Boardwalk Real Estate Investment Trust

TSX:BEI.UN

Earnings Call Transcript 2021-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to the Boardwalk Real Estate Investment Trust Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Also note, that the call is being recorded on Friday, August 13, 2021.And I would like to turn the call over to Mr. James Ha. Please go ahead, sir.

[James Ha, Vice President of Finance & Investor Relations]

Thank you, Sylvie, and welcome to the Boardwalk REITs 2021 second quarter results conference call. With me here today is Sam Kolias, Chief Executive Officer; and Lisa Smandych, Chief Financial Officer. Note that this call is being broadly disseminated by way of webcast. If you've not already done so, please visit bwalk.com/investors, where you will find a link to today's presentation as well as PDF files of the Trust's financial statements, MD&A, as well as supplemental information package.Starting on Slide 2, we would like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements. Information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly-filed documents.I would like to now turn the call over to Sam Kolias.

[Sam Kolias, Chairman & CEO]

Welcome, everyone, to our Q2 conference call. Starting on Slide 3. We have 4 strategic pillars for how we are creating value for our stakeholders. Our significant organic growth is derived of higher occupancies with strong rental market fundamentals in our core markets. Our mark-to-market is significant and inflation results in a reduction in discounts with much lower rental market vacancies. We continue with our disciplined investments in our value-add program, further diversifying our brand and product, resulting in increasing market share.We are accretively recycling our capital with the disposition of non-core assets, redeploying this capital into new acquisitions in both geographic and economically diverse markets. With higher inflation and recent sales of newly developed multifamily communities in the GTA, our on-time and on-budget current development in Brampton is highly accretive. We continue on a solid financial foundation with a strong balance sheet. Access to low-cost CMHC insured financing, which provides interest expense savings and our low payout ratio maximizes free cash flow for accretive reinvestment returns driving our FFO higher. We are well-positioned to continue our solid track record with the reopening of our economy.Slide 4 shows our most recent results of $0.75 per unit, which includes $0.02 of retirement costs. Our guidance for the remaining year is for FFO between $2.80 to $2.92, which includes retirement costs incurred.As Slide 5 shows, we are in the right place at the right time with demand for affordability growing, coupled with limited new supply in our core markets, putting Boardwalk on a solid foundation for many years of sustainable growth. We provide the most affordable rents in Canada. The graph on the right shows a shift of higher population and demand growth than new supply in Alberta and Saskatchewan.Slide 6 shows our seasonally strong summer leasing season continues to be active with the return of post secondary students, more jobs as per the most recent StatCan jobs report, resulting in the increase in demand for affordable housing. Note, June move-outs are seasonally high each year in Quebec.Slide 7. Our Q2 2021 key operating metrics show continued revenue gains through a combination of optimizing occupancy, rental rates and incentives, resulting in sustainable gains of occupied rent to a very affordable $1,191 in June. Our average unit size is a 2-bedroom unit.Slide 8 shows our rent change on new and renewal leases and how the use of incentives for new rentals has resulted in higher occupancy and sequential revenues as displayed in the purple weighted average line graph. Renewal spreads continue to remain positive and represent 60% to 70% of monthly lease activity. Sustainable inflation rental adjustments on renewals are offsetting inflationary increases in our non-controllable expenses. Positive spreads on new leases are realized when occupancy reaches 97% or higher. The Trust has positive new leasing spreads in Saskatchewan, Ontario and the Quebec markets. Calgary is ahead of Edmonton on occupancy and both regions are seeing strong rental demand through this summer, resulting in current occupancy of 97.5% in Calgary and 95% in Edmonton. With our international borders tentatively scheduled to reopen September 7th, we expect a continued strong second half of rentals.Slide 9 shows our significant organic growth opportunity as we stabilize vacancy in all our markets to 97% and higher, which allows us to reduce incentives further on both new and renewal leases. As depicted, Alberta represents the largest annualized revenue opportunity primarily from discount reductions. Ontario and Quebec have mark-to-market potential on turnover units.We would now like to pass the call on to Lisa Smandych, who will provide us with an overview of our operating margin, financial and repositioning results. Lisa?

[Lisa Smandych, Chief Financial Officer]

Thank you, Sam. Moving to Slide 10. In addition to the organic revenue growth opportunity, the Trust remains disciplined and focused on managing its controllable expenses despite increases in non-controllable costs. This discipline has resulted in declining controllable expenses year-over-year and when coupled with our revenue growth potential, will allow margins to continue to improve.On Slide 11, we have experienced the inflection in sequential revenue growth as Q2 was positive as compared to Q1. With improved occupancy and net effective rents increasing, we expect this positive sequential revenue growth to continue. Our Q2 2021 operating results reflect positive NOI growth in our Quebec, Saskatchewan and Ontario markets. A drop in NOI for our Alberta markets was due to higher non-controllable expenses, as well as slower winter months and further lockdowns. However, vacancy troughed in the first quarter of 2021 and as mentioned, we are expecting positive revenue growth for the remainder of the year.Looking at the second half of 2021, we anticipate property tax savings in Alberta will be a tailwind, while both utilities and insurance may be potential headwinds. With increased gas prices, utilities could be higher on our 25% non-hedge portion. However, higher gas prices are positive for the overall economy. Insurance premiums remain expensive due to continued market supply constraints. With these increases in non-controllable costs, we remain focused on managing our controllable expenses.Slide 12 illustrates Boardwalk's mortgage maturity schedule. Our mortgages are well-staggered with approximately 98% of our mortgage balance carrying NHA insurance through the Canada Mortgage and Housing Corporation. This insurance remains in effect for the full amortization of the mortgage and in addition to carrying the government of Canada's backing, provides access to low-cost financing with current estimated 5 and 10-year CMHC rates of 1.7% and 2.3%, respectively. With current rates well below the Trust maturing rates, mortgage financing continues to be one of the lowest cost of capital available to the Trust. With over $700 million in mortgage maturities for the remainder of 2021 and fiscal 2022, an 80 basis point interest rate decline on renewal provides annualized financing cost savings of $5.6 million subsequent to 2022.Slide 13 summarizes our progress on our 2021 mortgage maturities. To date, we have renewed or forward-locked approximately 49% of our 2021 mortgage maturities, as well as secured $117.9 million in new financing at low interest rates. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates. Moving to the right of the slide, we provide a summary of Boardwalk's available liquidity. The trust is well-positioned with approximately $52 million in cash and subsequently funded financings, as well as an undrawn $199 million operating line. This approximate $252 million in liquidity provides the Trust with a flexible financial position in the current environment, as well as providing the ability to take advantage of opportunities as they present themselves. Lastly, the Trust debt metrics continue to improve with an interest coverage of 2.86 in the current quarter.Slide 14 provides a summary of the recycling of cash flow towards value-add improvements. To date, we have completed approximately 26% of total suite improvements, while aiming to complete 47% of our total portfolio, common areas and amenity spaces by the end of 2021. Our focus is to continue to deliver the best products, optimizing our capital allocation for our value-add program to our targeted resident member demographic, so we can continue to provide the most exceptional elevated experience at an affordable price. The result is increased market demand, exceptional value and appealing returns with sustainable market rent adjustments.Slide 15 illustrates our stabilized renovation returns for Marlborough Manor and Fort Garry House, both located in Edmonton, Alberta, with returns of 13% and 10%, respectively, which has exceeded our internal hurdle rate of 8%. Our renovations continue to garner positive resident member testimonials, driving referrals and higher occupancy.I would now like to turn the call to James Ha to discuss our recent acquisitions and dispositions. James?

[James Ha, Vice President of Finance & Investor Relations]

Thank you, Lisa. As previously disclosed, Boardwalk closed on 2 acquisitions in the second quarter, as shown on Slide 16. Mountainview Estates in world-renowned Banff, Alberta is a 4-season tourism destination that has limited housing supply. The community features high demand, 2 and 3-bedroom units and currently has no availability. The property yields an attractive 5% cap rate and adds further efficiency to our Banff portfolio. Our second acquisition in the quarter was Aurora, a recently constructed fully-stabilized asset in Victoria. The 114-unit property in View Royal is 99% occupied and the accretive 4.25% cap rate represents exceptional value to recent market transactions in the region. The community features large suites located adjacent to the Victoria General Hospital, natural green spaces, nearby amenities and is immediately adjacent to Boardwalk's Eagles Nest development sites.Slide 17 provides a brief update on this Victoria development side and updates on our accretive and active development pipeline. Our Brampton development continues to progress on time and on budget with anticipated delivery of the first tower of the 365-unit marquee community in the fall of 2022. Eagles Nest, one of our development sites in Victoria, is nearing the completion of entitlements with development permit application anticipated in the third quarter.Slide 18 provides an update on our progress on our capital recycling through the sale of non-core assets. On June 30, the Trust sold a non-core 78-unit community in Edmonton. The sale price of $9.25 million was in line with the value the Trust has to asset carry that and represents a 4.5% cap rate on recent full year NOI. Post quarter, the Trust also agreed to sell Oak Tower, an 11-story non-core asset in Edmonton for a sale price of $11.8 million. This sale price of $169,000 per door was above the Trust's IFRS fair value for the asset and equates to a 3.75% cap rate on most recent full year NOI. The transaction is scheduled to close in mid-September.These sales of non-core assets provides the Trust with the opportunity to high-grade and redeploy proceeds toward higher quality and growth opportunities, and we look forward to sharing updates on our value-enhancing deployment of these proceeds.Slide 19 provides detail on the exceptional value that Boardwalk's current Trust Units represent. Boardwalk's current trading price implies a value of approximately $154,000 per apartment door and compares favorably to both our own and other recent transactions. The most recent market transaction in Edmonton was a portfolio of over 1,500 suburban apartment units that compare to Boardwalk's most affordable living brand assets in Edmonton. Our NAV of $59.35 per Trust Unit, equating to $176,000 per apartment door, represents an exceptional opportunity relative to market pricing and remains well below the increasing cost of replacement.Utilizing trailing 12-month property NOI, on Slide 20, Boardwalk's current trading price equates to an attractive 5.3% cap rate and is a significant spread to the cost of available mortgage capital, as well as recent capitalization rates seen in major markets in Canada. With sequential revenues increasing, the Trust is anticipating a return to NOI growth going forward and further increases the attractiveness of our implied cap rate.These improved multifamily fundamentals, increased visibility and the reopening of our economy are providing the Trust with the ability to reintroduce our financial guidance as summarized on Slide '21. For the last 6 months of 2021, the Trust is anticipating a return to same-property NOI growth with a range of up to 4%. This offsets the slight same-property NOI decline in the first half of this year, resulting from rental rate restrictions from the pandemic in 2020. The Trust anticipates our track record of FFO growth will continue with a forecasted range of $2.80 to $2.92 despite the inclusion of $0.02 of retirement costs incurred this year. The Trust is confident in its forecast for the year. However, please note that a rapid change in conditions may cause these estimates to change. Our Boardwalk team is committed to leading in transparency and will update its stakeholders in the events of any change in conditions that may materially impact our forecast.On Slide 22, the Trust continues to have an industry low payout ratio, providing maximum cash flow reinvestment, positioning Boardwalk with ample capital for growth. Our Board of Trustees regularly reviews our distribution and with the runway for FFO growth in our core portfolio, the Trust is well-positioned to return to sustainable distribution increases to its unitholders on an annual basis.And lastly, Slides 23 and 24 provide highlights from our recent ESG reports, as well as measurable objectives the Trust has set for the year. The Boardwalk team is proud to highlight our continued focus on ESG by continuing to provide our essential service of affordable housing to Canadians and striving to improve how we can further improve our environmental and social impact, while enhancing our already top-rated governance practices. We look forward to updating our stakeholders on our progress towards these measurable objectives in the coming quarters.We would now like to open up the phone line for questions. Sylvie?

[Operator]

[Operator Instructions] And your first question will be from Jonathan Kelcher at TD.

[Jonathan Kelcher, Analyst]

First question, just on the guidance. I guess, it sounds like property tax is going to be a tailwind in the back half of this year. You turned the corner to get sequential revenue growth in Q2 and you expect that to keep going. What would keep you guys closer to the low end of the 0% to 4% same-property NOI over the back half of the year?

[James Ha, Vice President of Finance & Investor Relations]

Jonathan, it's James here. Thanks for the question. 100% rates on those sequential revenue of 0.8% in the second quarter. As Sam mentioned in his prepared remarks, we continue to see growth in occupancy. We're continuing to position ourselves to begin incentive reductions or discount reductions towards the back half of this year. And that's giving us the confidence on, as Lisa mentioned, sequential revenue to continue to grow towards the back half of this year. With regards to property tax, we do have our final bills in now for the second half of the year, and there's a little bit of nuance there given property tax calendar years being from July to June.And so as a result of that, we are anticipating a decline in property tax for the second half of the year. For the bottom end of the guidance range, really, given the pandemic environment that exists here today, we certainly want to build in a little bit of cautiousness in the event of any material change in the macro economy. But at this point, given kind of 8 months of data with the current guidance range that we have, we're fairly comfortable with, again, our goal and target of meeting certainly at least the midpoint and aiming to exceed the midpoint of that guidance range.

[Jonathan Kelcher, Analyst]

Okay. So it's just a little bit conservative in case lockdowns come back or something unforeseen like that?

[James Ha, Vice President of Finance & Investor Relations]

That's correct, Jon.

[Jonathan Kelcher, Analyst]

Okay. And then the second question, just on the -- I think you said this, James, in your prepared remarks, you talked about potentially increasing the dividend. With your minimum payout ratio target, how close are you guys to having to do that? Is that something we would see in 2021? Or it's potentially 2022?

[Lisa Smandych, Chief Financial Officer]

Jonathan, it's Lisa. So we evaluate that distribution on a regular basis. Internally, we certainly do it monthly. So we're always looking at sort of our tax forecast and running those projections forward based on FFO growth. So we -- as James mentioned, the goal will be to provide sustainable increases, Right? So we want it to be sustainably able to grow over -- on an annual basis going forward. So we'll just -- we will keep looking at it. I don't think we know exactly our timeline. It will sort of depend on some of our dispositions and our other capital recycling. Because to your point, we want to maintain as much free cash flow as we can. So we'll keep those low payout ratios to maintain that free cash flow.

[Operator]

Next question will be from Matt Logan at RBC Capital Markets.

[Matt Logan, Analyst]

Sam, there certainly seems to be a stampede of leasing activity in Alberta. When you look towards the back half of the year and the burn-off of incentives starting to incur, would that imply kind of getting to a 97%-plus occupancy by December? And if so, what does that translate into in terms of potential same-property NOI growth in 2022?

[Sam Kolias, Chairman & CEO]

Thank you, Matt, it's Sam. And we're over 97% occupancy everywhere except for Edmonton at 95%. And with the stampede of rentals in Edmonton, we are looking at 97% occupancy in Edmonton by as soon as next couple of months, so before Christmas, especially with the international demand reopening in September, that is going to result in a big backlog of folks that are waiting to come back. And Edmonton, in particular, is a big beneficiary of international migration. And so Edmonton will be -- it will continue to be an even bigger star within the northern star it already is for us in the back half, and that will essentially put all of our markets over 97% occupancy.And our entire occupancy will be back to where it was pre- COVID, Matt, because essentially, we're going back to the future before COVID, and that's pretty well what we're seeing. And pre-COVID, we were seeing 4% to 8% renewals and new lease rates, which essentially is recovering inflation. And that's what we're looking to do. And we're actually seeing that today in Saskatchewan, 4% to 8% between our renewals and new rentals is what we're seeing today in Saskatchewan.

[Matt Logan, Analyst]

Great color. And in terms of the same-property NOI growth, does that kind of imply a mid-single-digit growth rate in 2022? Or could that be perhaps a bit better?

[James Ha, Vice President of Finance & Investor Relations]

Matt, it's James. Yes. Again, similar to what Sam was saying, certainly, pre-pandemic revenue is going to be a significant driver here or input for that same-property NOI. Obviously, on the controllable expenses, I think our team has done a fantastic job, and we'll continue to do a great job of exercising discipline and looking for innovative ways to save on our controllable expenses. We have a good property tax headwind, as Jonathan had mentioned earlier, for this year. But that remains, again, a non-controllable cost that we'll have to watch really closely. To Sam's point, similar to what we were doing pre-pandemic, we can get into that position where we're starting to obtain 4% to 8% leasing spreads on rentals. That's going to really position us well to do what we were doing pre-pandemic. And so if you look at pre-pandemic, that was mid-single-digit same-property NOI growth, which, in this interest rate environment, was delivering double-digit FFO growth.

[Matt Logan, Analyst]

Appreciate that. Maybe just changing gears. In your press release, you had a number of comments on the transactions in the market. What does that translate into for potential cap rate compression in the back half of the year?

[James Ha, Vice President of Finance & Investor Relations]

Yes. Thanks, Matt. It's really been great to see kind of that price discovery that everybody has been waiting for in our core markets. And it was great to see that those transactions occurred post quarter, our own included as well, as we just disclosed with our Oak Tower sale. And so in partnership with our external appraisers, we're going to have a really close eye on that going forward for the second half of the year. But similar to the trends we're seeing, frankly, across the country, we're seeing cap rate compression pretty well across the country in all major markets and Edmonton, Calgary, Regina, Saskatoon included. So working with our third-party external appraisers, we would anticipate the potential for some cap rate compression here in the back half of the year.

[Matt Logan, Analyst]

And can you tell us what the cap rate on the Oak Tower sale was?

[James Ha, Vice President of Finance & Investor Relations]

We did -- it was $0.0375 [ phonetic ] on most recent calendar year NOI.

[Operator]

Next question will be from Joanne Chen at BMO.

[J. Chen, Director of Equity Research]

Just maybe circling back on the capital recycling front, do you see more opportunities through the back half of the year and then redeploying? How will you think about the redeployment of those proceeds?

[Sam Kolias, Chairman & CEO]

Thank you, Joanne. Yes, we see lots of opportunity. And we're super excited about our development, which is really accretive and especially our wood-frame walk-up and especially where cap rates are leveling down at in Victoria. The wood-frame walk-up success we've had in Calgary and Regina, it's being applied in the 2 sites that we purchased, one fully zoned and one that's just going into the zoning. And the value that we're creating from the pre-zoning and land purchase right through to the development is extremely accretive and provides a potential future access of free cash flow like we're seeing our partner RioCan accessing cash flow by the most recently announced sales of the most recent development that were completed in Toronto. And so we're super excited about the new development in these supply-sustained markets.And that's where we see the biggest value creation going forward, especially with the wood-frame walk-up. We can build a wood-frame community within 12 months, refinance out of it and even sell some of it to provide all the equity for the multifamily community that we keep. And so it's super exciting to get into the fine-tuning and reengineering of our redevelopment and create the capital we need in our development program for newly developed multifamily communities. It's -- we're super excited about it.

[James Ha, Vice President of Finance & Investor Relations]

I'll just add to that, Joanne. I think our team has done a great job in term -- for the acquisitions that we've made as well in uncovering these opportunities. Our acquisition in Victoria, Aurora, acquiring that at 4.25% cap, like I mentioned in mine and in our prepared remarks, we're seeing cap rates transact very recently well below that, similar with our Kitchener, Waterloo acquisitions that we made earlier this year. Looking for those accretive opportunities for us to high-grade and redeploy capital, I mean, the more -- we can't get enough of that. And so yes, we'll continue with this active capital recycling, where we're able to pare these non-core assets and deploy that towards accretive, higher quality growth profiles.

[Sam Kolias, Chairman & CEO]

Thank you, James. We really can't give enough credit to our in-house design and redevelopment and repositioning. We are miles ahead of our competitors with our redesigned value-add program. For instance, London, Ontario we're seeing incentives in competitors' rents, and we have no incentives or vacancy in our Kitchener, Waterloo, London and Cambridge marketplaces, and that's a perfect example of -- and the performance that we're seeing and the results of the NOI growth that we're seeing out of our eastern reposition programs are super exciting.We have just returned from Quebec last week. We have so much excess empty land in Quebec City and Montreal for that. And so the empty land that we have got us really excited last week, too. Again, more wood-frame walk-up development infill potential there with land already bought and paid for. So we're -- yes, we're very excited with all the lessons we've learned with development. It took us a while to figure out the nuances of new development, and we're in turbocharge mode with new development and creating capital that is self-sustainable and recycling a phenomenal self-sustaining development program.

[J. Chen, Director of Equity Research]

Sounds great. And I guess maybe just to think you expect to see the leasing momentum pickup and how should we be thinking about the use of incentives towards the back half of the year? Should we be seeing that kind of slowly trend down again?

[Sam Kolias, Chairman & CEO]

Yes, we're seeing really what we've never seen before, a big wave of rentals. People are coming back home, back home to Alberta, back home to Saskatchewan. And when we are downtown Calgary, there's lots of people there. When we're on Deerfoot Trail, it's bumper to bumper. In the morning, bumper to bumper, even at 3:00 a.m., well before the 4:30 a.m. whistle. And so there are more people moving back home to Alberta and Saskatchewan than we've ever seen. And so that will create a much higher occupancy. With that, we're going to be very disciplined, we're going to continue to be flexible, and we're going to see some significant decreases in our reductions, which are going to allow us to recapture inflationary increases that we're all seeing.And that is how we see the future is a sustainable adjustment, where we can continue on our rock-solid foundation of affordability to deliver years and years and years of rock-solid FFO and NOI growth. And that's what we've reengineered ourselves to do is to be the best value proposition in the entire market and stay there. And that's how we're looking at our future.

[James Ha, Vice President of Finance & Investor Relations]

Yes, Joanne, I think occupancy is key for those incentives. And so, as Sam mentioned earlier, we've seen examples of that even in Saskatchewan. Right? Saskatchewan, we've seen that occupancy reach and exceed that 97% target. We've seen the broad market occupancy there increase, in other words, vacancy decline, and that's positioned us to deliver those sustainable incentive reductions on both new and renewals. Calgary, as Sam mentioned, we're sitting at 97.5% occupancy. Market continues to tighten in terms of vacancy in Calgary, and we're positioning ourselves now to convert those new leasing spreads with much reduced discounts from what we were doing in the past. Edmonton's not far behind. Right? Edmonton's at, as Sam mentioned, 95% occupancy, we're gaining on that occupancy each and every day.And that's all-in advance of this big migration growth that we're all expecting here across Canada. Right? Once we start a see a return to migration and more permanent residents, that's going to further tighten housing markets across the country. And as I mentioned, I mean, that incentive opportunity really is a significant mark-to-market opportunity for us for the foreseeable future.

[Sam Kolias, Chairman & CEO]

Joanne, it's Sam again. And we're also seeing jobs, jobs, jobs. And folks that we speak with are all advertising in other jurisdictions in the country to, again, attract people to come back home and fill these big job vacancies that we have, and we're struggling to fill the job vacancies. There are way more jobs than folks applying. And that's great news for our continued future as well, because job growth fuels population growth and we're seeing that in a big, big way. And everybody's seen that. But especially here in Alberta, Saskatchewan, we're seeing a big competition for applicants because there's a lot of jobs to choose from.

[Operator]

And your next question will be from Mario Saric at Scotiabank.

[Mario Saric, Analyst]

Just coming back to the occupancy in Calgary and Edmonton [Technical Difficulty], what would you say is your estimated market vacancy or market occupancy in Calgary and Edmonton? Some of your portfolio but the butter market today, what does that spread look like today?

[James Ha, Vice President of Finance & Investor Relations]

Yes. We -- as you know, Mario, and you can see that in the CMHC data slides that I think we've moved to the appendix, but we pride ourselves on consistently beating the market in terms of occupancy. I would say, today, in Calgary, we're about 100 basis points above the market, very similar to Edmonton. And so today, at 97% -- just over 97%, and that would make market vacancy right around 4%. That's a nice balance in terms of that housing market, 4% vacancy really allows that rebalance of kind of the -- between renters market versus the community provider market. And as we've already seen in our most recent rentals on new leasing, we've already seen kind of that return in terms of -- or the early day return of new leasing spreads being positive here in Calgary.

[Sam Kolias, Chairman & CEO]

Mario, it's Sam. We get daily rental reports from some communities and some of our leasing activity updates are leasing in Calgary with 0 incentives.

[Mario Saric, Analyst]

How would you -- how would that 100 basis point premium occupancy today, [indiscernible] but what's your sense in terms of what that would look like pre-pandemic? Would have been fairly similar?

[James Ha, Vice President of Finance & Investor Relations]

Yes, very consistent, very consistent. Every time we go back and, again, compare our occupancies versus CMHC's occupancies, it's fairly static, right around that 100 basis points. The one exception to that likely would have been in mid-2020 when -- during the beginning of the pandemic when we strategically really started to gain market share. I would say, since then, again, we're back to kind of that 100 basis point range.

[Sam Kolias, Chairman & CEO]

Sorry, Mario, just a little bit of feedback as well. There's another community in Calgary that has record back-to-back rentals, and that's what we call a rental that's occupied and currently rented and having income. And it's rented for the first of the following month back-to-back. So the existing resident moves out day before, the new resident moves in. So we essentially lose 0 revenue out of our back-to-back. So we're seeing a rise in back-to-backs in Calgary, Regina and Saskatoon because there's no vacant units to rent anymore.

[Mario Saric, Analyst]

Understood. Okay. And within the guidance that you offered, what is the implied strength in occupancy in the back of the year? Is it the 97% that, Sam, you mentioned you can get to? Or is it something less than that?

[James Ha, Vice President of Finance & Investor Relations]

Yes. Mario, our guidance certainly is going to be portfolio-wide. And so that's going to be a component of everything together. I think Sam gave some really good color in terms of what we're expecting for and what we're anticipating in terms of portfolio occupancy. And yes, we absolutely intend for that occupancy and see that occupancy continuing to grow for the balance of the year.

[Mario Saric, Analyst]

Okay. In terms of the investment market, if we have to generalize the activity in Alberta, in particular, let's say, pre-pandemic, it was $100. Where would you say that $100 was at the start of this year? And where do you think it is now?

[Sam Kolias, Chairman & CEO]

Sorry, the $100...

[Mario Saric, Analyst]

Yes, just the broader market, the broader markets, so not necessarily like what Boardwalk's underwriting in terms of acquisitions in Alberta. But if the broader market was, if we ended at $100, like pre-pandemic, how far did it decline in terms of the decline in investment volumes on multi-res side in Alberta during kind of the depths of the pandemic and where would that $100 be today? Like how much has it improved or accelerated?

[Sam Kolias, Chairman & CEO]

So are you asking about transaction volume in Alberta?

[Mario Saric, Analyst]

Yes.

[James Ha, Vice President of Finance & Investor Relations]

Yes. I mean, transaction volume, if we're speaking specifically about an investment volume in multifamily, I mean, I think we've seen that slow down significantly for everybody, right, during the pandemic. We're seeing the early days of that returning. I mean, again, we've seen that with our own transactions, we've seen it with market transactions at 1,500-unit portfolio that transacted in Alberta. There's certainly a little more activity now. I mean, even in our own inquiries, even in our own potential non-core asset dispositions, there's more velocity. I mean, it's pretty tough to gauge it on a relative $100 example. But what we can say is that activity certainly has returned. There's a lot more optimism, there's a lot more interest. I mean, where else in the country can you acquire assets at -- with cap rates that have a 4 handle on it, that have self-regulation in terms of an NOI trajectory that's quite positive going forward. So to answer your question, I would say, yes, Mario, I would say, investment is heavy, has increased much more than what we saw during the pandemic.

[Mario Saric, Analyst]

Okay. Does it feel like it's ahead of where you were pre-pandemic, like have we returned back to normal? Or is it still [Technical Difficulty] there?

[Sam Kolias, Chairman & CEO]

It's Sam, Mario, absolutely ahead. Everybody, as far as buyers, are now scrambling to find products. And it's getting very difficult with almost all inventory being sold, and it's getting very, very difficult to find anybody that wants to sell this time because of the significant improvement in the apartment rental fundamentals. Sellers are disappearing and buyers are lining up.

[Mario Saric, Analyst]

In terms of the characterization of the incremental buyer today, how prevalent are new first-time buyers in Alberta today at historical average?

[Sam Kolias, Chairman & CEO]

One buyer we saw from Edmonton, a counter-cyclical buyer that moved from Edmonton to Phoenix, and he recently sold everything in Phoenix, came back to Edmonton and is buying at Edmonton and has transacted with us, wants to buy more and has more capital to reinvest out of Arizona and into Edmonton. And that is just one of many smaller apartment community providers that want to be the next larger community provider. And so there's a lot of smaller apartment communities that are young, that are very, very successful, very hands-on and we see big opportunity with the smaller community providers that are solid, great community providers that we give a phenomenal opportunity for them to grow. And then in return, we have capital recycle and move on to other developments and acquisitions that are better suited for us. So it's really a win-win-win situation. We're talking with a lot more local, smaller owners right now, and it's exciting for everybody.

[Mario Saric, Analyst]

Great. Okay.

[Sam Kolias, Chairman & CEO]

Mario, I think we could probably sum up, the local owners understand what's happening and the out-of-town investors are just not here. They have no boots on the ground to really know what's happening because it's hard to imagine Stephen Avenue Mall with a ton of people in it if you're not here in Calgary, seeing that, it's hard to imagine plus-15 people all over, restaurants pretty well all made it. There's people in our downtown, and that actually is our biggest turnaround is our downtown multifamily communities are essentially 1%, 2% vacancy. It's the biggest turnaround we've seen. And that's a result of our reopening and the tough decisions our leadership has made to continue to be safe and to continue to live as normal as possible lives, and we're seeing that big pickup in activity. The new start-ups, we can't say enough how many new start-ups are coming and relocating to Alberta as well. And so that's all feeding into very positive multifamily fundamentals.

[Mario Saric, Analyst]

Yes. That's what I was trying to get to because it seems like valuations are coming up, and I was just curious to what extent kind of non-Alberta institutional investors have been driving those valuation higher or is that something that is still to come.

[Sam Kolias, Chairman & CEO]

Yes. I think the non-Alberta are missing both right now. We really, really see Alberta as the right place at the right time. I mean, we see that now more than we've ever seen it. So we'll make that call, and we're on record for that and happy to be so.

[Operator]

Next question will be from Yash Sankpal at Laurentian Bank.

[Yashwant Sankpal, VP & Equity Research Analyst of REIT]

The Oak Tower transaction, what was the average occupancy in that building over the last 1 year?

[James Ha, Vice President of Finance & Investor Relations]

Over the last year, certainly through the pandemic, it would have been representative of our portfolio as improving. That occupancy was, again, if you look at our Edmonton portfolio over the last 12 months would have been right around 94%, 95% over the past.

[Yashwant Sankpal, VP & Equity Research Analyst of REIT]

Okay. And the sale of the London property. Just want to understand what the rationale -- what was the rationale there?

[Sam Kolias, Chairman & CEO]

I'm sorry, Yash, which property?

[Yashwant Sankpal, VP & Equity Research Analyst of REIT]

The London -- you sold a property in London, Ontario. Right?

[James Ha, Vice President of Finance & Investor Relations]

We did not. No. Our 2 non-core asset sales were both in Edmonton.

[Yashwant Sankpal, VP & Equity Research Analyst of REIT]

Sorry, I'm reading too many MD&As, it looks like. Sorry about that. You talked about walk-up development projects and how you're excited about the potential your portfolio has. Can you maybe talk about what -- is it something new that you're thinking about or -- just trying to understand what changed your mind?

[Sam Kolias, Chairman & CEO]

The first walk-up development is almost 10 years old in Calgary. And for the longest time, we would never build because of the risks and the inexperience. And so what we did is build something very small and learned a lot. And we learned how many shingles we need for a walk-up, we learned how many square feet of drywall. we learned who to trust, who to partner up with. And we've built phenomenal relationships and partnerships that know every single red penny that goes into a new development and can build walk-up in their sleep and have built it, thousands of units over and over. And so that has taken us 10 years to do. And so this isn't like any other overnight success. It takes years and years to have. And that's a brief history of our wood-frame walk-up development's success. And they are highly accretive and the original developments we've almost financed entirely out of with very, very economical cost of capital, which is CMHC-backed cost of capital and it's a win-win, provides more supply for the marketplace, and it renews our product as well.

[James Ha, Vice President of Finance & Investor Relations]

And just to be clear, Yash, I mean development has always been part of our capital allocation opportunities. I think part of the reason why we're mentioning it here is you have recent completions like Brio, which is now completed and now stabilized. It's going to give us that opportunity to finance and create some equity and redeploy that equity again to future developments. And so Victoria, we have another project that was just very nearing development permitting stage, and we'll be looking to continue to backfill that future development pipeline so that we can consistently continue to add value through our developments.

[Sam Kolias, Chairman & CEO]

Thank you, James. I'm just going to add to that, Yash. Brio was mentioned, and that's a perfect example of what happens with new development. When we started Brio, our estimated cost was a lot lower than what we actually completed it for. And now the completion cost of Brio is super cheap compared to the construction cost we're seeing. And so everything changes and the significant inflation that we keep on seeing in new construction year in year out, all of a sudden, makes us look a lot better now. And Brio, by the way, is 100% occupied and our partner, RioCan, mentioned that we reached 100% occupancy in Northwest Calgary sooner than the Yonge and Eglinton newly developed rental community in Toronto.And so we have experienced that, over the development cycle, there's a significant change in prices that were locked in. And that's the importance of making sure our contracts are locked in, and our partners are super on cost control and delivering on time, on budget, like we're seeing in Brampton. And we're seeing the exact same value creation in Brampton occur now with construction costs continuing to escalate and our costs being locked in and that value that we're creating is growing and growing as we complete this community. And so we're just scratching the surface with this program. Many other multifamily private providers have a hybrid development/ownership model. And these private companies create capital and are super capital-efficient and self-sustainable and have grown and grown and grown and some of the most successful private multifamily community providers have this exact hybrid model.

[Yashwant Sankpal, VP & Equity Research Analyst of REIT]

Right. No, no, I was aware of your Calgary projects, but when you talked about Quebec, it felt like you're thinking of going across your portfolio and replicate that model. So is that something you guys are considering that you can take that model and apply anywhere else?

[Sam Kolias, Chairman & CEO]

Yes. So Quebec, for example -- thank you for bringing Quebec. A big repositioning we're doing in Quebec, which is creating significant values; the conversion of our seniors community in Quebec city to a regular multifamily community. This is cutting our operational costs by hundreds of thousands of dollars because we're converting back to [Technical Difficulty] of our repositioning capability that we've completely reengineered and moved way ahead of our peers with respect to our specifications and the value that we create with our repositioning program and walked that site, and there's a huge acreage or many acres of empty land at our L'Astre community. And we're like, wow, this is amazing. And with the experience we have, economically building this low-frame product, it's what we call in-house, a no brainer.We went to our other townhouse community that's in a very high-end residential community. Residential prices are rising as we have all seen single-family home price increases. So there is a big demand for larger 2, 3, 4-bedroom unit layouts in one of our Quebec communities. And so it's location-specific. Every location is unique within a sub-market and region, and we're revisiting everything with that new lens and seeing a lot of opportunity.

[Operator]

At this time, I would like to turn the call back over to Mr. Kolias. Please go ahead, sir.

[Sam Kolias, Chairman & CEO]

As always, if there are any further questions or comments, please do not hesitate to contact us. With gratitude, we'd like to thank our amazing team of heroes, our great leaders, loyal residents, CMHC, our lenders and all our stakeholders. It really is all about our amazing team of heroes on whose huge shoulders we stand. And as leaders we continue to do everything we can to support the continued growth in extraordinary. We really can't thank our amazing team and great leaders enough. We are pleased with our improving results on a foundation of exceptional value we continue to provide our resident members, our investors and all our stakeholders. Our home is much more than a place. Our future is family where love always lives. What can be more important when choosing where to call home.Thank you, again, everyone, for joining us this morning, and may got bless us all with healing, health and peace through all times. We now close with a summary of our call. The ball is back in Alberta. Thank you.

[Operator]

Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have yourselves a good weekend.