Boardwalk Real Estate Investment Trust

TSX:BEI.UN

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, ladies and gentlemen, and welcome to the Boardwalk Real Estate Investment Trust Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] This call is being recorded on February 26, 2020.I would now like to turn the conference over to Mr. James Ha. Please go ahead.

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

Thanks, Johanne, and welcome to the Boardwalk REIT 2020 Fourth Quarter Results Conference Call. With me here today is Sam Kolias, Chief Executive Officer; Lisa Smandych, Chief Financial Officer; and Lisa Russell, Senior Vice President of Corporate Development. 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, financial statements, MD&A as well as supplemental information package.Starting on Slide 2, we'd 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 recent 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]

Thank you, James, and thank you, everyone, for joining us this morning. Leading with care and integrity, Boardwalk's top priority remains the health and safety of both our resident members and our Boardwalk team of heroes, who continue to adapt, evolve and emerge through this pandemic environment. We remain committed to providing our essential service of safe, affordable housing in all our markets and are so grateful and proud of our team who have been rewarded with record-high resident satisfaction scores, which in turn have delivered resilient and growing FFO results for our unitholders, a virtuous circle.Coming together with all hands on deck with safety always in mind, we are moving the COVID-19 mountain, especially with vaccinations on the way. Slide 4 demonstrates our most impressive FFO per unit growth of 6.6%, including retirement costs; 9.3%, excluding them. Our FFO per unit remains the highest in the Canadian multifamily REIT sector.Slide 5 provides a summary of CMHC's recently released occupancy and average rental rate data compared to Boardwalk's portfolio in our core markets. Boardwalk, represented by the blue bars, outperforms in both metrics in our core markets. Building better communities continues to be at the heart of what we do. And Boardwalk remains the choice housing provider in all our markets.Slide 6 illustrates some key operational metrics. Our team continues to optimize our revenues, balancing occupancy, occupied rent and the use of incentives. Occupancy has seen a percentage decrease, a reflection of seasonality and the second wave of lockdowns in our core markets. Our occupied rents have continued to increase. Our rentals this year have outpaced our move-outs and our trend for March is for rising occupancy as it has been over the last 3 years as per slide 40 in our Appendix.Next slide 7 highlighted our new and renewal lease spreads, the precursor to average occupied rents. Our revenue optimization strategy through the current environment continues to focus on retention. New leasing spreads have gradually improved from the onset of the pandemic with increased lead generation. With our current high occupancy and the lifting of rental rate restrictions, Boardwalk has reintroduced sustainable discount reductions on our renewals and continue to see success targeting inflationary adjustments.With approximately 60% to 70% of Boardwalk's lease activity in the form of renewals, these sustainable discount reductions will provide the resilience and growth in optimizing Boardwalk's revenue to offset increasing noncontrollable expenses. Incentives for new leases are being offset with an increase in occupancy we are now experiencing in the first quarter.Slide 8, Boardwalk's portfolio of well-located, affordable homes provide an exceptional value proposition for current and future resident members. Of Boardwalk's 33,000 apartment units, approximately 62% are based in Alberta, 11% in Saskatchewan, with each of these provinces providing exceptional affordability with multi-decade low rents as a percentage incomes, creating an opportunity for incentives to be reduced further to help offset increasing noncontrollable expenses. Ontario and Québec represent 27% of Boardwalk's communities, providing exceptional affordable average rents as well with opportunity for future revenue growth.Slide 9. Boardwalk's product diversification captures a much wider audience of resident members' needs, increasing the overall demand for Boardwalk communities. We provide 3 different branded communities, Boardwalk Living, affordable value; Boardwalk Communities, enhanced value; and Boardwalk Lifestyle, affordable luxury. Currently, we have approximately 6% Lifestyle, 44% Communities and 50% Living Suites across our portfolio. Each brand provides exceptional value at each price point, grounded on some of the most affordable rents in Canada.Slide 10 through 13 highlight our most recent rebrand communities completed in 2020 with targeted rental rate adjustments. To date, we have completed approximately 34% of our total portfolio common area and amenity improvements as well as 23% of total suite improvements. Our design team, in-house renovation team and contractor partners moved mountains on renovating 23 community common areas last year. Well done, team.Slide 11. Our design, asset management and operations teams work closely to strategically identify each community rebrand or refresh. Our focus is to continue to deliver the best product, optimizing our capital allocation for our value-add program to our targeted resident member demographics 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 rental adjustments. We have highlighted Richmond Towers in Calgary and both Southgate Tower and Tower Hill in Edmonton as most recent completions that have continued during the COVID-19 environment.Slide 12 showcases more of our value-add capital program rebrand communities. 3 communities in Edmonton , The Palisades, Terrace Tower and Northridge Estates as well as 1 community in Calgary, Oak Hill Estates, with modest exterior, lobby amenity and experience center upgrades, unveiling a tremendous improvement in both aesthetics and resident member experience.Slide 13 continues on our value-add capital program rebrand features in Regina, Calgary and Edmonton.Slide 14 and 15 illustrates actual returns on 2 renovations we had completed approximately a year ago, providing actual stabilized average in-place rent relative to comparable communities where renovation dollars were not invested. Our Wimbledon community in Edmonton and our Carlton Tower community in Saskatoon are delivering a 10.4% and 9% yield on renovation cost, well above our 8% stabilized target.Our results continue to reflect the success of the reengineering of our service, product quality, diversity and experience led by our design team and executed by our entire team's all hands on deck approach. Thank you to our entire Boardwalk team.We would like to now pass the call on to Lisa Smandych, who will provide us with an overview of our financial results. Lisa?

[Lisa Smandych, Chief Financial Officer]

Thank you, Sam. On Slide 16, the Trust delivered strong FFO and AFFO growth, with FFO increasing by 6.6% from $32.2 million to $34.3 million for the 3 months ended December 31, 2020. AFFO increased by 14.1% from $26.1 million to $29.7 million, using an annualized maintenance CapEx estimate of $596 per apartment unit. For the year ended December 31, 2020, FFO increased 6.7% from $131 million to $139.7 million, while AFFO increased 12.1% from $106.9 million to $119.9 million. Included in our year-end FFO and AFFO results is approximately $33.7 million for retirement costs.Slide 17 summarizes the Trust's monthly revenue collections from its resident members for 2020 and January of 2021. Please note, collections are reported for the calendar month only and do not include revenue collected in subsequent months. 98.4% of January revenue was collected in January, which is consistent with the Trust's historic run rate. Though varying by province, city and site, prior to 2020, the Trust's historic bad debt expense was between 1% and 1.1% of total revenue. For the year ended December 31, 2020, and bad debt expense was 1.3% of total revenue.During COVID and up to today, Boardwalk has offered its resident members a deferral program for those who can demonstrate financial hardship. As at the end of January, there were approximately 30 participants in this program, which is down from 100 participants at the end of July. Additionally, the total deferred balance was approximately $24,000 at the end of January, also down from the $85,000 at the end of July.Slide 18 provides a summary of Boardwalk's available liquidity. The Trust is well positioned with approximately $70 million in cash and subsequently funded financing as well as an undrawn $199 million operating line. This approximate $269 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 and as visibility improves.Slide 19 illustrates Boardwalk's mortgage maturity schedule. Our mortgages are well staggered, with approximately 99% of our mortgage balance carrying NHA insurance to 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 1.3% and 2.1%, respectively. The Trust debt metrics continue to improve, with an interest coverage of 2.79x in the current quarter.The summary of our 2020 mortgage maturities is presented on Slide 20. Boardwalk took advantage of the current low interest environment to renew, forward lock as well as secure additional up-financing from our mortgage portfolio. In 2020, we renewed $310.5 million as well as secured $184.9 million in new financing, all at record-low interest rates, taking our maturing interest rate down by 90 basis points from 2.54% to 1.64%.Slide 21 summarizes our progress on our 2021 mortgage maturities. To date, we have renewed or forward-locked approximately 21% of our 2021 mortgage maturities as well as secured $16.5 million in new financing at record-low interest rates, highlighted by some recently completed financing at interest rates just over 1%. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates.I would now like to turn the call to Lisa Russell, who will provide an update on our investments.

[Elizabeth A. Russell]

Thank you, Lisa. Slide 22 provides a brief update on our current and future development projects, which provides progression toward our long-term strategy of geographic diversification and high-grading our portfolio. 45 Railroad in Brampton, Ontario is the Trust's only development project currently under construction. Work on the 2-tower, 365 unit project continues to move forward on time and on budget. We anticipate the first tower to be delivered in late 2022. Both the underground parkade and podium structures are complete, with work now focusing on tower portions. The partnership is nearing its 40% equity requirement and we'll be moving into the construction financing facility, which will fund the remaining construction costs.The Mississauga, Ontario development site, which Boardwalk holds a 50% interest in, continues through the rezoning process. We estimate rezoning to occur in the summer of 2021. In addition to our Eastern development projects, the Trust has 2 future development sites in Victoria, BC. Rental fundamentals in this market have remained strong throughout 2020, with low vacancy rates and demand outpacing the supply of rental housing. These 2 prime development sites give Boardwalk a solid foothold in these high-growth markets.The Victoria site, Eagles Nest, is located in the growing municipality of View Royal. This land was purchased in Q4 2020 for $14 million and has zoning in place for approximately 250 rental units. This prime site is located near Victoria General Hospital as well as a large retail plaza and provides quick access to both downtown Victoria and Langford. Work on permitting is currently underway for a potential 2022 construction start.The second Victoria site, the Carlisle Lands, is an assembly of 14 residential lots in the gentrifying municipality of Esquimalt and was acquired for a total of $14.8 million. Located across from the newly developed Esquimalt Town Square and Recreation Center, this prime development site will provide new rental housing in a growing and undersupplied market. Planning and entitlement work is underway, and we anticipate rezoning to be completed in 2021.These 2 sites provide the opportunity for Boardwalk to utilize its past experience and success in building accretive low-rise developments. The Trust is excited to bring Boardwalk's brand of unique design and affordability to Victoria while creating value for the Trust in our proven low-rise development program. We will continue to progress through rezoning, entitlement and the design of all our new development projects in 2021. For clarity, the Trust will not begin any new construction in 2021.Slide 23 shows several transactions that occurred throughout 2020 in our core markets of Edmonton and Calgary. Though 2020 saw a decline in transaction volume compared to 2019, the resiliency of the multifamily sector continues to attract investment, leading to stable valuations despite economic uncertainties caused by COVID-19. Low interest rates, high energy prices -- higher energy prices, rental rate growth potential from a base of strong affordability and exceptional value relative to increasing replacement and construction costs are leading to an increase in investment activity in Edmonton and Calgary. These most recent low-rise suburban transactions have traded at per door valuation well above the implied valuation of Boardwalk's high-quality, well-located portfolio.I would now like to turn the call over to James.

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

Thanks, Lisa. Expanding in Lisa's comments, Slide 24 further illustrates the exceptional value Boardwalk's current trading price represents when extrapolating the implied cap rate based on the Trust's current trailing financial results. The slide utilizes our reported NOI to illustrate implied valuation on a cap rate and per apartment door basis. Boardwalk's current trading price implies an attractive 5.6% cap rate on these most recent results.The Trust's resilient NOI performance through 2020 is highlighted on Slide 25. Boardwalk's resident-friendly approach has provided for steady revenue growth through 2020. Despite increases in noncontrollable operating expenses, Boardwalk's focus on innovating controllable expenses provided a significant offset, leading to portfolio operating expense increase of just 50 and 20 basis points for the fourth quarter and full year, respectively. Sequential revenue in the fourth quarter declined in our Alberta market, primarily due to increased vacancy. Looking at current availability for the month of February, new rentals have exceeded turnover, and with lower availability, are seeing occupancies improving.As shown on Slide 26, each of Boardwalk's core markets present unique opportunities to continue on our trend of organic growth. Our Alberta and Saskatchewan portfolios provide an opportunity to gain on occupancy while targeting sustainable incentive reductions on lease renewals. Our affordable and high-value offer in Ontario and Québec markets remain near full occupancy. The Trust continues to focus on achieving sustainable AGI increases for community improvements and optimizing rental rates when units turn over.Just a $25 adjustment in our monthly average in-place rent or a 2% improvement to our occupancy each equate to approximately $0.20 in annual FFO per unit and represents a significant growth opportunity over the near- and long-term as we continue to optimize our revenue and NOI.Slide 27 reflects on our performance through 2020, one of the most uncertain economic periods of our time. Through it, our competitive advantage and resident-friendly approach was rewarded with resilience and growth through optimization of our NOI, delivering 3.7% same-property growth. Our commitment to market-leading product quality and service allowed us to continue to invest in both suite and common area renovation projects that are targeting solid stabilized returns. Our strong balance sheet, paired with non-core asset sales, allowed us to take advantage of our steady geographic growth plans by accretively acquiring assets to expand our Kitchener and Waterloo portfolio while also entering the Victoria market.Record low interest rates provided for a significant tailwind as we renewed loans near and below 1%, providing a reduction of interest expense going forward. Overall, this resulted in 6.6% growth in 1 of our key performance metrics of FFO per unit. Looking forward, some uncertainties related to this pandemic remain. And as a result, the Trust will continue to provide regular operational updates to our shareholders in lieu of financial guidance to begin the year. As vaccinations progress and both economic and border restrictions ease, this will provide more detail needed to guide the extent of our growth rate for the year. Our outlook for 2021 remains cautiously optimistic with the resilience of our essential service of affordable housing and the persistence of our performance-focused team. We look forward to sharing updates on our progress and our continued performance through this new year and would like to open up the phone line for questions. Operator?

[Operator]

[Operator Instructions] The first question comes from Jonathan Kelcher with TD.

[Jonathan Kelcher, Analyst]

First question, just on the revenue growth for 2021, and I understand that you're not giving guidance. But if we just look at some of the stuff that makes it up, on renewals, it looks like you're trending your credit towards 2%. Is that something you think you can move higher back to where you were at the beginning -- the 4% or so you were at the beginning of 2020 over the course of this year?

[Sam Kolias, Chairman & CEO]

Yes. Right now, we are seeing exactly what we've seen over the last 3 years. And Slide 40, our apologies for sticking that in the Appendix, Slide 40 really describes what's happened over the last 3 years and really important to look at rentals, which are much higher than move-outs. And so our availability is dropping. And as soon as our availability drops and our new residents move in because our residents typically don't move in the same day they apply for an apartment and get approved. So it takes a little bit of time for residents to move in. And as per Slide 40, that occupancy increases as our residents move in that we've rented.Right now, we're below 4% availability. As of today -- it's closer to 3.5% as of today. The trend, as our availability drops, our incentive for new rentals will drop as well. And so it's a direct function as to the supply of new rentals that we have. So the good news is the trend that's in place right now will allow us to reduce incentives for new rentals even further. The math on a new rental is much more positive to increase occupancy than to worry about and focus on another $50 of incentive or $30, $40 of incentive. So the gain we realize on occupancy is much higher than whatever additional incentive adjustment that we have to make. And so that is what we're seeing as we speak.

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

Just to add to Sam's comments there, Jonathan. Yes, we're seeing -- we continue to see success with renewals today. I mean we're -- our team is targeting $20, $30, $40 adjustments on our lease renewals. And to Sam's point, as occupancy continues to improve, that's really going to position us coming out of the pandemic to get back to those incentive reductions that we had targeted prior to the pandemic, equating to about half a month or 1 month reduction or that 4% that you were referring to.

[Sam Kolias, Chairman & CEO]

Jonathan, we were on a conference call with the Alberta Business Council members of several CEOs in Alberta. And 1 of the CEOs, of TransAlta Energy, is an economist by training shared with everybody on the phone Alberta in February isn't typically a peak energy demand month. And in February, we peaked and went over any other energy consumption the province has ever, ever consumed. Energy is a real leading indicator of economic activity. And the CEO of TransAlta shared that with everybody on the line. And as there's a lot of negativity out there, and the sentiment is still very concerning for Alberta, there are facts like a record energy use that we are using in our province, our core province that has in the past been a leading economic indicator.

[Jonathan Kelcher, Analyst]

Okay. That is very helpful. The second question, just on your renovation program. 2020, you were actually able to do more individual units than you were in 2019, which is pretty impressive given COVID. Were you slowed down at all by COVID in 2020? And what do you think you can do in terms of the number of units in 2021?

[Sam Kolias, Chairman & CEO]

Yes. We really have to give credit to our team of heroes whose shoulders we stand. No, we were not slowed down by COVID and coming together with all hands on deck, we moved another mountain. And really focused on partial renovations as well. And that's a reason we are able to renovate more units because we focus more on affordability.The demand for affordable units is increasing. And the demand for affordable housing is increasing, and we're seeing that in our numbers. And so we're focusing in on affordability right now. And when the economy comes back, and the vaccines are rolled out and schools come back in the fall. Our demand will increase even more, and we'll see even better results and get back to a new normal as it unfolds.

[Jonathan Kelcher, Analyst]

Okay. So if you did roughly 1,600 suites last year, is that a number to sort of think about for this year?

[Sam Kolias, Chairman & CEO]

It's really hard to say. We've got the same budget for suite renovation. So it should be very similar. So our budget for this year is very similar to what it was last year, and we expect a similar amount of units to turn and to renovate. So it will be flat.

[Operator]

We have the following question from Matt Logan with RBC.

[Matt Logan, Analyst]

In terms of your own performance relative to some of the CMHC stats for your respective markets, what do you think the key factors are in driving those operating results?

[Sam Kolias, Chairman & CEO]

A long time ago, we've shared in conference calls the key leading indicator for growth in rental revenues is affordability. And we saw this many years ago and shared this. The key driver is affordability. We sat on the affordable housing panel for the province of Alberta. And the data is very clear. There is a growing demand for affordability. And we're seeing that in our rentals and in our performance. So that's our focus is to continue to deliver affordable, amazing homes that folks can live in.We were British Columbia, the other day, and we have to share our conversation. BC is doing really, really well, by the way, and it's growing, and the population is growing there. We're in a restaurant and almost very close to one another shielded by plexiglass, of course. And we couldn't help but hear a conversation next to us is, "I can't believe the rents are $2,000 for a 2 bedroom."And it just caught our ears and I thought, wow, of all the things that we would hear somebody talk about, and pardon, we were eavesdropping, but it was so loud. It was a big wow. We're shocked at this. While our rents are under $1,200 for typically a 2 bedroom unit, where else can Canadians come and move to them. Please, if you have any friends that are looking for affordable apartment, send them to Alberta. That's the solution for affordable housing, and Saskatchewan. There is a solution. And it's a beautiful place, by the way. Sorry.

[Matt Logan, Analyst]

I appreciate the color. Maybe changing gears to your same-property revenue and NOI growth in Ontario and Québec. Can you talk about the sustainability of what we've seen in Q4? Like, does that trend continue into 2021?

[Sam Kolias, Chairman & CEO]

Yes. You know, Matt, you're hitting on some key words. Affordability in the last question. Sustainability. What a keyword that is. And we've taken a similar approach in Ontario and Québec as we have in Alberta and Saskatchewan in the past. Our average rents in both those provinces are well below our peers, by the way. And so we've been taking a very sustainable, conservative approach and continuing to serve and deliver affordability in both those provinces that are -- that have been experiencing much higher stress in and around markets.Now on the high end, across the country, we've seen the data, and that reflects that there is a softening in the higher-priced rentals. There's clearly enough supply for higher-priced rentals. And the data reflects more supply than demand because vacancy has increased most in the higher end. In Ontario and Québec, like anywhere else in the country, affordability is key as well. And so we're taking a sustainable approach with a really low average in-place rents of Ontario and Québec, the question, is this sustainable and those? Absolutely is the answer, absolutely is the answer.

[Matt Logan, Analyst]

And maybe last one for me. When you think about your priorities and growing in Eastern Canada, like, how should we think about potential capital recycling this year?

[Elizabeth A. Russell]

So on a forward-looking basis, just to give some color to the market. Since September, we've seen a lot of deal flow. And moving into 2021, we continue to see the pipeline increase. We have seen some notable transactions, and we are actively underwriting right now specific to markets that we've been active in, in the past, call it, 24 months. But we are seeing small deals and larger portfolios, and we're actually really excited about the remaining part of 2021.

[Matt Logan, Analyst]

Now would that be mostly just a focus on potential acquisitions? Or would there be some dispositions as well?

[Elizabeth A. Russell]

So we have marketed some -- 3 Edmonton products, 3 Edmonton assets, and we have 2 of them under contract right now. Be happy to report back next quarter on those 2 transactions. We're seeing a lot of investment interest in Alberta, and it's picking up and the phones are ringing. And so on the acquisition side, it will be, yes, out East in BC. And yes, we're looking at some transactions in Edmonton right now.

[Sam Kolias, Chairman & CEO]

Buyers are private for the most part, very successful private operators, and countercyclical operators that are private families and extremely successful and have an impeccable track record at picking market bottoms. And it was great news to get a call from 1 of those families the other day asking for a large portfolio in Alberta. We were very happy to receive that call. But again, we're busier than we've ever been. We talked about that last quarter. We continue to be busier than we've ever been. Seeing much more deal flow, and it's an exciting time and exciting opportunities that we're seeing both on the acquisitions and disposition opportunities.

[Operator]

We have a following question from Mike Markidis with Desjardins.

[Michael Markidis, Real Estate Analyst]

Two for me this morning. First one would just be on the cost side. One of the things for this year has been your ability to really drive a lot of efficiencies through your OpEx line and through G&A. And I'm just wondering if you could, on both of those fronts, talk to what you see over from -- and the sustainability of that? Or were there any sort of anomalous factors that would have suppressed those numbers this year?

[Lisa Smandych, Chief Financial Officer]

It's Lisa Smandych. So certainly looking at our controllable expenses. As you know, as you mentioned, the focus really has been on our headcount. And so we're probably at a level where we're happy with our headcount. So right now, we are still focused on trying to bring those expenses down and working as hard as we can to keep doing that, focusing largely on technology initiatives. So things like our Yuhu platform, digital leasing, virtual showings.Also focusing on just maintain that headcount at an appropriate level. That obviously will be subject to some inflationary pressure just as we move forward. Same thing for the administrative side. Again, we focused on our head count in 2020 and have seen a lot of efficiencies there. Again, looking at technology from an administrative side, what software can we use, changes in some of those platforms to see if those can bring forth efficiencies. But again, we're probably -- hopefully, we can sort of keep that administration cost sort of flat year-over-year. But again, looking for any efficiencies that we can keep bringing.

[Michael Markidis, Real Estate Analyst]

I think the answer to question is, no, but you guys didn't have any wage subsidy that you guys did?

[Sam Kolias, Chairman & CEO]

No.

[Lisa Smandych, Chief Financial Officer]

I didn't catch the full question.

[Sam Kolias, Chairman & CEO]

Wage subsidy. Is that -- sorry, is that the question where you kind of...

[Michael Markidis, Real Estate Analyst]

No, no. Just a couple of -- I'm not a...

[Lisa Smandych, Chief Financial Officer]

You're really cutting out on us, we can't hear your question.

[Michael Markidis, Real Estate Analyst]

Is that better?

[Lisa Smandych, Chief Financial Officer]

That's better.

[Elizabeth A. Russell]

Yes.

[Michael Markidis, Real Estate Analyst]

Sorry, I'm closer to my phone here. Sorry, some others have noted that they benefited to a small degree from wage subsidies. So I just want to confirm that it wasn't the case for you guys, which it wasn't.And then last one for me, Sam, in the past, you've talked about Grande Prairie specifically and maybe sometimes Red Deer as being -- and areas in the coal mine in terms of leading indicators. And just looking at the last 2 quarters, those markets have been, on the revenue side, quite weak. So I was wondering if you could just talk to the dynamic there? And if that -- how you, if at all, read through that to what could be happening in other markets in Alberta?

[Sam Kolias, Chairman & CEO]

Those markets are improving as well, and we are seeing the same, as we're seeing in our core markets, rentals are higher than move-outs in both those markets. And so that -- and actually, Fort Mc, the Grande Prairie and the coal mine is doing really well. Almost 98% occupancy or a 2% availability, 2% to 3% availability towards month ends. So it is encouraging rental data that we're seeing in those markets.

[Michael Markidis, Real Estate Analyst]

Congrats on such a strong year in a very odd time.

[Operator]

Your next question comes from Matt Kornack with National Bank.

[Matt Kornack, Analyst]

Just a quick follow-up on Mike's line of questioning there. And I did notice that Fort Mc was kind of went from 94% occupancy beginning of last year to 97% as at Q1. Sounds like it improved further. I know historically, you've said you don't house energy workers per se, given that they tend to make a lot of money in own homes. But how do you think about the improvement of the energy markets from a WTI standpoint with regards to employment across Alberta more generally?

[Sam Kolias, Chairman & CEO]

Well, Matt, that's a good question. And God, we trust and everybody else bring data. So the data is quite strong in reflecting a shortage and supplies being concerning. The use of energy continues. Energy is everything for all the science fans out there. And the big focus in Alberta, and it was great, again, to share a call with so many CEOs on the line. The focus in Alberta is really clean energy. That's the key word. And we truly are a world leader in clean energy. And the more the world focuses in on clean and environmental sustainability, the more is going to be invested.We had a call from the new CEO of Alberta Development, CEO. He's getting bombarded by sovereign funds, by large investment bankers calling and saying, "Hey, Alberta is the cleanest. It's where we want to be. How do we get there? Who do we talk with? How do we invest back in Alberta? That was a great, great message that that CEO shared with everybody on the line today. And I hope I'm not sharing secrets, but it was a great call to be on. It's very, very encouraging to see Alberta turnaround.We also were on the line with the 2 CEOs of the unicorns, because everybody believes in flying horses and unicorns, where there is multibillion dollars in value, and Benevity and Shareworks, phenomenal and profitable and amazing companies, billion-dollar unicorns here in Calgary, talked about how great Calgary is once you get here and how we really have to focus in on Canada. Marcos, the CEO of Shareworks said, it's about what's great for Canada because let's face it, folks. Canada is an amazing place to be. And when we lift up ourselves as Canadians, first and foremost, it will get better for Alberta and for Calgary and Edmonton and everybody. And what an inspiring CEO, Marcos is to focus in on lifting everybody up, and it's no coincidence, his company is a multibillion-dollar success.

[Matt Kornack, Analyst]

That makes sense. One other follow-up question. I guess, the provincial government put out a budget yesterday. I don't know -- I'm sure you guys have looked at it in more detail than I have. But if you could provide any commentary as to what you think it does for your business. It sounds like you aren't going to see a tax increase, which is nice. But yes, just in terms of jobs growth, I know there was some focus on infrastructure spending, but at the same time, government efficiencies, so some thoughts there?

[Sam Kolias, Chairman & CEO]

Yes. The big headline was the deficit. And let's, I guess, share some thought with the deficit in that fiscal and monetary policy has changed dramatically with quantitative easing, and I'm sorry, I'm getting into economics here. It's important, though, because the question is, is a conservative fiscal policy of the past, something that is relevant with nations, the biggest nations with record deficits and record continued growth of debt capital?Is it an inspiration to see companies spend on innovation, spend and invest in technology? And are other countries great examples who are spending record amounts of capital on investment in technology and innovation? Is that an inspiration for, not just Alberta, but for Canada? And how can we look at these other big growth nations and learn from what others are doing and how can we compete if we do not invest in our companies, in our people and in our technology, innovation and infrastructure, how are we going to compete as a nation? But I'm going to end right there because I'm way off topic.

[Matt Kornack, Analyst]

No worries. I appreciate -- no, no, fair enough. It was a bit of a broad question anyways, but it sounds like -- I mean it's better to have a deficit and employ people and put money into infrastructure from a housing standpoint.

[Sam Kolias, Chairman & CEO]

How can we compete if we don't, is the question? Like, look around. It's all relative. Everything is relative. That -- for all the science fans out there, that's another really important fact to know, it's the law of relativity. And we got to keep in mind what everybody else is doing to keep relevant.

[Matt Kornack, Analyst]

Appreciate it. And it looks like you have to look into the future in terms of what you've disclosed, but it seems like things are forming a base and turning around in Alberta.

[Sam Kolias, Chairman & CEO]

Yes, in God we trust, everybody else bring data. The data says that. Thanks, Matt.

[Operator]

We have the following question from Howard Leung with Veritas.

[Howard Leung, Investment Analyst]

Just can you comment a bit on turnover and vacancy by brand segment, especially in Calgary and Edmonton, given how, I think, you pointed earlier that the Boardwalk brands are better than those by the CMHC. I was wondering how is that -- how you saw the living segment versus the community segment being affected by the competition?

[Sam Kolias, Chairman & CEO]

Oh, the living by far is the big success story. Affordability is really key, Howard. And looking at move-outs, again, we ask everybody to look at the data, Slide 40. And move-outs are pretty well in line with what they have been in previous years and actually dropping, which is a reflection of the success of our team and retention. That's a real key focus. We have invested and worked tirelessly on increasing our retention. And it's working, and the data reflects our success. And we're doing everything we can to keep everybody in our communities and especially in these times, we're being Yoga flexible, stretching our leg behind our heads to make a renewal, and it's working. It's a reflection of the great team that we have.And we get -- the Net Promoter scores that we've been keeping track, it's a record Net Promoter Score result. We get so many amazing reviews as, I'm here because of James, I'm here because of Jeff, I'm here because, and our team is who our residents are here for. And that's why we focus in on our employee Net Promoter Score. And I'm the cover-all training. I'm a train and asking our team, "What am I missing? What are we missing as leaders?" We work for our site teams, and our site teams work for our residents and our residents reward us with amazing results, who, in turn, our shareholders and unitholders benefit.So it's a virtuous cycle is what it is. And it's working and it's a flywheel that's gaining momentum. And for all those good to great readers. The flywheel is alive and well, and it's gaining momentum. And it's tough to move a big, heavy flywheel. From the past where we were 3, 4 years ago, it's been tough, and we give all our team, all the credit. Because our flywheel is spinning faster than it's ever been, and it's not slowing down. It's gaining even more momentum. So I've gone over my time limit, sorry.

[Howard Leung, Investment Analyst]

No, no. It makes a lot of sense given we are seeing rental pickup. On your comment on the team, I was wondering, last -- a few years ago, you referenced that Boardwalk had to hire a lot more associates to basically send the competition that was happening in the space. Now that we see competition pick up a little bit more, do you anticipate having to hire some more associates to help with that competition?

[Sam Kolias, Chairman & CEO]

So we have to balance technology and robotics with ethics. Again, ESG, our in-house developed robot, who works 24/7, replies to leads automatically quicker than anybody else and doesn't get over time or anything, is doing an amazing job. Are we going to be using more of that? Of course, we're going to balance and use technology. The question is, how do we make technology our slave, not the other way around. And so technology is great when it's used properly and effectively to enhance everybody's performance.It's like the chess players with and without technology. The chess player with technology will always beat and has continued to beat the robot. And that's what we use technology. And so are we going to see more? No. Probably last is the trend. And again, the data is we're doing a lot more with a lot less because of technology improvements. We have to do that because everybody else is doing it as well. Everything is relative.So we explained and we asked our team, what do we want to be? Do we want to be Blockbuster, who didn't change? Or do we want to be Netflix that's constantly changing? And everybody wants to be Netflix, wants to be a company that innovates, wants to be a company that's great. And greatness is in all of us, and that's what our purpose is to be just that, great.

[Howard Leung, Investment Analyst]

Okay. Yes, that's helpful. And then just 1 last one for me. On the incentive part, I think you disclosed in Q4, it was about $1.77 per door. With rentals kind of exceeding move-outs, you mentioned that they would drop. But I guess for now, they're still around that level. For the first few months. And are you offering -- given your comments about living versus communities, are you offering more incentives in the community space than living?

[Sam Kolias, Chairman & CEO]

Yes, the community space, clearly -- when we invest in common areas, the in-place occupied and the incentives are less. There is data that reflects we are doing extremely well when we do reposition -- in the right location, of course, it has to happen in the right location that has that demand for that enhanced common area improvement. Slide 7 clearly reflects the trend of declining incentives for new rentals. And so the data is clearly there. And the occupancy that we're gaining will allow us to continue to reduce incentives for new rentals and incentives overall. And so our -- the trend is our friend. And the trend is showing and our data is showing that we will be able to reduce incentives with this trend in place.

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

Just to add to that, Howard, we can't reiterate enough our focus on retention, right? I mean that is where -- represents about 60% to 70% of our deal flow. And that's where we're starting to see that steady, sustainable incentive decline. And as Sam points out on those leasing spreads on Slide 7, you can clearly see that. We're going to continue to do that, targeting $20, $30, $40 reductions on our lease rentals.

[Operator]

Your next question comes from Joanne Chen with BMO Capital.

[J. Chen, Director of Equity Research]

Just 2 quick ones for me. On the CapEx side of things, how should we be thinking about the trend for 2021?

[Sam Kolias, Chairman & CEO]

Very similar to what we saw in 2020, and we continue to find savings in materials and parts and supplies. The market continues to be extremely competitive. And technology and innovation continues to -- flooring prices, for example, Joanne, it just keeps on dropping and dropping. And we're really open source and inspired by the tech community, which is a people-focused community and an open source community. And we're coming together as other community providers. And like a buyer's club, union, we're coming together and putting our buying power together.Works great for Costco members. It will be great to work with apartment community members. This concept is something that the U.S. is way ahead of us. There's large multifamily buyer groups in the U.S. that represent millions of units. And so this club, I guess you might say, is just starting with some -- we -- pretty well, everybody that we call other of our public and private friends, and we're going to get even more savings. Watch out, we're coming with big, big contract. And it's going to be it's going to be a win-win, Joanne. It will be a win-win. Well, whatever we reduce in price, we'll make up in volume, though. So again, win-win, win always.

[J. Chen, Director of Equity Research]

I guess, I know this is a little bit further out ahead, but in terms of your Victoria developments. I know a lot of it's the uncertainty with the zoning and whatnot. But what kind of sort of time line should we be looking at? And I guess, maybe this might be a couple of questions to answer, but what sort of yield would you be targeting for the projects to kind of move ahead?

[Elizabeth A. Russell]

Yes. It is pretty early. And again, so we're working through rezoning right now and some different entitlements and working with underwritings have built the consulting team for both projects. So it's pretty much -- and again, it's still based on rents and we're very early days, but probably above the 4.5% to 5% is pretty much what the bill will be.

[Sam Kolias, Chairman & CEO]

The build cycle, Joanne, and everyone, around 12 months. That's the beauty with walkup. And actually, even quicker than 12-month build cycles. The permitting, soon?

[Lisa Smandych, Chief Financial Officer]

Yes. And again, the 1 site is zoned and the other sites, we're taking through rezoning right now. So they're at different stages and staggered development projects. But, yes. So almost everybody up.

[Sam Kolias, Chairman & CEO]

Yes. And the equity capital is the value that we create, exactly similar to the successful walkups we've built in Regina and Calgary. Our equity capital is really the 30%, 40% or 30% value that -- and actually 40% in some because costs have gone up so much. With time, our value goes up and the value creation goes up as a result and our equity goes up. And so that's really the source of our equity is mostly what we create. Brampton, for example, we're building at around $500,000 a door. Average condo prices in Brampton are over $700,000 a door. So that's $200,000 on $700,000, that's a big equity that we've created and realized. So it's exciting to create.And the value-add program that we have is in that most competitive market in the country gaining market share and proving that we have the best value-add program because it's no coincidence. There's no such thing. We have the best team. That produces it. So we're super excited with the acquisitions we made in Cambridge and Waterloo, Kitchener, incredible value creation well ahead of our pro forma budgeted NOI, well ahead of it. And again, a reflection of the value-add program we've really seasoned and curated over the last several years. It's a great recipe. It just keeps getting better and better, and that's what our goal is, get better.

[J. Chen, Director of Equity Research]

No, that's helpful. But -- and maybe that segue kind of into my -- just the last one for me. Can you maybe talk to kind of the competitive dynamics that you're seeing now in -- primarily in Calgary and Edmonton? I know despite some of the headwinds that still hang, would you say that you continue to take share given the attractiveness and affordability of your portfolio right now?

[Sam Kolias, Chairman & CEO]

Yes. It's a tale of 2 markets, Joanne, in everyone. The competitiveness in the new supply is very, very high. And even in a very high competitive new market with our 160 units and JV with RioCan, for example, we're doing extremely well. We're heading to about 65% occupancy. We're very close to that or there. I haven't quite looked at Brio today. So in the affordable living and communities brand, demand absolutely is increasing for us.The market overall continues to add new supply. we continue to see completions in both Calgary and Edmonton. And the good news is there's a lot less investment, there's a lot less enthusiasm to build even more supply in Calgary and Edmonton. And our advice is don't. We don't need any more supply in our province. The focus we have to focus is helping folks get into affordable housing and continue to focus in on maintaining that affordable stock and serving the increasing demand of affordable housing that's required by residents today across Canada.And so that's where the demand is. That's where we are in the middle of. And it's really well-serviced, well-maintained, well-designed and engineered product that is exceptional value for residents, and that's always in demand.

[Operator]

Your next question comes from Brendon Abrams with Canaccord Genuity.

[Brendon Abrams, Analyst of Real Estate]

Congrats on a strong 2020 in light of COVID and the pandemic and all those challenges. Maybe just -- I'm just trying to get a handle on leasing for next year. And I guess one thing I would struggle with, if I look at Slide 43, the loss to lease statistics, there shows a significant, I guess, mark-to-market opportunity within the Alberta portfolio. But then I take a look at Slide 7, and it shows spreads on new leases are negative. So I understand 60% to 70% of leases -- new leases -- leases signed are renewals. But on the 30% to 40%, just wondering for 2021. And obviously, no one has a crystal ball, but do you expect there to be upticks in terms of what Slide 43 would suggest? Or maybe slightly negative, which Slide 7 might suggest?

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

Brendon, it's James. Yes. As you point out on Slide 43, the biggest opportunity in Western Canada is incentives. And so as a result of that, we post both numbers here. We post the number on the left, which includes incentives, and the number on the right, which excludes incentives. For what we're seeing right now going forward into 2021, our plan, our playbook is the same as we had in 2020 through the pandemic. It's all about those sustainable increases focused on retention.And so in this environment, again, targeting those $20, $30, $40 incentive reductions on renewals. That's where we're seeing success, and it's appropriate for this current environment. On new leasing, it is competitive out there. You saw it in the CMHC data that was recently released. There's a cost of acquisition for those new tenants. But as Sam pointed out earlier, revenue management or managing that revenue, gaining that occupancy is the best way to manage that for the first part of this year, and that's where you'll see the focus going forward.And so on the incentive front, it's going to be that balance between what we're able to reduce on the renewals, offset by what we may have to give on new leases in the interim, right? And so as we start to see a little more velocity in terms of border and economic restrictions, that's what's going to set us up to get back to those larger incentive reductions going forward.

[Brendon Abrams, Analyst of Real Estate]

Okay. That's helpful. And maybe just on the -- taking a look at your urban and suburban portfolios, I don't know the exact split. It might -- that it would be in Calgary and Edmonton. But are you seeing any differences? Have you seen any differences in the last few quarters or even the beginning of 2021 between leasing velocity within your more kind of urban assets versus your suburban assets?

[Sam Kolias, Chairman & CEO]

We have focused more on redevelopment on our common areas in our urban communities. And as a result, our urban communities are improving, and we're regaining market share in those locations. And so we're seeing improvement overall, both urban and suburban as a result of that.

[Brendon Abrams, Analyst of Real Estate]

So no material differences between the 2 portfolios? Or?

[Sam Kolias, Chairman & CEO]

There is a stabilization as we speak. There used to be, last year there was. This year, we're seeing a more stabilization between our urban and our suburban because we focused a lot on retention and common area improvements in our more urban Edmonton communities and made some adjustments as per our IFRS on market rents in our urban communities to be more competitive. And so those have all helped to restabilize the occupancy in both the urban and -- versus the suburban.

[Brendon Abrams, Analyst of Real Estate]

Okay. That's helpful. And then maybe just the last question for me, the most important one. Sam, do you think there will be a Calgary Stampede this summer? And will you be hosting an Investor Day for that?

[Sam Kolias, Chairman & CEO]

Well, our theme in 2013 for the Calgary Stampede Exhibition and Stampede was, hell or high water, there's going to be a Stampede. And so even scientists believe, and we all have heard perception is a reality. And when we believe, it creates a reality. So yes, we'll see you at the Stampede.

[Brendon Abrams, Analyst of Real Estate]

All right. Well, I'm hopeful it's about reality, everyone.

[Operator]

Your next question comes from Mario Saric with Scotiabank.

[Mario Saric, Analyst]

I realize we're pushing an hour here, it's over an hour. So just a couple of these to come from my end. For the quarter, I noticed that G&A picked up about $1.4 million versus Q3, and then the direct operating costs came down a little bit relative to my expectations, at least. Just want to clarify whether there's any accounting changes during the quarter that would influence the balance between those 2 figures?

[Lisa Smandych, Chief Financial Officer]

Mario, it's Lisa. No, there was no accounting changes from Q3 to Q4. The increase in administration expense largely deals with year-end accruals as we finalize based on bonuses and profit share. So based on improved results for Q4, that was a function of why that accrual was bigger going into Q4 for administrative expenses.

[Mario Saric, Analyst]

Perfect. Okay. And then you noted that you had 3 assets on the market based off of Edmonton. But just curious, with respect to Calgary, the CBRE survey that just came out last week noted about a 25 basis point decrease in Calgary multifamily cap rates. Is that consistent with what you're seeing on the ground in terms of overall demand? Because it sounds like the demand is actually quite strong. So I'm just trying to understand the difference.

[Elizabeth A. Russell]

Yes, it's consistent. And again, cap rates are reported from various groups, private and public. There's different filters that everybody does use to end on their number. But that would be a fair comment. It's a fair comment to say, yes.

[Mario Saric, Analyst]

Okay. And then thirdly, I think in terms of the Alberta outlook. I think, Sam, you noted that Calgary has been voted 1 of the top 3 or 4 places in the world to live by The Economist. You mentioned affordability several times, clearly, they're very affordable. Outdoor living is more important in the days post-COVID, that bodes well for Alberta. So a lot of good things happening and positive trends. The federal government seems like they're itching to get international migration kick-started again through various initiatives. So that also bodes well to the projects given the lower supply per capita relative to the provinces.So the big question then comes to job growth. And it was touched on earlier in the call, but with, let's say, the oil industry and the energy industry in a bit of transition, as you pointed out, you've attended a lot of business meetings with other constituents or what not on the ground. If you have to point to 1 industry or 2 industries where you think that the market is underappreciating the job growth potential within the next 12 months, what would that 1 or 2 industry be? And do you have any data that kind of supports the potential quantum of job growth in those 2 industries?

[Sam Kolias, Chairman & CEO]

Health -- our health industry is massive. Infrastructure, that's a global growth area for investment as well. And so those are -- and really, the work-from-home, Mario, is a big movement. Because we heard from the unicorn CEOS, the work-from-home is super, super helpful. And so it's a real lesson in the -- especially in the last year, where we have seen as a global community how closely we're connected. And when somebody sneezes in some place in the planet, our whole planet can shut down.And so this conversation on how closely we are connected came up with the unicorn CEOs and how important it is to focus in on attracting all types of talent, not just full stack developers. Because a full stack developer will need a CFO, will need accounting, will need cleaning services in the office. And the flexibility, the work-from-home ability will need affordable housing. And so the ecosystem is what the tech world talks about ecosystems. And more and more governments and communities are learning about the importance of this ecosystem and how -- we all have to come together as a country, we really do. And work on real positive reasons and make it super simple. That's the big lesson of technology, kiss and easy, keep it super simple and easy.So if we make it really simple to come to Canada and grow in Canada and innovate and succeed in Canada, word's out, we're already doing that. And so this data as far as population, word's out, Alberta is doing that. Because the population data, according to Stats Can clearly reflects, as Albertans, word is getting out because Alberta, as per Stats Can, is growing more than anywhere else in Canada. So all those factors we talked about is absolutely working as reflected by the data. And so we need to get more of that information out.And again, as Albertans, we are proud Canadians, first and foremost. And that's who Albertans are. And that's and that's how we all have to be as Canadians. And the more we come together as a country -- the vaccine producers and innovators here in Calgary, we have a vaccine company in Calgary. That as Canadians, we have to all be really great for foreign support. So there's all sorts of great things happening here. The diversity and the data, the economic data clearly reflects a much more diverse economy in Alberta. And every time we go through an energy cycle, our economy gets much more diverse. And we're more diverse statistically as per the job data than we've ever been. And we're going to continue to be because the mother of invention is necessity.

[Mario Saric, Analyst]

Okay. My last question is just on the guidance and kind of wanting greater visibility in order to provide it. Am I correct in saying that the greater visibility is more on the top line revenue part of the equation as opposed to expenses? Or is it both on the top line as well as kind of wildcards in the expense category that has been on pause for now?

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

Mario, it's James. Look, at the end of the day, we are still in a pandemic here. From an expense item standpoint, good news. I would actually argue that we had better visibility than we did this time last year for 2020. And specifically, I'd point to property taxes, right? You remember this time last year, we talked a lot about property taxes and ended up seeing double-digit tax increases in some of our municipalities. Really good news for 2021, we're not anticipating that. As far as the other expense line items go, again, I mean in the context of what we're seeing right now, we're seeing more inflationary increases with the exception of maybe insurance as a specific line item.But on the revenue front, our playbook for 2021, like I said earlier, is going to be very similar to what we did in 2020 and how we ended up with growth through 2020, that focus on retention, that focus on gaining occupancy. But let's face it, we are in a pandemic. And so in the meantime and in between time, we'll continue with our increased transparency and disclosure with regular updates to our stakeholders. And as economic and border restrictions ease, that will give us the ability to reintroduce that guidance.

[Operator]

There are no further questions at this time. You may proceed.

[Sam Kolias, Chairman & CEO]

Thank you, operator. Before we end the call, our annual and ESG report will be published in March and take a more environmentally friendly, interactive digital approach. As always, if there are any questions or comments, please do not hesitate to contact us. With gratitude, we would 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 whose huge shoulders as we stand. And as leaders, we continue to do everything we can to support continued growth and excellence.We really can't thank our amazing team and great leaders enough. We are pleased with our improving results on the 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. The future is family where love always lives. What more important when choosing where to call home.Thank you, again, everyone, for joining us this morning. And may God bless us all with continued healing, health and peace through all times. Thank you.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you disconnect your lines.