Feb 26, 2021
Operator
Good morning, ladies and gentlemen, and welcome to the Boardwalk Real Estate Investment Trust Fourth Quarter 2020 Earnings Conference Call. At this time, all lines are in a listen-only mode.
Following the presentation, we will conduct a question-and-answer session. This call is being recorded on February 26, 2020.
I would now like to turn the conference over to Mr. James Ha.
Please go ahead.
James Ha
Thank you, Anne-son, and welcome to the Boardwalk REIT 2020 Fourth Quarter Results Conference Call. With me here today is Sam Kolias, Chief Executive Officer; Lisa Smandych, Chief Financial Officer; and Lisa Russell, Senior Vice President of Corporate Development.
Note that this call is being broadly disseminated by way of webcast. If you have not done so already, please visit bwalk.com/investors where you will find a link to today's presentation, as well as PDF files of the Trust's financial statements, MD&A, as well as supplemental information package.
Starting on slide 2, we'd like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements.
Information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly filed documents. I'd like to now turn the call over to Sam Kolias.
Sam Kolias
Thank you, James, and thank you everyone for joining us this morning. Leading with care and integrity, Boardwalk's top priority remains the health and safety of both our resident members and our Boardwalk team of heroes who continue to adapt, evolve and emerge through this pandemic environment.
We remain committed to providing our essential service of safe affordable housing in all our markets and are so grateful and proud of our team, who have been rewarded with record high resident satisfaction scores, which in turn have delivered resilient and growing FFO results for our unitholders a virtuous circle. Coming together with all hands on deck with safety always in mind, we are moving the COVID-19 mountain, especially with vaccinations on the way.
Slide 4, demonstrates our most impressive FFO per unit growth of 6.6%, including retirement costs 9.3% excluding them. Our FFO per unit remains the highest in the Canadian multifamily REIT sector.
Slide 5 provides a summary of CMHC's recently released occupancy and average rental rate data compared to Boardwalk portfolio in our core markets. Boardwalk represented by the blue bars outperforms in both metrics in our core markets, building better communities, continues to be at the heart of what we do.
And Boardwalk remains the choice housing provider in all our markets. Slide 6, illustrates some key operational metrics.
Our team continues to optimize our revenues, balancing occupancy, occupied rent and the use of incentives. Occupancy has seen a percentage decrease a reflection of seasonality and the second wave of lockdowns in our core markets.
Our occupied rents have continued to increase. Our rentals this year have outpaced our move-outs and our trend for March is for rising occupancy as it has been over the last three years as per slide 40 in our appendix.
Lisa Smandych
Thank you, Sam. On slide 16, the Trust delivered strong FFO and AFFO growth with FFO increasing by 6.6% from $32.2 million to $34.3 million for the three months ended December 31, 2020.
AFFO increased by 14.1% in from $26.1 million to $29.7 million, using an annualized maintenance CapEx estimate of $596 per apartment unit. For the year ended December 31, 2020, FFO increased 6.7% from $131 million to $139.7 million while AFFO increased 12.1% from $106.9 million to $119.9 million.
Included in our year end FFO and AFFO result, is approximately $33.7 million apologies for retirement costs. Slide 17 summarizes the Trust's monthly revenue collections from its resident members for 2020 and January of 2021.
Please note, collections are reported for the calendar month only and do not include revenue collected in subsequent months. 98.4% of January revenue was collected in January, which is consistent with the Trust's historic run rate.
Though varying by province, city and site, prior to 2020, the Trust's historic bad debt expense was between 1% and 1.1% of total revenue. For the year ended December 31, 2020 bad debt expense was 1.3% of total revenue.
Elizabeth Russell
Thank you Lisa. Slide 22 provides a brief update on our current and future development projects, which provides progression toward our long-term strategy of geographic diversification and high-grading our portfolio.
45 Railroad in Brampton Ontario is the Trust’s only development project currently under construction. Work on the two tower, 365 unit project continues to move forward on time and on budget.
We anticipate the first tower to be delivered in late 2022.
James Ha
Thanks, Lisa. Expanding in Lisa's comments slide 24 further illustrates the exceptional value.
Boardwalk’s current trading price represents when extrapolating the implied cap rate based on the Trust's current trailing financial results. The slide utilizes our reported NOI to illustrate implied valuation on a cap rate and per apartment door basis.
Boardwalk's current trading price implies an attractive 5.6% cap rate on these most recent results. The trust resilient NOI performance through 2020 is highlighted on slide 25.
Boardwalk's resident friendly approach has provided for steady revenue growth through 2020. Despite increases in non-controllable operating expenses, Boardwalk's focus on innovating controllable expenses provided a significant offset leading to portfolio operating expense increase of just 50 basis points and 20 basis points for the fourth quarter and full year respectively.
Sequential revenue in the fourth quarter declined in our Alberta market primarily due to increased vacancy. Looking at current availability for the month of February, new rentals have exceeded turnover and with lower availability are seeing occupancies improving.
As shown on slide 26 each of Boardwalk's core markets present unique opportunities to continue on our trend of organic growth. Our Alberta and Saskatchewan portfolios provide an opportunity to gain on occupancy, while targeting sustainable incentive reductions on lease renewals.
Our affordable and high-value offer in Ontario and Québec markets remain near full occupancy. The Trust continues to focus on achieving sustainable AGI increases for community improvements and optimizing rental rates when units turn over.
Just a $25 adjustment in our monthly average in-place rent or a 2% improvement to our occupancy each equate to approximately $0.20 in annual FFO per unit and represents a significant growth opportunity over the near and long-term as we continue to optimize our revenue and NOI. Slide 27 reflects on our performance through 2020, one of the most uncertain economic periods of our time.
Through it our competitive advantage and resident friendly approach was rewarded with resilience and growth through optimization of our NOI delivering 3.7% same-property growth. Our commitment to market-leading product quality and service allowed us to continue to invest both in suite and common area renovation projects that are targeting solid stabilized returns.
Our strong balance sheet paired with non-core asset sales allowed us to take advantage of our steady geographic growth plans by accretively acquiring assets to expand our Kitchener and Waterloo portfolio, while also entering the Victoria market. Record low interest rates provided for a significant tailwind as we renewed loans near and below 1% providing a reduction of interest expense going forward.
Overall, this resulted in 6.6% growth in one of our key performance metrics of FFO per unit. Looking forward, some uncertainties related to this pandemic remain.
And as a result, the trust will continue to provide regular operational updates to our shareholders in lieu of financial guidance to begin the year. As vaccinations progress in both economic and border restrictions ease, this will provide more detail needed to guide the extent of our growth rate for the year.
Our outlook for 2021 remains cautiously optimistic with the resilience of our essential service of affordable housing and the persistence of our performance focused team. We look forward to sharing updates on our progress and our continued performance through this New Year and would like to open up the phone line for questions.
Operator?
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session.
First question comes from Jonathan Kelcher with TD. Jonathan, your line is now open.
Jonathan Kelcher
Thanks, good morning.
Sam Kolias
Good morning, Jonathan.
Jonathan Kelcher
First question just on the revenue growth for 2021, and I understand that you're not giving guidance. But if we just look at some of the stuff that makes it up, on renewals, it looks like you're trending your credit towards 2%.
Is that something you think you can move higher back to where you were at the beginning of the 4% or so you were at the beginning of 2020 over the course of the last year?
Sam Kolias
Yes. Right now we are seeing exactly what we've seen over the last three years.
And slide 40 are apologies for sticking that in the appendix, slide 40 really describes what's happened over the last three years and really important to look at rentals, which are much higher than move-outs. And so our availability is dropping.
And as soon as our availability drops and our new residents move in, because our residents typically don't move in the same-day they apply for an apartment get approved. So it takes a little bit of time for residents to move in.
And as per Slide 40, that occupancy increases, as our residents move in that we've rented. Right now we're below 4% availability.
As of today, it's closer to 3.5%, as of today. The trend, as our availability drops, our incentive for new rentals will drop as well.
And so it's a direct function as to the supply of new rentals that we have. So the good news is the trend that's in place right now will allow us to reduce incentives for new rentals even further.
The math on a new rental is much more positive to increase occupancy than to worry about and focus on another $50 of incentive or $30, $40 of incentive. So the gain we realize on occupancy is much higher then whatever additional incentive adjustment that we have to make.
And so that that is what we're seeing as we speak.
James Ha
Just to add to Sam's comments there, Jonathan. Yes we're seeing – we continue to see success with renewals today.
I mean we're – our team is targeting $20, $30, $40 adjustments on our lease and to Sam's point as occupancy continues to improve that's really going to position us coming out of that pandemic to get back to those incentive reductions that we had targeted prior to the pandemic equating to about half a month or one month reduction or that that were referring to.
Sam Kolias
Jonathan, we were on a conference call with the Alberta Business Council members several CEOs in Alberta. And one of the CEOs of Transalta Energy is an economist by training shared with everybody on the phone.
Alberta in February, isn't typically a peak energy demand month. And in February, we peaked and went over any other energy consumption the province has ever, ever consumed.
Energy is a real leading indicator of economic activity. And the CEO of Transalta shared that with everybody on the line and as there's a lot of negativity out there and the sentiment is still very concerning for Alberta there are facts like a record energy use that we are using in our province our core province that has in the past been a leading economic indicator.
Jonathan Kelcher
Okay. That is very helpful.
The second question just on your renovation program. 2020 you were actually able to do more individual units than you were in 2019 which is pretty impressive given COVID.
Were you slowed down at all by COVID in 2020? And what do you think you can do in terms of the number of units in 2021?
Sam Kolias
Yeah. We really have to give credit to our team of heroes whose shoulders we stand.
No, we were not slowed down by COVID and coming together with all hands on deck, we moved another mountain and really focused on partial renovations as well. And that's a reason we are able to renovate more units because we focus more on affordability.
The demand for affordable units is increasing. And the demand for affordable housing is increasing and we're seeing that in our numbers.
And so we're focusing in on affordability right now. And when the economy comes back and the vaccines are rolled out and schools come back in the fall.
Our demand will increase even more and we'll see even better results. And get back to a new normal as it unfolds.
Jonathan Kelcher
Okay. So if you did roughly 1600 suites last year is that a number to sort of think about for this year?
Sam Kolias
It's really hard to say -- we've got the same budget, for suite renovation. So it should be very similar.
So our budget for this year is very similar to what it was last year and we expect a similar amount of units to turn and to renovate. It will be flat.
Jonathan Kelcher
Okay. Thanks.
I’ll turn it back.
Sam Kolias
Thank you.
Operator
Thank you. We have a following question from Matt Logan with RBC.
Matt, please go ahead.
Matt Logan
Thank you and good morning.
Sam Kolias
Good morning, Matt.
Matt Logan
In terms of your out performance relative to some of the CMHC stats for your respective markets, what do you think the key factors are in driving those operating results?
Sam Kolias
A long time ago we shared in conference calls the key leading indicator for growth in rental revenues is affordability. And we saw this many years ago and shared this.
The key driver is affordability. We sat on the affordable housing panel for the province of Alberta.
And the data is very clear. There is a growing demand for affordability.
And we're seeing that in our rentals and in our performance. So that's our focus is to continue to deliver affordable amazing homes that folks can live in.
We were in British Columbia the other day and we have to share conversation BC is doing really, really well by the way and it's growing and the population is growing there. We're in a restaurant and almost very close to one another shielded by Plexiglass of course.
And we couldn't help adhere a conversation next to us is I can't believe the rents are $2000 for a two bedroom. And it just caught our ears and I thought wow of all the things that we would hear somebody talk about and pardon we were eavesdropping, but it was so loud.
It was a big wow. We're shocked at this while our rents are under $1200 for typically a two bedroom unit where else can Canadians come and move to them please.
If you have any friends that are looking for affordable apartment send them to Alberta. That's the solution for affordable housing in Saskatchewan.
There is a solution. And it's a beautiful place by the way.
Sorry.
Matt Logan
I appreciate the color. Maybe changing gears to your same-property revenue and NOI growth in Ontario and Québec.
Can you talk about the sustainability of what we've seen in Q4? Like does that trend continue into 2021?
Sam Kolias
Yes. You know Matt you're hitting on some key words.
Affordability in last question. Sustainability.
What a keyword that is. And we've taken a similar approach in Ontario and Québec as we have in Alberta and Saskatchewan in the past.
Our average rents in both those provinces are well below our peers by the way. And so we've been taking a very sustainable conservative approach and continuing to serve and deliver affordability in both those provinces that are -- that have been experiencing much higher stress in around markets.
Now on the high end across the country, we've seen the data and that reflects that there is a softening in the higher priced rentals. There's clearly enough supply for higher priced rentals.
And the data reflects more supply than demand, because vacancy has increased most in the higher end. In Ontario and Québec like anywhere else in the country, affordability is key as well.
And so we're taking a sustainable approach, with a really low average in-place rents of Ontario and Québec the question, is this sustainable and those? Absolutely is the answer, absolutely is the answer.
Matt Logan
And maybe last one for me. When you think about your priorities and growing in Eastern Canada, like how should we think about potential capital recycling this year?
Elizabeth Russell
So, on a forward-looking basis, just to give some color to the market. Since September, we've seen a lot of deal flow.
And moving into 2021, we continue to see the pipeline increase. Some notable transactions and we are actively underwriting right now specific to markets that we've been active in the past call it 24 months.
But we are seeing small deals and larger portfolios and we're actually really excited about the remaining part of 2021.
Matt Logan
Now would that be mostly just a focus on potential acquisitions, or would there be some dispositions as well?
Elizabeth Russell
So we have marketed some three Edmonton products, three Edmonton assets and we have two of them under contract right now would be happy to report back next quarter on those two transactions. We're seeing a lot of investment interest in Alberta and it's picking up and the phones are ringing.
And so on the acquisition side it will yes out East in BC. And yes, we're looking at some transactions in Edmonton right now.
Sam Kolias
Buyers are private for the most part very successful private operators and countercyclical operators that are private families and extremely successful and have an impeccable track record at picking market bottoms. And it was great news to get a call from one of those families the other day asking for a large portfolio in Alberta, we were very happy to receive that call.
But again, we're busier than we've ever been. We talked about that last quarter.
We continue to be busier than we've ever been seeing much more deal flow and it's an exciting time and exciting opportunities that we're seeing both on the acquisitions and disposition opportunities.
Matt Logan
I appreciate the commentary. Thank you very much.
I’ll turn the call back.
Sam Kolias
Thank you, Matt.
Operator
Thank you. We have a following question from Mike Markidis with Desjardins.
Mike, please go ahead.
Mike Markidis
Hi, everybody. Two for me this morning.
First one would just be on the cost side. For this year has been your ability to really drive a lot of efficiencies for your OpEx line and through G&A.
And I'm just wondering if you could on both of those fronts talk to just deal over from Mr. Logan the sustainability of that, or were there any sort of anomalous factors that would have suppressed those numbers this year?
Lisa Smandych
Hi. It's Lisa Smandych.
So, certainly, looking at our controllable expenses. As you know, as you mentioned the focus really has been on our headcount.
And so we're probably at a level where we're happy with our headcount. So right now, we are still focused on trying to bring those expenses down and working as far as we can to keep doing that focusing largely on technology initiatives.
So things like our Yuhu platform, digital leasing, virtual showings, also focusing on just maintain that headcount at an appropriate level. That, obviously, will be subject to some inflationary pressure, just as we move forward.
Same thing for the administrative side. Again, we focused on our head count in 2020 and have seen a lot of efficiencies there.
Again, looking at technology from an administrative side, what software can we use, changes in some of those platforms, to see if those can bring forth efficiencies. But again, we're probably – hopefully, we can sort of keep that administration cost sort of flat year-over-year.
But again, looking for any efficiencies that we can keep bringing.
Mike Markidis
I think the answer to question is no, but you guys didn't have any wage
Sam Kolias
No.
Lisa Smandych
I didn't catch the full question.
Sam Kolias
Wage subsidy. Is that -- sorry, is that the question because you kind of --
Mike Markidis
No, no. We just a couple of -- I'm not a partner
Lisa Smandych
You're really cutting out on us, we can't hear your question.
Mike Markidis
Okay. Is that better?
Lisa Smandych
That's better.
Elizabeth Russell
Yes.
Mike Markidis
Okay. Sorry, I'm closer to my phone here.
Sorry, some others have noted that they benefited to a small degree from wage subsidies. So I just wanted to confirm that it wasn't the case for you guys, which it wasn't.
Okay. And then, last one for me, Sam, in the past you've talked about Grande Prairie specifically and maybe sometimes, Red Deers being in areas in the coal mine in terms of leading indicators.
And just looking at the last few quarters, those markets have been on the revenue side quite weak. So I was wondering if you could just talk to the dynamic there?
And if that -- how you, if at all, read through that into what could be happening in other markets in Alberta?
Sam Kolias
Those markets are improving as well and we are seeing the same as we're seeing in our core markets. Rentals are higher than move-outs in both those markets.
And so that -- and actually Fort Mc, the Grande Prairie in the coal line is doing really well. Almost 98% occupancy or a 2% availability, 2% to 3% availability towards month ends.
So it’s encouraging rental data that we're seeing in those markets.
Mike Markidis
Okay. That’s it for me.
Congrats on such a strong year in a very odd time. Thank you.
Sam Kolias
Thank you, Mike
Operator
Thank you. Your next question comes from Matt Kornack with National Bank.
Matt, please go ahead.
Matt Kornack
Hi, guys. Just a quick follow-up on Mike's line of questioning there.
And I did notice that Fort Mc was kind of went from 94% occupancy beginning of last year to 97% as at Q1. Sounds like it improved further.
I know historically you've said, you don't house energy workers per se, given that they tend to make a lot of money and own homes. But how do you think about the improvement of the energy markets from a WTI standpoint with regards to employment across Alberta more generally?
Sam Kolias
Well, Matt, that's a good question. And God we trust and everybody else bring data.
So the data is quite strong in reflecting our shortage and supplies being concerning. The use of energy continues.
Energy is everything for all the science fans out there. And the big focus in Alberta and it was great again to share a call with so many CEOs on the line, the focus in Alberta is really clean energy.
That's the key word. And we truly are a world leader in clean energy.
And the more the world focuses in on clean and environmental sustainability. The more is going to be invested.
We had a call from the new CEO of -- Alberta Development CEO, he's getting bombarded by sovereign funds, by large investment bankers calling and saying, hey, Alberta is the cleanest, it's where we want to be how do we get there? Who do we talk with?
How do we invest back in Alberta. That was a great, great message that that CEO shared with everybody on the line today.
And I hope I'm not sharing secrets, but it was a great call to be on. It's very, very encouraging to see Alberta turnaround.
We also were on the line with the two CEOs of the unicorns because everybody believes in flying horses and unicorns where there's multibillion dollars in value and benevides and share works phenomenal profitable amazing companies one billion-dollar unicorns here in Calgary talked about how great Calgary is once you get here and how we really have to focus in on Canada. Marco, the CEO of Shareworks said it's about what's great for Canada because let's face it folks.
Canada is an amazing place to be. And when we lift up ourselves as Canadians first and foremost, it will get better for Alberta and for Calgary and Edmonton and everybody.
And what an inspiring CEO, Marco is to focus in on lifting everybody up and it's no coincidence his company is a multibillion-dollar success.
Matt Kornack
Okay. That makes sense.
One other follow-up question, I guess, the provincial government put out a budget yesterday. I don't know -- I'm sure you guys have looked at it in more detail than I have.
But if you could provide any commentary as to what you think it does for your business? It sounds like you aren't going to see a tax increase which is nice.
But yes, just in terms of jobs growth I know there was some focus on infrastructure spending, but at the same time government efficiencies so some thoughts there?
Sam Kolias
Yes. The big headline was the deficit.
And let's, I guess, share some thought with the deficit and that fiscal and monetary policy has changed dramatically with quantitative easing and I'm sure, I'm getting into economics here. It's important though because the question is -- is a conservative fiscal policy of the past something that is relevant with nations the biggest nations with record deficits and record continued growth of debt capital.
Is it -- is it an inspiration to see companies spend on innovation, spend and invest in technology and our other countries great examples who are spending records amount of capital on investment in technology and innovation? Is that an inspiration for not just Alberta, but for Canada?
And how can we look at these other big growth nations and learn from what others are doing and how can we compete if we do not invest in our companies, in our people and in our technology, innovation and infrastructure how are we going to compete as a nation, but I'm going to end right there because I'm way off topic.
Matt Kornack
No worries. I appreciate -- no fair enough.
It was a bit of a broad question anyways, but it sounds like -- I mean it's better to have a deficit and employ people and put money into infrastructure from a housing standpoint.
Sam Kolias
How can we compete if we don't is the question? Like look around its all relative.
Everything is relative. That for all the science fans out there that's another really important fact to know.
It's a law of relativity. And we got to keep in mind what everybody else is doing to keep relevant.
Matt Kornack
Okay. Thanks, guys.
Appreciate it. And it looks like you have to look into the future in terms of what you've disclosed, but it seems like things are forming a basin turning around in Alberta?
Sam Kolias
Yes, in God we trust everybody else bring data. The data says that.
Thanks, Matt.
Operator
Thank you. We have a following question from Howard Leung with Veritas.
Howard, please go ahead.
Howard Leung
Hi. Thanks.
Just can you comment a bit on turnover and vacancy by brand segment especially, in Calgary and Edmonton given how -- I think you pointed earlier that box sprints are better than those by the CMHC. I was wondering how is that -- how you saw the living segment versus the community segment being affected by the competition?
Sam Kolias
The living by far is the big success story. Affordability is really key powered.
And looking at move-outs again we ask everybody to look at the data, slide 40. And move-outs are pretty well in line with what they have been in previous years and actually dropping which is a reflection of the success of our team and retention.
That's a real key focus. We have invested and worked tirelessly on increasing our retention.
And it's working and the data reflects our success. And we're doing everything we can to keep everybody in our communities and especially in these times we're being Yoga flexible stretching our leg behind our heads to make a renewal and it's working.
It's a reflection of the great team that we have. And we get the Net Promoter scores that we've been keeping track.
It's a record Net Promoter Score result. We get so many amazing reviews as I'm here because of James.
I'm here because of Jeff, I'm here because -- and our team is who our residents are here for. And that's why we focus in on our employee Net Promoter Score.
And I'm the cover all training I'm a -- and asking our team what am I missing? What are we missing as leaders we work for our site teams and our site teams work for our residents and our residents reward us with amazing results who in turn are shareholders and unit holders benefit.
So, it's a virtuous cycle is what it is. And it's working and it's a flywheel that's gaining momentum.
And for all those good to great readers. The flywheel is alive and well and it's gaining momentum.
And it's tough. To move a big heavy flywheel from the past where we were three, four years ago it's been tough and we get all our team all the credit.
Because our flywheel is spinning faster than it's ever been and it's not slowing down. It's gaining even more momentum.
So, I've gone over my time limit
Howard Leung
Sorry. No, it makes a lot of sense given we are seeing rental pickup.
On your comment on the team I was wondering last few years ago you referenced that Boardwalk had to hire a lot more associates to basically spend the competition that was happening in the space. Now, that we see competition pick up a little bit more do you anticipate having to higher a little more associates to help with that competition?
Sam Kolias
So, we have to balance technology and robotics with ethics again ESG. Our in-house developed robot who works 24/7 applies to leads automatically quicker than anybody else and doesn't get over time or anything is doing an amazing job.
Are we going to be using more of that? Of course we're going to balance and use technology.
The question is how do we make technology or slave not the other way around. And so technology is great when it's used properly.
And effectively to enhance everybody's performance. It's like the chess players with and without technology.
The chess player with technology will always beat and has continued to the beat robot. And that's what we use technology.
And so are we going to see more? No, probably last is the trend.
And again the data is we're doing a lot more with a lot less because of technology improvements. We have to do that because everybody else is doing it as well.
Everything is relative. So, we explained what we ask our team what do we want to be.
Do we want to be blockbuster who didn't change, or do we want to be Netflix that's constantly changing? And everybody wants to be Netflix wants to be a company that innovates wants to be a company that's great and greatness is in all of us and that's what our purpose is to be just that great.
Howard Leung
Yes, that's helpful. And then just one last one for me.
On the incentive part I think you disclosed in Q4 it was about $1.77 per door. With rentals kind of exceeding move-outs you mentioned that they would drop.
But I guess for now they're still around that level. For the first few months?
And are you offering – given your comments about life living versus communities are you offering more incentives in the community space than living?
Sam Kolias
Yeah, the community space clearly – when we invest in common areas the in-place occupied and the incentives are less. There is data that reflects, we are doing extremely well, when we do reposition in the right location of course it has to happen in the right location that has that demand for that enhanced common area improvement.
Slide 7, clearly reflects the trend of declining incentives for new rentals. And so the data is clearly there and the occupancy that we're gaining allow will us to continue to reduce incentives for new rentals and incentives overall.
And so our – the trend is our friend. And the trend is showing and our data showing that we will be able to reduce incentives with this trend in place.
James Ha
Just to add to that Howard, we can't reiterate enough our focus on retention, right? I mean, that is where represents about 60% to 70% of our deal flow.
And that's where we're starting to see that steady sustainable incentive decline and as Sam points out on those leasing spreads on slide 7, you can clearly see that. We're going to continue to do that targeting $20, $30, $40 reductions on our lease rentals.
Howard Leung
Okay. That's great.
Thanks. I’ll turn it back.
James Ha
Thanks, Howard.
Operator
Thank you. Your next question comes from Joanne Chen with BMO Capital.
Joanne, please go ahead.
Joanne Chen
Hi. Good morning.
Sam Kolias
Good morning, Joanne.
Joanne Chen
Just two quick ones for me. On the CapEx side of things, how should we be thinking about the trend for 2021?
Sam Kolias
Very similar to what we saw in 2020, and we continue to find savings in materials and parts and supplies. The market continues to be extremely competitive.
And technology and innovation continues to flooring prices for example Joanne, it's just keeps on dropping and dropping. And we're really open source and inspired by the tech community which is a people, focused community and an open source community.
And we're coming together as other community providers. And like a buyer's club union, where we're coming together and putting our buying power together works great for Costco members.
It will be great to work with apartment community member. This concept is something that the US is way ahead of us.
There's large multifamily buyer groups in the US that represent millions of units. And so this club, I guess, you might say is, just starting with some – we pretty well everybody that we call other of our public and private friends.
And we're going to get even more savings watch out, we're coming with big, big contract. And it's going to be – it's going to be a win-win, Joanne.
It will be a win-win. Well, whatever – whatever we reduce then price will make up in volume though.
So, again win-win, win always.
Joanne Chen
I guess, I know this is a little bit further out ahead but in terms of your Victoria developments, I know a lot of it is the uncertainty with the zoning and whatnot. But what kind of sort of time line should we be looking at?
And I guess, maybe this might be a couple of questions to answer, but what sort of yield would you be targeting for the projects to kind of move ahead?
Elizabeth Russell
Yeah. It is pretty early.
And again, so we're working through rezoning right now and some different entitlements and working with underwritings have built the consulting team for both projects. So it's pretty much – and again, it's still based on rents and we're very early days, but probably above the 4.5% to 5%.
It's pretty much what the build will be.
Sam Kolias
I think with the build cycle, Joanne, and everyone around 12 months. That's the beauty with walk up and actually even quicker than 12-month build cycles.
The permitting zone…
Lisa Smandych
Yes. And again the one site is zoned and the other sites that we're taking through rezoning right now.
So they are at different stages and staggered development projects. But Yes.
So its everybody up.
Sam Kolias
Yes. And the equity capital is the value that we create exactly similar to the successful walk ups we built in Regina and Calgary.
Our equity capital is really the 30%, 40% or 30% value that -- and actually 40% in some because costs have gone up so much. With time our value goes up and the value creation goes up as a result and our equity goes up.
And so that's really the source of our equity is mostly what we create. Brampton for example we're building at around $500 a door average condo prices in Brampton are over $700,000 a door.
So that's $200,000 on $700,000 that's a big equity that we've created and realized. So it's exciting to create.
And the value-add program that we have is in that most competitive market in the country. The market share and proving that we have the best value-add program because it's no coincidence, there's no such thing.
We have the best team. That produces it.
So we're super excited with the acquisitions we made in Cambridge and Waterloo Kitchener, incredible value creation well ahead of our pro forma budgeted NOI well ahead of it. And again a reflection of the value-add program, we've really seasoned and curated over the last several years.
It's a great recipe. It just keeps getting better and better and that's what our goal is get better.
Joanne Chen
No, that's helpful. But maybe that say work kind of into -- just a last one for me.
Can you maybe talk to kind of the competitive dynamics that you're seeing now in primarily in Calgary and Edmonton? I know despite some of the headwinds that still hang would you say that you continue to take share given the attractiveness and affordability of your portfolio right now?
Sam Kolias
Yes. It's a tale of two markets, Joanne and everyone.
The competitiveness in the new supply is very, very high. And even in a very high competitive new market with our 160 units and JV with RioCan for example, we're doing extremely well.
We're heading to about 65% occupancy. We're very close to that or there.
I haven't quite looked at Brio today. So in the affordable living and communities brand demand absolutely is increasing for us.
The market overall continues to add new supply. We continue to see completions in both Calgary and Edmonton.
And the good news is there's a lot less investment, there's a lot less enthusiasm to build even more supply in Calgary and Edmonton. And our advices don't.
We don't need any more supply in our province. The focus we have to -- focus is helping folks get into affordable housing and continue to focus on maintaining that affordable stock and serving the increasing demand of affordable housing that's required by residents today across Canada.
And so that's where the demand is. That's where we are in the middle of.
And it's really well serviced, well maintained, well-designed and an engineered product that is exceptional value for residents and that's always in demand.
Joanne Chen
Okay. That was super helpful.
And that’s if for me. Thanks very much, guys.
I will pass it back.
Sam Kolias
Thank you so much, Joanne.
Operator
Thank you. Your next question comes from Brendon Abrams with Canaccord Genuity.
Brendon, please go ahead.
Brendon Abrams
Hi. Good morning, everyone and congrats on a strong 2020 in light of COVID and the pandemic and all those challenges.
Maybe just -- I'm just trying to get a handle on leasing for next year. And I guess one thing I would struggle with.
If I look at slide 43 the loss to lease statistics, there shows a significant I guess mark-to-market opportunity within the Alberta portfolio. But then, I take a look at slide 7 and it shows spreads on new leases are negative.
So I understand 60% to 70% of leases, new leases -- assigned for renewals, but on the 30% to 40%, just wondering for 2021. And obviously no one has a crystal ball but do you expect there to be upticks in terms of what slide 43 would suggest, or maybe slightly negative, which slide 7 might suggest?
James Ha
Hey, Brendon, it's James. Yes.
As you point out on slide 43, the biggest opportunity in Western Canada is incentives. And so as a result of that we post both numbers here.
We post the number on the left, which includes incentives and the number on the right which excludes incentives. For what we're seeing right now going forward into 2021, our plan our playbook is the same as we had in 2020 through the pandemic.
It's all about those sustainable increases focused on retention. And so, in this environment, again, targeting those $20, $30, $40 incentive reductions on renewals.
That's where we're seeing success and it's appropriate for this current environment. On new leasing it is competitive out there.
You saw it in the CMHC data that was recently released. There's a cost of acquisition for those new tenants.
But as Sam pointed out earlier, revenue management or managing that revenue gaining that occupancy is the best way to manage that for the first part of this year and that's where you'll see the focus going forward. And so on the incentive front, it's going to be that balance between what we're able to reduce on the renewals offset by what we may have to give on new leases in the interim And so, as we start to see a little more velocity in terms of border and economic restrictions, that's what's going to set us up to get back to those larger incentive reductions going forward.
Brendon Abrams
Right. Okay, that's helpful.
And maybe just on the -- if we’re taking a look at your urban and suburban portfolios, I don't know the exact split. It might that it would be in Calgary and Edmonton.
But are you seeing any differences? Have you seen any differences in the last few quarters or even the beginning of 2021 between leasing velocity within your more kind of urban assets versus your suburban assets?
Sam Kolias
We have focused more on redevelopment on our common areas in our urban communities. And as a result, our urban communities are improving, and we're regaining market share in those locations.
And so we're seeing improvement overall both urban and suburban as a result of that.
Brendon Abrams
Okay. So, no material differences between the two portfolios, or?
Sam Kolias
There is stabilization as we speak. There used to be last year there was.
This year we're seeing a more stabilization between our urban and our suburban because we focused a lot on retention and common area improvements in our more urban Edmonton communities and made some adjustments as per our IFRS on market rents in our urban communities to be more competitive. And so, those have all helped to restabilize the occupancy in both the urban and versus the suburban.
Brendon Abrams
Okay. That's helpful.
And then maybe just last question for me, the most important one. Sam do you think there will be a Calgary stampede this summer, and will you be hosting an Investor Day for that?
Sam Kolias
Well, our theme in 2013 for the Calgary Stampede exhibition and stampede was hell or hide water where it's going to be a stampede. And so even scientists believe and we all have heard perception is our reality.
And when we believe it creates a reality. So yes.
We'll see at the staff all right. Well if a reality everyone.
Brendon Abrams
All right – what a reality, everyone. Thank you.
Operator
Thank you. Your Next question comes from Mario Saric with Scotia Bank.
Mario, please go ahead.
Mario Saric
Hi, thank you. Good morning.
I realize we're pushing an hour here it's over an hour. So just a couple of rigs to come to my end.
For the quarter I noticed that G&A picked up about $1.4 million versus Q3 and then the direct operating costs came down a little bit relative to my expectations at least. Just want to clarify whether there's any accounting changes during the quarter that would influence the balance between those two figures?
Lisa Smandych
Hi Mario, it's Lisa. No there was no accounting changes from Q3 to Q4.
The increase in administration expense largely deals with year-end accruals as we finalize based on bonuses and profit share. So based on improved results for Q4 that was a function of why that accrual was bigger going into Q4 for administrative expenses.
Mario Saric
Perfect, okay. And then you noted that you had three assets on the market east of Edmonton.
But just curious with respect to Calgary the CBRE survey that just came out last week noted about a 25 basis point increase in Calgary multifamily cap rates. Is that consistent with what you're seeing on the ground in terms of overall demand?
Because it sounds like the demand is actually quite strong. So I'm just trying to understand the difference
Elizabeth Russell
Yes, it's consistent. And again cap rates are reported from various groups private and public.
There's different filters that everybody does use to end on their number. But that would be a fair comment.
It's a fair comment to say yes.
Mario Saric
Okay. And then thirdly, I think in terms of the Alberta outlook.
I think Sam you noted that Calgary has been voted one of the top three or four places in the world to live by the Economist. You mentioned affordability several times clearly very affordable.
Outdoor living is more important in post-COVID that bodes well for Alberta. So a lot of good things happening and positive trends.
The federal government seems like they're -- a change to get international immigration kick-started again through various initiatives. So that also goes well.
The project given the lower supply per capita relative to the provinces. So the big question then it comes to job growth.
It was touched on earlier in the call, but with let's say the oil industry and the energy industry in a bit of transition as you pointed out to san you've attended a lot of business meetings with other constituents what not on the ground, if you have to point to one industry or two industries where you think that the market is underappreciating the job growth potential within the next 12 months? What would that one or two industry be?
And do you have any data that kind of supports the potential quantum of job growth in those two industries?
Sam Kolias
Health. Our health industry is massive, infrastructure that's a global growth area for investment as well.
And so those are -- and really the work from home, Mario is a big movement. Because we heard from the Unicorn CEOs, the work-from-home is super, super helpful.
And so it's a real lessen in the -- especially in the last year where we have seen a as a global community how closely we're connected. And when somebody sneezes in some place in the planet, our whole planet can shut down.
And so this conversation on how closely we are connected came up with the Unicorn CEOs and how important it is to focus in on attracting all types of talent, not just full stack developers because a full stack developer will need a CFO, we'll need accounting we'll need cleaning services in the office. And the flexibility, the work from home ability will need affordable housing.
And so the ecosystem is what the tech world talks about ecosystems. And more and more governments and communities are learning about the importance of this ecosystem and how -- we all have to come together as a country, we really do.
And work on real positive reasons. And make it super simple, that's the big lesson technology take an easy, keep it super simple and easy.
So if we make it really simple to come to Canada, and grow in Canada, and innovate and succeed in Canada works out. We're already doing that.
And so this data as far as population words out Alberta is doing that. Because the population data according to stats can clearly reflects, as Alberta where is getting out, because Alberta as per stats can is growing more than anywhere else in Canada.
So all those factors we talked about is absolutely working as reflected by the data. And so we need to get more of that information out.
And again, as Albertans we are proud Canadians, first and foremost. And that's who Albertans are.
And that's -- and that's how we all have to be as Canadians. And the more we come together as a country, the vaccine producers and innovators here in Calgary.
We have a vaccine company in Calgary. That as Canadians we have to all be really great performance support.
So there's, all sorts of great things happening here. The diversity and the data the economic data clearly reflects, a much more diverse economy in Alberta.
And every time we go through an energy cycle, our economy gets much more diverse. And we're more diverse statistically as per the job data, than we've ever been.
And we're going to continue to be because the mother of invention is necessity.
Mario Saric
Understood. My last question just on the formal guidance and kind of wanting greater visibility in order to provide it, am I correct in saying that, the greater visibility is more on the top line revenue part of the equation as opposed to expenses, or is it both on the top line as well as kind of wildcards in the expense category that has on pause here?
James Ha
Hey Mario, it's James. Look, at the end of the day we are still in a pandemic here.
From an expense item standpoint, good news, I would actually argue that we had better visibility than we did this time last year for 2020. And specifically, I'd point to property taxes.
You remember this time last year we talked a lot about property taxes. And ended up seeing, double-digit tax increases in some of our municipalities.
Really good news for 2021, we're not anticipating that. As far as the other expense line items go again, I mean, in the context of what we're seeing right now, we're seeing more inflationary increases with the exception of maybe insurance as a specific line item.
But on the revenue front, our playbook for 2021 like, I said earlier is going to be very similar to what we did in 2020 and how we ended up with growth through 2020 that focus on retention and focus on gaining occupancy. But let's face it we are in a pandemic.
And so in the meantime and in between time, we'll continue with our increased transparency and disclosure with regular updates to our stakeholders, and as economic and border restrictions ease that will give us the ability to reintroduce that guidance.
Mario Saric
Okay. Great.
Thanks for your time everyone.
James Ha
Thank you, Mario.
Sam Kolias
Thanks.
Operator
Thank you. There are no further questions at this time.
You may proceed.
Sam Kolias
Thank you, Operator. Before we end the call our annual and ESG report will be published in March.
And take a more environmentally friendly interactive digital approach. As always, if there are any questions or comments, please do not hesitate to contact us.
With gratitude, we would like to thank our amazing team of Heroes, our great leaders, loyal residents, CMHC, our lenders and all our stakeholders. It really is all about our amazing team of Heroes.
Whose huge shoulders as we stand. And as leaders we continue to do everything we can, to support continued growth and excellence.
We really can't thank our amazing team and great leaders in us. We are pleased with our improving results on the foundation of exceptional value we continue to provide our resident members our investors and all our stakeholders.
Our home is much more than a place. The future is family, where love always lifts what more important, when choosing where to call home.
Thank you again everyone for joining us this morning. And may god bless us all with continued healing, health and piece through all times.
Thank you.
Operator
Ladies and gentlemen, this concludes your conference call for today. Thank you for participating.
And ask that you disconnect your lines.