Mr. Philip Fraser reports

KILLAM APARTMENT REIT ANNOUNCES A 9.5% INCREASE IN FFO PER UNIT IN Q2-2016; STRONG SAME PROPERTY PERFORMANCE, ACQUISITIONS AND DEVELOPMENTS AND INTEREST SAVINGS DRIVE GROWTH

Killam Apartment Real Estate Investment Trust has released its second quarter 2016 results, including diluted funds from operations (FFO) per unit of 23 cents, up from 21 cents in second quarter 2015.

"Q2 2016 marks the sixth-consecutive quarter of strong FFO-per-unit growth for Killam," noted Philip Fraser, president and chief executive officer. "Increased net operating income from our same-property portfolio, accretive acquisitions and developments, and interest expense savings on refinancings all contributed to the 9.5-per-cent increase in FFO per unit.

"In addition to generating strong operating results, we have strengthened Killam's balance sheet and expanded the trust's acquisition capacity following the closing of our $98.0-million equity raise in June. With the raise proceeds we: (1) reduced debt with the redemption of $57.5-million of convertible debentures on July 4, 2016, (2) completed $57-million in high-quality acquisitions and (3) increased our portfolio of unencumbered assets. In July, we expanded our acquisition line of credit by $28-million. With more conservative leverage, added acquisition capacity and an adjusted funds from operations (AFFO) payout ratio of 81 per cent, we are well positioned for growth in the future."

                  FINANCIAL AND OPERATING HIGHLIGHTS

                         For the three           For the six 
                          months ended           months ended
                      June 30,   June 30,    June 30,   June 30,
                         2016       2015        2016       2015
FFO per unit/share
(diluted) (1)          $ 0.23     $ 0.21      $ 0.41     $ 0.35
AFFO per unit/share
(diluted) (1) (2)      $ 0.20     $ 0.18      $ 0.36     $ 0.30
AFFO payout ratio --
rolling 12 months          81%        91%         81%        91%
Apartment occupancy
(3)                      95.7%      95.1%       95.7%      95.1%
Same-property
revenue growth            1.8%                   1.6%
Same-property net
operating income
growth                    3.8%                   5.7%
                        -----                  -----

(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 are an 
international financial reporting standard.
(3) Occupancy represents actual residential rental
revenue, net of vacancy, as a percentage of gross 
potential residential rent from all properties.

Summary of second quarter 2016 results and operations

Growth of 9.5 per cent in funds from operations per unit

Killam generated FFO-per-unit growth of 9.5 per cent, earning 23 cents in second quarter 2016 compared with 21 cents in second quarter 2015. The growth was primarily attributable to strong same-property net operating income, contributions from developments and acquisitions, and interest expense savings. Also contributing to higher FFO in the quarter was a $500,000 early payout of a head lease for commercial space at Killam's Calgary asset. These increases were partially offset by a 5.6-per-cent increase in the weighted-average units outstanding.

Growth in rental rates and improved occupancy

Killam continues to generate top-line growth, achieving same-property revenue growth of 1.8 per cent in second quarter. Increased rents and higher occupancy levels both contributed to improved revenue in the quarter. The Halifax market outperformed for the third quarter in a row, achieving 3.8-per-cent same-property growth, the highest revenue growth of Killam's core markets. Halifax, representing 36 per cent of Killam's NOI, is a strong rental market, benefiting from economic growth, urbanization and strong demand for rental apartments from an older demographic transitioning from home ownership to apartment rental.

Operating expense savings boost NOI growth

Killam's same-property expenses decreased by 1.3 per cent in second quarter, contributing to a 3.8-per-cent increase in same-property NOI. Lower energy and water expenses, garbage contract savings, and a quarter-over-quarter reduction in snow-clearing costs more than offset moderate increases in other operating costs.

Equity raise of $98-million completed

Killam completed a $98.0-million equity raise on June 2, 2016, issuing 8,165,000 trust units at a price of $12 per unit. The net proceeds from the offering were used to redeem $57.5-million of convertible debentures on July 4, 2016, to finance acquisitions and to increase Killam's portfolio of unencumbered assets. The transaction strengthened Killam's balance sheet. Subsequent to the redemption of the convertible debentures on July 4, 2016, Killam's debt to total assets was reduced to 53.1 per cent, compared with 55.8 per cent at March 31, 2016.

Acquisitions totalling $57-million completed

During the second quarter, Killam completed $56.6-million of acquisitions, exceeding management's minimum acquisition target of $50-million for the year. Acquisitions included a 50-per-cent interest in the 173-unit Kanata Lakes Apartment III in Ottawa for $31.1-million, the remaining 51-per-cent interest in the 246-unit Garden Park Apartments in Halifax for $23.7-million and a 28-unit apartment building in Fredericton for $1.8-million. The Garden Park acquisition was completed without mortgage debt, allowing Killam to increase the value of its unencumbered assets to approximately $47-million, and its acquisition capacity to approximately $100-million.

Lower interest rates contributed to earnings growth

Killam benefited from lower interest rates on mortgages refinanced in 2015 and during the first half of 2016, contributing to a 5.2-per-cent reduction in same-property interest expense in the quarter. During second quarter 2016, Killam refinanced $42.9-million of maturing apartment mortgages with $58.4-million of new debt at a weighted-average interest rate of 2.60 per cent, 180 basis points lower than the weighted-average interest rate prior to refinancing. Killam's weighted-average mortgage interest rate decreased to 3.15 per cent as at June 30, 2016, from 3.27 per cent as at Dec. 31, 2015.

Financial summary

The attached financial summary table provides Killam's consolidated financial highlights for the periods ended June 30, 2016, and 2015, per international financial reporting standards. A reconciliation of net income to FFO is also provided. FFO is recognized as the industrywide standard measure of operating performance for real estate entities; however, it is not a measure defined by IFRS.

                        CONSOLIDATED FINANCIAL HIGHLIGHTS
                     (in thousands, except per-unit amounts)

                                   For the three months          For the six months
                                           ended                       ended
                                  June 30,      June 30,      June 30,      June 30,
                                     2016          2015          2016          2015

Property revenue                $  43,847     $  41,452     $  86,054     $  80,988
Net operating income            $  27,270     $  25,196     $  50,700     $  45,851
Income before fair value
adjustments, loss on
disposition and income taxes    $  14,323     $  12,953     $  24,292     $  22,075
Fair value adjustments          $  (8,740)    $    (613)    $ (13,212)    $     180
Net income                      $   3,666     $   8,942     $  48,833     $  16,110
Net income attributable to
unitholders/shareholders        $     458     $   8,753     $  45,371     $  15,675
                                   ------        ------        ------        ------

                   RECONCILIATION OF NET INCOME TO FFO  

                               For the three months      For the six months
                                      ended                    ended
                                June 30,    June 30,    June 30,    June 30,
                                   2016        2015        2016        2015

Net income                    $   3,666   $   8,942   $  48,833   $  16,110
Fair value adjustments            8,740         613      13,212        (180)
Non-controlling interest           (271)       (264)       (525)       (509)
Deferred tax expense
(recovery)                        1,626       3,215     (38,018)      5,962
Interest expense related to
exchangeable units                  705           -       1,416           -
Depreciation of owner-
occupied building                    45          46          78          92
Unrealized loss on
derivative liability                131           -         131           -
Loss on disposition                 291         183         265         183
REIT conversion costs               200         177       1,250         177
                                 ------      ------      ------      ------  
FFO                           $  15,133   $  12,912   $  26,642   $  21,835
                                 ------      ------      ------      ------  
FFO per unit/share (diluted)  $    0.23   $    0.21   $    0.41   $    0.35

Financial statements

Killam's condensed consolidated interim financial statements and management's discussion and analysis for the quarter ended June 30, 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 Aug. 4, 2016, at 11 a.m. Eastern Time. The dial-in numbers for the conference call are 416-340-2217 (in Toronto) or 866-696-5910 (toll-free, within North America). The passcode is 7178655.

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

We seek Safe Harbor.