May 15, 2015
Executives
James Ha - Director, Finance Sam Kolias - Chief Executive Officer Rob Geremia - President William Wong - Chief Financial Officer Bill Chidley - Senior Vice President, Corporate Development
Analysts
Alex Avery - CIBC Frederic Blondeau - Dundee Capital Markets Jonathan Kelcher - TD Securities Mario Saric - Scotiabank Jimmy Shan - GMP Securities Matt Kornack - National Bank Financial
Operator
Good morning. My name is Mike, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Boardwalk Real Estate Investment Trust First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise.
After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.
I will now turn the call over to James Ha, Director of Finance. You may begin your conference.
James Ha
Thank you, Mike. And welcome to the Boardwalk REIT 2015 first quarter results conference call.
With me here today is Sam Kolias, Chief Executive Officer; Rob Geremia, President; William Wong, Chief Financial Officer; and Bill Chidley, Senior Vice President of Corporate Development. Note that, this call is being broadly disseminated by way of webcast.
If you haven’t done so already, please visit www.boardwalkreit.com, where you will find a link to today’s presentation, as well as PDF files of the Trust’s financial statement, management discussion and analysis, as well as supplemental information package. Staring on slide two, I'd like to remind our listeners that certain statements in this call and presentation maybe considered forward-looking statements.
Although, the Trust believes that the expectations set forth in such statements are based on reasonable assumptions, Boardwalk’s future operation and its actual performance may differ materially from those in any forward-looking statements. Additional information that could cause actual results to differ materially from these statements are detailed in the earnings press release and in other publicly filed documents, including Boardwalk REIT’s annual report, annual information form and quarterly reports.
Moving on to slide three, our topics of discussion for this morning will include highlights of the REIT’s first quarter results; current fundamentals of the multi-family market; a review of the Trust’s financial and operational performance, a development update; operational review and analysis; financial overview; and lastly, an outlook and our quarterly guidance update. At the conclusion of today’s presentation, we will be opening up the phone lines for questions.
I would like to now turn the call over to Sam Kolias.
Sam Kolias
Thank you, James, and thank you everyone for joining us this morning. We are pleased to report on the solid first quarter for the Trust.
Starting on slide four, some financial highlights for the three months in the first quarter of 2015 include, total rental revenue of $120 million, an increase of 3% from the same period last year, NOI of $72.1 million, up 5.9% from the same period last year, funds from operations of $44.2million, an increase of 10.4% from last year, FFO per unit of $0.85 on a diluted basis, up 11.8% and adjusted funds from operation per unit, which includes an estimated $500 per apartment unit of maintenance capital per year of $0.77, up 13.2%. Some portfolio highlights on slide five include overall occupancy for the first quarter of 2015 was down 67.2% to 97.77% from 98.44% in the same period last year.
The monthly average occupied rent realized, period ending for the first quarter, which includes ancillary income was $1,178 per apartment unit, up $40 from $1,138 per apartment unit in the same period last year. Our Same Property performance for the first quarter ended March 31, 2015, rental revenues increased by 3.2%, overall operating costs increased by 0.6% and total NOI increased by 4.9%.
As slide six illustrate, our rental revenues are cyclical in nature. In the first quarter of 2015, the Edmonton and Calgary markets remained in a period of stability with higher occupancy and increased revenues.
By the recent decline in resource prices, Boardwalk continues to see stable demand for rental apartments in Alberta, with Calgary and Edmonton delivering another quarter of solid results. However, Boardwalk has experienced softening in some its Western rental markets, Saskatchewan and Fort McMurray in particular.
As a result of the slowing economy, coupled with an increase in supply, these markets remained in the softer part of the rental cycle resulting in a decrease in occupancy and increase incentives in these areas. Boardwalk continues to focus on customer service and lease renewal offering to weak specific incentive to mitigate the decline in occupancy in these areas.
Fort McMurray is 1% of our portfolio. In contrast, the Ontario and Quebec market has migrated to a period of growth as a result of the lower resource prices.
Our lower Canadian dollar and lower borrowing costs, increasing demand in the Eastern rental market. Moving on to slide seven, there still remains a significant gap between the economic rent required for new rental construction and condominium home ownership in Alberta and Saskatchewan.
Please note, the quality of condos is typically higher and this should be kept in mind when reviewing this chart. Slides eight, nine and 10 detail our net operating income optimization strategy and revenue strategy and highlights the Trust’s strategic balance between customer service, occupancy levels, market rents and operating costs, with customer service and occupancy being the primary focus.
Regardless of where the Trust markets are during the aforementioned revenue cycles, Boardwalk believes that continued focus on high occupancy, increased retention and our constant focus on customer service and quality is the key to providing the most stable long-term sustainable revenues and net operating income. Increased retention and lower turnover reduces costs and increases net operating income.
Boardwalk’s customer friendly, self-regulated rent control and the elimination of rental increases for customers that can prove financial hardship continue to drive high occupancy, build goodwill and the stronger community. With our new NDP Government in Alberta, Boardwalk recognizes the continued importance of working with our government leaders to ensure that together we provide all the information that this area to assist our new government to make the best policy decisions for all Albertan.
Our recent newspaper article in the Financial Post, refer to a published article in Calgary Herald back in October 14, 2014, where Premier-elect Notley was asked about rental control. The Premiers office deferred readers to their newly posted platform on their website.
A quick review of the newly posted Alberta NDP Government platform has no mention of rental control. We remained encouraged by the Premier-elect remark to maintain the provinces long history of being a very healthy place for investments.
Slide 11 shows our focus on quality and service is being rewarded by higher occupancy and lower turnover. Year-over-year, turnovers increased slightly and occupancy decreased slightly.
Slide 12, shows our average customer stay remains at just over 3.5 years, reflecting more of our customers who are calling Boardwalk home. If you truly feel at home, where else would you want to live?
Slide 13, highlights the increase in both the Trust’s occupied and market rents relative to our last fiscal quarter three months ago. During the last month of the last quarter, the Trust’s average occupied rent has increased by $8 per unit and by $40 per apartment unit since last year.
This trend remains positive. The trend, at the spread between occupied and market rents, has decreased slightly from the previous quarter, reflecting a portion of market rents has been realized in occupied rents.
As shown in slide 14, the Trust continues to have a favorable mark-to-market, with the average loss-to-lease totaling $26 per apartment unit per month. An illustration of the effect of a $25 increase or decrease to rents on FFO is shown on slide 15.
Assuming that occupancy levels and operating costs remain the same, a $25 adjustment to rents would increase or decrease the Trust's FFO by approximately $0.20 per unit. The effect of an increase in expenses is also illustrated on this slide.
Each 1% increase in expenses decreases the FFO per unit by approximately $0.03 using 2014 annualized expenses. Chart on slide 16 demonstrates occupancy versus availability.
Our occupancy for the first quarter was slightly lower while our availability also decreased slightly. Availability below zero reflects rentals that will be occupied in future months.
We believe that occupancy of 97% or higher, reflects our Boardwalk rental price volume. Slide 17 reflects demand i.e.
rental as compared to supply or also known as move-out and ties into our occupancy. In the first quarter, move-outs have increased with rental increasing on a greater rates and flattening out at the end of the quarter, resulting in a slight decline in occupancy levels.
Slide 18 illustrates revenue, vacancy lot and incentive. Incentives in vacancy continue to increase reflecting softer Saskatchewan and Fort McMurray market.
However, on an overall basis, revenue continues to trend upward. Slide 19 shows the results of the Trust’s customer move-out surveys.
For the first quarter, turnover was up 4.4% relative to the same period last year. Transfer to another Boardwalk REIT, top reason for move-out while move-out to purchase new homes came in second, increased by 2.3% this quarter.
New house illustrates significant alternative and our continued focus on building goodwill, quality and service are all essential. Skips have dropped by 4%, reflecting an improvement in screening and market-wide overall higher occupancies.
Rent too expensive has decreased by 6.6%, representing the market is more balanced than previous quarters. Slides 20 and Slide 21, show a softening economy going forward for Alberta to Saskatchewan’s Multifamily starts are forecasted to decrease slightly for Alberta and Saskatchewan in 2015 compared to elevated levels in 2014.
T-cap starts in Alberta and Saskatchewan are also starting to trend downwards slightly for 2015. Slide 22 illustrates the most recent unemployment statistics in Alberta and Saskatchewan.
Both province’s unemployment rate continues to be low with slightly increased levels in Alberta, compared to the same period last year. Slide 23 illustrates average weekly earnings as of the first quarter.
Alberta’s workers continue to earn the highest wages in the country with average weekly earnings increasing year-over-year although the provinces also saw positive wage growth for same period. Slides 24 and 25 show the most recent migration numbers for Alberta and Saskatchewan.
Migration to both the Saskatchewan and Alberta forecasted to be lower, with a weaker economy and more supplied multi-family units both forecasted for 2015 in Alberta. The rental markets supply and demand statistics reflect the movement to a more balanced market.
Saskatchewan’s international migration continues to be the biggest source of migration and is lower than last year’s number. Slide 26 shows the breakdown of major project investments in Alberta, which totaled $200.5 billion as of March 2015, down $7.8 billion over the last quarter, reflecting shelved upgrader projects.
We continue to monitor the long-term capital being invested in Alberta as the leading indicator to future demand for housing. As shown on slide 27, land sale revenues for the province of Alberta relating to petroleum and natural gas have slowed versus last year.
Natural gas and oil prices have fallen since the winter high that partially recovered and the Canadian dollar remains weaker which is positive for the oil and gas producers who export oil and gas in U.S. dollars.
As depicted by slides 28 and 29, the Alberta housing market has slowed over the last quarter. With single family home prices in Edmonton and Calgary down for condo prices and up slightly for home prices.
As depicted by slide 30, the average residential sales prices down slightly in Saskatoon and Regina. Slide 30 [sic] [Slide 31] illustrates cap rates in relation to our unit price.
Over the last quarter, our public market evaluation has dropped, resulting in a widening gap between the implied cap rate represented by our current unit price and the cap rate that quality assets have sold out on the private market. Stock and bond markets continue to be volatile.
The slide includes the IFRS values -- fair value, rental revenue and expenses, used to calculate implied cap rates on a per share basis and compares the Trust valuation net of $0.91 of cash per unit. We continue to review our portfolio.
Our current public market valuation continues to represent exceptional value when considered against the current replacement costs, other consumer housing options like condominium ownership and current valuations on private market transactions. I would now like to pass the call on to Bill Chidley who will provide more details on our newest projects.
Bill?
Bill Chidley
Thank you, Sam. Low interest rates continue to fuel investor appetite for apartments.
Cap rates for well-located, better quality properties remain at low levels. Moving on to slide 33.
Construction is well under way at Pines Edge Estates. The first phase consists of 79 units located on our existing property, Pines of Normanview.
The foundation and parquet pour is complete. Framing continues and electrical and mechanical reference have commenced.
Anticipated completion of this phase is Q1 of 2016 and is expected to cost approximately $14.1 million for $178,000 per door which equates to $179 per square feet billable and $209 per foot rentable. We are estimating the stabilized cap rate to range between 6% and 6.5%, excluding land.
Including the appraised value of land of approximately $12,000 per door the cap rate will be reduced by about 40 basis points. We have factored in some market rent decline in this analysis reflecting the possibility of continued market weakness.
This four storey wood framed elevators building will have one level of underground parking. There are 30-1 bedroom and 66-2 bedrooms of which 60 have two baths.
Moving on to the next slide. This slide highlights our other development opportunities.
In Calgary, a rezoning application was approved by City Council to build 200 additional units at Sarcee Trail Place. We are exploring various concept plans and accessing the economic viability of this project.
In Edmonton, we received approval from City Council for our RA9 zoning. The city is currently working on a text amendment to increase the FAR on all RA9 zones to five FAR which would allow us to build 312 additional units on this site.
City planners expect this text amendment to be ratified in 2015 by City Council. We have one major site in Calgary and one in Regina that we consider strong candidates for master planning.
These sites could achieve substantially higher density but would require substantial demolition. I would now like to turn it over to William Wong.
William?
William Wong
Thank you, Bill. Slide 35 shows the computation of FFO for the three months ended March 31, 2015 versus the same period last year and is calculated using profit from continuing operations as shown on our consolidated statement of comprehensive income prepared in accordance with IFRS.
Reported Funds from Operations or FFO, a performance measure not defined by IFRS, but that better reports the overall operational performance of real estate entities, for the current quarter was $44.2 million, up 10.4% from the amount reported in the same period last year and on a per unit basis, increased by 11.8% from $0.76 to $0.85. The increase was primarily driven by organic rental revenue growth primarily in Alberta and Ontario, lower utility expenses and lower financing costs.
The next slide, slide 36 shows our reconciliation on a per unit basis of FFO for the three months ended March 31, 2015, from the FFO per unit amounts reported in 2014. As the slide shows, NOI growth from our stabilized properties and a decrease in financing costs, contributed $0.07 and $0.04 to FFO growth for the current quarter compared to the same period in the prior year.
This was partially tampered by the FFO loss on the sale of West Park Ridge and our BC property Portfolio, which were sold in May of last year and higher administration, as a result of the first quarter profit-sharing accrual, which was not recorded in Q1 of 2014. Slide 37 shows an overall review of our rental operation performance for the current quarter as shown in our income statement.
Revenue from continuing operations, including ancillary rental income like coin and laundry for the current quarter was higher by approximately $3.5 million, or 3% compared to the same period in the prior year, primarily due to higher average rental rates in Alberta and Ontario while maintaining high occupancy levels. Total rental expenses for the current quarter decreased by approximately $500,000 or 1.1% from $48.5 million to $48 million, primarily due to lower utilities, partially offset by higher property taxes.
Utilities were lower by approximately $1 million or 6.3%, due primarily to lower natural gas expense as a result of the milder winter in the current quarter compared to 2014. Property taxes were higher by approximately $500,000 or 5.2% due to higher property tax assessments.
The net result is that overall net operating income or NOI, for the current quarter increased $4 million or 5.9% compared to the same quarter in 2014. Operating margin at 60.1% for the current quarter increased slightly from the 58.4% for the same period in the prior year.
Slide 38 shows a breakdown of capital. We reinvest back into our investments property portfolio.
This capital investment is categorized between repairs and maintenance, on-site maintenance personnel costs, maintenance capital, stabilizing and value enhancing capital investments and property, plant and equipment purchases or PP&E. Repairs and maintenance and on-site maintenance personnel costs are expensed when incurred since they are regular and ordinary expenditures necessary to maintain the operating condition of a property in the short-term.
Maintenance capital investment is capitalized and related to maintaining the existing earnings capacity of our property portfolio. Stabilizing and value enhancing capital and PP&E expenditures, which are more discretionary in nature are capitalized and focus on increasing the productivity and/or earnings capacity of our properties.
For the first quarter of 2015, Boardwalk invested and expensed an average of $411 per suite on R&M and on-site personnel costs and capitalized approximately $416 per suite on stabilized investment property improvements. In addition, Boardwalk extended approximately $1.5 million or $44 per suite on PP&E.
The next slide, slide 39 provides a breakdown of our operational capital improvements and capital asset additions for the first three months of 2015. The Trust reinvested back into its portfolio, a total of $15.9 million, comprised of $14.4 million towards stabilized investments properties and $1.5 million in property, plant and equipment, compared to a total of $14.1 million for the same period in 2014.
Included in the amounts to reflect Boardwalk’s internal capital program is approximately $4.2 million of allocated on-site wages and salaries and certain parts and supply. The same as the $4.2 million capitalized for the first three months of 2014.
Not included in the pie chart for the three months of 2015, Boardwalk invested $1.6 million in developments compared to $0.1 million for the same period in 2014, as well as $3.1 million for the acquisition of the Nun's Island office and warehouse. The slide 40 shows, total overall admin costs which includes operating and corporate G&A, for the first three months of 2015 were $14.4 million, an increase of $1.3 million or approximately 10% from $13.1 million for the same period last year.
The increase was due primarily to higher salaries and wages, as well as the $750,000 of profit-sharing accruals in the current quarter that was not recorded in the first quarter of 2014. I would now like to turn the presentation over to Rob Geremia.
Rob?
Rob Geremia
Thanks, William. Slides 41 and 42 focus on our stabilized portfolio.
At March 31, 2015, with the exception of the redeveloped 109-unit complex in Calgary, Boardwalk’s entire apartment portfolio was classified as stabilized. For the first quarter, revenue on these properties increased by 3.2% as compared to the same period in the prior year with operating cost increasing by 0.6%, resulting in an NOI increase of 4.9%.
As is noted on the chart, the significant increase in the expenses reported in Saskatchewan was a result of increased utility prices as well as the inclusion of a new costs relating to the inclusion of TV and Internet as part of the rental products offered in Saskatchewan. Slide 42 shows the sequential revenue of our stabilized properties over the last four quarters.
The first quarter reported an increase of 0.1%, when compared to the fourth quarter of 2014. Slide 43 documents the Trust’s continued strong liquidity position, with $47 million in cash and an additional $196,000 in existing line of credit, the Trust has $243 million of available liquidity.
This represents 11% of total debt outstanding at the end of the quarter. Boardwalk’s debt as a percentage of reported investment property asset value was 38% after adjusting for cash.
Slide 44 reports the Trust’s total debt maturity schedule at the end of the first quarter. Although over the recent months, we have seen the Government of Canada Benchmark Bonds recover from historical lows, refinancing rates continued to be well below our current maturing rates.
At March 31, 2015, the Trust’s overall weighted average and in-place interest rate was 3.3%. A rate that is 80 basis point above the current NHA insured 10-year rates of 2.5% and 160 basis points above the current five-year rate of 1.7%.
A particular note is that the remainder of fiscal 2015 and fiscal 2016, the Trust has over $900 million coming due at rates that are well over 100 basis points over the existing market rates. Boardwalk's remaining mortgage amortization under these insured loans is in excess of 30-years.
Slide 45 provides the reader with our estimate of current mortgage underwriting valuations. Boardwalk’s balance sheet continues to be conservatively levered at 43% after deducting our current cash position.
Slide 46 and 47 provide additional detail on Boardwalk's mortgage portfolio. A special note is over 3,000 apartment units currently have no outstanding mortgage encumbrances.
Slide 48 shows the Trust’s interest coverage on a four quarter rolling basis continues to increase to over 3.46 times, the highest in our reported history. Boardwalk’s secured mortgage portfolio is over 99% insured under the current NHA insurance program.
The use of insurance has two unique and distinct benefits and a system addressing the two distinct financing risks, these being interest rates and renewal risk. With respect to interest rate risk, the NHA insurance provides us the benefit of a very advantageous interest rate.
With this insurance we are able to obtain very competitive interest rates, which are currently at approximately 75 basis points to 90 basis points over the corresponding matching Government of Canadian bond. Renewal risk has substantially decreased with this insurance and that once obtained, it’s good for the entire amortization of the mortgage, which in most cases is between 30 to 40 years and the insurance is transferable to other approved lenders on term maturity.
Slide 48 provides the summary of our 2015 maturities. At March 2015, Trust has renewed its forward loss 42% of the maturing mortgages.
The weighted average renewal interest rate risk is 2.2%, as compared to the maturing rate of 3.56% and the average term on these renewals is seven years, has an estimated annualized savings of $3.8 million on term loan maturities. Slide 49 and 50 focus on Boardwalk’s investment property fair value calculations.
As Slide 49 shows Boardwalk’s reported fair value at March 31, 2015 on its investment properties was $5.82 billion, up from $5.78 billion reported at the end of the fiscal 2014. The increase is the combined result of a slight increase in NOI and the reported decrease in cap rates in selective markets as noted on slide 50.
Slide 51 highlights the capitalization rates used in determining the fair value of the investment properties. Overall weighted average capitalization rate used in the determination of the fair value was 5.46% at March 31, 2015.
The quarter noted decrease in the reported cap rate in Ontario and Quebec City. Slide 52 details the two key variables in the determination of these estimates, net operating income and capitalization rates.
As is noted, a slight shift either positively or negatively on these estimates could materially affect the reported amount. Slide 53 highlights Boardwalks’ current normal course issuer bid.
Under the current program, a total of 472,100 Trust units have been acquired for cancellation on the open market. The average price of these units was $67.01 as and when required.
No Trust units were required in the first quarter of 2015. Moving on to slide 54, Boardwalk’s 2015 financial guidance.
Consistent with prior years on a quarterly basis the Trust reviews reported financial guidance. This review consists mainly of comparing the actual reported results of those, those assumptions used in determining the reported guidance.
Based on this review, management may revise its estimate and/or adjust its reporting guidance range. This review for the first quarter of 2015 highlighted that existing mortgage refinancing market is being priced at rate lower than originally forecasted.
Based on this new information along with the fact that over 40% of our maturing mortgage debt and locked in for fiscal year the draft determined and adjustment to the reported financial guidance warranted. We have revised our FFO guidance for 2015 from $3.40 to $3.60 to $3.48 to $3.65.
In addition, we are revising our AFFO guidance range from $307 million to $327 million to $315 million to $332. All other key assumptions remain the same and include no new acquisitions, dispositions during the forecast period, the development project in Regina will not to be completed in 2015 and as such have no impact on the financial results.
And stabilized building NOI should increase as compared to prior year’s amount of between 1% to 4%. Side 55 to slide 60 highlight our 2015 capital budget.
For 2015, we anticipated total operational capital budget of $98.8 million with an additional $12.2 million being allocated to development. As is noted, our internal estimation on the amount of capital referred to as maintenance capital continues to be estimated at $500 per apartment per year.
Slide 56 provides the break-up of our 2015 capital as targeted to be investments. Slide 57 provides a break-up where the operational capital is estimated to be investment.
In addition for your reference slide 58 provides in more detail on our determination of maintenance capital. On average for larger capital projects such as new roofs and exterior upgrades, these are amortized over 12 years, where suite specific capital and our internal capital program are amortized over 3.5 years, a period which approximates the average customer stay at Boardwalk.
Moving on to slide 59 Boardwalk’s distributions. As is customary at each board meeting, the Board Trustees review the Trust’s unitholders distributions.
As a result of this review, the Board has determined to maintain its regular distribution at $0.17 per Trust unit monthly or $2.04 on annualized basis. This concludes the formal part of our presentation.
We'd like to open it up for questions now. Mike?
Operator
[Operator Instructions] Your first question is from Alex Avery with CIBC.
Alex Avery
Thank you. And good morning.
Rob Geremia
Good morning.
Alex Avery
I just wanted to dig a little bit into the Saskatchewan expense growth, pretty big number there. You did note that you’ve got this cable program, that’s impacting that and I guess as well the utility price, the price you’re paying for Gigajoule is up from I guess that was -- that happened in Q3.
But I was just wondering how that breaks down, what the -- I guess how sustainable that expense growth is?
Rob Geremia
Well, it’s about 50:50. On the utility side, we had actually last year when it was cold in western Canada versus this year, we saw exactly opposite.
We actually had a very advantageous fixed contract price at Saskatchewan that expired. So this year, we are actually paying more for gas than we were last year for that period of time, unlike Alberta which was the opposite situation.
So about half of that increase is a result, the other half is the fact that now we are including as part of the rent and we are getting it back on increased market rents on an overall basis. We are including cable and internet service as we do in Alberta and Saskatchewan for a number of years whereas this is the first quarter that has been in the Saskatchewan numbers.
So that itself will normalize itself by next year because the costs will be relatively same.
Alex Avery
Okay. So the cable expense, this is the first quarter that it was in there?
Rob Geremia
It’s the first quarter. It was not there last year at all.
Alex Avery
Okay.
Rob Geremia
When comparing it was zero number last year so that’s what really resulting in that increase.
Alex Avery
Okay. And then I guess as well just you’ve got the higher gas price contract and Q1 would be the biggest usage quarter so you tend to get a little bit of a bump there as well?
Rob Geremia
That is correct. That Q1 is always our highest usage of gas.
Alex Avery
Okay. And then just turning to the cash position, it’s lower than it’s been in the several years.
And I noted that you did a little bit about financing on the refis you’ve done year to date. But I was just wondering what we can expect there and whether this is sort of the new level we should expect?
Rob Geremia
So I think you will see as the increase in that number over the next number of months, number of maturities we have coming up in the last half of the year are going to allow us to tap up on top of that again. So that number right now probably is lower than we’re going to see by the end of the year.
Alex Avery
Okay. And the rates you’ve been getting have been exceptional, so well done on that point.
Rob Geremia
Well, thank you.
Alex Avery
That’s all about…
Rob Geremia
We had no control over the Government of Canada bonds.
Alex Avery
Fair enough. Thank you very much.
Rob Geremia
Thanks, Alex.
Operator
The next question is from Frederic Blondeau with Dundee Capital Markets.
Frederic Blondeau
Hi. Good morning.
And congrats on the quarter.
Rob Geremia
Thank you.
Frederic Blondeau
Just a couple of quick questions there. In terms of new supply, are you seeing any condo projects move to purpose built rental properties in Alberta and most probably in Calgary?
Rob Geremia
Frederic, it’s Rob. Yes, we have obviously moved to -- there are couples in Calgary now that are developed specifically for rental.
There is one that’s completed and being done and two more that are under constructions to speak right now. But in total, I wouldn’t say that they have a massive push for multifamily rental.
The number is from a construction point of view are still quite great and we are not quite sure if we can achieve the rent necessary to make a material impact to that supply.
Frederic Blondeau
Okay. Great.
And I was wondering if you could give a bit more color on the Quebec, relatively weak numbers?
Rob Geremia
Quebec is a challenge. The revenue is okay.
We’re still doing well. We are seeing -- we have seen excess supply in Quebec City particularly, so we’re seeing new supply coming there, that’s impacted our overall occupancy levels.
Again, it’s very difficult to get material increases in Montreal given the existing situation there so we’re controlling everything else. So we are trying.
Operating costs again were up this year. A lot of it was utilities as well too.
As you have Eastern Canada it was a lot different than Western Canada, this was almost the opposite of the prior year.
Frederic Blondeau
Right. Well, I was thinking more about on the revenue size, it seems like it’s the challenging again?
Rob Geremia
Yes, it is. Occupancy levels continue to be quite high in the markets.
We aren't worried about the vacancy loss, but some do have that, particularly seeing a bit of weakness in Quebec City again direct more related to supply than anything, but it is difficult to push rents in Montreal.
Frederic Blondeau
Right. And lastly, are you still thinking about using leverage to buy back units?
Sam Kolias
We are always considering ways to increase value and we did get some push back in investor meetings. We always ask our stakeholders what they think we should do and in particular some of our very long-term stakeholders believe that that’s not a good thing to do.
Some believe it is. So as we have in the past taken a balanced approach, we’ll consider that keeping on the table.
You can see our cap position right now is on the low end. And so we haven't used that capital to buyback our units, but again we always like to keep all choices of ways we can maximize value for all our unitholders and so it continues to be a choice.
And we believe a balanced approach is always best. And so that’s one thing to keep in mind going forward.
And that’s what our Board and we have discussed that on board meeting to keep the balanced approach and open-mind when it comes to value creation. So still on the table, but we haven’t used that yet.
Frederic Blondeau
All right. Okay.
Well, thanks and congrats again.
Rob Geremia
Thank you, Frederic.
Operator
[Operator Instructions] Next question is from Jonathan Kelcher with TD Securities.
Jonathan Kelcher
Thanks. Good morning.
Rob Geremia
Good morning, Jon.
Jonathan Kelcher
Just going back to Alex’s question on the cash position and I guess your revised guidance. How much up financing are you assuming in that?
Rob Geremia
In the guidance total about $70 million additional this year. I think we need -- we have another $50 million or so to go, $45 million to $50 million to go by the end of the year and the new stuff coming up.
So we did project originally to be closer to the $90 million and $100 million cash position level.
Jonathan Kelcher
Okay. And then I guess just following up on Fred’s question just on the [indiscernible] any idea of using leverage there, what would the Board be comfortable in keeping the overall leverage ratio of the Trust?
What was sort of the max you would look at going to?
Sam Kolias
We all believe our current level of debt is very good one and it’s prudent to maintain as low a debt to asset value ratio is possible. But again, that keep in an open-mind to ways we can create value.
And so a few percentage points, we don’t think it’s going to be a material thing. So we wouldn’t be firm on that number, plus or minus a few percentage points.
But again, we really, really believe very low leverage amount is better than a higher leverage amount. So we are leaning towards the lower end versus increasing it and so that’s kind of the discussion at the board meeting.
We enjoy strong balance sheet.
Jonathan Kelcher
For sure it served you well.
Sam Kolias
It has. And we have a Board that takes a very long-term perspective too and we agreed with that perspective and served as well.
And there is a lot of things to keep in mind and we’re again always open-minded and we’re always open to feedback from our stakeholders and so. If we’re missing something, we’re here to listen to what we’re missing and what we should be all reconsidering.
Jonathan Kelcher
Okay. Thanks.
I’ll turn it back.
Rob Geremia
Thanks, Jonathan.
Operator
Next question is from Mario Saric with Scotiabank.
Sam Kolias
Hello.
Rob Geremia
Good morning.
Mario Saric
Hi. Good morning.
How are you?
Rob Geremia
Very good, Mario.
Mario Saric
Good. So just maybe a couple quick questions, one on the balance sheet and then one just on operations in Alberta.
Following up in the last question, I think Rob you mentioned you are looking to finance $70 million of mortgages going forward. How should we think about the motivation behind your finance?
In terms of whether it’s more of a defensive motivation, are rates just so low that it makes sense to up finance or are you seeing a really good opportunity to kind of redeploy that $70 million and higher returns on capital?
Rob Geremia
It’s more of the former. I think remember, we have a capital budget of over $100 million this year to be all set to fund.
Of course, our financing will be there. And though the team is working hard but we’re not just seeing outside of our own development stuff, we’re not seeing strong opportunity.
I will let -- refer to Bill to comment on that too. But the pricing is still quite aggressive out there.
So, I think it’s fair to say, we’re not seeing a lot of opportunities right now. We are significant interested in doing.
Bill, any?
Bill Chidley
Absolutely correct. Rob, we’re always looking but we’re seeing that pricing continues to be continue to be very aggressive and it’s hard to make sense from our point of view, especially after you factor in the deferred maintenance that comes along with the buildings that generally are offered.
So, we’re not seeing any opportunities but that could change and it’s good to be in a position to take advantage of an opportunity if it does arise.
Rob Geremia
And on the finance, you are right. It’s 2.3%, 2.2%, 2.5%, 10-year money.
We can actually invest that money in security and T-bills and paper in around 1%. So the carrying value of the extra cash is not that material on an overall basis as well too.
So if something comes up, we want to be able to strike if we can, we do have almost $300 million of strike ability now but it couldn’t hurt that a little more to help.
Mario Saric
Okay.
Rob Geremia
On the operation question for Alberta, I think it was the second part?
Mario Saric
So just one follow-up, just on the balance sheet. So on the opposite end of the spectrum, I noted that you reduced cap rates for some of your Southwestern Ontario markets as well as the Quebec City are the two markets where in the past you explored potential disposition, so I don’t know if it’s a coincidence or not.
But can you maybe just give us an update in terms of how aggressive we are pursuing asset sales?
Rob Geremia
Everything is for sale with the right price in our entire portfolio and company, right. So, we are always looking for opportunities to create value.
Does that mean we are aggressively out there? Well, no.
We are just working together and looking for evaluations. Remember, the cap rates to compression, you still don’t know cap rates.
We actually use third-party information on all cap rates. We don’t take a look at them at all -- sorry, we review them to make sure they are reasonable.
But we do not prepare our own schedule of cap rates. We follow -- in our case we use Altus third-party appraisal cap rates.
So, we have -- the shift there has nothing to with us. It had to do with they felt that there has been some transaction occurring in Ontario and Quebec City that’s warranted a slight decrease in cap rates.
The reality probably is in today’s market, the cap rates that are reported are probably still too high, as more and more transaction that are occurring are occurring at rates significant lower than what the cap rates for fair value are being used at but not materially enough for them to go forward. We don’t depend a lot of time working on cap rates.
They are the experts in the field, we are not. So, we don’t -- we just check reasonability on that.
Mario Saric
Okay. I guess, given the cap rates are coming down and I think you also noted that operationally things are getting better in Ontario.
Does it makes sense to taking money off table on Ontario, or do you see further upside there over the next 12 months?
Rob Geremia
But we think Ontario -- the whole Ontario but we do think there’s upside. But again cap rates are coming down as well too.
So again, we look at all of our opportunities out there, look at everything out there and see where we can go with it. So at this point in time, no but we are always looking.
Sam Kolias
The answer really is, it depends and history is the only 20-20 eyesight we can give everybody. Our Crystal ball is as cloudy and poor as anybody else's.
So, we can’t predict the future but we certainly are always open to offers and opportunities. And in the past, we have seized on opportunity to sell assets at a higher valuation than we could buyback or return the capital to our unitholders.
We have not heard of anybody complaining of the special distribution that we distributed this year and we are not hearing anybody complaining about selling assets high and buying our units back at lower evaluation. So that is something we will continue to explore as part of our strategy to look at all options all the time to maximize unitholder, stakeholder value.
Mario Saric
Okay. And then just on Alberta or just maybe on operations in general.
How would you characterize your confidence in your 2015 same-property NOI and 2015 same-property revenue growth that's embedded in your guidance today versus when you reported Q4 results three months ago?
Sam Kolias
That's an excellent question, Mario. We have visibility for April and May and revenues are the most important line items for our quarter review results.
So, April and May again, another two of the three months solid, our revenues solid, occupancy in our core markets and really the difference is characterized by this. Overall, calls are down and we like to talk about just the anecdotal example where last year I would personally get phone calls from high-school students I haven’t seen for over 30 some years, panicking to find apartments for their children in Calgary and Edmonton going into university.
And this year those calls personally are down too and so really the difference between the markets today versus yesterday is last year, it took months to find an apartment, if you are looking for one in Calgary and Edmonton. Today, you can find one much quicker and much easier.
And so the market is moving towards the balance. Person can find an apartment if they need one right away because there are more vacancy.
And it’s available for right away versus last year where consumer would have a very difficult time doing that. That’s our occupancy and our turnovers in particular show over 30% of our units’ turnover every year.
And so there is always availability and you can always find the apartment. It’s just takes more time in higher occupancy markets.
And so we are happy the market’s moving towards more balanced. Our resident members are more confident of the market, that the rental markets can provide long-term housing and predictable housing prices as well because there is more choice for the consumer.
And so there is just more peace in the market is what we are seeing and that's a win-win for everybody.
Mario Saric
I guess it can be argued that your unit price today is reflecting much worse a full perennial erosion or is reflecting perennial erosion consistent with what you saw back in ‘08 and ’09, when you argued that we shouldn’t see a repeat of ‘08 and ’09. And I am just curious that as oil stays where it is, at what point is it two months, three months, six months, at what point is there enough visibility to look firmly communicate or indicate that things are very different this time relative to...?
Rob Geremia
We look at it every quarter and we analyze and take a look at the information and look at the number of phone calls and call to ratios and that stuff. And we are just not seeing but I would consider an uncharacteristic weakness right now.
Fort McMurray, Saskatoon and Saskatchewan, that was the same thing in Q3 last year. That’s not driven by the price of oil today.
There are other issues happening in those markets as well as oil obviously but there are other issues as well too. So we will -- at the end, we take it very seriously and we review our estimates every quarter.
We take a look at the assumptions. We look at back at what we forecast by area to see if the revenue growth is there compared and more focusing on the NOI than just the component revenue as well.
But -- and we are seeing as you saw this quarter, surprised us to the NOI growth for the quarter was above the high end of our expectations. Revenue came in very close and expense came in a little lower than we thought.
So we -- how long will it really to take to figure this all units, 12 to 18 months before you will blow down to pretty maturely impact this new area. Now just a curious, history has shown us because most affordable housing is rental.
You don’t see much weakness. I think in the ‘09 shift, we made a mistake.
I’ll be honest with you. We thought the market was weaker than it really was and we were more aggressive on the centers that we probably need to be and that resulted in a slight decrease.
If I compare Edmonton to what we did in Calgary, Edmonton was nearly as aggressive and we didn’t see the same pull back NOI that we saw in Calgary. We did mistake there this time and over the last couple of -- more strengths on years, we haven’t seen an increase rent especially we did back in ‘07 and ‘06.
So we’ve actually done a very good job. I think keeping higher occupancy levels and we hit back those days.
But also maintaining revenue is seen as very, very reasonable and the customer will not aggressively move and the things will move rent upward at an unfair rate.
Mario Saric
Okay. Thanks guys and congrats on a good fiscal year.
Sam Kolias
Thanks.
William Wong
Thanks.
Operator
Next question is from Jimmy Shan with GMP Securities.
Jimmy Shan
Yes. Actually, just one question on this NDP and rent control issues.
Is there anything else that perhaps you can add, have you guys had any discussion or maybe the association has done any discussion with your staff at all, any colors there would be really appreciated?
Sam Kolias
No, there is no discussion and we believe the current priority of the newly elected leadership is focus more on the royalty review discussion. And that appears to be a more important priority for government and the energy leader to work on.
So no, we haven’t heard anything.
Jimmy Shan
Okay. Actually small one, the Truth financing cost amortization, what would be a good run rate for that number, is that numbers appear to have come down quite a bit?
William Wong
Yeah. That part of the financing cost would also -- adjusting our forward guidance.
The Q1 is very reasonable for the rest of the year.
Jimmy Shan
Got it. Thanks.
William Wong
Thanks.
Sam Kolias
Thanks Jimmy.
Operator
Next question is from Alex Avery with CIBC.
Alex Avery
Thank you. Just wanted to follow-up on your comments, Robert, but I guess you’re a little bit more aggressive on accommodating tenants in the last -- in the oil price decline.
Can you give us any sense of perhaps in your biggest markets Calgary and Edmonton, if your plans have changed at all in terms of what kind of renewal rent increases you are likely going for the shift?
Rob Geremia
No. Look, we were not.
Actually, in those two markets we’re ahead of internal expectation and overall increases. Obviously, we are telling our people to keep on top of this.
If you see some weakness, we’ll give you more flexibility you need. If you need it, they are not going there yet.
But as Sam mentioned we are looking at this every week and we keep it. So that could change by next quarter but right now we are just not seeing it.
Back in on ‘09, we reacted more on the field in fact and we did. We just saw that things were up and we thought there was a cut across the board in Calgary and versus the Edmonton model which was these three selective and the renewal selective which is the fruition of the forecast we’re following right now.
Also back in ‘09, versus today the mark-to-market was a lot larger back then. So market rents materially adjusted and then we would say they were over stated at that period of time.
Now they are much more in line. We’re getting renewal rates and new market leases that are almost the same rate year-over-year growth.
So there really is no art in that market either.
Alex Avery
Okay. That’s great color.
Thank you.
Rob Geremia
Thanks.
Operator
Next question is from Matt Kornack with National Bank Financial.
Matt Kornack
Hi guys.
Sam Kolias
Good morning.
Matt Kornack
Just a very quick follow-up question and I think you sort of hinted at it before but given that rental product. Is that cheaper, less risky type of housing?
Have you seen a move from people selling their homes and moving into rental, especially if maybe gone from a full time to part time job at this point?
Sam Kolias
No. We haven’t heard of any discussion or feedback from our team.
Our onsite team haven’t seen that trend and that’s not happening. Thus far we don’t see any great amount.
Matt Kornack
And by any chance, did any of happen in the previous cycle?
Sam Kolias
No. we never really saw that.
The last time we saw that was back in the 80s, when we first started out. And there was a clear trend of folks move in out of foreclosure into rentals and we personally saw folks like that and rented to the family in that situation.
But that was 30 years ago and we haven’t see anything like that since.
William Wong
And ‘09 cycles are very, very short cycle. And the difference in the need of today is 3% interest rate versus 18% interest rate.
Matt Kornack
Right.
William Wong
So they all will be done and sort of be the last few to keep the cat. I think that’s quite away, but the interest rate where they are today.
Matt Kornack
And I guess on the interest rate front. To some extent, you’re benefiting from all oil being as cheap as it is because your fundamental will remain fairly strong, but the government of Canada bond deal doesn’t think so.
I mean assuming doesn’t still or forever, this does some more benefit you, does it not?
William Wong
It does. However, in my presentation if we had $10 million coming due in the next 18 months, so if rates stay where they are, it isn’t hard to figure out how much we can save.
Matt Kornack
Absolutely. Well.
Congrats on the quarter.
William Wong
Thanks.
Sam Kolias
Thank you.
Operator
There are no further questions at this time. I will turn the call back over to the presenters.
James Ha
Thanks Mike. If you missed any portion of today’s call, a copy of this webcast will be made available on our website www.boardwalkreit.com, where you’ll also find our contact information, if you have any further questions.
Thank you again for joining us this morning. This now concludes our call.
Operator
This concludes today’s conference call. You may now disconnect.