Mr. Philip Fraser reports

KILLAM APARTMENT REIT ANNOUNCES 20% INCREASE IN FFO PER UNIT IN Q1-2016

Killam Apartment Real Estate Investment Trust has released its first quarter 2016 results, including diluted funds from operations per unit of 18 cents, up from 15 cents in first quarter 2015.

"Our record Q1 results set Killam up for a strong 2016," noted Philip Fraser, president and chief executive officer. "Our same-property portfolio performed exceptionally well, achieving an 8-per-cent increase in net operating income, benefiting from top-line growth and lower energy and utility costs. Our acquisitions and developments completed in 2015 and interest expense savings on refinancings also contributed to the 20-per-cent increase in FFO per unit."

                 FINANCIAL AND OPERATING HIGHLIGHTS

                                             For the three months ended
                                                March 31,      March 31, 
                                                    2016           2015

FFO per unit per share (diluted) (1)               $0.18          $0.15
AFFO per unit per share (diluted) (1) (2)          $0.16          $0.12
AFFO payout ratio -- rolling 12 months                82%            94%
Apartment occupancy (3)                             95.7%          95.5%
Same-property revenue growth                         1.5%
Same-property net operating income growth            8.0%

(1) Killam completed a REIT conversion on Jan. 1, 2016. Per-unit
references in 2016 are based on trust and exchangeable units.
Per-share references in 2015 are based on common shares.
(2) Adjusted funds from operations, a non-international financial 
reporting standard measure.
(3) Occupancy represents actual residential rental revenue net of 
vacancy, as a percentage of gross potential residential rent from 
stabilized properties.

Summary of first quarter 2016 results and operations

Twenty-per-cent growth in funds from operations per unit

Killam generated FFO per unit growth of 20 per cent quarter over quarter, earning 18 cents in first quarter 2016 compared with 15 cents in first quarter 2015. The earnings growth was attributable to strong same-property net operating income, contributions from developments and acquisitions completed in 2015, and interest expense savings from refinancings.

Higher rents and improved occupancy results in same-property revenue growth

Killam continues to generate top-line growth, achieving same-property revenue growth of 1.5 per cent in first quarter. Increased rents and higher occupancy levels both contributed to improved revenues. Importantly, same-property revenues were up 3.2 per cent in Halifax in first quarter, the highest revenue growth in Killam's core markets.

Warmer temperatures and lower gas costs drive 8-per-cent NOI growth

Killam's same-property expenses decreased 5.6 per cent in first quarter 2016, contributing to the 8.0-per-cent increase in same-property NOI compared with first quarter 2015. Lower natural gas, oil and electricity costs led the reduction in expenses with a 12.9-per-cent decrease in same-property utility and fuel expense. The savings were attributable to warmer weather, lower natural gas costs in New Brunswick and Ontario, and lower oil prices and energy-efficiency initiatives. A decrease in operating expenses and relatively flat property tax expenses also contributed to the strong NOI growth in the quarter.

Developments and acquisitions contribute to FFO growth in 2015

Killam completed $54-million in acquisitions in 2015 and $38-million of condo-quality apartment developments. These properties contributed an additional $800,000 in FFO in first quarter 2016 compared with first quarter 2015.

Lower interest rates contribute to earnings growth

Killam benefited from lower interest rates on mortgages refinanced in 2015 and first quarter 2016, resulting in a $400,000 reduction in same-property interest expense in the quarter. During first quarter 2016, Killam refinanced $13.9-million of maturing apartment mortgages with $28.4-million of new debt at a weighted-average interest rate of 2.51 per cent, 208 basis points lower than the weighted-average interest rate prior to refinancing. Killam's weighted-average mortgage interest rate decreased to 3.23 per cent at March 31, 2016, from 3.27 per cent at Dec. 31, 2015.

Financial summary (in thousands, except per-unit amounts)

The attached consolidated financial highlights table provides Killam's consolidated financial highlights for the periods ended March 31, 2016, and 2015, per international financial reporting standards.

                CONSOLIDATED FINANCIAL HIGHLIGHTS               
                             (in $000)
                                              For the three months ended
                                                 March 31,      March 31, 
                                                     2016           2015

Property revenue                                  $42,207        $39,536
Net operating income                              $23,430        $20,655
Income before fair-value adjustments, gain on
disposition and income taxes                       $9,969         $9,122
Fair-value adjustments                            ($4,472)         $793
Net income                                        $45,167         $7,168
Net income attributable to
unitholders/shareholders                          $44,913         $6,922

New acquisitions in Halifax and Ottawa

Killam is pleased to announce two acquisitions totalling $54.6-million scheduled to close during the second quarter of 2016. Killam has agreed to acquire the remaining 51-per-cent interest in Garden Park Apartments in Halifax for $23.7-million, which will result in Killam owning 100 per cent of this well-located property. Killam has been acquiring partial ownership interests in the 246-unit building since its first investment in the property in 2005 and has been acting as the property manager for the building since 2011. The Garden Park acquisition will be fully financed through a new mortgage on the property. The property is currently free and clear of mortgage debt. The acquisition is expected to close in June, 2016.

Killam is also scheduled to acquire a 50-per-cent interest in Kanata Lakes Apartments III, located at 1047 Canadian Shields Ave. in Ottawa. The 173-unit apartment building was completed in late 2014 and is the third of a five-building complex with a shared clubhouse. Killam already has a 50-per-cent interest in both Kanata Lakes Apartments I and II. The acquisition cost of $30.8-million for Killam's 50-per-cent interest will be financed through a new 10-year CMHC-insured mortgage and cash. The acquisition is expected to close in May, 2016. Killam and its 50/50 partner have the two remaining buildings in the Kanata Lakes apartment development under contract, with closings scheduled for first quarter 2017.

Mr. Fraser commented on the acquisitions, saying: "These two acquisitions enable us to expand our portfolio with two exceptional assets, with which we are already familiar. Acquiring the remaining 51-per-cent interest in Garden Park Apartments gives Killam full control over one of the best-located apartment properties in Halifax. Also, the purchase of the 50-per-cent interest in Kanata Lakes III builds on our already-established interest in this unique condo-quality apartment development and increases our investment in the Ottawa market."

Financial statements

Killam's condensed consolidated interim financial statements and management's discussion and analysis for the quarter ended March 31, 2016, are posted under financial reports in the investor relations section of Killam's website. Readers are directed to these documents for financial details and a discussion around Killam's results.

Results conference call

Management will host a conference call to discuss these results on May 11, 2016, at 2 p.m. Eastern Time. The dial-in numbers for the conference call are 416-340-8527 (in Toronto) or 866-355-4959 (toll-free, within North America).

A live audio webcast of the conference call will be accessible on the company's website.

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