Killam Apartment REIT (KMP-UN-T) president and CEO Philip Fraser was able to report healthy increases in net operating income and same-property revenues during the trust's Q2 financials call with investors and analysts, in addition to lower overall debt levels.

Fraser told analysts during the Aug. 7 online presentation that he was “very pleased with our strong financial and operating results for the second quarter.”

Halifax-based Killam owns, operates, manages and is developing a $5.5-billion portfolio of apartments and manufactured home communities.

Killam reported Q2 net income of $33.13 million, compared to $114.45 million a year earlier. The decline was primarily due to lower fair value gains on investment properties, with $3.8 million recognized in 2025 compared to $85.5 million in 2024. The reduction in fair value gains reflects stabilization in rental rate growth and marginal capitalization rate expansion for select assets.

Killam generated net operating income (NOI) of $64.08 million, up from $59.92 million in the same quarter a year earlier. It achieved a six per cent increase in same property revenue and 6.7 per cent same property NOI growth in that same time period.

Killam’s debt-to-total assets ratio improved for the sixth consecutive quarter. It ended Q2 with a ratio of 39.6 per cent, down 80 basis points from the end of 2024.

Occupancy and rents

Same property apartment occupancy remained strong at 97.5 per cent, compared to 97.8 per cent in Q2 2024. Rents increased by 3.7 per cent for tenants with lease renewals, and by 13 per cent for new tenants.

“While many large metropolitan cities have experienced pressure at the top end of the rental market, Killam’s portfolio has demonstrated its resilience and we continue to see rental increases above historic norms,” chief financial officer Dale Noseworthy reported.

The use of rental incentives is expected to continue through the second half of 2025 in select markets and properties, Noseworthy added.

Tenant turnover year-to-date is approximately 12 per cent and a turnover rate of approximately 20 per cent is anticipated for the year, up from 18 per cent in 2024.

Commercial portfolio

“In the second quarter, Killam's commercial portfolio saw 4.8 per cent revenue growth, driven by a 50-basis point increase in commercial occupancy to 94.6 per cent and higher rental rates on renewals,” executive vice-president Robert Richardson said.

Killam achieved a weighted average rental rate increase of 16 per cent on 8,000 square feet of renewing commercial tenants in the quarter. The net effective rental rate on 17,500 square feet of new leasing was $24 per square foot.

The REIT has leased 28,400 square feet of new space and renewed 33,600 square feet with existing tenants so far this year.

Killam acquired the 306,000-square-foot Westmount Place office and retail property in Waterloo, Ont. in 2018. Its 16.6 acres of development potential was the main attraction, though having 250,000 square feet leased to Sun Life, Loblaws and Michaels at a weighted average term of 8.4 years was also appealing. 

Sun Life will vacate its 197,000 square feet on March 31, 2026 and Richardson said Killam has received “very strong leasing interest” from potential new tenants, including: insurance, technology and professional office users; a pharmacy; a grocer; and health and fitness companies. 

Capital recycling program

Killam’s capital recycling program is focused on divesting non-core and slower growth properties, or those that may be more capital- or carbon-intensive. 

Killam completed the sale of four sites with 318 units in Newfoundland and Labrador for gross proceeds of $18.5 million during the second quarter. It sold three apartment properties with 128 units in Charlottetown, P.E.I. for $15.9 million. 

Subsequent to quarter-end, Killam completed the sale of a 60-unit townhouse complex in P.E.I. for $9 million. A deal to sell an additional 521 units in P.E.I. for net proceeds of $81.9 million was to close on Aug. 8.

Killam also has a firm agreement to sell 99 units in Saint John, N.B. for $17 million before the end of September.

Proceeds will be used to fund acquisitions, including 114 units purchased in Fredericton, N.B. for $28.7 million on July 22. 

Killam also closed on the $136-million acquisition of the remaining 50 per cent interest in three Ottawa apartment properties — Frontier, Latitude and Luma — held through a joint venture with RioCan REIT on July 29.

Development activity

Killam began welcoming residents at The Carrick in Waterloo in June. The 139-unit apartment building is 60 per cent leased.

Brightwood, a 128-unit apartment building in Waterloo, is scheduled for completion in June 2026.

Killam made its first investment in Ontario’s Kitchener-Waterloo-Cambridge area with the acquisition of two apartment buildings in 2010. Its portfolio in the area is now up to nine properties.

“These properties contain over 1,500 units, of which we have built one-third of them,” Fraser said. “In addition to Brightwood, we own land in the region with the development potential to build over 1,200 units.”

Work is continuing on Eventide, a 55-unit apartment building in Halifax scheduled for completion in Q3 2026.

Killam is working on two densification projects; a 95-unit development at Victoria Gardens in Dartmouth, N.S. and a 150-unit development on Harlington Crescent in Halifax. 

“These developments will utilize vacant land on our existing sites, creating additional density without displacing existing tenants,” said Fraser. “We aim to begin at least one of the above-mentioned developments by the end of the year.”

Sustainability initiatives

Killam has invested $1.7 million in energy efficiency initiatives this year, and committed $4 million to energy-related capital projects to be executed before the end of this year. 

These initiatives include installing solar panels with 1.2 megawatts of capacity at five properties in Kitchener-Waterloo-Cambridge, expected to yield over $180,000 in annual utility savings.

Killam plans to add solar panels at two more properties in the market over the next year.