Mr. Philip Fraser reports

KILLAM APARTMENT REIT ANNOUNCES Q3-2023 OPERATING PERFORMANCE AND FINANCIAL RESULTS

Killam Apartment Real Estate Investment Trust has released its results for the three and nine months ended Sept. 30, 2023.

"We are pleased to deliver another strong quarter of operating and financial performance," noted Philip Fraser, President and CEO. "Top line growth remained robust, driving 8.1% growth in same property net operating income.

"Our disposition program remains on track, with a total of $130.5 million in property sales to-date, and more closings expected during the remainder of the fourth quarter. Our strategy of selling non-core assets and using the proceeds to pay down variable rate debt has been an important step in strengthening both our portfolio and our balance sheet. We ended the quarter with a debt to total assets ratio of 42.8%, the lowest in Killam's history.

"Killam's development program continues to be an important component of our long-term strategy. During the third quarter, we completed two developments, in Halifax and in Kitchener, adding $94 million of new, high-quality units to our portfolio."

Q3-2023 Financial & Operating Highlights

• Reported net income of $68.3 million, an increase of $64.7 million compared to $3.6 million in Q3-2022. The growth in net income is primarily attributable to $38.5 million of fair value gains on investment properties in the period.
• Generated net operating income (NOI) of $60.5 million, a 6.6% increase from $56.8 million in Q3-2022.
• Earned funds from operations (FFO) per unit of $0.32, a 3.2% increase from $0.31 in Q3-2022.[1]
• Increased adjusted funds from operations (AFFO) per unit by 3.7% to $0.28, from $0.27 in Q3-2022, and reduced the rolling 12-month AFFO payout ratio by 100 basis points (bps) to 72%, from 75% in Q3-2022.1
• Achieved a 5.6% increase in revenue for the same property portfolio compared to Q3-2022.
• Generated 8.1% same property NOI growth.2

Summary of Q3-2023 Results and Operations

Generated Net Income of $68.3 Million

Killam generated net income of $68.3 million in Q3-2023, compared to $3.6 million in Q3-2022. The increase in net income is primarily attributable to fair value gains on investment properties of $38.5 million, compared to fair value losses of $41.3 million in the same period in 2022. The gains in Q3-2023 were a direct result of strong NOI growth, partially offset by an expansion in cap rates in Ontario, BC and PEI. The fair value losses in Q3-2022 were related to an expansion of cap-rates across the portfolio.

Achieved Same Property NOI Growth of 8.1%

Killam achieved an 8.1% increase in same property NOI during the quarter, based on a 5.6% increase in same property revenue and a 0.7% increase in same property operating expenses. Revenue growth was driven by a 4.7% increase in apartment rental rates, coupled with a 10 bps increase in same property apartment occupancy and further reduction in rental incentives. General operating expenses increased 1.7%, driven by higher wages and contract costs, partially offset by lower insurance, bad debt and repairs and maintenance costs, while property tax expense decreased 0.9%. Lower natural gas pricing partially offset higher electricity and water costs, resulting in only a 1.3% increase in utility and fuel expenses compared to the same period in 2022. The strong performance resulted in an operating margin expansion of 160 bps for the same property portfolio compared to Q3-2022.

Delivered 3.2% FFO per Unit Growth and 3.7% AFFO per Unit Growth

Killam delivered FFO per unit of $0.32 in the quarter, a 3.2% increase from $0.31 per unit in Q3-2022. AFFO per unit increased 3.7% to $0.28, compared to $0.27 in Q3-2022. The growth in FFO and AFFO was attributable to strong NOI growth from Killam's same property portfolio, coupled with incremental contributions from developments completed in 2022. This growth was partially offset by a 1.3% increase in the weighted average number of Trust Units outstanding, along with higher interest expense as a result of rising interest rates.

Continued Progress on Killam's Disposition Strategy

During Q3-2023, Killam completed the disposition of Parkwood Apartments, located in Saint John, NB, for gross proceeds of $15.0 million. Parkwood Apartments is a complex containing 205 apartment units across 20 buildings. It was originally built in 1947 and was acquired by Killam in 2004. Proceeds were used to reduce Killam's credit facility and to fund on-going developments. The sale of the property aligns with Killam's strategy to optimize value from the existing portfolio. During the first nine months of 2023, Killam completed five dispositions for gross proceeds of $97.0 million.

Completion of Two Development Projects

Two developments reached substantial completion in Q3: Civic 66, containing 169 apartment units and 3,000 SF of ground floor commercial space located in Kitchener, and The Governor, containing 12 luxury apartment units and 3,500 SF of ground floor commercial space located in Halifax. The total combined development cost of the properties was $94.1 million. Civic 66 is currently 54% leased, while The Governor is currently 42% leased. The Carrick, a 139-unit property located in Waterloo, is currently under development and expected to be completed in the second half of 2025, with an expected cost of $83.5 million. Killam also owns a 10% interest in the second phase of the Nolan Hill development in Calgary, which is expected to be completed in December 2023. Killam has a commitment to purchase 100% of the development for $65.0 million.

Focus on Reduced Leverage

Year-to-date, debt to total assets decreased 250 bps, from 45.3% at December 31, 2022, to 42.8% at September 30, 2023. Since the beginning of the year, Killam's variable rate debt has been reduced by $110.5 million, as funds from dispositions, mortgage refinancings, and general operations were used to reduce the balance on Killam's credit facility, and permanent financing has replaced construction loans. Variable rate debt as a percentage of total debt has decreased to 4.9% at the end of Q3-2023 from 9.8% as at December 31, 2022. Looking ahead, Killam expects to continue to reduce variable rate debt during the fourth quarter, with the placement of permanent financing on two developments and a further reduction in the credit facility. Overall, Killam's weighted average mortgage interest rate increased 26 bps at the end of Q3-2023 to 3.0%, compared to 2.7% at December 31, 2022. The maturity dates for Killam's mortgages are staggered to help mitigate interest rate risk, and the weighted average term to maturity is four years.

ESG Progress

In October, Killam received a green, three-star designation for its 2023 GRESB real estate assessment. During the quarter, Killam invested $2.5 million in energy initiatives, and, to date, Killam has 19 photovoltaic (PV) solar arrays producing power, with an expected 1,900 MWh of annual energy production. PV solar arrays, along with geothermal heating and cooling systems at Killam's new developments, illustrate Killam's ongoing commitment to lowering its carbon footprint. Additionally, Killam is installing Level II electric vehicle (EV) charging stations across its portfolio, with 355 charging stations operational at 47 properties, plus an additional 54 charging stations underway at seven additional properties. Killam's 2022 ESG report can be accessed on its website. The report summarizes Killam's commitment to creating and maintaining sustainable communities, and details its progress and future plans to achieve its long-term targets.

Additional Dispositions Subsequent to Quarter End

On October 5, 2023, Killam completed the disposition of Edward Court, a 96-unit apartment building located in Miramichi, NB, for a sale price of $11.0 million, and net cash proceeds of $5.1 million after mortgage repayment. On November 2, 2023, Killam completed the disposition of two apartment buildings totalling 139 units located in Sydney, NS, for a combined sale price of $22.5 million, and net cash proceeds of $10.1 million. Year-to-date, Killam has completed $130.5 million of dispositions.

Financial Statements

Killam's condensed consolidated interim Financial Statements and Management's Discussion and Analysis (MD&A) for the three and nine months ended September 30, 2023, are posted under Financial Reports in the Investor Relations section of Killam's website and are available on SEDAR+. Readers are directed to these documents for financial details and a discussion of Killam's results.

Results Conference Call

Management will host a webcast and conference call to discuss these results and current business initiatives on Wednesday, November 8, 2023, at 9:00 AM Eastern Time. The webcast will be accessible on Killam's website. A replay of the webcast will be available for one year after the event at the same link.

The dial-in numbers for the conference call are as follows:

• North America (toll free): 1-888-664-6392
• Overseas or local (Toronto): 1-416-764-8659

Profile

Killam Apartment REIT, based in Halifax, Nova Scotia, is one of Canada's largest residential real estate investment trusts, owning, operating, managing and developing a $4.9 billion portfolio of apartments and manufactured home communities. Killam's strategy to enhance value and profitability focuses on three priorities: 1) increasing earnings from existing operations; 2) expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties; and 3) developing high-quality properties in its core markets.

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