Boardwalk Real Estate Investment Trust (BOWFF) CEO Sam Kolias on Q2 2022 Results – Earnings Call Transcript

Boardwalk Real Estate Investment Trust (OTCPK:BOWFF) Q2 2022 Results Conference Call August 10, 2022 1:00 PM ET

Company Participants

Eric Bowers – VP, Finance & IR

Sam Kolias – CEO

Lisa Smandych – CFO

James Ha – President

Rick Anda – Head, Acquisitions

Conference Call Participants

Jonathan Kelcher – TD Securities

Kyle Stanley – Laurentian Bank

Jenny Ma – BMO

Johann Rodrigues – Industrial Alliance

Operator

Good afternoon, ladies and gentlemen, and welcome to Boardwalk Real Estate Investment Trust Second Quarter 2022 Earnings Call. [Operator Instructions] Also note that the call is being recorded on August 10, 2022.

And I would like to turn a conference over to Eric Bowers. Please go ahead, sir.

Eric Bowers

Thank you, Sylvie, and welcome to the Boardwalk REIT’s 2022 second quarter results conference call. With me here today are Sam Kolias, Chief Executive Officer; Lisa Smandych, Chief Financial Officer; James Ha, President; and Rick Anda, Head of Acquisitions.

Please note that this call is being broadly disseminated by way of webcast. If you have 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 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 and such statements are based on reasonable assumptions, Boardwalk’s future operation and its actual performance may defer materially from those in any forward-looking statements. Additional information that could cause actual results to defer 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

Thank you, Eric, and welcome everyone to our Q2 2022 conference call. Starting on Slide 4, our performance with our GAAP and non-GAAP measures of FFO per unit, profit per unit, net asset value and unit holder equity and fair value of investment properties all seen in increase from the prior quarter last year. Slide 5, our Q2 2022 FFO per unit growth is at 6.7% from the same quarter last year, reflecting a strong apartment rental fundamentals in our core markets.

Slide 6, our strategy to create value for all our stakeholders begins with our people. We are positioned and are so grateful for our extraordinary team who continues to innovate and deliver our places, homes for our resident members. In turn this leads to leading earnings performance, which we believe will continue to result in strong total returns for all our stakeholders. Our strategic focuses are significant organic growth from utilizing our proven platform that focuses on operational excellence to optimize NOI growth.

When we pair this with the current improvement in apartment rental market fundamentals on a solid foundation of some of the most affordable rents in Canada, we are well positioned to accelerate on our organic growth trend. Accretive capital recycling focuses on opportunistic investment into acquisitions, development and investment into our own high quality existing portfolio with a tactical unit buyback. These opportunistic investments combined with our operational optimization have positioned Boardwalk for increasing asset values within Boardwalk’s diversified and high-quality multi-family portfolio.

Our solid financial foundation provides flexibility on our balance sheet with our growing free cash flow and with CMHC insurance on 96% of our financings, which provides access to low-cost mortgage capital with reduced renewal risk.

Slide 7, we are in the right place at the right time, delivering solid growth. Boardwalk’s existing exposure to strong rental demand, non-price-controlled markets with increased immigration significant organic growth at Alberta and Saskatchewan at some of the most affordable rental rates in the country with limited new supply versus demand in both international and interprovincial migration.

Rising interest rates, making home ownership more expensive and rising construction costs are all widening the gap between our replacement cost of our assets and our current valuation. Construction levels remain low relative to historic levels and the stronger demand for housing.

In our largest market, Edmonton, the factors that have led to lower occupancy in the past are reversing now and helping to contribute to our overall significant occupancy gains. The economy is opening as restrictions of ease, international migration has returned as well as university students, blue collar jobs, which can’t work from home are now being filled again and previous oversupply in Edmonton continues to be absorbed by an increase in demand and a flattening of new supply as many builders have moved to DC to build where there’s a need for more supply. Overall, new supply in Edmonton continues to remain flat. As condo construction has declined sharply offsetting the sharp increase in rental construction.

Apartment rental fundamentals are quickly moving to a low-single-digit market wide vacancy resulting in incentives dropping.

Slide 8, Alberta saw an increase of 15,000 full-time jobs in July, while overall in Canada jobs decreased by 30,600 as per the most recent jobs numbers published by Statistics Canada. The economy and labor market in Alberta has significantly improved with our jobs minister expecting our economy to bounce back to 2014 levels. For The Royal Bank of Canada, June, 2022 provincial report strong growth is continued to be expected in Alberta with real GDP growth of 5.7%.

In addition, Calgary has risen to third in the economist intelligence unit, annual list of the world’s most livable cities are record highest ranking, which makes Calgary the most desirable place to live in North America. Real time statistics published by the Calgary Real Estate Board reflect home sales in Calgary are moderating relative to a couple of months ago, in part due to the recent increase in interest rates. Total sales and medium prices remain slightly up so far in August compared to a year ago, reflecting continued strong demand for affordability. In addition to the positive impact that higher commodity prices are providing for our western Canadian markets with Alberta’s fiscal budget now balanced, there has been a steady stream of investment and job creating announcements from the emerging technology and clean energy sectors.

As of the most recent data, over 106,600 jobs are now vacant and available in Alberta, which is approximately 58% growth in job vacancies since May 2021. Slide 9 shows our large presence in affordable and non-price-controlled markets with Alberta and Saskatchewan representing 62.4% and 10.4% of our portfolio. Boardwalk’s current market — mark-to-market which includes the reduction of incentives, averages $145 per month, and equates to a significant $55 million revenue opportunity.

Slide 10, our markets and portfolio provide some of the most affordable rents in Canada when comparing to median incomes. In addition, projected population growth in our markets are outpacing new supply leading to strong apartment rental and housing market fundamentals. Our available supply of affordability are a great opportunity for new and existing Canadians looking for a new affordable place to call home.

Slide 11 shows our retention continues to increase with our lower moveouts and stronger move ins leading to occupancy gains with decreasing turnovers and a rising occupancy of approximately 97.1%. As per our appendix Slide 32, we continue to see more movements from out of town as more existing and new Canadians move back to Alberta, Saskatchewan.

Slide 12 shows our key operational metrics with actual occupancy of approximately 97.1%. Incentives continued to drop, occupied rent continues to increase with vacancy loss decreasing in the busier spring summer season, resulting in an increase in revenue this quarter.

Slide 13 shows continue improvement in net new renewal rental rates. Year-over-year, we have seen significant improvements with restrictions easing in favorable economic fundamentals, we are seeing growing strength in our apartment rental fundamentals positioning us to capture our significant mark-to-market opportunity.

On Slide 14, which shows our quarterly sequential revenue growth up 2.2% a significant increase from previous periods reflecting strong apartment rental fundamentals. This sequential revenue growth is our best quarterly sequential gains since 2008.

We would like to now pass the call on to Lisa Smandych, who will provide us with an overview of her portfolio performance, balance sheet and repositioning results. Lisa?

Lisa Smandych

Thank you, Sam. Moving to Slide 15 for Q2 2022, same property net operating income increased by 2.8% as compared to Q2 2021. Positive revenue growth was offset by an increase in operating expenses, largely the result of increased wages and salaries and utility costs. In particular with the increased rental demand in Edmonton during the spring and summer leasing season, the Trust incurred higher operating expenses to meet demand, which has positioned our Edmonton portfolio with higher occupancy heading into the fall.

We have seen significant occupancy growth and incentive reductions in Edmonton, which will lead to revenue growth in upcoming quarters. For the 6 months ended June 30, 2022, same property net operating income increased by 2.1% as compared to the same period in the prior year. Positive revenue growth in all provinces was offset by an increase in operating expenses, largely the result of increased utility costs as noted in Q1 2022.

The trust uses fixed price contracts to balance commodity price volatility, however, is not 100% hedged. For the province of Quebec, year-to-date NOI has declined by 4%, which is an improvement from the 8.8% decline in Q1 022. The majority of this decline is a result of increased expenses driven by increased utility costs and property taxes. The increase in property taxes is due to both an increase in property tax assessments as well as positive tax appeal in 2021, which did not reoccur in 2022.

Slide 16 illustrates Boardwalk’s mortgage maturity schedule, our mortgages are well staggered with approximately 96% 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 financing at rates lower than conventional mortgages, with a current estimated 5 years CMHC rate of 3.7%. The current interest rates are above the trust maturing rates, the trust maturity curve remains staggered, reducing the renewal amount in any particular year. Despite increases in interest rates mortgage financing continues to be a low cost of capital available to the trust.

Slide 17 summarizes our 2022 mortgage maturities. To date, we have renewed our forward locked approximately 60% of our 2022 mortgage maturities as well as secured 198.4 million in new financing, which included converting our construction loan on BRIO to a CMHC insured mortgage as well as new financing related to our acquisitions. Current underwriting criteria and our most recent submissions to CMHC under 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 64 million in cash and subsequently funded financings as well as an undrawn $199 million operating line. This approximate 264 million in liquidity provides the trust with a flexible financial position.

Slide 18, the trust debt metrics continue to improve with an interest coverage of 3 in the current quarter. This continuous improvement is a result of strong financial performance led by cash flow growth.

Slide 19 illustrates the trust estimated fair value of its investment properties, excluding adjustments for IFRS 16, which totaled 6.7 billion as of June 30, 2022, as compared to 6.4 billion as of December 31, 2021. The slight increase in overall fair value is a result of increases in market rents, as select sites and communities as market fundamentals improve, as well as adjustments to the trust vacancy assumptions. In consultation with our external appraisers and supported by recent transactions, the capitalization rates used in determining Q2 2022 fair value are unchanged from Q4 2021. Current estimated fair value of approximately 194,000 per apartment door remains well below replacement cost.

Slide 20 provides a summary of the recycling of cash flow towards value added improvements. To date, we have completed approximately 30% of total suite improvements, while aiming to complete 53% of our total portfolio, common area and amenity spaces by the end of fiscal 2022. Our focus is to continue to deliver the best product, 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 21 illustrates our stabilized renovation return for landmark towers located in London, Ontario, with the return of 16%, which 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 Rick Anda to discuss our acquisitions and development. Rick?

Rick Anda

Thank you, Lisa. In Q1, Boardwalk as opportunistically invested 117.5 million with no additional closings in Q2 2022. The level located in Calgary highlighted on Slide 22 was acquired for 41.87 million closed subsequent to the second quarter 2022. Completed in 2020, the property is 99% occupied and will announce our portfolio in South Calgary with operating efficiencies, given its proximity to our Auburn Landing Community. The acquisition has an initial cap rate of 4.75% and included the assumption of a $29.2 million of debt at a 3.18% interest rate. The trust continues to be active in sourcing accretive and opportunistic opportunities to expand.

Slide 23 provides a brief update on our active development pipeline. Our Brampton development 45 railroad continues to progress on time and on budget with anticipated delivery of the first tower of the 365-unit marquee community in November 2022. Pre-leasing is underway and we are seeing strong demand. Our aspire development in Victoria now has an approved development permit and construction is underway. We continue to progress on entitlements at our second development in Victoria area named The Marin. We have received third reading approval from council. Our expectations for yield and cap rate remain unchanged.

As previously announced, we have now closed on another development site in Victoria called Island Highway, which will provide an opportunity to develop another estimated 250 units. Our development pipeline presents an opportunity for the trust to expand in undersupplied market of Victoria and scale our portfolio with much needed newly developed communities over time.

I would like to turn the call over to James Ha.

James Ha

Thank you. Rick. Slide 24 provides our stakeholders with our current and relative view on sources and uses of capital. From a source standpoint, we believe that our growing internally generated cash flow, property mortgage financing, as well as equity from non-core asset dispositions currently represent the most attractive sources of capital for opportunities that arise. These capital sources can be used to fund accretive opportunities such as our continued focus on platform innovation, our value-add capital improvement program, new development, opportunistic acquisitions, and the investment in our own high quality portfolio at a discount to intrinsic value through our normal course issuer.

In the second quarter, Boardwalk purchased and canceled 140,000 trust units and a volume weighted average price of approximately $47. Since the reintroduction of our NCIB in November of 2021, Boardwalk has invested $44.8 million in buybacks and continues to view this investment as an attractive use of proceeds for recent non-core asset sales. Our team will continue to update our view on capital sources and uses on a regular basis. And as market conditions change.

Slide 25, provides detail on the exceptional value that Boardwalk’s current trust units represent. Boardwalk’s current trading price implies a value of approximately 162,000 per apartment door and compares favorably to recent external apartment market transactions. Our NAV of $70 per trust unit equates to 194,000 per apartment door and 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 26, Boardwalk’s current trading price equates to an attractive 5.3% cap rate on trailing NOI, and is a significant spread to the current cost of available mortgage capital, as well as current capitalization rates seen in transactions in our markets.

With our strong leasing trends and NOI growth in our portfolio through this inflationary expense environment, this cap rate represents an attractive option for the trust to continue to invest in our own high-quality portfolio.

Slide 27 provides a review and update of our 2022 expectations and guidance. Since the introduction of our 2022 guidance in February, we have seen a significant increase in both interest costs and utility prices and had adjusted our estimates in May to reflect the increased volatility in these line items. With our strong performance in the second quarter, aligning with our expectations for strong spring and summer leasing season, and the completion of 60% of our mortgage renewals to date the trust is providing an update to our guidance to increase the bottom end of our FFO range with a 2022 forecast of $3 to $3.15 per trust unit.

Our same property NOI growth guidance is reiterated at 2% to 5% with strong revenue growth partially offset by inflation in expenses. Our Boardwalk team is committed to leading in transparency and we’ll continue to update our stakeholders in the event of any change in conditions that may materially impact our forecast.

On Slide 28, our Board of Trustees has confirmed our monthly cash distribution of $1.08 per trust unit on an annualized basis, which is an 8% increase from the same period a year ago, and has been declared for the next three months as shown on the slide. Trust continues to have an industry low payout ratio providing significant cash flow reinvestment positioning Boardwalk with ample capital for growth. As we continue to grow our free cash flow, our distributions will continue to grow alongside.

Lastly, on Slide 29, our third annual ESG report released earlier this year highlights and celebrates our team, resident and community contributions to our collective environmental, social and governance goals. Our ESG report, along with all our financial reports can be found on our website at bwalk.com/investors.

This concludes the formal portion of our presentation and would now like to open up the phone line for questions. Sylvie?

Question-and-Answer Session

Operator

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

Jonathan Kelcher

First question just on the renewals overall for the portfolio in July, it dipped a little bit to the 3%. Is that really just because of Quebec?

James Ha

It’s James here. You’ve got to bang on. And we’ve seen that trend similar. You can see it on that slide as well, July last year, that’s a result of the volume that comes out of Quebec and our volume of renewals that occur in that province for July 1.

Jonathan Kelcher

So overall, I guess starting August, you can sort of think of the portfolio overall at 4% to 5% and probably a little like 5% or 5% plus in Alberta?

Sam Kolias

Certainly, that opportunity, I mean, the trend on the left-hand side there with our Alberta renewals, continues to grow, as we talked about, at our last conference call in May. Our team is targeting adjustments in that 5% to 8% range. Primarily a result of incentive reductions. That was incentive reductions are a great opportunity for us to continue to grow these leasing spreads and to close the gap in terms of our loss to lease and mark-to-market opportunity.

Jonathan Kelcher

And then just switching gears to the cost side, I think this is around the time of year that you guys get a good sense of what property taxes are going to look like. Do you have any color on that?

Lisa Smandych

It’s Lisa, you are correct. So we have received all of our bills from the property tax perspective, as we had previously articulated, we’re looking at about a 3% increase year-over-year. And that’s consistent with what we saw with the bills. As we always do, we will look at appealing some of those assessments. However, we don’t consider any positive outcomes from those appeals until we have confirmation that they have occurred. So our estimates will not include any of those positive outcomes potentially.

Jonathan Kelcher

So sort of 3% bump. And then just lastly, maybe just on the acquisition, that you announced, maybe a little bit of color on that. Was that a marketed deal and are you guys seeing any other opportunities?

Rick Anda

It was it was an off-market offering. And we liked what we saw in terms of the age and the quality of the asset.

James Ha

Jonathan, it’s James here, just add to Rick’s comments. Again then huge appeal there is it was newly constructed, a great cap rate going in, and a creative use of capital, there was some existing financing in place, which allowed for fairly low amounts of cash to close. But most importantly, we’re getting some great operating efficiencies in that pocket of town, we have an asset that is just down the street, we’ll be able to gain some operating efficiencies and really optimize the cash flow coming from that new acquisition.

Jonathan Kelcher

It is fully leased.

Sam Kolias

It’s fully leased, it’s Sam, Jonathan. And another key part of our decision to acquire is it’s just blocks away from the South Campus, the health center, that’s a major employer and health continues to increase in investment and jobs. And so this is a real great strong location with lots of health jobs that are permanent, and it’s got a real strong demand in that pocket. And we’re seeing very high occupancy in our Auburn landing and it’s going to increase our efficiencies as we discussed, because we can operate this new community out of our Auburn landing community and share resources.

Jonathan Kelcher

Was that the developer you bought from?

Sam Kolias

The developer is row hit — development, a great relationship with the row hit group and us and great design, great quality construction and at the price per door reflects great value for us as well.

James Ha

As you know, Jonathan, it’s James here. Just add to Sam’s comments, we’re quite particular in terms of the layouts that Sam was mentioning. And so, large units, good, two bedrooms, great spaces. And again, really aligned with the demographic that we’re expecting with that growing south end of the city.

Operator

Next question will be from Kyle Stanley at Laurentian Bank.

Kyle Stanley

What would you point to as the key drivers of the 2.2% sequential same property revenue growth print that we saw this quarter, like would it be increased demand from students, job growth, attracting new residents into your markets in Alberta affordability or a mix of the above?

Sam Kolias

The key is affordability, Kyle, you nailed that one, and that is the most significant driver. Our average in place rents of about $1,200 are a very small compared to the average asking price of rents in Canada are now $1,700 as per the rentals.ca. That is one of the last internet listing sites that publishes average asking prices across Canada. And that is much lower. The average in Canada is much lower than the $3,000 average asking rental price in Toronto and $3,500 average asking price in Vancouver.

So we’re seeing lots of migration from Toronto, Vancouver, the work from home, allowing folks to come and move and live in Calgary. The most livable city in North America as per the economist magazine, enjoy our mountains, our source of clean water and air as a result. And that is a big, big driver. This is not a commercial, it’s a great place to move to and secrets out more and more are moving back to Alberta, lots of jobs as well. That’s the other key drivers, there’s plenty of jobs to be filled. So it’s a real great place to be right now.

Kyle Stanley

You mentioned in your prepared remarks that the supply curve remains relatively flat in Calgary and Edmonton, but I’m just wondering, it’s been a few years since the last wave of new supply hit the market. And I mean, with fundamentals really starting to improve, are you concerned about a potential significant supply response in the near term?

Sam Kolias

Not yet, simply because our average rent is still far below the $2.5,000 to $3,000 minimum and as cost rise that that rent requirement is going to rise as well. And so that is helping, a great deal, keep supply Abed and it’s been a busy, busy region in DC builders are really active in that market and that’s a market that’s even more under supplied. And that’s where rents are even higher. And that’s really where the resources and where we’re seeing the activity. That’s normally Alberta focused, that very evidently moved to British Columbia when we’re on tour and in those cities in British Columbia, we can see a lot more activity there than we do here.

It’s hard to find a crane in Calgary and Edmonton guys now. Very difficult. We saw one the other day. But, but again, it’s few and far between, versus the past and other cities.

Kyle Stanley

Okay. And then just maybe one more for me, the incentive burn off seems to be continuing at a solid pace here. Is there a level either maybe as a percentage of revenue or total amount you see incentive use bottoming? Or is the expectation that they will burn off fully moving forward?

Sam Kolias

So on rent faster is the most popular internet listing site. It’s really, really hard to next to impossible to find any incentives in Calgary right now, let alone availability. And so incentives have completely evaporated in Calgary, for example, because overall the occupancy in Calgary market wide is around 98%, 99%. It’s above that 97%. Saskatchewan, Regina, Saskatoon, pretty well, the same, but Calgary clearly is the front runner right now. And our availability in Calgary is under 1% at the moment, and whenever anybody gets a notice, we rent it right away mostly by waiting list now. And so we’re seeing a significant drop in incentives in Edmonton simply because our bar availability in Edmonton is very low single digit.

And with that our incentives are about half of what they used to be. If at all, in some locations that have under 2% or 1% availability, we then eliminate incentives in those communities in Edmonton as well. So incentives are dropping very quickly as we speak all over and occupancy continues to rise.

Operator

[Operator Instructions] And your next question will be from Jenny Ma at BMO.

Jenny Ma

When you held your Investor Day, about a month ago, you had mentioned that Calgary has been doing very well and that Edmonton at the time was days or weeks away from having some real pricing power. And I think the commentary from some of the prior questions sort of points that direction. So could you expand on that and whether or not that’s played out, and maybe an update also on the student demand in Edmonton as they head back to his class in September?

Sam Kolias

So at the end of July, we did reach below 2% availability as per our goal and ended up at 1.8% availability. Now we want to clarify availability is different than physical vacant units. We can have a physical vacant unit, but it is rented. And so availability is more of a leading indicator of what our occupancy is going to be. And so our availability continues to be very low in Edmonton and it’s only the 10th of August. So we can see below 2% availability at the end of this month as well and even get closer to that 1% is what we’re really shooting for and working. So the incentives as a result are much lower, it is much easier to rent, rentals are very strong. We’re continuing to see our occupancy rise all over. Last month to give you an idea, our stabilized occupancy for our entire portfolio ended up or availability, availability at the end of July was 27% for our entire portfolio.

James Ha

Jenny, it’s James. Just add to Sam’s comments here. When we look at Edmonton, your preliminary vacancy for August continues to improve. We are in the optimal zone that are entering that optimal zone that we’ve talked about in the past where we can get to that 3% to 4% vacancy zone. You see on our leasing spread slide. When we highlight Alberta, that growth that’s occurring in Alberta in terms of leasing spreads on both renewal and new leases. A big portion of that is Edmonton and the inflection that we’ve seen in terms of pricing in Edmonton over the last couple of months.

The biggest opportunity that we have from our mark-to-market is the reduction of incentives there. And so we do anticipate continued growth there especially, to Sam’s point their availability is declining students or students are moving in as we speak. Over the next couple of weeks, we have seen a bit of a closing of that gap between availability and vacancy, as Sam was talking about. And that’s going to allow us to turn down incentives over the coming months and quarters.

Jenny Ma

So it sounds like there are still incentives being offered here and there in Edmonton, is that correct?

James Ha

Very, very little and it really varies from community to community. I mean, we have several communities that have very, very low availability and have no incentives being offered. While others may perhaps have a little more elevated occupancy, we’re releasing them up. And we may be offering half a month, maybe up to one month at the most at this juncture. That’s very similar in the market as well. If you’re, we encourage you to look up our peers and our competitors out there. There’s not a lot of incentives out there in Edmonton.

And that’s on the basis of an exceptional affordability, rentals.ca as Sam was talking about earlier, $1,200, $1,300 rents, we may have had, Edmonton and Calgary have had some of the highest rent growth month over month according to rentals.ca. But yet are some of the most affordable cities in Canada.

Jenny Ma

With that in mind, I know Boardwalk has a self-imposed limits in terms of rent or renewal rent growth. Are you seeing any impact on turnover in your Alberta markets, because market rents are moving so high? Or do you think that cadence of turnover is more or less close to historical levels?

Sam Kolias

Yes. So a drop of between 10% and 20% of move outs for reasons to buy and purchase a new home which is quite significant. We have seen that drop and quite a while. To give you an Edmonton, for example, we’re seeing the biggest drop in move outs. This month right now we have 301 move outs in Edmonton, for example. Last year this time, we had 489 move out notices in August last year. That’s a significant drop and we’re seeing the biggest drop and move out. This is a great question and a great indicator of how the market and Edmonton has changed so quickly and has tightened up so much, and the effect of rising interest rates as well. And so it’s a combination, as well as Edmonton is one of the most it’s — it’s actually the most affordable — Vancouver, Edmonton, Calgary, Toronto, Ottawa, Montreal City. That compares to those other major Canadian cities. There’s no other major Canadian city that offers better value in rental housing than Edmonton right now. And so we’re seeing that have a big effect and there’s no other real city that a person can move and find an apartment today. Edmonton is the last major city in Canada where you can still do that again. It’s not a commercial do it quickly because it is filling out fast.

Jenny Ma

Are you seeing a similar declining trend in turnover in Calgary as well?

Sam Kolias

I’ll pull up, Calgary. I’ll just take a few seconds here. Calgary move out 157, last year was 214. So yeah, it’s about a 25% drop in turnovers, but it’s still early in the month. There’s late notices that we do see, it’s not going to be as much as the turnover of last year, but again, we have to remind everybody there is going to be late notices. That’s going to add to that turnover amount. So by month that that turnover amount will be higher. And that’s good news for renters and people looking for housing because there’s always turnover. There’s just a requirement of more time that’s needed to rent an apartment right now.

Jenny Ma

And then my last question is on same property operating expenses in the Quebec portfolio was up dramatically higher than all the other markets. Was there anything particular happening there and, or is it — was it more of a one-time phenomenon?

Lisa Smandych

No, and I think Jenny, I tried to address some of that, I guess, in my speech remark. So we did see — we have seen pressure on the utility side. The cap trade system in Quebec is a little bit more punitive from a carbon tax. And we do see in some of our other provinces. We did have sort of consistent across the board, a little bit of inflationary pressures on the wages and salary side. That’s just — a bit a bit what the markets are demanding, but nothing other than the utilities and property taxes, as we spoke to, I think there was nothing else of sort of significant to note.

Operator

And your next question will be from Johann Rodrigues at Industrial Alliance.

Johann Rodrigues

I had to step away for a bit, I missed a couple questions, so I apologize if this was asked, but a couple of your peers have talked given where equity pricing is about in terms of capital allocation, maybe capital recycling and selling some assets to fund parts of the business? Is that something you guys are considering, are there pockets of the portfolio that you guys would call or consider listing?

James Ha

Hey, Johan, it’s James here. Consistent with our strategy or approach over the last few years, you’ve seen us recycled capital. We’re evaluating our portfolio every single day and with non-core assets, we certainly will take advantage of the opportunity to go into the market, recycle those assets, take that capital and redeploy similar to what we’ve done over the past several months is recycle that same capital into stock buyback, that is a trade that we’re happy to do, especially at these price levels. And so from our standpoint, I think it’s safe to say we’re certainly looking at that we’ll evaluate that each and every day. And we’ll keep everybody posted on that.

Johann Rodrigues

And just my second question would be, you’ve seen out yeast and some of the some of the vector markets, some movement on cap rates upwards, specifically Montreal and Ottawa. You know, I know you guys have said repeatedly that, that Alberta, both Edmonton and Calgary are doing really well, right now. You haven’t moved cap rates this quarter. But is there some sense either from transaction data or just anecdotally that that, in the coming quarters, there’s an expectation that, you know, cap rates in those two markets, or any of the smaller Alberta markets might need to move upwards?

Sam Kolias

We’ve seen limited transaction so far, there have been some and I believe we highlight one of them on Slide 25. That did close just last month. Those cap rates are remained fairly similar to what they were, prior to what we’ve seen occur with interest rates back in March, April. I think one of the key attributes that we have to remember with our western Canadian markets here is, we do have, we are seeing some strong rental rate growth and some revenue growth. But in addition to the cap rates that we’ve had coming into this higher rate environment were already elevated. So it was one of the few markets that had positive leverage relative to the cost of debt capital that has allowed our markets to stay fairly resilient.

Good, there is some assets that are in the market, including some from our peers. And so we’re excited to see kind of how and where those transact. But from a cap rate standpoint, again, knowing that we were a little more elevated coming into this environment certainly gives us in our markets, we believe, anecdotally a better opportunity to remain fairly fixed and not see the same increases that perhaps other markets are.

Operator

Thank you. Please go ahead.

Sam Kolias

Thank you, operator. 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 extraordinary team, loyal residents, CMHC, our lenders, our unitholders, and all our stakeholders. It really is all about our people whose huge shoulders we stand. And as leaders, we continue to do everything we can to support continued growth and extraordinary. We really can’t thank our extraordinary 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 or a location. Our future 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. God bless us and grant us all peace.

Operator

Thank you, sir. 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 you to please disconnect your lines.

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