Industry 20 Report 20 REITs RHB: REITs have dropped in value, although multifamily has fared better than other sectors with a lot of cash on hand from 2019. Indications are that their performance should continue in 2020 and 2021. What are you projecting for your REIT’s performance for the balance of 2020 and looking further into 2021? Mark Kenney: We remain positive of strong performance for the balance of 2020 and 2021. Our Net Operating Income margins have remained strong even though bad debts have been higher compared to prior years. Occupancies have remained at near full levels in the residential portfolio, with marginal declines. CAPREIT has a strong balance with low leverage and significant liquidity. We could leverage up to acquire accretive; however, pricing for acquisitions appears to becoming more competitive. Interest rates dropped in 2020 and are at historical low levels, resulting in lower interest expense on refinancings and new financings. Rates have dropped from 2.5 per cent for 10-year money to 1.7 per cent. During the pandemic, we have characterized our business as back to basics: collecting as much rent as possible each month, filling vacancies, and investigating areas where we might find operating efficiencies. We are an affordable proposition for people, which we believe is a highly defensive asset class during the pandemic.
Matthew Organ: Throughout COVID-19, Skyline Apartment REIT maintained its value. As a private REIT, it is valued based on actual value of hard assets, as well as income the assets generate, and is less correlated with the ups and downs of public markets. Distributions have remained unchanged as cash flow has been stable; with nine months behind us, our 2020 Net Operating Income is forecasted to be on budget. From an operations standpoint, suite turnover is low and demand for apartments remains high. As we look to 2021, we anticipate low vacancy rates will continue, and we have significant mark to market rent growth opportunity to be realized, which will help ensure stable financial performance. In spring 2020, we temporarily slowed our acquisition process until we had the certainty of investor support to continue with our growth strategy, which was back on track by midsummer. We are anticipating the REIT to grow by approximately $400 million to $500 million by year-end 2021.
RHB: As REITs have had consistently positive cash flow, are there more opportunities to purchase product? Why or why not? Mark Kenney: We continue to see high demand and competitive bid processes in all major markets across Canada, except Alberta given the impact of the struggling oil industry.
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