that all control issues and instances of fraud or error, if
any, within Killam have been detected.
Disclosure Controls and Procedures
As of December 31, 2020, Management evaluated the effectiveness of the operation of its disclosure controls and procedures
(“Disclosure Controls”), as defined under rules adopted by the Canadian Securities Administrators. This evaluation was performed under
the supervision of, and with the participation of, the Chief Executive Officer and the Chief Financial Officer, with the assistance of
Management.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in documents filed with securities
regulatory authorities is recorded, processed, summarized and reported on a timely basis, and is accumulated and communicated to
Management, including the President and Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
Based on the evaluation of Disclosure Controls, the Chief Executive Officer and the Chief Financial Officer have concluded that, subject
to the inherent limitations noted above, Disclosure Controls are effective in ensuring that material information relating to Killam and its
consolidated subsidiaries is made known to Management on a timely basis by others within those entities, and is included as
appropriate in this MD&A.
Internal Controls over Financial Reporting
Internal controls over financial reporting ("ICFR") are designed to provide reasonable assurance regarding the reliability of Killam’s
financial reporting and its preparation of financial statements for external purposes in accordance with IFRS. Management’s
documentation and assessment of the effectiveness of Killam’s ICFR continues as of the date of this MD&A with the focus on processes
and controls in areas identified as being “key risks”.
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As at December 31, 2020, Killam’s President and Chief Executive Officer and its Chief Financial Officer, with the assistance of
Management, assessed the effectiveness of the ICFR using the criteria set forth in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission in 2013 and, based on that assessment, determined that the ICFR
were designed and operating effectively as at December 31, 2020. Killam did not make any changes to the design of ICFR in 2020 that
have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.
Related Party Transactions
Killam has construction management agreements with companies owned by a Trustee of Killam. The agreements include a market rate
construction management fee of 2.5% and 1.5% development management fee on hard construction costs for the Shorefront
development and a 4.0% construction management fee for the Harley Street development, totalling $0.3 million (December 31, 2019 -
$0.2 million). These fees are to be paid over the construction period. In addition, these companies supply direct construction services or
contract arm’s-length services. For the year ended December 31, 2020, these companies were paid $3.1 million (December 31, 2019 -
$2.1 million).
Killam owns a 50% interest in two commercial properties located at 3700 & 3770 Kempt Road in Halifax, NS. The remaining 50% interest
in these properties is held by a company owned by an executive and Trustee of Killam. These properties are managed by an arm's length
third party. Killam's head office occupies approximately 23,000 square feet of one of the buildings with rent of approximately $13.00 per
square foot net, of which 50% is paid to the related party based on the ownership interest.
The remuneration of directors and other key management personnel, which include the Board of Trustees, President & Chief Executive
Officer, Executive Vice President, Chief Financial Officer and other Vice-Presidents of Killam. During 2020, three additional employees
were promoted to Vice President and included in the disclosure below. The total remuneration is as follows:
For the years ended December 31,
Salaries, board compensation and incentives
Deferred unit-based compensation
Total
Subsequent Events
2020
$5,138
1,727
$6,865
2019
$4,674
1,822
$6,496
On January 15, 2021, Killam announced a distribution of $0.05667 per unit, payable on February 15, 2021, to unitholders of record on
December 31, 2020.
On January 21, 2021, Killam acquired the remaining 90% interest in the 233-unit Nolan Hill property in Calgary, AB, for $49.5 million.
On January 29, 2021, Killam acquired development land in Charlottetown, PE, for $3.4 million.
On January 29, 2021, Killam acquired a property for future development in Halifax, NS, for $3.0 million.
On February 1, 2021, Killam acquired a 23-unit apartment building in Moncton, NB, for $5.6 million.
On February 1, 2021, Killam acquired a property for future development in Stratford, PE, for $3.8 million.
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Management’s Responsibility for Financial Statements The accompanying consolidated financial statements and management’s discussion and analysis (MD&A) have been prepared by the management of Killam Apartment REIT in accordance with International Financial Reporting Standards, and include amounts based on management’s informed judgements and estimates. Management is responsible for the integrity and objectivity of these consolidated financial statements. The financial information presented in the MD&A is consistent with that in the consolidated financial statements in all material respects. To assist management in the discharge of these responsibilities, management has established the necessary internal controls designed to ensure that our financial records are reliable for preparing financial statements and other financial information, transactions are properly authorized and recorded, and assets are safeguarded. As at December 31, 2020, our Chief Executive Officer and Chief Financial Officer evaluated, or caused an evaluation under their direct supervision of, the design and operation of our internal controls over financial reporting (as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) and, based on that assessment, determined that our internal controls over financial reporting were appropriately designed and operating effectively. Ernst & Young LLP, the auditors appointed by the Unitholders, have examined the consolidated financial statements in accordance with Canadian generally accepted auditing standards to enable them to express to the Unitholders their opinion on the consolidated financial statements. Their report as auditors is set forth below. The consolidated financial statements have been further reviewed and approved by the Board of Trustees and its Audit Committee. This committee meets regularly with management and the auditors, who have full and free access to the Audit Committee. February 10, 2021 Philip Fraser Dale Noseworthy President and Chief Executive Officer Chief Financial Officer 8 0 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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Consolidated Statements of Financial Position
In thousands of Canadian dollars,
Note
December 31, 2020
December 31, 2019
ASSETS
Non-current assets
Investment properties
Property and equipment
Other non-current assets
Current assets
Cash
Rent and other receivables
Other current assets
Assets held for sale
TOTAL ASSETS
EQUITY AND LIABILITIES
Unitholders' equity
Non-controlling interest
Total Equity
Non-current liabilities
Mortgages and loans payable
Lease liabilities
Exchangeable Units
Deferred income tax
Deferred unit-based compensation
Other non-current liabilities
Current liabilities
Mortgages and loans payable
Credit facilities
Construction loans
Accounts payable and accrued liabilities
Total Liabilities
TOTAL EQUITY AND LIABILITIES
Commitments and contingencies
Financial guarantees
$3,741,918
$3,320,604
8,349
—
7,113
295
$3,750,267
$3,328,012
$2,556
6,561
17,176
26,293
—
$12,801
9,025
16,099
37,925
14,163
$3,776,560
$3,380,100
$1,768,129
$1,602,254
129
113
$1,768,258
$1,602,367
$1,430,344
$1,161,702
9,573
70,177
184,611
4,784
188
8,919
78,668
175,048
5,363
—
$1,699,677
$1,429,700
$201,345
7,029
41,345
58,906
308,625
$2,008,302
$3,776,560
$276,568
—
24,851
46,614
348,033
$1,777,733
$3,380,100
[5]
[8]
[10]
[9]
[6]
[17]
[11]
[12]
[16]
[23]
[19]
[11]
[13]
[14]
[15]
[28]
[29]
See accompanying notes to the consolidated financial statements.
Approved on behalf of the Board of Trustees
Trustee
Trustee
8 4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
1
Consolidated Statements of Income and Comprehensive Income
In thousands of Canadian dollars,
Property revenue
Property operating expenses
Operating expenses
Utility and fuel expenses
Property taxes
Net operating income
Other income
Financing costs
Depreciation
Administration
Fair value adjustment on unit-based compensation
Fair value adjustment on Exchangeable Units
Fair value adjustment on investment properties
Loss on disposition
Income before income taxes
Deferred tax expense
Net income
Comprehensive income
Net income attributable to:
Unitholders
Non-controlling interest
Comprehensive income attributable to:
Unitholders
Non-controlling interest
See accompanying notes to the consolidated financial statements.
Note
[20]
Year ended December 31,
2020
2019
$261,690
$242,164
(41,610)
(23,240)
(32,178)
(97,028)
(37,602)
(23,515)
(28,711)
(89,828)
$164,662
$152,336
641
6,059
[22]
(48,919)
(47,443)
(630)
(14,745)
59
7,676
46,885
—
(720)
(14,881)
(1,590)
(12,461)
244,130
(1,269)
[16]
[5]
155,630
324,161
[23]
(9,590)
(40,636)
$146,040
$146,040
$283,525
$283,525
146,024
283,536
16
(11)
$146,040
$283,525
146,024
283,536
16
(11)
$146,040
$283,525
2
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 8 5
Consolidated Statements of Changes in Equity
In thousands of Canadian dollars,
Consolidated Statements of Cash Flows
In thousands of Canadian dollars,
Year ended December 31, 2020
Trust Units
Contributed
Surplus
Retained
Earnings
Non-controlling
Interest
Total Equity
As at January 1, 2020
$1,009,166
$795
$592,293
$113
$1,602,367
Units issued on exchange of
Exchangeable Units
Distribution reinvestment plan
Deferred Unit-based compensation
Issued for cash
Net income
Distributions declared and paid
Distributions payable
As at December 31, 2020
815
21,372
578
65,782
—
—
—
—
—
—
—
—
—
—
—
—
—
—
146,024
(62,793)
(5,903)
—
—
—
—
16
—
—
815
21,372
578
65,782
146,040
(62,793)
(5,903)
$1,097,713
$795
$669,621
$129
$1,768,258
Year ended December 31, 2019
Trust Units
Contributed
Surplus
Retained
Earnings
Non-controlling
Interest
Total Equity
As at January 1, 2019
$798,473
$795
$369,546
$136
$1,168,950
Distribution reinvestment plan
Deferred Unit-based compensation
Issued for cash
Net income
Distributions on non-controlling interest
Distributions declared and paid
Distributions payable
As at December 31, 2019
17,651
1,298
191,744
—
—
—
—
—
—
—
—
—
—
—
—
—
—
283,536
—
(55,349)
(5,440)
—
—
—
(11)
(12)
—
—
17,651
1,298
191,744
283,525
(12)
(55,349)
(5,440)
$1,009,166
$795
$592,293
$113
$1,602,367
See accompanying notes to the consolidated financial statements.
OPERATING ACTIVITIES
Net income
Add (deduct) items not affecting cash
Fair value adjustments
Depreciation
Amortization of deferred financing
Non-cash compensation expense
Deferred income taxes
Loss on disposition
Loss on derivative liability
Interest expense on Exchangeable Units
Straight-line rent
Interest expense on lease liability
Net change in non-cash operating activities
Cash provided by operating activities
FINANCING ACTIVITIES
Deferred financing costs paid
Net proceeds on issuance of Units
Cash paid on redemption of restricted Units
Cash paid on lease liabilities
Mortgage financing
Mortgages repaid
Mortgage principal repayments
Credit facility proceeds/ (repayments)
Proceeds from construction loans
Construction loan repayments
Distributions paid to non-controlling interest
Distributions to Unitholders
Cash provided by financing activities
INVESTING ACTIVITIES
Decrease (increase) in restricted cash
Disposition of investment properties
Development of investment properties
Capital expenditures
Cash used in investing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
Acquisition of investment properties, net of debt assumed
See accompanying notes to the consolidated financial statements.
Year ended December 31,
Note
2020
2019
[25]
$146,040
$283,525
(54,620)
(230,080)
717
3,126
1,727
9,563
4
483
2,784
(657)
385
13,962
720
3,093
1,918
40,364
1,269
235
2,727
(423)
298
(8,438)
$123,514
$95,208
(7,647)
65,782
(1,672)
(314)
(5,384)
191,729
(1,424)
(133)
433,501
332,658
(187,568)
(191,892)
(51,592)
7,029
39,613
(44,792)
(53,350)
28,726
(23,119)
(64,377)
16
(12)
(49,633)
(45,041)
$224,396
$146,708
(255)
811
(206,274)
(133,426)
($358,155)
($232,904)
—
(81,975)
(69,651)
(10,245)
12,801
$2,556
11,520
(38,390)
(73,419)
9,012
3,789
$12,801
8 6 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
3
4
Consolidated Statements of Cash Flows
In thousands of Canadian dollars,
Year ended December 31,
Note
2020
2019
OPERATING ACTIVITIES
Net income
Add (deduct) items not affecting cash
Fair value adjustments
Depreciation
Amortization of deferred financing
Non-cash compensation expense
Deferred income taxes
Loss on disposition
Loss on derivative liability
Interest expense on Exchangeable Units
Straight-line rent
Interest expense on lease liability
Net change in non-cash operating activities
Cash provided by operating activities
FINANCING ACTIVITIES
Deferred financing costs paid
Net proceeds on issuance of Units
Cash paid on redemption of restricted Units
Cash paid on lease liabilities
Mortgage financing
Mortgages repaid
Mortgage principal repayments
Credit facility proceeds/ (repayments)
Proceeds from construction loans
Construction loan repayments
Distributions paid to non-controlling interest
Distributions to Unitholders
Cash provided by financing activities
INVESTING ACTIVITIES
Decrease (increase) in restricted cash
Acquisition of investment properties, net of debt assumed
Disposition of investment properties
Development of investment properties
Capital expenditures
Cash used in investing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
See accompanying notes to the consolidated financial statements.
[25]
$146,040
$283,525
(54,620)
(230,080)
717
3,126
1,727
9,563
4
483
2,784
(657)
385
13,962
720
3,093
1,918
40,364
1,269
235
2,727
(423)
298
(8,438)
$123,514
$95,208
(7,647)
65,782
(1,672)
(314)
(5,384)
191,729
(1,424)
(133)
433,501
332,658
(187,568)
(191,892)
(51,592)
7,029
39,613
(44,792)
(53,350)
28,726
(23,119)
(64,377)
16
(12)
(49,633)
(45,041)
$224,396
$146,708
(255)
811
(206,274)
(133,426)
—
(81,975)
(69,651)
11,520
(38,390)
(73,419)
($358,155)
($232,904)
(10,245)
12,801
$2,556
9,012
3,789
$12,801
4
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 8 7
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
1. Organization of the Trust
Killam Apartment Real Estate Investment Trust ("Killam" or the "Trust") is an unincorporated open-ended mutual fund trust
created pursuant to the amended and restated Declaration of Trust ("DOT"), dated November 27, 2015, under the laws of the
Province of Ontario. Killam specializes in the acquisition, management and development of multi-residential apartment buildings,
manufactured home communities ("MHCs") and commercial properties in Canada.
The consolidated financial statements comprise the financial statements of Killam and its subsidiaries as at and for the year
ended December 31, 2020. Killam's head office operations are located at 3700 Kempt Road, Halifax, Nova Scotia, B3K 4X8.
2. Significant Accounting Policies
(A) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements of the Trust for the year ended December 31, 2020 were authorized for issue in
accordance with a resolution of the Board of Trustees of Killam on February 10, 2021.
(B) Basis of Presentation
The consolidated financial statements of Killam have been prepared on a historical cost basis, except for investment properties,
deferred unit-based compensation, a derivative liability and Exchangeable Units, which have been measured at fair value.
Historical cost is generally based on the fair value of the consideration given in exchange for assets. The consolidated financial
statements have been prepared on a going concern basis and are presented in Canadian dollars, which is Killam’s functional
currency, and all values are rounded to the nearest thousand ($000), except per unit amounts or as noted.
The consolidated financial statements have been prepared considering the impact that the spread of COVID-19 has and continues
to have on local, national and worldwide economies. Measures taken to contain the spread of the virus, including travel bans,
quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses
worldwide, resulting in an economic slowdown. Canadian and global stock markets have also experienced great volatility.
Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions. Killam
has considered the negative economic outlook and cash flow difficulties that may be experienced as a result of this virus, on its
tenants, suppliers and lenders. Despite the commencement of a vaccine rollout, the ultimate duration and impacts of the
COVID-19 pandemic are not currently known, Killam has used the best information available as at December 31, 2020, in
determining its estimates and the assumptions that affect the carrying amounts of assets and liabilities, and earnings for the year.
Actual results could differ from those estimates. Killam considers the estimates that could be most significantly impacted by
COVID-19 to include those underlying the valuation of investment properties and the estimated credit losses on accounts
receivable.
(C) Adoption of Accounting Standards
Amendments to IFRS 3, Definition of a Business
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities
determine whether an acquired set of activities and assets is a business or not. The amendments clarified the minimum
requirements for a business, removed the assessment of whether market participants are capable of replacing any missing
elements, added guidance to help entities assess whether an acquired process is substantive, narrowed the definition of a
business and of outputs, and introduced an optional fair value concentration test.
The amendments clarify that to be considered a business, an integrated set of activities and assets must include, at a minimum, an
input and a substantive process that together significantly contribute to the ability to create output. They also clarify that a
business can exist without including all of the inputs and processes needed to create outputs. That is, the inputs and processes
applied to those inputs must have 'the ability to contribute to the creation of outputs' rather than 'the ability to create outputs'.
Prior to the amendments, IFRS 3 stated that a business need not include all of the inputs or processes that the seller used in
operating that business, 'if market participants are capable of acquiring the business and continuing to produce outputs, for
example, by integrating the business with their own inputs and processes'. The reference to such integration is now deleted from
IFRS 3 and the assessment must be based on what has been acquired in its current state and condition.
8 8 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
5
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
1. Organization of the Trust
2. Significant Accounting Policies (continued)
Killam Apartment Real Estate Investment Trust ("Killam" or the "Trust") is an unincorporated open-ended mutual fund trust
created pursuant to the amended and restated Declaration of Trust ("DOT"), dated November 27, 2015, under the laws of the
Province of Ontario. Killam specializes in the acquisition, management and development of multi-residential apartment buildings,
manufactured home communities ("MHCs") and commercial properties in Canada.
The consolidated financial statements comprise the financial statements of Killam and its subsidiaries as at and for the year
ended December 31, 2020. Killam's head office operations are located at 3700 Kempt Road, Halifax, Nova Scotia, B3K 4X8.
2. Significant Accounting Policies
(A) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
("IFRS") as issued by the International Accounting Standards Board ("IASB").
The consolidated financial statements of the Trust for the year ended December 31, 2020 were authorized for issue in
accordance with a resolution of the Board of Trustees of Killam on February 10, 2021.
(B) Basis of Presentation
The consolidated financial statements of Killam have been prepared on a historical cost basis, except for investment properties,
deferred unit-based compensation, a derivative liability and Exchangeable Units, which have been measured at fair value.
Historical cost is generally based on the fair value of the consideration given in exchange for assets. The consolidated financial
statements have been prepared on a going concern basis and are presented in Canadian dollars, which is Killam’s functional
currency, and all values are rounded to the nearest thousand ($000), except per unit amounts or as noted.
The consolidated financial statements have been prepared considering the impact that the spread of COVID-19 has and continues
to have on local, national and worldwide economies. Measures taken to contain the spread of the virus, including travel bans,
quarantines, social distancing, and closures of non-essential services have triggered significant disruptions to businesses
worldwide, resulting in an economic slowdown. Canadian and global stock markets have also experienced great volatility.
Governments and central banks have responded with monetary and fiscal interventions to stabilize economic conditions. Killam
has considered the negative economic outlook and cash flow difficulties that may be experienced as a result of this virus, on its
tenants, suppliers and lenders. Despite the commencement of a vaccine rollout, the ultimate duration and impacts of the
COVID-19 pandemic are not currently known, Killam has used the best information available as at December 31, 2020, in
determining its estimates and the assumptions that affect the carrying amounts of assets and liabilities, and earnings for the year.
Actual results could differ from those estimates. Killam considers the estimates that could be most significantly impacted by
COVID-19 to include those underlying the valuation of investment properties and the estimated credit losses on accounts
receivable.
(C) Adoption of Accounting Standards
Amendments to IFRS 3, Definition of a Business
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities
determine whether an acquired set of activities and assets is a business or not. The amendments clarified the minimum
requirements for a business, removed the assessment of whether market participants are capable of replacing any missing
elements, added guidance to help entities assess whether an acquired process is substantive, narrowed the definition of a
business and of outputs, and introduced an optional fair value concentration test.
The amendments clarify that to be considered a business, an integrated set of activities and assets must include, at a minimum, an
input and a substantive process that together significantly contribute to the ability to create output. They also clarify that a
business can exist without including all of the inputs and processes needed to create outputs. That is, the inputs and processes
applied to those inputs must have 'the ability to contribute to the creation of outputs' rather than 'the ability to create outputs'.
Prior to the amendments, IFRS 3 stated that a business need not include all of the inputs or processes that the seller used in
operating that business, 'if market participants are capable of acquiring the business and continuing to produce outputs, for
example, by integrating the business with their own inputs and processes'. The reference to such integration is now deleted from
IFRS 3 and the assessment must be based on what has been acquired in its current state and condition.
The amendments specify that if a set of activities and assets does not have outputs at the acquisition date, an acquired process
must be considered substantive only if: (a) it is critical to the ability to develop or convert acquired inputs into outputs; and (b) the
inputs acquired include both an organized workforce with the necessary skills, knowledge, or experience to perform that process,
and other inputs that the organized workforce could develop or convert into outputs. In contrast, if a set of activities and assets
has outputs at that date, an acquired process must be considered substantive if: (a) it is critical to the ability to continue producing
outputs and the acquired inputs include an organized workforce with the necessary skills, knowledge, or experience to perform
that process; or (b) it significantly contributes to the ability to continue producing outputs and either is considered unique or
scarce, or cannot be replaced without significant cost, effort or delay in the ability to continue producing outputs.
The amendments narrowed the definition of outputs to focus on goods or services provided to customers, investment income
(such as dividends or interest) or other income from ordinary activities. The definition of a business in Appendix A of IFRS 3 was
amended accordingly.
The amendments introduced an optional fair value concentration test to permit a simplified assessment of whether an acquired
set of activities and assets is not a business. Entities may elect to apply the concentration test on a transaction-by-transaction
basis. The test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or
group of similar identifiable assets. If the test is met, the set of activities and assets is determined not to be a business and no
further assessment is needed. If the test is not met, or if an entity elects not to apply the test, a detailed assessment must be
performed applying the normal requirements in IFRS 3.
Killam applied these amendments prospectively beginning on January 1, 2020, to transactions or other events that occur on or
after the date of application. The application of these amendments did not have a significant impact on Killam's consolidated
financial statements.
Amendments to IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and
Errors: Definition of Material
In October 2018, the IASB issued amendments to IAS 8 to align the definition of material across the standards and to clarify certain
aspects of the definition. The new definition states that information is material if omitting, misstating or obscuring it could
reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of
those financial statements, which provide financial information about a specific reporting entity. The amendments clarify that
materiality will depend on the nature or magnitude of information, or both. An entity will need to assess whether the information,
either individually or in combination with other information, is material in the context of the financial statements.
The amendments explain that information is obscured if it is communicated in a way that would have a similar effect as omitting
or misstating the information. Material information may, for instance, be obscured if information regarding a material item,
transaction or other event is scattered throughout the financial statements, or disclosed using a language that is vague or unclear.
Material information can also be obscured if dissimilar items, transactions or other events are inappropriately aggregated, or
conversely, if similar items are inappropriately disaggregated.
Killam adopted this amendment on January 1, 2020. The amendment did not have a material impact on Killam’s consolidated
financial statements.
(D) Basis of Consolidation
(i) Subsidiaries
The consolidated financial statements comprise the assets and liabilities of all subsidiaries and the results of all subsidiaries for the
financial year. Killam and its subsidiaries are collectively referred to as Killam in these consolidated financial statements. Non-
controlling interest represents the portion of profit or loss and net assets not held by Killam and is presented separately in the
consolidated statements of income and comprehensive income and within equity in the consolidated statements of financial
position, separately from unitholders’ equity.
Subsidiaries are entities controlled by Killam. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have
been changed when necessary to align them with the policies adopted by Killam.
5
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 8 9
6
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
Killam's investments in subsidiaries, all of which are incorporated in Canada, are listed in the following table:
Subsidiary
Killam Apartment General Partner Ltd.
Killam Apartment Limited Partnership
Killam Properties Inc.
Killam Properties SGP Ltd.
Killam Apartment Subsidiary Limited Partnership
Killam Investments Inc.
Killam Investments (PEI) Inc.
Killam Properties Apartments Trust
Killam Properties MHC Trust
Blackshire Court Limited
Killam KamRes (Silver Spear) Inc.
Killam KamRes (Grid 5) Inc.
Blackshire Court Limited Partnership
Killam KamRes (Kanata Lakes) I Inc.
Killam KamRes (Kanata Lakes) II Inc.
Killam KamRes (Kanata Lakes) III Inc.
Killam KamRes (Kanata Lakes) IV Inc.
Riotrin Properties (Gloucester 3) Inc.
AKK 4th Avenue Inc.
Christie Point Apt. Ltd.
1140459 BC Ltd.
% Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97%
50%
50%
50%
50%
50%
40%
100%
100%
(ii) Joint arrangements
Killam has interests in three properties (seven buildings), three development projects and land for future development that are
subject to joint arrangements. Killam has assessed the nature of its joint arrangements as at December 31, 2020 and determined
them to be joint operations. For joint operations, Killam recognizes its share of revenues, expenses, assets and liabilities, which
are included in their respective descriptions on the consolidated statements of financial position and consolidated statements of
income and comprehensive income. All balances and effects of transactions between joint operations and Killam have been
eliminated to the extent of its interest in the joint operations.
(E) Property Asset Acquisitions
At the time of acquisition of a property or a portfolio of investment properties, Killam evaluates whether the acquisition is a
business combination or asset acquisition. IFRS 3, Business Combinations (“IFRS 3”) is only applicable if it is considered that a
business has been acquired. A business according to IFRS 3, is an integrated set of activities and assets that must include, at a
minimum, an input and a substantive process that, together, significantly contribute to the ability to create output. When
determining whether the acquisition of an investment property or a portfolio of investment properties is a business combination
or an asset acquisition, Killam applies judgment when determining the substance of the assets and activities acquired in addition
to the property or portfolio of properties.
When an acquisition does not represent a business as defined under IFRS 3, Killam classifies these properties or a portfolio of
properties as an asset acquisition. Identifiable assets acquired and liabilities assumed in an asset acquisition are measured initially
at their relative fair values at the acquisition date. Acquisition-related transaction costs are capitalized to the property. All of
Killam’s acquisitions have been classified as asset acquisitions.
9 0 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
7
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
2. Significant Accounting Policies (continued)
Killam's investments in subsidiaries, all of which are incorporated in Canada, are listed in the following table:
Subsidiary
Killam Apartment General Partner Ltd.
Killam Apartment Limited Partnership
Killam Properties Inc.
Killam Properties SGP Ltd.
Killam Apartment Subsidiary Limited Partnership
Killam Investments Inc.
Killam Investments (PEI) Inc.
Killam Properties Apartments Trust
Killam Properties MHC Trust
Blackshire Court Limited
Killam KamRes (Silver Spear) Inc.
Killam KamRes (Grid 5) Inc.
Blackshire Court Limited Partnership
Killam KamRes (Kanata Lakes) I Inc.
Killam KamRes (Kanata Lakes) II Inc.
Killam KamRes (Kanata Lakes) III Inc.
Killam KamRes (Kanata Lakes) IV Inc.
Riotrin Properties (Gloucester 3) Inc.
AKK 4th Avenue Inc.
Christie Point Apt. Ltd.
1140459 BC Ltd.
% Interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97%
50%
50%
50%
50%
50%
40%
100%
100%
(ii) Joint arrangements
Killam has interests in three properties (seven buildings), three development projects and land for future development that are
subject to joint arrangements. Killam has assessed the nature of its joint arrangements as at December 31, 2020 and determined
them to be joint operations. For joint operations, Killam recognizes its share of revenues, expenses, assets and liabilities, which
are included in their respective descriptions on the consolidated statements of financial position and consolidated statements of
income and comprehensive income. All balances and effects of transactions between joint operations and Killam have been
eliminated to the extent of its interest in the joint operations.
(E) Property Asset Acquisitions
At the time of acquisition of a property or a portfolio of investment properties, Killam evaluates whether the acquisition is a
business combination or asset acquisition. IFRS 3, Business Combinations (“IFRS 3”) is only applicable if it is considered that a
business has been acquired. A business according to IFRS 3, is an integrated set of activities and assets that must include, at a
minimum, an input and a substantive process that, together, significantly contribute to the ability to create output. When
determining whether the acquisition of an investment property or a portfolio of investment properties is a business combination
or an asset acquisition, Killam applies judgment when determining the substance of the assets and activities acquired in addition
to the property or portfolio of properties.
When an acquisition does not represent a business as defined under IFRS 3, Killam classifies these properties or a portfolio of
properties as an asset acquisition. Identifiable assets acquired and liabilities assumed in an asset acquisition are measured initially
at their relative fair values at the acquisition date. Acquisition-related transaction costs are capitalized to the property. All of
Killam’s acquisitions have been classified as asset acquisitions.
(F) Revenue Recognition
(i) Rental income
Revenue from rental properties represents the majority of Killam’s revenue and includes rents from tenants under leases, parking
income, laundry income and other miscellaneous income paid by the tenants under the terms of their existing leases. Rental
revenue from investment properties is recognized on a straight-line basis over the lease term. Rental payments are due from
tenants at the beginning of the month. The operating leases entered into with tenants create a legally enforceable right to control
the use of an identified asset by the tenant for a period of time and also require Killam to provide additional services. IFRS 16,
Leases (“IFRS 16”), provides guidance on “lease components” such as base rent, realty tax and insurance recoveries, which
therefore are outside of the scope of IFRS 15, Revenue from Contracts with Customers ("IFRS 15"). Property management and
ancillary income (such as utilities, parking and laundry) are considered non-lease components and are within the scope of IFRS 15.
The performance obligation for the property management and ancillary services is satisfied over time, which is generally the lease
term. The Trust applies the practical expedient in IFRS 15 and does not disclose information about remaining performance
obligations that have original expected durations of one year or less.
(ii) Other income
Other corporate income includes interest income and management fees. Interest income is recognized as earned, and
management fees are recorded as services are provided.
(iii) Service charges and expenses recoverable from tenants
Income arising from expenses recovered from tenants is recognized gross of the related expenses in the period in which the
expense can be contractually recovered. Revenue related to laundry and parking is included gross of the related costs.
(iv) Manufactured home sales
Where revenue is obtained from the sale of manufactured homes, it is recognized when control has been transferred to the buyer.
This will normally take place on the closing date of the home sale. Such sales are considered sales of goods.
(v) Straight-line rent
Certain commercial lease agreements contain changes in rental rates over the term of the lease. Total rental income is recorded
on a straight-line basis over the life of the lease agreement. An accrued rent receivable is recorded for the difference between the
straight-line rent recorded in property revenue and the rent that is contractually due from tenants. Tenant incentives are
amortized on a straight-line basis over the term of existing leases and the amortization is shown as a reduction in property
revenue.
(vi) Common area maintenance ("CAM") services
Killam has an obligation to commercial tenants to provide CAM services in exchange for CAM recoveries, which are considered
non-lease components. CAM services are performed during the period in which the tenants occupy the premises, therefore CAM
recoveries are recognized in revenue based on actual costs incurred.
(vii) Lease cancellation fees
Amounts payable by tenants to terminate a lease prior to the contractual expiry date are included in rental revenue as lease
cancellation fees at the effective date of the lease termination.
(G) Tenant Inducements
Incentives such as cash, rent-free periods and move-in allowances may be provided to lessees to enter into a lease. These
incentives are amortized on a straight-line basis over the term of the lease as a reduction of rental revenue.
(H) Investment Properties
Investment properties include multi-family residential properties, MHC's and commercial properties held to earn rental income
and properties that are under construction or development for future use as investment properties and land held for future
development. Killam considers its income properties to be investment properties under IAS 40, Investment Property ("IAS 40"),
and has chosen the fair value model to account for its investment properties in the consolidated financial statements. Fair value
represents the amount at which the properties could be exchanged between a knowledgeable and willing buyer and a
knowledgeable and willing seller in an arm's length transaction at the date of valuation.
Killam's investment properties have been valued on a highest and best use basis and do not include any portfolio premium that
may be associated with the economies of scale from owning a large portfolio or the consolidation of value from having compiled a
large portfolio of properties over a long period of time, mostly through individual property acquisitions.
7
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 9 1
8
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
Investment properties are measured initially at cost, including transaction costs. Transaction costs include deed transfer taxes and
various professional fees. Subsequent to initial recognition, investment properties are recorded at fair value. Fair value is
determined based on a combination of internal and external processes and valuation techniques. Gains and losses arising from
changes in fair values are included in the consolidated statements of income and comprehensive income in the year in which they
arise. Investment property is derecognized when it has been disposed of or permanently withdrawn from use and no future
economic benefit is expected. Any gains or losses on the retirement or disposal of investment properties are recognized in the
consolidated statements of income and comprehensive income in the year of retirement or disposal.
Properties under development are also adjusted to fair value at each consolidated statement of financial position date, with fair
value adjustments recognized in net income.
(i) Investment properties under construction ("IPUC")
Properties under development include those properties, or components thereof, that will undergo activities that will take a
substantial period of time to prepare the properties for their intended use as income properties.
The cost of a development property that is an asset acquisition comprises the amount of cash, or the fair value of other
consideration, paid to acquire the property, including transaction costs. Subsequent to acquisition, the cost of a development
property includes costs that are directly attributable to these assets, including development costs, property taxes, directly
attributable labour costs and borrowing costs on both specific and general debt. Direct and indirect borrowing costs, development
costs and property taxes are capitalized when the activities necessary to prepare an asset for development or redevelopment
begin, and continue until the date that construction is substantially complete and all necessary occupancy and related permits
have been received, whether or not the space is leased. If Killam is required as a condition of a lease to construct tenant
improvements that enhance the value of the property, then capitalization of these costs continues until such improvements are
completed. Capitalization of finance costs is suspended if there are prolonged periods when development activity is interrupted.
Interest is capitalized using Killam's weighted average cost of borrowing after adjusting for borrowing associated with specific
developments. Where borrowing is associated with specific developments, the amount capitalized is the gross interest incurred on
such borrowing less any investment income arising on temporary investment of such borrowing.
(I) Assets Held for Sale
Assets held for sale include assets that meet the held for sale criteria in accordance with IFRS 5, Non-current Assets Held for Sale
and Discontinued Operations. These assets have carrying amounts that will be recovered principally through a sale and are
available for immediate sale in their present condition. Upon designation as held for sale, the investment property continues to be
measured at fair value and is presented separately in the consolidated statement of financial position.
(J) Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation and consist mainly of Killam's head office
buildings, leasehold improvements, vehicles and information technology systems. The estimated useful lives, residual values and
depreciation methods are reviewed at each year-end, with the effect of any changes in estimates accounted for prospectively.
These items are categorized into the following classes, and their respective useful economic life is used to calculate the amount of
depreciation for each period.
Useful Life/Depreciation Rate
Depreciation Method Used
Category
Building
Heavy equipment
Vehicles
40 years
8%
10%
Furniture, fixtures and office equipment
10% to 30%
Leasehold improvements
Lease term
Straight-line
Declining balance
Declining balance
Declining balance
Straight-line
(K) Inventory
Inventory represents manufactured homes available for sale. The manufactured homes are valued at the lower of cost (purchase
price plus delivery and setup costs) and net realizable value. Net realizable value is the estimated selling price in the ordinary
course of business based on market prices at the reporting date less costs to complete and the estimated costs of sale.
9 2 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
9
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
2. Significant Accounting Policies (continued)
Investment properties are measured initially at cost, including transaction costs. Transaction costs include deed transfer taxes and
various professional fees. Subsequent to initial recognition, investment properties are recorded at fair value. Fair value is
determined based on a combination of internal and external processes and valuation techniques. Gains and losses arising from
changes in fair values are included in the consolidated statements of income and comprehensive income in the year in which they
arise. Investment property is derecognized when it has been disposed of or permanently withdrawn from use and no future
economic benefit is expected. Any gains or losses on the retirement or disposal of investment properties are recognized in the
consolidated statements of income and comprehensive income in the year of retirement or disposal.
Properties under development are also adjusted to fair value at each consolidated statement of financial position date, with fair
value adjustments recognized in net income.
(i) Investment properties under construction ("IPUC")
Properties under development include those properties, or components thereof, that will undergo activities that will take a
substantial period of time to prepare the properties for their intended use as income properties.
The cost of a development property that is an asset acquisition comprises the amount of cash, or the fair value of other
consideration, paid to acquire the property, including transaction costs. Subsequent to acquisition, the cost of a development
property includes costs that are directly attributable to these assets, including development costs, property taxes, directly
attributable labour costs and borrowing costs on both specific and general debt. Direct and indirect borrowing costs, development
costs and property taxes are capitalized when the activities necessary to prepare an asset for development or redevelopment
begin, and continue until the date that construction is substantially complete and all necessary occupancy and related permits
have been received, whether or not the space is leased. If Killam is required as a condition of a lease to construct tenant
improvements that enhance the value of the property, then capitalization of these costs continues until such improvements are
completed. Capitalization of finance costs is suspended if there are prolonged periods when development activity is interrupted.
Interest is capitalized using Killam's weighted average cost of borrowing after adjusting for borrowing associated with specific
developments. Where borrowing is associated with specific developments, the amount capitalized is the gross interest incurred on
such borrowing less any investment income arising on temporary investment of such borrowing.
(I) Assets Held for Sale
Assets held for sale include assets that meet the held for sale criteria in accordance with IFRS 5, Non-current Assets Held for Sale
and Discontinued Operations. These assets have carrying amounts that will be recovered principally through a sale and are
available for immediate sale in their present condition. Upon designation as held for sale, the investment property continues to be
measured at fair value and is presented separately in the consolidated statement of financial position.
(J) Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation and consist mainly of Killam's head office
buildings, leasehold improvements, vehicles and information technology systems. The estimated useful lives, residual values and
depreciation methods are reviewed at each year-end, with the effect of any changes in estimates accounted for prospectively.
These items are categorized into the following classes, and their respective useful economic life is used to calculate the amount of
depreciation for each period.
Useful Life/Depreciation Rate
Depreciation Method Used
Category
Building
Heavy equipment
Vehicles
40 years
8%
10%
Furniture, fixtures and office equipment
10% to 30%
Leasehold improvements
Lease term
Straight-line
Declining balance
Declining balance
Declining balance
Straight-line
(K) Inventory
Inventory represents manufactured homes available for sale. The manufactured homes are valued at the lower of cost (purchase
price plus delivery and setup costs) and net realizable value. Net realizable value is the estimated selling price in the ordinary
course of business based on market prices at the reporting date less costs to complete and the estimated costs of sale.
(L) Consolidated Statements of Cash Flows
Cash consists of cash on hand and bank account balances excluding cash on hand held for security deposits. Investing and
financing activities that do not require the use of cash or cash equivalents are excluded from the consolidated statements of cash
flows and are disclosed separately in the notes to the consolidated financial statements.
(M) Deferred unit-based Compensation
Unit-based compensation benefits are provided to officers, Trustees and certain employees and are intended to facilitate long-
term ownership of Trust Units and provide additional incentives by increasing the participants’ interest, as owners, in Killam. In
accordance with IAS 32, Financial Instruments: Presentation ("IAS 32"), the Restricted Trust Units ("RTUs") are presented as a
liability on the consolidated statements of financial position as the Trust Units are considered puttable instruments in accordance
with IAS 32.
The fair value of performance-based RTUs is estimated using a Monte Carlo pricing model. The fair value estimate requires
determination of the most appropriate inputs to the pricing model including the expected life, volatility, and dividend
yield. The grant date fair value of the deferred unit-based compensation is determined based on the market value of the Trust's
Units on the date of grant and compensation expense is recognized over the vesting period and included in administration costs.
Under IAS 19, Employee Benefits, the RTUs are classified at fair value through profit or loss ("FVTPL") and are measured at each
reporting period at fair value, with changes in fair value recognized in the consolidated statements of income and comprehensive
income.
(N) Financial Instruments
Financial instruments are accounted for, presented, and disclosed in accordance with IFRS 7, Financial Instruments: Disclosures,
IAS 32, and IFRS 9, Financial Instruments ("IFRS 9"). Killam recognizes financial assets and financial liabilities when it becomes a
party to a contract. Financial assets and financial liabilities, with the exception of financial assets classified at FVTPL, are measured
at fair value plus transaction costs on initial recognition. Financial assets classified at FVTPL are measured at fair value on initial
recognition and transaction costs are expensed when incurred.
Each type of fair value is categorized based on the lowest level input that is significant to the fair value measurement in its
entirety. The following summarizes Killam’s classification and measurement of financial assets and liabilities:
Type
Classification
Measurement
Rent, loans and other receivables
Financial assets
Amortized cost
Accounts payable, accrued liabilities
Financial liabilities
Amortized cost
Mortgages, loans payable and construction loans
Financial liabilities
Amortized cost
Exchangeable Units
Deferred unit-based compensation
Derivative liabilities
FVTPL
FVTPL
FVTPL
Fair value
Fair value
Fair value
Financial liabilities at FVTPL
The Exchangeable Units of the Trust are exchangeable into units of the Trust at the option of the holder. These Exchangeable Units
are considered puttable instruments in accordance with IAS 32 and are required to be classified as financial liabilities at FVTPL. The
distributions paid on the Exchangeable Units are accounted for as financing costs.
Financial liabilities are classified as FVTPL if they meet certain conditions and are designated as such by Management, or they are
derivative liabilities. Financial liabilities classified as FVTPL are measured at fair value, with changes recognized in the consolidated
statements of income and comprehensive income.
Financial assets
Such receivables arise when Killam provides services to a third party, such as a tenant, and are included in other current assets,
except for those with maturities more than 12 months after the consolidated statement of financial position date, which are
classified as other non-current assets. Loans and receivables are accounted for at amortized cost.
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K I L L A M A PA R T M E N T R E I T | 2 0 2 0 9 3
10
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
Financial liabilities
Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial
liabilities are measured at amortized cost using the effective interest rate method. The effective interest rate method is a method
of calculating the amortized cost of an instrument and of allocating interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts (including all transaction costs and other premiums
or discounts) through the expected life of the debt instrument to the net carrying amount of the initial recognition.
Trust Units
Killam's Trust Units are redeemable at the option of the holder and, therefore, are considered puttable instruments. Puttable
instruments are required to be accounted for as financial liabilities, except where certain conditions are met in accordance with
IAS 32, in which case the puttable instruments may be presented as equity. Killam's Trust Units meet the conditions of IAS 32 as
they are the most subordinate to all other classes of instruments and are, therefore, presented as equity on the consolidated
statements of financial position.
Exchangeable Units
The Exchangeable Units are considered a financial liability as there is a contractual obligation for the Trust to deliver Trust Units
upon exchange of the Exchangeable Units. The distributions on the Exchangeable Units are recognized as financing costs in the
consolidated statements of income and comprehensive income. The distributions payable as at the reporting date are reported
under other current liabilities on the consolidated statements of financial position. The Exchangeable Units are measured at each
reporting date at fair value, which is based off of the unit price of the Trust given the Exchangeable Units can be converted into
Trust Units. Changes in fair value are recognized in the consolidated statements of income and comprehensive income.
Mortgages and loans payable
Mortgages and loans payable are initially recognized at fair value less directly attributable transaction costs. After initial
recognition, mortgages and loans payable are subsequently measured at amortized cost using the effective interest rate method.
Mortgage maturities and repayments due more than 12 months after the consolidated statement of financial position date are
classified as non-current.
Financing costs
Financing fees and other costs incurred in connection with debt financing are deducted from the cost of the debt and amortized
using the effective interest rate method. Upon refinancing, any financing costs associated with previous mortgages are written off
to income. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the effective interest rate calculation.
Prepaid insurance premiums
Canada Mortgage and Housing Corporation ("CMHC") insurance premiums are netted against mortgages and loans payable. They
are amortized over the amortization period of the underlying mortgage loans on a straight-line basis (initial period is typically
25-30 years) and are included as a component of financing costs. Should Killam refinance an existing mortgage, CMHC premiums
associated with the new mortgage will be reflected in deferred financing costs. Other unamortized CMHC premiums and fees
associated with the property that are no longer linked to a current mortgage will be amortized in the period in which the
refinancing occurs.
Transaction costs
Transaction costs related to loans and receivables and other liabilities, measured at amortized cost, are netted against the carrying
value of the asset or liability and amortized over the expected life of the instrument using the effective interest rate method.
Determination of fair value
The fair value of a financial instrument on initial recognition is generally the transaction price, which is the fair value of the
consideration given or received. Subsequent to initial recognition, the fair value of financial instruments is remeasured based on
relevant market data. Killam classifies the fair value for each class of financial instrument based on the fair value hierarchy. The
fair value hierarchy distinguishes between market value data obtained from independent sources and Killam’s own assumptions
about market value. See note 26 for a detailed discussion of valuation methods used for financial instruments quoted in an active
market and instruments valued using observable data.
9 4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
Financial liabilities
Other financial liabilities are financial liabilities that are not classified as FVTPL. Subsequent to initial recognition, other financial
liabilities are measured at amortized cost using the effective interest rate method. The effective interest rate method is a method
of calculating the amortized cost of an instrument and of allocating interest income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts (including all transaction costs and other premiums
or discounts) through the expected life of the debt instrument to the net carrying amount of the initial recognition.
Trust Units
Killam's Trust Units are redeemable at the option of the holder and, therefore, are considered puttable instruments. Puttable
instruments are required to be accounted for as financial liabilities, except where certain conditions are met in accordance with
IAS 32, in which case the puttable instruments may be presented as equity. Killam's Trust Units meet the conditions of IAS 32 as
they are the most subordinate to all other classes of instruments and are, therefore, presented as equity on the consolidated
statements of financial position.
Exchangeable Units
The Exchangeable Units are considered a financial liability as there is a contractual obligation for the Trust to deliver Trust Units
upon exchange of the Exchangeable Units. The distributions on the Exchangeable Units are recognized as financing costs in the
consolidated statements of income and comprehensive income. The distributions payable as at the reporting date are reported
under other current liabilities on the consolidated statements of financial position. The Exchangeable Units are measured at each
reporting date at fair value, which is based off of the unit price of the Trust given the Exchangeable Units can be converted into
Trust Units. Changes in fair value are recognized in the consolidated statements of income and comprehensive income.
Mortgages and loans payable
Mortgages and loans payable are initially recognized at fair value less directly attributable transaction costs. After initial
recognition, mortgages and loans payable are subsequently measured at amortized cost using the effective interest rate method.
Mortgage maturities and repayments due more than 12 months after the consolidated statement of financial position date are
classified as non-current.
Financing costs
refinancing occurs.
Transaction costs
Financing fees and other costs incurred in connection with debt financing are deducted from the cost of the debt and amortized
using the effective interest rate method. Upon refinancing, any financing costs associated with previous mortgages are written off
to income. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the effective interest rate calculation.
Prepaid insurance premiums
Canada Mortgage and Housing Corporation ("CMHC") insurance premiums are netted against mortgages and loans payable. They
are amortized over the amortization period of the underlying mortgage loans on a straight-line basis (initial period is typically
25-30 years) and are included as a component of financing costs. Should Killam refinance an existing mortgage, CMHC premiums
associated with the new mortgage will be reflected in deferred financing costs. Other unamortized CMHC premiums and fees
associated with the property that are no longer linked to a current mortgage will be amortized in the period in which the
Transaction costs related to loans and receivables and other liabilities, measured at amortized cost, are netted against the carrying
value of the asset or liability and amortized over the expected life of the instrument using the effective interest rate method.
Determination of fair value
The fair value of a financial instrument on initial recognition is generally the transaction price, which is the fair value of the
consideration given or received. Subsequent to initial recognition, the fair value of financial instruments is remeasured based on
relevant market data. Killam classifies the fair value for each class of financial instrument based on the fair value hierarchy. The
fair value hierarchy distinguishes between market value data obtained from independent sources and Killam’s own assumptions
about market value. See note 26 for a detailed discussion of valuation methods used for financial instruments quoted in an active
market and instruments valued using observable data.
2. Significant Accounting Policies (continued)
Derivatives
Derivative financial instruments are initially recognized at fair value on the date a derivative contract is entered into and
subsequently re-measured at fair value. The method of recognizing the resulting gain or loss depends on whether the derivative
financial instrument is designated as a hedging instrument and, if so, the nature of the item being hedged. For Killam's accounting
policy on hedging, see the Hedging Relationships section below. Derivatives not designated in a hedging relationship are measured
at fair value, with changes therein recognized directly through the consolidated statements of income and comprehensive income.
Embedded derivatives
Derivatives embedded in other financial instruments or contracts are separated from their host contracts and accounted for as
derivatives when their economic characteristics and risks are not closely related to those of the host contract; the terms of the
embedded derivative are the same as those of a free-standing derivative; and the combined instrument or contract is not
measured at fair value. These embedded derivatives are measured at fair value, with changes therein recognized within net
income in the consolidated statements of income and comprehensive income.
(O) Hedging Relationships
Killam may use interest rate swaps to hedge its risks associated with interest rates. Such derivative financial instruments are
initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair
value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
At the inception of a hedge relationship, Killam formally designates and documents the hedge relationship to which it wishes to
apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes
identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how Killam will
assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows
attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or
cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the
financial reporting periods for which they were designated.
Cash flow hedges
For the purpose of cash flow hedge accounting, hedges are classified as cash flow hedges when hedging exposure to variability in
cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast
transaction.
The effective portion of the gain or loss on the hedging instrument is recognized directly in equity through other comprehensive
income, while any ineffective portion is recognized immediately in the consolidated statements of income and comprehensive
income. Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when
the hedged financial income or financial expense is recognized.
If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in equity are
transferred to the consolidated statements of income and comprehensive income. If the hedging instrument expires or is sold,
terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously
recognized in equity remain in equity until the forecast transaction or firm commitment occurs.
(P) Comprehensive Income
Comprehensive income includes net income and other comprehensive income. Other comprehensive income includes the
effective portion of cash flow hedges less any amounts reclassified to interest and other financing costs and the associated income
taxes.
(Q) Distributions
Distributions represent the monthly cash distributions on outstanding Trust Units and Exchangeable Units.
(R) Provisions
In accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets ("IAS 37"), a provision is a liability of uncertain
timing or amount. Provisions are recognized when the entity has a present legal or constructive obligation as a result of past
events and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated.
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2. Significant Accounting Policies (continued)
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the
date of the consolidated statements of financial position, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is
the present value of those cash flows, where the time value of money is material. When some or all of the economic benefits
required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is
virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Provisions reflect
Killam’s best estimate at the reporting date. Killam’s provisions are immaterial and are included in accounts payable and accrued
liabilities.
(S) Taxation
Effective January 1, 2016, Killam qualified as a "mutual fund trust" as defined under the Income Tax Act (Canada) and as a REIT
eligible for the "REIT Exemption" in accordance with the rules affecting the tax treatment of publicly traded trusts. Accordingly,
the Trust is not taxable on its income provided that all of its taxable income is distributed to its unitholders. This exemption,
however, does not extend to the corporate subsidiaries of Killam that are subject to income taxes.
(i) Current income tax
Current income tax assets and liabilities are measured at the amount expected to be paid to tax authorities, net of recoveries,
based on the tax rates and tax laws enacted or substantively enacted at the reporting date. Current income tax relating to items
recognized directly in equity is recognized in equity and not profit or loss. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions
where appropriate.
(ii) Deferred income tax
Deferred income tax is provided using the liability method on all temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes, except where the temporary difference
arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that, at
the time of the transaction, affects neither accounting nor taxable profit or loss.
Deferred income tax assets are recognized only to the extent that it is probable that taxable profit will be available against which
deductible temporary differences, carried forward tax credits, or tax losses can be utilized. The carrying values of deferred income
tax assets are reviewed at each reporting date and reduced to the extent it is no longer probable that the income tax asset will be
recovered. Killam determines the deferred tax consequences associated with temporary differences relating to investment
properties as if the carrying amount of the investment property is recovered entirely through sale. Deferred income tax assets and
liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
(T) Earnings Per Unit
As a result of the redemption feature of Killam's Trust Units, these Units are considered financial liabilities under IAS 33, Earnings
per Share, and they may not be considered as equity for the purposes of calculating net income on a per Unit basis. Consequently,
Killam did not report earnings per Unit calculations, as permitted under IFRS.
(U) Leases
In accordance with IFRS 16, at the commencement date of any new leases, Killam will recognize a liability to reflect the present
value of the lease obligations and an asset representing the right to use the underlying asset during the lease term. Land leases
meet the definition of investment property under IAS 40, Investment Property; therefore, the fair value model is applied to these
assets. Interest expense on the lease liability and the fair value gain or loss on the right-of-use asset is recognized separately on
the consolidated statements of income and comprehensive income.
Killam measures lease liabilities at the present value of the lease payments to be made over the lease term. The lease payments
include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The variable lease payments that
do not depend on an index or a rate are recognized as an expense in the period in which the event or condition that triggers the
payment occurs.
In calculating the present value of lease payments, Killam uses the incremental borrowing rate at the lease commencement date if
the interest rate implicit in the lease is not readily determinable. After the commencement date, the lease liabilities are increased
to reflect the accretion of interest and reduced for lease payments made. The carrying amount of lease liabilities are remeasured
if there are modifications, a change in the lease terms, a change in the in-substance fixed lease payments or a change in the
assessment to purchase the underlying asset.
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
3. Critical Accounting Judgments, Estimates and Assumptions
Critical Judgments in Applying Accounting Policies
The following are the critical judgments, apart from those involving estimations (see Key Accounting Estimates and Assumptions
below) that have been made in applying the Trust’s accounting policies and that have the most significant effect on the reported
amounts in the consolidated financial statements:
(i) Income taxes
The Trust applies judgment in determining the tax rates applicable to its corporate subsidiaries and identifying the temporary
differences in each of such legal subsidiaries in respect of which deferred income taxes are recognized. Deferred taxes related to
temporary differences arising from its corporate subsidiaries are measured based on the tax rates that are expected to apply in
the year when the asset is realized or the liability is settled. Temporary differences are differences that are expected to reverse in
the future and arise from differences between accounting and tax asset values.
(ii) Investment property and internal capital program
The Trust’s accounting policy relating to investment properties is described in note 2(H). In applying this policy, judgment is
applied in determining the extent and frequency of utilizing independent, third-party appraisals to measure the fair value of the
Trust’s investment properties. Additionally, judgment is applied in determining the appropriate classes of investment properties in
order to measure fair value. The Trust also undertakes internal capital improvements and upgrades. Such work is specifically
identified, and the Trust applies judgment in the estimated amount of directly attributable salaries to be allocated to capital
improvements and upgrades of its investment properties.
(iii) Financial instruments
The Trust’s accounting policies relating to financial instruments are described in note 2(N). Critical judgments inherent in these
policies related to applying the criteria set out in IFRS 9 and IAS 32 to determine the appropriate recognition model, i.e. FVTPL,
etc., assess the effectiveness of hedging relationships and determine the identification of embedded derivatives, if any, that are
subject to fair value measurement.
(iv) Basis of consolidation
The consolidated financial statements of the Trust include the accounts of Killam and its wholly owned subsidiaries, as well as
entities over which the Trust exercises control on a basis other than ownership of voting interest within the scope of IFRS 10,
Consolidated Financial Statements. Judgment is applied in determining if an entity meets the criteria of control as defined in the
accounting standard.
(v) Revenue Recognition
The Trust applies judgment about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract
with a customer. The Trust concluded that revenue for property management and ancillary services is to be recognized over time
because the tenant simultaneously receives and consumes the benefits provided by the Trust. Rents charged to tenants are
generally charged on a gross basis, inclusive of property management and ancillary services. If a contract is identified as containing
more than one performance obligation, the Trust allocates the total transaction price to each performance obligation in an
amount based on an expected cost plus a margin approach.
Key Accounting Estimates and Assumptions
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the
reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year. Actual results could differ from estimates.
(i) Valuation of investment properties
The choice of valuation method and the critical estimates and assumptions underlying the fair value determination of investment
properties are set out in note 5. Significant estimates used in determining the fair value of the Trust’s investment properties
include capitalization rates and stabilized net operating income used in the overall capitalization rate valuation method. A change
to any one of these inputs could significantly alter the fair value of an investment property. Please refer to note 5 for sensitivity
analysis.
IPUC and land held for development are also valued at fair value, except if such values cannot be reliably determined. In the case
when fair value cannot be reliably determined, such property is recorded at cost.
(ii) Deferred unit-based compensation
The compensation costs relating to deferred unit-based compensation are based on estimates of how many deferred units will be
awarded as well as how many will actually vest and be exercised, as well as valuation models, which by their nature are subject to
measurement uncertainty.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 9 7
14
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
3. Critical Accounting Judgments, Estimates and Assumptions (continued)
(iii) Deferred taxes
The amount of the temporary differences between the accounting carrying value of the Trust’s assets and liabilities held in various
corporate subsidiaries versus the tax bases of those assets and liabilities and the tax rates at which the differences will be realized
are outlined in note 23.
4. Future Accounting Policy Changes
The following new or amended accounting standards under IFRS have been issued or revised by the IASB; however, they are not
yet effective and as such have not been applied to the consolidated financial statements.
Amendments to IAS 1, Presentation of Financial Statements, Amendments to classification of liabilities as current or non-
current
In January 2020, the IASB issued amendments to IAS 1 to specify the requirements for classifying liabilities as current or non-
current. The amendments clarify the definition of a right to defer settlement and specify that the conditions which exist at the end
of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists.
The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments must be applied
retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is
permitted. Killam is in the process of assessing the impact the amendments may have on future financial statements and plans to
adopt the new standard retrospectively on the required effective date.
9 8 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
3. Critical Accounting Judgments, Estimates and Assumptions (continued)
(iii) Deferred taxes
are outlined in note 23.
The amount of the temporary differences between the accounting carrying value of the Trust’s assets and liabilities held in various
corporate subsidiaries versus the tax bases of those assets and liabilities and the tax rates at which the differences will be realized
4. Future Accounting Policy Changes
The following new or amended accounting standards under IFRS have been issued or revised by the IASB; however, they are not
yet effective and as such have not been applied to the consolidated financial statements.
Amendments to IAS 1, Presentation of Financial Statements, Amendments to classification of liabilities as current or non-
current
In January 2020, the IASB issued amendments to IAS 1 to specify the requirements for classifying liabilities as current or non-
current. The amendments clarify the definition of a right to defer settlement and specify that the conditions which exist at the end
of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists.
The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments must be applied
retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is
permitted. Killam is in the process of assessing the impact the amendments may have on future financial statements and plans to
adopt the new standard retrospectively on the required effective date.
5. Investment Properties
As at December 31, 2020
Balance, January 1, 2020
Fair value adjustment on investment properties
Acquisitions
Transfer from IPUC
Capital expenditures
Transfer between apartment and commercial segment
Transfer from land for development
Transfer from held for sale
Impact of change in right-of-use asset
Interest capitalized on IPUC and land for development
Balance, December 31, 2020
As at December 31, 2019
Balance, January 1, 2019
Fair value adjustment on investment properties
Acquisitions
Transfer from IPUC
Capital expenditures
Transfer from land for development
Transfer to held for sale
Impact of change in right-of-use asset
Interest capitalized on IPUC and land for development
Balance, December 31, 2019
Apartments
$2,874,407
53,765
200,017
22,117
57,961
9,475
—
—
627
—
$3,218,369
Apartments
$2,432,273
208,624
149,654
36,215
62,317
—
(15,099)
423
—
$2,874,407
MHCs Commercial
$157,572
$202,431
1,820
4,044
—
4,392
—
—
—
12
—
$212,699
IPUC
$46,867
10,184
3,968
(22,117)
76,050
—
11,462
—
—
1,686
$128,100
(14,862)
2,555
—
3,340
(9,475)
—
—
—
—
$139,130
Land for
Development
$39,327
Total
$3,320,604
46,885
211,821
—
145,082
—
—
14,214
639
2,673
$3,741,918
(4,022)
1,237
—
3,339
—
(11,462)
14,214
—
987
$43,620
MHCs Commercial
$122,835
$153,509
38,540
3,985
—
5,016
—
—
1,381
—
$202,431
IPUC
$37,163
774
—
(36,215)
29,341
15,050
—
—
754
$46,867
(1,549)
32,124
—
4,162
—
—
—
—
$157,572
Land for
Development
$61,028
Total
$2,806,808
244,726
191,963
—
106,536
—
(33,500)
1,804
2,267
$3,320,604
(1,663)
6,200
—
5,700
(15,050)
(18,401)
—
1,513
$39,327
During the year ended December 31, 2020, Killam acquired the following properties:
Property
Christie Point
9 Carrington
Domaine Parlee
1325 Hollis
Crossing at Belmont
3644 & 3670 Kempt Rd
Luma
171 & 181 Leopold
1538 Carlton Street
88 Sunset
Total Acquisitions
Location
Victoria, BC
Halifax, NS
Shediac, NB
Halifax, NS
Langford, BC
Halifax, NS
Ottawa, ON
Moncton, NB
Halifax, NS
Moncton, NB
Acquisition
Date
15-Jan-20
31-Jan-20
23-Mar-20
31-Mar-20
30-Apr-20
15-Jul-20
30-Jul-20
26-Oct-20
30-Oct-20
13-Nov-20
Ownership
Interest
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
Property Type
Apartment
Apartment
MHC
Apartment
Apartment
Commercial
Development Land
Apartment
Development Land
Apartment
Purchase Price (1)
$54,000
8,800
3,950
3,700
60,000
2,500
4,300
17,600
1,200
55,000
$211,050
(1) Purchase price does not include transaction costs.
During the year ended December 31, 2020, Killam capitalized salaries of $3.8 million (year ended December 31, 2019 - $3.8 million),
as part of its project improvement, suite renovation and development programs. For the year ended December 31, 2020, interest
costs associated with the general corporate borrowings used to fund development were capitalized to the respective development
projects using Killam's weighted average borrowing rate of 2.69% (December 31, 2019 - 2.94%). Interest costs associated with
development specific loans were capitalized to the respective developments using the actual borrowing rate associated with the
loan.
Investment properties with a fair value of $3.5 billion as at December 31, 2020 (December 31, 2019 - $3.1 billion), have been pledged
as collateral against Killam's mortgages, construction loan and credit facilities.
15
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 9 9
16
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
5. Investment Properties (continued)
Valuation methodology
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (i.e. an exit price). Expectations about future improvements or modifications to be made to the
investment property to reflect its highest and best use may be considered in the valuation.
Investment properties carried at fair value are categorized by level according to the significance of the inputs used in making the
measurements. As the fair value of investment properties is determined with significant unobservable inputs, all investment
properties are classified as Level 3 fair value measurements. See note 26 for further details.
Killam’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in
circumstances that caused the transfer. There were no transfers in or out of Level 3 fair value measurements for investment
properties during the year.
Valuation processes
Internal valuations
Killam measures the vast majority of its investment properties using valuations prepared by its internal valuation team. This team
consists of individuals who are knowledgeable and have specialized industry experience in real estate valuations and report directly
to a senior member of Killam’s management. The internal valuation team's processes and results are reviewed and approved by
senior management of Killam, including the President & Chief Executive Officer; Chief Financial Officer; and other executive
members, in line with Killam's quarterly reporting dates.
External valuations
Depending on the property asset type and location, management may at times use external valuations to support its fair value,
obtaining valuations from independent third-party firms that employ experienced valuation professionals. Killam obtained a total of 9
external property appraisals throughout the year. The internal valuation team also verifies all major inputs used by the external valuator
in preparing the valuation report, compares the fair value against the fair value determined in internal models, and holds discussions
with the external valuator.
Valuation techniques underlying management’s estimation of fair value
Income properties
The apartment and MHC investment properties were valued using the direct income capitalization method. In applying the direct
income capitalization method, the stabilized net operating income (“SNOI”) of each property is divided by a capitalization rate. The
significant unobservable inputs include the following:
• SNOI is based on budgeted rents and expenses and supported by the terms of any existing leases, other contracts or external
evidence such as current market rents for similar properties. Budgeted rents and expenses are adjusted to incorporate allowances
for vacancy rates, management fees, expected post sale property taxes and market-based maintenance and salary costs. The
resulting capitalized value is then adjusted for other costs inherent in achieving and maintaining SNOI, including structural
reserves for capital expenditures.
• Capitalization rate is based on location, size and quality of the properties and takes into account market data at the valuation date.
IPUC and land for development
Management uses an internal valuation process to estimate the fair value of properties under development and land for
development. Where a site is partially developed, the direct capitalization method is applied to capitalize the pro forma net operating
income ("NOI"), stabilized with market allowances, from which the costs to complete the development are deducted. The significant
unobservable inputs are based on the following:
• Pro forma SNOI is based on the location, type and quality of the properties and supported by the terms of actual or anticipated
future leases, other contracts or external evidence such as current market rents for similar properties. Vacancy rates are based on
expected future market conditions, and estimated maintenance costs are based on management's experience and knowledge of
the market conditions.
• Costs to complete are derived from internal budgets based on management's experience and knowledge of the market conditions.
• Capitalization rate is risk-adjusted taking into consideration the inherent risk of the development project based on location, size
and quality of the properties and taking into account market data at the valuation date.
The primary method of valuation for land acquired for development is the comparable sales approach, which considers recent sales
activity for similar land parcels in the same or similar markets. Land values are estimated using either a per acre or per buildable
square foot basis based on highest and best use. Such values are applied to Killam's properties after adjusting for factors specific to
the site, including its location, intended use, zoning, servicing and configuration.
1 0 0 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
5. Investment Properties (continued)
Valuation Basis
Using the direct income capitalization method, the apartment properties were valued using capitalization rates ("cap-rates") in the
range of 3.25% to 7.00%, applied to a stabilized net operating income ("SNOI") of $150.1 million (December 31, 2019 - 3.5% to 8.0%
and $137.0 million), resulting in an overall weighted average effective cap-rate of 4.67% (December 31, 2019 - 4.76%). The stabilized
occupancy rates used in the calculation of SNOI were in the range of 92.5% to 99.0% (December 31, 2019 - 93.5% to 99.0%). Using
the direct income capitalization method, the MHC properties were valued using cap-rates in the range of 5.0% to 6.5%, applied to a
SNOI of $11.3 million (December 31, 2019 - 5.0% to 6.5% and $10.0 million), resulting in an overall weighted average effective cap-
rate of 5.64% (December 31, 2019 - 5.65%). The stabilized occupancy rate used in the calculation of SNOI was 97.8% (December 31,
2019 - 97.8%). Using a discounted cash flow model, the stabilized commercial properties were valued using key inputs determined by
management based on review of asset performance and comparable assets in relevant markets. Using the discounted cash flow
(DCF) method, fair value is estimated using assumptions regarding benefits and liabilities of ownership over the asset's life, including
a terminal value. This method involves the projection of stabilized cash flows on each individual property, with market derived
discount rates and terminal capitalization rates applied to the stabilized cash flow to establish the present value of the income
stream associated with the asset.
Killam reviewed its valuation of investment properties in light of COVID-19 as at December 31, 2020. It is not possible to forecast with
certainty the duration and full scope of the economic impact of COVID-19 and other consequential changes on Killam's business and
operations, both in the short-term and in the long-term. In the long-term scenario the aspects which could be impacted include rental
rates, occupancy and cap-rates which would impact the underlying valuation of investment properties. Killam has applied judgement in
estimating the valuation given the uncertainties surrounding the economic impact of COVID-19. Key assumptions for the apartment
portfolio include reflecting lower rental rate increases and increased vacancy in regions seeing more significant economic downturn,
including Alberta and Newfoundland. For commercial assets adjustments were made to lease up assumptions, increased credit
allowances and adjustments to the discount and terminal rates.
Investment property valuations are most sensitive to changes in the cap-rate. The cap-rate assumptions for the investment properties
are included in the following table by region:
December 31, 2020
December 31, 2019
Apartments
Halifax
Moncton
Fredericton
Saint John
St. John's
Charlottetown
Ontario
British Columbia
Alberta
Other Atlantic
MHCs
Ontario
Nova Scotia
New Brunswick
Newfoundland
Effective
Weighted
Average
4.67%
4.50%
5.05%
5.53%
5.79%
5.62%
5.50%
3.97%
4.22%
4.64%
6.38%
5.64%
5.95%
5.30%
5.72%
6.00%
High
7.00%
5.60%
7.00%
6.00%
6.00%
6.00%
5.75%
5.00%
4.35%
5.00%
7.00%
6.50%
6.50%
6.00%
6.50%
6.00%
Low
3.50%
3.75%
4.99%
5.00%
5.75%
5.00%
5.28%
3.50%
—
4.47%
5.75%
5.00%
5.00%
5.00%
5.80%
6.00%
Effective
Weighted
Average
4.76%
4.49%
5.54%
5.72%
6.04%
5.63%
5.77%
4.06%
—
4.69%
6.65%
5.65%
5.96%
5.30%
6.06%
6.00%
High
8.00%
5.60%
7.00%
6.00%
6.25%
6.00%
6.00%
5.08%
—
5.00%
8.00%
6.50%
6.50%
6.00%
6.50%
6.00%
Low
3.25%
3.75%
4.50%
5.00%
5.50%
5.00%
5.25%
3.25%
4.08%
4.47%
5.50%
5.00%
5.00%
5.00%
5.19%
6.00%
Fair Value Sensitivity
The following table summarizes fair value sensitivity of Killam's investment properties valued using the direct income capitalization
method:
5. Investment Properties (continued)
Valuation methodology
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (i.e. an exit price). Expectations about future improvements or modifications to be made to the
investment property to reflect its highest and best use may be considered in the valuation.
Investment properties carried at fair value are categorized by level according to the significance of the inputs used in making the
measurements. As the fair value of investment properties is determined with significant unobservable inputs, all investment
properties are classified as Level 3 fair value measurements. See note 26 for further details.
Killam’s policy is to recognize transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in
circumstances that caused the transfer. There were no transfers in or out of Level 3 fair value measurements for investment
properties during the year.
Valuation processes
Internal valuations
Killam measures the vast majority of its investment properties using valuations prepared by its internal valuation team. This team
consists of individuals who are knowledgeable and have specialized industry experience in real estate valuations and report directly
to a senior member of Killam’s management. The internal valuation team's processes and results are reviewed and approved by
senior management of Killam, including the President & Chief Executive Officer; Chief Financial Officer; and other executive
members, in line with Killam's quarterly reporting dates.
External valuations
Depending on the property asset type and location, management may at times use external valuations to support its fair value,
obtaining valuations from independent third-party firms that employ experienced valuation professionals. Killam obtained a total of 9
external property appraisals throughout the year. The internal valuation team also verifies all major inputs used by the external valuator
in preparing the valuation report, compares the fair value against the fair value determined in internal models, and holds discussions
with the external valuator.
Income properties
Valuation techniques underlying management’s estimation of fair value
The apartment and MHC investment properties were valued using the direct income capitalization method. In applying the direct
income capitalization method, the stabilized net operating income (“SNOI”) of each property is divided by a capitalization rate. The
significant unobservable inputs include the following:
• SNOI is based on budgeted rents and expenses and supported by the terms of any existing leases, other contracts or external
evidence such as current market rents for similar properties. Budgeted rents and expenses are adjusted to incorporate allowances
for vacancy rates, management fees, expected post sale property taxes and market-based maintenance and salary costs. The
resulting capitalized value is then adjusted for other costs inherent in achieving and maintaining SNOI, including structural
• Capitalization rate is based on location, size and quality of the properties and takes into account market data at the valuation date.
reserves for capital expenditures.
IPUC and land for development
Management uses an internal valuation process to estimate the fair value of properties under development and land for
development. Where a site is partially developed, the direct capitalization method is applied to capitalize the pro forma net operating
income ("NOI"), stabilized with market allowances, from which the costs to complete the development are deducted. The significant
unobservable inputs are based on the following:
• Pro forma SNOI is based on the location, type and quality of the properties and supported by the terms of actual or anticipated
future leases, other contracts or external evidence such as current market rents for similar properties. Vacancy rates are based on
expected future market conditions, and estimated maintenance costs are based on management's experience and knowledge of
the market conditions.
• Costs to complete are derived from internal budgets based on management's experience and knowledge of the market conditions.
• Capitalization rate is risk-adjusted taking into consideration the inherent risk of the development project based on location, size
and quality of the properties and taking into account market data at the valuation date.
The primary method of valuation for land acquired for development is the comparable sales approach, which considers recent sales
activity for similar land parcels in the same or similar markets. Land values are estimated using either a per acre or per buildable
square foot basis based on highest and best use. Such values are applied to Killam's properties after adjusting for factors specific to
the site, including its location, intended use, zoning, servicing and configuration.
Effective Weighted
Average
4.23%
4.48%
4.73%
4.98%
5.23%
Fair Value Variance
% Change
$400,950
186,391
—
(177,809)
(333,690)
12%
5%
—%
(5) %
(10) %
Fair Value of Investment
Properties (1)
$3,832,018
3,617,459
3,431,068
3,253,259
(0.50) %
(0.25) %
—%
0.25%
0.50%
Cap-rate Sensitivity
Increase (Decrease)
3,097,378
17
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 0 1
18
(1) Includes Killam's apartment and MHC portfolios, which are valued using the direct income capitalization method.
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
6. Assets Held for Sale
Killam determined that a parcel of land for development located in Calgary, AB, previously classified as held for sale no longer met
the criteria for this classification and reclassified the land to investment properties. During the year, Killam has recognized a $6.3
million fair value loss on the property, resulting in a carrying value of $8.1 million (Killam's 40% interest).
7. Joint Operations and Investments in Joint Venture
Killam has interests in three properties (seven buildings), three development projects and land for future development that are
subject to joint control and are joint operations. Accordingly, the consolidated statements of financial position and consolidated
statements of income and comprehensive income include Killam's rights to and obligations for the related assets, liabilities,
revenue and expenses. As at December 31, 2020, the fair value of the investment properties subject to joint control was $316.0
million (December 31, 2019 - $261.2 million).
8. Property and Equipment
As at
Land
Building
Heavy equipment
Vehicles
Furniture, fixtures and office equipment
Leasehold improvements
Less accumulated depreciation
9. Other Current Assets
As at
Restricted cash
Deposits
Prepaid expenses
Inventory
December 31, 2020
December 31, 2019
Cost
$270
2,107
415
2,612
6,710
4,456
16,570
(8,221)
$8,349
Accumulated
Depreciation
$—
Cost
$270
524
2,119
155
1,095
5,726
721
342
2,540
6,594
2,818
8,221
14,683
(7,570)
$7,113
Accumulated
Depreciation
$—
480
138
931
5,504
517
7,570
December 31, 2020
December 31, 2019
$6,849
3,266
7,052
9
$17,176
$6,594
4,433
5,060
12
$16,099
Restricted cash consists of security deposits and property tax reserves. Deposits consist of funds held in trust for future
acquisitions. Inventory relates to manufactured homes for which sales have not closed at year-end.
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
10. Rent and Other Receivables
As at
Rent receivable
Other receivables
December 31, 2020
December 31, 2019
$790
5,771
$6,561
$1,311
7,714
$9,025
Included in other receivables are laundry revenue, insurance receivables and other non-rental income. The majority of these
receivables are less than 60 days old. Killam’s policy is to write off tenant receivables when the tenant vacates the unit and any
subsequent receipt of funds is netted against bad debts. Killam’s bad debt experience has historically been less than 0.3% of
revenue. While overall rent collection remained strong despite the ongoing COVID-19 pandemic, certain commercial tenants have
faced hardships. Killam recorded an allowance for doubtful accounts for the year ended December 31, 2020, related to its
commercial tenants of $0.3 million (December 31, 2019 - $nil).
11. Mortgages and Loans Payable
As at
December 31, 2020
December 31, 2019
Weighted
Average Interest
Debt
Balance
Weighted
Average Interest
Debt
Balance
Mortgages and loans payable
Fixed rate
Variable rate
Total
Current
Non-current
2.69 %
1.98 %
$1,623,889
7,800
$1,631,689
201,345
1,430,344
$1,631,689
2.90 %
4.63 %
$1,427,470
10,800
$1,438,270
276,568
1,161,702
$1,438,270
Mortgages are collateralized by a first charge on the properties of Killam.
As at December 31, 2020, unamortized deferred financing costs of $36.7 million (December 31, 2019 - $32.2 million) and mark-
to-market adjustments on mortgages assumed on acquisitions of $0.08 million (December 31, 2019 - $0.01 million) are netted
against mortgages and loans payable.
Estimated future principal payments and maturities required to meet mortgage obligations by the 12 month period ending
December 31, are as follows:
Principal Amount
% of Total Principal
2021
2022
2023
2024
2025
Subsequent to 2025
Unamortized deferred financing costs
Unamortized mark-to-market adjustments
$201,345
211,947
257,276
256,140
245,761
495,835
$1,668,304
($36,691)
$76
$1,631,689
12.1%
12.7%
15.4%
15.4%
14.7%
29.7%
100.0%
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 0 3
20
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
12. Lease Liabilities
Balance, beginning of year
Net change in lease liabilities
Balance, end of year
2020
$8,919
654
$9,573
2019
$7,115
1,804
$8,919
As at December 31, 2020, the right-of-use assets and lease liabilities are $9.6 million (December 31, 2019 - $8.9 million). The right-
of-use assets are classified as part of investment properties and the lease liabilities are classified in other liabilities on the
consolidated statement of financial position. The total lease payments for the year ended December 31, 2020, were $0.3 million
(December 31, 2019 - $0.1 million).
13. Credit Facilities
Killam has access to two credit facilities with credit limits of $110.0 million ($130.0 million with the accordion feature) and $10.0
million that can be used for acquisition and general business purposes.
The $110.0 million facility bears interest at prime plus 70 bps on prime rate advances or 170 bps over bankers' acceptances ("BAs").
The facility includes a $30.0 million demand revolver and a $80.0 million committed revolver as well as an accordion option to
increase the $110.0 million facility by an additional $20.0 million. The committed revolver was increased by $40.0 million on
December 23, 2020. The agreement includes certain covenants and undertakings with which Killam was in compliance as at
December 31, 2020.
The $10.0 million demand facility bears interest at prime plus 125 bps on advances and 135 bps on issuance of letters of credit in
addition to 50 bps per annum. The agreement includes certain covenants and undertakings with which Killam was in compliance as
at December 31, 2020.
As at December 31, 2020
$110.0 million facility
$10.0 million facility
Total
As at December 31, 2019
$70.0 million facility
$5.0 million facility
Total
Maximum Loan
Amount(1)
$130,000
10,000
$140,000
Maximum Loan
Amount(1)
$90,000
5,000
$95,000
Amount Drawn
Letters of Credit Amount Available
5,000
2,029
$7,029
—
1,773
$1,773
$125,000
6,198
$131,198
Amount Drawn
Letters of Credit
Amount Available
—
—
$—
—
1,282
$1,282
$90,000
3,718
$93,718
(1) Maximum loan includes a $20.0 million accordion option, for which collateral is pledged.
14. Construction Loans
As at December 31, 2020, Killam had access to five variable rate non-revolving demand construction loans, for the purpose of
financing development projects, totaling $134.7 million. As at December 31, 2020, $41.3 million was drawn on the
construction loans (December 31, 2019 - $24.9 million). Payments are made monthly on an interest-only basis. The weighted-
average contractual interest rate on amounts outstanding at December 31, 2020, was 2.37% (December 31, 2019 - 3.32%).
Once construction is complete and rental targets achieved, construction financing will be replaced with permanent mortgage
financing.
1 0 4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
21
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
12. Lease Liabilities
Balance, beginning of year
Net change in lease liabilities
Balance, end of year
13. Credit Facilities
December 31, 2020.
at December 31, 2020.
As at December 31, 2020
$110.0 million facility
$10.0 million facility
Total
As at December 31, 2019
$70.0 million facility
$5.0 million facility
Total
Killam has access to two credit facilities with credit limits of $110.0 million ($130.0 million with the accordion feature) and $10.0
million that can be used for acquisition and general business purposes.
The $110.0 million facility bears interest at prime plus 70 bps on prime rate advances or 170 bps over bankers' acceptances ("BAs").
The facility includes a $30.0 million demand revolver and a $80.0 million committed revolver as well as an accordion option to
increase the $110.0 million facility by an additional $20.0 million. The committed revolver was increased by $40.0 million on
December 23, 2020. The agreement includes certain covenants and undertakings with which Killam was in compliance as at
The $10.0 million demand facility bears interest at prime plus 125 bps on advances and 135 bps on issuance of letters of credit in
addition to 50 bps per annum. The agreement includes certain covenants and undertakings with which Killam was in compliance as
Maximum Loan
Amount(1)
$130,000
10,000
$140,000
Maximum Loan
Amount(1)
$90,000
5,000
$95,000
Amount Drawn
Letters of Credit Amount Available
5,000
2,029
$7,029
—
1,773
$1,773
$125,000
6,198
$131,198
Amount Drawn
Letters of Credit
Amount Available
—
—
$—
—
1,282
$1,282
$90,000
3,718
$93,718
(1) Maximum loan includes a $20.0 million accordion option, for which collateral is pledged.
14. Construction Loans
As at December 31, 2020, Killam had access to five variable rate non-revolving demand construction loans, for the purpose of
financing development projects, totaling $134.7 million. As at December 31, 2020, $41.3 million was drawn on the
construction loans (December 31, 2019 - $24.9 million). Payments are made monthly on an interest-only basis. The weighted-
average contractual interest rate on amounts outstanding at December 31, 2020, was 2.37% (December 31, 2019 - 3.32%).
Once construction is complete and rental targets achieved, construction financing will be replaced with permanent mortgage
financing.
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
2020
$8,919
654
$9,573
2019
$7,115
1,804
$8,919
15. Accounts Payable and Accrued Liabilities
As at
Accounts payable and other accrued liabilities
Distributions payable
Mortgage interest payable
Security deposits
December 31, 2020 December 31, 2019
$39,950
$28,960
6,136
3,434
9,386
5,668
3,202
8,784
$58,906
$46,614
As at December 31, 2020, the right-of-use assets and lease liabilities are $9.6 million (December 31, 2019 - $8.9 million). The right-
of-use assets are classified as part of investment properties and the lease liabilities are classified in other liabilities on the
consolidated statement of financial position. The total lease payments for the year ended December 31, 2020, were $0.3 million
(December 31, 2019 - $0.1 million).
16. Exchangeable Units
2020
2019
Number of
Exchangeable Units
Value
Number of
Exchangeable Units
Value
Balance, beginning of year
4,153,520
$78,668
4,153,520 $66,207
Exchangeable Units exchanged for Trust Units
Fair value adjustment
Balance, end of year
(52,000)
(815)
—
(7,676)
—
—
—
12,461
4,101,520
$70,177
4,153,520 $78,668
The Exchangeable Units are non-transferable, but are exchangeable, on a one-for-one basis, into Killam Trust Units at any time
at the option of the holder. Prior to such exchange, distributions will be made on these Exchangeable Units in an amount
equivalent to the distributions that would have been made had the Units been exchanged for Killam Trust Units.
17. Unitholders' Equity
By virtue of Killam being an open-ended mutual fund Trust, unitholders of Trust Units are entitled to redeem their Trust Units at
any time at prices determined and payable in accordance with the conditions specified in Killam’s Declaration of Trust ("DOT"). As
a result, under IFRS, Trust Units are defined as financial liabilities; however, for the purposes of financial statement classification
and presentation, the Trust Units may be presented as equity instruments as they meet the puttable instrument exemption under
IAS 32.
All Trust Units outstanding are fully paid, have no par value and are voting Trust Units. The DOT authorizes the issuance of an
unlimited number of Trust Units. Trust Units represent a unitholder’s proportionate undivided beneficial interest in Killam. No
Trust Unit has any preference or priority over another. No unitholder has or is deemed to have any right of ownership in any of
the assets of Killam. Each Unit confers the right to one vote at any meeting of unitholders and to participate pro rata in any
distributions and, on liquidation to a pro rata share of the residual net assets remaining after preferential claims thereon of
debtholders.
Unitholders have the right to redeem their Units at the lesser of (i) 90% of the market price of the Trust Unit (market price is
defined as the weighted average trading price of the previous 10 trading days) and (ii) the most recent closing market price
(closing market price is defined as the weighted average trading price on the specified date) at the time of the redemption. The
redemption price will be satisfied by cash, up to a limit of $50 thousand for all redemptions in a calendar month, or a note
payable. For the year ended December 31, 2020, no unitholders redeemed Units.
The Units issued and outstanding are as follows:
Balance, December 31, 2019
Distribution Reinvestment Plan
Restricted Trust Units redeemed
Units issued on exchange of Exchangeable Units
Units issued for cash
Balance, December 31, 2020
Number of Trust Units
97,863,244
1,190,034
70,549
52,000
Value
$1,009,166
21,372
578
815
4,036,500
65,782
103,212,327
$1,097,713
21
22
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 0 5
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
17. Unitholders' Equity (continued)
Units issued for cash
Price per Unit
Gross Proceeds Transaction Costs Net Proceeds
Units Issued
Bought-deal (July 21, 2020)
Over-allotment (July 21, 2020)
$17.10
$17.10
Total
$60,000
9,000
$69,000
$2,785
$57,215
3,510,000
433
8,567
526,500
$3,218
$65,782
4,036,500
Distribution Reinvestment Plan ("DRIP")
Killam's DRIP allows unitholders to acquire additional Units of the Trust through the reinvestment of distributions on their Units.
Unitholders who participate in the DRIP receive additional Units equal to 3% of the Units reinvested. Units issued with the DRIP
are issued directly from the Trust at a price based on the 10-day volume weighted average closing price of the Toronto Stock
Exchange ("TSX") preceding the relevant distribution date, which typically is on or about the 15th day of the month following the
distribution declaration.
18. Distributions
Killam paid distributions to its unitholders during 2020 in accordance with its DOT. Distributions declared by the Board of
Trustees were paid monthly, on or about the 15th day of each month.
For the year ended December 31, 2020, the distributions declared related to the Trust Units were $68.7 million (year ended
December 31, 2019 - $60.8 million). For the year ended December 31, 2020, distributions declared related to the Exchangeable
Units were $2.8 million (year ended December 31, 2019 - $2.7 million). The distributions on the Exchangeable Units are
recorded in financing costs.
19. Deferred Unit-based Compensation
Restricted Trust Units ("RTUs") are awarded to members of the senior executive team and director-level employees as a
percentage of their compensation. The Trust also grants RTUs subject to performance conditions under the RTU Plan for certain
senior executives. Non-executive members of the Board of Trustees have the right to receive a percentage of their annual
retainer in the form of RTUs.
The number of RTUs awarded are based on the volume weighted average price of all Trust Units traded on the TSX for the five
trading days immediately preceding the date on which the compensation is awarded. The RTUs earn distributions based on the
same distributions paid on the Trust Units, and such distributions translate into additional RTUs. The initial RTUs, and RTUs
acquired through distribution reinvestment, are credited to each person's account and are not issued to the employee or Board
member until they redeem such RTUs. For employees, the RTUs will be redeemed and paid out in Trust Units by December 31
of the year in which the RTUs have vested. Effective Q3-2017, RTUs issued to Trustees will be redeemed and paid, in the
issuance of Trust Units, upon retirement from the Board.
The RTUs subject to performance conditions will be subject to both internal and external measures consisting of both absolute
and relative performance over a three-year period. Killam accounts for the RTUs subject to performance conditions under the
fair value method of accounting, and uses the Monte-Carlo simulation pricing model to determine the fair value, which allows
for the incorporation of the market based performance hurdles that must be met before the RTUs subject to performance
conditions vest.
The RTUs are considered a financial liability because there is a contractual obligation for the Trust to deliver Trust Units (which
are accounted for as liabilities, but presented as equity instruments under IAS 32) upon conversion of the RTUs. The RTUs are
measured at fair value with changes flowing through the consolidated statements of income and comprehensive income. The
fair value of the vested RTUs as at December 31, 2020, is $4.8 million, which includes $2.1 million related to RTUs subject to
performance conditions (December 31, 2019 - $5.4 million and $1.4 million). For the year ended December 31, 2020,
compensation expense of $1.7 million (year ended December 31, 2019 - $1.9 million) has been recognized in respect of the
RTUs.
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
19. Deferred Unit-based Compensation (continued)
The details of the RTUs issued are shown below:
For the years ended December 31,
Outstanding, beginning of period
Granted
Redeemed
Forfeited
Additional Restricted Trust Unit distributions
Outstanding, end of period
20. Revenue
2020
2019
Number of
RTUs
Weighted
Average Issue
Price
Number of
RTUs
Weighted
Average Issue
Price
364,875
114,920
(133,531)
(7,988)
13,458
351,734
$14.73
19.49
13.09
18.57
17.82
$16.93
403,730
98,928
(151,222)
(1,529)
14,968
364,875
$13.12
17.44
12.64
12.83
18.88
$14.73
In accordance with IFRS 15, Management has evaluated the lease and non-lease components of its revenue and has determined
the following allocation:
Rental revenue (1)
Property expense recoveries
Ancillary revenue
(1) Includes base rent, realty taxes and insurance recoveries, which are outside the scope of IFRS 15.
21. Other Income
Insurance claim recovery (1)
Management fee revenue
Interest revenue
Home sale revenue
For the years ended December 31,
2020
2019
$188,416
$174,359
62,806
10,468
58,119
9,687
$261,690
$242,164
For the years ended December 31,
2020
$—
593
47
1
$641
2019
$5,023
756
175
105
$6,059
(1) Insurance claim recovery represents proceeds realized on an insurance settlement from Killam's insurance providers relating to one building,
consisting of 29 apartment units located in Charlottetown, PEI, that was lost by fire in 2019.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 0 7
24
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
22. Financing Costs
Mortgage, loan and construction loan interest
Interest on credit facilities
Interest on Exchangeable Units
Amortization of deferred financing costs
Amortization of fair value adjustments on assumed debt
Unrealized loss on derivative liability
Interest on lease liabilities
Capitalized interest
23. Deferred Income Tax
For the years ended December 31,
2020
$44,055
671
2,784
3,126
88
483
385
(2,673)
$48,919
2019
$41,954
1,266
2,727
3,093
137
235
298
(2,267)
$47,443
Trusts that satisfy the REIT Exemption are excluded from the specified investment flow-through ("SIFT") definition and therefore
will not be subject to taxation under the SIFT Rules. Effective December 31, 2020, Killam qualified for the REIT Exemption and
continues to meet the REIT Exemption as at December 31, 2020, and is therefore not subject to taxation to the extent that income
is distributed to unitholders. However, this exemption does not extend to the corporate subsidiaries of Killam that are taxable
legal entities. For the year ended December 31, 2020, the deferred tax expense relates to the corporate subsidiary entity of the
REIT.
As at December 31,
Deferred tax liabilities (assets) related to:
Real estate properties
Loss carryforwards
Unrealized capital gains
Other
Net deferred tax liabilities
As at December 31,
Deferred tax liabilities (assets) related to:
Real estate properties
Loss carryforwards
Unrealized capital gains
Other
Net deferred tax liabilities
Recognized in
consolidated
statement of
income and
comprehensive
income
2019
2020
$180,555
$11,398
$191,953
(12,819)
(2,388)
(15,207)
3,876
3,436
(133)
686
3,743
4,122
$175,048
$9,563
$184,611
Recognized in
consolidated
statement of
income and
comprehensive
income
2018
2019
$134,662
$45,893
$180,555
(6,412)
3,363
3,071
(6,407)
(12,819)
513
365
3,876
3,436
$134,684
$40,364
$175,048
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
23. Deferred Income Tax (continued)
The deferred tax expense for the year can be reconciled to the accounting profit as follows:
For the years ended December 31,
Income before income taxes
Statutory tax rate
Income tax expense at statutory rates
Amounts not subject to tax
Income taxed at a lower amount
Effect of provincial tax rate changes
Other
Change to tax basis in excess of book basis
Total tax expense
24. Segmented Information
2020
2019
$155,630
$324,161
28.6%
44,572
(43,196)
(3,742)
(6,013)
(155)
18,097
$9,563
29.5%
95,692
(93,292)
(3,876)
(1,047)
(68)
43,227
$40,636
For investment properties, discrete financial information is provided on a property-by-property basis to members of executive
management, which collectively comprise the chief operating decision maker ("CODM"). The individual properties are
aggregated into segments with similar economic characteristics such as the nature of the property, vacancy rates, long-term
growth rates and other characteristics. Management considers that this is best achieved by aggregating into apartments, MHCs
and commercial segments. Consequently, Killam is considered to have three reportable segments, as follows:
•Apartment segment - acquires, operates, manages and develops multi-family residential properties across Canada;
•MHC segment - acquires and operates MHC communities in Ontario and Eastern Canada; and
•Commercial segment - includes seven commercial properties.
Killam’s administration costs, other income, financing costs, depreciation, fair value adjustments, loss on disposition and deferred
tax expense are not reported to the CODM on a segment basis.
The accounting policies of these reportable segments are the same as those described in the summary of significant accounting
policies described in note 2 to the consolidated financial statements for the year ended December 31, 2020. Reportable
segment performance is analyzed based on NOI. The operating results, and selected assets and liabilities, of the reportable
segments are as follows:
Year ended December 31, 2020
Apartments
MHCs
Commercial
Total
Property revenue
Property operating expenses
Net operating income
$228,915
$17,393
$15,382
$261,690
(82,767)
(6,541)
(7,720)
(97,028)
$146,148
$10,852
$7,662
$164,662
Year ended December 31, 2019
Apartments
MHCs
Commercial
Total
Property revenue
Property operating expenses
Net operating income
$211,558
$16,806
$13,800
$242,164
(76,820)
(6,342)
(6,666)
(89,828)
$134,738
$10,464
$7,134
$152,336
26
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 0 9
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
24. Segmented Information (continued)
As at December 31, 2020
Total investment properties (1)
Mortgages payable/construction loans
As at December 31, 2019
Total investment properties (1)
Mortgages payable/construction loans
Apartments
$3,390,089
$1,562,861
Apartments
$2,960,601
$1,357,680
MHCs
Commercial
Total
$212,699
$84,150
$139,130
$3,741,918
$26,023
$1,673,034
MHCs
Commercial
Total
$202,431
$75,577
$157,572
$3,320,604
$29,864
$1,463,121
(1) Total investment properties for the Apartments segment includes IPUC and land held for development.
25. Supplemental Cash Flow Information
Net income items related to investing and financing activities
Interest paid on mortgages payable and other
Interest paid on credit facilities
Net change in non-cash operating assets and liabilities
Rent and other receivables
Other current assets
Accounts payable and other liabilities
For the years ended December 31,
2020
2019
$44,376
671
$45,047
$2,464
(794)
12,292
$13,962
$41,979
1,266
$43,245
($5,999)
(5,294)
2,855
($8,438)
1 1 0 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
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Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
24. Segmented Information (continued)
26. Financial Instruments and Financial Risk Management Objectives and Policies
As at December 31, 2020
Total investment properties (1)
Mortgages payable/construction loans
As at December 31, 2019
Total investment properties (1)
Mortgages payable/construction loans
Apartments
$3,390,089
$1,562,861
Apartments
$2,960,601
$1,357,680
MHCs
Commercial
Total
$212,699
$84,150
$139,130
$3,741,918
$26,023
$1,673,034
MHCs
Commercial
Total
$202,431
$75,577
$157,572
$3,320,604
$29,864
$1,463,121
(1) Total investment properties for the Apartments segment includes IPUC and land held for development.
25. Supplemental Cash Flow Information
Net income items related to investing and financing activities
Interest paid on mortgages payable and other
Interest paid on credit facilities
Net change in non-cash operating assets and liabilities
Rent and other receivables
Other current assets
Accounts payable and other liabilities
For the years ended December 31,
2020
2019
$44,376
671
$45,047
$2,464
(794)
12,292
$13,962
$41,979
1,266
$43,245
($5,999)
(5,294)
2,855
($8,438)
Killam’s principal financial liabilities consist of mortgages, credit facilities, construction loans and trade payables. The main
purpose of these financial liabilities is to finance investment properties and operations. Killam has various financial assets, such as
tenant receivables, which arise directly from its operations.
Fair Value of Financial Instruments
Fair value is the amount that would be received in the sale of an asset or would be paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value of interest-bearing financial assets and
liabilities is determined by discounting the contractual principal and interest payments at estimated current market interest
rates for the instrument. Current market rates are determined by reference to current benchmark rates for similar term and
current credit spreads for debt with similar terms and risks. The fair values of the Trust’s financial instruments were determined
as follows:
(i) the fair values of the mortgages payable are estimated based upon discounted future cash flows using discount rates that
reflect current market conditions for instruments with similar terms and risks. Such fair value estimates are not necessarily
indicative of the amounts Killam might pay or receive in actual market transactions;
(ii) the fair value of the deferred unit-based compensation and the Exchangeable Units is estimated at the reporting date, based
on the closing market price of the Trust Units listed on the TSX. The performance based RTUs are determined using a pricing
model. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in estimates could significantly affect fair values;
(iii) the fair value of the derivative is calculated based on an estimate of the mid-market arbitrage-free price of the swap. The
arbitrage-free price comprises the present value of the future rights and obligations between two parties to receive or deliver
future cash flows or exchange other assets or liabilities. Future obligations are valued as the sum of the present values as
of the valuation date of contractually fixed future amounts and expected variable future amounts, the expected size of which is
calculated from the projected levels of underlying variables. Future rights are valued as the sum of the present values of the
expected values of contingent future amounts, the existence and size of which are calculated from the projected levels of
underlying variables.
The significant financial instruments and their carrying values as at December 31, 2020, and December 31, 2019, are as follows:
As at
Classification
Financial assets carried at FVTPL:
Derivative asset
Financial liabilities carried at amortized cost:
Mortgages and loans payable
Financial liabilities carried at FVTPL:
Exchangeable Units
Derivative liability (1)
Deferred unit-based compensation
December 31, 2020
December 31, 2019
Carrying
Value
Fair Value
Carrying
Value
Fair Value
$—
$—
$295
$295
$1,631,689
$1,714,740
$1,438,270
$1,478,413
$70,177
$188
$4,784
$70,177
$188
$4,784
$78,668
$—
$5,363
$78,668
$—
$5,363
(1) The $0.2 million derivative liability is included in other non-current liabilities within the consolidated statements of financial position
(December 31, 2019 - $0.3 million derivative asset included in other non-current assets).
The interest rates used to discount the estimated cash flows, when applicable, are based on the five-year government yield
curve at the reporting date, which is in-line with Killam's weighted average years to maturity of 4.6 years, plus an adequate
credit spread, and were as follows:
As at
Mortgages - Apartments
Mortgages - MHCs
December 31, 2020
December 31, 2019
1.31 %
2.31 %
2.59 %
3.84 %
27
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 1 1
28
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
26. Financial Instruments and Financial Risk Management Objectives and Policies (continued)
Assets and Liabilities Measured at Fair Value
Fair value measurements recognized in the consolidated statements of financial position are categorized using a fair value
hierarchy that reflects the significance of inputs used in determining the fair values:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities or valuation techniques where significant inputs are
based on observable market data.
Level 3: Valuation techniques for which any significant input is not based on observable market data.
The fair value hierarchy of assets and liabilities measured at fair value on a recurring basis in the consolidated statements of
financial position is as follows:
As at
Assets
Investment properties
Derivative asset
Liabilities
Exchangeable Units
Derivative liability
Deferred unit-based compensation
December 31, 2020
December 31, 2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
—
—
—
—
—
—
$3,741,918
—
$70,177
$188
—
—
—
$3,601
$1,183
—
—
—
—
—
—
$3,320,604
$295
$76,668
—
—
—
—
$3,987
$1,376
Transfers between levels in the fair value hierarchy are recognized on the date of the event or change in circumstances that
caused the transfer. There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 during the year ended
December 31, 2020.
Risk Management
Killam may enter into derivative transactions, primarily interest rate swap contracts to manage interest rate risk arising from
fluctuations in bond yields, as well as natural gas and oil swap contracts to manage price risk arising from fluctuations in these
commodities. It is, and has been, Killam’s policy that no speculative trading in derivatives shall be undertaken. The main risks
arising from Killam’s financial instruments are interest rate risk, credit risk and liquidity risk. These risks are managed as follows:
Interest Rate Risk
(i)
Killam is exposed to interest rate risk as a result of its mortgages and loans payable; however, this risk is mitigated through
Management's strategy to structure the majority of its mortgages in fixed-term arrangements, as well as, at times, entering into
cash flow hedges. Killam also structures its financings so as to stagger the maturities of its debt, minimizing the exposure to
interest rate volatility in any one year.
As at December 31, 2020, $56.1 million of Killam's debt had variable interest rates, including four construction loans totaling $41.3
million, amounts drawn on credit facilities of $7.0 million and one demand loan totaling $7.8 million. These loans and facilities
have interest rates of prime plus 0.5% - 1.25% (December 31, 2019 - prime plus 0.55% - 1.0%) and consequently, Killam is exposed
to short-term interest rate risk on these loans.
Killam’s fixed mortgage debt, which matures in the next 12 months, totals $141.2 million. Assuming these mortgages are
refinanced at similar terms, except at a 100 bps increase in interest rates, financing costs would increase by $1.4 million per year.
Credit Risk
(ii)
Credit risk arises from the possibility that tenants may experience financial difficulty and be unable to fulfill their lease term
commitments. Killam mitigates the risk of credit loss through the diversification of its existing portfolio and limiting its exposure to
any one tenant.
Credit assessments are conducted for all prospective tenants and Killam also obtains a security deposit to assist in potential
recoveries. In addition, receivables balances are monitored on an ongoing basis. Killam's bad debt expense experience has
historically been less than 0.3% of revenue. None of Killam’s tenants account for more than 4% of the tenant receivables as at
December 31, 2020 or 2019.
1 1 2 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
29
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
26. Financial Instruments and Financial Risk Management Objectives and Policies (continued)
Killam has considered the cash flow difficulties that may be experienced by commercial and residential tenants due to the impact
of COVID-19 and the probability of default. Killam reached agreements with a number of commercial tenants under the Canadian
Emergency Commercial Rent Assistance (CECRA) program recording a reduction in commercial revenue of $0.3 million for the year
ended December 31, 2020. Killam also entered into rent deferral agreements to minimize credit losses in the event of default.
Killam continues to assist residential tenants on a case-by-case basis dependent upon need. The maximum exposure to credit risk
is the carrying amount of each class of financial assets.
Liquidity Risk
(iii)
Management manages Killam’s cash resources based on financial forecasts and anticipated cash flows. Killam structures its
financing so as to stagger the maturities of its debt, thereby minimizing Killam’s exposure to liquidity risk in any one year. In
addition, Killam's apartments qualify for Canadian Mortgage and Housing Corporation ("CMHC") insured debt, reducing the
refinancing risk upon mortgage maturities. Killam’s MHCs do not qualify for CMHC insured debt; however, MHCs have access to
conventional mortgage debt. Management does not anticipate liquidity concerns on the maturity of its mortgages as funds
continue to be accessible in the multi-residential sector.
During the year ended December 31, 2020, Killam refinanced $205.7 million of maturing apartment mortgages with new
mortgages totaling $274.7 million, generating net proceeds of $69.1 million. In addition, during the year ended December 31,
2020, Killam refinanced $13.4 million of maturing MHC mortgages with new mortgages totaling $22.4 million, generating net
proceeds of $9.0 million. The following table presents the principal payments (excluding interest) and maturities of Killam’s
liabilities for the next five years and thereafter:
For the twelve months ending
December 31,
Mortgage and loans
payable
Construction
loans
Credit facilities (1)
2021
2022
2023
2024
2025
Thereafter
$201,345
$41,345
7,029
211,947
257,276
256,140
245,761
495,835
—
—
—
—
—
—
—
—
—
—
Total
$249,719
211,947
257,276
256,140
245,761
495,835
$1,668,304
$41,345
$7,029
$1,716,678
(1) Killam's $70.0 million credit facility expired in December 2020 and was amended and extended for one year.
The duration and impact of the COVID-19 pandemic, as well as the effectiveness of government and central bank responses,
remains unclear at this time. It is not possible to reliably estimate the duration and severity of these consequences, as well as their
impact on the financial position and results of the Trust for future periods.
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 1 3
30
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted)
Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
27. Capital Management
The primary objective of Killam’s capital management is to ensure a healthy capital structure to support the business and
maximize unitholder value. Killam manages its capital structure and makes adjustments to it in light of changes in economic
conditions. To maintain or adjust the capital structure, Killam may adjust the distribution payment to unitholders, issue additional
Units, issue debt securities or adjust mortgage financing on properties.
Killam's primary measure of capital management is the total debt to total assets ratio. Killam’s strategy, as outlined in the
operating policies of its DOT, is for its overall indebtedness not to exceed 70% of total assets. However, Killam's long-term target is
to manage overall indebtedness to be below 50%. The calculation of the total debt to total assets is summarized as follows:
As at
Mortgages and loans payable
Credit facilities
Construction loans
Total interest bearing debt
Total assets (1)
Total debt as a percentage of total assets
December 31, 2020
December 31, 2019
$1,631,689
$1,438,270
7,029
41,345
$1,680,063
$3,766,987
44.6 %
—
24,851
$1,463,121
$3,371,477
43.4 %
(1) Excludes right of use asset of $9.6 million as at December 31, 2020 (December 31, 2019 - $8.9 million).
The above calculation is sensitive to changes in the fair value of investment properties, in particular, cap-rate changes. The
quantitative sensitivity analysis shown below illustrates the value increase or decrease in Killam's debt to asset ratio given the
change in the noted input:
Cap-rate Sensitivity
Increase (Decrease)
(0.50) %
(0.25) %
—%
0.25%
0.50%
Fair Value of
Investment Properties(1)
$3,832,018
$3,617,459
$3,431,068
$3,253,259
$3,097,378
Total Assets
$4,028,807
$3,814,248
$3,627,857
$3,450,048
$3,294,167
Total Debt as % of
Total Assets
41.7%
44.0%
46.3%
48.7%
51.0%
Change (bps)
(460)
(230)
—
240
470
(1) Includes Killam's apartment and MHC portfolios, which are valued using the direct income capitalization method.
28. Commitments and Contingencies
Killam is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally
covered by insurance. Management believes that the final outcome of such matters will not have a material adverse effect on the
financial position, results of operations or liquidity of Killam. However, actual outcomes may differ from Management's
expectations.
Killam owns a 10% interest of a planned four-phase 829-unit development project in Calgary, Alberta. At the completion of
construction of the first phase, which was completed in January 2021, and the achievement of certain conditions, Killam has a
$55.0 million commitment in place to purchase three, four-storey apartment buildings, containing 233 residential units.
Killam entered into a supply contract for electricity to hedge its own usage, which is summarized below:
Area
Ontario
Alberta
Utility
Gas
Hydro
Usage Coverage
Term
Cost
25%
50%
November 1, 2020 - March 31, 2021
$3.90/GJ
January 1, 2021 - December 31, 2021
$56.40/MWh
1 1 4 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
31
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Notes to the Consolidated Financial Statements
Dollar amounts in thousands of Canadian dollars (except as noted)
29. Financial Guarantees
Killam is the guarantor on a joint and several basis for certain mortgage debt held through its joint operations. As at December 31,
2020, the maximum potential obligation resulting from these guarantees is $83.1 million, related to long term mortgage financing
(December 31, 2019 - $85.1 million). The loans held through its joint operations are secured by a first ranking mortgage over the
associated investment properties. Killam's portion of the total mortgages for these properties are recorded as a mortgage liability
on the consolidated statements of financial position.
Management has reviewed the contingent liability associated with its financial guarantee contracts and, as at December 31, 2020,
determined that a provision is not required to be recognized in the consolidated statements of financial position (December 31,
2019 - $nil).
30. Comparative Figures
Certain comparative figures have been reclassified to conform to the financial statement presentation adopted for the current
period. Killam reclassified on the consolidated statement of income and comprehensive income, net bad debt expense and
recovery of $0.4 million from "property revenue" to "operating expenses" to reflect the nature of these expenses for the year
ended December 31, 2019.
31. Related Party Transactions
Killam has construction management agreements with companies owned by a Trustee of Killam. The agreements include a market
rate construction management fee of 2.5% and 1.5% development management fee on hard construction costs for the Shorefront
development and a 4.0% construction management fee for the Harley Street development, totalling $0.3 million (December 31,
2019 - $0.2 million). These fees are to be paid over the construction period. In addition, these companies supply direct
construction services or contract arm’s-length services. For the year ended December 31, 2020, these companies were paid $3.1
million (December 31, 2019 - $2.1 million).
Killam owns a 50% interest in two commercial properties located at 3700 & 3770 Kempt Road in Halifax, NS. The remaining 50%
interest in these properties is held by a company owned by an executive and Trustee of Killam. These properties are managed by
an arm's length third party. Killam's head office occupies approximately 23,000 square feet of one of the buildings with rent of
approximately $13.00 per square foot net, of which 50% is paid to the related party based on the ownership interest.
The remuneration of directors and other key management personnel, which include the Board of Trustees, President & Chief
Executive Officer, Executive Vice President, Chief Financial Officer and other Vice-Presidents of Killam. During 2020, three
additional employees were promoted to Vice President and included in the disclosure below. The total remuneration is as follows:
For the years ended December 31,
Salaries, board compensation and incentives
Deferred unit-based compensation
Total
32. Subsequent Events
2020
$5,138
1,727
$6,865
2019
$4,674
1,822
$6,496
On January 15, 2021, Killam announced a distribution of $0.05667 per unit, payable on February 15, 2021, to unitholders of
record on December 31, 2020.
On January 21, 2021, Killam acquired the remaining 90% interest in the 233-unit Nolan Hill property in Calgary, AB, for $49.5
million.
On January 29, 2021, Killam acquired development land in Charlottetown, PE, for $3.4 million.
On January 29, 2021, Killam acquired a property for future development in Halifax, NS, for $3.0 million.
On February 1, 2021, Killam acquired a 23-unit apartment building in Moncton, NB, for $5.6 million.
On February 1, 2021, Killam acquired a property for future development in Stratford, PE, for $3.8 million.
32
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 1 5
Notes to the Consolidated Financial StatementsDollar amounts in thousands of Canadian dollars (expect as noted) Five Year Summary
In thousands (except per unit)
Statement of Income Information
2020
2019
2018
2017
2016
Revenue
Operating expenses
Net operating income
Other income
Financing costs
Administration
Depreciation
Fair value adjustments
Loss on disposition
$261,690 $242,164 $215,959 $187,377 $175,269
($97,028)
($89,828)
($80,247)
($72,157)
($69,845)
$164,662
$152,336
$135,712
$115,220 $105,424
$641
$6,059
$965
$847
$1,227
($48,919)
($47,443)
($42,648)
($34,846)
($37,698)
($14,745)
($14,881)
($14,201)
($12,958)
($12,733)
($630)
($720)
($859)
($787)
($884)
$54,620
$230,079
$127,877
$56,202
($11,231)
$ –
$(1,269)
($197)
($259)
($264)
Deferred tax recovery (expense)
($9,590)
($40,636)
($31,478)
($18,659)
$27,598
Net income
$146,040
$283,525
$175,171
$104,760
$71,439
Net income attributable to
unitholders/common shareholders
Funds From Operations (FFO)
$146,024
$283,536
$175,144
$104,732
$67,982
FFO
$104,678
$93,884
$81,808
$69,873
$58,886
FFO per unit/share (diluted)
$1.00
$0.98
$0.94
$0.90
$0.86
Statement of Financial Position Information
Total assets
Total liabilities
Total equity
$3,776,560 $3,380,100 $2,824,406 $2,311,210 $1,987,929
$2,008,302 $1,777,733 $1,655,456 $1,343,488 $1,237,463
$1,768,258 $1,602,367 $1,168,950
$967,722 $750,466
Statement of Cash Flow Information
Cash provided by operating activities
$123,514
$95,208
$89,738
$82,916
$64,011
Cash provided by financing activities
$224,396
$146,708
$237,657
$154,460
$52,356
Cash used in investing activities
($358,155)
($232,904)
($335,606)
($250,028)
($106,013)
Unit Information (1)
Weighted average number of units (2)
104,340
95,719
Units outstanding at December 31(2)
107,314
102,017
86,949
90,212
77,575
84,428
Unit price at December 31
$17.11
$18.94
$15.89
$14.22
67,912
71,736
$11.94
Market Capitalization at December 31(2)
$1,836,143 $1,932,201 $1,433,469 $1,200,566 $856,528
(1) Killam converted to a real estate investment trust (REIT) effective January 1, 2016. References to REIT units prior to
that date relate to common shares of Killam Properties Inc.
(2) Includes Trust Units and Exchangeable Units.
1 1 6 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
Executive Team
Philip Fraser
President & Chief Executive Officer
Robert Richardson, FCPA, FCA
Executive Vice President
Dale Noseworthy, CPA, CA, CFA
Chief Financial Officer
Ruth Buckle
Senior Vice President,
Property Management
Erin Cleveland, CPA, CA
Senior Vice President, Finance
Nancy Alexander, CPA, CA
Vice President, Investor Relations
& Sustainability
Carrie Curtis, P. Eng.
Vice President, Ontario
and Alberta
Michael McLean
Senior Vice President,
Developments
Jeremy Jackson
Vice President, Marketing
Brian Jessop P. Eng, CPM
Vice President, Operations
Colleen McCarville
Vice President, Human Resources
K I L L A M A PA R T M E N T R E I T | 2 0 2 0 1 1 7
Board of Trustees
Timothy Banks
President & CEO,
APM Group of Companies
Charlottetown, Prince Edward Island
Trust Information
Auditors
Ernst & Young, LLP
Halifax, Nova Scotia
Philip Fraser
President & CEO,
Killam Apartment REIT
Halifax, Nova Scotia
Robert Kay
Chairman of the Board,
Killam Apartment REIT
Chairman,
Springwall Group International
and Springwall Sleep Products Inc.
Moncton, New Brunswick
Aldéa Landry(2)(3)
President, Landal Inc.
Moncton, New Brunswick
James Lawley
President, Salters Gate Developments
Halifax, Nova Scotia
Arthur Lloyd
President, ADAM Capital
Calgary, Alberta
Laurie MacKeigan, CPA, CA, CPA (IL) (1)(3)
President, Backman Vidcom
Halifax, Nova Scotia
Karine MacIndoe(1)(3)
Trustee
Toronto, Ontario
Robert Richardson, FCPA, FCA
Executive Vice President,
Killam Apartment REIT
Halifax, Nova Scotia
Manfred Walt, CPA, CA (1)(2)
President & CEO,
Walt & Co. Inc.
Toronto, Ontario
(1) Member of the Audit Committee
(2) Member of the Governance and ESG Committee
(3) Member of the Compensation Committee
Solicitors
Bennett Jones, LLP
Calgary, Alberta
Stewart McKelvey
Halifax, Nova Scotia
Registrar and Transfer Agent
Computershare Investor Services Inc.
1500 Robert-Bourassa Blvd
7th Floor
Montreal, Quebec
H3A 3S8
Unit Listing
Toronto Stock Exchange (TSX)
Trading Symbol: KMP.UN
2020 Annual Distribution
$0.68 per unit
Head Office
3700 Kempt Road
Suite 100
Halifax, NS B3K 4X8
902.453.9000
866.453.8900
Investor Inquiries
investorrelations@killamreit.com
902.442.0374
Annual Meeting
The Annual Meeting of Unitholders
will be held on Friday, May 7, 2021,
10:30 am Atlantic Time, at 3700
Kempt Road, Halifax, NS.
Unitholders are encouraged to
attend via webcast.
1 1 8 K I L L A M A PA R T M E N T R E I T | 2 0 2 0
Suite 100
3700 Kempt Road
Halifax, Nova Scotia
B3K 4X8
1.866.453.8900
killamreit.com
TSX: KMP.UN
KILLAM APARTMENT REIT