Welcome to the Canadian Apartment Properties REIT fourth quarter and year-end 2020 conference call. At this time all participants are in a listen-only mode. After the speakers' presentation there will be a question and answer session. To ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to David Mills. Please go ahead, Mr. Mills. Thank you, Denise. Before we begin, let me remind everyone that the following discussion may include comments that constitute forward-looking statements about expected future events and the financial and operating results of CAPREIT. Our actual results may differ materially from these forward-looking statements, as such statements are subject to certain risks and uncertainties. Discussions concerning these risk factors, the forward-looking statements, and the factors and assumptions on which they are based can be found in our regulatory filings, including our annual information form and MD&A, which can be found at sedar.com. I'll turn things over to Mr. Mark Kenney, President Chief Executive Officer. Thanks, David. Good morning, everyone, and thank you for joining us. Scott Cryer, our Chief Financial Officer, is also with me this morning. As we look back on 2020, I'm very proud of how our teams have responded effectively and in a timely manner to the significant challenges presented by the COVID-19 pandemic. As we've discussed over the last few quarters, with the advent of the pandemic last March, our teams began implementing programs at warp speed aimed at ensuring that our residents and employees remain safe and healthy, preserving capital, maintaining a strong and flexible financial position, mitigating risk, and generating the best operating results possible. Looking back, I believe we were successful in achieving these objectives, generating many significant achievements during this year. I'd like to touch on a few of these accomplishments this morning. The second wave of the pandemic last fall had an impact on our fourth quarter results, as you can see on slide five. Nevertheless, revenues were up over 8% on the same quarter last year, driven by the positive contribution from our acquisitions, increased monthly rents, and continued high occupancies. NOI rose 9.5%, with NFFO up approximately 12%, generating another very conservative NFFO payout ratio of just under 60% in the quarter. Our growth also remains accretive to unitholders, with NFFO per unit up 6.2%, despite the 5.4% increase in units outstanding. Turning to slide six, despite the pandemic affecting our operations for most of last year, we still achieved record financial and operating performance in 2020, a testament to the skill and dedication of our people, the stability of our asset base, and the resiliency of the rental residential sector in real estate in Canada. As you can see, we generated strong increases in revenues, NOI, and NFFO in 2020 compared to the prior year. These record results once again demonstrated that CAPREIT can generate strong, stable, and growing returns for our unitholders through both good and bad economic times. Over the last 23 years, we have built the team, the asset base, and the operating platform that we believe will only accelerate this track record of performance as the pandemic eases in the future. Once again, on behalf of the Board of Trustees and all unitholders, I want to thank our people for their exceptional contribution to our performance last year, and we look forward to significant increases in our key financial benchmarks over the long term. From an operating perspective, we maintained our track record of solid performance in our stabilized portfolio, as you can see on slide seven. Occupancies remained effectively at full levels while net average monthly rent rose, driven by increases on turnovers and renewals. Our track record of organic growth also continues with same property NOI up 3.9%, while maintaining a strong NOI margin of over 65%. As you can see on slide eight, we've experienced very stable occupancies through the pandemic. It's important to note that our vacancy at year-end is primarily related to a very small number of properties impacted the most by the pandemic, luxury properties in the downtown core locations and properties impacted by reduced student demand and lower immigration due to foreign travel restrictions. Not only is this a small number of properties, it's actually less than 10 across the majority of our portfolio. The bulk of the portfolio, the remainder, remains at near full levels. We also believe that our small vacancy rate is not reflected on the overall rental market, but the challenges of renting empty suites during the pandemic. As we emerge from this challenging time, we are confident occupancies will increase quickly to our historic near full levels across the entire portfolio. Despite the constraints placed on us during the pandemic, we continued to generate increases on turnover and renewals, as shown on slide nine. Clearly, turnovers are being impacted by the ability of residents to move or personally visit our properties. People just don't move around as normal during a pandemic. Still, almost 8% in the Canadian portfolio and over 9% in the Netherlands on turnovers are solid results. We expect to return to our more traditionally high increases once the pandemic eases. Renewals have been affected by the rent increase freeze that we implemented in Canada on April 1st last year to help our residents work through these challenging times. We are now beginning to implement modest rent increases in certain markets in consultation with our residents. As slide 10 shows, we significantly enhanced the size and scale of our Canadian property portfolio in 2020 with the purchase of another 2,847 suites and sites for CAD 690 million. We also sold some non-core properties, including an underperforming asset in Calgary. We were also pleased to have completed the buyout of 12 of our 15 operating leases in the Greater Toronto Area, as detailed on Slide 11, for a total cost of approximately CAD 173 million. We have taken a highly opportunistic approach to our portfolio through the pandemic, and these buyouts are an excellent example. We acted on these buyouts earlier than scheduled, resulting in a 31% discount to the agreed-upon price for the properties, creating long-term value for our unit holders. Importantly, the transition to fee simple ownership for these properties adds material new financing capacity to fund our growth going forward, meaningful net asset value accretion, and unlocks the potential for potential new developments in the future. As we have discussed over the last few quarters, we successfully implemented many key initiatives last year to mitigate the impacts of the pandemic. As you can see on slide 12, these programs allowed us to generate solid performance despite the many issues that we faced. The most important program began in the early days of the pandemic with strategies to get closer to our residents, communicate with them, and understand the issues that they were facing, and help them stay safely in their homes, while at the same time ensuring that we collected as many of our rents as possible. Our Compassionate Care program saw an average 3,500-4,000 calls to residents each month. Despite not being able to have prospective new tenants visit our properties, by moving our leasing activities online, we still generated over 2,700 new leases on average each quarter. To facilitate more efficient rent collections, today more than 85% of our residents now pay electronically. These programs have had a lasting and positive impact on our cash flows. As of yesterday, bad debts stood at only 0.6% of revenues, while over 99% of our rents have been collected. We are very proud of these achievements and remain confident that these programs will result in stable collections moving forward. We have also made significant progress on our ESG programs. This commitment is important, not only because it's the right thing to do, but also because it's a strong business case to be made for reducing costs, attracting and retaining the best people, adopting strong governance policies, and allowing us to provide innovative solutions to our market. A key element of this program is to focus on diversity and inclusion. As you can see on slide 13, we hold an equal gender split between men and women in 2020. 52% of new employees hired were women. We also celebrate over 55 languages spoken amongst our employees, a reflection of the diverse makeup of the Canadian population and the residents that live in our communities. Additionally, we have a highly multi-generational workforce. This focus on diversity helps us to better interact with and support the communities that we serve, the communities in which we live, where people work, and where people are now investing. It enables us to deliver innovative approaches and solutions both within and outside the organization. As detailed on slide 14, our environmental, social, and governance programs are helping us reduce costs, attract and retain the best people, and ensure CAPREIT maintains strong governance policies and transparency. Our commitment to reducing our environmental footprint is enhancing the resiliency of our properties. It's building healthy communities and delivering strong returns on investment. In November, we were honored with a Green Star designation by the 2020 Global Real Estate Sustainability Benchmark program and a ranking of six amongst our North American real estate peers. Our employee recognition programs, courses, and conferences, and our career development programs continue to generate very strong engagement scores amongst our employees. While our satisfaction surveys ensure that we meet the standards and needs of our residents. We are pleased to be recognized for the seventh consecutive year in the top tier of Canada's Best Employers. I'll now turn things over to Scott. Thanks, Mark. Turning to slide 16, you can see that we are clearly in a strong financial position at year-end, with a conservative debt to gross book value and historically high liquidity. We have CAD 750 million of liquidity available through our credit facility and cash on hand. In addition, we have CAD 974 million in Canadian unencumbered properties to provide additional liquidity if ever it should be needed. In total, if we were to access all these sources of capital, we have available liquidity of approximately CAD 1.9 billion. Even if we did this, our leverage ratio would still remain a very conservative 42%. Looking at our financings in 2020, we locked in a very low interest rate of 1.84% on our total refinancings and top-ups, and we expect we will continue to benefit from the current low interest rate environment for some time. At year-end, 99.3% of our mortgages incurred a fixed interest rate. We are also confident that debt markets and financing will remain highly available for our properties, given their stability and the strong fundamentals of the rental residential business. As of December 31st, 2020, 98.7% of our properties hold CMHC-insured mortgages. At year-end, we recorded an almost CAD 1.3 billion increase in the fair value of our property portfolio, including CAD 600 million in fair market value gains. Another strong indication of the stability of our business and the value of our properties that we bring to the unitholders. Turning to our balance sheet on slide 17, you can see that we continue to maintain a strong and flexible financial position at year-end, with conservative leverage of 36%, strengthened covenant ratios, such as an almost four 4x interest cover ratio. In 2020, we continued to decrease our interest costs on our mortgage portfolio to 2.56% at a weighted average term to maturity of 5.8 years. We expect to continue this trend in 2021. Slide 18 outlines our debt strategy for 2020 and 2021. Starting in 2020, management modified its debt strategy to have longer amortization terms on its CMHC-insured mortgages by extending the amortization period to 30 or 35 years compared to the 25 years historically used. By executing on this strategy, CAPREIT has been able to increase the amount of debt we can fund at the refinancing date and the total average debt outstanding over the term of such mortgages, thereby locking in more total debt at the current attractive long-term interest rates. Management believes this strategy will allow CAPREIT to use the CMHC top-up program in future years, which will reduce the overall CMHC cost related to premiums. In 2020, we accelerated our refinancing and acquisition financings and expect to continue to do so in 2021. CAPREIT completed CAD 1.4 billion of total mortgages in 2020, which is approximately 30% of our total mortgage portfolio. We expect to refinance another CAD 850 million-CAD 900 million in 2021 in order to lock in very low interest rates for long-term debt. With the 2020 refinancing, CAPREIT repaid the credit facility and made it available for potential future investments. Again, on slide 19, we significantly accelerated our refinancing in 2020 compared to the prior year, and this has significantly reduced our interest cost and extended the average term to maturity. We had a total top-up of over CAD 900 million in 2020, far exceeding the amounts provided in 2019. We have been very proactive in capitalizing on these low interest rates and will continue to do so this year, with rates coming off previous refinancing versus the current rate, all dropping straight to the bottom line. Our mortgage portfolio remains well-balanced, as shown on slide 20. In any given year, no more than 11% of the total mortgages come due, thereby reducing risk in a rising interest rate environment. Looking ahead, our current ability to top up renewing mortgages through 2035 will provide further significant liquidity in the event of major capital needs. You can also see on this graph that we have considerable opportunity to reduce our long-term interest cost in today's attractive interest rate environment for years to come. The current five-year and 10-year estimated rates of approximately 1.5% and 2.2% are well below expiring mortgage rates of between 3.1%-3.3% over the next three or four years. Turning to slide 21, our European exposure is managed by utilizing a number of different tactics with very favorable impacts. Including obtaining local euro third-party mortgages at very favorable interest rates and entering into cross-currency swaps on our local debt. Our European assets are currently 81% hedged using euro debt and cross-currency swaps. Swaps are now staggered between one to five years to take advantage of the low swap rates and make sure that they continue long into the future. In total, CAD 676 million of Canadian debt is currently swapped with EUR debt, with all-in effective rates between 24 basis points and 80 basis points, depending on the assumed mortgage term. As such, we have locked in significant interest savings while hedging European exposure. A key reason for our prime focus on the Canadian residential sector is the attractive spread between cap rates and interest rates. As you can see on slide 22, historically, there have been very strong spreads over the last three to four years. With forecasts for interest rates to remain low for the foreseeable future, we are now seeing quite high overall spreads between 200 and 250 basis points. Clearly, spreads are lower in key markets like Toronto and Vancouver, there is still good accretive deal flow available to us, and we continue to evaluate and act on the opportunity to acquire properties in our target markets. I'll now turn things over to Mark to wrap up. Thanks, Scott. Looking back over the past few months, as I've said in the presentation, I'm extremely proud of our teams and how they've responded to the COVID-19 pandemic. Our continuing growth and solid performance is a testament to our resiliency and ability to quickly and effectively adapt to these challenges. I can't thank our team enough for their efforts, their professionalism, and their dedication. Looking ahead, I'm confident that the programs that we've put in place will continue to generate strong and stable performance in the coming months and will contribute to even stronger growth as the pandemic eases. A key factor in our success has been our focused asset allocation strategy, as detailed on slide 24. On the apartment side, we continue to generate and target, I should say, value-add properties in the mid-tier segment. These properties are acquired at well under 50% of replacement cost. We have proven our ability to invest in them to increase value, and their stability is driven by their very affordable rental rates. We also continue to like the MHC sector, a highly stable, low-risk business with very strong potential to increase cash flows. Revenues are highly stable, and with residents owning their own homes, capital requirements and maintenance needs are significantly reduced. MHC properties also provide another level of diversification within our portfolio, allowing us to enter more rural and smaller markets than a residential focus on large urban regions. Our European presence is driving significant and growing dividend and fee income. Dividends in 2020 from ERES and IRES totaled CAD 32.9 million, while our fee income for property management services increased 5.2% to CAD 22.1 million. As the only professionally managed operating platform in Europe, the opportunities for further growth and enhanced value are significant. However, we will target our exposure to European markets and keep our exposure to Europe at approximately 15%. Another key attribute of our growing property portfolio is our focus on Canada's three largest and most vibrant rental markets, Toronto, Montreal, and Vancouver. As you can see on slide 25, in addition to offering quality rental accommodation in these high-demand markets, our rents constitute a very manageable percentage of total disposable income for our residents. Our rental rates are between CAD 1.50 and CAD 2.00 per square foot are clearly affordable when compared to other rental alternatives that are much more expensive. For example, in Toronto, rents for new build and condo rentals are going upwards of CAD 3-CAD 5 per square foot. This clearly makes our product attractive to the mass mid-tier market. Quality properties and more space at affordable rents, this is the CAPREIT value proposition. Through this value proposition, our main growth focus going forward is on the mid-tier segment in suburban markets that offer size and affordability. With these mid-tier properties, we are providing quality suites at rates around CAD 1.75 per square foot, far below the suburban average. Our apartment properties contain mainly two-bedroom homes, space that is seeing strong demand. We are also the largest owner of townhome rental properties and the second-largest owner of manufactured housing communities in Canada. Renters today want more space, and our properties provide a range of affordable options for them. Our recent acquisition in Halifax is a key example. These brand-new properties around the downtown core contain many two and three-bedroom suites with lots of living space, and they rent for an average of only CAD 1.20 per square foot. Again, value is being created by offering quality rental suites with more space at affordable rates. We continue to target these fundamentals going forward. Further to this point, you can see on slide 27 that our residential suite portfolio is predominantly positioned in suburban markets around Canada's three largest cities. Our presence in downtown cores is minimal. For example, you can see in the GTA that approximately 22% of our total portfolio is located in suburban GTA markets, with only 5% of the portfolio being located downtown. Looking ahead, we will continue to build on our presence in more suburban markets or in nearby population centers with short commutes. We believe the affordability of our suites, as well as its geographical allocation, will continue to experience strong demand after the pandemic. In summary, looking ahead, we are very excited about our opportunities for further growth and enhanced unitholder value. Our focus on the mid-tier sector meets the increased demand for affordable, high-quality homes. Our predominantly suburban locations outside downtown cores and our larger size suites, townhomes, and MHC sites are meeting the needs for renters seeking more space. We are experiencing a strong pipeline of accretive acquisition opportunities and expect to see solid portfolio growth in the quarters ahead. The continuing low interest rate environment provides significant opportunities to acquire properties with strong cap rate spreads and to reduce interest costs on our refinancing initiatives. Most importantly, as our markets return to more normal conditions, we are confident we will see another year of record performance in 2021 and going forward. Thank you for your attention this morning, and we'd now be pleased to take any questions that you may have. Ladies and gentlemen, to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just a moment and call a Q and A roster. Your first question comes from Dean Wilkinson with CIBC. Your line is open. Thanks. Morning, guys. Morning, Dean. Mark, can you just talk a little about market rents and that 20% differential? Market rent is a bit of a nebulous term. Can you remind us what goes into your assessment of that 20% gap? Yeah. In our case, when we look at our in-place rents versus what we survey to be the opportunity in the market, that's clearly the gap. How we do that, Dean, is we're constantly ranking our quality of offering versus the quality of offerings of buildings in the immediate location, and we price ourselves accordingly. Okay? For the number three quality offering in competition for the local area, because apartments are a local business, we want to strive for being at least that rent level or higher. Constantly update it on a monthly basis. How should we think about, I guess, COVID kind of put us all on our heads in 2020, your mark on turns was 8% versus the 20%, I guess in 2019, it was more in the mid-teens. What should we be thinking about for 2021? Is it going to be more of a self-regulating year around bumps on turns and maybe 2022 is more back to that normal year that we would have saw pre-pandemic? Yeah. I'll give you a very qualified answer because it's completely correlated to the vaccine rollout and the easing of the pandemic. Okay? I wouldn't call anything that you see in the numbers a strong trend at this point, other than the strong results you're seeing from us. I wouldn't read too much into rent, and I'll tell you why. As we've all gone through this pandemic, and I mean all the apartment communities gone through it, we've really struggled how to find residents when there are no residents there for certain situations. We've been fighting on lowering rents, incentives, and improvements. The reality is people just aren't moving. They're staying at home. There's been this massive household consolidation go on. Okay? We don't know the numbers, Dean, but there's more kids living with their mom and dads right now than ever before in Canadian history. That's not a trend either. Okay. That I hope not. We believe that September is a magic month. Okay? Or as we get closer to September. The reason why is that's when the government's calling for a vaccine rollout to be substantially complete, and that's when there's a return to school, and that's when we believe things will start to get back to normal. I believe that that marks the beginning of what we're going to see in terms of new trends. If everything stays the way we think it's going to stay today, and it could move around, I think we could see back to normal rents probably in Q4 of this year and most likely Q1 of next. Of next year. When I'm talking about pre-pandemic rent levels, if not higher. The reason I say that, again, strange effects are going on in the marketplace. We've seen home value prices surge, so the affordability for home ownership has actually grown significantly during this pandemic because you've seen even further acceleration in home price valuations and a decrease in rents. The gap is the largest gap we've ever witnessed. Dean this is a bridge, the gap between the, let's say last year being 2019 at 13% or 14% on turnover versus 20% for the portfolio? Yep. We do see that the higher the gap between market and in-place rent, the less likely people are to leave. We actually have more built-up demand in older leases that are higher mark-to-market. That bridges the gap between our turnovers and our mark-to-market. Yeah, no, that does totally make sense. My second question, it might not be one that you can answer. I guess, there has been some growing concern around just the veracity of these new variants. Do you have an ability to track the incidences of positive case counts in your buildings? Have there been any sort of outbreaks or anything? Is that something that's maybe a little too invasive to track? No, no. We have the ability to track it. We don't have the information. It's tracked by public health. Okay? For privacy reasons, we don't know what's going on, but public health guidelines across the country are basically the same. When declaring an outbreak in an apartment building, it has to be more than three cases. We've only had two of those that breached three, and very short-lived. People went into quarantine, and it was fine. We do know, but we only know through public health, and the incidence of outbreak has been virtually nonexistent. Very, very well. Okay. I'm sure we had more flu cases in the past. We certainly aren't aware of any deaths. No doubt. Okay. That's great. I will hand it back. Thanks, guys. Yep. Thanks. Your next question comes from Lorne Kalmar with TD Securities. Your line is open. Thanks. Good morning, everyone. Good morning, Lorne. On vacancy, you guys are still doing pretty well, but what are your thoughts on sort of letting it drift a little bit higher over the course of the pandemic? At what point would you start pushing occupancy? Well, it's a little bit of science and a little bit of art because if you play the vacancy game too soon, you can really get behind, and it's very, very hard to catch up. Okay. In the context of the pandemic, if the return to normal is expected to be September, and that isn't quite right, then you've lost your leasing season because you get low lease velocity in January. You've really only got a fourth quarter to make up all the ground you've lost with accumulating vacancy. Okay. My mind has changed on this because I'm the one that's been saying, "Don't call a trend. It's not a trend. It's a pandemic effect." I believe that wholeheartedly. When it comes to holding out for value, we'll be more inclined to do that over the second and third quarter because our numbers aren't too bad, and we don't have that many properties that need to catch up. I really feel confident in the case of CAPREIT. If you look at the 10 buildings that we've got trouble in, the majority of those are student, university-focused buildings, and they will fill up quickly. We will hold off on value offering on those for sure. Okay. Yeah, you painted a pretty compelling picture of what you guys are expecting in September. Yeah. Maybe just switching gears to acquisitions. Are there any other big portfolios out there that are in your wheelhouse? There are. We'll remain restrained on value and what we pay. We've got a very refined, sophisticated acquisition department. Our team does a great job, and we'll stick to our modeling. The market will determine what the market will pay always, but I'm never upset when we lose a deal. It's just validation that we're sticking to a disciplined approach. Okay. Are there any markets where you're really seeing more opportunities than others? I would say what the pandemic has taught us and moved our mind to is space. Probably that will result in a continued focus on suburbs, as I said in the presentation, and some open-mindedness to smaller markets. By smaller markets, I mean plus 200,000 population markets. We've seen how incredibly resilient those markets have been in the pandemic, and I think that if people have more flex work options, they'll be more likely to move themselves into those markets. Sure. Just one last one from me. Have you guys seen any increase in demand in the townhomes and MHC sites as a result of the pandemic, or a sustained increase, I guess? Totally sustained. Yeah? Yeah. Okay, great. That's all from me. Thanks, guys. Yep. Yeah. Thanks. Your next question comes from Matt Logan with RBC Capital Markets. Your line is open. Thank you, and good morning. Good morning, Matt. Mark, maybe just following up on Lorne's question. When you talk about acquisition opportunities in smaller markets. Can you give us a sense for which markets you might be considering? Would those be in Ontario, Quebec, or across the country? Yeah. We've been pretty open. We like the Ottawa market, as an example. We could pretty much take any market across Canada that's got a population of, call it 200,000 people. We would just look to see what the opportunities are in those markets in terms of supply, growth, and demand. In terms of acquisition volume, would it be fair to say you're targeting something in line with what we've seen in 2020 or perhaps a bit more? Yeah, I think that's fair. We really have this disciplined approach to valuation and bid in the market, and what happens. What's been consistently revealing itself is that we're successful about 5% of the time. If we continue to be successful 5% of the time, given 300 deals of underwriting last year, we'll probably see ourself in the same kind of space of acquisition. Wouldn't be unreasonable to assume CAD 400 million-CAD 800 million of acquisitions, but it's really hard to say. Well, what you're doing certainly seems to be working. Maybe just changing gears to your letter to unit holders, you had talked about some growth opportunities in your MHC business to increase revenues. Could you give us some color on what that might entail? What the pandemic has also taught us is that the whole topic of affordable homeownership is on the minds of every government pretty much everywhere. We know that the MHC market offers a very affordable homeownership option for people. It's our intention to build on the development and intensification, I should say, of our existing MHC sites and look to get into developing new MHC sites. It's the one area of development that I believe is under-serviced and underappreciated, and it's an area that we have high expertise in. Great color. Maybe a question for Scott in terms of the fair value marks in the quarter. Can you talk a little bit about what drove the higher normalized NOI assumptions and where you're seeing the most cap rate compression in your portfolio? Yeah, for sure. I think realistically, we came into Q1 with some very strong cap rate compression, and we are cautious on that. Obviously in underwriting our evaluations in Q2 and Q3, we are again very cautious on what we were projecting from a stabilized NOI point of view. I think really it's reflective in Q4, more confident having been in this for a year, that maybe our underwriting on the NOI side was too conservative. Then the cap rate side, we continue to see incredible cap rate compression. I would say we think it's going to continue. Obviously, the interest rate environment is a huge driver of that, as well as the asset class just showing its resilience. Q4, the majority of it for the year was a cap rate compression, but it was about two-thirds cap rate compression and about one-third stabilized NOI impact. As far as where the compression is greatest, definitely the GTA and Ontario market would probably be where we saw the strongest compression. That's great color. Maybe one more from me, and I'll turn it back. We're about two months into 2021. Has there been any material improvement or deterioration in the rental markets so far this year? I'd say moderate deterioration. It's directly related to case count, is all I can say. It's not as severe as case count. We can see that our traffic obviously slows down with case count increases and improves when case count drops off. The second wave has been faster and probably just a far more quiet market because it was built on top of the slowest quarter of renting in the year, first quarter. I'm expecting an improvement in Q2, but all of this is in the context and backdrop of CAPREIT's incredibly strong results. We're still, as I said in the presentation, bad debt at year-end stood at 0.6%, and vacancies are obviously strong and still achieving increases on turnover. Well, I appreciate the commentary. Thank you very much. I'll turn the call back. Thanks. Your next question comes from Mario Saric. Sorry. Please state your company name. Your line is open. Hi, thank you. Scotiabank. Just a couple of follow-on questions. Maybe first off, on the 20% mark-to-market. It's probably hard to quantify but within that number, what would you estimate would be the required kind of CapEx spend per suite to get to that 20%? Are you saying the 20% is simply the gap to market rent as the condition of the unit stands today? I just go to traditional numbers, Mario, to pre-pandemic spend on in-suite. I would apply those kind of assumptions as being the normalized way of getting at that mark-to-market. The mark-to-market is just a very difficult number right now because we believe that the market isn't truly indicative of what the market is because of the pandemic. This is why I keep saying be very careful about looking at trend. There's the difference between pandemic effect and trend, and I think in the case of CAPREIT, you'll see a very fast reversal. Which again, it won't reverse with the trajectory of that change forever. It's just the end of the pandemic effect will result in a very quick normalization. Yeah. Okay. I recognize that the student population in your portfolio is low. You mentioned roughly about 10 buildings. I do think that one of the reasons why multifamily, yourself included, may have been feeling a little bit of pressure recently in terms of unit prices the market uncertainty with respect to the vaccine rollout efficiency that the Prime Minister has laid out. Yeah September being the target date for the government. September is also the start of the new school year. Just maybe a couple of points here, a couple of questions. Number one, within your portfolio, international students when they do come into the country for the school year, is it typically well in advance of September? Do you typically see them come in August, start of September? It'll be August. We'll have end of July, first week of August, we'll know exactly where we're at with the situation. In your view- Sorry, I can't say it enough. We've got 10 buildings, so in CAPREIT's case, we're talking about six to, you could argue eight because buildings that are just in the downtown core always have students, but six that are direct. We're talking about 700,000 foreign students returning to the country. An unlimited, we don't know. Sorry, not unlimited. We can't quantify the double cohort effect of kids that didn't go to university that did courses online last year that are going to re-enroll this year. The biggest one, by far, is the household consolidation one. Maybe I'm using the wrong words, just kids living at home with mom and dad that are not going to stay there. Anecdotally, I think we all have friends that have teenager, 20s or early 30 kids at home right now that aren't looking to stay. They're only home for safety reasons. That release of consolidation of households is going to be profound. Even though we're not core. I very much am of the belief that you'll see a really pronounced recovery in the core across the country once it's safe to live there. The cities have become anti-lifestyle when cities have grown and urbanized because of their lifestyle offering. The exact reasons why young people live in these big cities has become the exact reason you don't want to be there because of the deadly pandemic effect. Anti-lifestyle. Yeah. No, I appreciate that. I guess the catalyst is really when the universities and colleges kind of determine when in-person classes will commence. In your view, do you view that as the government hitting their targeted vaccination program? Is that sufficient for universities to commence in-person classes in September? Any thoughts on when we might get clarity on that front? Yeah. This is unconfirmed. It can be checked. Universities are starting to announce now in-class learning, I could have this wrong, but I was told yesterday McGill was either about to announce or had announced the return to in-class in September, and that's a positive sign at this early stage. I think we'll get real good clarity out of the universities in the next quarter. Perfect. Yeah. No, that's kind of your. Maybe shifting just one quick question on the MHC discussion. Do you have a broad kind of sense in terms of timeline with respect to potentially formulating your MHC strategy over the next two to five years? What we will be doing, what CAPREIT has been doing, is been adding somewhere in the neighborhood of 50- 70 homes per year to our existing MHC portfolio by infill. What we are doing, hopefully in the spring, it's all permit pending on our existing lands is looking at intensifying the development on four locations. I'm hoping that gives us an additional 100 homes. We're actively trying to understand the zoning process. That's the single biggest stumbling block to rolling out affordable home ownership in Canada is finding land that we can have zoned for this use. Politically, the people we've been engaging with, it's had a remarkably positive response. We're hopeful. We've got a track record of doing it. We're the second largest in Canada, there's been very little MHC development in this country for decades. I think there's plenty of room for capacity. Right. Would it be fair to say unlikely a 2021 event, but also unlikely something that you have to wait four, five years for. Yeah. It won't be five years, but we hope to give examples and evidence of our ability to develop these communities in 2021. That's my hope, to get some actual intensification going on in our existing sites. Okay. My last question is just on the distribution. I believe in 2019, you announced the distribution increase with Q4 results. The pandemic obviously took over throughout 2020. In the past, you've announced distribution increases as part of the AGM more often than with Q4 results. I'm just curious in terms of what the Board's thought process is on the distribution and whether it's simply a timing issue or whether it's kind of a wait-and-see approach in terms of how 2021 transpired. Yeah. We're incredibly proud of the fact that not only are we lowering guidance on our distribution range, we've now moved it from 60% to 70%. We're touching the bottom of that range as I said in the presentation. The Board feels very comfortable that we're moving in that direction. It's great stability. We are going into a second wave. We're moving with caution, obviously, when these kind of decisions are made. It's clear that we have the capacity to consider that option. Okay, great. That's it for me. Thank you. Thanks, Mario. Your next question comes from Brad. Sorry, Brad Sturges from Raymond James. Your line is open. Hi, good morning. Good morning, Brad. Just to follow on to Mario's question on the MHC front. It sounds like, if you do pursue some of the infill or intensification opportunities, that could be on your own. If you're going to maybe start a more, a larger formal program, would that still be potentially with a partner? Well, we haven't gone as far as to announce partnerships yet. When it comes to apartment transactions, let's just follow CAPREIT's thinking there. We've been very comfortable- with buying apartment buildings in the final stages of construction or the early stages of lease-up, when we can properly assess rents and we de-risk the development costs. Our track record at buying those apartment buildings at good cap rates is strong. Okay. We think that for whatever development profit we could be saving by developing apartment buildings, our existing strategy has been a good one. We'd be very open to applying the same thinking when it comes to MHC development. The CAPREIT is, you've heard me say, I believe one of Canada's greatest REITs, and we've done a fantastic job of adding value in in-place income opportunities and don't proclaim to be development experts. We would always, as everything, proceed with caution here. It's being thoughtful, mindful, and planned in our approach to a development program. What we need right now is political will. Once we feel there's political will on the rezoning process, we will consider how to proceed with the strategy. It's a hyper-fast strategy, Brad. Once you have zoning, it's not like building an apartment building. You're building land infrastructure, as you know, and the homes are manufactured and brought in quite quickly. The development cycle is hyper-fast relative to apartments. Got it. It's everything geared around zoning. Yep. I guess in the past too, capital recycling has been more opportunistic than anything. Could this year or going forward, could you be a little bit more active from an asset rotation perspective, or is it still going to be very opportunistic? I think it's the new CAPREIT to take a hard look at where we think we've created, from our perspective, the most amount of value. If somebody else sees more value in that opportunity, then that's fine. We're extremely open-minded today. It's not really a change of thinking, it's more the size of the platform. We're big enough that we don't need to just grow. We have a great track record of doing that with acquisitions. Again, our acquisition team, it's a big team, it's a great team, and they do a wonderful job at analyzing our existing properties and qualifying opportunities to look at disposal. Wouldn't call any of this major deviations from strategy. It's just building on what's worked. I'd say the same thing with MHC development. We're easing into it, probably with more conviction than apartment development. When it comes to dispositions, we're open-minded and no fundamental change in strategy there. It opened to recycling capital. Got it. Great. Thank you. Thanks. Your next question comes from Mike Markidis with Desjardins. Your line is open. Hey, everyone. One quick technical one here and a couple of high-level ones. I know, Mark, you don't want us to dwell too much on the recent spreads over the past, the turnover spreads over the past three quarters. Just a technical question. Are the impacts of the inducements included in that spread? Are you lowering it, or is that something inefficient too? Scott, you can answer the question. I'm not sure I get it technically correct. Yeah. The spreads are based on rent? Yeah. The turnover numbers or the mark-to-market would not include any level of incentive. Okay. Yeah, that's not incorporated. We do have good disclosure on the levels of incentives. They have increased this year a little bit. We are starting to move away from them, and I think we talked about being more comfortable with vacancy, which, to some degree, inducement is just a level of vacancy. Yeah, it's excluded. Mike, if I can address that point, because what you're raising is actually an important point. This is going to sound a little bit confusing because it's not a trend environment, okay? What we found was incentives weren't working. It's just not moving the needle. Lowering rents really isn't moving the needle either. What we didn't know is the duration of this pandemic. The conservative approach that CAPREIT always takes is how long is this going to go on for, and we have to hold our revenues intact. We tried to combat that with traditional tools like rental rate adjustment, incentives, and quite frankly, not effective in the long run. There's just people not moving, as I said, because of the pandemic. Scott just alluded to it. We're taking a very hard look now that we believe that our prime minister is giving us good guidance on September. We have something more solid we can work towards. We will be reviewing those very carefully. Despite the fact that traffic will be probably more impaired over the next few weeks than it was in the first wave of the pandemic. We won't be as open to using those tools as we were. Okay. If I understand, in the short term, we're not likely to see that number increase as quickly as it did in the last couple of quarters, just owing to regulation, I guess. Yeah. There's a 12-month run rate on some of those incentives, so they have to bleed off. Yes. Yeah the rate at which you're using them, you're totally right. That is unlikely to continue at the same rate. Okay. Which leads to my next question, just a clarification. Can you remind us, from a rent allowable guideline increase perspective, as long as you don't see three months in Ontario, it doesn't factor into your, like, you're able to burn those off next year, correct? Without or you restricted in terms of other rents before re-renting. Sorry, Mike, I couldn't quite hear you. If you could repeat that question. Yeah. No, I'm just trying to make sure I'm clear on the maximum allowable increase being set at 0% next year in Ontario. Right you've used incentives. Is it three months or what's the rules again on that, in terms of can you burn off if you gave someone two, three months, are you allowed to burn that off and that doesn't count as an increase under the guideline? We don't use our incentives that. I know what you're referring to, but we do not use our incentives that way. Scott, you can give more color to it, but some people use those incentives. We don't do that. The guideline increase is on the existing rent, and that's it. It's just straight line. If your rent was CAD 1,200, you were able to get a 1.4% guideline increase. Government's saying zero, it's zero for the year. You can't offset it with any sort of other number in Ontario. Okay. Just with respect to regulatory concern, there's been some intervention and obviously unprecedented times, unprecedented measures by governments to intervene. When we come out of the pandemic, is your thought process that that pressure will abate somewhat or are you expecting to have more regulatory concern as we emerge from the pandemic? It's an interesting question because traditionally, if you go into disturbed economic times, which we all thought we were going to, haven't seen real evidence of that yet. You would expect to see rents recede and political pressure ease off. What we've had happen here is this low interest rate environment has really, as I said, accelerated the homeownership market to clearly heated levels. There's no political pressure to that arena. There should be, but there's not. Okay. Where the political pressure then moves is to rental. I think it has a lot to do with the anxiety levels of number one, people that are frozen out of the homeownership market, that feel trapped by that, and how bad the recession, if there is one, is on people. When you look at our collection rate, and yes, there's government assistance. It's been quite strong. There's not that evidence of government intervention even being necessary at this point. I think it's just been highlighted because there's a lot of anxiety out there, and understandably so. When there's uncertainty, these issues all escalate. The government seems to understand the only real solution to what we're talking about here is supply, and they do seem to understand that. I'm hopeful that the anxieties just calm. Okay. That's actually a great segue into my last question. Just we've talked about undersupply even now, but leading up to the pandemic and how that's causing rental rate inflation or market rent inflation. You've also talked to the fact that new supply comes on and it is in that CAD 3-CAD 5 per square foot range in select markets where you're not sure what the depth of leasing demand is for some of that product. I guess given that this can only deliver at a certain cost, what's got to give? How do we address that going forward? I think there needs to be creativity, and that's why I use the manufactured home ownership as an example. I think the problem is that we've all been trying to solve the affordable housing problem by looking at how we can make concrete buildings half price, and there is no way to do that. As a result, there's been very little progress made. You can't build something for half price. How do you charge half-price rents? That is the heartbeat of why CAPREIT is such a great value offering, is because we're buying income, which really creates a valuation of less than 50% of replacement cost. That is why we're so strong. I don't think there's a clear-cut answer as to how we get out of this without high government conviction and possibly intervention to solve the zoning issue. It's all about the length of time for zoning. It's just far too long for the population ambitions that the federal government has does not align with the conviction to zone at the municipal level. Quite frankly, I feel bad for the provinces. They tend to be stuck in the middle of the problem that they regulate. It is a bit of a complicated issue that needs government unity. If we're going to move through a period of growing our population, as I think we should, we need to have strong housing policy that's led at a federal level that can coordinate the thinking and activities of provincial and municipal governments. It's a dislocation between those three level of governments which has made our portfolio so valuable, and it's a dislocation and unity of those three governments which will help ease the supply problem. Okay. Thank you. I appreciate your comments, and congrats on an incredible year this way. Thanks, Mike. Your next question comes from Joanne Chen with BMO Capital Markets. Your line is open. Hi. Good morning, guys. Good morning. Let me just go. Sorry if all of you have addressed this earlier, you kind of quoted that CAD 400 million-CAD 500 million of acquisitions in 2021. Would it be fair to say that would be more skewed towards Canada at this juncture in terms of where you're seeing the opportunities? When I quote that number, I'm quoting the Canadian acquisitions. Acquisitions. Canadian. Okay, thanks. It really is a tough one. You've probably seen in our investor deck. We have that little pyramid that shows how many deals we underwrite and how many transactions that we do. Quite frankly, our success rate is not so impressive. When you look at the dollar value of that success rate, during a pandemic year, we put almost CAD 700 million of acquisitions into the portfolio. Year before it was over CAD 1 billion. We're incredibly disciplined. Our true strength is our ability to cover the country and underwrite so many deals with a disciplined approach. I would just look at that track record in 2019 and 2020, I can't see a reason why it would be different in 2021. You don't know, A, what's going to come to the market, and you don't know how much froth is going to be out there for multifamily assets given what's happened during the pandemic. We'll stay disciplined, but I'm hopeful that we can continue to find value. If we can't find value, we've got a great portfolio, and I'm not driven to grow just for the sake of growth. I'd just add that we are still very bullish on Europe. happy to support ERES in their growth if strong opportunities happen. I think from a CAPREIT point of view, we like the European market, and then you'll see from the slides our ability to hedge the FX and create incredibly low interest rates levered up to close to 100% makes our European strategy extremely accretive. Definitely not afraid to grow there as well. Yeah. Would there be opportunities to, I guess further increase your interest in IRES as well or? Yeah. Listen, our attentions are really and primary focus has been in the support of ERES. We continue to support our IRES investment and value that investment. Looking at the track record, the support in the last couple of years that's been welcomed by the ERES Board has been supporting that entity. As Scott says, we really like the dynamics and deal flow opportunities in the Netherlands, and we're very happy with our Irish investment. Okay. Maybe just another way to circle it back to the regulatory risk question. Given the pace of vaccinations that we are able to get here now in Canada, it seems like that recovery is being pushed back or keeps getting pushed back. Hopefully, we will get a big- Hope in the next month or so. Let's hope so What is your thinking maybe in terms of, I guess specific to Ontario, the possibility for the extension of the rent freeze into 2022 right now at this juncture? I think it's hard to say. The magnitude of that, or the impact, I should say, of that rent freeze in 2021 isn't great, but it's not overly material to CAPREIT. It's not something that we would openly, I guess, welcome because we have costs that are growing and residents that we need to service and employees we need to take care of. It's not of concern to me. I think we're in the environment we're in, and until it's stable, it's hard to call what's going to happen. Yeah. For sure. Okay, no, that's helpful. That's it from me. I'll turn it back. Thanks. Thank you. Your next question comes from Matt Kornack with National Bank Financial. Your line is open. Good morning, guys. Geez, you're awfully popular here today, Matt. I know. I know. I also need to get better at clicking the button because then hopefully this will end. Yeah. Just two quick questions. It's your time. One, six properties. We also saw the announcement from McGill University. Are any of those your assets in close proximity to McGill? Yes. That one property that you have in the McGill ghetto is about as core and central to the university as you can get. Yeah talk to kind of the quantum of vacancy in those six properties. Sure. Hold onto your chair and remember that CAPREIT vacancy is extremely low overall levels. We've been hardest hit in Halifax, Edmonton, and then Montreal. Okay. Those numbers in those buildings are + 30%- 40%, and there's really not much that can be done about that. The good news on that front is that they're going to fill up fast if September is back to in-place learning, and if the vaccine is rolled out, and mom and dad are comfortable letting their kids go to school. There'll be no lack of students. When you're trying to catch the overall market and solve problems of that magnitude, you can't. When you've got a returning market, it'll fully return, especially with the double cohort effect that we think is out there. We don't know for sure, but we think that there's a number of kids that didn't go away to school last year that wanted to, that are going to be enrolling first year this year, as well as the foreign student effect. I think these high vacancies bode well for CAPREIT. I've never said that before in the history of our company. I think that it allows us to get market rent, and it'll allow us to improve vacancy very, very quickly. All right. I think that's a fair point. I know that property in particular in Montreal. Yeah going to be in high demand eventually when McGill is back, and you've got some near Concordia as well. One of my favorite Canadian cities now. Quickly on mortgage. You were able to basically term out your mortgage, 25% of your mortgage is at sub 2% for over 10 years. It sounds like you plan on doing a fair bit. Just wondering, bond yields have moved a bit of late. Do you have any- Yeah sort of, or what is the amount of mortgages that you kind of have a lock on, and at what rate at this point? You don't have much variable debt to repay. defeasing some of your existing mortgages to repay them at this point? Look, we were super aggressive. We broke mortgages and did everything we could to create as much liquidity in 2020. Spreads have come out from that 180, we are looking closer to 220 today, maybe 215. Just on doing that in advance, we probably saved CAD 50 million of interest versus today's rate. We will look at a little bit more, some short-term stuff to fill in our portfolio. I think I did a pro forma of kind of where we are focused on terms for next year. We really think being aggressive right now is the right thing to do, even if that means sitting on a little bit of cash. The acquisition pipeline has been robust. We are not afraid. To be fair, we don't have much room on our line left to pay down. We have about CAD 100 million, but we're sitting on cash, so we're kind of net neutral. It'll be utilizing cash for acquisitions. We'll continue to be aggressive getting at those today because we don't want to miss this low-rate environment. Okay. No, fair enough. Have to echo some prior guys, a very impressive quarter in the context of where we are today. Thanks, Matt. Thanks a lot, Matt. Okay. There are no further questions. At this time, I'll turn the call back over to Mr. Kenney for closing remarks. Well, that was a great catch-up of questions. Probably one of the longest question sessions that I can remember. I would just use that as a reminder that Scott and I are always available to answer questions throughout the quarter. Please just reach out and let us know. We've done significant investor outreach, and they're always there for people that are showing further interest in CAPREIT and a better understanding. I'd like to thank you again for your time and attention today. If you have any further questions, like I said, please don't hesitate to contact us at any time. Thanks again, and goodbye. This concludes today's conference call. You may now disconnect.